Friday, December 11, 2009

FN09, pirates, tax, HK, ASIC, Lynch, IO, EMCF, Nomura MTF, Bondi to Bronte

Congratulations to Hirander & Chi-X, for his spot in ‘Top of the class of 2009’ in Financial News rising stars.
Congratulations also to EMCF. Largest European equity CCP in November. Who would have thought that in 2006?
Some nice feedback on Pirates business model from an Old Buccaneer.
BATS joins the call for European market protocol. Rightly so too.
As the UK seeks to impose Tobin taxes the Japanese waive them for foreigners.
LSE right to champion the cause to abolish stamp duty. Nasdaq out at LSE, TMX sola in. And LSE in derivs.
NYX distances itself from equities.
TSE ouch.
SGX / SMX / MAS / CDYS – this too short (selling)
HK in / on the dark.
Liked this, even Buffett having a pop at Nasdaq. Everyones beating up on cross subsidy.

Aussie treasury consults on transfer of supervision from ASX to ASIC. In my view it is unquestionably the right thing to have ASIC as a central market supervisor. The process should be commoditised. Interesting how we get there. Throws up some questions:
A. The “compensation for loss of powers” argument needs more clarification. Is this compensation cost included in the “establishment” fee. (I assume not, as ASX would end up contributing to its own compensation). Will this compensation be a one off cost worn by ASIC and not passed back to new market operators. The consultation paper appears to be silent on ASX compensation.
B. It is assumed the new market operators will pass on / pass through both the fixed and variable components of ASIC levies. Given these costs are already included in the ASX business model does this mean ASX will not pass through additional charges? (In fact a small cost reduction would be anticipated due to the now mutualised nature of the market supervision component – whilst market operations will remain the same).
C. Do the ASIC levies, albeit passed through to participants, represent a material barrier to entry (and hence efficiency of the domestic capital markets). My guesstimate is that these levies will be circa $27myn per year.
D. How will the mechanics of the establishment fee work. At what point is the service considered “established”. Is the establishment fee static or vary depending on time of application (who has gone before) and incremental costs at that time.

I wanted to have a rant about lynching Lynch for his suggested ownership reform. Now EU’s Wright is in on the game I’m relaxed.
CME comes to the CDS clearing game.
LCH sneaks in Irish.
Concentration risk back on the radar…. A Centralized Derivatives Clearing House Will Create Invisible and Deadly Global Risk…this sounds more sinister than 2012. Scary, No?
I’m pleased to see a bit more than a one liner on IO:

I nice piccie on who’s who in the US:

And for those MTF watchers, Nomura to reclassify as an MTF. This is the first I’m aware of. I find it surprising how often theis question is asked in Asia.

Ahhhh, and for you Northern Hemisphere souls…

Bondi to Bronte. A wonderful swim. What ocean swimming is all about. Schools of fish, deep blue waters, the silence of the ocean (apart from flapping arms) and the sun rays dancing as they probe the deep. Lovely. Also marked with some strong currents (favourable), choppy seas and an almighty kick in the solar plexus from some pesky breaststroker just as I was coming through the final set of waves onto the beach. I tell ya, it felt like a ninja death punch and had me virtually retching as I crossed the line. Typical, a lovely day out and some wombat poleaxes ya.

(The Solar Plexus, also known as Conceptor Vessel 14 in Dim Mak, is the most deadly point in acupuncture. Behind it there is a large bundle of nerves. It can potentially cause cardiac arrest, but it is most useful for the crippling pain it inflicts. It is right below the the sternum, right between the bottom of the neck and the waist. The Solar Plexus is also most likely the point responsible for the "ninja death punch." )

Results available here:
2,180 entrants (I came 834) of which 1,611 men (673) . Avg time 37:15, fastest 22:29, mine 35:52.
My age group 282, 230 men and I came in 120th.
(If you do look at the results page, note the 40-44 have a faster average time than those useless whipper snappers (nippers I say) in 20-24, 25-29, 30-34, 35-39 etc. In fact, only the elite, u16 and u20 beat us. And as for the rest, yeah, we were faster than all the old fogies too. Long rein the boofheads – we know how to draft, to grab ankles and to swim over the top of others)

