G’day All,
End Feb. Scary.
MTFs: Story was Quote, welcome Quote MTF but of course this is overcome by events at Chi-X. Chi-X notes a management change as first reported in the FT. The bit I like most about the FT story is: Neither Chi-X Europe, Chi-X Global, Instinet nor Nomura would comment. And that is pretty much how I’m going to leave it. I think it shows a nice, tight, line / team / group. Congrats too, to Equiduct on completing testing.
Clearing: Great that there is commitment to an EU solution (in or out of the Eurozone). Even with clearing there are limits to concentration risk / systemic risk. Clearing, to me at least, is of EU significance. The rush to CDS continues to dominate. I agree, but with reservations, and these are touched on in the fin news story – commoditisation of product and extent of participation. The absence of the European houses does not mean European houses are not active CDS participants. This needs to be respected. Interesting to see Eurex prepared to share governance. Recommendation 6 of the EACH paper on clearing benefits also interesting. They state A&I may increase systemic risk. Finally, Clearing fees at LCH.CN. Yes, please do reconsider fees…how about ad valorem fees with a 6 euro cent cap? That would inject some interest in the debate. Robbing Peter to pay Paul is not the level playing field the industry deserves. (NB, sorry LCH.CN readers, this is just my view – not personal attack)
Surveillance: I was unaware Cinnober was in this space…Burgundy, a Nordic multilateral trading facility, and the Hong Kong Mercantile Exchange (HKMEx) have signed up to Scila Surveillance.
LSE: Towergroup research reaching the already known conclusion. In my view: 1. Participants typically do their own due diligence (every firm has a different context) and 2. so what if national exchange x is cheaper than national exchange y, the issue is do you have access and fungibility. Still, if it increases awareness it is a step in the right direction.
Asian Exchange Alliance: At the outset of the project C&S is recognised. "Brokers will benefit from building on their relationships with their home clearing houses and need not take on foreign counterparty risks". This sounds like a monster A&I (Access & I/Op) project. Much to be learnt from Europe here.
On the trivia bit.
Australia is certainly a great Southern Land. I was unaware of the significance of the floods in Queensland to Lake Eyre (in South Australia). Hard to grasp this country, floods in one state, bush (wild) fires in another (Vic), and lakes the size of the Netherlands popping up in another state. Meanwhile, here in NSW we have sharks….which leads me to…
Well, this weekend sees a swim with the sharks…Sydney Harbour where a navy diver got bitten 2 weeks ago, literally losing an arm and a leg.
http://www.theaustralian.news.com.au/story/0,25197,25075692-5006784,00.html
For the swim itself: http://www.sydneyharbourswim.com/
Wish me an ‘uneventful’ morning.
Can’t believe I’ve missed 2 rounds of 6 nations. Important w/end for Wales to win away against the French, England will beat the Irish and the Scots will book the only home game win against Italy. Not that hard is it?
So, that’s it for me. I’m off to start my w/end (11pm here).
Whatever your pleasure, have a great week-end all.
S
Chief to go as Chi-X Europe faces a shake-up
By Jeremy Grant
Published: February 25 2009 23:06 Last updated: February 25 2009 23:06
Chi-X Europe, the pan-European share trading platform, is to lose its chief executive in a reorganisation by controlling shareholder Nomura of Japan, people familiar with the move said.
The move will come as a shock to market participants because Peter Randall, 53, has been credited with rapidly building Chi-X to the point where it is now the fifth-largest share trading venue in Europe by volume.
His departure, a date for which has not yet been set, was for personal reasons, the people said. Chi-X is the first of a breed – known as multilateral trading facilities – that took advantage of European Union rules enacted in 2007 that broke the exchanges’ monopolies over where shares can be traded.
Since it was launched almost two years ago, Chi-X has captured about 15 per cent of trading in FTSE 100 shares. The arrival of Chi-X, and later Turquoise and BATS Europe, prompted the London Stock Exchange and others to cut fees and speed their trading systems.
The departure of Mr Randall, a vocal critic of the LSE, comes as Chi-X is trying to develop a more global business, including a possible push into the US. It is also planning to collaborate with some exchanges. In November, Chi-X bought Cicada Corp, a trading technology group.
The development comes weeks after Chi-X Europe’s complex ownership structure changed after a fresh fundraising round. That cut the stake of its majority owner, broker Instinet Europe, to a minority ownership, although the broker retains full voting rights until the end of the year.
Instinet is owned by Nomura, which is expanding its brokerage and trading operations in Europe, spearheaded by the former Lehman Brothers equities operations it recently acquired.
The rest of Chi-X Europe is owned by 14 shareholders, including Getco, a Chicago-based electronic market making group, hedge fund Citadel, UBS and Morgan Stanley.
Neither Chi-X Europe, Chi-X Global, Instinet nor Nomura would comment
Eurex plans to offer up to a 90% ownership stake in its new credit derivatives clearing service to bank participants, with a potential launch date at the end of 1Q09.
Lake Eyre is an extensive 'salt sink' which derives its mineralisation from the evaporation of floodwaters over countless years. The lake has only filled to capacity three times in the past 150 years. It can harbour water nine times as salty as the sea.
When Lake Eyre does fill, it becomes the biggest lake in Australia. The massive Lake Eyre system covers an area of 9,690 square kilometres, or roughly the size of Holland. Nearly one-sixth of Australia's landmass drains into Lake Eyre.
http://www.southaustralia.com/LakeEyreNationalPark.aspx
Sex, lies and the internet Protecting kids from harassment in cyberspace
(as a Dad how could I not read this?)
19/02/2009 15:24:00
CDS DEALERS BOW TO PRESSURE AND COMMIT TO EU CLEARING COUNTERPARTY
Nine of the leading dealer firms in the credit default swaps markets have committed to the use of central counterparty clearing for CDS in the European Union by end-July 2009.
Concerned that the U.S. will dominate the sector via a stateside clearing solution, EU officials, exchanges and brokers have pushed for a European-based initiative. After a prior agreement with the global dealers collapsed, internal market commissioner Charlie McCreevy had threatened to pass legislation that would force the banks to use a European clearinghouse for eligible CDS contracts.
The letter of commitment, signed by Barclays Capital, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JP Morgan Chase & Co., Morgan Stanley and UBS.
More on this story: http://www.finextra.com/fullstory.asp?id=19659
20/02/2009 14:57:00
LSE CONFIRMS INTEREST IN LCH.CLEARNET CONSORTIUM
The London Stock Exchange has confirmed its interest in the consortium of inter-dealer brokers and investment banks that is considering a cash offer for LCH.Clearnet.
More on this story: http://www.finextra.com/fullstory.asp?id=19663
EUROPEAN CCPS ISSUE PAPER ON OTC CLEARING BENEFITS
http://www.finextra.com/fullpr.asp?id=26142
Recommendation 6 (on A&I)
Different CCPs have taken diverse approaches to the risk management model and
service portfolio of financial instruments, resulting in different product specifications and
service offerings. Therefore any interoperability may be practically difficult to achieve at
this point in time and may increase systemic risk for the market.
CCP for European CDS edges closer as banks add support
LCH.Clearnet mulls revamping fees LCH.Clearnet, Europe's largest independent clearing house, is weighing a major shift in the way it charges fees, which would cut clearing costs for some of the region's largest market participants. (Financial Times)
French working group readies a clearing assault A high-level French working group has prepared a controversial report detailing secret plans for the creation of a super Euro-zone clearinghouse, in an attempt to boost Paris's profile and to face off clearing competitors from the UK and US.
French banks hold the key to European clearing enigma There were two big developments in clearing last week – and the key to understanding them is how they connect. First, the revelation of French plans for clearing in Paris and the formation of the Europlace scheme and, second, the announcement that nine large dealers had committed to clearing their EU-eligible credit derivatives trades in Europe through a European-based clearing house.
ECB offers lifeline to London-based clearers The European Central Bank has said there will be no preferential treatment for credit derivatives clearers based in the eurozone over their non-eurozone based European rivals, Financial News has learnt.
Chi-X fees a tenth of European incumbents' – TowerGroup
LSE undercuts European rivals by 50% The London Stock Exchange has been boosted by news that its trading costs are lower than those of its main European counterparts.
JPMorgan Chase slashed its shareholder dividend from 38 cents a share to 5 cents. The news surprised investors. The bank maintained that its first-quarter performance so far is “solidly profitable” and capital is “strong”. Its decision will save it $5 billion a year.
Rates market should attract more interest from clearers A panel of practitioners was asked recently to predict how many of the five or six clearing solutions being developed for credit derivatives would be live with at least one trade by the end of this year. The general response was two or three, although one contrarian posited that it would either be all or none.
***this is Natsha’s article / view which I like.
23/02/2009 11:38:00
ASEAN EXCHANGES COLLABORATE ON E-TRADING LINK
Bursa Malaysia Berhad, Indonesia Stock Exchange, Philippine Stock Exchange, Singapore Exchange and The Stock Exchange of Thailand, have signed a Memorandum of Understanding (MOU) to form an Asean electronic trading link
More on this story: http://www.finextra.com/fullstory.asp?id=19666
Custodians to play bigger role on risk mgmt
Custodians can best serve their clients following last year's crisis by working more closely, over the long term, to develop custodial processes that can highlight risk management issues before they pose serious problems.
Read more »
Turquoise faces liquidity challenge Turquoise faces a key test next month when the agreements that helped the bank consortium-owned trading system build market share run out, although the European equity platform insists it has enough liquidity from other sources to remain competitive.
THE TRADE NEWS: QUOTE MTF Reveals Launch Date, Appoints CCPBy Staff2/19/09QUOTE MTF, a Hungarian-based multilateral trading facility, plans to start trading on 5 June and has selected European Multilateral Clearing Facility (EMCF) as its central counterparty (CCP).QUOTE MTF, which was announced on 9 February, is majority-owned by Canadian firm BRMS Holdings, which also owns Canadian alternative trading system SwiftTrade. The platform will operate its own proprietary trading engine based in London and will offer trading in pan-European equities.The new trading platform aims to use its low-cost Hungarian operation to offer competitive trading fees. “Based on our novel pricing mechanism, QUOTE MTF will pay the highest rebates, attracting liquidity from day one, said Tamas Madlena, CEO of QUOTE MTF, in a statement. “The recent success of EMCF, as well as our partnership with them, is a clear justification for European traders to join QUOTE MTF if seeking a low-cost, state of the art equities trading platform.”Jan Booij, CEO of EMCF, added, “Adding QUOTE MTF to the existing platforms and exchanges for which we act as CCP will benefit the clearing and trading participants on the various platforms and exchanges.”QUOTE MTF is the second trading platform that has signed up to EMCF in the last two weeks. Last Monday, Burgundy, a regional MTF for Nordic stocks due to launch in Q2 this year, also appointed EMCF as its clearing house.EMCF is jointly owned the Dutch government and exchange group Nasdaq OMX. It provides CCP services for Chi-X, Nasdaq OMX Europe and BATS Europe. The provision of services to QUOTE MTF is subject to regulatory approval.
=====================THE TRADE NEWS: CCPs Forging More Links, But Progress Could be SlowBy Staff2/20/09Two links have already been forged between European central counterparties (CCPs), and more are being worked on amid growing demand for trading platforms to have multiple clearing houses. But several barriers – not least the reluctance to share business with competitors – could impede progress.Swiss clearing house SIX x-clear has been involved in both the links announced so far. It started interoperating with the UK arm of European clearing house LCH.Clearnet on 12 December last year, following the London Stock Exchange’s introduction of competitive clearing, and on 3 February this year it signed a memorandum of understanding to interoperate with pan-European CCP European Multilateral Clearing Facility (EMCF).According to Marco Strimer, CEO of SIX x-clear, more links are in the pipeline in response to demand from clients. “We have requested trade feeds from Deutsche Börse and Euronext and want to interoperate with their incumbent CCPs,” he told theTRADEnews.com. X-clear is also seeking a trade feed from Turquoise and interoperability with its clearing house, EuroCCP.A big driver for CCP linkages could be MTFs seeking multiple CCPs, especially as many may no longer be comfortable only having one clearing house. EMCF, for example, was rescued by the Dutch government following the near collapse of its parent company Fortis last year.Although EMCF now has government backing, this event alerted many to the fact that a CCP could fail. EMCF is the clearing house for the majority of the pan-European multilateral trading facilities (MTFs) that have been launched in Europe – it serves Chi-X, BATS Europe and Nasdaq OMX Europe. While declining to comment on specific interoperability initiatives his firm is working on, Wayne Eagle, managing director of LCH.Clearnet’s equity clearing service, EquityClear, said, “I think there will be more CCP linkages, and it is likely to be driven by liquidity providers being uncomfortable with single or lighter CCP solutions,” he said. “It is easier to add more CCPs in the MTF space than the incumbent markets, which tend to have a greater regulatory burden.” He added, “We constantly talk to MTFs about the possibility for LCH to clear for them.”Diana Chan, CEO of EuroCCP, agrees. “After the market events of last September, we received a lot of demand for us to become an alternative CCP for some MTFs as there was a widespread concern about the safety of CCPs,” she said. But she adds that there are three barriers to CCP interoperability. The first is regulation – some jurisdictions, such as France and Germany, require CCPs to be registered as banks. The second is risk – the fact that interoperating CCPs are exposed to the risk of each other’s failure. The third and, argues Chan, the most important, is commercial. “Incumbent CCPs have no interest whatsoever in sharing their lunch with anybody,” she said. “An incumbent CCP would prefer to interoperate with those that pose the least competitive threat, which by definition brings the least value to most of the incumbent’s users. The Code of Conduct is a good framework for interoperability, but everyone knows there are a lot of requests that have been stuck for a while.”Miranda Mizen, senior consultant at research firm TABB, said in a recent report on European equities clearing that there were more than 80 interoperability requests outstanding. “Most of the 80 will never see the light of day,” she wrote. Chan said EuroCCP is in discussions about clearing for new platforms that have yet to appoint a CCP, although she declined to name them, and is working on becoming an alternative CCP for the Nasdaq OMX Nordic markets. Nasdaq OMX has appointed EMCF, in which it owns a 22% stake as one of the CCPs, but is hoping to offer a range of clearers.=====================
THE TRADE NEWS: Burgundy and HKMEx Sign up to New Surveillance ToolBy Staff2/19/09Burgundy, a Nordic multilateral trading facility, and the Hong Kong Mercantile Exchange (HKMEx) have signed up to Scila Surveillance, a new market surveillance tool jointly developed by systems provider Cinnober and technology firm Scila. The firms said the new system can be implemented on any trading system on the market. Scila Surveillance is designed for exchanges, banks and regulatory bodies. According to the two firms, the focus of their partnership was to develop a solution with a shorter time-to-market, low cost of ownership and improved usability compared with other surveillance systems.“Confidence is one of the most important assets for any marketplace and where a modern and effective market surveillance tool is a key component”, said Olof Neiglick, CEO of Burgundy, in a statement. “I’m impressed with the Scila system, especially the connectivity solution, which allows for a quick and efficient implementation.”Lieven Van den Brande, chief information and operations officer at HKMEx, added, “The short implementation process and seamless integration with the trading engine were key considerations in choosing a surveillance tool when building our new marketplace.”Scila is a newly founded Stockholm-based company, in which Cinnober has a minority stake.
