Friday, September 4, 2009

AMCF News: Chi-X fees, T sale time line, MTF consolidation, Aussie Post Trade, Sausage Bourse

G’day All,

Where has the week gone?

Chi-X…I think this is a bit sensationalised. I thought that was the idea? Increase volume, reduce cost.
T increases urgency of sale…(the good old variable are price, time & product)
Nyfix deal in general is unsurprising. T and Euro millennium (thanks spell check) on the market at the same time is less convenient.
(I liked the Tabb report on this – in full below)

Local infrastructure changes in Aussie. Improvement in settlement process to be applauded. Harmonisation is more about SFE / ASX merger hangover and ASX optimisation of their cost base (at least in my view) rather than driven by participant desires. Somewhere in this lot was a derivatives fee hike.
I’m still reeling after: Revenues 538myn, Post Tax profit 313myn.

Nice piccies of Nomura’s new gaff here:
(Am I alone in not ever getting the “Typical Office” view?)
And another story Instinet’ers will love – the sausage exchange, maybe I should open the Aussie branch, the sausage sizzle (a la BBQ)…nah, the boy scouts have already got that one sewn up.

CTFC / SEC. Stop it. Get on with it. Just do this and get it over with. At the end of the day, where there is no overlap, the ‘agency’ will have appropriate divisions.

..and how very nicely put (SIFMA/LIBA/ISDA): As long as risk itself is not standardised, then tailored instruments will remain important.

I had a meeting with some guys from KPMG this morning.
One of them mentioned during some form filling in the office the question arose: “do you have dependent children?”.
He responded: “is there any other type?”
I kinda understand that.

…but this is oh so true…
When a thing is funny, search it carefully for a hidden truth."
George Bernard Shaw,Nobel laureate in literature

On that note, have a great week-end all.

…and yes, the wallabies will lose 7 on the trot, but hey, who watches rugby these days?



Multilateral trading facility Chi-X Europe has outlined plans for an aggressive pricing promotion this autumn as the battle for equity market share across the continent continues to rage.
Full story:


Turquoise sets deadline for sales shortlist High-profile trading system Turquoise, which two weeks ago began a review of its strategic options, has set an aggressive deadline to move ahead with its sales plan, pledging to have presented to its board a shortlist of “two or three” alternatives before the end of this month.

NYSE Euronext to spend about $144 million for NyfixNYSE Euronext will pay about 95% more than Nyfix's recent closing price of 86 cents to acquire the electronic brokerage. The deal is likely part of "NYSE's ambition to become a more important source of transaction infrastructure, beyond just providing marketplaces and related market data," said Ed Ditmire, an analyst at Fox-Pitt Kelton Cochran Caronia Waller. Bloomberg (8/27) , The Wall Street Journal (8/28)
*** Also of interest, the advisors and Millennium divestment

Summary (Thx JPM!)
· Liquidity fragmentation in Europe last week was up 0.4% to 22.1%, driven by UK and Germany.
· Ireland (67.8%), UK (36.4%), Netherlands (24.7%), France (25.2%), and Germany (24.5%) were the most fragmented markets in percentage terms.
· UK ($2.7bn), France ($1.6bn), Germany ($1.4bn), Netherlands ($0.5bn), Italy ($0.6bn) and Switzerland ($0.5bn) were the most fragmented in terms of Displayed Liquidity traded away from the primary market.
· Chi-X achieved average daily turnover (ADT) of $5.0bn, equivalent to 13.8% of flow in Chi-X names. Total ($93m, 20.8%), Arcelormittal ($83m, 19.4%) and Unicredit ($79m, 4.7%) had the highest ADT.
· ADT on the Turquoise Displayed Order Book was $1.7bn. Market share in Turquoise names was 4.6%. Nestle ($33m, 8.4%), HSBC ($27m, 9.2%) and Roche HLDG ($27m, 10.3%) had the highest ADT.
· BATS achieved ADT of $1.0bn. Market share in BATS names was 2.9%. France Telecom ($29m, 8.5%), Unicredit ($29m, 1.7%) and ENI ($23m, 5.6%) had the highest ADT.
· Nasdaq OMX achieved ADT of $238.94m.
· 27 stocks traded more than 20% ADV on Dark venues. Swiss Block achieved ADT of $68.61m.


