G’day All,
Where does the time go? Yes, SIBOS is around the corner again.
For those of you heading to HK I’d love to catch up.
This is also a call to all of you with social programs…ummm, I’m a social type of guy.
The blog is one source of information, but of course it is just the tip of the ice berg.
If your organisation has serious plans in the Asian region and is keen to talk market structures, I’d be keen to catch up.
So this is also a call for those to engage at a higher level.
What else has been going on?
Chi-X and Aussie market reform – following on from Monday late blog. I don’t think we’ve heard the last about the cost of compliance.
Update on Flash and good to see some more robust defence.
SEC review I think is feed by misperceptions.
…yikes, I gotta go in 4 mins…
Nice response to the madness of Custodian liability…thanks SIFMA!
Good story, copied in full from the Business Times in Asia on SGX as an Asian gateway.
…In Aust they keep ranting about how clever they are do dodge the GFC…
*** One small thing they fail to mention, Aust has survived the crisis better than anyone else in the world because…we have 4 banks that don’t compete and use predatory pricing to bloat their balance sheets, and no matter what the government does we’re the quarry for Asia and beyond. No sooner do we blow a hole in the budget with a ballooning deficit and we find 50 billion of gas in some hole somewhere. Howzz that…for a get out of deficit free card?
http://www.news.com.au/perthnow/story/0,21598,25983794-5017962,00.html
This week-end I’m digging up the back yard. God’s knows what I’ll find…copper, gold, opals, oil, gas, bushranger loot…(or knowing my luck, an old empty stubby).
After the woe of the Rugby and the Cricket last Sunday I found solace in the Boomer result…it was not to be for long….
Australia humiliated by New Zealand in Oceania basketball championship
crushed 100-78
http://www.foxsports.com.au/story/0,8659,25982041-23769,00.html
Sport? I give up.
I will be giving up zero time to watch the Boks beat the wallabies…in the second half…again.
…that’s it, times up.
Recent studies estimate that more than half of all Australian women (52%) and two-thirds of men (67%) are overweight or obese. That is, almost 60% of the adult population in Australia is overweight or obese.
http://www.asso.org.au/home/obesityinfo/stats/fastfacts
Have a great week-end,
S
http://clearingandsettlement.blogspot.com/
Markets
Australian market participants have welcomed proposed changes to the structure of financial markets supervision in the country and anticipate an increase in the number of alternative trading venues bidding to compete with Australian Securities Exchange (ASX).
Read story
ASIC will need quicker response times as overseer
The back story is that competitor exchanges are on their way.
http://business.smh.com.au/business/asic-will-need-quicker-response-times-as-overseer-20090824-ewkl.html?page=-1
*** I agree with this story. Good summary / conclusion.
AUSTRALIAN REGULATION CHANGES PAVE WAY FOR NEW TRADING PLATFORMS The Australian government has handed the country's regulator responsibility for supervising real-time trading on markets, in a move that is expected to end the monopoly currently enjoyed by the ASX.
Full story: http://www.finextra.com/fullstory.asp?id=20397
Nasdaq MTF will not drop BLNK despite ‘flash’ controversy
o A Flash in the Pan? Over the summer there has been a lot of controversy surrounding the future of "flash" order types and whether their benefits to individual traders and investors outweigh the detriment to the current market structure.
Opinion: Eliminating flash trading would be mistakeChris Hynes and Donald Luskin, co-creators of the first alternative trading system, Investment Technology Group's POSIT, argue against prohibiting the strategy of flash trading. Hynes and Luskin say a ban would hinder automation in equity trading as well as competition. "Flash trading exemplifies the virtues of two decades of innovation that have improved executions for both individual and institutional investors," they write. The Wall Street Journal (8/27)
NYSE EURONEXT TO BUY NYFIX FOR $144M
Nyse Euronext has entered into a definitive agreement to acquire, through its technology unit, US trading systems vendor Nyfix in a cash deal worth around $144 million.
Full story: http://www.finextra.com/fullstory.asp?id=20421
DOW JONES NEWSWIRES: NYSE Euronext to Buy Nyfix at 95% Premium By Kevin Kingsbury8/27/09NYSE Euronext announced it has agreed to acquire trading technology subsidiary NYFIX Inc. for $144 million, bolstering its efforts to improve its trading operations.The price tag, which includes preferred stock, comes as operations such as the New York Stock Exchange and Nasdaq OMX Group Inc. try to stem market-share losses to upstarts such as BATS and Direct Edge.NYFIX shares will be purchased for $1.675 each, a 95% premium to Wednesday's closing price. The stock traded above $45 in 2000 and through Wednesday was down 74% the past year.
Senator to call on SEC to review stock market structuresSen. Ted Kaufman, D-Del., is expected today to send a letter to Securities and Exchange Commission Chairwoman Mary Schapiro urging the agency to assess all forms of stock market structure. The move adds to continuing debate about the controversial strategy of high-frequency trading. "I request the SEC undertake a comprehensive, independent 'zero-based regulatory review' of a broad range of market-structure issues, analyzing current market structure from the ground up before piecemeal changes built on the current structure increase the potential for execution unfairness," Kaufman wrote, according to Dow Jones Newswires. The Wall Street Journal (8/24)
Deutsche Börse latest to move ahead with upgrade plan Deutsche Börse has become the second major European stock exchange in a week to move forward with its plan to upgrade its technology to enable its clients to trade higher volumes of trades more quickly.
§ Obama to tap Bernanke for second term as Fed chairman
In an announcement today, President Barack Obama will nominate Ben Bernanke to a second term as chairman of the Federal Reserve, said David Axelrod, a senior adviser to Obama. "The president believes that Bernanke has provided extraordinary leadership during the most difficult financial crisis we've faced since the Great Depression," Axelrod said. "As we build our economy, that leadership is still needed." Despite some lawmakers' criticism of Bernanke's efforts during the financial crisis, Obama opted for continuity in economic policy. ClipSyndicate/Bloomberg (8/25) , The Wall Street Journal (8/25) , Financial Times (tiered subscription model) (8/25) , Reuters (8/25)
*** Interesting, more politics behind the scenes than in the actual re-appointment itself.
26/08/2009 16:13:00
ALGO TRADERS AND DARK POOLS UNDER FIRE AS US SENATOR CALLS FOR MARKET REVIEW
The Securities and Exchange Commission (SEC) has been urged to conduct a comprehensive review of market structure by US Senator Ted Kaufman, who warns that practices such as algorithmic trading and the use of dark pools may erode investor confidence.
More on this story: http://www.finextra.com/fullstory.asp?id=20414
*** poor reporting and a lack of education, information and awareness….will erode investor confidence.
NASDAQ OMX AND BM&F BOVESPA IN PARTNERSHIP TALKS; LSE AND NYSE EURONEXT EYE INDIAN BOURSE STAKES Nasdaq OMX and Brazil's BM&F Bovespa have entered into exclusive discussions aimed at setting up a strategic, commercial and technological partnership. Meanwhile, local press reports suggest the LSE and Nyse Euronext are both considering taking five per cent stakes in India's MCX-SX.
Full story: http://www.finextra.com/fullstory.asp?id=20417
Clearing
SIX X-CLEAR TO OFFER COMPETITIVE CLEARING FOR QUOTE MTF
http://www.finextra.com/fullpr.asp?id=29211
A nice response to the madness of:
EU might hold custodian banks liable for processing agents' wrongdoing
From SIFMA (Europe)
http://essf.sifma.org/publications/documents/ESSF%20Legal%20Cttee%20Position%20Paper%20Fund%20Depositories%2015Jul09%20_2_.pdf
Participants
Instinet Agrees to Acquire Derivatives Trading Tech Company
Instinet Incorporated, an agency-only broker, today announced that it has agreed to acquire substantially all the business and assets of TORC Financial, LLC, a provider of derivatives trading technologies.
http://advancedtrading.com/derivatives/showArticle.jhtml;jsessionid=Q12K01W4O34HPQE1GHRSKHWATMY32JVN?articleID=219500112&_requestid=330020
Citadel to rebrand fund-administration unit Citadel Investment Group intends to rechristen its fund-administration arm, Citadel Solutions, as Omnium, it has emerged. (The Wall Street Journal)
· Computershare gains foothold in Scandinavia
Little-known Getco is key player in high-frequency tradingGetco might not be a household name, but the private company is one of the largest players in high-frequency trading, often accounting for as much as 20% of daily trading volume of many stocks. Getco, which stands for Global Electronic Trading Co., has become one of the five largest traders when measured by volume in stocks and other electronically traded instruments. "They are probably the biggest market maker in the U.S. stock market," said Justin Schack, a vice president at Rosenblatt Securities. The Wall Street Journal (8/27)
Instinet's Lesko says unbundling to become more common in AsiaGlenn Lesko was transferred from New York to Hong Kong to serve as CEO of Instinet's Asian business. "The biggest obstacle in Asia to best execution is that if there is no unbundling allowed, then there is no execution-only trading," Lesko said. But unbundling is becoming increasingly common as more buy-side traders use algorithms, cost analysis and electronic trading. AsianInvestor.net (27 Aug.)
BUSINESS TIMES (SINGAPORE): SGX as Asian Gateway - But at What Price?By Chew Xiang8/27/09A monopoly faces two choices when a new competitor comes knocking: to fight or to cooperate. The Singapore Exchange (SGX) has chosen to cooperate. Two weeks ago, it signed a deal with New York-based exchange operator Chi-X to set up a dark pool trading Singapore, Hong Kong, Australia and Japan equities.Chi-X had wanted to set up an alternative exchange here directly competing with SGX for trading revenue; that threat has evidently made the two parties bedfellows.It was a deal that 'made so much sense on so many levels', says an industry insider. SGX keeps its monopoly on trading of Singapore-listed stocks. It also keeps a half-share of all the trades that leak into dark pools, a breed of specialised exchange that electronically matches big trades. And, subject to regulatory approval, it gets a foothold in foreign markets - something it has been trying to do ever since Clob International became as good as dead and a trading link with the Australian Securities Exchange (ASX) set up in 2001 was severed five years later.Perhaps most importantly, it gets to keep its regulatory functions, which it would have had to lose before new entrants could enter. A rule proposed earlier this year to increase minimum order size requirements was seen by some as anti-competitive. And a slew of measures to improve corporate governance announced last Saturday could be seen by the cynical as a way to head off yet more (admittedly not always fair) criticism that SGX can't balance its commercial and supervisory goals.This week, ASX was told it has to fight. On Monday, it lost its supervision of financial market trading to an independent government regulator. It used to regulate itself, and critics hit out at the obvious conflict of interest. So long as ASX regulated itself, other market operators couldn't enter. And why, they demanded, should ASX shareholders pay A$16 million (S$19.3 million) a year for supervision, even though that is in the public interest? Chris Bowen, the Australian minister for financial services, superannuation and corporate law, agreed that ASX should not also look after its competitors. 'It will not be possible for (them) to enter the market and actually operate until the supervision of Australia's financial markets has been centralised under the one agency,' Mr Bowen said. Three operators - Liquidnet, Chi-X and AXE, a unit of the New Zealand Stock Exchange - have been waiting for years for their exchange licences from Canberra.ASX will continue to enforce its own listing rules, so it won't be totally toothless. And even if the three operators are granted licences (which they have not yet obtained), ASX still retains a monopoly on clearing - a major cash cow for them, as it is for SGX. So it's not all doom and gloom, and the Australians will have deep pockets going into any battle. ASX reported pre-tax annual profit of A$445 million on sales of A$538 million, compared with SGX's operating profit of S$367 million on turnover of S$595 million. (With margins between 60 and 80 per cent, you can't deny being a monopoly is hugely profitable.)But what if SGX had been forced to fight? What if the Monetary Authority of Singapore (MAS) had taken over its regulatory powers and then allowed Chi-X - and anyone else who wanted - into the country? Not merely as a dark pool, but as a fully functional electronic exchange trading SGX-listed stocks?Investors may benefit if operators slash trading costs. Reports say spreads in Singapore are among the highest in the region, so there's fat to trim. And if it gets cheaper to trade, liquidity should improve, along with valuations, which should help attract new listings, in turn drawing even more liquidity into Singapore. And if others were allowed into securities clearing too, that could open up space for a true Asia-wide clearing house.On the other hand, there are some regulatory issues to sort out first (although the Australians are leading the way with their solution for this one). And the traditional excuse - sorry, reason - that Singapore is just too small a market could actually be true. Asians could also be culturally less disposed to work with newfangled innovations like dark pools, alternative trading systems, or multilateral trading facilities. Entrants may find it hard to break into long-held relationships between brokers and their clients.Is this the case? The problem is, we don't know - and now that Chi-X is in a happy partnership with the exchange, we may never know. The deal, if it's successful, should position SGX well as the Asian Gateway it wants to become. But is that worth sacrificing domestic competition for?
