G’day All,
Well, pressed for time.
First thing, is time for a rant – it’s been a while.
During TradeTech liquidity this week there were some comments made about CCPs.
I though the comments well off the mark if not irresponsible in the current market situation.
See below (I have already posted the response in my blog).
Other news:
Great that the US gets out of Iraq – they have enough things at home to spend their cash on.
NYSE & Liquidnet link up. Lit and dark will continue to mix.
AIG: This is ridiculous. Nobody works for a dollar per annum. This is just ‘disclosed’ compensation, there are obviously other drivers here. Why would any of us work for a dollar? The pendulum has swung too far the other way. What are the motivators (believe me, self interest is in there somewhere).
Chi-X: news from Asia
Nasdaq: Energy
CDS Clearing: Again, forget when I said it, but we see the call for competition. See: http://clearingandsettlement.blogspot.com
Fidessa: I do like the concept of the fragmentation index. I can’t comment on the formula, but it is a view. Up until now I have relied on the BBG MDM page (Market Depth Monitor). Worth a look for those interested in liquidity shifts: http://fragmentation.fidessa.com/ (Fidessa is now traded on Chi-X and cleared by EMCF)
BHP: If ever there was a time to pull a deal this was a good one.
Hey: Aussie is getting digital radio next year! Cutting edge down here I tell you!
Fortunately we had some rain last weekend so I could watch some sport.
For variety I watch Aust NZ in the rugby league world cup final. We were useless and in my view deserved to lose for being too complacent. Awful and depressing performance.
As for the Aust / France game. We got through by the skin of our teeth. I think both teams were held back by a dreadful ref.
Have a great week end all.
S
The Rant bit:
I read the below remarks from yesterdays TradeTech Liquidity conference with some concern.
Skinner comments ….” I raised heckles a little by asking the dumb question, “as EMCF only has two risk managers and is now run by the Dutch Government, isn’t that bad for business?”
(Well, – I’m taking the bait here).
I’d like to suggest the following points are also worthy of consideration when responding to such, at least in my view, mis-informed questions:
1.
Risk management is a sub second world is not about people watching trades. It is about systems, procedures, rules etc. To date the regulators have proven very effective at supervising all the new CCPs. I recommend any of the national regulatory reports (FSA, DNB etc.) where you can see first hand how CCPs are measured against the CPSS / IOSCO standards. Let the regulators continue with their jobs.
2.
A CCP operates as a closed eco-system. There are layers of protection from participation criteria, margining (remember the focus here) and elements of mutualisation such as a default fund. In between there may be other layers of protection of various degrees. What is important, and what the regulators accesses, is the ability of a CCP to handle default events without recourse to external capital. Neither the capitalisation of the CCP nor its ownership could be relevant in the event of adequate margins being called. When a CCP is stress tested, it is done on this basis. If the overall protection is not sufficient you will see either an increase in margin rates, default fund requirements or other. Again, leave the regulators to carry on doing their supervisory role.
3.
Personally, I don’t think there was any joy in allowing Lehmans to fail. Nor for that matter in any of this market turmoil. That said, EMCF has experienced a default event and within 36 hours all EMCF participants were assured that there would be no recourse to their default fund contributions. This was possible in part due to the focus of the assets serviced and risks monitored. Again, the ownership of EMCF had no bearing on this event (the Lehman event was prior to the Fortis change of control announcements). This was simply a CCP doing what it is created for.
4.
To date we have seen no failure by the regulators in their supervision of CCPs. That is not to say they should not be challenged but let’s do it constructively.
5.
Fragmentation is the cost that allows the benefits of competition to accrue to the market. Embrace the evolving market place and do your bit for all Europeans!
6.
People also want cheaper post trade costs. Remember clearing (risk management and charged per transaction) is different from settlement (change of ownership and charged net per transaction). EMCF has hammered down clearing costs to 5 eurocents and the primary market CCPs have begun to respond. EMCF has identified there is a place for new entrant CCPs and indeed they have come (e.g. EuroCCP).
Iraq boots out the Americans It's official (nearly): Iraq's government wants America's army out by the end of 2011Full article
Worst of financial crisis yet to come: IMF chief economist
The IMF's chief economist has warned that the global financial crisis is set to worsen and that the situation will not improve until 2010, a report said Saturday.
http://news.yahoo.com/s/afp/20081122/bs_afp/financeeconomyimfwarning_081122230427;_ylt=AltDxLTl468j48yo2z2gkXSmOrgF
'The Economy Fell off the Cliff'
George Soros, 78, has made billions as a hedge-fund manager and investor. SPIEGEL spoke with him about the current financial crisis, how he expects President-elect Barack Obama to respond to the economic disaster and the responsibilities borne by speculators.
http://www.spiegel.de/international/business/0,1518,592268,00.html
Saving Citi May Create More Fear
By ERIC DASH
The government’s bailout of Citigroup could lead other banks to take bigger risks.
