On Default Funds….
I had a look at the HK Exchanges quarterly report.
P40, Notes to accounts 18e).
“Consequently, the designated reserves of the Clearing House Funds were reduced by $163,203,000 in the year ended 31 December 2008, which was attributable to firstly the forfeited contributions of the defaulting Clearing Participant”
http://www.hkex.com.hk/relation/reannt/2009qiarep.htm
Just a note to self. Yes CCPs have defaults, Lehman was one of these and in some cases, there were calls on mutual guarantee funds. HK for example.
On self interest….
Exchanges will always vote for an extension of their monopoly. Their viewpoint is MTFs and ECN are of course bad things because they fragment liquidity and hence compromise price discovery. Of course I disagree and even the Oxera study agrees that MTFs have brought about a reduction in costs. It is this angle that I think does no credit to this week story from DTCC. Of course DTCC want their trade warehouse to be awarded monopoly status. But I think this really misses the point of the great work they did during their piece of the Lehman default. I’d rather see more weight on the positive aspects of their proven abilities than the more ‘negative’ we want a monopoly in CDS. Let technology busy itself with knitting together fragmentation. We don’t need regulatory decrees to stifle innovation. I also see CFTC urges competition in some subsequent stories.
On retail…
I was surprised to read Citadel…hopes to replicate its success in the US market, where it executes 2 million off-exchange retail orders a day and accounts for over 40% total US retail order flow. I was unaware of the retail penetration they have over there. This also makes a nice parallel tie in with the Optiver and Binck Bank offering of The Order Machine in the Netherlands.
Ummm…
LSE…should not forget it’s core business. If it wasn’t for it’s customers it couldn’t diversify. It should diversify…and I bet it regrets being saddled w/ 600myn debt.
Infrastructure should be flexible…user owned utilities must work side by side with for-profit. Otherwise the ‘utility’ aspects get eroded over time by inefficiency.
OTC…we still need to quantify size of market and what is the opportunity we’re buying into.
Yea! Go for…Clearnet (conflict, former employer, but I’m still allowed to like ‘em!) – they geddit, go for…growth.
FSA…urky purky. Conservatives killing FSA is misdirected shooting of the messenger. Bad call on what I think is by and large a good brand. We need reform and repair, not revolution. Conservatives should just shut up and let Brown keep on merrily sinking the ship.
If anyone’s been on a pig farm…they’ll agree…1.7myn is a bargain to fix the stench.
Off to the Gold Coast (GC) this week for the sister-in-laws wedding. Why don’t people plan these things around my kids school year? I’ll test the waters on the GC but at the moment training is for the City to Surf (14K run). I also have some reading with me…I wonder if anyone will nick my copy of the Oxera report? More likely I’ll get fined for littering. I’ll also be thinking about http://www.oceanswims.com/oceania/manafiji.html. I’m missing my riding at the moment, especially after watching Lance in the Tour de France. (imagine, Lance and I in the same sentence!). I should be watching the Kiwis beat the Boks…and I will, but I’m strangely drawn to the Tour this year. Whatever goes on in Armstrongs personal life, I sure wish him a podium finish in this years tour. Mans a legend. My own tour will be somewhat more modest… http://www.springcycle.com.au/
Have a good ‘un all. I’ll be on the b’berry. Why not?
S
http://clearingandsettlement.blogspot.com/
Clearing
Clearing landscape lacks clarity The London Stock Exchange last week reported its revenue for the three months to the end of June and, barely 60 days into his tenure as the exchange’s chief executive, Xavier Rolet may have found himself having to pardon his French – the numbers made grim reading.
The time is right to resolve the infrastructure problem Who should own and control financial market infrastructures? Should they be run as user-governed utilities, or as privately owned and independently controlled entities? This question has never been answered satisfactorily or even submitted to comprehensive high-level scrutiny.
OTC clearing houses to share $400m The greater use of clearing over-the-counter trades as a result of political and regulatory pressure will add $400m (€284m) to the combined annual revenues of four financial groups, according to new research. However, the figure is lower than many had expected as the groups will have to share profits to achieve a "buy-in" from dealer banks.