Junk
THIS ATM'S HAVING A BUBBLE - EAST END CASH MACHINES GO COCKNEY A cash machine operator has introduced Cockney rhyming slang prompts and options to five of its ATMs in east London.
Full story: http://www.finextra.com/fullstory.asp?id=20401
… Customers choosing the cockney option will be asked to enter their Huckleberry Flynn (PIN) and will then be able to select sausage and mash (cash) amounts such as a speckled hen (£10).
The Bank Machine ATMs will then advise that they are contacting the user's rattle and tank (bank) for approval.
Ron Delnevo, MD, Bank Machine, says: "Whilst we expect some residents will visit the machine to just have a butchers (look), most will be genuinely pleased as this is the first time a financial services provider will have recognised the cockney language in such a manner."
Australian regulator to gain broad powers next yearAustralian Treasurer Wayne Swan announced that some regulatory authority will shift from the stock exchange to the securities and investment regulator. The Australian Securities & Investments Commission will take over supervision of all trading in the country's financial markets, while the Australian Securities Exchange will have authority only over rules governing its listed companies. "Australia's financial system has performed better than any other during the global recession, and these reforms will ensure Australia's regulatory arrangements remain among the best in the world," Swan said. The Australian (25 Aug.)
*** One small thing they fail to mention, Aust has survived the crisis better than anyone else in the world because…we have 4 banks that don’t compete and use predatory pricing to bloat their balance sheets, and no matter what the government does we’re the quarry for Asia and beyond. No sooner do we blow a hole in the budget with a ballooning deficit and we find 50 billion of gas in some hole somewhere. Howzz that…for a get out of deficit free card?
http://www.news.com.au/perthnow/story/0,21598,25983794-5017962,00.html
This week-end I’m digging up the back yard. God’s knows what I’ll find…copper, gold, opals, oil, gas, bushranger loot…(or knowing my luck, an old empty stubby).
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
Friday, August 28, 2009
Monday, August 24, 2009
AMCF News: Aussie market reform, Chi-X global offer, BATS pricing, Turquoise for sale, LCH DBk switch, Levitt
G’day All,
Sorry to join the Monday crush of information.
Friday blog got sidelined due to very important event….Miss R returns from her Far North Queensland Experience (2 week field trip)….
But there has been lots of interesting industry news….
I’m glad I held over till today. The Aussie Gov’t has finally announced a timetable for the next steps to get competition up and running in the local market…Yahoo. Market supervision will be assumed by ASIC (the local regulator). Market structure wise I think this is a much better fit that with the domestic exchange. Too many conflicts of interest for one thing. I think this is a good result for Aussie.
For those watching the space from afar the local market has been in ‘limbo’ for some time. Now there is at least a path forward (timelines could be better / more aggressive but that is another story). Aussie is currently an ASX vertical silo (monopoly). There are two ECNs/MTFs knocking on the competition door. Chi-X, whom I hope you know, and AXE (a local syndicate la Turquoise).
Then we have the European MTFs
Chi-X: Global makes an offer for to consolidate the European business (at somewhat different valuations to Turquoise)
Turquoise: Old news now re UBS offer (but I use the blogspot for my own history of events hence included here)
BATS: Goes after LSE with inverted maker / taker. One of the saddest things about this item was that I could not find one report that actually correctly reported the commercial details. It shows how far we still have to go to educate the press (and in a pinch, how we should rely on our own judgement…and not the medias!)
Then LSE ditching TradElect. Common sense prevails at last, but boy oh boy, what a lot of money was pumped down that blind alley. Well done Accenture, but every gravy train has its end.
Euronext: Smartpool…sound more like ‘gone fishing’…sorry strike that. Too biased.
Clearing.
LCH loses another, Deutsche. Ultimately LCH’s unintended internal cross subsidies will come to light.
EU madness on Custodial Banks – this has got to be a joke?
Good position by Levitt. We wouldn’t have F1 if we regulated to the lowest standard.
Blast from the past.
ADXers, you’re copied on this one. PPB announced a “final” distribution last Friday.
We have positively tracked down 36 of 56 staff on the PPB list.
Special mention of thanks needs to go to Cathy Lyall and Jess (nee Mackenzie) Gillet – the ladies have done some excellent work in tracking you ex ADXers down.
Please do check out the latest contact list at:
http://clearingandsettlement.blogspot.com/2009/08/adx-alumni-and-ppb-distribution.html
If you have updates, please, please, search them out and let me know.
…and Sport. Did anyone notice?
Yes, Rugby. We lost. I feel awful. We’re 3rd in the Tri-Nations, but frankly, I think we deserve to be if we have the lack of compose we currently display.
Oh…Cricket? Should I mention it? Ricky, first man to lose back to back English tours in 119 years. Lovely. If I felt awful, I was then gutted.
…but hey, BasketBall is great!
I was at the Boomer game on Sunday night.
Aussie beat the kiwis 84 - 77
http://www.foxsports.com.au/story/0,20797,25970600-23769,00.html?from=public_rss
Like me, you’d have loved it.
Have a great week all,
S
Friday arvo
Dear Parents of Year 9,
This email confirms the arrangements for the arrival of Year 9 and Staff back at school on Friday evening.
Parents are invited to assemble in the Main Quad at 5.45pm to await their arrival.
*** It was Miss R’s DoB whilst ‘on tour’. As it happened she ended up doing community service in a respite care home for her b’day. Different.
Platforms
Reforms to the supervision of Australia's financial markets - 24/08/2009
http://ministers.treasury.gov.au/DisplayDocs.aspx?doc=pressreleases/2009/013.htm&pageID=003&min=ceba&Year=&DocType
Chi-X Global Said to Make Buyout Offer for Europe Trading Unit
Aug. 22 (Bloomberg) -- Chi-X Global Inc. proposed buying out minority owners of its Chi-X Europe unit for stock that values the business at $177.3 million, according to five people familiar with the situation.
http://www.bloomberg.com/apps/news?pid=20601080&sid=anl9nBD1jU9E
Turquoise hires UBS to solicit bids, sources sayTurquoise CEO Eli Lederman confirmed that the alternative trading platform is studying its options with UBS as competition heats up in share trading. The company sent information about a possible sale to more than a dozen possible bidders, including the London Stock Exchange, NYSE Euronext and Deutsche Borse. "This is the beginning of the next wave of consolidation in the industry," said Mamoun Tazi, an exchange analyst at MF Global. "The players are a little different because the industry is a little different. Still, the issues aren't. As volumes become scarce and companies seek to survive, people have to find solutions." Bloomberg (17 Aug.)
Questions emerge over value as Turquoise plans sale The board of Turquoise, the European trading system that has put itself up for sale to rivals, plans to complete a deal before the end of this year despite concerns among potential buyers over the future value of the business.
*** This article puts a value on T of 2 times annual earnings, i.e. 5.8myn euros. Hardly a stratospheric number. Certainly puts trade matching in the commoditised basket. T has 9 shareholders, so less than a million back for each of them. Certainly the value proposition is not in the infrastructure.
Bats Europe lays down pricing challenge to LSE Bats Europe, the alternative trading system, is planning to make a direct challenge to its main rival the London Stock Exchange by introducing an aggressive pricing plan next month for UK stocks, which it hopes will attract orders from the LSE and double its UK market share overnight.
*** Ouch. This is aggressive but inevitable (Luke the maths is out by a factor of 1,000 but hey the principle is identical).
BATS Europe Targets Market Share of London Stock Exchange Offers pricing special in September, with 0.40 basis point rebate for adding liquidity, and a free liquidity ...
*** This story is worse, they price per share.
ROLET CLOSE TO REPLACING FURSE TRADING PLATFORM Xavier Rolet, chief executive of the London Stock Exchange, has demonstrated his determination to break with his predecessor Dame Clara Furse’s legacy by moving ahead with his plan to scrap her main technology project TradElect.
http://mail.efnmail.co.uk/r/118799880/MjU3MzA2OjIyMjgy/
TURQUOISE FOUNDER RUES HFT DEFICIT Turquoise, the alternative equities market that put itself up for sale last week, missed out by not working more closely with high-frequency trading firms, according to one of the system’s founders, illustrating the growing clout of the new breed of trader and casting doubt over a move by the London Stock Exchange away from them.
http://mail.efnmail.co.uk/r/118799888/MjU3MzA2OjIyMjgy/
SMARTPOOL TO ADD MID-CAP SECURITIES
SmartPool, the European exchange-led dark pool for block trading set up by Nyse Euronext, BNP Paribas, HSBC and JPMorgan, is moving into pan-European mid-cap securities.
Full story: http://www.finextra.com/fullstory.asp?id=20378
WALL STREET JOURNAL: Opinion -- Don't Set Speed Limits on Trading Why penalize efficiency? It creates deep and liquid markets.By Arthur Levitt Jr. 8/18/09
We should not set a speed limit to slow everyone down to the pace set by those unwilling or unable to compete at the highest levels of market activity. Investors large and small have always been served well by those looking to build the deepest possible pool of potential buyers and sellers, make trades at a better price, and all as quickly as possible. More liquidity, better pricing and faster speeds are the building blocks of healthy and transparent markets, and we must always affirm those goals. Mr. Levitt was chairman of the Securities and Exchange Commission from 1993 to 2001. *** well said I say!
Seth Merrin Examines the Pros and Cons of High Frequency TradingWhile high frequency trading as a category has its pros and cons, like all trading, but flash orders have absolutely no pros, says Merrin, an advocate of the institutional investor.
(Seth Merrin, founder and CEO of Liquidnet Holdings, operator of the largest buy-side only dark pool)
*** I disagree with much of this – and that leads me to think how much is a personal view and how much is a corporate position.
Levitt leaves a much better taste / feel.
FINANCIAL TIMES: ASX Centre of Iress Bid SpeculationBy Peter Smith in Sydney8/20/09The Australian Securities Exchange on Thursday refused to comment on speculation it was considering a bid for Iress Market Technologies, an Australian-listed market data and trading group in which it has built a 20 per cent stake.Iress, which is popular with stockbrokers and has a market value of close to A$1bn (US$830m), last week said it could not explain a surge in its share price beyond talk of interest from potential suitors.The rumours were also fuelled by attempts by the ASX to increase its cash reserves and the potential threat to the exchange if Australia’s monopolistic securities market are opened to new entrants.
Clearing
LCH.Clearnet faces second loss to Swiss rival Anglo-French clearing house LCH.Clearnet faces the defection of a second large client in less than a year after it emerged that Deutsche Bank is planning to move its UK equities business to a Swiss rival.
SIX X-CLEAR OPENS STOCKHOLM OFFICE
http://www.finextra.com/fullpr.asp?id=29143
EUROCCP PLANS CLEARING AND SETTLEMENT SERVICES FOR DEPOSITARY RECEIPTS
http://www.finextra.com/fullpr.asp?id=29110
Draft copies of Papers presented at the Reserve Bank of Australia 2009 Conference - Inflation in an Era of Relative Price Shocks - on 17 and 18 August 2009 have been published on the Bank’s website.
http://www.rba.gov.au/PublicationsAndResearch/Conferences/2009/index.html
*** I’d love to be reading this…but alas…no time.
EU might hold custodian banks liable for processing agents' wrongdoingThe European Commission proposed holding the region's depositary banks responsible for wrongdoing by prime brokerages and subcustodian banks with which they do business. The European banks would be required to make investors whole. The definition of the relationship between the depositary bank and subcustodians appears to be at the core of the issue. The European Securities Services Forum, an affiliate of SIFMA, said subcustodian contracts should not be considered as outsourcing arrangements. "In the custody business, the reasons for appointing a subcustodian are not driven by the commercial considerations of the global custodian, but from the need to support the investment transactions of the client in a broad range of jurisdictions, each with their own regulations and market requirements," the ESSF said in a position paper. Securities Industry News (17 Aug.)