http://www.nytimes.com/2008/11/25/business/25citi.html?hp
Action on 'Lehman loophole'
By Jean Eaglesham, Chief Political Correspondent
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http://www.ft.com/cms/s/0/9026ada6-ba92-11dd-aecd-0000779fd18c.html?nclick_check=1
Liquidnet and NYSE Arca link up
By Anuj Gangahar in New York
The electronic trading arm of NYSE Euronext, the transatlantic exchange, is to start providing liquidity to customers of Liquidnet in the latest sign of convergence between exchanges and so-called “dark liquidity pools”.
http://www.ft.com/cms/s/0/c93e6c2e-ba55-11dd-92c9-0000779fd18c.html
or
25/11/2008 15:02:00
NYSE ARCA TO PARTNER WITH LIQUIDNET
Nyse Arca is to add liquidity to buy-side block crossing network Liquidnet, as traditional exchanges and dark pools trend towards convergence strategies.
More on this story: http://www.finextra.com/fullstory.asp?id=19337
Citigroup bailout servicing costs double with rescue Citigroup will have to pay an annual cost of nearly $4bn (€3.2bn) in dividend payments to service the securities that it has issued over the past 12 months in order to recapitalise itself, after the bank last night accepted a $20bn bailout from the US Treasury.
AIG freezes executive salaries
By James Langton
American International Group, Inc. announced voluntary restrictions on executive compensation Tuesday. The restrictions include a US$1 salary for its chief executive officer; no 2008 annual bonuses and no salary increases through 2009 for AIG’s top-seven-officer leadership group; and no salary increases through 2009 for the 50 next-highest executives, in addition to other bonus, severance and retention award restrictions.
http://www.investmentexecutive.com/client/en/News/DetailNews.asp?id=47119&IdSection=149&cat=149&BImageCI=1
AIG said it would freeze the pay of its seven most senior executives, and that its chief executive would receive a token salary of $1. The decision was welcomed by those who had criticised the insurance company when executives lavished $440,000 at a resort soon after AIG was bailed out. Separately, Marcel Ospel, a former chairman of UBS, who was ousted in April, agreed to return SFr22m ($18.4m) in pay to the troubled Swiss bank.
Asset managers support bank pay Fund managers have largely voted in favour of UK banks’ remuneration arrangements despite criticism of bankers’ pay since the start of the financial crisis, according to new research, which found that the 81.8% support recorded for HSBC's pay packages in May was the lowest yes-vote for a UK-listed bank since 2006.
New Chi-X Asia-Pacific CEO targets 2009 launches
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Full story: http://www.finextra.com/fullstory.asp?id=19349
Gooch and Smith call for CDS clearing competition
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http://www.efinancialnews.com/usedition/tradingandtechnology/content/3452566936/
New US clearers could face frosty reception - Tabb
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FIDESSA CLAIMS 20 EUROPEAN CLIENTS FOR INTELLIGENT LIQUIDITY ACCESS STRATEGY
http://www.finextra.com/fullpr.asp?id=24766
http://fragmentation.fidessa.com/
Changes reflect the add-on of Fidessa Group as a cleared stock for the UK segment. As of tomorrow, this stock will be available for trading on all three platforms.
25/11/2008 15:31:00
ASSET MANAGERS CALL FOR CONSOLIDATED TAPE AS MIFID RULE CHANGES HIT DATA QUALITY
The UK Investment Management Association (IMA) says the quality of information relating to best execution in UK equities has deteriorated since the introduction of the Markets in Financial Instruments Directive (MiFID) last year.
More on this story: http://www.finextra.com/fullstory.asp?id=19338
http://www.investmentuk.org/
http://www.investmentuk.org/press/2008/20081125.asp
http://www.thetradenews.com/operations-technology/market-data/2511
SECFINEX SIGNS WITH SIS X-CLEAR FOR SECURITIES LENDING CCP Nyse Euronext subsidiary SecFinex has commissioned SIS x-clear to develop a central counterparty service for stock borrowing and lending across the SecFinex Order Market.
Full story: http://www.finextra.com/fullstory.asp?id=19335
EUROCLEAR TO ACQUIRE XTRACKTER
European depository Euroclear is to acquire Xtrakter, the capital markets services division of trade association ICMA.
Full story: http://www.finextra.com/fullstory.asp?id=19312
Tokyo Stock Exchange Decides Detail Contents And Pricing Of Co-Location Service
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http://www.mondovisione.com/index.cfm?section=news&action=detail&id=79104
BHP advisers lose millions as collapsed deal breaks records Eight investment banks hired to advise Anglo-Australian miner’s BHP Billiton $66bn (€51bn) hostile takeover bid for Rio Tinto today lost over a $100m in potential fees in the largest transaction ever to be withdrawn.
Digital radio comes late to the party was meant to be the Christmas present on everyone's list this year but we will now have to wait until Mother's Day to experience free-to-air digital radio.
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