For those there is spirit you can also get your very own certificate here:

Good write up (and piccies) here:

“Always do what you are afraid to do."
Ralph Waldo Emerson, American transcendentalist poet, philosopher, essayist
***Always?...Nah, this is not good advice. Self preservation is there for a reason.
Emerson dies in 1882, he went walking despite having an apparent cold and was caught in a sudden rain shower. Two days later, he was diagnosed with
pneumonia. I guess he refused to be afraid of the weather.

And what about those pirates?....An insightful report from an “Old Buccaneer”

Don't be so harsh on the pirates. They are doing the same sort of innovation to allow risk-spreading that's at the heart of financial markets everywhere. And as entrepreneurs, levering in external capital without giving up one iota of control is always attractive. Not to mention providing incentives for the crew. Now if Somalia was in the EU, the pirate king would have to be interviewed by 5 elders (old farts), he would need a majority of retired pirates on the board, audit, risk and remuneration committees. His directors and highest paid employees will need to disclose their remuneration and will have to leave their bonuses in the pirate king's chest for 3 years and he can 'claw back' the bonus if the ransoms are less than expected at the time of capture. His investors would need to be registered, hold their investments in an EU credit institution, subject the investments to external valuation, and be subject to leverage caps. All trading would take place on a regulated market and trades would be cleared through a CCP. (Both platforms authorised and regulated) The captain and crew would be subject to strict anti-market abuse controls and could be sent to jail for insider trading (oooh! There's a dis-incentive?!). Short selling of shares would be banned. 7-11 per cent of the proceeds of the offering would be paid to intermediaries. I would love to see the accountants' report on the three year track record in the prospectus (as well as the 'description of business' and 'use of proceeds' sections). Shares in pirate syndicates can go down as well as up and you may not get back the sum originally invested. The pirate king's children would get law degrees and settle down to quiet jobs in regulation and compliance. One particularly clever girl would get a Ph.D in market structure, marry an Australian and live happily ever after. Just as well 'cos when Somalia joins the global fight against money laundering her old dad will be out of a job (so he'll buy a big house in London and a yacht (for old times' sake) - I assume he won't have enough points to move to Oz). Still, at least the pirates didn't cause a global financial crisis."One man's terrorist is another man's freedom fighter"the Old Buccaneer

China Executes Ex-Galaxy Securities Trader for Embezzlement, Xinhua Says A former senior trader at a Chinese securities company was executed yesterday for embezzlement and misappropriating 94.5 million yuan ($13.8 million), the official Xinhua News Agency reported, citing court documents.

Parties for me this w/end.

Have a great one yourselves.



TOP OF THE CLASS OF 2009 This is the fifth annual list of the Financial News Rising Stars – our pick of the 100 men and women under the age of 40 who have the potential to make it to the pinnacle of their professions. The first list was selected in 2005 in a completely different market – this year’s nominees have had to prove their worth in the wake of an unprecedented global economic meltdown.
*** Congratulations Chi-X and Hirander.

BATS Europe publishes MTF price formation studyPaul O'Donnell, COO, BATS Europe: "We believe there is a need for a clear market outage protocol to ensure consistency so that market participants can plan for such scenarios and that trading will remain orderly. BATS Europe has announced the publication of a white paper examining whether effective price formation can take place on Multilateral Trading Facilities (MTFs) independent of the listing market.BATS Europe based its analysis on data from outages that occurred at the London

08/12/2009 17:22:00
In the wake of last month's technical glitch at the London Stock Exchange, Bats Europe is calling for a clear market outage protocol to help participants plan and ensure trading remains orderly.
More on this story:

The complete white paper, titled “Listed Market Outages: A Continuity and Price Formation study”, is available at:

Rolet slams stamp duty and Tobin taxes Xavier Rolet, the chief executive of the London Stock Exchange, has slammed stamp duty at a European hearing into "Tobin" taxes, warning it had a “significant dampening effect” on the UK economy and hurt savers and small companies.
*** Hear, Hear. Rolet and Furse singing from the same hymn sheet on this one.