*** Ridiculous
ADX
PPB Distribution.
Well, today is the day of the PPB dividend distribution. This is an urgent reminder to ADX alumni to check:
http://clearingandsettlement.blogspot.com/2009/08/adx-alumni-and-ppb-distribution.html
to fill as many gaps as possible.
If we don’t do it, we’re reliant on PPB. (The gauntlet is thrown PPB – pleasantly surprise us please).
UBS makes Tap available for Australian, Hong Kong marketsTap, UBS' advanced algorithmic trading platform, is available in the Asian-Pacific region, the Swiss bank announced. The platform provides access to dark liquidity pools. "We've been monitoring Tap in the US and Europe for the past nine months and also analysing market data on the exchanges in Australia, Hong Kong and Japan, and concluded that Tap would be a valuable service for our clients in the region. We set up a pilot scheme in Hong Kong and Sydney a couple of months ago; we will also soon launch the service in Japan," said David Rabinowitz, head of direct execution for Asian equities at UBS. FinanceAsia.com (19 Aug.)
US regulators pressed Citigroup to replace finance chief Citigroup was pressed directly by the Federal Reserve, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation to replace Ned Kelly as finance chief only weeks before his unexpected exit on July 9, a secret late-June agreement between both sides has revealed. (Financial Times)
**** I’m sorry, but any visitor to Melbourne gaol (jail) could have seen the risk in appointing a “Ned Kelly” to a responsible financial position…Ahhh, what we can learn from history. (Sorry Ned…but as Redgum says…(aussie music fans only)…”Poor Ned, you’re better off”)
Check out more at: http://www.oldmelbournegaol.com.au/
RESEARCHERS CLAIM NETWORK DELAY TRACKING BREAKTHROUGH In a breakthrough that could prove significant for investment banks running electronic trading systems, computer scientists say they have developed an inexpensive way to track microsecond delays in data centre networks.
Full story: http://www.finextra.com/fullstory.asp?id=20396
JPM Summary
· Liquidity fragmentation in Europe last week was up 0.8% to 23.8%, driven by UK, Germany and France.
· Ireland (60.2%), UK (36.8%), Netherlands (25.8%) , France (26.2%), and Germany (27.0%) were the most fragmented markets in percentage terms.
· UK ($2.8bn), France ($1.4bn), Germany ($1.6bn), Netherlands ($0.6bn), Italy ($0.5bn) and Switzerland ($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 $4.9bn, equivalent to 14.4% of flow in Chi-X names. Deutsche ($103m, 18.9%), Total ($88m, 19.4%) and BP ($81m, 27.6%) had the highest ADT.
· ADT on the Turquoise Displayed Order Book was $2.0bn. Market share in Turquoise names was 5.7%. Nestle ($62m, 9.3%), Rio Tinto ($36m, 9.5%) and Total ($34m, 7.5%) had the highest ADT.
· BATS achieved ADT of $0.9bn. Market share in BATS names was 3.0%. E.ON ($29m, 6.5%), Deutsche Bank ($26m, 4.5%) and Enel ($22m, 7.7%) had the highest ADT.
· Nasdaq OMX achieved ADT of $207.13m.
· 20 stocks traded more than 20% ADV on Dark venues. Swiss Block achieved ADT of $68.61m.
Richards gets three-year coaching ban in 'bloodgate' row
LONDON - Former Harlequins director of rugby Dean Richards was banned from coaching for three years by an independent European Rugby Cup disciplinary committee in Glasgow on Monday.
*** Well, this is just stupid / cheating. Must be some funny conflicts / pressures at play here.
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
Sorry to join the Monday crush of information.
Friday blog got sidelined due to very important event….Miss R returns from her Far North Queensland Experience (2 week field trip)….
But there has been lots of interesting industry news….
I’m glad I held over till today. The Aussie Gov’t has finally announced a timetable for the next steps to get competition up and running in the local market…Yahoo. Market supervision will be assumed by ASIC (the local regulator). Market structure wise I think this is a much better fit that with the domestic exchange. Too many conflicts of interest for one thing. I think this is a good result for Aussie.
For those watching the space from afar the local market has been in ‘limbo’ for some time. Now there is at least a path forward (timelines could be better / more aggressive but that is another story). Aussie is currently an ASX vertical silo (monopoly). There are two ECNs/MTFs knocking on the competition door. Chi-X, whom I hope you know, and AXE (a local syndicate la Turquoise).
Then we have the European MTFs
Chi-X: Global makes an offer for to consolidate the European business (at somewhat different valuations to Turquoise)
Turquoise: Old news now re UBS offer (but I use the blogspot for my own history of events hence included here)
BATS: Goes after LSE with inverted maker / taker. One of the saddest things about this item was that I could not find one report that actually correctly reported the commercial details. It shows how far we still have to go to educate the press (and in a pinch, how we should rely on our own judgement…and not the medias!)
Then LSE ditching TradElect. Common sense prevails at last, but boy oh boy, what a lot of money was pumped down that blind alley. Well done Accenture, but every gravy train has its end.
Euronext: Smartpool…sound more like ‘gone fishing’…sorry strike that. Too biased.
Clearing.
LCH loses another, Deutsche. Ultimately LCH’s unintended internal cross subsidies will come to light.
EU madness on Custodial Banks – this has got to be a joke?
Good position by Levitt. We wouldn’t have F1 if we regulated to the lowest standard.
Blast from the past.
ADXers, you’re copied on this one. PPB announced a “final” distribution last Friday.
We have positively tracked down 36 of 56 staff on the PPB list.
Special mention of thanks needs to go to Cathy Lyall and Jess (nee Mackenzie) Gillet – the ladies have done some excellent work in tracking you ex ADXers down.
Please do check out the latest contact list at:
http://clearingandsettlement.blogspot.com/2009/08/adx-alumni-and-ppb-distribution.html
If you have updates, please, please, search them out and let me know.
…and Sport. Did anyone notice?
Yes, Rugby. We lost. I feel awful. We’re 3rd in the Tri-Nations, but frankly, I think we deserve to be if we have the lack of compose we currently display.
Oh…Cricket? Should I mention it? Ricky, first man to lose back to back English tours in 119 years. Lovely. If I felt awful, I was then gutted.
…but hey, BasketBall is great!
I was at the Boomer game on Sunday night.
Aussie beat the kiwis 84 - 77
http://www.foxsports.com.au/story/0,20797,25970600-23769,00.html?from=public_rss
Like me, you’d have loved it.
Have a great week all,
S
Friday arvo
Dear Parents of Year 9,
This email confirms the arrangements for the arrival of Year 9 and Staff back at school on Friday evening.
Parents are invited to assemble in the Main Quad at 5.45pm to await their arrival.
*** It was Miss R’s DoB whilst ‘on tour’. As it happened she ended up doing community service in a respite care home for her b’day. Different.
Platforms
Reforms to the supervision of Australia's financial markets - 24/08/2009
http://ministers.treasury.gov.au/DisplayDocs.aspx?doc=pressreleases/2009/013.htm&pageID=003&min=ceba&Year=&DocType
Chi-X Global Said to Make Buyout Offer for Europe Trading Unit
Aug. 22 (Bloomberg) -- Chi-X Global Inc. proposed buying out minority owners of its Chi-X Europe unit for stock that values the business at $177.3 million, according to five people familiar with the situation.
http://www.bloomberg.com/apps/news?pid=20601080&sid=anl9nBD1jU9E
Turquoise hires UBS to solicit bids, sources sayTurquoise CEO Eli Lederman confirmed that the alternative trading platform is studying its options with UBS as competition heats up in share trading. The company sent information about a possible sale to more than a dozen possible bidders, including the London Stock Exchange, NYSE Euronext and Deutsche Borse. "This is the beginning of the next wave of consolidation in the industry," said Mamoun Tazi, an exchange analyst at MF Global. "The players are a little different because the industry is a little different. Still, the issues aren't. As volumes become scarce and companies seek to survive, people have to find solutions." Bloomberg (17 Aug.)
Questions emerge over value as Turquoise plans sale The board of Turquoise, the European trading system that has put itself up for sale to rivals, plans to complete a deal before the end of this year despite concerns among potential buyers over the future value of the business.
*** This article puts a value on T of 2 times annual earnings, i.e. 5.8myn euros. Hardly a stratospheric number. Certainly puts trade matching in the commoditised basket. T has 9 shareholders, so less than a million back for each of them. Certainly the value proposition is not in the infrastructure.
Bats Europe lays down pricing challenge to LSE Bats Europe, the alternative trading system, is planning to make a direct challenge to its main rival the London Stock Exchange by introducing an aggressive pricing plan next month for UK stocks, which it hopes will attract orders from the LSE and double its UK market share overnight.
*** Ouch. This is aggressive but inevitable (Luke the maths is out by a factor of 1,000 but hey the principle is identical).
BATS Europe Targets Market Share of London Stock Exchange Offers pricing special in September, with 0.40 basis point rebate for adding liquidity, and a free liquidity ...
*** This story is worse, they price per share.
ROLET CLOSE TO REPLACING FURSE TRADING PLATFORM Xavier Rolet, chief executive of the London Stock Exchange, has demonstrated his determination to break with his predecessor Dame Clara Furse’s legacy by moving ahead with his plan to scrap her main technology project TradElect.
http://mail.efnmail.co.uk/r/118799880/MjU3MzA2OjIyMjgy/
TURQUOISE FOUNDER RUES HFT DEFICIT Turquoise, the alternative equities market that put itself up for sale last week, missed out by not working more closely with high-frequency trading firms, according to one of the system’s founders, illustrating the growing clout of the new breed of trader and casting doubt over a move by the London Stock Exchange away from them.
http://mail.efnmail.co.uk/r/118799888/MjU3MzA2OjIyMjgy/
SMARTPOOL TO ADD MID-CAP SECURITIES
SmartPool, the European exchange-led dark pool for block trading set up by Nyse Euronext, BNP Paribas, HSBC and JPMorgan, is moving into pan-European mid-cap securities.
Full story: http://www.finextra.com/fullstory.asp?id=20378
WALL STREET JOURNAL: Opinion -- Don't Set Speed Limits on Trading Why penalize efficiency? It creates deep and liquid markets.By Arthur Levitt Jr. 8/18/09
We should not set a speed limit to slow everyone down to the pace set by those unwilling or unable to compete at the highest levels of market activity. Investors large and small have always been served well by those looking to build the deepest possible pool of potential buyers and sellers, make trades at a better price, and all as quickly as possible. More liquidity, better pricing and faster speeds are the building blocks of healthy and transparent markets, and we must always affirm those goals. Mr. Levitt was chairman of the Securities and Exchange Commission from 1993 to 2001. *** well said I say!
Seth Merrin Examines the Pros and Cons of High Frequency TradingWhile high frequency trading as a category has its pros and cons, like all trading, but flash orders have absolutely no pros, says Merrin, an advocate of the institutional investor.
(Seth Merrin, founder and CEO of Liquidnet Holdings, operator of the largest buy-side only dark pool)
*** I disagree with much of this – and that leads me to think how much is a personal view and how much is a corporate position.
Levitt leaves a much better taste / feel.
FINANCIAL TIMES: ASX Centre of Iress Bid SpeculationBy Peter Smith in Sydney8/20/09The Australian Securities Exchange on Thursday refused to comment on speculation it was considering a bid for Iress Market Technologies, an Australian-listed market data and trading group in which it has built a 20 per cent stake.Iress, which is popular with stockbrokers and has a market value of close to A$1bn (US$830m), last week said it could not explain a surge in its share price beyond talk of interest from potential suitors.The rumours were also fuelled by attempts by the ASX to increase its cash reserves and the potential threat to the exchange if Australia’s monopolistic securities market are opened to new entrants.
