G’day All,
Well, we’re back into full force.
Fragmentation: Attached is a good report from JPM (many thanks Mark) along with some interesting and detailed stats. Would be keen for any feedback on this report or the layout.
DTCC: What a funny coupling this is. Nasdaq says competition will not harm the markets, then DTCC pops up with, we’ll novate trades when we should, i.e. trade date. I’m sure they’re independent events.
US clearing competition will not add cost – Nasdaq
DTCC to offer real-time trade guarantees and boost capacity
LCH.Clearnet: ICAP along with BNP, Citi, DB, HSBC, JPM, RBS, SG and UBS puts together a competing bid with the DTCC. Clearly someone recognises the value in clearing…and a European solution. (Yes, DTCC folks, your defence / governance response is included). What it does scream to me is that European clearing and competition has a long way to go.
LCH.Clearnet SA: Congratulations to the good old gang (my old shop) on commencement with SmartPool.
Chi-X: Access and Interoperability. EMCF and X-Clear breath new life into the Code….but following on from the previous story…are we satisfied with 2 fleas fighting over the dog? What should we be doing next to ensure the winds of change can continue to bring benefits to European investors? i.e how do we get the big primary market incumbents to the game?
WFE priorities: IOSCO work & circuit breakers. Excellent. Fragmentation? What a waste of rhetoric – vested interest, Turkeys never vote for X-mas springs to mind.
OTC Clearing: Ha, HSBC & JPM join swapclear…and Icap syndicate. Then we have the contenders for CDS clearing: CME, Eurex, NYSE and TCC. Clearing of stock lending pops up again.
NASDAQ / Osaka: Execute an MoU.
Fees: Crest, at last Clearing fees are where they should be for Crest – zero….except they have now relabelled them value added services. Still, I agree with this. Competition will bring price pressure which forces transparency. Lot on the new NYSE pricing. If you have access to it, I recommend the Rosenblatt commentary on this, otherwise BATS addresses the issue with their angle. Chi-X Canada offers inverse pricing. Swift provides 5% rebate…and I am sure there is a host more I have missed. Still plenty of room in our markets for competition.
MTFs: Arca Europe delayed…..and Equiduct delayed….but at the request of users.
I’m done! Amazing Madoff was reported to the SEC in Nov 2005. Poor old Mr Thain repurchasing his kit from ML. (I wonder if he wants any of my ML stock at 2007 prices?). Global warming…amazing what we don’t know.
This week-end is another Ocean Swim at Bondi.
The North Bondi Classic: http://www.northbondisurfclub.com/
But really it is just a training run for the 2nd of the Hahn Series of Ocean Swims (beer tastes nice after a swim…or breakfast too actually):
The Malabar to Little Bay: http://www.rainbowclubaust.com.au/oceanswim/
Posting this now on http://clearingandsettlement.blogspot.com/ though you will miss the JPM attachment.
I’m OOO tomorrow, so have a great one all.
Phew!
S
03/02/2009 12:07:00
SIX- X-CLEAR AND EMCF TO OFFER COMPETITIVE CLEARING
SIX x-clear and Dutch central counterparty EMCF have signed a Memorandum of Understanding to offer competitive clearing across multiple stock exchange venues.
More on this story: http://www.finextra.com/fullstory.asp?id=19596
Chi-X Europe to become first MTF to offer participants choice through CCP interoperability
http://www.automatedtrader.net/algo-trading-news-7429.xhtm
Icap targets OTC market with approach
Inter-dealer broker Icap and a consortium of banks are preparing a bid for clearing house LCH.Clearnet in an effort to cash in on a planned regulatory overhaul of the credit derivatives market.
http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/4436549/Icap-targets-OTC-market-with-approach.html
Eight emerge as backers of LCH.Clearnet takeover plan Eight banks have emerged as co-backers of a plan to launch a last-minute counterbid for LCH.Clearnet in a move that represents the clearest signal yet that banks are embracing the need to create a credible European clearing house for over-the-counter derivatives.
