Friday, March 11, 2011

News 110311: Predatory pricing, CXA, Merger Mania, Regulators one tool trick....t2c report.

Exchanges appear to be moving with the times...consolidation.

Liquidity also appears to be moving to the opening and closing auctions...and whola...the exchanges apply some predatory pricing.


Time heals all wounds...and so too I think it will come to pass with merger mania.

Sovereign interest will remain an issue, but if it is not rushed and rather timed, some of these deals could get done.

One analyst this week said the SGX bid values ASX at 44 yet it is trading at 37...hence he votes with the market, no deal.

Australia also has a sensitive political balance.

The Canadian situation also appears to be politically sensitive with various provincial vetos.

TSE joins the party.

Meanwhile the NYSE appears to be making the best progress of all.

ASX lodge their Foreign Investment Review Board submission.

FEX also applies for an Aussie market license...for derivatives...not competing with the ASX.

Asking CCPs to increase capital bases smacks of sensationalism.

Why not just increase margins...or default funds...or limits...or membership criteria.

Why focus on one tool? It all ends up as a user pays model.

Another 148 pages from CPSS.

PIMCO and Icahn moves make me feel GFC still has some distance to go.

Last weekend was the Tamarama to Clovelly swim.

Nice updated piccies here:

I dunno what it is about this swim, but it always finds some way to test you.

Getting out through the break was hard work again this year. Even with a friendly rip I find it a deceptive and strong break.

When the waves break, they kinda dump and drag you with them but the water is too deep to duck dive and get a grip on anything so you just stay under as long as you can and then swim like crazy into the next break.

As ever, I tried to stay out wide of the buoys and swim in the deeper ocean waters where there is less chop. But this year there was no hiding from the choppiness. At times I felt I was getting a work over from a chiropractor. My arms would be reaching up, my torso twisted and then a surging wave would wrench your legs in some other weird direction. Real washing machine treatment.

The last part of the course is by far the best. Once you round shark point it is all over marine national park. At one stage I was over a ginormous school of fish. Hundreds and hundreds and hundreds of fish and stacked in tiers from about 6 meters down to as far as the eye could see. After 45 minutes I was in mixed feelings, I was feeling the strain, but at the same time happy to be in the water. This is one swim that must get easier.

Have a great w/end all.



NYSE Stock Volume Down. So Are Nasdaq's Prospects.******NN

*** Nice pie chart of US Equity market shares

'Deep' probe expected for D.Boerse-NYSE merger

Derivatives competition a concern for regulators

*** Positive sentiment coming out of NY.

FINANCIAL TIMES: Anger as Exchanges Raise Closing Auction Fees
By Jeremy Grant
Two of Europe’s largest exchanges have raised the fees they charge for traders dealing during the end-of-day auction, provoking an outcry among banks and brokers that are their biggest customers.
The moves by NYSE Euronext, which operates bourses in Amsterdam, Paris, Brussels and Lisbon, and Nasdaq OMX, which runs exchanges in Sweden, Denmark, Finland and Iceland, come as exchanges have been forced to lower fees amid stiff competition from rival platforms such as Chi-X and BATS.
These cuts have applied mostly to trading that happens between the opening and closing auctions. By contrast, at these auctions – which take place only at established exchanges and usually last five minutes – fees have risen.

REUTERS: Exchange Merger Mania Barely Stirs National Pride

"I don't see a problem," said U.S. Representative Barney Frank. "Are we supposed to be stupid that we don't know this is an international thing, that transactions are mobile and that they transcend borders?"
"Nobody is going to be able to operate the NYSE, no matter who owns it and be exempt from SEC regulations, so what's to worry about it?" the lawmaker said at the Reuters Future Face of Finance Summit this week

"I think it's kind of a natural evolution," Mary Schapiro, chairman of the U.S. Securities and Exchange Commission, said of the tie-ups. "It strikes me as a not unusual progression in the global consolidation of markets."
"The New York Stock Exchange building, that iconic symbol, will still be there," she said, adding that the SEC will focus on governance, ownership, and access to information as it reviews the NYSE plan.

LSE merger concern: Toronto exec responds

LSE shareholders will hold 55 per cent of the new company and TMX will have 45 per cent

TMX Group statement tesponding to an open letter from a select group of financial institutions.