Clearing
LCH.Clearnet faces second loss to Swiss rival Anglo-French clearing house LCH.Clearnet faces the defection of a second large client in less than a year after it emerged that Deutsche Bank is planning to move its UK equities business to a Swiss rival.
SIX X-CLEAR OPENS STOCKHOLM OFFICE
http://www.finextra.com/fullpr.asp?id=29143
EUROCCP PLANS CLEARING AND SETTLEMENT SERVICES FOR DEPOSITARY RECEIPTS
http://www.finextra.com/fullpr.asp?id=29110
Draft copies of Papers presented at the Reserve Bank of Australia 2009 Conference - Inflation in an Era of Relative Price Shocks - on 17 and 18 August 2009 have been published on the Bank’s website.
http://www.rba.gov.au/PublicationsAndResearch/Conferences/2009/index.html
*** I’d love to be reading this…but alas…no time.
EU might hold custodian banks liable for processing agents' wrongdoingThe European Commission proposed holding the region's depositary banks responsible for wrongdoing by prime brokerages and subcustodian banks with which they do business. The European banks would be required to make investors whole. The definition of the relationship between the depositary bank and subcustodians appears to be at the core of the issue. The European Securities Services Forum, an affiliate of SIFMA, said subcustodian contracts should not be considered as outsourcing arrangements. "In the custody business, the reasons for appointing a subcustodian are not driven by the commercial considerations of the global custodian, but from the need to support the investment transactions of the client in a broad range of jurisdictions, each with their own regulations and market requirements," the ESSF said in a position paper. Securities Industry News (17 Aug.)
*** Ridiculous
ADX
PPB Distribution.
Well, today is the day of the PPB dividend distribution. This is an urgent reminder to ADX alumni to check:
http://clearingandsettlement.blogspot.com/2009/08/adx-alumni-and-ppb-distribution.html
to fill as many gaps as possible.
If we don’t do it, we’re reliant on PPB. (The gauntlet is thrown PPB – pleasantly surprise us please).
UBS makes Tap available for Australian, Hong Kong marketsTap, UBS' advanced algorithmic trading platform, is available in the Asian-Pacific region, the Swiss bank announced. The platform provides access to dark liquidity pools. "We've been monitoring Tap in the US and Europe for the past nine months and also analysing market data on the exchanges in Australia, Hong Kong and Japan, and concluded that Tap would be a valuable service for our clients in the region. We set up a pilot scheme in Hong Kong and Sydney a couple of months ago; we will also soon launch the service in Japan," said David Rabinowitz, head of direct execution for Asian equities at UBS. FinanceAsia.com (19 Aug.)
US regulators pressed Citigroup to replace finance chief Citigroup was pressed directly by the Federal Reserve, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation to replace Ned Kelly as finance chief only weeks before his unexpected exit on July 9, a secret late-June agreement between both sides has revealed. (Financial Times)
**** I’m sorry, but any visitor to Melbourne gaol (jail) could have seen the risk in appointing a “Ned Kelly” to a responsible financial position…Ahhh, what we can learn from history. (Sorry Ned…but as Redgum says…(aussie music fans only)…”Poor Ned, you’re better off”)
Check out more at: http://www.oldmelbournegaol.com.au/
RESEARCHERS CLAIM NETWORK DELAY TRACKING BREAKTHROUGH In a breakthrough that could prove significant for investment banks running electronic trading systems, computer scientists say they have developed an inexpensive way to track microsecond delays in data centre networks.
Full story: http://www.finextra.com/fullstory.asp?id=20396
JPM Summary
· Liquidity fragmentation in Europe last week was up 0.8% to 23.8%, driven by UK, Germany and France.
· Ireland (60.2%), UK (36.8%), Netherlands (25.8%) , France (26.2%), and Germany (27.0%) were the most fragmented markets in percentage terms.
· UK ($2.8bn), France ($1.4bn), Germany ($1.6bn), Netherlands ($0.6bn), Italy ($0.5bn) and Switzerland ($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 $4.9bn, equivalent to 14.4% of flow in Chi-X names. Deutsche ($103m, 18.9%), Total ($88m, 19.4%) and BP ($81m, 27.6%) had the highest ADT.
· ADT on the Turquoise Displayed Order Book was $2.0bn. Market share in Turquoise names was 5.7%. Nestle ($62m, 9.3%), Rio Tinto ($36m, 9.5%) and Total ($34m, 7.5%) had the highest ADT.
· BATS achieved ADT of $0.9bn. Market share in BATS names was 3.0%. E.ON ($29m, 6.5%), Deutsche Bank ($26m, 4.5%) and Enel ($22m, 7.7%) had the highest ADT.
· Nasdaq OMX achieved ADT of $207.13m.
· 20 stocks traded more than 20% ADV on Dark venues. Swiss Block achieved ADT of $68.61m.
Richards gets three-year coaching ban in 'bloodgate' row
LONDON - Former Harlequins director of rugby Dean Richards was banned from coaching for three years by an independent European Rugby Cup disciplinary committee in Glasgow on Monday.
*** Well, this is just stupid / cheating. Must be some funny conflicts / pressures at play here.
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
Friday, August 14, 2009
AMCF News: Chi-X Asia, High frequency trading, compensation, Waterhouse OMX, c2s
G’day All,
Well, nothing solicits blog feedback more than sport.
There was me thinking people we’re interested in C&S!
I got an email from Google blocking the blogspot: http://clearingandsettlement.blogspot.com/
One of their robots thought it was spam. Anyway, looks like I’m able to post again.
News of the week has been the Chi-X Asian Dark Pool announcement with SGX.
It’s great to see the early positive feedback in the press.
As a result of a busy week I’ve not red all the stories.
There is a good piece on high frequency trading with is included in full.
Flash orders fail to light up the dark pools.
Waterhouse takes OMX securities.
The National Reference Data story resonated with me – absolute common sense.
And a clever cloggie!
ADXers, I called PPB to get confirmation of how they’re doing in tracking people down…they didn’t return my call.
Any updates / input gratefully received.
...but for all you souls that commented on the sport, I reserve the right of reply.
(BTW is a C&S Blog, not a multinational ridicule Australia at sport blog)
Cricket.
Yes, Yay to the Poms for defying the win at Cardiff and taking the spoils at Lords.
Headingly. A tale of two innings?
Langer. My heart goes out to him. Someone’s sold him out. Disappointing.
…and now to the Oval. Unless the weather favours England I call an Aussie win to retain the Ashes.
…dunno Freddies state of health, but put him in the side anyway.
Rugby.
Yes. The Wallabies continue to disappoint.
As much as I like Deans I still can’t see World Cup winners in the Wallabies.
I just don’t see the on field cohesion or the on / and off field hunger and passion for victory.
Deans still has much to do….maybe we could take some lessons from the Rugby League guys?
Wallabies to come 3rd in this years Tri-Nations.
Running.
I did the city2surf last week.
Largest fun run in the world – the atmosphere on the day makes this a must do if you can in my view.
My result?...pretty dreadful, but I blame Mrs R…I mean dinner with friends when the Rugby comes on at 1am?
I vow not to be a ‘slave’ to these events…and I sure wasn’t counting the beers.
Anyway, next year I have an easy time to beat.
(In 2001 I did the race in around 84 mins, in ’09 102 mins)
Got a lovely postcard from Miss R who is on a school field trip for 2 weeks in Far North Queensland.
…and as I flipped it over to see what sight she’d chosen…the Daintree…Cape Tribulation…Aboriginal crafts…..
Nah, a nice piccie of the Sydney Opera House.
Have a great week-end all,
S
http://clearingandsettlement.blogspot.com/
Platforms
Chi-X and SGX team up to launch Singapore dark pool
Market participants welcome dark-pool JV from SGX, Chi-XSingapore Exchange's plans to establish a joint venture with alternative trading platform Chi-X to develop a dark pool for Asia could revolutionise the region's trading. Market participants, including buy-side traders, technology providers and dark-pool brokers, lauded the announcement because the venture offers potential solutions to fragmentation and monopolisation, which are two of the biggest issues in Asia's equity trading. AsianInvestor.net (14 Aug.) , Financial Times (tiered subscription model) (12 Aug.)
Analysis shows renewed interest in block trading in AsiaITG developed a liquidity barometer to measure trading activity across several Asian-Pacific markets, including Australia, Japan, Singapore, South Korea, Hong Kong and Taiwan. The data generated suggest that liquidity in the region is coming back. "This indicates a renewed interest for block trading and a return to trading in volume, rather than the trend of small order sizes," said Clare Rowsell, head of client-relationship management at ITG in Hong Kong. AsianInvestor.net (13 Aug.)
Chi-X Canada inverts fees in ETF price promotion
FT.COM: High Frequency Traders -- The View from EuropeBy Richard Balarkas8/7/09High frequency traders, a relatively small number of firms that have grown to command upwards of 70 per cent market share of US equity trades without most equity investors even knowing they exist, are arousing suspicion. Throw into the mix the fact that many are proprietary traders and rumoured to be immensely profitable, and we have the makings of a scapegoat for everything from the next financial crisis to swine flu.
US incumbents’ market shares slump as Direct Edge soars
Turquoise suffers third glitch in a year High-profile equity trading platform Turquoise, which has steadily rebuilt its market share in the past three months, suffered a setback this morning when its third technical problem in less than a year halved its trading activity overnight.
Quote MTF
BUDAPEST-Hungarian multilateral trading facility (MTF) Quote MTF will be available for participant testing by the end of this week, giving users the ability to see how the technology will operate once the new venue goes live on Sept. 4.
BATS, Nasdaq to stop offering flash orders Sept. 1Nasdaq OMX and BATS Exchange both announced that as of Sept. 1, they will no longer offer flash-trading orders, which give some traders an early glimpse at orders. "We respectfully call on other markets offering similar functionality to make the same decision," Nasdaq OMX CEO Bob Greifeld said in a statement. The Securities and Exchange Commission is considering prohibiting the practice. The Wall Street Journal (8/7)
DTCC and Markit set launch date for OTC derivatives service
*** 1st Sept.
ICE pulls ahead in CDS clearing in Europe, USIntercontinentalExchange appears to be pulling ahead of its competition in terms of clearing credit default swaps in both Europe and the US. The exchange group said its European clearinghouse cleared 840 CDS transactions worth a total of €37.8 billion during its first two weeks of operation. The firm's North American CDS clearinghouse, which launched in March, has cleared contracts worth more than $1,700 billion. Financial Times (tiered subscription model) (10 Aug.)
NYSE Euronext suspends CDS clearing
Luke Jeffs
Exchange giant NYSE Euronext has been forced to suspend its European credit default swap clearing service because it had failed to attract a single trade almost eight months after launch.
http://www.efinancialnews.com/homepage/content/1054929909/restricted
*** sounds like ownership and governance to me.
NYSE LIFFE SHELVES CDS CLEARING
Nyse Euronext subsidiary Liffe has suspended its European credit default swaps (CDS) clearing service after failing to attract a single trade since launching in December.
Full story: http://www.finextra.com/fullstory.asp?id=20369
White House divides CDS regulatory jurisdiction
Credit default swaps to be overseen by SEC, CFTC
http://www.ft.com/cms/s/0/5cfd675e-871e-11de-9280-00144feabdc0,dwp_uuid=60835a20-4167-11de-bdb7-00144feabdc0.html
*** whoops. Well, there goes another opportunity to try and get it right.
Move to OTC Clearing Is Right, Says LCH.Clearnet CEOAs regulators focus on curbing speculation, the Wall Street Journal chats with Roger Liddell, LCH.Clearnet CEO, about whether things are headed in the right direction. Liddell also reveals plans for forex clearing, and updates on a proposed LCH.Clearnet takeover.