HSBC AND JPMORGAN JOIN SWAPCLEAR; DTCC HITS BACK AT LCH.CLEARNET CRITICS HSBC and JPMorgan have become shareholders of OTCDerivNet, the company which provides strategic direction to LCH.Clearnet's SwapClear service.
Full story: http://www.finextra.com/fullstory.asp?id=19599
The New York Federal Reserve is leading the push for a US solution and four groups have now come up with offerings: CME Group and Citadel, the Chicago-based hedge fund; Eurex Clearing; NYSE Euronext/Liffe/LCH.Clearnet; and The Clearing Corporation, which the banks sold a stake in to IntercontinentalExchange late last year.
However, the European Commission threw a spanner in the works late last year when it called for Europe to have its own clearing house for the CDS markets.
http://www.ft.com/cms/s/0/ab795eb0-ef07-11dd-bbb5-0000779fd2ac,dwp_uuid=ca6d2fe6-eec0-11dd-bbb5-0000779fd2ac.html
Credit derivatives drive hits a wall
By Paul J Davies
In early April last year a group of leading investment banks blew the dust off their ownership of a near forgotten company with no chief executive, just 40 staff and Chicago offices that were dominated by unoccupied cubicles. Their plan for this atrophied asset was to confront directly regulators’ fears over the systemic risks posed by the huge over-the-counter credit derivatives market – fears heightened weeks earlier by the failure of Bear Stearns, which had been a huge player in the field.
http://www.ft.com/cms/s/0/ab795eb0-ef07-11dd-bbb5-0000779fd2ac,dwp_uuid=ca6d2fe6-eec0-11dd-bbb5-0000779fd2ac.html
Stock-Loan Platforms Race To Offer CCPsWith counterparty risk a focus on both sides of the Atlantic, the securities lending industry is moving to put centralized clearing in place.
LCH.Clearnet launches clearing services for SmartPool
LCH.Clearnet has successfully launched clearing services for SmartPool, a new Multilateral Trading Facility (MTF) set up by NYSE Euronext, BNP Paribas, HSBC and J.P. Morgan, which provides a dark pool environment for the execution of large institutional order flow. By using LCH.Clearnet for SmartPool trades, members benefit from offsetting in risk and settlement between SmartPool and NYSE Euronext markets.
http://www.lchclearnet.com/media_centre/press_releases/2009-02-04.asp
NASDAQ OMX AND OSAKA SECURITIES EXCHANGE SIGN MOU
http://www.finextra.com/fullpr.asp?id=25802
Tensions over clearing are near to boiling point Relations between clearing houses and members are invariably strained.
THE TRADE NEWS: Consortium Plans rival bid for LCH.ClearnetBy Staff2/2/09Interdealer broker ICAP has confirmed it is an equal member of a consortium of financial institutions that is considering making a bid for European clearing house LCH.Clearnet.“Discussions are at a very preliminary stage, and there can be no certainty that such an offer will be made,” the firm said in a statement. “A further statement will be made if and when appropriate.”A bid, if it emerges, would pit the consortium against US clearing house The Depository Trust & Clearing Corporation (DTCC), which entered a non-binding agreement to buy the LCH.Clearnet in October. Under DTCC’s offer, LCH.Clearnet shareholders would receive total consideration of up to €739 million (€10 a share). DTCC plans to merge LCH.Clearnet with its existing European clearing operation, EuroCCP.It is not clear who the other consortium members are, but news reports have suggested that banks Société Générale and Morgan Stanley are among them.LCH, though its UK subsidiary LCH.Clearnet Ltd and French subsidiary LCH.Clearnet SA, provides clearing services to a range of European stock exchanges, including the London Stock Exchange and NYSE Euronext’s European operations.