Clearnet emerges as top contender to clear CDS in EuropeAfter LCH.Clearnet struggled to move forward with clearing over-the-counter credit default swaps in the UK, its French subsidiary, Clearnet, has become the leading contender to do so across Europe. French regulators have been advocating basing a CDS clearer in Paris to serve the euro zone. The goal is to develop the city as a financial hub of Europe. LCH.Clearnet launched a clearing facility for CDS in December, but it was shelved after failing to attract interest. Financial Times (tiered subscription model) (20 Jul.)
23/07/2009 13:03:00
ICE TRUST SETS OUT PLANS FOR BUY-SIDE PARTICIPATION IN CDS CLEARING
IntercontinentalExchange (ICE) says it will introduce a solution that will enable buy-side participation in credit default swap clearing by October.
More on this story: http://www.finextra.com/fullstory.asp?id=20302
CPSS AND IOSCO FORM WORKING GROUP TO REVIEW APPLICATION OF OTC CLEARING RECOMMENDATIONS
http://www.finextra.com/fullpr.asp?id=28686
DTCC CHIEF STRESSES IMPORTANCE OF SINGLE TRADE REPOSITORY FOR OTC DERIVATIVES
http://www.finextra.com/fullpr.asp?id=28722
CFTC chief urges competition in derivatives clearing
By Jeremy Grant in London
The US futures regulator on Wednesday insisted traders should be able to choose between exchanges that offer trading and clearing of over-the-counter derivatives, signalling that the Obama administration may be starting to address barriers to competition in exchange-traded derivatives markets. Gary Gensler, chairman of the Commodity Futures Trading Commission, said in congressional testimony that as OTC derivatives became standardised and moved onto exchanges and other electronic platforms, open positions between the various platforms should be “fungible”.
http://www.ft.com/cms/s/0/f6474a8a-76f0-11de-b23c-00144feabdc0.html
CFTC's Gensler encourages competition in OTC derivatives trading
http://www.smartbrief.com/news/nyssa/storyDetails.jsp?issueid=62E088FA-8E53-41C1-B817-CF1B3A379425©id=DF77894D-0B88-42CE-952F-1A8BCA3CEABE
Platforms
Equiduct enters into strategic partnership with Citadel Securities
http://www.equiduct-trading.com/latest-press-releases/21-07-09--equiduct-enters-into-strategic-partnership-with-citadel-securities.asp
*** Equiduct was founded in 2007 by Börse Berlin, a small German regional stock exchange, with a 53 per cent stake. Jos Peeters, a Belgian venture capitalist and founder of the former Easdaq exchange, held 23 per cent with the rest held by Knight Capital and other investment banks, including Goldman Sachs.
*** Citadel is building up its European business, which it launched in Italy and the UK last September. It hopes to replicate its success in the US market, where it executes 2 million off-exchange retail orders a day and accounts for over 40% total US retail order flow.
In addition to its investments in Direct Edge and Equiduct, Citadel has a stake in pan-European multilateral trading facility (MTF) Chi-X Europe. It is also among the six initial liquidity providers in Turquoise’s dark liquidity aggregation service.
21/07/2009 15:34:00
ALGO REVIVAL POWERS SURGE IN ELECTRONIC TRADING VOLUMES
A surge in algorithmic trading helped drive a significant increase in the share of US equity trading volumes executed via electronic platforms last year, according to the results of Greenwich Associates' 2009 US Equity Investors Study.
More on this story: http://www.finextra.com/fullstory.asp?id=20292
NYSE poised to make London switch Transatlantic exchange NYSE Euronext is set to shift its main European trading system to London in order to better compete with a slew of new rivals, dealing a blow to French efforts to position Paris as Europe's financial capital.
