Wednesday, June 30, 2010

News 100630: So farewell Fortis :( , updated email address, ASX responds, BOATees, Data management, Movies & client money

As a new day dawns in Asia, the end of an era comes to pass.

So, Please note that with effect of the legal merger of Fortis Bank Nederland N.V. and ABN AMRO Bank N.V. this email address will change to:

The legal merger is intended to become effective on 1 July 2010, subject to the fulfilment of the applicable conditions precedent, including but not limited to the timely receipt of relevant legal and regulatory approvals.

(right now I’ve not heard anything to the contrary, so I think we can take it as read).

Please update your email address for me!....(and likewise, if I’m using an out of date alias for you, please let me know).

30th June is also the end of the Aussie financial year.

28th June saw the ASX commence its internal fragmentation of their order book (positioning to compete with CXA).

(amongst other changes including the Nippa upgrade…and Genium…and market data enhancements etc. etc….who says you don’t need the threat of competition to deliver change?)

1st July is farewell to Nasdaq OMX Europe (NEURO)…the first step in the predicted European MTF rationalisation?...or does it just mean we’ll see more niche players.

Looks like BOAT continues to attract trade reports. My only reservation is the business model. I feel this data is best offered for free (or at least notional cost).

SECs data ambitions are worrying. Yes, if you can’t measure it, you can’t manage it…but then if you can’t use it / don’t use it why collect it?

Really disappointed that the movie exchange looks like being strangled by the lobbyists before it even begins.

And good old client money pops up again. One local resident had a rant with the default of Sonray. Touch of de ja vu with that one. I’m sure for all of us.

Siemens to set up a bank…sign of the ‘credit crunch’ times. (see also economist debt chart / sovereign risk)

Interesting piece on toxic liquidity from Bright Trading.

And then to sport…

As one English fan pointed out…. “England win the ODI, at Rugby we beat Australia, Murray in the second week of Wimbledon, Hamilton leads the Formula One World Championship (Button second) and er lets move on”

Actually, delighted to see Lewis Hamilton top of the F1 leader board. I warmed much more to him than Button or any other driver. I guess I should be going for Webber…but I can’t get beyond the gut feeling that the only Aussies that drive cars fast are either thieves or police (not pursuit, just doing their own drag race thing).

Motorbikes. That is all together different. Bikes are a sport of skill and of course Aussies should be vying for world champ status ala Gardner, Doohan and now Casey Stoner.

And this world cup thing…looks like the Dutch have a hard road…but all the while they’re in, I’m with ‘em.

So, please update the email address and have a good week!

Many thanks,



NASDAQ OMX Europe (NEURO) has announced that it will cease trading operations as per the close of business of 1 July 2010.

ASX VolumeMatch to go live on 28 June 2010

The Australian Securities Exchange's (ASX) new large order execution service, VolumeMatch, will be available from next Monday, 28 June 2010. Twenty-three ASX Participants have satisfied the certification and... (more)


*** Nippa is dead. Nippa 2megabits / sec, ASX Net 100 megabits / sec

Brokers fight it out as trading soars | The Australian

25 Jun 2010 ... TURNOVER on the Australian securities exchange has lifted more than 20 per cent in the past financial year.

*** TURNOVER on the Australian securities exchange has lifted more than 20 per cent in the past financial year.


Asian fragmentation to pursue own course | The Trade News

25 Jun 2010 ... Yang Xia, UBS Fragmentation of liquidity in Asia's equities markets will take a different path to the US and Europe, as domestic exchanges ...

Exchanges impede Asia's high-frequency trading, insider says
Alan Donohue, CEO of Singapore's Nyenburgh, said exchanges in Asia are hindering the growth of high-frequency trading by not providing technologies needed by major Western funds. "Most Asian exchanges have severe order-throughput limitations in comparison to their Western counterparts," Donohue said. "On top of these physical constraints, there are the regulatory constraints that require you to have a 'responsible person' or 'designated trader' for each session." (30 Jun.)


Markit BOAT is the largest trade reporting venue in Europe with 74% market share of MiFID OTC trade reporting. This represents 22% of combined on-and-off exchange turnover in Europe(Source: Thomson Reuters).