See also:
Website www.cinnober.com
Founded 1998
Headquarters Stockholm, Sweden
Owners Overall majority - founders, employees and Catella Fokus (12,4%)
Contact Nils-Robert Persson, Executive Chairman, nils-robert.persson@cinnober.com, +46-(0)8 503 47 80
Website www.scila.se
Founded 2008
Headquarters Stockholm, Sweden
Owners Founders/employees and Cinnober Financial Technology (23,1%)
Contact Mats Wilhelmsson, COO, mats@scila.se, +46-(0)70 361 52 81
Source: Financial News OnlineA high-level French working group has prepared a controversial report detailing secret plans for the creation of a super Euro-zone clearinghouse, in an attempt to boost Paris's profile and to face off clearing competitors from the UK and US.The backers of the plan appear to foresee the split-up of the Anglo-French LCH.Clearnet Group, and the subsequent combination of Eurex Clearing and Clearnet SA, the London-based central counterparty's Paris arm. The plan also anticipates the potential consolidation of other Euro-zone CCP providers.LCH.Clearnet and Eurex were not immediately available for comment.The confidential document, obtained by Financial News yesterday, was written by a working group headed up by the Banque de France and prepared for the Haut Comité de Plaçe, a body formed by French finance minister, Cristine Lagarde, to promote Paris's position in the financial markets. Contributors to the document include individuals from BNP Paribas, CACEIS, Calyon, NYSE Euronext, Société Générale, the Bank of France, the financial market regulator (Autorité des Marchés Financiers), the French banking federation (Fédération Bancaire Française), the finance ministry and Paris Europlace, the capital's financial markets organisation.The plan is likely to yield strong reactions from banks, infrastructure providers, regulators and politicians outside the Euro-zone because it reveals a dramatic attempt to promote Euro-zone providers above their non-Euro-zone rivals. The plan covers the working group's concerns about the current clearing providers as well as the potential that current developments might weaken Paris's position in the financial markets. The document also outlines a possible set of actions, including the development of a proposal for clearing in Europe, the urging of French authorities to both campaign for a Euro-zone solution and to secure a commitment from French banks, and their Euro-zone counterparts to "work towards creating a clearinghouse for the Euro-zone."It recommends that in order to best promote Paris, a consortium comprised of Euro-zone banks and infrastructure providers should be formed to develop an integrated Euro-zone clearing infrastructure covering multiple products, including cash equities, fixed income and derivatives.Under the scenario detailed in the document, each Euro-zone infrastructure provider would contribute its principal systems to the project – the examples given, being Eurex Clearing for derivatives and LCH.Clearnet SA for cash equities.The document also suggests that the Eurosystem (the Euro system of central banks) should effectively sponsor a series of "specifications" that would form a road map for the project. These would set out the principal characteristics that would later be required of an over-the-counter derivatives clearinghouse in the Euro-zone "for reasons of financial and monetary stability." The set of principals would specify the clearinghouse's scope, the instruments to clear and its risk management parameters.The document will prove particularly controversial in London where most clearing in Europe is currently conducted and where LCH.Clearnet Group is based. It says that LCH.Clearnet SA, the Paris-based arm of the CCP, is "threatened because it belongs to a group whose decision-making structure has been located in London," and because the bids for the clearer that are now being tabled by both the US-based Depository Trust Clearing Corp. and the consortium of banks and Icap "could lead to an increase in the weight of the London financial market" or "the relocation of governance to the United States." The document states: "[LCH.Clearnet SA] is weakened by the current fragmented position of clearing in Europe, which makes it unable to effectively resist the growing competition from infrastructures based in the United States. The strategic nature of this business sector means that it is important to create a pan-European clearinghouse for the Euro-zone with sufficient critical size to face down these challenges."
THE TRADE NEWS: Turquoise Prepared for End of Market-Making DealsBy Staff2/19/09Turquoise, a broker-backed pan-European multilateral trading facility, expects a drop in order flow when its market-making agreements expire in mid-March, but said this will be alleviated by improvements to its trading service.“This was a major commitment from nine large trading firms so we are expecting some evidence of change when the period ends. However, the effect will be countered by the increase seen in natural flow on the platform from our growing member network,” Duncan Higgins, head of client relationship management, Turquoise, told theTRADEnews.com. “We’ve introduced enhanced rebates, are continuing to reduce trading latencies and are delivering further innovation in our trading model. These initiatives benefit all firms and incentivise increased trade volumes.”Since the start of 2009, Turquoise has announced a series of improvements to its platform. In January, the MTF introduced a new fee structure that incentivises high-volume users. It also expects to implement speed and capacity upgrades by 6 March, and launch a dark pool aggregation service in Q1.Turquoise’s nine backers – BNP Paribas, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, Merrill Lynch, Morgan Stanley, Société Générale and UBS – committed to making markets on the MTF from its launch until mid-March. All nine banks also had a hand in recapitalising the platform last month, another sign of confidence in and commitment to trading on the platform, according to Higgins.According to the Fidessa Fragmentation Index, which tracks where equity trades are executed in Europe, Turquoise had a 5.86% share of trading on the 11 indices covered by the index in the week ending 13 February.
Burgundy Readies for May LaunchSTOCKHOLM-Officials at Nordic multilateral trading facility (MTF) Burgundy are in the final stages of preparation for the MTF's scheduled May launch.
Friday, February 27, 2009
Thursday, February 19, 2009
News: CDS, MTFs, Fragmentation, bye bye NSC...and Salps.
G’day All,
CDS Clearing: The land grab is on. LSE interest is of course fuelled by profitability. Tensions rise to the surface between LCH.CN Ltd & SA. This is in turn reflected at the policy level UK (out) / Eurozone (in).
MTFs: The secrets out??? Yep, pricing is a key component of the MTF business model.
FSA fee increases: We’ll know sub prime is over when we, the end investor, pays. Well, APCIMS is alerting us to where the FSA charges are going to bite.
Fragmentation: Flurry of activity on this topic this week. FESE joins the game and announce some consolidated stats. Equiduct announce their product offering too. And a summary from JPM.
Kerviel: Pathetic. Didn’t even read the story.
NYSE Universal Trading System: Ahhh, the end of an era for those of us familiar with NSC. Another one for memory lane.
And the trivia bit…..
Communication: The 3 most effective ways to communicate in todays modern age: Tele-phone, Tele-vision, Tell-a-woman.
Optical Illusions and the Illusion of Love
http://www.sciam.com/slideshow.cfm?id=optical-illusions-and-love&thumbs=horizontal&photo_id=68E814AA-A9CA-FFED-ADD30AA83F924C1E
http://www.sciam.com/slideshow.cfm?id=optical-illusions-and-love&thumbs=horizontal&photo_id=68E814A4-C686-678B-0CBC4863DFDD4E9E
….And for a mere 21 euros!
http://www.madeindesign.com/prod-Psyshirt-love-femme-Pa-Design-refpa85t1l.html
I should also mention the Aussie bushfires. Sure, this is part and parcel of our great southern land, an occupational risk you might say. Nevertheless, the carnage, pain and tragedy is awful for those touched by it (like any natural disaster). One thing that struck me was the plea for simple items, like a tooth brush, or a comb. A stark reminder of the luxury we surround ourselves with every day and take for granted. We have much to be grateful for.
Malabar to Little Bay swim.
Well, this was a bit of a personal nightmare.
It was always a bit self indulgent doing this swim. My daughter, Rebecca, had been in surgery on Friday to get 4 wisdom teeth out.
Anyway, Sunday morning, a dark and raining day, and I was running late (making smoothies for Rebecca etc.).
Got to the swim, but missed getting my timing chip. So no formal results for this one.
‘Nice’ conditions on arrival. Sea was black and foreboding, and a light drizzle of rain.
Other weird thing was Salps.
When I got to waters edge I was pretty put off, it was awash with white things that I just assumed were jelly fish.
Still, the beach was not closed so I assumed they were the non-stinging kind of jelly fish.
http://en.wikipedia.org/wiki/Salp
Anyway, got the race underway and no stings..so off we go..through the swarming Salp. (Oh, I did follow surf life saving advice on shark attack and check I was not bleeding from any limbs before the start).
I thought it was a bit weird that everyone was heading towards the left of the headland, I assumed it was just to make the rounding a bit easier.
Conditions were ‘challenging’. Nice big swell bobbing everyone up and down, Salp, and then the driving rain started…Ah, the joy.
Anyway, we finally get out into the open water, and I round the bouy and turn right, on my way to little bay and I notice everyone else is heading back to shore.
Ahhh, they’ve changed the race course due to the conditions. I guess they just forgot to tell me.
Well, it sure woke me up. So far every ocean swim is different. You and the event really are at the mercy of the elements. This would have been that much more enjoyable if a) I knew that Salp were non-toxic and b) if someone had told me the course had changed (which is my own fault for being late).
A good wrap at:
http://www.oceanswims.com/nsw89/090215.html
Next one, Sydney Harbour. This week. I think I’ll have a rest….and watch some Rugby!
Super14, all home teams to win apart from two away winners, Reds (hopefully) and Lions.
Of course, need to add the blog site:
http://clearingandsettlement.blogspot.com/
Whatever you’re up to, have a great week-end,
S
LCH.Clearnet To Clear CDS in Eurozone by Year-End
By Shane Kite
LCH.Clearnet announced today that it plans to introduce a Eurozone clearing service for credit default swaps (CDS) by December 2009, pending regulatory approval.
The service, which will be managed by the clearinghouse’s Paris operation
http://www.securitiesindustry.com/news/23194-1.html?ET=securitiesindustry:e1463:171544a:&st=email
And
LCH.CLEARNET TO DEVELOP EUROZONE CLEARING HOUSE FOR CREDIT DEFAULT SWAPS
LCH.Clearnet has announced plans to launch a clearing service for credit default swaps in the Eurozone by December 2009.
More on this story: http://www.finextra.com/fullstory.asp?id=19639
NYSE Euronext, LCH.Clearnet Downplay CDS Clearing Rift
By Jacob Bunge
CHICAGO -(Dow Jones)- NYSE Euronext (NYX) and London-based clearinghouse LCH.Clearnet on Wednesday downplayed perceptions of a growing schism over their respective plans to clear credit derivative trades. In a statement, the two companies emphasized their commitment to clearing credit default swaps via NYSE Euronext's BClear platform, their joint effort that went online in late December and remains the sole functioning CDS clearing service.
http://www.nasdaq.com/aspxcontent/NewsStory.aspx?cpath=20090218%5cACQDJON200902181029DOWJONESDJONLINE000715.htm&&mypage=newsheadlines&title=NYSE%20Euronext,%20LCH.Clearnet%20Downplay%20CDS%20Clearing%20Rift
CDS DEALERS BOW TO PRESSURE AND COMMIT TO EU CLEARING COUNTERPARTY Nine of the leading dealer firms in the credit default swaps markets have committed to the use of central counterparty clearing for CDS in the European Union by end-July 2009.
Full story: http://www.finextra.com/fullstory.asp?id=19659
LSE revealed as core consortium member The London Stock Exchange is a core member of the bank-led consortium that is preparing to bid for LCH.Clearnet, according to documents seen by Financial News.
MTFS SET TO WIN MORE MARKET SHARE AS PRICE COMPETITION TAKES HOLD Trading on new multilateral trading facilities (MTFs) in Europe costs less than a fifth of the fees levied by traditional exchanges according to the latest research from TowerGroup.
Full story: http://www.finextra.com/fullstory.asp?id=19657
INDUSTRY ASSOCIATION WARNS ON EUROPEAN CLEARING PUSH The Futures and Options Association is urging UK authorities to respond to a proposal for over-the-counter derivatives clearing that the industry body says could split European financial services in two. Anthony Belchambers, chief executive of the FOA, is understood to be writing to the UK Treasury urging it to oppose calls to mandate a eurozone-based solution for over-the-counter derivatives clearing.
http://mail.efnmail.co.uk/r/38531615/MjU3MzA2OjIwMjU3/
LCH.CLEARNET BIDDERS NEED TO KEEP EVERYONE HAPPY If those leading the LCH.Clearnet bid wish to be taken seriously and succeed in winning the suddenly coveted clearing house, they should take note of the reactions to the proposed deal.
http://mail.efnmail.co.uk/r/38531635/MjU3MzA2OjIwMjU3/
FORMER LEHMAN MAN ROLET TO TAKE LSE HELM; CHI-X MAKES NEW HIRES The London Stock Exchange has confirmed the appointment of Xavier Rolet as its next chief executive. The former Lehman Brothers man will take over from Clara Furse in mid-May.
Full story: http://www.finextra.com/fullstory.asp?id=19637
INDIA'S MCX-STOCK EXCHANGE CLEARING CORPORATION COMMENCES OPERATION
http://www.finextra.com/fullpr.asp?id=26024
APCIMS HITS OUT AT FSA FEE INCREASES
http://www.finextra.com/fullpr.asp?id=25985
Poland to invite four foreign bourses for Warsaw exchange Poland’s government intends to invite four foreign stock exchanges to negotiations on ultimately buying the Warsaw stock exchange, said the treasury ministry. (Financial Times)
Misdirected order flow is costing investors millions.
Equiduct, the pan-European equity trading platform, is expanding its data offering and launching a new liquidity fragmentation analytics service, OrangeLFA, to complement its OrangeVBBO product. This shows that a significant number of trades on the incumbent exchanges are not being traded at the best price available.
http://www.equiduct-trading.com/downloads/equiduct-orangelfa-january-2009-uk.pdf
FESE publishes for the first time the ‘European Equity Market Share Report' which gathers data from all the market segments operated by FESE members (including Regulated Markets and Multilateral Trading Facilities) as well as from the major MTFs operated by investment firms in the European market. The FESE Statistics Methodology used in the Report has been agreed by all the trading venues involved, both RM and MTFs.
http://www.fese.be/en/?inc=news&id=99
Competition drags LSE to record low The uphill task facing Xavier Rolet, the chief executive-elect of the London Stock Exchange, was underlined this week as it emerged the LSE’s share of trading in FTSE 100 index stocks fell to an all-time low.