Derivatives notices: market information documents: enhancing australia's equity settlement system; and central counterparty (ccp) harmonisation and linking[
market information documents: enhancing australia's equity settlement system; and central counterparty (ccp) harmonisation and linking ]

Markit launches derivatives JV Markit, the London-based financial data group, has launched a joint venture with the biggest US clearing house aimed at simplifying trading of over-the-counter derivatives, as regulators press for measures to reduce risk in the vast OTC markets.


Hong Kong regulator discusses enforcement activityMartin Wheatley, CEO of Hong Kong's Securities and Futures Commission, discusses how the regulator of markets has ratcheted up its enforcement efforts and why. He also disuses the emergence of dark pools in Asia, the minibond crisis and how Hong Kong is leading the way on short-selling rules. The Wall Street Journal (28 Aug.)

Oxford Properties eyes further London investments after Nomura deal Oxford Properties, the property unit of the Ontario Municipal Employees Retirement System, is seeking fresh investments in offices in the City of London and the West End after signing up Nomura as a tenant at its Watermark Place scheme. (The Daily Telegraph)


Trade groups urge G-20 to ensure reforms promote open marketsSIFMA issued a joint statement with a trio of other financial trade groups from around the world pressing finance ministers from the Group of 20 nations to ensure that regulatory reforms do not distort competition, hinder market entry or spur regulatory arbitrage. "It is critical that the G-20 finance ministers remain committed to ensuring that reforms are developed and implemented in a manner that promotes open markets and the free flow of capital," SIFMA, along with the Investment Industry Association of Canada, the Japan Securities Dealers Association and the London Investment Banking Association, said in a statement. Read the full news release. Jones Newswires (03 Sep.) , Investment Executive (Canada) (03 Sep.)

CFTC, SEC work toward finding common groundAs the Securities and Exchange Commission and the Commodity Futures Trading Commission prepare to share supervision of the over-the-counter derivatives market, the regulators are attempting to come together on their rule books. The task might be more difficult than it appears because the heads of major exchanges differ on harmonizing the regulators, and the agencies' philosophies on regulating markets also differ. The Wall Street Journal (9/3) , The Bond Buyer (free content) (9/3)

SIFMA, LIBA, ISDA support initiatives on derivatives marketsAlong with the London Investment Banking Association and the International Swaps and Derivatives Association, SIFMA praised efforts outlined by the European Commission to improve derivatives markets. "We have a simple message from all those that use these vital risk-management products," said Robert Pickel, executive director and CEO of ISDA. "The real economy faces diverse risks and depends on privately negotiated derivatives to address them effectively. As long as risk itself is not standardised, then tailored instruments will remain important." Read the full news release. Forbes/Reuters (02 Sep.)

SEC Summary: Madoff Intimidated ExaminersThe Executive Summary of SEC Inspector General David Kotz's internal report on the agency's failings ...;jsessionid=W2HHNJDMVP0BZQE1GHRSKH4ATMY32JVN?articleID=219501094&_requestid=12157

The SEC Madoff report
**** Great the Madoff report is available…caution, 10MB size.


Star ex-Goldman trader plans Facebook-style property portal Anton Kreil, the former Goldman Sachs trader behind the popular BBC TV show Million Dollar Traders, will launch, a Facebook-style portal that plans to assist property owners sell homes without paying an average 1.5% commission fee to estate agents. (The Daily Telegraph)
*** Anything that is uncomfortable for estate agents is good news.

Disney surprised Hollywood with its purchase of Marvel Entertainment for $4 billion. Films based on Marvel’s comic-book characters, such as Spider-Man and the X-Men, have drawn some of the biggest audiences of recent years. Although Marvel is committed to current projects with other studios, Disney hopes that its catalogue of 5,000 action-heroes will eventually provide material for many blockbusters, as well as the increasingly lucrative accompanying licensed merchandise.
See article
*** inevitable I guess. Still, it saddens a part of me.

Laid- Off German Banker Opens Fast Food Joint Thomas Brausse used to trade stocks for a living in Frankfurt. Now, after being laid off as a result of the financial crisis, he sells French fries and sausages from a lunch truck -- and is delighted with his new career.,1518,646794,00.html#ref=nlint

I had a meeting with some guys from KPMG this morning.
One of them mentioned during some form filling in the office the question arose: “do you have dependent children?”.
He responded: “is there any other type?”
I kinda understand that.