FSA releases guidance on bankers' bonusesThe U.K. Financial Services Authority published updated rules regarding bankers' bonuses. The rules, which include a ban on guaranteed bonuses of more than a year, apply to a couple of dozen of the largest banks. The City watchdog said penalties for violations include higher capital charges and possible enforcement action. Financial Times (tiered subscription model) (8/13) , The New York Times/Reuters (8/12) , BBC (8/12) , Bloomberg (8/12) , The Times (London) (8/13)
**** not read this – but what an awful bind / balance to get right.
Sol's $9m final pay packet
Matt O’Sullivan 10:15AM Telstra's controversial former boss, Sol Trujillo, has pocketed a total of $9 million for 10 months work.
**** but a million a month can’t be right either.
TD Waterhouse expands into backroom services with acquisitionTD Waterhouse CEO Angus Rigby said the stockbroker plans to continue making acquisitions as he announced the takeover of OMX Securities, a provider of clearing and settlement services. "We continue to be in the marketplace for good-value acquisitions -- expanding into corporate services brings you the scale that is so important and lacking in UK brokerage," Rigby said. Financial Times (tiered subscription model) (13 Aug.)
TD Waterhouse acquires OMX Securities
Hannah Stodell
UK execution only broker TD Waterhouse is acquiring 100 per cent of the share capital of OMX Securities Services, a provider of outsourced clearing and settlement services.
http://www.moneymarketing.co.uk/cgi-bin/item.cgi?id=191726&d=340&h=341&f=342
Banks start to unload billions of dollars in troubled mortgagesLarge financial institutions are quietly selling troubled residential mortgages to hedge funds, private-equity firms and other participants in the distressed-mortgage market. The move comes as the government pressures lenders to rid their balance sheets of such troubled debt. Distressed-mortgage players expect the loans to generate profit after they are modified, sources said. The New York Times/DealBook blog (8/13)
**** If I could, I’d be doing this too. I think there is a huge up side here. (as already experienced by the CS bonus pool)
07/08/2009 13:05:00
PETITION SET UP FOR NATIONAL REFERENCE DATA RESPOSITORY TO COMBAT SYSTEMIC RISK
The American Statistical Association (ASA), as well as the EDM Council, have endorsed a petition to create a new US Federal agency to build and oversee a centralised utility for maintaining reference and trade data.
More on this story: http://www.finextra.com/fullstory.asp?id=20352
Madoff Relied on `Key Lieutenant,' Old Stationery to Hide Scam
Bernard Madoff used a random-number generator, old stationery, a “phantom” trading platform and an aging computer to hide for decades the world’s biggest Ponzi scheme, U.S. regulators said in claims against the person they called his “key lieutenant,” Frank DiPascali.
http://www.bloomberg.com/apps/news?pid=20601170&sid=alsaRupBZoMU
*** Awful, just awful. Beggars belief. How could one bring themselves to do this?...and by closing “sophisticated investor” accounts the pain is localised to those least able...(e.g. charities). That’s becoming evil….prolonged public ritual humiliation is more appropriate than a warm jail cell and a good book to reflect on times of living the high life.
Locked up Myanmar's opposition leader, Aung San Suu Kyi, is detained againFull article
*** this don’t feel right either.
THE FLYING DUTCHMAN Teen Takes to the Skies in Pedal- Powered Plane At the tender age of 16, Jesse van Kuijk already knew he wanted to fly. But he didn't take flying lessons or train as a flight attendant. Instead, he built his own pedal-powered aircraft and became one of a select group of people to take to the skies under their own steam.
*** clever cloggie!
FT.COM: High Frequency Traders -- The View from EuropeBy Richard Balarkas8/7/09High frequency traders, a relatively small number of firms that have grown to command upwards of 70 per cent market share of US equity trades without most equity investors even knowing they exist, are arousing suspicion. Throw into the mix the fact that many are proprietary traders and rumoured to be immensely profitable, and we have the makings of a scapegoat for everything from the next financial crisis to swine flu.As equity markets have become increasingly electronic and faster-moving these firms have invested heavily in trading technology and the brain power to drive it. Their employees are rumoured to be more at home with fluid mechanics and wave theory than with discounted cash flow analysis.That their current success results from careful competitive positioning in response to easily discernible trends in market structure is neatly overlooked by commentators who suggest that they have an unfair advantage, or that they represent innovation gone too far. Based on what we know, however, it is hard to find anything that is unfair or indeed new in how these firms generate their revenues. Take for example liquidity rebates. In order to win market share stock exchanges and MTF’s [multilateral trading facilities] often “buy” liquidity through offering rebates to traders who leave passive limit orders. This is designed to attract high frequency trading firms as they can employ strategies in which they are net providers of liquidity, generating profits from the rebates alone. This is leading to concerns that rebates are an unnecessary tax on other investors who come to the market as net takers of liquidity. Paying for liquidity in order to generate revenue or attract additional paying liquidity is, however, a long standing practice. Every institutional investor who has ever used a broker’s risk book to complete a trade, or asked for guaranteed VWAP*, has swapped a fixed execution performance for their liquidity usually without having any idea of how much money they are leaving on the table for the broker to make out of the trade. A more valid concern for institutional investors should be guarding against their brokers boosting their own margins and potentially sacrificing execution quality by routinely routing their clients’ orders to the exchanges that pay the broker the highest rebate.Some traders no doubt use smart computer models to spot traders using less intelligent computer algorithms to work larger orders into the market over a period of time. For example many trading algorithms simply “peg” orders at the market’s current best price, and as the market price moves the pegged order price follows suit, with less intelligent algorithms literally being walked up and down the market paying more, and selling for less, than they might otherwise have done. If this is deemed unfair then on whom should the regulators focus, the high frequency trader competing fairly on a transparent market, or the clumsy broker employing a trading strategy that can be second-guessed? Lets not forget that for years any institution - and there are plenty of them - that has ever asked a bank to “start” a buy order by selling the institution a parcel of stock off the bank’s book, possibly making the book short of stock, has been setting up a competitive buyer for the stock who has a distinctly unfair advantage and who is very likely to push the price higher as they try to cover the short position. High frequency traders employ a diverse range of strategies. Some will involve spotting short term trading patterns and reading supply and demand signals. Others will involve more complex strategies that straddle the equity and derivative markets. But as yet nothing indicates they have an unfair advantage. As large participants they will, however, exercise their significant buyer power to further their goals. In the space of one second we recently registered 90 trades, 72 price changes and 11 “backwardations” (ie: where the stock was offered for sale on one trading venue at a price below what it was being bid for on another venue) in Vodafone’s shares. Traders can choose to invest in acquiring the ability to assimilate this information and make and execute profitable trading decisions. Those who do not will never know the opportunities existed, and into this segment fall a large number of Europe’s institutional brokers. Brokers who are not adept at using technology to seek and exploit opportunities for themselves or their clients, but who are themselves exploited, deserve to lose competitive ground. Information imbalance may be unfair, intellectual imbalance is not. Big and powerful as the high frequency firms may appear, most of what they feed on are the crumbs that fall from the institutional brokers’ tables. If, as they predominantly do, institutions place their orders with brokers who internalise client orders so that they can interact with their proprietary trading capability, then they should assume that every means of extracting revenue from their order will already have been exploited before what is left of it gets passed to the market. * Volume-weighted average price, representing the total value of shares traded in a particular stock on a given day, divided by the total volume of shares traded in that stock on that day.Richard Balarkas is chief executive of Instinet Europe, a broker.
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
Well, nothing solicits blog feedback more than sport.
There was me thinking people we’re interested in C&S!
I got an email from Google blocking the blogspot: http://clearingandsettlement.blogspot.com/
One of their robots thought it was spam. Anyway, looks like I’m able to post again.
News of the week has been the Chi-X Asian Dark Pool announcement with SGX.
It’s great to see the early positive feedback in the press.
As a result of a busy week I’ve not red all the stories.
There is a good piece on high frequency trading with is included in full.
Flash orders fail to light up the dark pools.
Waterhouse takes OMX securities.
The National Reference Data story resonated with me – absolute common sense.
And a clever cloggie!
ADXers, I called PPB to get confirmation of how they’re doing in tracking people down…they didn’t return my call.
Any updates / input gratefully received.
...but for all you souls that commented on the sport, I reserve the right of reply.
(BTW is a C&S Blog, not a multinational ridicule Australia at sport blog)
Cricket.
Yes, Yay to the Poms for defying the win at Cardiff and taking the spoils at Lords.
Headingly. A tale of two innings?
Langer. My heart goes out to him. Someone’s sold him out. Disappointing.
…and now to the Oval. Unless the weather favours England I call an Aussie win to retain the Ashes.
…dunno Freddies state of health, but put him in the side anyway.
Rugby.
Yes. The Wallabies continue to disappoint.
As much as I like Deans I still can’t see World Cup winners in the Wallabies.
I just don’t see the on field cohesion or the on / and off field hunger and passion for victory.
Deans still has much to do….maybe we could take some lessons from the Rugby League guys?
Wallabies to come 3rd in this years Tri-Nations.
Running.
I did the city2surf last week.
Largest fun run in the world – the atmosphere on the day makes this a must do if you can in my view.
My result?...pretty dreadful, but I blame Mrs R…I mean dinner with friends when the Rugby comes on at 1am?
I vow not to be a ‘slave’ to these events…and I sure wasn’t counting the beers.
Anyway, next year I have an easy time to beat.
(In 2001 I did the race in around 84 mins, in ’09 102 mins)
Got a lovely postcard from Miss R who is on a school field trip for 2 weeks in Far North Queensland.
…and as I flipped it over to see what sight she’d chosen…the Daintree…Cape Tribulation…Aboriginal crafts…..
Nah, a nice piccie of the Sydney Opera House.
Have a great week-end all,
S
http://clearingandsettlement.blogspot.com/
Platforms
Chi-X and SGX team up to launch Singapore dark pool
Market participants welcome dark-pool JV from SGX, Chi-XSingapore Exchange's plans to establish a joint venture with alternative trading platform Chi-X to develop a dark pool for Asia could revolutionise the region's trading. Market participants, including buy-side traders, technology providers and dark-pool brokers, lauded the announcement because the venture offers potential solutions to fragmentation and monopolisation, which are two of the biggest issues in Asia's equity trading. AsianInvestor.net (14 Aug.) , Financial Times (tiered subscription model) (12 Aug.)
Analysis shows renewed interest in block trading in AsiaITG developed a liquidity barometer to measure trading activity across several Asian-Pacific markets, including Australia, Japan, Singapore, South Korea, Hong Kong and Taiwan. The data generated suggest that liquidity in the region is coming back. "This indicates a renewed interest for block trading and a return to trading in volume, rather than the trend of small order sizes," said Clare Rowsell, head of client-relationship management at ITG in Hong Kong. AsianInvestor.net (13 Aug.)
Chi-X Canada inverts fees in ETF price promotion
FT.COM: High Frequency Traders -- The View from EuropeBy Richard Balarkas8/7/09High frequency traders, a relatively small number of firms that have grown to command upwards of 70 per cent market share of US equity trades without most equity investors even knowing they exist, are arousing suspicion. Throw into the mix the fact that many are proprietary traders and rumoured to be immensely profitable, and we have the makings of a scapegoat for everything from the next financial crisis to swine flu.
US incumbents’ market shares slump as Direct Edge soars
Turquoise suffers third glitch in a year High-profile equity trading platform Turquoise, which has steadily rebuilt its market share in the past three months, suffered a setback this morning when its third technical problem in less than a year halved its trading activity overnight.
Quote MTF
BUDAPEST-Hungarian multilateral trading facility (MTF) Quote MTF will be available for participant testing by the end of this week, giving users the ability to see how the technology will operate once the new venue goes live on Sept. 4.
BATS, Nasdaq to stop offering flash orders Sept. 1Nasdaq OMX and BATS Exchange both announced that as of Sept. 1, they will no longer offer flash-trading orders, which give some traders an early glimpse at orders. "We respectfully call on other markets offering similar functionality to make the same decision," Nasdaq OMX CEO Bob Greifeld said in a statement. The Securities and Exchange Commission is considering prohibiting the practice. The Wall Street Journal (8/7)
DTCC and Markit set launch date for OTC derivatives service
*** 1st Sept.
ICE pulls ahead in CDS clearing in Europe, USIntercontinentalExchange appears to be pulling ahead of its competition in terms of clearing credit default swaps in both Europe and the US. The exchange group said its European clearinghouse cleared 840 CDS transactions worth a total of €37.8 billion during its first two weeks of operation. The firm's North American CDS clearinghouse, which launched in March, has cleared contracts worth more than $1,700 billion. Financial Times (tiered subscription model) (10 Aug.)