*** The exchange will also be able to base trading of all European instruments in one location, as it moves its disparate markets onto a single Universal Trading Platform. The exchange’s derivatives market, Liffe, is already located in the UK capital, as is its European dark pool, SmartPool, and it plans to move its alternative equities market, NYSE Arca Europe, from Paris to London in October
Regulation
FSA gets tough in wake of financial crisisThe UK Financial Services Authority adopted a tougher stance to regulation by scrutinising the business plans of brokers, requesting more data and attending banks' board meetings. Watchdog officials said the changes stem from the collapse of Northern Rock and other issues within the banking system. "There's a lot more detailed investigation and requests for numbers, a lot more fundamental analysis of the building blocks. We are a lot less reliant on what the firms are telling us," said Lyndon Nelson, head of risk at the FSA. Financial Times (tiered subscription model) (19 Jul.)
Conservative White Paper to propose FSA abolition George Osborne, the shadow UK chancellor, will on Monday unveil the Conservative white paper on banking reform, proposing to abolish the Financial Services Authority and divide its responsibilities between a bolstered Bank of England and a new consumer protection agency. (The Guardian)
Asia
NASDAQ OMX PRESIDENT MAGNUS BOCKER QUITS FOR SGX ROLE Nasdaq OMX president Magnus Bocker is quitting the market operator to take over as chief executive officer of the Singapore Exchange.
Full story: http://www.finextra.com/fullstory.asp?id=20287
Alternative Trading Systems Take Bite Out of TSE in JapanThe Tokyo Stock Exchange is facing a big challenge to its iron-grip hold on cash equities trading
* PTS share of equity trading tiny but rising fast
* TSE launching new system in January to counter rivals
* Unbundling regulation could determine fate of PTS
HK unveils $800M plan to pay back Lehman investors
By JEREMIAH MARQUEZ
HONG KONG – Hong Kong banks agreed to return more than $800 million to investors burned by Lehman Brothers-backed products, potentially ending a nearly yearlong dispute that sparked street protests and exposed problems in the financial center's markets.
http://news.yahoo.com/s/ap/20090722/ap_on_bi_ge/as_hong_kong_lehman_investors_2
Singapore's SMX appoints Stanchart as clearing bank
SINGAPORE, July 22 - The Singapore Mercantile Exchange , set to launch futures trading in various commodities and financial products in the fourth quarter of this year, has appointed Standard Chartered Bank
Besides banking facilities for clearing members of SMX, Stanchart would also provide employee banking services to the exchange, the two organisations said in a joint statement on Wednesday.
Summary (JPM)
· Liquidity fragmentation in Europe last week was down 2.2% to 23.1%, driven by Germany, France and Netherlands.
· Ireland (65.7%), UK (35.8%), France (27.1%), Netherlands (26.7%) and Germany (23.5%) were the most fragmented markets in percentage terms.
· UK ($2.5bn), Germany ($1.4bn), France ($1.3bn), Switzerland ($0.4bn) and Netherlands ($0.4bn) were the most fragmented in terms of Displayed Liquidity traded away from the primary market.
· Chi-X achieved average daily turnover (ADT) of $4.5bn, equivalent to 14.9% of flow in Chi-X names. Total ($96m, 21.6%), HSBC ($91m, 19.6%) and Deutsche Bank ($83m, 15.3%) had the highest ADT.
· ADT on the Turquoise Displayed Order Book was $1.2bn. Market share in Turquoise names was 3.9%. Nestle ($34m, 10.1%), Roche HLDG P ($32m, 11.9%) and Novartis ($24m, 9.0%) had the highest ADT.
· BATS achieved ADT of $1.0bn. Market share in BATS names was 3.4%. Total ($28m, 6.3%), ENI ($22m, 5.0%) and Rio Tinto ($21m, 6.7%) had the highest ADT.
· Nasdaq OMX achieved ADT of $236.7m, a new high.
· 19 stocks traded more than 20% ADV on Dark venues.
Junk
Swine stench spurs multimillion-dollar settlementsThe government has earmarked $1.7 million to help the USDA's Swine Odor and Manure Management Research Unit figure out what makes pigs stink
Scott Riley
EMCF Business Development
European Multilateral Clearing Facility
8th Floor 50 Bridge Street Sydney Australia 2000
((Off)+61 (0)2 8916 9634 È(Mob): +61 (0)418 117 627
* scott.riley@au.fortis.com
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