J.P. Morgan Europe Liquidity Fragmentation Index - Week 7
· Liquidity fragmentation in Europe last week was 16.4%, 0.4% down on the previous week driven by France, Germany, Switzerland and the Netherlands. At a stock level, Roche, British American Tobacco and Siemens were the main contributors (see table 4). · Ireland (69.8%), UK (27.0%), Netherlands (21.7%), France (19.6%) and Germany (19.0%) were the most fragmented markets in percentage terms. · UK ($2.0bn), France ($1.0bn), Germany ($0.9bn), Netherlands ($0.3bn) and Switzerland ($0.3bn) were the most fragmented in terms of Displayed Liquidity traded away from the primary market. · Chi-X achieved average daily turnover (ADT) of $2.7bn, equivalent to 9.7% of flow in Chi-X names. Total ($88m, 16.6%), BP ($87m, 24.9%), and Rio Tinto ($66m, 15.3%) had the highest ADT on Chi-X. · ADT on the Turquoise Displayed Order Book was a new high at $1.7bn, equivalent to 6.0% of flow in Turquoise names. Total ($41m, 7.9%), Royal Dutch Shell A ($40m, 12.3%), and Siemens ($34m, 9.2%) had the highest ADT on Turquoise. · BATS achieved ADT of $347.6m. BHP Billiton ($12.0m, 3.5%), Rio Tinto ($11.1m, 2.6%) and BP ($10.9m, 3.1%) had the highest ADT on BATS. · Nasdaq OMX achieved ADT of $31.2m. · 7 stocks traded more than 20% ADV on Dark venues. See Figures 7 – 10 and Tables 8 - 9 for further details.
Kerviel blames SocGen for 'dangling the keys' Jérôme Kerviel, the alleged rogue trader, has blamed the risk culture at his former employer Société Générale for a €4.9bn ($6.4bn) trading loss last year. His comments come as the chief executive of Goldman Sachs this morning pointed to the weaknesses in banks' risk controls that have exacerbated the crisis in the global banking industry.
17/02/2009 14:23:00
NYSE EURONEXT COMPLETES MIGRATION TO UNIVERSAL TRADING PLATFORM
NYSE Euronext has migrated trading of all European equities, including exchange-traded fund (ETF) products, listed on the company's Amsterdam, Brussels, Lisbon and Paris markets to its next-generation Universal Trading Platform from the pervious Nouveau Système de Cotation (NSC) platform.
More on this story: http://www.finextra.com/fullstory.asp?id=19649
SUNGARD SETS UP GLOBAL TRADING BUSINESS
http://www.finextra.com/fullpr.asp?id=25998
18/02/2009 15:20:00
SWISS EXCHANGE STARTS MIGRATION TO NEW TRADING PLATFORM
SIX Swiss Exchange has gone live with its new SWXess modular trading platform, starting a migration period that gives member banks until April 9 to move off the old SWX platform. Swiss Bank BEKB BCBE has become the first bank to connect to the FIX-based standard interface module, using the GLOX7 trading connectivity solution from GlobalXTrade.
More on this story: http://www.finextra.com/fullstory.asp?id=19653
Comment: CDS market draws unjust fire Warren Buffett called derivatives weapons of mass destruction, but even the Sage of Omaha has bought a few recently. Today, a European industry body for exchanges made a sweeping generalisation that off-exchange traded derivatives were responsible for the credit crisis, while credit default swaps in particular have attracted the financial services equivalent of UN weapons inspectors. But does the CDS market deserve such hostility?
AUSTRALIAN FINANCIAL REVIEW: Elstone Expected to Stay as ASX ChiefBy Matthew Drummond2/17/09Robert Elstone’s future as chief executive of the Australian Securities Exchange is expected to be discussed when the board meets today, as the bourse’s directors seek an indication of whether Mr Elstone will stay on with the company he has run since its 2006 merger with the Sydney Futures Exchange.While the subject is not on the formal agenda, it is understood ASX’s directors are keen to get an early take on Mr Elstone’s intentions given his term is due to expire on June 30 and can be extended by mutual agreement with the board.Though he is yet to give any indication on whether he wants an extension, it is anticipated he will stay on. The widely respected CEO has been credited with bolstering profits at the ASX, mainly by stripping out costs. His tough management of costs was one of the main reasons ASX was forced to dump its chief executive Tony D’Aloisio and appoint Mr Elstone as head of the merged group in 2006 following a shareholder push.In his first-half profit result as ASX chief he delivered a 40 per cent jump in net profit followed by a 34 per cent rise the following half.He has also cushioned the ASX against swings in the amount of share trading by introducing a rebate structure which rewards brokers in bull markets but takes money back when trading activity falls. Clawing money back helped to keep profit steady in 2008.With no major debt and no end in sight to the exchange’s monopoly in providing a platform for trading in ASX-listed stocks, the company is considered to be in as solid form as possible to weather a prolonged rout in equities.Rival exchange Chi-X has been waiting for one year and AXE-ECN have been waiting for three years to obtain the licences they need to set up rival exchanges to compete with the ASX. But the federal government has been reluctant to shake the market structure during the financial crisis, thanks in part to lobbying by Mr Elstone and senior ASX executives and directors in Canberra.“I’d be surprised if he does not see them through the next phase of the ASX’s life,” one analyst said. “At some point we’re going to get competition in equities trading. It’s difficult to know when, but I’d think it’s important that he’s there when it happens.”He said Mr Elstone had wide investor support. “He’s taken a conservative approach and he copped a bit of criticism during the bull market, but he’s not getting that criticism now,” the analyst said.ASX will report results for the six months to December 31 tomorrow. UBS analyst Chris Williams has forecast a net profit of $176 million, down marginally from the $187 million a year earlier.With only a handful of companies floating in the second half of last year, listings revenue is expected to fall, as well as revenue from processing shares and derivative trading.Reported trading figures from January showed just $57 billion in shares changed hands for the month, the lowest amount in five years. Total futures and options contracts numbered just 3.1 million for the month, a six-year low.With revenues falling, analysts are closely looking at how the ASX is managing costs. The company gave guidance that costs would rise in financial 2009 at CPI levels.Analysts are also looking for update on initiatives announced by the ASX last year to improve services to large institutional investors. The proposed services include a “dark pool” to be called Volume- Match, where large investors can anonymously move big share parcels, and “iceberg orders” allowing traders to enter a large trade but reveal only a small amount of the total volume at one time.=====================FINANCIAL TIMES MANDATE: The Ongoing Search for LiquidityBy Ceri Jones February 2009Multilateral trading facilities (MTFs) have made inroads into European equities trading and are likely to drive down pricing, and threaten the data revenues of the main bourses.Four MTFs are now operational in Europe. Bats Europe, Nasdaq OMX Europe and Turquoise have launched MTFs since mid-2008, joining Instinet company Chi-X, which was first off the blocks in March 2007.Chi-X and Turquoise, which went live last August, had a headstart on the market, and have systematically taken the lion's share. At the end of the year Chi-X accounted for 13 per cent of trades on FTSE stocks, while Turquoise, which can count on the support of its big bank shareholders, took 6 per cent, according to the Fidessa Fragmentation Index.Chi-X has had particular success in Euronext Amsterdam where it has taken nearly half the trade in certain blue chips such as Philips. The first-mover became profitable in October, but that month probably revelled in the highest equity trading volumes of all time, and since then volumes have halved.Nasdaq and Bats have not attracted the same commitment, accounting for 0.8 per cent and 0.36 per cent of trades in FTSE stocks at the year-end respectively."One of the biggest challenges is how to get liquidity out to the platform and how to encourage dealers to buy into providing liquidity," says Harrell Smith, head of product strategy at Portware."Perhaps some of the newer entrants such as Nasdaq would have fared better with the backing of the broker-dealer community. The competition is good for pricing and performance but those that succeed will be those that make it attractive to participants, by giving them a stake."There is growing concern that the sharp downturn in trading volumes could make it difficult for MTFs to break-even. NYSE Euronext blamed extreme market conditions for postponing the launch of its planned MTF, now scheduled for March, while Pipeline has pulled its launch back from October. There are rumours that Nyfix Millennium is looking for a buyer, while Scandinavian MTF Burgundy has been struggling with settlement and counterparty issues.Equiduct Trading, owned by Borse Berlin, has pulled its launch back from February. Artur Fischer, joint-CEO, said trading participants are not as prepared as expected, transactions in the marketplace have been shrinking and that the price war among brokers had not helped. Prospective members may have previously been deterred from connecting because Equiduct does not offer access to pan-European central counterparties, such as EuroCCP or EMCF but may now favour three well-established counterparties it can offer.MARKET SHARE"Unless you can catch significant market share, making money is going to be tough in this environment, but the volumes some of these guys are achieving is very small," says Jerry Lees, head of alternative execution services at Cheuvreux. "We've had 29 conversations with MTFs about potential connectivity but many of these different products are now on hold."Nevertheless, Europe is only in its first wave of market fragmentation compared with the US. The UK, the Netherlands and, France and Germany are leading the way while some other countries have been slow to implement the EU's Markets in Financial Instruments Directive (Mifid). Both Turquoise and rival Chi-X have experienced difficulties entering the Spanish market owing to complications related to the country's Iberclear clearing system.This fragmentation has created a new demand for Smart Order Routers (SORs), that sweep different execution venues looking for the best price, a process that involves a hierarchy of decision-making criteria based on price, size and liquidity. The best run multi-sweeps will continuously watch all the order books and will adjust any limit orders. Some traders have been slow to capitalise on execution platforms as both price formation and price discovery mechanisms, however.LACKING INVESTMENTThe products have also been found lacking. For instance, alternative trading venues failed to benefit from the shutdown of the London Stock Exchange for seven hours on 8 September 2008, because many brokers' SORs were not configured to take into account that the primary market could go down."A lot of SORs aren't very smart at all," says Bradley Duke, head of institutional electronic sales in Europe, at Knight Capital. "Many do not re- evaluate the trade through the life of an order on a continuous basis, including some from big name providers.""While Tier One institutions have deep enough pockets to pay for this IT investment, Tier Two brokers may struggle with perhaps the exception of BNP, Calyon and us," says Richard Hills, global head of electronic services, Societe Generale."Firms that are out of the top ten will really struggle to make the level of investment required. Tier Three brokers will largely sign up with software houses. Fidessa for example has 20 clients."The issue for vendor provided products is whether they will keep pace with the plethora of new venues as they are launched, and whether they can ever incorporate the intelligence provided by the in-house traders in a broker-built smart router.The impact of SORs and algorithms on trading costs has been huge, but it is also part of a long-term trend."In terms of driving costs down there is an incentive to use MTFs much more than the LSE, but liquidity, not cost, is the more important factor," says Mr Hills. "Currently, if a router is connected to the LSE there is a much greater chance of getting a hit but as soon as an MTF begins to take more than 50 per cent, then that situation will change. The LSE has also been reducing its prices to guard against this trend.""Costs have come down dramatically in 12-14 years," says Kevin Houston, director of Rapid Addition, "but it is difficult to know how much of that is down to other factors and while the liquid section of the market is in a position where the technologies work well for it, in the areas of mid caps or where a very large slug of shares are sold the solutions are not as efficient."Both buyside and sellside are looking for the same features from trading execution, particularly where the buyside is actively trying to obtain alpha from the process, but shaving off costs is less important for passive buyside such as pension funds and other long-term investors, and even for some hedge funds where for instance the objective is to take a controlling share, in which case a few basis points of slippage is neither here nor there."Three important things are changing - market structure, tools and trading habits," says Miranda Mizen, senior consultant at Tabb Group. "In Europe, the market structure is under enormous strain as it changes from a vertical structure to a more pan-European horizontal structure."To cope with the changes, traders need new tools, and this takes time and resources, and many do not yet have the sophisticated tools they need," she explains. "They must determine which crossing networks to connect to, and be able to measure and compare executions on the different trading venues. It is tough as the buyside is being bombarded with information and has to increase their education while the economic environment has put many in survival mode."In large part algos are productivity tools, enabling a reduction in headcount. In options trading, for instance, traders have traditionally used a combination of both the phone and electronic trading systems when trading large blocks or complex multi-legged options orders, especially for less liquid options. An algo frees up time to focus on other opportunities, and the trading process itself automatically generates back office processes.As traders begin to use algos for their more complex trading activities, they may require less assistance for trading support from brokers, empowering them to act more independently. "Buy-side dealing desks are getting more sophisticated and capable of trading themselves," says Belinda Keheyan, head of international marketing at International Technology Group (ITG). "Often it is individuals that are enabled by technology as they have much greater choice and more direct access. They are taking control to trade in a more innovative way and opting to in-source technology."Dark poolsTrades have been crossed on exchanges for years perhaps 60 per cent of the LSE trades are crossed and 50 per cent of trades in Europe. What has changed is the creation of automated engines to match buy and sell orders, known as 'dark pools of liquidity'.Dark pools provide two services critical to the institutional investor liquidity, from various fragmented sources, and anonymity, to avoid impacting publicly-quoted prices. This anonymity, for example, will prevent competitors from front-running, or attempting to gain advantage by trading mispriced securities ahead of others.There are 24 such pools in the US, such as Sigmax and Bats, accounting for around 9 per cent of trades, compared with 3 per cent in the Europe. This is expected to double next year, according to Miranda Mizen, senior consultant at Tabb Group, as dark pools proliferate in Europe and begin to compete for business with traditional, organised exchanges. The typical trade size on established bourses has come down markedly as trading patterns move to a more frequent slicing and dicing of orders and trading in pieces over an hour or a day.There are regulatory issues, however. Producing a dark pool and resting liquidity in that pool requires registration under Mifid as a multilateral trading facility (MTF), but the legal position is poorly defined and some big brokers have taken the view that the resting place is just another cross, and that in not inviting external flows, only internal flows, there is no requirement to register. The registration process is reckoned to take six months.Duncan Higgins, head of client relationship management at Turquoise, says the MTF has seen a big increase in the use of dark orders, of between 30-50m euros a day and doubling month on month. Moreover, he points out, it is early days."This is when a relatively small number of firms are using our dark functionality," Mr Higgins adds. "As more firms develop their capability we expect to see ever more growth from that."
