Friday, January 8, 2010

News : WE 100108 Asset bubbles, TSE, MTF pricing, OTC clearing EU v US

G’day All and Happy New Year.

Much news down under of the big chill up North.

An amazing spread of temperatures, just 29C (positive) here today and I think I got a touch of sunburn during my lunch time swim.

Sound familiar? Maybe not.

I found the economist piece on warning about bubbles timely.

What really resonated with me was the Nomura piece on “balance sheet recession”. I totally agree.

Yet again, the ratings agencies can wield more harm than good if they are not questioned, challenged and understood in context.

Likewise, during a deleveraging, people aren’t going to borrow at zero %, their deleveraging.

Certainly this was my favourite piece of the week.

Some changes to MTF fee schedules.

Arrowhead appears to be flying straight and true. I hope it continues to do so for all parties concerned with the markets.

A more vibrant TSE is a pre-requisite for more market initiatives.

For those of you looking at the snow, or trapped in snow it is the North Bondi rough water this weekend.

This outing is just to burn off the Xmas excess, it sure doesn’t get any easier after a break.

If you are in the snow, enjoy it while it lasts. As for slush and black ice…you can have it!

Have a great week-end all and for those coming back, welcome back and hello 2010.

Warm regards,


A warning about bubbles

Volatility Falls to Pre-Lehman Lows
The VIX's decline to a 16-month low shows an absence of anxiety on Wall Street, reports's ...

Interview with Richard Koo, chief economist, Nomura Research Institute:

Barron's: What are the other implications of the balance-sheet recession?

Koo: Many countries will continue to run massive fiscal deficits for the foreseeable future. There are two issues. One is how to rate the sovereign debt of countries that have fallen into balance-sheet recessions and require heavy fiscal stimulus. Issuing more government debt when an economy isn't in a balance-sheet recession leads to a variety of problems, including higher interest rates, crowding out, inflation, and inefficient distribution of resources. Any of these would be ample justification for a rating downgrade.

But increased issuance of government debt during a balance-sheet recession is a positive. Unless the government issues a sufficient amount of debt and boosts fiscal expenditures, the economy will fall into a deflationary spiral. At such times, rating agencies that don't understand the concept of balance-sheet recessions can send the wrong signal with credit downgrades, preventing governments from doing what is necessary and sparking further weakness in the economy. Of the two main U.S. rating agencies, Moody's appears to be paying much more attention to this issue. Standard & Poor's, on the other hand, remains entirely indifferent and continues to apply orthodox rating criteria in a doctrinaire fashion.

It was the haphazard assignment of AAA ratings to sub-prime CDOs by these two organizations that enabled those instruments to be bought by investors around the world, ultimately triggering the global financial crisis. The problem of sovereign-debt downgrades represents another opportunity for these agencies to exacerbate problems in the global economy. National and international authorities urgently need to pursue further regulation and reform of the rating agencies as part of their efforts to tighten regulation of the financial sector.


Chi-Delta extends pricing promotion
Chi-X Europe Ltd (Chi-X) has announced the extension of the Chi- Delta pricing promotion. Following the initial pricing promotion announced in November 2009, the revised pricing structure will be extended to 31st March 2010.In November 2009 "Chi-Delta was the largest traded pool of non-displayed pan-European liquidity" according to Thomson Reuters' Equity Market Share Reporter (EMSR)' with 27.3% market share.Chi-Delta executions resulting from a passive order type* will qualify for a reduction in trading.

The promotion, which started on 10 November and was due to expire at the end of 2009, halved the fee for adding liquidity to the platform to 0.15 basis points from 0.3 bps. Passive order types on Chi-Delta are non fill-or-kill and immediate-or-cancel orders. The fee reduction will now run until 31 March 2010. Aggressive orders sent to Chi-Delta will continue to be charged at 0.3 bps.
By comparison, BATS Europe charges 0.15 bps per order on its dark pool, while NEURO Dark, Nasdaq OMX Europe’s non-displayed order book, charges 0.2 bps.
According to data vendor Thomson Reuters, Chi-Delta accounted for 32% of dark European liquidity in December 2009, making it the largest pan-European non-displayed trading venue.

PRESS RELEASE: Chi-East Appoints Ned Phillips as CEO
SINGAPORE - 6 January 2010 – Chi-East, a joint venture of Chi-X® Global Inc. and Singapore Exchange Limited (SGX), announced today that it has appointed Ned Phillips as its Chief Executive Officer, effective immediately.

The new ownership structure of pan-European multilateral trading facility Turquoise following its takeover by the London Stock Exchange will be key to stepping up competition with market-leading MTF Chi-X Europe, according to those involved with the deal.

Read story

Nasdaq MTF to boost passive routing fees for second time



Electronic multi-bank foreign exchange trading portal FXall has agreed to buy rival platform LavaFX from Citi. Financial terms of the deal were not disclosed.

Full story:

FINANCIAL TIMES: Trading Platform Launch Lifts Tokyo Stocks
By Lindsay Whipp
The Tokyo Stock Exchange’s new trading platform successfully completing its first day of operation.
A relatively easy day to launch its new trading platform – called Arrowhead – which brings its technology in line with global standards.
The TSE hopes that it will give a much-needed boost to trading in the world’s second-largest equity market.
One market participant said “everybody was very concerned about the first day” but it was “smooth and without problems”.
Market participants expect volumes to grow on the TSE as investors take advantage of the much faster system where trades now take five milliseconds to complete compared with seconds on the outgoing platform.


