G’day All,
(Piccie is of the AMP office block on a May Autumn morning).
Where to begin: Flash? Or CCP smash?
Let’s start with FIX.
http://www.fix-events.com/Hong%20Kong/agenda.html
This was an excellent event and a lot of policy issues were covered. A sign of heightened awareness of the Asian growth opportunities…and barriers that need to be addressed.
On the flight back, I watched this…(and if you get the chance I recommend it!)
I found this terribly moving. This stark reality is highly recommended. Mugabe’s regime is simply dreadful. I just wonder if it would be any different if there was oil in Zimbabwe rather than mangoes and mange tout.
http://www.mugabeandthewhiteafrican.com/
The Flash Crash.
I guess the jury is still out. I think it would be an error to blame any one segment…e.g. ECNs / MTFs etc. What is the alternative if you didn’t have these destinations? Competition is good. That means fragmentation. Fragmentation is no longer an option…it’s just something we’ve gotta get on with, learn from, and continuously improve on.
I’ll hold off on my view (anyway, as it’s free, I consider it worthless) until more feedback is in. The other observation I would make is yet again, post trade infrastructure has weathered the storm. What technology can fragment…your local CCP can risk manage and reconsolidate.
European Crossing Volumes.
I like it. Sure, there might still be some gaps, but I agree with Serocold. Ya gotta start somewhere.
CCP smash.
Breathtaking news from NYSE.EN on LCH.CN. One piece that got sent to me from Cairneagle is attached (along with my response to them). I liked the ‘devil in the detail’ of the NYSE press release. IF LCH.CN pull a commercial rabbit out of the hat, they’ll reconsider. Pretty clear what the drivers are. I’m not sure that ‘build your own CCP’ in an economy of scale business is the panacea to all your ills. It also raises the prospect of cross subsidy etc. Again, I don’t think this is the right business model. Of all the commentary I liked Rolets remark “not hermetically sealed”. Europe still needs innovation, price competition and open arms for new entrants. Vertical solutions don’t cater to this need.
Congratulations to LCH.Clearnet SA….they’ve snuck in an ROCH status in the UK. I’m sure they’ll sit nicely beside their Limited company.
Fancy running out of IP addresses.
Congratulations Mr Barnes and ATB at UBS MTF.
Those ANZ guys. Drug dealing in the mortgage department and identity fraud in debt collections. Nice of them to go to pains to make it clear that the different ‘activities’ are taking place in unrelated teams.
Congrats to the Reds (Qld) who started off with an excellent State of Origin campaign against those cheating Blues (penalty knock on and final try knocked on too!)
Have a great w/end all.
Off to 2 School events tonight.
S
http://clearingandsettlement.blogspot.com/
Loneliness is to endure the presence of one who does not understand.
Elbert Hubbard.
Children have never been very good at listening to their elders, but they have never failed to imitate them.
James Baldwin.
A handy link for those looking at different timezones.
http://www.poodwaddle.com/worldclock.swf
(worth a look!)
Trading
ASX Market Activity Report for April 2010
The value of ASX-listed stocks, as measured by the All Ordinaries Index, fell 1.2% in April in line with modest falls in a number of other markets including: the UK down 2.2%, Hong Kong down 0.6%, Germany down 0.3%, and Japan... Read More Here
• Total cash market traded value was $111 billion in April 2010, up 54% on the pcp, with a daily average value of $5.9billion, up 62% on the pcp
• Total cash market trades for April 2010 were 9.6 million, up 20% on the pcp
May 18, 2010
CHI-X Australia says it's on track to launch its electronic market exchange to rival the Australian Securities Exchange (ASX) in October.
25/05/2010 11:57:00
CHI-X EUROPE RESHUFFLES BOARD AS MACKAY MOVES ASIDE
Chi-X Europe has appointed John Woodman as chairman, replacing long-standing incumbent and founding CEO Tony Mackay (pictured), who moves to take up a non-executive position of chairman emeritus at the global equities exchange
More on this story: http://www.finextra.com/news/fullstory.aspx?newsitemid=21422
http://www.chi-x.com/home/home.asp
Knight to take stake in Equiduct - Financial Times
The ‘Flash Crash’.