SECURITIES INDUSTRY NEWS: EU Depositories, Clearinghouses Take Interoperability Steps By Chris Kentouris 2/16/09Momentum is building with announcements by clearinghouses and depositories earlier this month that further the European Union's efforts to reduce post-trade processing costs by improving interoperability.On Feb. 3, the same day that Link Up Markets, a joint venture of eight central securities depositories, unveiled its March 30 launch date, the European Multilateral Clearing Facility (EMCF) and SIX x-clear said they had signed a memorandum of understanding to provide competitive clearing to the trading venues they service.Chi-X Europe, whose clearer is Fortis subsidiary EMCF, says it will be the first multilateral trading facility (MTF) to take advantage of the new link to offer users a choice of central counterparty. NYSE Euronext's MTF, which recently had its rollout delayed for a second time, in October named Depository Trust & Clearing Corp. subsidiary EuroCCP as its clearing provider but said it will also let LCH.Clearnet, SIX x-clear and EMCF act as central counterparties (CCPs) once they establish interoperability."Choice and competition offered through this horizontally integrated CCP model will result in lower costs," said Hirander Misra, COO of consortium-owned Chi-X Europe. "It's a better alternative than having trades go to only one CCP." Jan Bart De Boer, chairman of EMCF's supervisory board, added that "in post-trading, competition, not consolidation, delivers better and cheaper services for market participants."While the European Commission has sought to harmonize cross-border clearing through the 2006 voluntary code of conduct for market infrastructures, only Switzerland's SIX x-clear and London- and Paris-based LCH.Clearnet have established a clearing link-for London Stock Exchange trades. SIX x-clear and EMCF say their connection will be live this summer.Depository ConnectivityMadrid-based Link Up Markets, announced in April, aims to establish an interoperability hub for Germany's Clearstream Banking Frankfurt, Greece's Hellenic Exchanges Group, the Cyprus Stock Exchange, Spain's Iberclear, Austria's Oesterreichische Kontrollbank, Switzerland's SIS SegaInterSettle, Denmark's VP Securities Services and Norway's VPS. The German, Austrian, Swiss and Danish depositories will be the first to interconnect; Greece and Spain will follow in June and Cyprus and Norway in the fourth quarter."We have fulfilled our commitment to be live by this date," said Tomas Kindler, CEO of Link Up Markets, adding that the schedule reflects the level of preparedness at each depository. "In some cases we are improving on the bilateral links between some of the depositories, while in other instances there was no cross-border link," he said. The depositories in Greece and Cyprus, for example, use the same trading and settlement platforms and do not have external links to any other depositories.Members of Link Up Markets will use International Organization for Standardization (ISO) 15022 message types for all communications but can choose to send them over the Swift messaging network or proprietary systems. "Because of the size of our book of business we feel it will be more cost-effective to start with a proprietary link," explained Vivian Mitropoulou, senior project manager at the Hellenic Exchanges' international division. "The larger depositories are in a better position to negotiate rates with Swift." The Greek depository had about EUR68 billion ($88 billion) in assets under custody at the end of last year.Though he declined to provide an average fee for using Link Up, Kindler said that the cost for settling a cross-border European trade will be as much as 80 percent less than through an intermediary bank. Participating depositories would also be charged messaging fees.Euroclear has estimated that when it consolidates its depositories in the U.K., Ireland, France, Finland, Sweden the Netherlands and Belgium onto a single platform in 2011, it will generate an annual cost savings of EUR300 million ($388 million) for its members.Euroclear supports the Link Up initiative "in principle," said director of strategy Michel Boving, "since it aims to reduce cross-border settlement inefficiencies and costs. But we question how it will deliver the meaningful cost savings it claims without systems consolidation and harmonizing market practices as the Giovannini Group recommends." The EC-sponsored Giovannini Group in 2003 advocated a series of measures to eliminate 15 barriers to unified European clearance and settlement.The European Central Bank says that central depositories that outsource their settlement functions to the Target2-Securities platform, expected to begin operations in 2013, could pay 28 eurocents for a cross-border transaction. That number, however, does not include the fees that depositories charge their clients.
Scott Riley
EMCF Business Development
European Multilateral Clearing Facility
8th Floor 50 Bridge Street Sydney 2000
((Off)+61 (0)2 8916 9634 È(Mob): +61 (0)418 117 627
* scott.riley@au.fortis.com
CDS Clearing: The land grab is on. LSE interest is of course fuelled by profitability. Tensions rise to the surface between LCH.CN Ltd & SA. This is in turn reflected at the policy level UK (out) / Eurozone (in).
MTFs: The secrets out??? Yep, pricing is a key component of the MTF business model.
FSA fee increases: We’ll know sub prime is over when we, the end investor, pays. Well, APCIMS is alerting us to where the FSA charges are going to bite.
Fragmentation: Flurry of activity on this topic this week. FESE joins the game and announce some consolidated stats. Equiduct announce their product offering too. And a summary from JPM.
Kerviel: Pathetic. Didn’t even read the story.
NYSE Universal Trading System: Ahhh, the end of an era for those of us familiar with NSC. Another one for memory lane.
And the trivia bit…..
Communication: The 3 most effective ways to communicate in todays modern age: Tele-phone, Tele-vision, Tell-a-woman.
Optical Illusions and the Illusion of Love
http://www.sciam.com/slideshow.cfm?id=optical-illusions-and-love&thumbs=horizontal&photo_id=68E814AA-A9CA-FFED-ADD30AA83F924C1E
http://www.sciam.com/slideshow.cfm?id=optical-illusions-and-love&thumbs=horizontal&photo_id=68E814A4-C686-678B-0CBC4863DFDD4E9E
….And for a mere 21 euros!
http://www.madeindesign.com/prod-Psyshirt-love-femme-Pa-Design-refpa85t1l.html
I should also mention the Aussie bushfires. Sure, this is part and parcel of our great southern land, an occupational risk you might say. Nevertheless, the carnage, pain and tragedy is awful for those touched by it (like any natural disaster). One thing that struck me was the plea for simple items, like a tooth brush, or a comb. A stark reminder of the luxury we surround ourselves with every day and take for granted. We have much to be grateful for.
Malabar to Little Bay swim.
Well, this was a bit of a personal nightmare.
It was always a bit self indulgent doing this swim. My daughter, Rebecca, had been in surgery on Friday to get 4 wisdom teeth out.
Anyway, Sunday morning, a dark and raining day, and I was running late (making smoothies for Rebecca etc.).
Got to the swim, but missed getting my timing chip. So no formal results for this one.
‘Nice’ conditions on arrival. Sea was black and foreboding, and a light drizzle of rain.
Other weird thing was Salps.
When I got to waters edge I was pretty put off, it was awash with white things that I just assumed were jelly fish.
Still, the beach was not closed so I assumed they were the non-stinging kind of jelly fish.
http://en.wikipedia.org/wiki/Salp
Anyway, got the race underway and no stings..so off we go..through the swarming Salp. (Oh, I did follow surf life saving advice on shark attack and check I was not bleeding from any limbs before the start).
I thought it was a bit weird that everyone was heading towards the left of the headland, I assumed it was just to make the rounding a bit easier.
Conditions were ‘challenging’. Nice big swell bobbing everyone up and down, Salp, and then the driving rain started…Ah, the joy.
Anyway, we finally get out into the open water, and I round the bouy and turn right, on my way to little bay and I notice everyone else is heading back to shore.
Ahhh, they’ve changed the race course due to the conditions. I guess they just forgot to tell me.
Well, it sure woke me up. So far every ocean swim is different. You and the event really are at the mercy of the elements. This would have been that much more enjoyable if a) I knew that Salp were non-toxic and b) if someone had told me the course had changed (which is my own fault for being late).
A good wrap at:
http://www.oceanswims.com/nsw89/090215.html
Next one, Sydney Harbour. This week. I think I’ll have a rest….and watch some Rugby!
Super14, all home teams to win apart from two away winners, Reds (hopefully) and Lions.
Of course, need to add the blog site:
http://clearingandsettlement.blogspot.com/
Whatever you’re up to, have a great week-end,
S
LCH.Clearnet To Clear CDS in Eurozone by Year-End
By Shane Kite
LCH.Clearnet announced today that it plans to introduce a Eurozone clearing service for credit default swaps (CDS) by December 2009, pending regulatory approval.
The service, which will be managed by the clearinghouse’s Paris operation
http://www.securitiesindustry.com/news/23194-1.html?ET=securitiesindustry:e1463:171544a:&st=email
And
LCH.CLEARNET TO DEVELOP EUROZONE CLEARING HOUSE FOR CREDIT DEFAULT SWAPS
LCH.Clearnet has announced plans to launch a clearing service for credit default swaps in the Eurozone by December 2009.
More on this story: http://www.finextra.com/fullstory.asp?id=19639
NYSE Euronext, LCH.Clearnet Downplay CDS Clearing Rift
By Jacob Bunge
CHICAGO -(Dow Jones)- NYSE Euronext (NYX) and London-based clearinghouse LCH.Clearnet on Wednesday downplayed perceptions of a growing schism over their respective plans to clear credit derivative trades. In a statement, the two companies emphasized their commitment to clearing credit default swaps via NYSE Euronext's BClear platform, their joint effort that went online in late December and remains the sole functioning CDS clearing service.
http://www.nasdaq.com/aspxcontent/NewsStory.aspx?cpath=20090218%5cACQDJON200902181029DOWJONESDJONLINE000715.htm&&mypage=newsheadlines&title=NYSE%20Euronext,%20LCH.Clearnet%20Downplay%20CDS%20Clearing%20Rift
CDS DEALERS BOW TO PRESSURE AND COMMIT TO EU CLEARING COUNTERPARTY Nine of the leading dealer firms in the credit default swaps markets have committed to the use of central counterparty clearing for CDS in the European Union by end-July 2009.
Full story: http://www.finextra.com/fullstory.asp?id=19659
LSE revealed as core consortium member The London Stock Exchange is a core member of the bank-led consortium that is preparing to bid for LCH.Clearnet, according to documents seen by Financial News.
MTFS SET TO WIN MORE MARKET SHARE AS PRICE COMPETITION TAKES HOLD Trading on new multilateral trading facilities (MTFs) in Europe costs less than a fifth of the fees levied by traditional exchanges according to the latest research from TowerGroup.
Full story: http://www.finextra.com/fullstory.asp?id=19657
INDUSTRY ASSOCIATION WARNS ON EUROPEAN CLEARING PUSH The Futures and Options Association is urging UK authorities to respond to a proposal for over-the-counter derivatives clearing that the industry body says could split European financial services in two. Anthony Belchambers, chief executive of the FOA, is understood to be writing to the UK Treasury urging it to oppose calls to mandate a eurozone-based solution for over-the-counter derivatives clearing.
http://mail.efnmail.co.uk/r/38531615/MjU3MzA2OjIwMjU3/
LCH.CLEARNET BIDDERS NEED TO KEEP EVERYONE HAPPY If those leading the LCH.Clearnet bid wish to be taken seriously and succeed in winning the suddenly coveted clearing house, they should take note of the reactions to the proposed deal.
http://mail.efnmail.co.uk/r/38531635/MjU3MzA2OjIwMjU3/
FORMER LEHMAN MAN ROLET TO TAKE LSE HELM; CHI-X MAKES NEW HIRES The London Stock Exchange has confirmed the appointment of Xavier Rolet as its next chief executive. The former Lehman Brothers man will take over from Clara Furse in mid-May.
Full story: http://www.finextra.com/fullstory.asp?id=19637
INDIA'S MCX-STOCK EXCHANGE CLEARING CORPORATION COMMENCES OPERATION
http://www.finextra.com/fullpr.asp?id=26024
APCIMS HITS OUT AT FSA FEE INCREASES
http://www.finextra.com/fullpr.asp?id=25985
Poland to invite four foreign bourses for Warsaw exchange Poland’s government intends to invite four foreign stock exchanges to negotiations on ultimately buying the Warsaw stock exchange, said the treasury ministry. (Financial Times)
Misdirected order flow is costing investors millions.
Equiduct, the pan-European equity trading platform, is expanding its data offering and launching a new liquidity fragmentation analytics service, OrangeLFA, to complement its OrangeVBBO product. This shows that a significant number of trades on the incumbent exchanges are not being traded at the best price available.
http://www.equiduct-trading.com/downloads/equiduct-orangelfa-january-2009-uk.pdf
FESE publishes for the first time the ‘European Equity Market Share Report' which gathers data from all the market segments operated by FESE members (including Regulated Markets and Multilateral Trading Facilities) as well as from the major MTFs operated by investment firms in the European market. The FESE Statistics Methodology used in the Report has been agreed by all the trading venues involved, both RM and MTFs.
http://www.fese.be/en/?inc=news&id=99
Competition drags LSE to record low The uphill task facing Xavier Rolet, the chief executive-elect of the London Stock Exchange, was underlined this week as it emerged the LSE’s share of trading in FTSE 100 index stocks fell to an all-time low.
J.P. Morgan Europe Liquidity Fragmentation Index - Week 7
· Liquidity fragmentation in Europe last week was 16.4%, 0.4% down on the previous week driven by France, Germany, Switzerland and the Netherlands. At a stock level, Roche, British American Tobacco and Siemens were the main contributors (see table 4). · Ireland (69.8%), UK (27.0%), Netherlands (21.7%), France (19.6%) and Germany (19.0%) were the most fragmented markets in percentage terms. · UK ($2.0bn), France ($1.0bn), Germany ($0.9bn), Netherlands ($0.3bn) and Switzerland ($0.3bn) were the most fragmented in terms of Displayed Liquidity traded away from the primary market. · Chi-X achieved average daily turnover (ADT) of $2.7bn, equivalent to 9.7% of flow in Chi-X names. Total ($88m, 16.6%), BP ($87m, 24.9%), and Rio Tinto ($66m, 15.3%) had the highest ADT on Chi-X. · ADT on the Turquoise Displayed Order Book was a new high at $1.7bn, equivalent to 6.0% of flow in Turquoise names. Total ($41m, 7.9%), Royal Dutch Shell A ($40m, 12.3%), and Siemens ($34m, 9.2%) had the highest ADT on Turquoise. · BATS achieved ADT of $347.6m. BHP Billiton ($12.0m, 3.5%), Rio Tinto ($11.1m, 2.6%) and BP ($10.9m, 3.1%) had the highest ADT on BATS. · Nasdaq OMX achieved ADT of $31.2m. · 7 stocks traded more than 20% ADV on Dark venues. See Figures 7 – 10 and Tables 8 - 9 for further details.