Japan to waive corporate-bond income tax for foreignersOverseas investors pay a 15% tax on interest income earned on their Japanese corporate-bond holdings. Japan's tax panel decided to waive the tax for three years starting next year. The tax is considered a contributing factor in foreign investors' lack of interest in Japanese corporate bonds. The move follows similar initiatives by the UK, France and other countries. (06 Dec.)

LSE Starts New Trading System for EDX, Seeks Nasdaq BusinessBy Nandini SukumarDec. 7 (Bloomberg) --
London Stock Exchange Group Plc said its new trading system for the EDX London Ltd. futures market started today, as the U.K. company seeks to take on rival Nasdaq OMX Group Inc. in Nordic derivatives trading.


Market surveillance solution from Cinnober now live in two options marketsScila Surveillance successfully launched at EDX London and Oslo BrsBoth EDX London and Oslo Brs switched to the Scila Surveillance solution for their respective derivatives markets as they commenced trading on their new, common equity derivatives trading platform on December 7.

LSE Said to Plan FTSE 100 Derivatives, Challenging NYSE LiffeBy Nandini SukumarDec. 9 (Bloomberg) -- London Stock Exchange Group Plc, where the bulk of FTSE 100 Index stocks are traded, plans to offer futures and options based on the U.K. benchmark index in competition with NYSE Euronext's Liffe futures market, according to people familiar with the situation. Euronext's Value Lies In Derivatives -CEOBy Jacob Bunge The single biggest misconception about exchange operator NYSE Euronext (NYX), Chief Executive Duncan Niederauer said Wednesday, is that it's a stock market-focused company. Never mind the Big Board or the famed trading floor at the intersection of Wall and Broad streets--futures and options are the main business of NYSE Euronext these days, and the company's valuation ought to reflect that, according to Niederauer. "Most people still think of us as largely a U.S. equities exchange, and we haven't been that since 2006," Niederauer said. "We have a much more vibrant derivatives franchise that I would say accounts for much of our market capitalization."

TSE ORDERED TO PAY MIZUHO Y10.7BN OVER 'FAT FINGER' TRADE BOTCH-UP The Tokyo Stock Exchange (TSE) has been ordered to pay Y10.7 billion (£73m) to Mizuho Securities in compensation for losses incurred following a botched trade in 2005.
Full story:

New entrants create dark pool splash The shake-up of Europe’s "dark" trading landscape continued as transatlantic exchange NYSE Euronext announced a tie-up with a Swiss dark pool, while Chi-X Europe overtook longstanding market leader, Liquidnet Europe, as the continent’s biggest dark pool operator.
SIX SWISS EXCHANGE TO MOVE SWISS BLOCK DARK POOL TO SMARTPOOL SIX Swiss Exchange is to move its Swiss Block dark pool service for Swiss blue chips to SmartPool, following the closure of the Nyfix Euro Millennium platform earlier this week by new owners Nyse Technologies.
Full story:

SMX Gets In-principle Regulatory Clearance From MAS
In a significant milestone, the Singapore Mercantile Exchange (SMX) today announced that it has received in-principle regulatory clearance from the Monetary Authority of Singapore (MAS), the central bank of Singapore and regulators....
Read More Here

SGX to add more commoditiesASIA'S second-largest listed bourse, the Singapore Exchange (SGX), will launch contracts for gold, fuel oil and coffee in the first quarter of next year, as the firm sees interest in commodities trading driving growth.

SGX to mandate short-sale reportingSingapore Exchange Limited (SGX) and the Monetary Authority of Singapore have joined forces to make the declaration of all short-selling orders compulsory in a bid to improve market transparency

Dark Pools Increase Stock Volatility, Arculli Says (Update2)By Darren BoeyDec. 9 (Bloomberg) -- Hong Kong Exchanges & Clearing Ltd. Chairman Ronald Arculli took aim at alternative trading platforms today, saying that so-called dark pools are difficult to regulate and increase share-price volatility.