SEC Must Explain Why the NYSE Got 'CLOBered'
Craig Pirrong submits:
CME Group Chairman Terry Duffy's testimony before a subcommittee of the House Financial Services Committee is quite informative and fascinating. Of course, he is defending his firm and talking his book, but he makes a very persuasive case on many issues. What he says does not demonstrate that the May 6 market boomerang did not begin at the CME (sorry about the double negative). However, he does make it pretty plain that precautions built into the CME's Globex system worked to arrest the decline, and that the rebound probably began at CME as a result.
http://jlne.ws/czSOqm
**** CLOB is Central Limit Order Book. … and hence I loved the headline.
Opening Statement on the Flash Crash from SEC’s Shapiro
May 20, 2010 @ 11:44 AM | By Greg MacSweeney
The SEC and market participants are still trying to sort out what exactly happened during a 20-minute period on May 6 that saw the markets swing wildly in both directions. Mary Shapiro, chair of the Securities and Exchange Commission, briefs Congress on what the regulator has discovered in this video from MSNBC.
Regulators May Never Pinpoint Cause of Market Crash
'Flash crash' shows need for price discovery and safeguards
Duncan Niederauer - NYSE Euronext for the FT
To build confidence in this fragmented system, we must enhance transparency, price discovery and accountability across the marketplace. At the NYSE, we have long believed in the ability to slow our market during times of volatility - analogous to taking the plane off auto pilot during turbulence.
http://jlne.ws/aOhyJV
**JK - Niederauer takes a jab at ECNs.
Six Firms to Publish European Crossing Volumes
The data will cover automated crosses only on systems such as Citi Match, CS Crossfinder, DBA, JPM-X, MSPool and UBS PIN.
Buy-side cool on new broker dark pool data
“For me, this data provides no added value and I am struggling to see which types of market participant would find this useful,” Sören Steinert, head of trading at Quoniam Asset Management, told theTRADEnews.com. “It would perhaps be a little more useful if it was reported in the context of total dark trading in Europe, but the data is of very little use in its current format with just six brokers.”
Goldman Sachs, which operates the SIGMA X dark pool, and Bank of America Merrill Lynch’s MLXN, are among the largest omissions from the Markit data.
According to John Serocold, managing director at the Association for Financial Markets in Europe, a trade body for wholesale financial market participants, who was responsible for coordinating the initiative, the main purpose of the data will be to provide extra “market colour”
The Committee of European Securities Regulators (CESR), which is charged with coordinating supervision across the continent’s securities markets, proposed in a consultation paper issued last month that broker dark pools should be reclassified as MTFs when they reach a certain level of trading activity. Brokers assert that being held to MTF obligations, such as fair and open access and pre-trade transparency requirements, would undermine their ability to achieve best execution for their clients. Responses to CESR’s MiFID consultation paper will be fed into the European Commission’s review of the directive, which is scheduled for this summer.
Japan’s Nomura became the first investment bank to reclassify its dark pool NX from an OTC crossing network to an MTF in January
http://www.thetradenews.com/trading-venues/crossing-networks/4622
SGX Securities Trading Grows 34 Percent in April
Singapore Exchange (SGX) said May 5 securities and commodities trading remained strong in April 2010.
· Total securities trading value rose 34% year-on-year to $35.3 billion, as investor interest and confidence remained... Read More Here
NZX Group Operational Report April 2010
NZX released today the Group Operational Report for April 2010. The total number of trades on NZX Securities Markets in April 2010 was 45,284, a 2% increase on the same period last year as a result of increased trading... Read More Here
SIFMA speaks out against proposal on subpenny trading
Money managers and their brokers are voicing opposition to trading stocks in subpenny increments, a proposal driven by the largest stock exchange operators. "Quoting in sub-penny increments would not contribute to the maintenance of orderly markets," SIFMA wrote in a letter to the Securities and Exchange Commission. "Sub-penny pricing would encourage market participants to 'step ahead' of competing limit orders by submitting an order with an economically insignificant price enhancement." Traders Magazine Online (5/17)
*** queue spot has a value that should be rewarded. Every stock has an optimum tick…I’m just not sure it is sub-penny.
Deutsche Boerse Seeks Shareholder Approval to Increase Capital
By Julie Cruz and Nandini Sukumar - Bloomberg
May 27 (Bloomberg) -- Deutsche Boerse AG asked shareholders for permission to boost its capital as Europe's largest exchange seeks to increase its "room for maneuver," Chief Executive Officer Reto Francioni said.