NYSE Euronext suspends CDS clearing
Luke Jeffs
Exchange giant NYSE Euronext has been forced to suspend its European credit default swap clearing service because it had failed to attract a single trade almost eight months after launch.
http://www.efinancialnews.com/homepage/content/1054929909/restricted
*** sounds like ownership and governance to me.
NYSE LIFFE SHELVES CDS CLEARING
Nyse Euronext subsidiary Liffe has suspended its European credit default swaps (CDS) clearing service after failing to attract a single trade since launching in December.
Full story: http://www.finextra.com/fullstory.asp?id=20369
White House divides CDS regulatory jurisdiction
Credit default swaps to be overseen by SEC, CFTC
http://www.ft.com/cms/s/0/5cfd675e-871e-11de-9280-00144feabdc0,dwp_uuid=60835a20-4167-11de-bdb7-00144feabdc0.html
*** whoops. Well, there goes another opportunity to try and get it right.
Move to OTC Clearing Is Right, Says LCH.Clearnet CEOAs regulators focus on curbing speculation, the Wall Street Journal chats with Roger Liddell, LCH.Clearnet CEO, about whether things are headed in the right direction. Liddell also reveals plans for forex clearing, and updates on a proposed LCH.Clearnet takeover.
FSA releases guidance on bankers' bonusesThe U.K. Financial Services Authority published updated rules regarding bankers' bonuses. The rules, which include a ban on guaranteed bonuses of more than a year, apply to a couple of dozen of the largest banks. The City watchdog said penalties for violations include higher capital charges and possible enforcement action. Financial Times (tiered subscription model) (8/13) , The New York Times/Reuters (8/12) , BBC (8/12) , Bloomberg (8/12) , The Times (London) (8/13)
**** not read this – but what an awful bind / balance to get right.
Sol's $9m final pay packet
Matt O’Sullivan 10:15AM Telstra's controversial former boss, Sol Trujillo, has pocketed a total of $9 million for 10 months work.
**** but a million a month can’t be right either.
TD Waterhouse expands into backroom services with acquisitionTD Waterhouse CEO Angus Rigby said the stockbroker plans to continue making acquisitions as he announced the takeover of OMX Securities, a provider of clearing and settlement services. "We continue to be in the marketplace for good-value acquisitions -- expanding into corporate services brings you the scale that is so important and lacking in UK brokerage," Rigby said. Financial Times (tiered subscription model) (13 Aug.)
TD Waterhouse acquires OMX Securities
Hannah Stodell
UK execution only broker TD Waterhouse is acquiring 100 per cent of the share capital of OMX Securities Services, a provider of outsourced clearing and settlement services.
http://www.moneymarketing.co.uk/cgi-bin/item.cgi?id=191726&d=340&h=341&f=342
Banks start to unload billions of dollars in troubled mortgagesLarge financial institutions are quietly selling troubled residential mortgages to hedge funds, private-equity firms and other participants in the distressed-mortgage market. The move comes as the government pressures lenders to rid their balance sheets of such troubled debt. Distressed-mortgage players expect the loans to generate profit after they are modified, sources said. The New York Times/DealBook blog (8/13)
**** If I could, I’d be doing this too. I think there is a huge up side here. (as already experienced by the CS bonus pool)
07/08/2009 13:05:00
PETITION SET UP FOR NATIONAL REFERENCE DATA RESPOSITORY TO COMBAT SYSTEMIC RISK
The American Statistical Association (ASA), as well as the EDM Council, have endorsed a petition to create a new US Federal agency to build and oversee a centralised utility for maintaining reference and trade data.
More on this story: http://www.finextra.com/fullstory.asp?id=20352
Madoff Relied on `Key Lieutenant,' Old Stationery to Hide Scam
Bernard Madoff used a random-number generator, old stationery, a “phantom” trading platform and an aging computer to hide for decades the world’s biggest Ponzi scheme, U.S. regulators said in claims against the person they called his “key lieutenant,” Frank DiPascali.
http://www.bloomberg.com/apps/news?pid=20601170&sid=alsaRupBZoMU
*** Awful, just awful. Beggars belief. How could one bring themselves to do this?...and by closing “sophisticated investor” accounts the pain is localised to those least able...(e.g. charities). That’s becoming evil….prolonged public ritual humiliation is more appropriate than a warm jail cell and a good book to reflect on times of living the high life.
Locked up Myanmar's opposition leader, Aung San Suu Kyi, is detained againFull article
*** this don’t feel right either.
THE FLYING DUTCHMAN Teen Takes to the Skies in Pedal- Powered Plane At the tender age of 16, Jesse van Kuijk already knew he wanted to fly. But he didn't take flying lessons or train as a flight attendant. Instead, he built his own pedal-powered aircraft and became one of a select group of people to take to the skies under their own steam.
*** clever cloggie!
FT.COM: High Frequency Traders -- The View from EuropeBy Richard Balarkas8/7/09High frequency traders, a relatively small number of firms that have grown to command upwards of 70 per cent market share of US equity trades without most equity investors even knowing they exist, are arousing suspicion. Throw into the mix the fact that many are proprietary traders and rumoured to be immensely profitable, and we have the makings of a scapegoat for everything from the next financial crisis to swine flu.As equity markets have become increasingly electronic and faster-moving these firms have invested heavily in trading technology and the brain power to drive it. Their employees are rumoured to be more at home with fluid mechanics and wave theory than with discounted cash flow analysis.That their current success results from careful competitive positioning in response to easily discernible trends in market structure is neatly overlooked by commentators who suggest that they have an unfair advantage, or that they represent innovation gone too far. Based on what we know, however, it is hard to find anything that is unfair or indeed new in how these firms generate their revenues. Take for example liquidity rebates. In order to win market share stock exchanges and MTF’s [multilateral trading facilities] often “buy” liquidity through offering rebates to traders who leave passive limit orders. This is designed to attract high frequency trading firms as they can employ strategies in which they are net providers of liquidity, generating profits from the rebates alone. This is leading to concerns that rebates are an unnecessary tax on other investors who come to the market as net takers of liquidity. Paying for liquidity in order to generate revenue or attract additional paying liquidity is, however, a long standing practice. Every institutional investor who has ever used a broker’s risk book to complete a trade, or asked for guaranteed VWAP*, has swapped a fixed execution performance for their liquidity usually without having any idea of how much money they are leaving on the table for the broker to make out of the trade. A more valid concern for institutional investors should be guarding against their brokers boosting their own margins and potentially sacrificing execution quality by routinely routing their clients’ orders to the exchanges that pay the broker the highest rebate.Some traders no doubt use smart computer models to spot traders using less intelligent computer algorithms to work larger orders into the market over a period of time. For example many trading algorithms simply “peg” orders at the market’s current best price, and as the market price moves the pegged order price follows suit, with less intelligent algorithms literally being walked up and down the market paying more, and selling for less, than they might otherwise have done. If this is deemed unfair then on whom should the regulators focus, the high frequency trader competing fairly on a transparent market, or the clumsy broker employing a trading strategy that can be second-guessed? Lets not forget that for years any institution - and there are plenty of them - that has ever asked a bank to “start” a buy order by selling the institution a parcel of stock off the bank’s book, possibly making the book short of stock, has been setting up a competitive buyer for the stock who has a distinctly unfair advantage and who is very likely to push the price higher as they try to cover the short position. High frequency traders employ a diverse range of strategies. Some will involve spotting short term trading patterns and reading supply and demand signals. Others will involve more complex strategies that straddle the equity and derivative markets. But as yet nothing indicates they have an unfair advantage. As large participants they will, however, exercise their significant buyer power to further their goals. In the space of one second we recently registered 90 trades, 72 price changes and 11 “backwardations” (ie: where the stock was offered for sale on one trading venue at a price below what it was being bid for on another venue) in Vodafone’s shares. Traders can choose to invest in acquiring the ability to assimilate this information and make and execute profitable trading decisions. Those who do not will never know the opportunities existed, and into this segment fall a large number of Europe’s institutional brokers. Brokers who are not adept at using technology to seek and exploit opportunities for themselves or their clients, but who are themselves exploited, deserve to lose competitive ground. Information imbalance may be unfair, intellectual imbalance is not. Big and powerful as the high frequency firms may appear, most of what they feed on are the crumbs that fall from the institutional brokers’ tables. If, as they predominantly do, institutions place their orders with brokers who internalise client orders so that they can interact with their proprietary trading capability, then they should assume that every means of extracting revenue from their order will already have been exploited before what is left of it gets passed to the market. * Volume-weighted average price, representing the total value of shares traded in a particular stock on a given day, divided by the total volume of shares traded in that stock on that day.Richard Balarkas is chief executive of Instinet Europe, a broker.
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
Friday, August 7, 2009
AMCF & News: Growing Up, Flash in the pan, Spain, CDS wallet size, ADXers
G’day All,
Well, no blog last week.
I was up on the Gold Coast at the sister-in-laws wedding.
Did I read the Oxera report?...Ummm, nope.
I did do a 14K run along Southport beach to the spit and I went for a swim in the surf most days (unless Shaz had me on family duties).
Even though it is “winter” here the water is a glorious 19oC (which actually feels less cold, the colder the outside air temp is – if that makes sense).
…and the water. Amazing. Absolutely crystal clear. The summer currents tend to stir things up a bit. For some reason the winter currents leave the water clear as a bell. As you dive under the breaking waves you just see this vast expanse of aqua before you…mesmerising apart from the fact that your lungs might burst.
…oh that and after a while the toes go numb (you lose some feeling pushing of the sea floor) and the fingers white…
Anyway, Queensland is lovely….
…but not as lovely as my daughter.
OMG. I walked my daughter to the bridesmaid suite with her dress and heels and I just thought…OMG.
Amazing.
Weddings are always great events but Rebecca sang to the congregation at this one.
Moved me (to be expected) but also brought a tear to the eye of many others (including the celebrant).
That made me think this was pretty special too.
Pretty gutsy performance by R.
But it’s our industry that binds us together.
The current kerfuffle appears to be about flash orders.
I’m not opposed to flash order types. I don’t think they are evil or disrupt liquidity.
Please excuse me, as trade types are not my area of expertise (leave me in the C&S world) but I feel entitled to a view.
Lets go back a step.
Flash orders are just another order type of increased functionality.
By default, an order has to have an order type but no-one is saying you have to use flash types.
(see direct edge)
Flash orders would only have been created to satisfy a demand in the market.
Why is there this demand?
Maybe because smart order routers are not always so smart, and sometimes orders weren’t waiting around long enough to be replenished etc.
Customers might have valid reasons to use one order type on one platform and a different order type on another.
Why can’t customers control their own costs of execution and execution types?
To me, it’s all about customer choice.
There are a couple of other remarks I respect. (including the official responses from the new entrants)
Balarkas:
“The dilemma for the regulators in the US seems to be this assumption that their job is to ensure there is absolute equality of information amongst all market participants and it all boils down to this efficient market hypothesis,” he says. “In reality there are a couple of thousand tiers of information in the market and there always have been. If the regulators want to insist on this single-tier philosophy, where do they stop?”
…and I like the parallel that Time magazine went with.
If flash orders are so bad i.e create an unlevel playing field…then what about co-location?
The primary exchanges have little or no credibility in this debate. I just see their vested interest.
As a retail investor, do I care?
Maybe I should co-locate my compliance officer on a trading engine before I send my orders through for pre-approval.
Different folks have different strokes.
Trading covers a spectrum from size / speed / cost etc. Leave each to their own.
Interesting. NYSE hates flash yet builds a monster data centre that they can charge a premium for…buts that OK because its in the shareholders interest?
I’m still learning – bear with me.
Flash rant over.
Spain: Phah. Last time I looked MTF orders had to be reported net for book entry / “put through” (double counted) on the exchange anyway – just further reducing the credibility and transparency.