Kerviel blames SocGen for 'dangling the keys' Jérôme Kerviel, the alleged rogue trader, has blamed the risk culture at his former employer Société Générale for a €4.9bn ($6.4bn) trading loss last year. His comments come as the chief executive of Goldman Sachs this morning pointed to the weaknesses in banks' risk controls that have exacerbated the crisis in the global banking industry.
17/02/2009 14:23:00
NYSE EURONEXT COMPLETES MIGRATION TO UNIVERSAL TRADING PLATFORM
NYSE Euronext has migrated trading of all European equities, including exchange-traded fund (ETF) products, listed on the company's Amsterdam, Brussels, Lisbon and Paris markets to its next-generation Universal Trading Platform from the pervious Nouveau Système de Cotation (NSC) platform.
More on this story: http://www.finextra.com/fullstory.asp?id=19649
SUNGARD SETS UP GLOBAL TRADING BUSINESS
http://www.finextra.com/fullpr.asp?id=25998
18/02/2009 15:20:00
SWISS EXCHANGE STARTS MIGRATION TO NEW TRADING PLATFORM
SIX Swiss Exchange has gone live with its new SWXess modular trading platform, starting a migration period that gives member banks until April 9 to move off the old SWX platform. Swiss Bank BEKB BCBE has become the first bank to connect to the FIX-based standard interface module, using the GLOX7 trading connectivity solution from GlobalXTrade.
More on this story: http://www.finextra.com/fullstory.asp?id=19653
Comment: CDS market draws unjust fire Warren Buffett called derivatives weapons of mass destruction, but even the Sage of Omaha has bought a few recently. Today, a European industry body for exchanges made a sweeping generalisation that off-exchange traded derivatives were responsible for the credit crisis, while credit default swaps in particular have attracted the financial services equivalent of UN weapons inspectors. But does the CDS market deserve such hostility?
AUSTRALIAN FINANCIAL REVIEW: Elstone Expected to Stay as ASX ChiefBy Matthew Drummond2/17/09Robert Elstone’s future as chief executive of the Australian Securities Exchange is expected to be discussed when the board meets today, as the bourse’s directors seek an indication of whether Mr Elstone will stay on with the company he has run since its 2006 merger with the Sydney Futures Exchange.While the subject is not on the formal agenda, it is understood ASX’s directors are keen to get an early take on Mr Elstone’s intentions given his term is due to expire on June 30 and can be extended by mutual agreement with the board.Though he is yet to give any indication on whether he wants an extension, it is anticipated he will stay on. The widely respected CEO has been credited with bolstering profits at the ASX, mainly by stripping out costs. His tough management of costs was one of the main reasons ASX was forced to dump its chief executive Tony D’Aloisio and appoint Mr Elstone as head of the merged group in 2006 following a shareholder push.In his first-half profit result as ASX chief he delivered a 40 per cent jump in net profit followed by a 34 per cent rise the following half.He has also cushioned the ASX against swings in the amount of share trading by introducing a rebate structure which rewards brokers in bull markets but takes money back when trading activity falls. Clawing money back helped to keep profit steady in 2008.With no major debt and no end in sight to the exchange’s monopoly in providing a platform for trading in ASX-listed stocks, the company is considered to be in as solid form as possible to weather a prolonged rout in equities.Rival exchange Chi-X has been waiting for one year and AXE-ECN have been waiting for three years to obtain the licences they need to set up rival exchanges to compete with the ASX. But the federal government has been reluctant to shake the market structure during the financial crisis, thanks in part to lobbying by Mr Elstone and senior ASX executives and directors in Canberra.“I’d be surprised if he does not see them through the next phase of the ASX’s life,” one analyst said. “At some point we’re going to get competition in equities trading. It’s difficult to know when, but I’d think it’s important that he’s there when it happens.”He said Mr Elstone had wide investor support. “He’s taken a conservative approach and he copped a bit of criticism during the bull market, but he’s not getting that criticism now,” the analyst said.ASX will report results for the six months to December 31 tomorrow. UBS analyst Chris Williams has forecast a net profit of $176 million, down marginally from the $187 million a year earlier.With only a handful of companies floating in the second half of last year, listings revenue is expected to fall, as well as revenue from processing shares and derivative trading.Reported trading figures from January showed just $57 billion in shares changed hands for the month, the lowest amount in five years. Total futures and options contracts numbered just 3.1 million for the month, a six-year low.With revenues falling, analysts are closely looking at how the ASX is managing costs. The company gave guidance that costs would rise in financial 2009 at CPI levels.Analysts are also looking for update on initiatives announced by the ASX last year to improve services to large institutional investors. The proposed services include a “dark pool” to be called Volume- Match, where large investors can anonymously move big share parcels, and “iceberg orders” allowing traders to enter a large trade but reveal only a small amount of the total volume at one time.=====================FINANCIAL TIMES MANDATE: The Ongoing Search for LiquidityBy Ceri Jones February 2009Multilateral trading facilities (MTFs) have made inroads into European equities trading and are likely to drive down pricing, and threaten the data revenues of the main bourses.Four MTFs are now operational in Europe. Bats Europe, Nasdaq OMX Europe and Turquoise have launched MTFs since mid-2008, joining Instinet company Chi-X, which was first off the blocks in March 2007.Chi-X and Turquoise, which went live last August, had a headstart on the market, and have systematically taken the lion's share. At the end of the year Chi-X accounted for 13 per cent of trades on FTSE stocks, while Turquoise, which can count on the support of its big bank shareholders, took 6 per cent, according to the Fidessa Fragmentation Index.Chi-X has had particular success in Euronext Amsterdam where it has taken nearly half the trade in certain blue chips such as Philips. The first-mover became profitable in October, but that month probably revelled in the highest equity trading volumes of all time, and since then volumes have halved.Nasdaq and Bats have not attracted the same commitment, accounting for 0.8 per cent and 0.36 per cent of trades in FTSE stocks at the year-end respectively."One of the biggest challenges is how to get liquidity out to the platform and how to encourage dealers to buy into providing liquidity," says Harrell Smith, head of product strategy at Portware."Perhaps some of the newer entrants such as Nasdaq would have fared better with the backing of the broker-dealer community. The competition is good for pricing and performance but those that succeed will be those that make it attractive to participants, by giving them a stake."There is growing concern that the sharp downturn in trading volumes could make it difficult for MTFs to break-even. NYSE Euronext blamed extreme market conditions for postponing the launch of its planned MTF, now scheduled for March, while Pipeline has pulled its launch back from October. There are rumours that Nyfix Millennium is looking for a buyer, while Scandinavian MTF Burgundy has been struggling with settlement and counterparty issues.Equiduct Trading, owned by Borse Berlin, has pulled its launch back from February. Artur Fischer, joint-CEO, said trading participants are not as prepared as expected, transactions in the marketplace have been shrinking and that the price war among brokers had not helped. Prospective members may have previously been deterred from connecting because Equiduct does not offer access to pan-European central counterparties, such as EuroCCP or EMCF but may now favour three well-established counterparties it can offer.MARKET SHARE"Unless you can catch significant market share, making money is going to be tough in this environment, but the volumes some of these guys are achieving is very small," says Jerry Lees, head of alternative execution services at Cheuvreux. "We've had 29 conversations with MTFs about potential connectivity but many of these different products are now on hold."Nevertheless, Europe is only in its first wave of market fragmentation compared with the US. The UK, the Netherlands and, France and Germany are leading the way while some other countries have been slow to implement the EU's Markets in Financial Instruments Directive (Mifid). Both Turquoise and rival Chi-X have experienced difficulties entering the Spanish market owing to complications related to the country's Iberclear clearing system.This fragmentation has created a new demand for Smart Order Routers (SORs), that sweep different execution venues looking for the best price, a process that involves a hierarchy of decision-making criteria based on price, size and liquidity. The best run multi-sweeps will continuously watch all the order books and will adjust any limit orders. Some traders have been slow to capitalise on execution platforms as both price formation and price discovery mechanisms, however.LACKING INVESTMENTThe products have also been found lacking. For instance, alternative trading venues failed to benefit from the shutdown of the London Stock Exchange for seven hours on 8 September 2008, because many brokers' SORs were not configured to take into account that the primary market could go down."A lot of SORs aren't very smart at all," says Bradley Duke, head of institutional electronic sales in Europe, at Knight Capital. "Many do not re- evaluate the trade through the life of an order on a continuous basis, including some from big name providers.""While Tier One institutions have deep enough pockets to pay for this IT investment, Tier Two brokers may struggle with perhaps the exception of BNP, Calyon and us," says Richard Hills, global head of electronic services, Societe Generale."Firms that are out of the top ten will really struggle to make the level of investment required. Tier Three brokers will largely sign up with software houses. Fidessa for example has 20 clients."The issue for vendor provided products is whether they will keep pace with the plethora of new venues as they are launched, and whether they can ever incorporate the intelligence provided by the in-house traders in a broker-built smart router.The impact of SORs and algorithms on trading costs has been huge, but it is also part of a long-term trend."In terms of driving costs down there is an incentive to use MTFs much more than the LSE, but liquidity, not cost, is the more important factor," says Mr Hills. "Currently, if a router is connected to the LSE there is a much greater chance of getting a hit but as soon as an MTF begins to take more than 50 per cent, then that situation will change. The LSE has also been reducing its prices to guard against this trend.""Costs have come down dramatically in 12-14 years," says Kevin Houston, director of Rapid Addition, "but it is difficult to know how much of that is down to other factors and while the liquid section of the market is in a position where the technologies work well for it, in the areas of mid caps or where a very large slug of shares are sold the solutions are not as efficient."Both buyside and sellside are looking for the same features from trading execution, particularly where the buyside is actively trying to obtain alpha from the process, but shaving off costs is less important for passive buyside such as pension funds and other long-term investors, and even for some hedge funds where for instance the objective is to take a controlling share, in which case a few basis points of slippage is neither here nor there."Three important things are changing - market structure, tools and trading habits," says Miranda Mizen, senior consultant at Tabb Group. "In Europe, the market structure is under enormous strain as it changes from a vertical structure to a more pan-European horizontal structure."To cope with the changes, traders need new tools, and this takes time and resources, and many do not yet have the sophisticated tools they need," she explains. "They must determine which crossing networks to connect to, and be able to measure and compare executions on the different trading venues. It is tough as the buyside is being bombarded with information and has to increase their education while the economic environment has put many in survival mode."In large part algos are productivity tools, enabling a reduction in headcount. In options trading, for instance, traders have traditionally used a combination of both the phone and electronic trading systems when trading large blocks or complex multi-legged options orders, especially for less liquid options. An algo frees up time to focus on other opportunities, and the trading process itself automatically generates back office processes.As traders begin to use algos for their more complex trading activities, they may require less assistance for trading support from brokers, empowering them to act more independently. "Buy-side dealing desks are getting more sophisticated and capable of trading themselves," says Belinda Keheyan, head of international marketing at International Technology Group (ITG). "Often it is individuals that are enabled by technology as they have much greater choice and more direct access. They are taking control to trade in a more innovative way and opting to in-source technology."Dark poolsTrades have been crossed on exchanges for years perhaps 60 per cent of the LSE trades are crossed and 50 per cent of trades in Europe. What has changed is the creation of automated engines to match buy and sell orders, known as 'dark pools of liquidity'.Dark pools provide two services critical to the institutional investor liquidity, from various fragmented sources, and anonymity, to avoid impacting publicly-quoted prices. This anonymity, for example, will prevent competitors from front-running, or attempting to gain advantage by trading mispriced securities ahead of others.There are 24 such pools in the US, such as Sigmax and Bats, accounting for around 9 per cent of trades, compared with 3 per cent in the Europe. This is expected to double next year, according to Miranda Mizen, senior consultant at Tabb Group, as dark pools proliferate in Europe and begin to compete for business with traditional, organised exchanges. The typical trade size on established bourses has come down markedly as trading patterns move to a more frequent slicing and dicing of orders and trading in pieces over an hour or a day.There are regulatory issues, however. Producing a dark pool and resting liquidity in that pool requires registration under Mifid as a multilateral trading facility (MTF), but the legal position is poorly defined and some big brokers have taken the view that the resting place is just another cross, and that in not inviting external flows, only internal flows, there is no requirement to register. The registration process is reckoned to take six months.Duncan Higgins, head of client relationship management at Turquoise, says the MTF has seen a big increase in the use of dark orders, of between 30-50m euros a day and doubling month on month. Moreover, he points out, it is early days."This is when a relatively small number of firms are using our dark functionality," Mr Higgins adds. "As more firms develop their capability we expect to see ever more growth from that."