http://jlne.ws/cpUzXQ
Clearing
SIFMA SmartBrief Special Update on Clearing and Exchange Trading -- Part I
NYSE Euronext to Construct 2 Clearinghouses for Europe
NYSE Euronext Announces European Clearing Strategy
While construction of the new clearing houses de novo progresses, NYSE Euronext also remains open to discussions on any potential restructuring of LCH.Clearnet Group Ltd, and/or its subsidiary companies. Should any such discussions lead to a firm conclusion that such a restructuring route, in respect of clearing activities in London and/or Paris, could offer greater benefit to NYSE Euronext's customers and shareholders than continuing de novo construction, this matter would be thoroughly reviewed by NYSE Euronext's board and further announcements made as appropriate.
http://www.nyse.com/press/1273657947929.html
S&P puts LCH.Clearnet rating 'on creditwatch'.
By Jeremy Grant in London
Published: May 14 2010 01:01 | Last updated: May 14 2010 01:01
LCH.Clearnet, Europe’s largest independent clearing house, suffered a rare setback in the clearing business after Standard & Poor’s, the rating agency, put its counterparty credit rating “on creditwatch with negative implications”.
The move comes a day after its biggest customer, NYSE Euronext, said it would abandon LCH.Clearnet and set up two new clearing houses in London and Paris in 2012. S&P’s move comes as competition between clearing houses is likely to intensify as a trend towards exchange control of clearing increases.
http://www.ft.com/cms/s/0/1dd85136-5ede-11df-af86-00144feab49a.html?ftcamp=rss
NYSE Euronext’s new “concept” leaves clearer in the cold
http://www.thetradenews.com/trading-venues/exchanges/4583
*** In its role as a general clearing member, BNP Paribas clears up to 40% of the cash equities traded on NYSE Euronext.
*** In 2009, LCH.Clearnet Group received €60.6 million from clearing equity transactions, 47.1% down on 2008. Equities accounted for 27% of LCH.Clearnet’s clearing revenue (total: €221.3 million) in 2009 and 6.6% of its total revenue of €907.3 million. As well as clearing services, LCH revenues included interest from cash and collateral margins (€376.2 million) and a one-off cancellation payment of €260.4 million from NYSE Euronext upon the termination of clearing services for NYSE Liffe.
*** “Our cuts in fees last year, combined with increasing fragmentation of liquidity and greater competition between central counterparties have been the main factors in the reduction of equity clearing revenue,” said the spokesperson. “Given these kinds of cost pressures, diversification is, and always has been, important for our business.”
Recent examples of diversification include the extension of interest rate swap clearing to buy-side market participants last year, having previously only been available to the inter-bank market, and the recent launch of clearing services for the Hong Kong Mercantile Exchange and power trading venue Nodal Exchange. LCH.Clearnet is also positioned to benefit from the commitment of regulators on both sides of the Atlantic to clearing centrally a much larger proportion of over-the-counter derivatives.
Rolet targets post-trade overhaul, puts LCH relationship on review
“Post-trade services represent the biggest challenges but also the biggest opportunities for the exchange. The days of the horizontal exchange model are numbered,” said Rolet. “However, it will be important to ensure that a vertical model is not hermetically sealed and that users can enter or leave the process at a time of their choosing.”
http://www.thetradenews.com/trading-venues/exchanges/4607
Dear Asta,
Many thanks for this.
I found the piece worthy of reading.
I also liked the other items on your web site.
( http://www.cairneagle.com/news/home.html )
I’ll post both on the blog….and include you on my email distribution.
Why do we need competition in the CCP space?
You touch on them and it is why we feel central market infrastructure (the incumbent natural partners) at times are dysfunctional.
- Project risk
- Time to market
- Price
- Service and
- Functionality
I’m not sure competing vertical silos is the correct end game.
Maybe, if we have set a new floor for pricing and a new standard for services, we can hold off the next wave of change.
I think Xavier Rolets remark…to ensure a vertical model is not hermetically sealed…is spot on.