TMX deal divides Bay Street


Platforms Asia

WALL STREET JOURNAL: Competition Won't Slash Australian Trading Costs
Traders of Australian stocks may expect their costs to plummet soon. They're wrong.
In the next 12 months, Australia will go from a monopoly for its national trading shop, ASX, to a smorgasbord of trading options.
Chi-X just last week got the OK to be officially up and running by October, and other trading venues including Kansas-based Bats say they are looking down under.

ASX Limited (ASX) advises that Singapore Exchange Limited (SGX) has today lodged a formal application to the

Australian Foreign Investment Review Board (FIRB) about the proposed merger of ASX and SGX.

The ACCC wants the ASX to lodge a formal undertaking to govern access to the clearing and settlement services.

ASX Halts Trading Due to Technical Glitch

London isn't alone in its technical woes as the Australian Securities Exchange (ASX) halted trading around 2:48 pm today in its equities session

ASIC consults on Market Integrity Rules for the Chi-X market
ASIC has today released a consultation paper proposing the application of new market integrity rules should Chi-X be granted a market licence. 11-39AD.

ASX ready for market competition

*** ASX press release.

ASIC consultation extension welcomed

With the scene set for competition in the country to take off, Rowsell believes that the only barrier to ASX’s proposed takeover by the Singapore Exchange – political intervention – will soon fall.

“Many of the concerns raised by some anti-takeover independent politicians relate to ‘national interest’, but when the ASX has to go up against an international competitor within its own borders, this argument loses some of its strength,” she says. “Australian politicians may start to find that the fear of getting left behind in a global race to attract liquidity outweighs the fear of foreign ownership of the ASX.”

ASIC consults on FEX licence application
We have released a consultation paper to seek views on the application by the Financial and Energy Exchange Limited (FEX) for an Australian market licence. 11-40AD.

FEX proposes to operate an exchange market for energy, commodity, and environmental derivatives. FEX has applied for a domestic Australian market licence under Part 7.2 of the Corporations Act 2001.

SGX securities and derivatives activities increase in February

Securities turnover grew 32% year on year to $31.5 billion with an SDAV of $1.7 billion.

The OTC financial derivatives clearing business, which began in November, showed good traction with a notional US$24.2 billion of interest rate swaps cleared from the launch to end-February. In February alone, a notional US$10.2 billion of swaps were cleared.

HKEx’s Extended Trading Hours to Begin 7 March

Starting on 7 March, the trading sessions of HKEx’s securities market will start earlier and will run from 9:30 am to 12:00 noon and then from 1:30 pm until 4:00 pm.

TOKYO AND OSAKA EXCHANGES PONDER MERGER; TMX RESPONDS TO BANK CRITICS OF LSE TIE-UP Exchange merger-mania has hit Japan, with the Tokyo and Osaka bourses set to hold talks this month about a possible tie-up.

Full story:

Proposed merger of Japanese exchanges fails to wow investors
Tokyo Stock Exchange Group is looking to merge with Osaka Securities Exchange, said TSE President Atsushi Saito. However, some investors are expected to see the proposed tie-up as being too local and too late. "The optimum timing for them to merge was about 20 years ago, when Tokyo was a giant," said Masahiko Ejiri, a fund manager at Mizuho Asset Management. "Also they only look at the inside of Japan. They don't care about foreign investors. If Tokyo were to merge with a stock exchange in Asia, that would be much more powerful." Bloomberg (10 Mar.)

Stock Exchange of Thailand prepares for higher algo VOLUMES

The Stock Exchange of Thailand (SET) has drawn up a shortlist of vendors to supply a new trading engine that is expected boost capacity of the exchange by 100 times when implementation is completed in two years.



New York Portfolio Clearing: We Can Help NYSE Euronext Take on CME

Let the battle begin. That’s the motto of New York Portfolio Clearing, the NYSE Euronext’s Liffe US and the Fixed Income Clearing Corp after announcing that the Commodity Futures Trading Commission has given NYPC the green light to begin a process called one-pot margining.

Regulators want clearinghouses to increase financial bases
Global securities regulators are calling on clearinghouses, which are poised to play a larger role in the financial system, to bolster their bases. The move is expected to raise costs for trading equities, bonds and derivatives. "A [clearinghouse] should maintain additional financial resources, such as additional collateral or a pre-funded default arrangement to cover credit exposures from participant defaults in extreme but plausible market conditions," according to a report from the Bank for International Settlements. Reuters (10 Mar.)