SECURITIES INDUSTRY NEWS: EU Depositories, Clearinghouses Take Interoperability Steps By Chris Kentouris 2/16/09Momentum is building with announcements by clearinghouses and depositories earlier this month that further the European Union's efforts to reduce post-trade processing costs by improving interoperability.On Feb. 3, the same day that Link Up Markets, a joint venture of eight central securities depositories, unveiled its March 30 launch date, the European Multilateral Clearing Facility (EMCF) and SIX x-clear said they had signed a memorandum of understanding to provide competitive clearing to the trading venues they service.Chi-X Europe, whose clearer is Fortis subsidiary EMCF, says it will be the first multilateral trading facility (MTF) to take advantage of the new link to offer users a choice of central counterparty. NYSE Euronext's MTF, which recently had its rollout delayed for a second time, in October named Depository Trust & Clearing Corp. subsidiary EuroCCP as its clearing provider but said it will also let LCH.Clearnet, SIX x-clear and EMCF act as central counterparties (CCPs) once they establish interoperability."Choice and competition offered through this horizontally integrated CCP model will result in lower costs," said Hirander Misra, COO of consortium-owned Chi-X Europe. "It's a better alternative than having trades go to only one CCP." Jan Bart De Boer, chairman of EMCF's supervisory board, added that "in post-trading, competition, not consolidation, delivers better and cheaper services for market participants."While the European Commission has sought to harmonize cross-border clearing through the 2006 voluntary code of conduct for market infrastructures, only Switzerland's SIX x-clear and London- and Paris-based LCH.Clearnet have established a clearing link-for London Stock Exchange trades. SIX x-clear and EMCF say their connection will be live this summer.Depository ConnectivityMadrid-based Link Up Markets, announced in April, aims to establish an interoperability hub for Germany's Clearstream Banking Frankfurt, Greece's Hellenic Exchanges Group, the Cyprus Stock Exchange, Spain's Iberclear, Austria's Oesterreichische Kontrollbank, Switzerland's SIS SegaInterSettle, Denmark's VP Securities Services and Norway's VPS. The German, Austrian, Swiss and Danish depositories will be the first to interconnect; Greece and Spain will follow in June and Cyprus and Norway in the fourth quarter."We have fulfilled our commitment to be live by this date," said Tomas Kindler, CEO of Link Up Markets, adding that the schedule reflects the level of preparedness at each depository. "In some cases we are improving on the bilateral links between some of the depositories, while in other instances there was no cross-border link," he said. The depositories in Greece and Cyprus, for example, use the same trading and settlement platforms and do not have external links to any other depositories.Members of Link Up Markets will use International Organization for Standardization (ISO) 15022 message types for all communications but can choose to send them over the Swift messaging network or proprietary systems. "Because of the size of our book of business we feel it will be more cost-effective to start with a proprietary link," explained Vivian Mitropoulou, senior project manager at the Hellenic Exchanges' international division. "The larger depositories are in a better position to negotiate rates with Swift." The Greek depository had about EUR68 billion ($88 billion) in assets under custody at the end of last year.Though he declined to provide an average fee for using Link Up, Kindler said that the cost for settling a cross-border European trade will be as much as 80 percent less than through an intermediary bank. Participating depositories would also be charged messaging fees.Euroclear has estimated that when it consolidates its depositories in the U.K., Ireland, France, Finland, Sweden the Netherlands and Belgium onto a single platform in 2011, it will generate an annual cost savings of EUR300 million ($388 million) for its members.Euroclear supports the Link Up initiative "in principle," said director of strategy Michel Boving, "since it aims to reduce cross-border settlement inefficiencies and costs. But we question how it will deliver the meaningful cost savings it claims without systems consolidation and harmonizing market practices as the Giovannini Group recommends." The EC-sponsored Giovannini Group in 2003 advocated a series of measures to eliminate 15 barriers to unified European clearance and settlement.The European Central Bank says that central depositories that outsource their settlement functions to the Target2-Securities platform, expected to begin operations in 2013, could pay 28 eurocents for a cross-border transaction. That number, however, does not include the fees that depositories charge their clients.
Scott Riley
EMCF Business Development
European Multilateral Clearing Facility
8th Floor 50 Bridge Street Sydney 2000
((Off)+61 (0)2 8916 9634 È(Mob): +61 (0)418 117 627
* scott.riley@au.fortis.com
Thursday, February 12, 2009
LCH.CN bid, QuoteMTF, SDRT, Aust MLO, Sharks!
G’day All,
Another week flies by.
Clearing landscape: I think the EC is right to call for a home grow solution for CDS. Forgive me for stating the obvious, but I think the reason for a competing bid to DTCC for LCH.CN is because people see value in clearing (all the more so after the events of the last 6mths). The value in clearing is mixed. Derivatives, last time I looked are around 3pence. That, given volumes, is maybe a bit high now, but given the nature of the contracts (tenure and leverage) I don’t think needs to be attacked. Equity clearing…different story. Fees were unsustainable and this has been evidenced by fee cuts. We still have a long way to go. Equities I believe will become highly commoditised. Blue chips, will cost far less, illiquids and others may cost more. There has been an inadvertent cross subsidy going on that has only been exposed with the advent of competition. This was never intentional. Freight, energy, metals all interesting. Now CDS, swapclear etc. There is some scale to go for. And with scale comes margin. And with margin comes renewed interest. On CDS I would say that the work is far from done. Clearing thrives on commoditised products and processes. Then we need to consider the all important default arrangements. The CDS world was not born with these restrictions. It is hard to discipline unruly children…but a common aligned industry through the vested interest of equity ownership I believe has a better chance.
Anyway, the land grab for clearing niche markets is on. I do not think all the value in the LCH.CN deal is in equities. It is certainly in scale.
MTFs: Welcome QuoteMTF – see also Canadian MTFs
Carnegie: Well, I thought the governments would dispose in 2010. Those Sweds are always fast movers when they want to be. (first to electronic trading etc.)
German SDRT: abolished in 1991…oh what a backward step to re-instate it. I understand the political drivers, but they are taxing the wrong source. As previously stated, we’ll know sub prime is over when we start to feel it as tax payers.
Aust Market: Good piece in the Australian.
JP Morgan: Liquidity fragmentation (I’m drawn to this report, especially the new graphs)
And the swimming bit….
Wow, last week someone (G’day Pierre) asked me about shark attacks during open water swims. I was a bit dismissive. This week a Navy diver was mauled in Sydney Harbour (you’ll find me at the harbour swim http://www.sydneyharbourswim.com/index.html on 1st March) and another got his arm nibbled at Bondi (as in last weeks North Bondi Classic and the earlier Bondi to Bronte).
SYDNEY, Feb 13 AAP - Life savers have urged beach-goers not to panic after a surfer nearly lost his hand in a shark attack at Sydney's famous Bondi Beach. The 33-year-old man was savaged on Thursday night, the day after a navy clearance diver was mauled by a shark in Sydney Harbour, within sight of the Sydney Opera House. The Bondi local was attacked after catching a wave about 7.30pm (AEDT), when the shark locked its jaws onto his left arm. Surf Life Saving Australia (SLSA) said despite the attack at Bondi, and the attack on the diver at Garden Island on Wednesday, shark attacks were still unlikely if people avoided swimming at dawn or dusk, or in murky water. It also urged people to swim between the flags - in close proximity to shark safety equipment - not to enter the water when bleeding, and not to swim near schools of fish. SLSA shark adviser, the CSIRO's Barry Bruce, said swimmers had a much bigger chance of drowning than being mauled by a shark. "It is important to recognise that there is always some inherent risk when using an environment inhabited by sharks," Mr Bruce said. "The risk of shark-related incidents varies according to the time of day, time of year, the geographic location and species of shark in the area." Mr Bruce said there was no evidence to suggest shark numbers or the number of attacks was on the increase. In response to the Bondi attack, the Westpac Life Saver Rescue Helicopter had increased its patrols along Sydney's beaches, the SLSA said. AAP ab/evt
For those that are interested more at: http://www.oceanswims.com/
Last weekend I did the North Bondi Classic.
This is a 2km’ish swim out and around bondi. Out to one headland (north) across to the next headland (south) and then turn around, head north and back to the beach.
Two things of note on this event. One, there was almost no surf but this was because the currents had changed during the week. The water was 16C. Now some people think 16C is OK, for me, I think it is very cold. For the first 300 meters I could not breath properly, ya know that feeling when the bitter cold takes your breath away? After about 500 meters I got that tingly feeling before you start going numb, which was good, because then you don’t feel the cold anymore. The other notable item in this event is the number of swimmers, 1,270. That is a lot of people to crash through, so although the surf was calm, the course was littered with bodies and hence lots of ‘bumps’. Anyway, I came in OK and boy, did it feel good to walk up the beach and feel the sun on my back. (Weird burying my toes in the sand and not feeling them). Anyway, for totally different reasons to the Big Swim, I’m also noting this as a hard swim simply due to the icy conditions.
I’ve also noticed there are some pretty fit and serious swimmers turn up at these things. I’m starting to feel not so bad about some of my times.
Results, Overall 510/1270. Males 377/887, Age group 53/128. Winner 25:52, Me: 37:15 (and just happy to be on dry land).
Also at:
http://www.northbondisurfclub.com/html/s02_article/article_view.asp?id=838&nav_top_id=-1&nav_cat_id=-1
This weekend, despite the sharks, warmer waters and bigger surf is predicted for the:
http://www.rainbowclubaust.com.au/oceanswim/
Looking forward to this one!
And….I’ll be following the SLSA advice, if I am bleeding from any limbs I won’t be entering the water during shark feeding hours of dawn and dusk.
Have a great week-end all,
S
The European Commission calls for a CDS clearinghouse
A regulatory approach is necessary for the clearing of CDS on a CCP, McCreevy said and called on the EP to support an amendment in the CRD . He also strongly opposed to any carve-out of all short term inter-bank exposures from any prudential rules.
http://online.wsj.com/article/SB123370034868545223.html?mod=todays_europe_money_and_investing
Consultation on CESR/ESCB draft recommendations for securities settlement systems, and draft recommendations for central counterparties
http://www.cesr-eu.org/index.php?page=responses&id=124
CEBS – Committee of European Banking Supervisors:
Consultation.
CEBS has committed to undertake further work to establish the materiality of custodian banks internalising settlement activities or carrying out CCP-like activities.
http://www.c-ebs.org/getdoc/954bfd48-9f42-445c-bc7c-0463afa92c10/CEBS-2009-07-Annex-1-(Questionnaire-to-market-part.aspx
Hungary-based equity MTF set to challenge European rivals Europe’s seemingly crowded equities trading landscape is set to have its fifth participant in June with the launch of Quote MTF, a platform majority-backed by Canadian entrepreneur Peter Beck, founder of SwiftTrade, a Canadian equities trading firm. (Financial Times)
Burgundy chooses EMCF, plans multi-clearer model
QUOTE MTF TO ENTER PAN-EUROPEAN TRADING MARKET
The crowded European market for stock exchange trading will welcome another new liquidity platform in the coming months with the summer launch of Quote MTF, an upstart independent venue operating out of Hungary.
More on this story: http://www.finextra.com/fullstory.asp?id=19620
New Hungarian MTF will have liquidity “from day one”
Bit more context:
CANADA STOCKWATCH: CNSX Alpha Trading Averages 16.9 Million Shares By Mike Caswell2/9/09Alpha Trading Systems was the most active of Canada's alternative trading systems in the week ended Feb. 6, 2009, with average daily volume of 16.9 million shares, down from 17.8 million the prior week. In second place was Pure Trading, which averaged 10.5 million shares, followed by Chi-X Canada, with 5.1 million shares. The least active ATS was Omega, which averaged 900,620 shares. Combining their volumes, the market share of Canada's ATSs was 6.67 per cent.
EMCF “ready to service LSE flow”
Consortium’s counterbid makes sense When news first emerged that the Depository Trust & Clearing Company was pondering a bid for LCH.Clearnet, the logic seemed impeccable. And when the deal was finally announced last year, it still seemed to make good sense. But now many of the same banks that once gave their support appear to have had an epiphany. Why?
Deutsche Bank wins mandate on LCH.Clearnet bid Deutsche Bank has emerged as an adviser to the consortium of eight banks and interdealer broker Icap that is preparing an €850m (€1.09bn) bid for clearer LCH.Clearnet, Financial News has learnt.
Brokers bidding against themselves in LCH battle
OMGEO DEBUTS COUNTERPARTY RISK MANAGEMENT OFFERING
http://www.finextra.com/fullpr.asp?id=25760
Celent Asia Interview
Buy-side use of electronic trading tools in Asia saw rapid growth between 2004 and 2007, according to a recent study of securities execution conducted by Celent, but barriers to further development remain.
Neil Katkov, managing director of the research and advisory firm’s Asia Research group, acknowledges that several markets have recently made progress, but explains that Asian markets lack the regulatory and structural forces that have pushed Europe and the US towards more advanced trading techniques.
Read the Interview
Nordic duo swoop on Sweden's Carnegie Two Nordic buyout firms have bought Sweden's Carnegie Investment Bank and affiliated insurer Max Matthiessen from state ownership for at least Skr2.2bn (€214m), in one of the first buyouts from government since the credit crunch began.
Election pledge threatens German traders with €15bn tax Investors in Germany could be forced to pay as much as €15bn ($19.4bn) in new trading fees if the country's finance minister presses ahead with plans to impose a tax on share trades.
Frontrunner 'in the frame' as LSE nears chief selection The London Stock Exchange is to name a candidate to replace chief executive Clara Furse before the end of this month, with one
candidate, the former chief executive of Lehman Brothers in France, reportedly emerging as the frontrunner.
Also: http://www.finextra.com/fullstory.asp?id=19611
TOP MANAGEMENT CHANGES AT TRAYPORT AS FOUNDER HOR STEPS ASIDE
http://www.finextra.com/fullpr.asp?id=25844
Barclays balance sheet balloons to over £2 trillion Barclays' balance sheet has now exceeded the gross domestic product of the entire UK economy after ballooning to more than £2 trillion (€2.3 trillion) last year, it disclosed on Monday. (The Guardian)
FSA STATEMENT RE: HBOS
http://www.finextra.com/fullpr.asp?id=25968
The World from Berlin: What Sweden's Nuclear About-Face Means for GermanySweden's government announced on Thursday it was reversing its pledge to phase out nuclear energy. The decision isolates Germany in Europe -- and commentators say it is high time for Berlin to take a new look at nuclear energy here too. mehr...
Tricom delay shows it's time to strip ASX as regulator
Adele Ferguson February 09, 2009
Article from: The Australian
AS the anniversary of Tricom Equities' delayed settlement on the ASX came and went on January 29 - with no signs of a fine or penalty from the ASX for the chaos it caused - work is going on behind the scenes to push the federal Government into handballing ASX's supervisory powers to ASIC.
The Rudd Government has had almost a year to decide whether to simultaneously depose the ASX as supervisor of the markets and bust open its monopoly by granting three new licences to operate rival exchanges. For ASX boss Robert Elstone, that clock is now ticking.
One of the licence applicants, Chi-X, has organised a meeting at the end of the month with Treasurer Wayne Swan, Corporate Law Minister Nick Sherry, Assistant Treasurer Chris Bowen and Finance Minister Lindsay Tanner, to try to speed up a decision.
A few well-placed fund managers are also believed to be looking at ways to get a decision before the end of June.
The global head of Chi-X, Tony Mackay, is currently in Australia to reignite interest and hurry an outcome. This is the first time Chi-X will meet with all the big hitters in the decision-making process.
"We are going to push harder now as we are concerned they are making it more complicated than it needs to be.
"It is understandable there was a delay given the global financial crisis and the Lehman collapse, but with the new short-selling legislation in place, there is nothing to stop them from making a decision," Mackay says.
Mackay, like many operators, believes ASIC is more suitable - and now able - to take over the role of supervising all exchanges, particularly since it reorganised itself last year and appointed two highly regarded operators - Mark Adams, to watch market exchange operators, and Greg Yanko as the regulator in charge of brokers and market participants.
Since the ASX demutualised and listed on its own exchange in 1998, there has been a growing concern in regulatory and investment circles that it should have been stripped of its supervisory powers to avoid any inherent conflicts of interest from operating a money-making business alongside its regulatory duties.
This concern manifested itself at its AGM last year when RiskMetrics, a company that advises big institutional investors on how to vote their share rights, organised a protest vote against one of the ASX's director's on the basis of its woeful performance as market supervisor.