HK exchange chief warns on dark poolsBy Tom Mitchell in Hong KongThe head of Hong Kong's stock exchange has warned that the growth of dark pools, which facilitate the private trading of large blocks of shares, pose a systemic risk to the global financial system and disadvantage retail investors.

S.I.N. ALERT: Buffett’s Business Wire Calls Nasdaq Fee Hikes Anti-Competitive
By John Hintze
Business Wire, one of the top two distributors of official news and information from public companies, recently submitted a letter to the Securities and Exchange Commission saying listing fee hikes proposed by Nasdaq OMX Group will be used to subsidize other services, including its GlobeNewswire service, with which it competes.
Business Wire contends that subsidization would be anti-competitive.
Nasdaq OMX Group has proposed revising and increases several types of fees to apply for and maintain listings on its Nasdaq exchange in the United States, including a annual fee that will levy an additional $5,000 annually on approximately 75% of its listed companies and fee increases applicable to listing ADRs that will range from $8,775 to $20,000.



Reforms to the Supervision of Australia’s Financial Markets - Exposure Draft and Consultation Paper

THE federal government's recently announced plans to give ASIC control of real-time market surveillance for the Australian marketplace
But it is important that this is not seen as a "get out of jail" card for the ASX, where I have seen estimates that this decision will save them $16 million.

Enforcer Under Pressure, But There's No Easy Solution To Market Surveillance
he Australian Securities Exchange doesn't publicly state how much the supervisory unit costs to run, but the figure is in the vicinity of $30 million a year, and the budget has been rising even as ASX boss Robert Elstone cuts costs elsewhere

ASX wants compensation for loss of powers ASIC
30 Sep 2009 ... ASX wants compensation for loss of powers ... Mr Elstone noted the transfer in market supervision to ASIC ''will present a significant new

FINANCIAL SERVICES STRIKE TO FORCE FINNS ONLINE Around 30,000 financial services staff in Finland are set to go on a three day strike next week, leaving virtually all bank branches closed and online, ATM and in-store services subject to disruption.
Full story:
*** market failure is one thing that will cause liquidity to shift.


CME TO LAUNCH CDS CLEARING HOUSE WITH SUPPORT OF EIGHT MAJOR DEALERS After months of wrangling, The Chicago Mercantile Exchange has finally secured agreement with eight leading dealers to participate in its credit default swaps counterparty clearing initiative.
Full story:

FX derivatives caught up in clearing reformBy
Jeremy Grant in BrusselsEuropean regulators yesterday signalled that foreign exchange derivatives might be required to be cleared in Europe under sweeping reform of the over-the-counter derivatives markets on both sides of the Atlantic.

Singapore Exchange Chief Outlines Technology, Expansion PlanBy Katrina NicholasDec. 3 (Bloomberg) -- Singapore Exchange Ltd., the operator of the city-state's securities and derivatives markets, will be able to process trades faster and attract more business as it rolls out services including a new derivatives clearing engine.

WARNING: A Centralized Derivatives Clearing House Will Create Invisible and Deadly Global RiskJohn CarneyThe idea of forcing
over-the-counter derivatives trading out into the open has widespread support in financial and regulatory circles. Unfortunatley, the most popular mechanism for doings so would create giant systemic risks that would likely require a government bailout in the future.