WALL STREET LETTER: Europe Moves Toward Clearing Unification By Allie Zendrian2/3/09The European markets are getting closer toward streamlining and creating more competition in clearing now that the European Multilateral Clearing Facility and SIX x-clear have signed an MOU to link to each other. Since each market has different regulations and clearing needs, clearing operations operate separately of each other in each market. The two central counterparty clearing agencies signed a memorandum of understanding. To date, Europe has almost as many clearing solutions as it has countries, said Hans-Ole Jochumsen, division executive v.p. of Nasdaq OMX Group. “It’s obvious to everyone that there are too many clearing houses in Europe,” he added. Chi-X will become the first multi-lateral trading facility to offers an interoperable clearing model following the deal that it claims will help its participants reduce costs. “We see horizontal integration of clearing houses is essential to provide market participants with choice,” said Hirander Misra, chief operating officer. “We need harmonization of rules, risk models and operations to have these clearing houses work together.” Chi-X is in discussions with other CCPs as well to further extend the user choice model.
A derivatives first
CBOE’s Brodsky first derivatives CEO to head WFE
William Brodsky, chief executive officer of the Chicago Board Options Exchange, today became the first executive from a derivatives market to take over as chairman of the World Federation of Exchanges.
Markets at "critical" juncture – new global exchanges head
The WFE listed its
first priority as helping the International Organisation of Securities Commissions (IOSCO) establish best practices for short selling and securities lending.
In addition, the WFE said it would clarify the use of circuit breakers in volatile markets as predictable and temporary tools.
Thirdly, the federation intends to study the effects of fragmentation on market quality.
1. IOSCO work excellent and important
2. Ditto
3. Ummm, forget it.
Euroclear UK & Ireland implements fee reductions in 2009
Effective 1 March 2009, Euroclear UK & Ireland will implement the following fee changes:
Clearing fees will no longer be charged to Central Counterparty (CCP) Participants returning the benefits of economies of scale to clients and ensuring that Euroclear UK & Ireland’s overall tariff remains competitive.
To ensure that fees reflect the services delivered, a separate charge for CCP Participants will be introduced for the added-value settlement-related services currently grouped in the above CCP clearing fees including: auto-splitting, corporate actions, automatic allocation engine etc.
Stock deposits, stock withdrawals and residual charges for Euroclear UK & Ireland’s CREST Courier and Sorting Service (CCSS) will be revised.
The user standing charge will be increased. This measure will ensure that all users contribute to the operating costs of the CCSS service.
The Euroclear UK & Ireland tariff brochure with the new rates will be published on Monday, 2 February 2009 in
About > Tariff in the Euroclear UK & Ireland section of www.euroclear.com.
NYSE And NYSE Arca Announce Changes In Equities Transaction Pricing, Effective March 1
NYSE initiatives cater for high-frequency traders
Rosenblatt Securities, www.rblt.com
WALL STREET LETTER: Ratterman Disputes New NYSE Model By Staff2/2/09Joe Ratterman, BATS Global Markets’ ceo, struck out against the New York Stock Exchange’s new floor market structure in a letter to clients Friday. In particular, Ratterman objected to the new designated market maker and supplemental liquidity provider classes, who he argues may be given unfair advantage over customers in the name of providing liquidity. The NYSE has placed DMMs on parity with the rest of the market, whereas specialists had had to yield to customers. “Because of the DMM parity benefit, you will receive a smaller portion of the next execution, or depending on your place in the book, your order might get passed over completely… How much benefit is enough?” Ratterman asked in the letter, admonishing traders to switch to BATS because it has no privileged participants or payment rates in its structure. Ratterman also expressed concerns over rebates being assigned differently for different types of market participants and about the general sustainability of the inverse rebate model. “We encourage market participants to re-examine whether it makes sense to post orders on a market that favors certain participants over others. A market structure like this may lead to lower fill rates and inferior economics for all those who aren’t part of the privileged class,” Ratterman wrote. The NYSE, on the other hand, has argued that it has seen an uptick in floor-based market share since the adoption of the DMM/SLP model. DMM participation increased to 7% from 3.2% since August, and the percentage of orders being routed away dropped to 9.2% from 11.5% in the same time period, according to a recent NYSE Exchanges blog.
