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
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