FSA is right to step back from position limits to control market prices. Regulators should not be in the business of manipulating markets, they should act against it.
CDS clearing. Interesting to see the wallet size range of 100-200myn.
ICE has a CCP and posts record revenues. (Once upon a time IPE used LCH).
NYSE wants it’s own derivatives CCP and incurs a cost in doing so. (Once upon a time Liffe used LCH).
ETF’s: After the GFC ETFs should boom. People want diversification and liquidity. ETFs give you all that plus they don’t lock you in with redemption clauses etc.
Another little rant.
ADX Alumni: PPB have to distribute ½ a mill to former staff in unpaid entitlements. I’ve added you to the distribution list this week in the hope to spur you on to identify all the names. So far we have 27 validated responses, 12 unconfirmed and 17 unknown / undeliverable of 56 staff. Lets pin ‘em down.
(please see blog post from earlier this week).
..and finally…
This week-end sees the City to Surf with a record 75,000 entrants. Hopefully all of them will be an excuse for holding me up. (I’d run faster but you need to move over). Running is one of my least favourite activities but this event is spectacular and worth taking part in. You hear the feet of the herd before the runners are in sight. (meanwhile at the back of the pack you just see a sea of bobbing heads as far as the eye can see).
http://city2surf.sunherald.com.au/
..next up…I’ll be back on the bike…spring cycle with a view to doing the ‘gong (Sydney to Wollongong for you foreigners)…and that should bring us back into the ocean swimming season…
Whatever you’re up to, have a great week-end!
S
http://clearingandsettlement.blogspot.com/
You better live your best and act your best and think your best today, for today is the sure preparation for tomorrow and all the other tomorrows that follow."
--Harriet Martineau, English writer and philospher
The Paper Behind the High-Frequency Trading UproarWhy have mainstream news outlets suddenly gotten excited about the "high frequency" or algorithmic trading that's taken place on Wall Street for years? According to Time magazine, a short white paper written by Joseph Saluzzi and Sal L. Arnuk, co-heads of the equity trading desk at agency brokerage Themis Trading, is behind most of the uproar.
High-Frequency Trading Grows, Shrouded in Secrecy
By Kristi Oloffson and Stephen Gandel
The Securities & Exchange Commission (SEC), concerned about the exponential growth of hyper-frequency trading, announced on Tuesday, Aug. 4, that it was considering a ban on one form of this activity, known as flash trading. But it has said nothing about an even bigger element of high-frequency trading, known as co-location, even as the New York Stock Exchange (NYSE) is building two new facilities to house such traders.
http://www.time.com/time/business/article/0,8599,1914724,00.html?xid=rss-topstories
DIRECT EDGE CEO HITS BACK OVER FLASH ORDERS The boss of Direct Edge, the alternative trading system that pioneered the introduction of flash order types three years ago, has launched a robust defence of the controversial practice as regulators hint at a looming crackdown.
Full story: http://www.finextra.com/fullstory.asp?id=20348
Direct Edge explain their ELP product here:
http://www.directedge.com/ELPP.aspx
Of note is the comment: All Direct Edge subscribers can choose to interact with ELPs or act as an ELP themselves.
This is a service open to all users, “based upon the subscriber’s instructions”.
Nobody is forced to use the service or order type.
Direct Edge Update - Market Structure Principles
http://www.directedge.com/NewsletterDetail.aspx?Id=100
FINANCIAL TIMES: The Dash to FlashBy Michael Mackenzie and Jeremy Grant 8/6/09
“The dilemma for the regulators in the US seems to be this assumption that their job is to ensure there is absolute equality of information amongst all market participants and it all boils down to this efficient market hypothesis,” he says. “In reality there are a couple of thousand tiers of information in the market and there always have been. If the regulators want to insist on this single-tier philosophy, where do they stop?”
NASDAQ OMX PROFIT SLIDES ON MARKET SHARE DECLINES AND WRITE-OFFS Nasdaq OMX has posted a 31% drop in quarterly profits as the transAtlantic exchange operator incurred some $35 million in charges and saw its market share in US stock trading drop for the fifth successive quarter.
Full story: http://www.finextra.com/fullstory.asp?id=20347
… its share of cash equity trading crashing to 20%, compared to 30% this time last year.
I think this just goes to show how commoditised trade matching (exchanges) has become. And I fully believe this is appropriate. Matching is a commodity.
Compare Nasdaq valuations to Asian exchanges and we start to get a feel of how much value needs to be “shifted”.
NYSE builds huge data centre for high-frequency trading The New York Stock Exchange is creating a nearly 400,000-square-foot data centre in New Jersey that, in 12 months’ time, is expected to house several football fields of cutting-edge computing equipment for hedge funds and other firms that deal in high-frequency trading. (The Wall Street Journal)
NYSE Euronext seeks bank backers for derivatives platforms NYSE Euronext plans to offer equity stakes in its US derivatives units to banks in a bid to boost business, a senior official said.
*** this is not a “copy” of any playbook…unless it means getting the ownership and governance model right.
Munich Stock Exchange Selects Trayport Carbon Credit Trading PlatformMunich Stock Exchange will create a pan-European carbon emissions exchange to trade European Union Allowances ...
PATSYSTEMS SWINGS TO H1 PROFIT
http://www.finextra.com/fullpr.asp?id=28990
Spanish exchange outperforms rivals with volume rise The Spanish exchange Bolsas y Mercados Españoles, Europe’s fourth largest market, outperformed its larger rivals in the second quarter of this year as its equity trading rose strongly, partly to a relative lack of competition in its domestic market.
See also:
http://www.tradeturquoise.com/doclibrary/FAQs_Spanish_Trading_English.pdf
FSA appears against tightening commodity-market regulationThe UK Financial Services Authority, which held a meeting with oil-industry representatives this week, seems likely to keep the status quo in regard to regulation of commodity markets, an industry source said. "The conclusion of the FSA remains the same -- they are not convinced speculation has been a major influence in the long-term trend in commodity prices. The problem has been supply and demand," the source said. "They are not convinced tightening position limits or removing hedging exemptions is really the way forward." Reuters (06 Aug.)
BATS LAUNCHES MEMBER CONNECTIVITY DASHBOARD
http://www.finextra.com/fullpr.asp?id=28981
*** I like this. Is it free?
Clearing
On CDS clearing commercial opportunity I thought this comment from Sanford C. Bernstein & Co Research interesting…
…We remain cautious that the overall European CDS revenue opportunity is relatively slight (likely under ~€100m a year),
I think I’ve read elsewhere this market (wallet size) is estimated at 200myn. Either way, we are starting to get a range.
Market participants partially meet deadline for CDS registrationParticipants in the global over-the-counter derivatives market entered 216,765 credit default swap contracts into The Depository Trust & Clearing Corp.'s Trade Information Warehouse, according to DTCC. The industry had made a commitment to global regulators to have all such contracts registered into a repository by mid-July. "We are pleased to be able to verify and now report on CDS data based on what we've seen from firms' initial submission of contracts into our global registry to meet their 17 July deadline," said Stewart Macbeth, DTCC managing director and general manager of the Trade Information Warehouse. SCI (05 Aug.)
Clearing revenues drive Ice performance IntercontinentalExchange posted record revenues from transaction and clearing services in the second quarter, providing a welcome boost for the electronic derivatives market ahead of plans to expand its credit default clearing platform to buyside investors later this year.
NYSE Euronext slumps on $440m charges NYSE Euronext slumped to a $182m (€129m) loss in the second quarter despite higher trading volumes, as the transatlantic exchange paid out almost half a billion dollars to cut loose staff and exit an agreement with its European derivatives clearing house.
Brokers
Instinet hires Foster to boost UK sales effort
http://www.thetradenews.com/trading-execution/brokerage/3487
Optiver claims rival Tibra stole software
Susannah Moran
ONE of Australia's largest derivatives trading companies is suing a rival company set up by a former employee, claiming that its software is being used by the new company to help win lucrative trades.
http://www.australianit.news.com.au/story/0,24897,25890671-15306,00.html
FINANCIAL NEWS: Nomura Hits Top-Spot on LSE in July By Dawn Cowie8/5/09Japan's Nomura leapfrogged Credit Suisse and Bank of America Merrill Lynch to become the largest trader by value of shares on the London Stock Exchange last month, hitting an ambitious target that it set itself in January when it relaunched the former Lehman Brothers equities platform.Nomura had a market share of 7.4% of cash equities traded by value on the LSE in July, the largest of any broker, according to an internal memo seen by Financial News. This was up from 6.3% in June when it ranked third.
Investors return to ETFs en masseFrom April 2008 to the end of last year, the value of global exchange-traded funds dropped from $805 billion to $711 billion. Now, assets invested globally in ETFs have increased to $862 billion, with net inflows accounting for roughly half of the rebound. "We're on track for assets to reach $1,000 billion by the year-end," said Deborah Fuhr of BGI. Financial Times (tiered subscription model) (06 Aug.)
Asia
Nasdaq Dubai mulls contingency plan for DP World bourse exit
by Claire Ferris-Lay and Kat Slowe
Nasdaq Dubai has admitted that it is examining contingency plans should its largest stock, DP World , chose to leave the bourse. DP World has lost 72 percent of its listed value since it joined the bourse in November 2007.
http://www.arabianbusiness.com/564070-nasdaq-dubai-admits-plans-in-case-dp-world-leaves-bourse
ANZ buys RBS businesses for $687 million
ANZ forges its presence in Asia when it bought several banking and wealth management businesses in the region from the Royal Bank of Scotland for $687 million.
Read more »
HKEx overcomes CME to become world's largest exchangeWhile the Obama administration pushes regulatory changes, Hong Kong Exchanges and Clearing has become the largest exchange in the world, according to its market capitalisation. US futures exchange CME Group previously held the top spot. CME and other US exchanges are growing as regulators demand clearing for more over-the-counter derivatives. CME has struggled, however, to launch its clearing facility for OTC credit default swaps. Financial Times (tiered subscription model) (30 Jul.)
Electronic Brokerage Fees In Asia
http://www.asiaetrading.com/blog/electronic-brokerage-fees-in-asia/
Green
Our carbon bubble danger
“We could ‘do something’ about reducing Australia’s greenhouse gas emissions by taxing them fairly heavily, encouraging pass-through of the costs to consumers and using the tax proceeds to compensate consumers by cutting income taxes and raising social benefits, with the net effect being revenue neutral",
http://www.businessspectator.com.au/bs.nsf/Article/Our-carbon-bubble-danger-pd20090804-UKT7J?OpenDocument&src=kgb
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
Well, no blog last week.
I was up on the Gold Coast at the sister-in-laws wedding.
Did I read the Oxera report?...Ummm, nope.
I did do a 14K run along Southport beach to the spit and I went for a swim in the surf most days (unless Shaz had me on family duties).
Even though it is “winter” here the water is a glorious 19oC (which actually feels less cold, the colder the outside air temp is – if that makes sense).
…and the water. Amazing. Absolutely crystal clear. The summer currents tend to stir things up a bit. For some reason the winter currents leave the water clear as a bell. As you dive under the breaking waves you just see this vast expanse of aqua before you…mesmerising apart from the fact that your lungs might burst.
…oh that and after a while the toes go numb (you lose some feeling pushing of the sea floor) and the fingers white…
Anyway, Queensland is lovely….
…but not as lovely as my daughter.
OMG. I walked my daughter to the bridesmaid suite with her dress and heels and I just thought…OMG.
Amazing.
Weddings are always great events but Rebecca sang to the congregation at this one.
Moved me (to be expected) but also brought a tear to the eye of many others (including the celebrant).
That made me think this was pretty special too.
Pretty gutsy performance by R.
But it’s our industry that binds us together.
The current kerfuffle appears to be about flash orders.
I’m not opposed to flash order types. I don’t think they are evil or disrupt liquidity.
Please excuse me, as trade types are not my area of expertise (leave me in the C&S world) but I feel entitled to a view.
Lets go back a step.
Flash orders are just another order type of increased functionality.
By default, an order has to have an order type but no-one is saying you have to use flash types.