Principles for financial market infrastructures - consultative report

CPSS Publications No 94: March 2011

*** Nice 148 pages...comments due by 29th July

Derivatives: Unlucky for some

*** A nice short piece from The Economist on Dodd Frank

European Banks Say It's Okay to Regulate Depositories

The largest trade group representing European banks has just told the European Commission that it supports its plan to require common operating standards for national European securities depositories.

Sen. Stabenow says regulators need resources to oversee derivatives
Sen. Debbie Stabenow, D-Mich., said that to prevent a repeat of the credit crisis, the Securities and Exchange Commission and the Commodity Futures Trading Commission need resources to supervise the derivatives market. "I am concerned that if our agencies don't have the tools they need, we are asking for a repeat of the crisis," Stabenow said. She also warned that the regulators, which got more powers under the Dodd-Frank Act, must not overstep their authority. Bloomberg (3/3), Jones Newswires (3/3)

Dodd-Frank helps European banks, JPMorgan Cazenove says
Analysts at JPMorgan Cazenove, the UK investment banking division of JPMorgan Chase, said new U.S. financial regulations encourage major European financial institutions to go after their American rivals' business. Large European banks "could benefit from regulatory arbitrage opportunities and gain market shares" under the the Dodd-Frank Act, the analysts said in a report. blog (3/9)

Banks warn CFTC swaps plan could hinder liquidity
The Commodity Futures Trading Commission is planning rules that would require swaps traders to get quotes from five or more market participants and make their trades through "swap execution facilities." Major banks said the requirements, including the request for quote system, could stifle market liquidity. "We recommend that the determination of the number of market participants to which an RFQ should be sent be left to the discretion of market participants," said Dexter Senft, managing director at Morgan Stanley. On Tuesday, SIFMA and ISDA filed a joint comment to the CFTC on swap execution facilities. Reuters (3/8),

CFTC member says agency pushing rules too quickly
Jill Sommers, a member of the Commodity Futures Trading Commission, said the regulator is moving too quickly and going too far in its efforts to force swaps to trading platforms. Sommers said the CFTC's proposal for swaps execution facilities is not consistent with proposals made by global regulators or the Securities and Exchange Commission. "One of my primary concerns is that the CFTC is moving out of step in time, substance, or both with the SEC and the rest of the world in implementing trade execution requirements for standardized swaps," Sommers said. Reuters (3/7)

Asia: Still Tightening

We had more mixed news out of Asia yesterday. China's trade account dipped into the red in February (see separate story), Japan's economy slowed by a bit more than forecast in the second estimate of 4th quarter growth, while South Korea joined Thailand in lifting

ICMA today released the results of its 20th semi-annual survey of the European repo market, undertaken in December 2010.

Canada’s HFT reforms divide market

Plans by Canadian regulators to reduce high-frequency traffic have been welcomed by some equity market participants, while others fear higher costs would prompt a flight of low-latency trading volumes to the US.


Citic deal doubts put Agricole brokerages in play

Although France's third-biggest listed bank has downplayed concerns over progress in the talks, the banking source said a deal may not happen, and that potential bidders were being lined up for Cheuvreux and Hong-Kong-based unit CLSA.

Penson files figures
New York
Penson Worldwide Inc. has filed its annual report for 2010.

For the year ended December 31, 2010, the firm generated net revenues of $288.3 million.

Goldman Sachs receives regulatory approval for MTF

Bulge-bracket broker Goldman Sachs has received approval from UK regulator the Financial Services Authority to launch its dark multilateral trading facility (MTF), SIGMA X MTF

ING Direct Is Up For Grabs
ING Group is selling off its U.S. online bank to repay Dutch government.


PIMCO pops Ben's bubble

Karen MaleyBy dropping all US government-related debt, PIMCO's Bill Gross has put action to concerns that the QE program only covered up symptoms of a sick US economy and issued a vote of no confidence in Ben Bernanke's policies

Icahn to Return all His Clients' Money

SWIFT Introduces Digital Signature System

The financial messaging provider, which serves 9,500 financial institutions and corporations in 209 countries, said its Secure Signature Key system will allow companies and their executives to digitally sign financial messages and files sent to banks.

Wallabies eye $3m World Cup bonus

THE Wallabies squad is expected to earn more than $3 million in bonus payments if they win this year's World Cup in New Zealand.

*** Double it.

Scott Riley

Business Development

ABN AMRO Clearing

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