Instinet BlockMatch joins the following brokers and MTFs reporting their cash equity trades on Markit BOAT:

Alliance Bernstein


Bank of America Merrill Lynch




Block Cross


Block Match


BNP Paribas

Link Asset & Securities


Marshall Wace

CA Cheuvreux

Morgan Stanley





Conduit Capital Markets


Credit Suisse

Olivetree Securities

Deutsche Bank

Pipeline Financial Group Limited

Evolution Securities

Royal Bank of Scotland N.V.

Goldman Sachs

State Street


Sucden Financial










Broadridge announced the execution of an 11-year global outsourcing services contract to provide securities processing and back-office support services to PFSI.

*** Broadridge pulling out of clearing services (in conflict with its users) makes perfect sense to me.

New Pecking Order in Derivatives?
Exchanges and clearinghouses are expected to win big from the new derivatives rules in the financial ...

Here's an excerpt from the FT:
"The pecking order in the derivatives world will not change much to begin with, as a similar group of big banks dominate the ranking of FCMs, as they do the OTC markets. According to CFTC information, the top five FCMs, based on capital, are divisions of Goldman Sachs, UBS, Credit Suisse, JP Morgan and Citigroup In terms of customer assets under management, Newedge ranks first, followed by Goldman, JP Morgan Futures, Deutsche and UBS, according to CFTC data.

*** Usual suspects: Goldman Sachs, UBS, Credit Suisse, JP Morgan,Citigroup, Deutsche


SEC's Audit Trail "A Waste of $4 Billion"

The Securities and Exchange Commission is seeking comment on its May 26 proposal to create a real-time trail of all trade and trader information. The comment it got Wednesday at the Securities Industry and Financial Markets Association's 2010 Financial Services Technology Expo: "It's a waste of $4 billion."

*** Fully agree. No problem sending data…if you’re going to use it. Much of this is data for the sake of it. If your seeking comment on why you need data….ummm, you don’t need it. It’s like my kids seeking comment on a Crispy Cream in the food court….ummm, no ya don’t need it.

IOSCO-UPDATE 1-Brazil market fragmentation coming 'in principle'

MONTREAL, June 8 (Reuters) - Brazil's main stock exchange will "in principle" eventually face competition from other trading venues, the country's top securities regulator said, adding a final decision has been delayed by the financial crisis, a European market review and the mysterious U.S. flash crash.

29/06/2010 17:15:00


Despite receiving regulatory approval, Cantor Fitzgerald appears set to abandon plans to launch an exchange for trading movie box office receipt contracts after lawmakers moved to ban the practice.

More on this story:

*** This is a dreadful result. It evidences lobbyists (i.e. cash) can do as much harm as good. A worrying weakness / flaw in our political system(s).

Gillard unveils new cabinet

Prime Minister leaves Rudd out of reshuffle; says former PM would be welcome in re-elected Labor cabinet. 1:26 PM read more

*** No change for Bowen, Minister for Corp Law.

One reader had a rant about this: (a local broker going belly up, on a bad FX position, and the relevant client taking all the other clients assets down with him).

Derivatives broker Sonray folds freezing 3000 client accounts ...

24 Jun 2010 ... Sonray, founded in 2003 by securities and derivatives specialist Russell ... Hodgson has yet to ascertain the cause of the firm's failure, ...


And a good local blog post:

Bronte Capital: Sonray Capital – another Australian broker failure

Sonray Capital failed a couple of days ago and the clients are likely to incur nasty ... It is a failure – as if another one was needed – of Australian ... - Cached

For those in the UK a touch of ‘been there done that’...

Global Trader’s insolvency

Global Trader Europe Limited (Global Trader), a broker authorised by the FSA that dealt in spread-betting and contracts for difference (CFDs) as principal, went into administration on 15 February 2008 with funds in two types of accounts: (i) segregated, and (ii) non-segregated. The total of both types of accounts was insufficient to meet its liabilities.

…and before that we had Sussex Futures…

Day One Trader: A Liffe Story: John Sussex, Joe ...

This review is from: Day One Trader: A Liffe Story (Hardcover). Couldn't put the book down until finished. John Sussex and Joe Morgan have written a book ... › ... › Investments & SecuritiesFutures - Cached - Similar

*** Sussex futures folded as a result of a day trader ‘blowing his limits’ (gilts in 30 seconds).

SIEMENS TO SET UP OWN BANK AS CREDIT CRISIS RUMBLES ON Giant German industrial conglomerate Siemens has applied for a banking licence in an effort to reduce its dependence on troubled eurozone banks for financing.