The moment CCPs start to feel they have an incontestable monopoly new entrants will be stymied for choice and once again the barriers to entry will be smashed down.
Middle para on page two has double full stop.
Interesting bar chart on transaction volumes. I assume you’ve included derivatives.
Mixing underlyings and their derivatives I think muddies the waters.
Equity open interest and margin (3 day tenure) is different to derivatives business model.
I’d be interested in the “venues cleared” by name rather than number (save me a bit of searching).
LCH.CLEARNET SA BECOMES FSA AUTHORISED RECOGNISED OVERSEAS CLEARING HOUSE
http://www.finextra.com/news/announcement.aspx?pressreleaseid=33948
CME Delays Europe Debt-Swap Clearing Plan, Switches to Energy
By Nandini Sukumar - Bloomberg
May 17 (Bloomberg) -- CME Group Inc., owner of the world's biggest futures exchange, is postponing its plan to clear credit-default swaps in Europe and is instead seeking to process energy derivatives.
http://jlne.ws/axkzNU
Clearing is not a cure-all for mitigating risk, insiders warn
Although regulators are pushing central clearing as a way to mitigate risk, they must acknowledge that clearing is not a panacea, said participants at a clearing event in London. "While clearinghouses do mitigate risk, the industry should work with the regulators to ensure clearing isn't regarded as the solution for all asset classes," said Richard Wilkinson, director of futures clearing at Royal Bank of Canada Europe. Risk.net/Operational Risk & Regulation (20 May.)
HKEx Announces CFO Appointment
Hong Kong Exchanges and Clearing Limited (HKEx) announced May 7 the appointment of Samuel Wong as its Chief Financial Officer (CFO) and Head of Finance and Administration. He will join HKEx on 2 July. Mr Wong has over 20 years... Read More Here
Dealers scrutinize proposed standards for CCPs
The Committee on Payment and Settlement Systems and the International Organization of Securities Commissions published recommendations for central counterparties for the over-the-counter derivatives market. The recommendations cover margin setting, participation requirements, governance and default procedures. Dealers said the proposal does not address major issues. "There are good intentions here but little substance; it is very vague and lacking in any specific recommendations," said Riccardo Rebonato of Royal Bank of Scotland. Risk.net/Risk magazine (5/12)
IOSCO and CPSS consult on policy guidance for central counterparties and trade repositories in the OTC derivatives market
The International Organization of Securities Commissions (IOSCO) and the Committee on Payment and Settlement Systems (CPSS) have issued two consultative reports containing proposals aimed at strengthening the over-the-counter (OTC) derivatives market.
The first report is entitled Guidance on the application of the 2004 CPSS-IOSCO Recommendations for Central Counterparties to OTC derivatives CCPs.
Because of the complex risk characteristics and market design of OTC derivatives products, clearing them safely and efficiently through a central counterparty (CCP) presents unique challenges that clearing listed or cash-market products may not. These aspects were not fully discussed in the 2004 CPSS-IOSCO Recommendations for Central Counterparties (the 2004 Recommendations).
A working group established by IOSCO and CPSS in June 2009 has reviewed the 2004 Recommendations in light of these experiences and identified key new issues that arise when a CCP provides clearing services for OTC derivatives. The working group has produced this report with the aim of promoting consistent interpretation, understanding and implementation of the 2004 Recommendations across arrangements for OTC derivatives transactions. The deadline for comments on the report is 25 June 2010.
The second report is entitled Considerations for trade repositories in OTC derivatives markets.
In this report the IOSCO-CPSS working group set out a number of factors that should be considered by trade repositories in designing and operating their services and by the relevant authorities in regulating and overseeing trade repositories. The deadline for comments on the report is also 25 June 2010.
The two consultation reports are complementary and, taken together, constitute an important part of the responses of IOSCO and the CPSS to the recommendations of the G20 that called for the strengthening of the robustness of the OTC derivatives market.