(see direct edge)
Flash orders would only have been created to satisfy a demand in the market.
Why is there this demand?
Maybe because smart order routers are not always so smart, and sometimes orders weren’t waiting around long enough to be replenished etc.
Customers might have valid reasons to use one order type on one platform and a different order type on another.
Why can’t customers control their own costs of execution and execution types?
To me, it’s all about customer choice.
There are a couple of other remarks I respect. (including the official responses from the new entrants)
Balarkas:
“The dilemma for the regulators in the US seems to be this assumption that their job is to ensure there is absolute equality of information amongst all market participants and it all boils down to this efficient market hypothesis,” he says. “In reality there are a couple of thousand tiers of information in the market and there always have been. If the regulators want to insist on this single-tier philosophy, where do they stop?”
…and I like the parallel that Time magazine went with.
If flash orders are so bad i.e create an unlevel playing field…then what about co-location?
The primary exchanges have little or no credibility in this debate. I just see their vested interest.
As a retail investor, do I care?
Maybe I should co-locate my compliance officer on a trading engine before I send my orders through for pre-approval.
Different folks have different strokes.
Trading covers a spectrum from size / speed / cost etc. Leave each to their own.
Interesting. NYSE hates flash yet builds a monster data centre that they can charge a premium for…buts that OK because its in the shareholders interest?
I’m still learning – bear with me.
Flash rant over.
Spain: Phah. Last time I looked MTF orders had to be reported net for book entry / “put through” (double counted) on the exchange anyway – just further reducing the credibility and transparency.
FSA is right to step back from position limits to control market prices. Regulators should not be in the business of manipulating markets, they should act against it.
CDS clearing. Interesting to see the wallet size range of 100-200myn.
ICE has a CCP and posts record revenues. (Once upon a time IPE used LCH).
NYSE wants it’s own derivatives CCP and incurs a cost in doing so. (Once upon a time Liffe used LCH).
ETF’s: After the GFC ETFs should boom. People want diversification and liquidity. ETFs give you all that plus they don’t lock you in with redemption clauses etc.
Another little rant.
ADX Alumni: PPB have to distribute ½ a mill to former staff in unpaid entitlements. I’ve added you to the distribution list this week in the hope to spur you on to identify all the names. So far we have 27 validated responses, 12 unconfirmed and 17 unknown / undeliverable of 56 staff. Lets pin ‘em down.
(please see blog post from earlier this week).
..and finally…
This week-end sees the City to Surf with a record 75,000 entrants. Hopefully all of them will be an excuse for holding me up. (I’d run faster but you need to move over). Running is one of my least favourite activities but this event is spectacular and worth taking part in. You hear the feet of the herd before the runners are in sight. (meanwhile at the back of the pack you just see a sea of bobbing heads as far as the eye can see).
http://city2surf.sunherald.com.au/
..next up…I’ll be back on the bike…spring cycle with a view to doing the ‘gong (Sydney to Wollongong for you foreigners)…and that should bring us back into the ocean swimming season…
Whatever you’re up to, have a great week-end!
S
http://clearingandsettlement.blogspot.com/
You better live your best and act your best and think your best today, for today is the sure preparation for tomorrow and all the other tomorrows that follow."
--Harriet Martineau, English writer and philospher
The Paper Behind the High-Frequency Trading UproarWhy have mainstream news outlets suddenly gotten excited about the "high frequency" or algorithmic trading that's taken place on Wall Street for years? According to Time magazine, a short white paper written by Joseph Saluzzi and Sal L. Arnuk, co-heads of the equity trading desk at agency brokerage Themis Trading, is behind most of the uproar.
High-Frequency Trading Grows, Shrouded in Secrecy
By Kristi Oloffson and Stephen Gandel
The Securities & Exchange Commission (SEC), concerned about the exponential growth of hyper-frequency trading, announced on Tuesday, Aug. 4, that it was considering a ban on one form of this activity, known as flash trading. But it has said nothing about an even bigger element of high-frequency trading, known as co-location, even as the New York Stock Exchange (NYSE) is building two new facilities to house such traders.
http://www.time.com/time/business/article/0,8599,1914724,00.html?xid=rss-topstories
DIRECT EDGE CEO HITS BACK OVER FLASH ORDERS The boss of Direct Edge, the alternative trading system that pioneered the introduction of flash order types three years ago, has launched a robust defence of the controversial practice as regulators hint at a looming crackdown.
Full story: http://www.finextra.com/fullstory.asp?id=20348
Direct Edge explain their ELP product here:
http://www.directedge.com/ELPP.aspx
Of note is the comment: All Direct Edge subscribers can choose to interact with ELPs or act as an ELP themselves.
This is a service open to all users, “based upon the subscriber’s instructions”.
Nobody is forced to use the service or order type.
Direct Edge Update - Market Structure Principles
http://www.directedge.com/NewsletterDetail.aspx?Id=100
FINANCIAL TIMES: The Dash to FlashBy Michael Mackenzie and Jeremy Grant 8/6/09
“The dilemma for the regulators in the US seems to be this assumption that their job is to ensure there is absolute equality of information amongst all market participants and it all boils down to this efficient market hypothesis,” he says. “In reality there are a couple of thousand tiers of information in the market and there always have been. If the regulators want to insist on this single-tier philosophy, where do they stop?”
NASDAQ OMX PROFIT SLIDES ON MARKET SHARE DECLINES AND WRITE-OFFS Nasdaq OMX has posted a 31% drop in quarterly profits as the transAtlantic exchange operator incurred some $35 million in charges and saw its market share in US stock trading drop for the fifth successive quarter.
Full story: http://www.finextra.com/fullstory.asp?id=20347
… its share of cash equity trading crashing to 20%, compared to 30% this time last year.
I think this just goes to show how commoditised trade matching (exchanges) has become. And I fully believe this is appropriate. Matching is a commodity.
Compare Nasdaq valuations to Asian exchanges and we start to get a feel of how much value needs to be “shifted”.
NYSE builds huge data centre for high-frequency trading The New York Stock Exchange is creating a nearly 400,000-square-foot data centre in New Jersey that, in 12 months’ time, is expected to house several football fields of cutting-edge computing equipment for hedge funds and other firms that deal in high-frequency trading. (The Wall Street Journal)
NYSE Euronext seeks bank backers for derivatives platforms NYSE Euronext plans to offer equity stakes in its US derivatives units to banks in a bid to boost business, a senior official said.
*** this is not a “copy” of any playbook…unless it means getting the ownership and governance model right.
Munich Stock Exchange Selects Trayport Carbon Credit Trading PlatformMunich Stock Exchange will create a pan-European carbon emissions exchange to trade European Union Allowances ...
PATSYSTEMS SWINGS TO H1 PROFIT
http://www.finextra.com/fullpr.asp?id=28990
Spanish exchange outperforms rivals with volume rise The Spanish exchange Bolsas y Mercados Españoles, Europe’s fourth largest market, outperformed its larger rivals in the second quarter of this year as its equity trading rose strongly, partly to a relative lack of competition in its domestic market.
See also:
http://www.tradeturquoise.com/doclibrary/FAQs_Spanish_Trading_English.pdf
FSA appears against tightening commodity-market regulationThe UK Financial Services Authority, which held a meeting with oil-industry representatives this week, seems likely to keep the status quo in regard to regulation of commodity markets, an industry source said. "The conclusion of the FSA remains the same -- they are not convinced speculation has been a major influence in the long-term trend in commodity prices. The problem has been supply and demand," the source said. "They are not convinced tightening position limits or removing hedging exemptions is really the way forward." Reuters (06 Aug.)
BATS LAUNCHES MEMBER CONNECTIVITY DASHBOARD
http://www.finextra.com/fullpr.asp?id=28981
*** I like this. Is it free?
Clearing
On CDS clearing commercial opportunity I thought this comment from Sanford C. Bernstein & Co Research interesting…
…We remain cautious that the overall European CDS revenue opportunity is relatively slight (likely under ~€100m a year),
I think I’ve read elsewhere this market (wallet size) is estimated at 200myn. Either way, we are starting to get a range.
Market participants partially meet deadline for CDS registrationParticipants in the global over-the-counter derivatives market entered 216,765 credit default swap contracts into The Depository Trust & Clearing Corp.'s Trade Information Warehouse, according to DTCC. The industry had made a commitment to global regulators to have all such contracts registered into a repository by mid-July. "We are pleased to be able to verify and now report on CDS data based on what we've seen from firms' initial submission of contracts into our global registry to meet their 17 July deadline," said Stewart Macbeth, DTCC managing director and general manager of the Trade Information Warehouse. SCI (05 Aug.)
Clearing revenues drive Ice performance IntercontinentalExchange posted record revenues from transaction and clearing services in the second quarter, providing a welcome boost for the electronic derivatives market ahead of plans to expand its credit default clearing platform to buyside investors later this year.
NYSE Euronext slumps on $440m charges NYSE Euronext slumped to a $182m (€129m) loss in the second quarter despite higher trading volumes, as the transatlantic exchange paid out almost half a billion dollars to cut loose staff and exit an agreement with its European derivatives clearing house.
Brokers
Instinet hires Foster to boost UK sales effort
http://www.thetradenews.com/trading-execution/brokerage/3487
Optiver claims rival Tibra stole software
Susannah Moran
ONE of Australia's largest derivatives trading companies is suing a rival company set up by a former employee, claiming that its software is being used by the new company to help win lucrative trades.
http://www.australianit.news.com.au/story/0,24897,25890671-15306,00.html
FINANCIAL NEWS: Nomura Hits Top-Spot on LSE in July By Dawn Cowie8/5/09Japan's Nomura leapfrogged Credit Suisse and Bank of America Merrill Lynch to become the largest trader by value of shares on the London Stock Exchange last month, hitting an ambitious target that it set itself in January when it relaunched the former Lehman Brothers equities platform.Nomura had a market share of 7.4% of cash equities traded by value on the LSE in July, the largest of any broker, according to an internal memo seen by Financial News. This was up from 6.3% in June when it ranked third.
Investors return to ETFs en masseFrom April 2008 to the end of last year, the value of global exchange-traded funds dropped from $805 billion to $711 billion. Now, assets invested globally in ETFs have increased to $862 billion, with net inflows accounting for roughly half of the rebound. "We're on track for assets to reach $1,000 billion by the year-end," said Deborah Fuhr of BGI. Financial Times (tiered subscription model) (06 Aug.)
Asia
Nasdaq Dubai mulls contingency plan for DP World bourse exit
by Claire Ferris-Lay and Kat Slowe
Nasdaq Dubai has admitted that it is examining contingency plans should its largest stock, DP World , chose to leave the bourse. DP World has lost 72 percent of its listed value since it joined the bourse in November 2007.
http://www.arabianbusiness.com/564070-nasdaq-dubai-admits-plans-in-case-dp-world-leaves-bourse
ANZ buys RBS businesses for $687 million
ANZ forges its presence in Asia when it bought several banking and wealth management businesses in the region from the Royal Bank of Scotland for $687 million.
Read more »
HKEx overcomes CME to become world's largest exchangeWhile the Obama administration pushes regulatory changes, Hong Kong Exchanges and Clearing has become the largest exchange in the world, according to its market capitalisation. US futures exchange CME Group previously held the top spot. CME and other US exchanges are growing as regulators demand clearing for more over-the-counter derivatives. CME has struggled, however, to launch its clearing facility for OTC credit default swaps. Financial Times (tiered subscription model) (30 Jul.)
Electronic Brokerage Fees In Asia
http://www.asiaetrading.com/blog/electronic-brokerage-fees-in-asia/
Green
Our carbon bubble danger
“We could ‘do something’ about reducing Australia’s greenhouse gas emissions by taxing them fairly heavily, encouraging pass-through of the costs to consumers and using the tax proceeds to compensate consumers by cutting income taxes and raising social benefits, with the net effect being revenue neutral",
http://www.businessspectator.com.au/bs.nsf/Article/Our-carbon-bubble-danger-pd20090804-UKT7J?OpenDocument&src=kgb
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
Subscribe to:
Posts (Atom)