RiskMetrics identified the following areas of concern with how the ASX discharged its role as market supervisor: insider trading, director trading, short-selling disclosure and the 2005 removal by the ASX of the requirement for listed companies to seek shareholder approval for equity to be granted to directors.
The ASX defended the criticism by pointing to ASIC's annual assessment of its supervisory powers, which gave it a clean bill of health.
In an era when regulation will be front and centre stage, following the collapse of capitalism as we know it, the Government will be cognisant that most other countries stripped their main stock exchange of their supervisory powers once they became a listed entity.
It will also be aware that the massive market manipulation that revealed all sorts of holes in the ASX's market rules, as companies were targeted and their share prices shredded, helped bolster the ASX's profits from the volatile trading.
Since the ban on short selling financial stocks was put in place, the ASX's trading activities have depleted markedly. Indeed, the ASX's shares have fallen almost 30 per cent to $24.20 since the first ban on short selling was announced on September 21.
The fact remains that there is an inherent conflict of interest with a listed entity policing its own customers. As one market watcher has often been quoted: "Having this dual role is like the police force being allowed by law to operate a money-making business alongside its regulatory duties. The obvious conflict of interest would undermine law enforcers' capacity to perform their duties efficiently."
In the case of Tricom, a spokesman for the ASX says its contact with Tricom continues and it continues to assist ASIC with its inquiries. "As you know, ASX will not comment on any specific supervisory activity," the spokesman says. "And any consideration of penalties, such as a fine, is for the independent Disciplinary Tribunal to determine. ASX's focus will always be on ensuring the market's stability and integrity -- the timing of a disciplinary outcome is less urgent."
Taking more than a year to penalise a broker for causing such disarray on the market symbolises what is wrong with the ASX and its arm's-length supervisory division. Delays of this kind send out a clear message that the ASX and its independent disciplinary tribunal are not on the ball.
If the ASX is stripped of all regulatory functions, it can be left to get on with what it really wants to do: make money.
==========
THE TRADE NEWS: MiFID Benefits ‘An Illusion,’ Despite Price Improvement By Staff2/6/09Instinet Europe’s chief executive has claimed that many of MiFID’s benefits “are illusory to the end-investor”, despite the agency broker reporting that it had achieved an average of 5.72 basis points of price improvement for clients in Q4 2008. “We pass all price improvement back to our customers,” asserted Instinet Europe’s Richard Balarkas. “But there are a whole host of models on the sell-side. There seems to be little appreciation on the buy-side of the opportunity cost of using a broker that internalises a large percentage of flow, compared to one that opens up to as many external venues as possible,” said. Price improvement is defined as the difference between execution price and the best quoted price on the primary exchange at a given time. Instinet Europe data is based only on executions that remove liquidity from MTFs over the time period. Instinet Europe said it routed nearly 28% of its European equity trades away from primary exchanges by value traded in Q4 2008 and was among the first brokers to connect to the multilateral trading facilities (MTFs) launched last year: BATS Europe, Nasdaq OMX Europe, Turquoise and dark pool NYFIX Euro Millennium. During 2008, the firm also executed the first trade on SWX’s Swiss Block dark pool, launched its own MTF, BlockMatch, and, along with Credit Suisse, became the first broker in Europe to offer reciprocal dark pool access. Instinet Europe executed 35.42% of its trades in French, German, Dutch and UK stocks on MTFs in the final quarter of 2008. Other brokers have also been using smart order routing capabilities to optimise electronic client order flow. According to its latest monthly European Liquidity Report, Citi routed 53% of its UK orders to MTFs in January as well as similar proportions of its Dutch (56%), French (52%) and German (48%) orders. Citi, which does not publish price improvement data, also reported that MTFs captured roughly 20% of market share in these four markets in January. Some sell-side institutions have pointed out that the quality of execution achieved via brokers’ smart order routing capabilities is near-impossible to boil down into headline figures. "Because routing orders in this increasingly fragmented environment is a very sophisticated and complicated process, headline numbers quoting price improvement can be overly simplistic and misleading without proper qualification." said Mike Seigne, co-head of sales, Europe, Goldman Sachs.Although price improvement comparisons can provide some insight into aggressive order execution quality, this is not the case for passive orders. "An SOR will typically route an aggressive order to the venue or venues with the best price, then take liquidity from those venues until the order is satisfied, with the price improvement being passed on to the client. But it gets more complicated to fairly measure the price improvement with passive orders because they inevitably give out information when posted to lit venues. It’s very difficult to measure the opportunity cost that is lost at a result of placing that order on any lit market," said Seigne. Seigne says Goldman Sachs has been encouraging clients to be proactive in responding to the execution data the firm provides. One approach is to consider the contribution to the parent order of the broker’s order routing logic. “On their own, price improvement figures from child orders routed to MTFs might look good,” he said, “but you also need to figure out how and why they contribute to the parent order execution quality. The portion of contribution from the passive order in any lit market needs to be analysed to better understand the opportunity cost associated with that benefit. Hence questions focusing on relative fill ratios of venues, and the prices of the other lit venues at the time of those fills, need to be understood." Brokers also argue that market participants must distinguish more clearly between trading on a traditional exchange and an MTF, where a higher proportion of participants use smart order routing and/or are engaged in high frequency strategies. “For someone to suggest that all their fills from MTFs are much better than from venues with a lower proportion of participants with SORs etc., clearly needs to be challenged more,” said one broker. “Firms are achieving beneficial fills from MTFs, but in venues where the spread is typically tighter, those demanding liquidity should do better than from demanding the same liquidity at a less favourable price elsewhere. However, those posting liquidity to less active venues – either at the same price or at a less favourable price than more active venues – carry a higher risk of a non-fill and/or get filled at a less favourable price. It’s hard to reflect these factors in data form.”Instinet’s Balarkas insists that many brokers have not fully availed their clients of the advantages of competition among trading venues, commonly cited as MiFID’s key achievement since the directive came into force in November 2007. A number of the buy-side firms complained of slow progress on reducing trading costs in their responses to the Committee of European Securities Regulators’ (CESR) recent call for evidence on MiFID’s impact on European securities markets. And at this week’s SIFMA European Market Liquidity conference in London, heads of trading questioned the benefits of more trading venues being introduced onto the European equities market. The principles-based regulatory framework established across Europe by MiFID does not exert sufficient pressure on brokers to deliver best execution to end-investors, said Balarkas. “Under MiFID, there’s no real obligation on brokers to link to MTFs. And the idea that all the brokers across Europe are busy updating their best execution policies is fanciful,” he said. “There’s nothing wrong with principles-based regulation, but at some point someone has to come along with a big stick to remind firms that it’s not a case of anything goes. MiFID relies on informed customers asking detailed questions about how asset managers and brokers execute trades. But none of this is transparent, at present.”
J.P.Morgan Europe Liquidity Fragmentation Index - Week 6
Summary · Liquidity fragmentation in Europe last week was 16.7% (a new high!), driven by the UK, Germany and Switzerland. At a stock level, British American Tobacco, Unilever and Siemens were the main contributors (see table 3). · Ireland (73.1%), UK (26.2%), Netherlands (22.0%), France (20.9%) and Germany (19.4%) were the most fragmented markets in percentage terms. · UK ($2.0bn), France ($1.1bn), Germany ($1.0bn), Netherlands ($0.4bn) and Switzerland ($0.3bn) were the most fragmented in terms of Displayed Liquidity traded away from the primary market. · Chi-X achieved average daily turnover (ADT) of $2.9bn, equivalent to 10.0% of flow in Chi-X names. Total ($101m, 17.7%), BP ($99m, 22.8%), and Royal Dutch Shell A ($75m, 19.0%) had the highest ADT on Chi-X. · ADT on the Turquoise Displayed Order Book was a new high at $1.9bn, equivalent to 6.1% of flow in Turquoise names. France Teleom ($46m, 13.2%), Royal Dutch Shell A ($43m, 11.0%), and Siemens ($42m, 9.1%) had the highest ADT on Turquoise. · BATS achieved ADT of $368.9m. Total ($15.6m, 2.7%), BP ($10.8m, 2.5%) and British American Tobacco ($10.3m, 4.4%) had the highest ADT on BATS. · Nasdaq OMX achieved ADT of $40.6m. · 7 stocks traded more than 20% ADV on Dark venues, including Paragon which traded almost 10x ADV on POSIT. See Figures 7 – 10 and Tables 8 - 9 for further details.
Further details of fragmentation:
http://fragmentation.fidessa.com/stats/
Another week flies by.
Clearing landscape: I think the EC is right to call for a home grow solution for CDS. Forgive me for stating the obvious, but I think the reason for a competing bid to DTCC for LCH.CN is because people see value in clearing (all the more so after the events of the last 6mths). The value in clearing is mixed. Derivatives, last time I looked are around 3pence. That, given volumes, is maybe a bit high now, but given the nature of the contracts (tenure and leverage) I don’t think needs to be attacked. Equity clearing…different story. Fees were unsustainable and this has been evidenced by fee cuts. We still have a long way to go. Equities I believe will become highly commoditised. Blue chips, will cost far less, illiquids and others may cost more. There has been an inadvertent cross subsidy going on that has only been exposed with the advent of competition. This was never intentional. Freight, energy, metals all interesting. Now CDS, swapclear etc. There is some scale to go for. And with scale comes margin. And with margin comes renewed interest. On CDS I would say that the work is far from done. Clearing thrives on commoditised products and processes. Then we need to consider the all important default arrangements. The CDS world was not born with these restrictions. It is hard to discipline unruly children…but a common aligned industry through the vested interest of equity ownership I believe has a better chance.
Anyway, the land grab for clearing niche markets is on. I do not think all the value in the LCH.CN deal is in equities. It is certainly in scale.
MTFs: Welcome QuoteMTF – see also Canadian MTFs
Carnegie: Well, I thought the governments would dispose in 2010. Those Sweds are always fast movers when they want to be. (first to electronic trading etc.)
German SDRT: abolished in 1991…oh what a backward step to re-instate it. I understand the political drivers, but they are taxing the wrong source. As previously stated, we’ll know sub prime is over when we start to feel it as tax payers.
Aust Market: Good piece in the Australian.
JP Morgan: Liquidity fragmentation (I’m drawn to this report, especially the new graphs)
And the swimming bit….
Wow, last week someone (G’day Pierre) asked me about shark attacks during open water swims. I was a bit dismissive. This week a Navy diver was mauled in Sydney Harbour (you’ll find me at the harbour swim http://www.sydneyharbourswim.com/index.html on 1st March) and another got his arm nibbled at Bondi (as in last weeks North Bondi Classic and the earlier Bondi to Bronte).
SYDNEY, Feb 13 AAP - Life savers have urged beach-goers not to panic after a surfer nearly lost his hand in a shark attack at Sydney's famous Bondi Beach. The 33-year-old man was savaged on Thursday night, the day after a navy clearance diver was mauled by a shark in Sydney Harbour, within sight of the Sydney Opera House. The Bondi local was attacked after catching a wave about 7.30pm (AEDT), when the shark locked its jaws onto his left arm. Surf Life Saving Australia (SLSA) said despite the attack at Bondi, and the attack on the diver at Garden Island on Wednesday, shark attacks were still unlikely if people avoided swimming at dawn or dusk, or in murky water. It also urged people to swim between the flags - in close proximity to shark safety equipment - not to enter the water when bleeding, and not to swim near schools of fish. SLSA shark adviser, the CSIRO's Barry Bruce, said swimmers had a much bigger chance of drowning than being mauled by a shark. "It is important to recognise that there is always some inherent risk when using an environment inhabited by sharks," Mr Bruce said. "The risk of shark-related incidents varies according to the time of day, time of year, the geographic location and species of shark in the area." Mr Bruce said there was no evidence to suggest shark numbers or the number of attacks was on the increase. In response to the Bondi attack, the Westpac Life Saver Rescue Helicopter had increased its patrols along Sydney's beaches, the SLSA said. AAP ab/evt
For those that are interested more at: http://www.oceanswims.com/
Last weekend I did the North Bondi Classic.
This is a 2km’ish swim out and around bondi. Out to one headland (north) across to the next headland (south) and then turn around, head north and back to the beach.
Two things of note on this event. One, there was almost no surf but this was because the currents had changed during the week. The water was 16C. Now some people think 16C is OK, for me, I think it is very cold. For the first 300 meters I could not breath properly, ya know that feeling when the bitter cold takes your breath away? After about 500 meters I got that tingly feeling before you start going numb, which was good, because then you don’t feel the cold anymore. The other notable item in this event is the number of swimmers, 1,270. That is a lot of people to crash through, so although the surf was calm, the course was littered with bodies and hence lots of ‘bumps’. Anyway, I came in OK and boy, did it feel good to walk up the beach and feel the sun on my back. (Weird burying my toes in the sand and not feeling them). Anyway, for totally different reasons to the Big Swim, I’m also noting this as a hard swim simply due to the icy conditions.
I’ve also noticed there are some pretty fit and serious swimmers turn up at these things. I’m starting to feel not so bad about some of my times.
Results, Overall 510/1270. Males 377/887, Age group 53/128. Winner 25:52, Me: 37:15 (and just happy to be on dry land).
Also at:
http://www.northbondisurfclub.com/html/s02_article/article_view.asp?id=838&nav_top_id=-1&nav_cat_id=-1
This weekend, despite the sharks, warmer waters and bigger surf is predicted for the:
http://www.rainbowclubaust.com.au/oceanswim/
Looking forward to this one!
And….I’ll be following the SLSA advice, if I am bleeding from any limbs I won’t be entering the water during shark feeding hours of dawn and dusk.
Have a great week-end all,
S
The European Commission calls for a CDS clearinghouse
A regulatory approach is necessary for the clearing of CDS on a CCP, McCreevy said and called on the EP to support an amendment in the CRD . He also strongly opposed to any carve-out of all short term inter-bank exposures from any prudential rules.
http://online.wsj.com/article/SB123370034868545223.html?mod=todays_europe_money_and_investing
Consultation on CESR/ESCB draft recommendations for securities settlement systems, and draft recommendations for central counterparties
http://www.cesr-eu.org/index.php?page=responses&id=124
CEBS – Committee of European Banking Supervisors:
Consultation.