View IOSCO and CPSS consult on policy guidance for central counterparties and trade repositories in the OTC derivatives market, 12 May 2010
View Guidance on the application of the 2004 CPSS-IOSCO Recommendations for Central Counterparties (RCCP) to OTC derivatives CCPs, 12 May 2010
View Considerations for trade repositories in OTC derivatives markets, 12 May 2010
ECSDA RE-ELECTS JOËL MÉRÈRE AS CHAIRMAN AND ELECTS NEW EXECUTIVE COMMITTEE
http://www.finextra.com/news/announcement.aspx?pressreleaseid=33944
Gyorgy Dudas (Keler/ Hungary) was re-elected as Vice-Chair as well as Andreas Wolf (Clearstream International/ Luxembourg) who was newly elected as Vice-Chair of the Association. Vesna Zivkovic (CSD Croatia) was re-elected as Treasurer of ECSDA.
Further, the new Executive Committee of ECSDA will be composed of 9 additional members: Jesus Benito (Iberclear/ Spain), Abel Ferreira (Interbolsa/ Portugal), Anderea Giochetta (Monte titoli/ Italy), Johannes Luef (VP/ Denmark), Nikolaos Porfyris (Helex/ Greece), Robert Rickenbacher (SIX-SIS/ Switzerland), Boris T. Snuderl (CSCC Slovenia), Iwona Sroka (KPDW/ Poland), Adriana Tanasoiu (Depozitarul Central/ Romania) and Georg Zinner (OeKB/ Austria).
Survey: 70% of Ops Execs Plan to Automate OTC Post-Trade Processes
A majority of senior operations professionals plan to automate post-trade OTC derivatives processes, with nearly 70% answering that they will do so this year, according to a survey released Tuesday by OpenLink Financial.
*** Yeah? A 100% of firms are looking to automate to increase throughput and reduce costs and operational risks.
What does this say about the other 30%. Sorry couldn’t be bothered to look at the article, the stupid headline scared me off.
Policy
JOINT COMMITTEE ON CORPORATIONS AND FINANCIAL SERVICES
Reference: Oversight of the Australian Securities and Investments Commission
THURSDAY, 29 APRIL 2010
SYDNEY
http://www.aph.gov.au/hansard/joint/commttee/J12968.pdf
** PJC
Report prepared for the City of London Corporation
by Europe Economics
Published May 2010
The Future of Banking Regulation
US Senate approves bill to overhaul financial regulation
The US Senate approved legislation to overhaul financial regulation with a 59-39 vote. The bill would establish a consumer-protection agency, prohibit banks from proprietary trading and bolster oversight of derivatives trading. Republicans scrutinised the bill, citing concerns about its failure to address Fannie Mae and Freddie Mac and other issues. SIFMA President and CEO Timothy Ryan lauded some "important, positive steps" in the bill but voiced concerns about derivatives rules and fiduciary standards. "Requiring financial institutions entering into swap contracts with state governments, pension funds or endowments to act as fiduciaries for their clients is legally unworkable," Ryan said. The Washington Post (21 May.) , Bloomberg (20 May.) , The Wall Street Journal (21 May.) , Nasdaq.com/Dow Jones Newswires (20 May.)
Commentary: Changes are inevitable for credit rating agencies
Credit rating agencies are under attack worldwide, columnist David Pauly argues, and much-needed changes are on the horizon. Standard & Poor's, Moody's Investors Service and Fitch Ratings "gave top ratings to pools of risky mortgages that collapsed, causing a global credit crisis", Pauly writes. European officials, including Michel Barnier of the European Commission and Jean-Claude Trichet, head of the European Central Bank, have called for changes. Meanwhile, the US Senate approved a measure that aims to prevent companies from shopping around for the most attractive rating. Bloomberg Businessweek (17 May.)
FSA aims to enhance its image after UK election
Britain's unusual election results have given the Financial Services Authority a new lease on life, prompting agency officials to strive to prove it is deserved. During the past several months, the FSA has flexed its muscles and now must show that its tougher stance was more than an effort to avoid the ax. Critics continue to question the FSA's credentials and efforts. The Wall Street Journal (17 May.)
Reforms of MiFID will focus on pricing transparency
EU regulators said an overhaul of the Markets in Financial Instruments Directive will focus on improving pricing transparency in off-exchange trades rather than draconian curbs to the sector's activities. Alexander Justham of the Committee of European Securities Regulators said the review will zero in on tougher disclosure requirements for the over-the-counter sector. "I don't think MiFID was designed to completely annihilate the OTC market," Justham said. "The area we feel MiFID could be significantly improved is in post-trade transparency in OTC. We see that as the next area of focus." Reuters (17 May.)