Full story:

The move would enable the group to deposit a portion of its EUR9 billion cash pile at the Bundesbank as a safe haven.

*** and at the other end of the spectrum to Sonray….Siemens. (No wonder they have 9byn to deposit, because they care…speaks volumes about other Co’s too indebted to care).

JP Morgan's Richard Berliand To Retire - Financial News
By Shanny Basar in New York FINANCIAL NEWS
The banker at the heart of JP Morgan's successful integration of Bear Stearns' prime brokerage business, which helped transform the Wall Street giant into one of the top banks serving hedge funds, is planning to retire after 20 years with the firm. Richard Berliand, global head of prime services at JP Morgan, will leave the bank at the end of 2010 to spend more time with his family and pursue personal interests, according to an internal memo from Carlos Hernandez, global head of equities, seen by Financial News.

*** Ahh, and he was a nice guy too.

TABB FORUM: Recipe For a Toxic Market - Part I
By Dennis Dick, Bright Trading

Bright Trading, LLC, has addressed a letter to the SEC, in response to its June 2, 2010 Roundtable.1 What follows is Part 1 of an article summarizing the views contained in that letter.

As more and more participants internalize uninformed2 order flow, there is less uninformed order flow reaching the displayed market. This, in effect, makes the displayed market more “toxic” to displayed market makers, as the marketable order flow is executed before it reaches the displayed market, leaving only informed order flow to trade against. This discourages market making participants from displaying liquidity.

Speaking as part of the SEC panel on HFT, Terrence Hendershott said that “a limit order is a free option for somebody to trade against.”3 Displayed bids act like a short-term put option to the market, giving participants the right to sell to it. Alternatively, displayed offers act like a short-term call option, giving participants the right to buy from it. There is a risk involved in displaying these bids and offers. If the return does not justify the risks, market making participants won't display these bids and offers.

Of even greater concern is that participants in these internalization pools do not have to display any liquidity, yet they reap the rewards of getting the execution. This reward comes at the expense of the displayed liquidity provider’s risk. As displayed liquidity providers receive fewer executions, they will seek out other trading venues. The most logical venues to seek out are the ones getting the executions against this uninformed flow, which in many cases are these internalization pools. In essence, these internalization practices are driving our displayed liquidity providers into the undisplayed trading centers, leaving us with less and less displayed liquidity.

Proponents of these internalization practices argue that spreads have never been narrower, and liquidity has never been deeper. This may be true of the very liquid, most highly-traded NMS stocks, but it is not true of the majority of thinly traded, more illiquid issues: these spreads are not narrowing, but are, in fact, widening due to these predatory internalization practices.

If internalization practices are allowed to continue, and internalizers simply have to match the NBBO, eventually the majority of market makers, and participants acting as market makers, will move their trading businesses to these undisplayed pools, as they seek out the uninformed flow.

The fundamental flaw with this movement is that the prices internalizers give to the uninformed flow are derived from the publicly displayed market. The current market structure encourages competition in the undisplayed trading centers, while deriving their prices from the displayed trading centers. Competition should be fostered in the displayed trading centers, as they are the source of public price discovery. If displayed market participants continue to be pushed into the undisplayed trading centers, displayed spreads will widen, and the executions that internalizing firms give to this uninformed flow will become more subjective as a result of the widening displayed spreads.

We believe it's important to provide incentive for the public display of liquidity by regulating these internalization practices and requiring an internalizing firm to provide meaningful price improvement over the displayed NBBO.

1 Bright Trading's letter, in its entirety, appears here:

2 When discussing informed order flow, reference is not to market participants with inside information, but to market participants’ orders that are on the right side of the market in the short-term. Alternatively, when discussing uninformed order flow, reference is to market participants’ orders that are on the wrong side of the market in the short-term

3 Time 1:13:00

An interactive chart of debt across the world

Please note that with effect of the legal merger of Fortis Bank Nederland N.V. and ABN AMRO Bank N.V. this email address will change to:

The legal merger is intended to become effective on 1 July 2010, subject to the fulfilment of the applicable conditions precedent, including but not limited to the timely receipt of relevant legal and regulatory approvals.

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


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