CEBS has committed to undertake further work to establish the materiality of custodian banks internalising settlement activities or carrying out CCP-like activities.
http://www.c-ebs.org/getdoc/954bfd48-9f42-445c-bc7c-0463afa92c10/CEBS-2009-07-Annex-1-(Questionnaire-to-market-part.aspx
Hungary-based equity MTF set to challenge European rivals Europe’s seemingly crowded equities trading landscape is set to have its fifth participant in June with the launch of Quote MTF, a platform majority-backed by Canadian entrepreneur Peter Beck, founder of SwiftTrade, a Canadian equities trading firm. (Financial Times)
Burgundy chooses EMCF, plans multi-clearer model
QUOTE MTF TO ENTER PAN-EUROPEAN TRADING MARKET
The crowded European market for stock exchange trading will welcome another new liquidity platform in the coming months with the summer launch of Quote MTF, an upstart independent venue operating out of Hungary.
More on this story: http://www.finextra.com/fullstory.asp?id=19620
New Hungarian MTF will have liquidity “from day one”
Bit more context:
CANADA STOCKWATCH: CNSX Alpha Trading Averages 16.9 Million Shares By Mike Caswell2/9/09Alpha Trading Systems was the most active of Canada's alternative trading systems in the week ended Feb. 6, 2009, with average daily volume of 16.9 million shares, down from 17.8 million the prior week. In second place was Pure Trading, which averaged 10.5 million shares, followed by Chi-X Canada, with 5.1 million shares. The least active ATS was Omega, which averaged 900,620 shares. Combining their volumes, the market share of Canada's ATSs was 6.67 per cent.
EMCF “ready to service LSE flow”
Consortium’s counterbid makes sense When news first emerged that the Depository Trust & Clearing Company was pondering a bid for LCH.Clearnet, the logic seemed impeccable. And when the deal was finally announced last year, it still seemed to make good sense. But now many of the same banks that once gave their support appear to have had an epiphany. Why?
Deutsche Bank wins mandate on LCH.Clearnet bid Deutsche Bank has emerged as an adviser to the consortium of eight banks and interdealer broker Icap that is preparing an €850m (€1.09bn) bid for clearer LCH.Clearnet, Financial News has learnt.
Brokers bidding against themselves in LCH battle
OMGEO DEBUTS COUNTERPARTY RISK MANAGEMENT OFFERING
http://www.finextra.com/fullpr.asp?id=25760
Celent Asia Interview
Buy-side use of electronic trading tools in Asia saw rapid growth between 2004 and 2007, according to a recent study of securities execution conducted by Celent, but barriers to further development remain.
Neil Katkov, managing director of the research and advisory firm’s Asia Research group, acknowledges that several markets have recently made progress, but explains that Asian markets lack the regulatory and structural forces that have pushed Europe and the US towards more advanced trading techniques.
Read the Interview
Nordic duo swoop on Sweden's Carnegie Two Nordic buyout firms have bought Sweden's Carnegie Investment Bank and affiliated insurer Max Matthiessen from state ownership for at least Skr2.2bn (€214m), in one of the first buyouts from government since the credit crunch began.
Election pledge threatens German traders with €15bn tax Investors in Germany could be forced to pay as much as €15bn ($19.4bn) in new trading fees if the country's finance minister presses ahead with plans to impose a tax on share trades.
Frontrunner 'in the frame' as LSE nears chief selection The London Stock Exchange is to name a candidate to replace chief executive Clara Furse before the end of this month, with one
candidate, the former chief executive of Lehman Brothers in France, reportedly emerging as the frontrunner.
Also: http://www.finextra.com/fullstory.asp?id=19611
TOP MANAGEMENT CHANGES AT TRAYPORT AS FOUNDER HOR STEPS ASIDE
http://www.finextra.com/fullpr.asp?id=25844
Barclays balance sheet balloons to over £2 trillion Barclays' balance sheet has now exceeded the gross domestic product of the entire UK economy after ballooning to more than £2 trillion (€2.3 trillion) last year, it disclosed on Monday. (The Guardian)
FSA STATEMENT RE: HBOS
http://www.finextra.com/fullpr.asp?id=25968
The World from Berlin: What Sweden's Nuclear About-Face Means for GermanySweden's government announced on Thursday it was reversing its pledge to phase out nuclear energy. The decision isolates Germany in Europe -- and commentators say it is high time for Berlin to take a new look at nuclear energy here too. mehr...
Tricom delay shows it's time to strip ASX as regulator
Adele Ferguson February 09, 2009
Article from: The Australian
AS the anniversary of Tricom Equities' delayed settlement on the ASX came and went on January 29 - with no signs of a fine or penalty from the ASX for the chaos it caused - work is going on behind the scenes to push the federal Government into handballing ASX's supervisory powers to ASIC.
The Rudd Government has had almost a year to decide whether to simultaneously depose the ASX as supervisor of the markets and bust open its monopoly by granting three new licences to operate rival exchanges. For ASX boss Robert Elstone, that clock is now ticking.
One of the licence applicants, Chi-X, has organised a meeting at the end of the month with Treasurer Wayne Swan, Corporate Law Minister Nick Sherry, Assistant Treasurer Chris Bowen and Finance Minister Lindsay Tanner, to try to speed up a decision.
A few well-placed fund managers are also believed to be looking at ways to get a decision before the end of June.
The global head of Chi-X, Tony Mackay, is currently in Australia to reignite interest and hurry an outcome. This is the first time Chi-X will meet with all the big hitters in the decision-making process.
"We are going to push harder now as we are concerned they are making it more complicated than it needs to be.
"It is understandable there was a delay given the global financial crisis and the Lehman collapse, but with the new short-selling legislation in place, there is nothing to stop them from making a decision," Mackay says.
Mackay, like many operators, believes ASIC is more suitable - and now able - to take over the role of supervising all exchanges, particularly since it reorganised itself last year and appointed two highly regarded operators - Mark Adams, to watch market exchange operators, and Greg Yanko as the regulator in charge of brokers and market participants.
Since the ASX demutualised and listed on its own exchange in 1998, there has been a growing concern in regulatory and investment circles that it should have been stripped of its supervisory powers to avoid any inherent conflicts of interest from operating a money-making business alongside its regulatory duties.
This concern manifested itself at its AGM last year when RiskMetrics, a company that advises big institutional investors on how to vote their share rights, organised a protest vote against one of the ASX's director's on the basis of its woeful performance as market supervisor.
RiskMetrics identified the following areas of concern with how the ASX discharged its role as market supervisor: insider trading, director trading, short-selling disclosure and the 2005 removal by the ASX of the requirement for listed companies to seek shareholder approval for equity to be granted to directors.
The ASX defended the criticism by pointing to ASIC's annual assessment of its supervisory powers, which gave it a clean bill of health.
In an era when regulation will be front and centre stage, following the collapse of capitalism as we know it, the Government will be cognisant that most other countries stripped their main stock exchange of their supervisory powers once they became a listed entity.
It will also be aware that the massive market manipulation that revealed all sorts of holes in the ASX's market rules, as companies were targeted and their share prices shredded, helped bolster the ASX's profits from the volatile trading.
Since the ban on short selling financial stocks was put in place, the ASX's trading activities have depleted markedly. Indeed, the ASX's shares have fallen almost 30 per cent to $24.20 since the first ban on short selling was announced on September 21.
The fact remains that there is an inherent conflict of interest with a listed entity policing its own customers. As one market watcher has often been quoted: "Having this dual role is like the police force being allowed by law to operate a money-making business alongside its regulatory duties. The obvious conflict of interest would undermine law enforcers' capacity to perform their duties efficiently."
In the case of Tricom, a spokesman for the ASX says its contact with Tricom continues and it continues to assist ASIC with its inquiries. "As you know, ASX will not comment on any specific supervisory activity," the spokesman says. "And any consideration of penalties, such as a fine, is for the independent Disciplinary Tribunal to determine. ASX's focus will always be on ensuring the market's stability and integrity -- the timing of a disciplinary outcome is less urgent."
Taking more than a year to penalise a broker for causing such disarray on the market symbolises what is wrong with the ASX and its arm's-length supervisory division. Delays of this kind send out a clear message that the ASX and its independent disciplinary tribunal are not on the ball.
If the ASX is stripped of all regulatory functions, it can be left to get on with what it really wants to do: make money.
==========
THE TRADE NEWS: MiFID Benefits ‘An Illusion,’ Despite Price Improvement By Staff2/6/09Instinet Europe’s chief executive has claimed that many of MiFID’s benefits “are illusory to the end-investor”, despite the agency broker reporting that it had achieved an average of 5.72 basis points of price improvement for clients in Q4 2008. “We pass all price improvement back to our customers,” asserted Instinet Europe’s Richard Balarkas. “But there are a whole host of models on the sell-side. There seems to be little appreciation on the buy-side of the opportunity cost of using a broker that internalises a large percentage of flow, compared to one that opens up to as many external venues as possible,” said. Price improvement is defined as the difference between execution price and the best quoted price on the primary exchange at a given time. Instinet Europe data is based only on executions that remove liquidity from MTFs over the time period. Instinet Europe said it routed nearly 28% of its European equity trades away from primary exchanges by value traded in Q4 2008 and was among the first brokers to connect to the multilateral trading facilities (MTFs) launched last year: BATS Europe, Nasdaq OMX Europe, Turquoise and dark pool NYFIX Euro Millennium. During 2008, the firm also executed the first trade on SWX’s Swiss Block dark pool, launched its own MTF, BlockMatch, and, along with Credit Suisse, became the first broker in Europe to offer reciprocal dark pool access. Instinet Europe executed 35.42% of its trades in French, German, Dutch and UK stocks on MTFs in the final quarter of 2008. Other brokers have also been using smart order routing capabilities to optimise electronic client order flow. According to its latest monthly European Liquidity Report, Citi routed 53% of its UK orders to MTFs in January as well as similar proportions of its Dutch (56%), French (52%) and German (48%) orders. Citi, which does not publish price improvement data, also reported that MTFs captured roughly 20% of market share in these four markets in January. Some sell-side institutions have pointed out that the quality of execution achieved via brokers’ smart order routing capabilities is near-impossible to boil down into headline figures. "Because routing orders in this increasingly fragmented environment is a very sophisticated and complicated process, headline numbers quoting price improvement can be overly simplistic and misleading without proper qualification." said Mike Seigne, co-head of sales, Europe, Goldman Sachs.Although price improvement comparisons can provide some insight into aggressive order execution quality, this is not the case for passive orders. "An SOR will typically route an aggressive order to the venue or venues with the best price, then take liquidity from those venues until the order is satisfied, with the price improvement being passed on to the client. But it gets more complicated to fairly measure the price improvement with passive orders because they inevitably give out information when posted to lit venues. It’s very difficult to measure the opportunity cost that is lost at a result of placing that order on any lit market," said Seigne. Seigne says Goldman Sachs has been encouraging clients to be proactive in responding to the execution data the firm provides. One approach is to consider the contribution to the parent order of the broker’s order routing logic. “On their own, price improvement figures from child orders routed to MTFs might look good,” he said, “but you also need to figure out how and why they contribute to the parent order execution quality. The portion of contribution from the passive order in any lit market needs to be analysed to better understand the opportunity cost associated with that benefit. Hence questions focusing on relative fill ratios of venues, and the prices of the other lit venues at the time of those fills, need to be understood." Brokers also argue that market participants must distinguish more clearly between trading on a traditional exchange and an MTF, where a higher proportion of participants use smart order routing and/or are engaged in high frequency strategies. “For someone to suggest that all their fills from MTFs are much better than from venues with a lower proportion of participants with SORs etc., clearly needs to be challenged more,” said one broker. “Firms are achieving beneficial fills from MTFs, but in venues where the spread is typically tighter, those demanding liquidity should do better than from demanding the same liquidity at a less favourable price elsewhere. However, those posting liquidity to less active venues – either at the same price or at a less favourable price than more active venues – carry a higher risk of a non-fill and/or get filled at a less favourable price. It’s hard to reflect these factors in data form.”Instinet’s Balarkas insists that many brokers have not fully availed their clients of the advantages of competition among trading venues, commonly cited as MiFID’s key achievement since the directive came into force in November 2007. A number of the buy-side firms complained of slow progress on reducing trading costs in their responses to the Committee of European Securities Regulators’ (CESR) recent call for evidence on MiFID’s impact on European securities markets. And at this week’s SIFMA European Market Liquidity conference in London, heads of trading questioned the benefits of more trading venues being introduced onto the European equities market. The principles-based regulatory framework established across Europe by MiFID does not exert sufficient pressure on brokers to deliver best execution to end-investors, said Balarkas. “Under MiFID, there’s no real obligation on brokers to link to MTFs. And the idea that all the brokers across Europe are busy updating their best execution policies is fanciful,” he said. “There’s nothing wrong with principles-based regulation, but at some point someone has to come along with a big stick to remind firms that it’s not a case of anything goes. MiFID relies on informed customers asking detailed questions about how asset managers and brokers execute trades. But none of this is transparent, at present.”
J.P.Morgan Europe Liquidity Fragmentation Index - Week 6
Summary · Liquidity fragmentation in Europe last week was 16.7% (a new high!), driven by the UK, Germany and Switzerland. At a stock level, British American Tobacco, Unilever and Siemens were the main contributors (see table 3). · Ireland (73.1%), UK (26.2%), Netherlands (22.0%), France (20.9%) and Germany (19.4%) were the most fragmented markets in percentage terms. · UK ($2.0bn), France ($1.1bn), Germany ($1.0bn), Netherlands ($0.4bn) and Switzerland ($0.3bn) were the most fragmented in terms of Displayed Liquidity traded away from the primary market. · Chi-X achieved average daily turnover (ADT) of $2.9bn, equivalent to 10.0% of flow in Chi-X names. Total ($101m, 17.7%), BP ($99m, 22.8%), and Royal Dutch Shell A ($75m, 19.0%) had the highest ADT on Chi-X. · ADT on the Turquoise Displayed Order Book was a new high at $1.9bn, equivalent to 6.1% of flow in Turquoise names. France Teleom ($46m, 13.2%), Royal Dutch Shell A ($43m, 11.0%), and Siemens ($42m, 9.1%) had the highest ADT on Turquoise. · BATS achieved ADT of $368.9m. Total ($15.6m, 2.7%), BP ($10.8m, 2.5%) and British American Tobacco ($10.3m, 4.4%) had the highest ADT on BATS. · Nasdaq OMX achieved ADT of $40.6m. · 7 stocks traded more than 20% ADV on Dark venues, including Paragon which traded almost 10x ADV on POSIT. See Figures 7 – 10 and Tables 8 - 9 for further details.
Further details of fragmentation:
http://fragmentation.fidessa.com/stats/
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