Chi-X Canada to launch X-Factor promotion
SWIFT PROVIDES 5% REBATE ON ALL 2008 MESSAGING
http://www.finextra.com/fullpr.asp?id=25825
INSTINET PUBLISHES 2008 RESULTS OF MIFID BEST EXECUTION POLICY REVIEW
http://www.finextra.com/fullpr.asp?id=25806
BLUE SYSTEMS DELIVERS CHI-X EUROPE DATA OVER MOBILE PLATFORM
http://www.finextra.com/fullpr.asp?id=25826
NYSE Arca Europe delayed as customers reprioritise resources
DEALING WITH TECHNOLOGY: Equiduct Trading Sets New Launch DateBy Cecilia Bergamaschi2/2/09After pushing back the launch date for Equiduct Trading, the multilateral trading facility's (MTF's) officials expect the venue to go live later this quarter. A soft launch was originally scheduled for July (DWT, June 16, 2008) and then for September last year (DWT, July 14, 2008). Artur Fischer, co-CEO of Equiduct Trading, attributes the delay to the current market turmoil, which has affected member firms as well as potential new clients. MTF officials have restarted the process and are now in talks with firms, he says. The undisclosed members are testing Equiduct's platform, which was developed in 2000 and adapted for the European Association of Securities Dealers Automated Quotation (Easdaq), Nasdaq Europe and Nasdaq Deutschland. The technology is set to offer an average message latency of 2 to 3 milliseconds, says Fischer.Equiduct maintains its original model, but officials have cut costs by reducing staff, says Fischer. There are 35 employees in its London office and 13 in the Berlin office, a 20 percent reduction compared with the total number of employees the MTF had last year.Equiduct plans to generate extra income by charging for the data product starting July 2009. "We process around 200 million quotes per day and we store those, so we have a product that helps the buy side see if they have best execution and enables the sell side to provide best execution," Fischer says.Equiduct plans to launch its service in the U.K. markets this quarter, followed by the French and the German markets, although there is no specific date for the phased rollout, says Fischer. His aim is to have around 20 member firms this year. "The financial community is now more interested in reducing costs, which goes in our favor, because we offer them the opportunity to connect to only one feed," he says, referring to Equiduct's Orange volume-weighted best bid and offer (VBBO). The product consolidates market data-including the London Stock Exchange, Chi-X, Turquoise, Bats Europe, Nasdaq OMX, Xetra and NYSE Euronext markets-into a single virtual book.Fidessa, GL Trade, Ullink and XeLink will connect to Equiduct. Clients will be able to access Equiduct through a FIX 4.4 connection.Clients can connect to either of the two Equiduct datacenters, configured in a hot-hot architecture. Each datacenter handles half the MTF's computational load. If one facility fails, the other can pick up the full load, says Fischer.The MTF's pan-European coverage will be divided into geographic segments, with each segment following the trading schedule and characteristics of its local market. Each will offer access to the local post-trade central counterparty environment (DWT, June 16, 2008).
JPMORGAN SACRIFICES CDS ENGINE TO OPEN SOURCE IN BID TO STAVE OFF LEGISLATION JPMorgan is to hand over its inhouse-developed CDS analytical engine to the International Swaps and Derivatives Association to run as an open platform in an effort to increase transparency in credit default swaps pricing and stave off legislation.
