Friday, August 28, 2009

AMCF News: Chi-X, Flash, Nyfix, SGX in Asia

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?,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 100-78,8659,25982041-23769,00.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.

Have a great week-end,



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.
*** 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:

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 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:

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
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:
*** 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:



A nice response to the madness of:
EU might hold custodian banks liable for processing agents' wrongdoing
From SIFMA (Europe)


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.;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. (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?


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:
… 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?,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

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