§ Treasury makes profit by selling 20% stake in Citigroup
The Treasury Department sold 1.5 billion of the 7.7 billion shares it holds in Citigroup, earning $6.2 billion. The government authorized Morgan Stanley to continue selling Citi shares under a pre-arranged deal. "We are pleased that Treasury is making significant progress in profitably selling its common shares in Citi," said Stephen Cohen, a Citi representative. 
CNBC (5/26) , Bloomberg (5/26) , The New York Times (free registration) (5/26)
Misc
No room at the internet
CONRAD WALTERS | Certain websites could become inaccessible as we run out of IP addresses.
http://www.smh.com.au/technology/technology-news/no-room-at-the-internet-20100517-v9gs.html
Seeing Triple: Changing Times, Changing Tunes at Euroclear
When Euroclear SA came up with the idea of a single operating platform for all its settlement and related services under one roof, it was considered a pretty bold step. But even if all of its depositories now operate under one roof, settlement will be occurring in three phases. Here’s how the tune has changed as time has moved on.
Getco to Participate in SEC Roundtable
Getco, a big market maker and high-frequency trader, is among those set to participate in a Securities ...
DEALING WITH TECHNOLOGY: Human Factors
By Staff
5/17/10
UBS has appointed Robert Barnes CEO of its new multilateral trading facility (MTF), UBS MTF, according to bank officials. Barnes has worked for the investment bank for more than 16 years, most recently as head of market structures for the past five years. Barnes will continue his current role at the investment bank, officials add.
**** he..he…lucky Rob, not only does he get a new job…he gets to keep the old one too! Congratulations Mr B. J
FBGC Asia Pacific Unveils New Offering to Clients for Low Latency Trading and DMA
Fortis Bank Global Clearing N.V (FBGC) Asia Pacific have unveiled its new distinct offering to clients for low latency trading and direct market access. As part of an internally managed, state of the art, Global High Speed Network, algo... Read More Here
Nomura Expands Electronic Trading Platform With Rollout of NX in Hong Kong
Nomura, the global investment bank, has announced that it will launch NX (NomuraCross), its non-displayed global crossing network, in Hong Kong at the end of May 2010 after it received approval for an Automated Trading Services (ATS)... Read More Here
ANZ staff set up fake site to track missing debtors
The internal Facebook investigation comes as police investigate allegations of a drug trafficking network operating from an ANZ office in Melbourne. While the drug claims also allegedly involved debt collections staff, Mr Ries said the fake Facebook incident was ''completely separate and involves different people''.
The staff accused of having bought or sold drugs have already left the bank and worked with mortgage collections in their former roles, while the employee who allegedly created the Max Bourke page worked with unsecured collections.
*** It’s all go at ANZ in Melb. Mortgage collections / drug dealing etc. Must be a nightmare in the post room managing the alter ego’s. And we thought the CDS salesmen were the unethical ones.
ANZ acquires RBS's Singapore business
by Chris Kennedy - Money Management
ANZ has completed its acquisition of the Royal Bank of Scotland's (RBS's) retail and commercial business in Singapore, the company announced.
http://jlne.ws/bYeO7n
*** I wonder if they’ll export the new ANZ ‘cultcha’ to Sing.
Tutu lauds Bulls move to Soweto
|
|
12:37pm | Archbishop Desmond Tutu says the decision by the Bulls to play their Super 14 rugby semi-final in Soweto is the "most important development in the sport since the Springboks won the World Cup in 1995."
*** Nice.
The Qld flag to fly on the Sydney Harbour Bridge
The traditional bet involving the losing state flying the winner's flag - either on Sydney Harbour Bridge or Brisbane's Story Bridge - started in 1999 with a wager between Queensland's Peter Beattie and NSW's Bob Carr, when the Maroons won the series.
http://www.abc.net.au/news/stories/2010/05/25/2908327.htm?site=northqld
..and where it all began…
http://www.abc.net.au/pm/stories/s31915.htm
Scott Riley
Business Development
Fortis Global Clearing
8th Floor | 50 Bridge Street | Sydney | Australia | 2000
((Off)+61 (0)2 8916 9634 È(Mob): +61 (0)418 117 627