Full story: http://www.finextra.com/fullstory.asp?id=19587
EU panel calls for CDS clearing The European Commission on Tuesday urged the European parliament to back legislation making it mandatory for lenders in the European Union to adopt a clearing house in the region to clear credit-default swaps. (The Wall Street Journal)
Deutsche Börse equity turnover drops 70% in January
Instinet enhances Australian post-trade capabilities
ASX Market Activity Report for January 2009
http://www.asx.com.au/about/pdf/ma040209_jan09_mkt_announcement.pdf
Read Markopolos' memo to SEC (.pdf)
http://static.reuters.com/resources/media/editorial/20090127/Markopolos_Memo_SEC.pdf
Amazing, written 7th Nov 2005. Oh for eagle eye hindsight.
Market Insight: Housing Recovery: Not Yet, but When? Standard & Poor's believes markets will stabilize and then recover in 2010. more
Thain pledges to repay $1.2m decorating bill John Thain, who last week stepped down as president of global banking and securities at Bank of America less than a month after it took over his former firm Merrill Lynch, has described the $1.2m (€918m) office renovations that have hit the press headlines in recent days as "a mistake" and promised to reimburse the bank for any costs incurred.
NEWSJetting Their Way to a Better Understanding of Global WarmingScientists have taken the first crack at solving a fundamental climate mystery: where and when greenhouse gases enter and leave the atmosphere
http://www.sciam.com/article.cfm?id=jetting-their-way-to-a-better-understanding-of-global-warming&sc=WR_20090204
BLOOMBERG: Turquoise Beats Chi-X Intraday, Falls Back by CloseBy Nandini Sukumar2/3/09Turquoise, an alternative platform set up by banks to challenge stock exchanges, overtook rival Chi-X Europe Ltd. for the first time as it gained market share in European equity trading.London-based Turquoise accounted for about 9.05 percent of trading across the U.K.'s FTSE 100, France's CAC 40 and Germany's DAX at about 12 p.m. in London, while Chi-X's share was 7.86 percent, according to data compiled by Bats Trading Inc. By the end of the day, Chi-X pushed past Turquoise, accounting for 9.11 percent of trading today compared with Turquoise's 6.88 percent.The European Union's Markets in Financial Instruments Directive, which took effect Nov. 1, 2007, has spurred competition between traditional bourses such as London Stock Exchange Group Plc, Deutsche Boerse AG and NYSE Euronext and MTFs including Chi-X, Turquoise and the European ventures of Bats andNasdaq OMX Group Inc.Chi-X is a unit of Instinet Europe Ltd. and had been the most successful of the new entrants to date. Turquoise boosted incentives for its highest volume traders starting Feb. 2."Our tariff modification is beginning to have some bite," Turquoise Chief Executive Officer Eli Lederman said today before markets closed. "We're really pleased. Liquidity begets liquidity. The market is now identifying us as the biggest MTF. We see continued growth in the underlying market."'Not Representative'In FTSE 100 trading, Turquoise accounted for about 12 percent of trades at about midday, as Chi-X drew 10.8 percent and LSE, where the stocks are listed, had 76.15 percent, according to Bats data. At the close, LSE led with 76.74 percent, Chi-X was second with 13.12 percent and Turquoise accounted for 8.26 percent, Bats data showed."It's a process, not an event," Peter Randall, chief executive officer of Chi-X, said in an interview before markets closed. "From time to time, Turquoise will be bigger than us. What matters is where we are at the end of the day and not where we were at one particular moment. It's not representative."Over the past five days, Turquoise's share of trading in the three European indexes was 5.36 percent on average, compared to Chi-X's 10.11 percent, Bats data showed."We've never said Turquoise or Chi-X is better suited to one market or another," Randall said. "What we have to celebrate is that MTFs' total market share of the FTSE 100 is about 22 percent and growing."Bats, which also competes for European trading and has said it plans to be "aggressive" in winning at least a 10 percent market share in the region, today accounted for 1.10 percent and Nasdaq OMX Europe had about 0.05 percent, the data show.Bats, the London-based unit of the third-biggest U.S. equity exchange, compiles and distributes market share data for Europe on its Web site.
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