LCH.Clearnet: Rep Lynch's Clearing Proposal Will Hurt BusinessBy Sarah N. Lynch and Jacob Bunge WASHINGTON (Dow Jones)--The chief executive of London-based clearing firm LCH.Clearnet on Wednesday protested a U.S. House proposal that would limit banks' stakes in derivatives clearinghouses, warning of a serious impact to the company's U.S. customers. The proposal, pushed by Rep. Stephen Lynch (D., Mass) and backed by LCH.Clearnet rival Nasdaq OMX (NDAQ), is slated to be considered by the House Rules Committee later Wednesday. If approved, the full U.S. House will decide likely sometime later this week if the provision should be tucked into a broader measure to overhaul the financial regulatory system. Lynch's proposal represents a major threat to LCH.Clearnet, the dominant clearer in the estimated $420 trillion interest rate swap market and 83% owned by users including big banks - well above a 20% threshold suggested by Lynch. In the proposal's current form, Liddell said, "it would appear to mean that U.S. clients could not use LCH.Clearnet." Clearing Plan Won't Affect Existing Firms, Lynch Says (Update2)By Matthew LeisingDec. 8 (Bloomberg) -- A proposal to limit bank ownership in clearing and execution services for private derivatives won't affect existing companies such as LCH.Clearnet Ltd. or Tradeweb LLC, said U.S. Representative Stephen Lynch, the plan's author. Lynch Amendment Stirs Up Battle in Derivatives ReformBy Ivy SchmerkenA battle is brewing over the so-called Lynch Amendment that would block large bank dealers from controlling the OTC derivatives clearinghouse.The Futures Industry Association has sent a letter to Congress opposing an amendment to the House of Representatives legislation on financial reform legislation, on the grounds that it reduces competition.

LCH.Clearnet to clear Irish Securities for BATS EuropeDecember 9th, 2009 - LCH.Clearnet to clear Irish Securities for BATS Europe

Tradeweb Calls Lynch Amendment "Anti-Competitive"With Rep. Lynch proposing an amendment to limit bank ownership of derivatives clearinghouses, Tradeweb's CEO Lee Olesky issued a statement calling the amendment anti-competitive.

10/12/2009 15:34:00
A proposed amendment to the US financial reform bill that would limit bank ownership of derivatives clearing houses has been met by a wave of criticism from financial market participants.
More on this story:

DOW JONES NEWSWIRES: TMX CEO Suggests Alpha Shareholders Should Cut Stake By Ben Dummett 12/8/09TMX Group Inc. (X.T) Chief Executive Tom Kloet suggested the dealers, mainly units of Canada's big banks, that control Alpha Trading Systems should be forced to reduce their combined controlling stake to a minority interest to protect the integrity of Canada's capital markets.
Jos Schmitt, head of Alpha, was dismissive of Kloet's concerns. "I think it's sour grapes" and a "reaction around our progress," he said.

The Changing OTC Market Place
Future demands on infrastructure for clearing
SunGard's Front Arena solution looks at the changing OTC market place.
Click here to download paper >>

And…more transparency on IO.


FINANCIAL TIMES: EU Sets up Trio of Financial WatchdogsBy Nikki Tait 12/3/09Three new pan-European watchdogs are to oversee the financial services sector under a compromise deal struck by ministers in Brussels on Wednesday.
In the bank
Which central bank has the most employees?

EU compromises with UK on financial regulatory frameworkEU finance ministers have come to an agreement on creating a pan-European financial-oversight system after the UK accepted concessions regarding future bank rescues. The system will be based on a risk-assessment agency and three regulatory boards for the individual sectors of banking, securities and insurance. The agreement will head to the European Parliament, where changes could be proposed. Some in Parliament already voiced concerns that the regulatory framework is not strong enough. The Guardian (London) (02 Dec.) , Bloomberg (02 Dec.) , The Wall Street Journal (03 Dec.) , The New York Times (02 Dec.)

Geithner: Entire financial system at risk at height of crisisGoldman Sachs executives, including CEO Lloyd Blankfein, said the company did not need the government's aid to survive the financial crisis. Treasury Secretary Timothy Geithner responded, saying the entire financial system was threatened at the height of the crisis. "The entire U.S. financial system and all the major firms in the country, and even small banks across the country, were at that moment at the middle of a classic run, a classic bank run," Geithner said. Goldman Sachs, JPMorgan Chase, Morgan Stanley and others have since returned the government's funds with interest. Bloomberg (12/5)

And a nice piccie from Bill Hodgson at Sapient on who’s who.

