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
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