An unhurried sense of time is in itself a form of wealth."
--Bonnie Friedman, author

=====================THE TRADE NEWS: MTF Consolidation to Diverge from US Path, According to TABBBy Staff9/2/09Any consolidation among Europe’s multilateral trading facilities (MTFs) will find few parallels with the acquisition of US ECNs by exchange groups in the mid-2000s, according to Larry Tabb, founder and CEO of research consultancy TABB Group.Two pan-European MTFs – consortium-backed Turquoise and Euro Millennium, owned by recently-acquired technology provider NYFIX – are currently looking for buyers, but Tabb suggests that established European exchange groups might not be first in the queue.“Consolidation in the US was a trading platform issue as well as market share issue,” said Tabb. “NYSE did not have a platform that could compete with Archipelago, so they bought it. When Nasdaq bought INET, they bought a better platform and market share.”Europe’s leading exchange groups – Deutsche Börse, London Stock Exchange Group, Nasdaq OMX and NYSE Euronext – all have sufficiently strong technology platforms not to want to buy purely to secure a new trading platform, Tabb asserted.In December 2005, the then member-owned New York Stock Exchange voted to acquire Chicago-based electronic trading venue Archipelago. Days later, Nasdaq completed the acquisition of the INET ECN from agency broker Instinet. Turquoise, the MTF launched by nine global investment banks in September 2008, appointed stakeholder UBS to find a potential buyer last month. On 27 August, NYSE Euronext confirmed that the acquisition by its subsidiary, NYSE Technologies, of NYFIX, a US-based connectivity-to-transactions technology provider, left the exchange group considering external partners among the strategic options for NYFIX’s dark pools, Millennium, a US-based venue, and Euro Millennium.The art of M&A is a relatively new one for stock exchanges to master and Tabb believes that Europe’s exchange groups may draw another reason for caution from the experience of NYSE and Nasdaq in purchasing domestic rivals.“Consolidation is good from a cost standpoint, but bad from a revenue standpoint,” said Tabb. “If you consolidate two platforms you don’t get twice as much volume on one platform, you get maybe 1.5 times the volume. To that extent, you’re better off running multiple market models so that there is an arbitrage between markets that increases volumes rather than decreases it.”However, the MTFs will not be short of suitors. Tabb believes that a buyer could come from three potential sources: an existing player that needs more penetration; an outside entity that wants to establish a London presence; or local exchange that does not have a London-based MTF.Of the largest four equity exchange groups in the US, only Direct Edge has not yet launched a London-based MTF. In January, CEO William O’Brien told that the firm would only consider overseas opportunities where the firm could differentiate itself from the competition. “We are not going to look to engage in new areas where we are a me-too player,” he said.With a 4.66% share of pan-European order book trades, according to the latest weekly analysis from the Fidessa Fragmentation Index, Turquoise controls the second-largest market share of any MTF behind Chi-X and just ahead of BATS Europe. Tabb suggests that a change of ownership could provide the necessary stimulus to make Turquoise a profitable business in the longer term.“The main goal of Turquoise was to put pressure on the local exchanges to reduce prices, increase speed and offer more flexible terms. To that extent, it has been successful,” said Tabb. “But consortium ownership is not the most efficient operating infrastructure. By selling Turquoise off, it becomes possible to bring a set of more focused management talent in to change the business model and get Turquoise running more profitably and gaining more market share.”In the US, consolidation marked a slowdown in the pace of innovation in the view of many market participants. The sale of INET to Nasdaq led directly to 13 traders leaving Kansas City-based proprietary trading firm Tradebot to form BATS Trading. But Tabb is optimistic that changes in ownership among Europe’s MTFs will not put a brake on the pace of change in Europe’s equity trading markets.“New players are coming into the market, new trading strategies are being developed and enhancements are being made to market structures,” he said. “But what may change is where innovation comes from. Some of the broker-dealers may not have the budgets that they once had, so you might see the high-frequency guys beginning to drive change.”If the US is showing a lead to Europe, it may be in the field of regulation. In recent months, the US Securities and Exchanges Commission has voiced its concerns on use of ‘flash’ orders and the post-trade reporting practices of dark pools. The European Commission will complete its review of the impact of MiFID in 2010. The Committee of European Securities Regulators, the body charged with ensuring consistent securities regulation across Europe, is conducting ongoing consultations on the use of pre-trade transparency waivers by European dark pools. “I think we will see more investigations into the appropriate market structures and order types and how should the markets work in a more open access way,” said Tabb.=====================

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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