FINANCIAL TIMES: Dark Pools Come Under Fresh ScrutinyBy Jeremy Grant 12/3/09The Federation of European Exchanges has accused banks’ “crossing networks” – a form of dark pool – of operating “with full opacity”. It has called on regulators to force them to register as “multilateral trading facilities” (MTFs) – the same legal status used by platforms such as Chi-X Europe. The banks reject FESE’s claim that bank crossing networks account for up to 40 per cent of all European share trading, arguing it is closer to 2 per cent.
*** Sordid. Why would FESE attack their biggest users?

Geithner Slams Bonuses, Says All Big Banks Could Have FailedBy Robert SchmidtDec. 4 (Bloomberg) -- Treasury Secretary
Timothy Geithner criticized the record bonuses expected to be paid by big banks this year and refuted claims by Goldman Sachs Group Inc. that it would have survived without government aid. Taking aim at what he called an era of irresponsibly high bonuses, Geithner said all banks -- even those that have repaid government aid -- need to restrain the amount they pay their leaders and tie compensation to long-term goals.
Bernanke admits mistakes, says Fed should stay independent

Gensler: Big Banks Should Clear All Standard Swaps

Securitisation revival is expected to help UK housing marketPartners at law firm Clifford Chance said the UK housing market is poised to take off as banks return to securitisation practices. However, the securitisation deals are more transparent and less complex than they were in the past, the lawyers said. "Functioning securitisation markets are needed to make credit cheaper," said Kevin Ingram, a partner at the law firm. The Guardian (London) (03 Dec.)

Labour opens new front in battle with the City
Gordon Brown is planning to escalate Labour's growing war with the City by threatening two more levies on banks in addition to the tax on bonuses due to be announced tomorrow by the chancellor.



New Nomura dark pool is a firstBy Jeremy GrantNomura, the Japanese bank, plans to launch what would be the first bank-owned "dark pool" in Europe to reveal publicly what trades have been done in an attempt to "remove the mystery" from such increasingly controversial trading facilities.
Nomura reclassifies dark pool for commercial reasons

Barclays to Open Australian Equities Business, Australian SaysBy Jacob GreberDec. 7 (Bloomberg) -- Barclays Capital plans to become a full-scale investment bank in Australia and build a domestic equities business in the first half of next year, the Australian reported.

BofA Merrill hires Asia-Pacific electronic sales headGlobal broker Bank of America Merrill Lynch has poached a director from agency broker and trading technology firm ITG to head its Asia-Pacific electronic trading sales team.

ECB's Trichet expresses confidence in Greek governmentThe Wall Street Journal (10 Dec.)
*** I’m not…but disaster will be averted.

Bing Back After Outage (12/04/2009 -- 01:01 PM)Microsoft is investigating what happened in an effort to prevent future downtime.
*** Bing was out…and people noticed.

Summary (from JPM)
· Liquidity fragmentation in Europe last week was up 1.2% to 26.0% (a new high), driven by the UK, Germany and France.
· Ireland (64.1%), UK (45.2%), France (28.5%) and Germany (26.9%) were the most fragmented markets in percentage terms.
· UK ($4.2bn), Germany ($2.1bn) and France ($2.0bn) were the most fragmented in terms of Displayed Liquidity traded away from the primary market.
· Chi-X achieved average daily turnover (ADT) of $6.9bn, equivalent to 16.2% of flow in Chi-X names. BP ($149m, 38.3%), Rio Tinto ($137m, 31.4%) and HSBC ($126m, 29.6%) had the highest ADT.
· BATS achieved ADT of $1.8bn. Market share in BATS names was 4.6%. UniCredit ($68m, 9.9%), BHP Billiton ($57m, 14.1%) and BP ($43m, 11.0%) had the highest ADT.
· ADT on the Turquoise Displayed Order Book was $1.6bn. Market share in Turquoise names was 3.8%. Nokia ($37m, 10.9%), BASF ($36m, 9.3%) and Siemens ($32m, 4.6%) had the highest ADT.
· Nasdaq OMX achieved ADT of $587m.

Scott Riley
Business Development

[Please note my new email address:]

Fortis Global Clearing
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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