Tokyo Exchange Girds for Tech Race
TOKYOThe Tokyo Stock Exchange on Monday is set to launch a high-tech replacement to its creaky trading platform after years of embarrassing trading gaffes, a move that may unleash a technology war between brokers in Japan.


THE TRADE NEWS: Exchanges' 2009 Figures Highlight European Equities Slump
By Staff
Several of Europe’s major stock exchanges have reported significant declines in equities trading volume and value for the full year of 2009 compared with 2008, but activity in exchange-traded funds bucked the general trend.
The exchanges’ figures echo the trend across Europe. According to figures from data vendor Thomson Reuters, total equities trading turnover for the continent in 2009 was €7.56 trillion, a 68.5% drop from 2008’s €24.05 trillion. Trading volumes across Europe fell to 1.15 trillion trades, down 48.5% from 2008’s 2.23 trillion.
Exchanges' 2009 figures highlight European equities slump

ELX Futures Announces 2009 Results as Total Volume Exceeds 5MM Contracts; Average Daily Volume Surpasses 41K Contracts; Open Interest Tops 20K Contracts; ELX Becomes Best Performing New Financial Futures Exchange in Decade

Trayport(R) Exchange Systems Goes Live with Sibiu Monetary Financial and Commodities Exchange
LONDON, Jan. 6 /PRNewswire/ -- Trayport Exchange Systems today announced that Sibiu Monetary Financial and Commodities Exchange (SIBEX) in Romania has gone live with Trayport's Exchange Trading System for the trading of single stock, interest rate, currency and gold futures and options.


[Video] Diverging OTC reform
FT Trading Room
Anthony Belchambers on different plans of EU and US

European firms want exemptions for OTC derivatives rules
More than 160 of the largest nonfinancial companies in Europe signed a letter in opposition to proposals by the European Commission for stricter regulations for over-the-counter derivatives markets. The businesses argue that the changes could hinder economic growth and increase the cost of hedging market risks. Last month, an official in the commission's division of internal market and services said staff thought it would be impossible to exclude OTC derivatives users unrelated to the financial industry. Financial Times (tiered subscription model) (05 Jan.) , The Wall Street Journal/Dow Jones Newswires (05 Jan.)

05/01/2010 12:17:00


Brussels-based depository Euroclear has appointed HSBC veteran Tim Howell chief executive officer, replacing Pierre Francotte who is quitting after 10 years in the role.

More on this story:

Garry O'Connor takes the helm at IDCG
International Derivatives Clearing Group, LLC (IDCG), a majority owned, independently operated, subsidiary of The NASDAQ OMX Group, Inc.(SM) today announced that the IDCG Board of Directors appointed Garry N. O'Connor as CEO of IDCG, effective immediately.


Industry Reacts to Dark Pool Proposals
As the SEC looks to improve market transparency, dark pools have come under renewed fire. Three regulatory ...;jsessionid=UMQT24G43UW2LQE1GHPSKH4ATMY32JVN?articleID=222100088&_requestid=59193

*** includes SEC link: SEC's Fact Sheet About Dark Pools,

Remarks of Chairman Gary Gensler, “OTC Derivatives Reform”, Council on Foreign Relations

January 6, 2010

BUSINESS DEMANDS TO OUTPACE TRADING TECH BUDGETS IN 2010 - TABB Speed will continue to be the name of the game for US equity brokers in 2010 but business demands beyond latency may outpace trading technology budgets, according to a study from Tabb Group.

Full story:

*** and if you can’t measure it, you can’t manage it.

FINANCIAL TIMES: Quick View -- Fast, But Just How Fast?
By Jeremy Grant
A next step forward – and a potentially big one – comes in the next few weeks from NYSE Euronext. It is working with Corvil on setting up a website that aims to standardise latency measurement, allowing traders to see how they did across various exchanges and platforms.
NYSE Euronext plans initially to publish the latency of the exchange’s own data feeds. Traders will be able to compare that with other exchanges.
Stanley Young, chief executive of NYSE technologies, tells FT Trading Room the hope is that other exchanges and platforms will join in and publish their data feeds too, kicking off an industry standard. “We are hoping that everyone will publish so you can check all venues.”

BarCap starts trading equities in Japan

Suppose Gordon Brown is right on fiscal stimulus...
UK Prime Minister Gordon Brown has drawn flak from opposition politicians for sticking to his policy of spending his way out of the recession. But according to a Barron's interview with the influential chief economist at the Nomura Research Institute, the research arm of the Japanese securities firm, extensive public spending may be the only way to address a private sector-led recession. The full interview, which incidentally makes no mention of Brown or the UK, follows below.

Yes there are two paths you can go by, but in the long run there's still time to change the road you're on."

--Led Zeppelin,
British rock band, from "Stairway to Heaven"

Young men are as apt to think themselves wise enough, as drunken men are to think themselves sober enough."

--Philip Dormer Stanhope,
4th earl of Chesterfield

Scott Riley

Business Development

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Fortis Global Clearing

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