Friday, August 19, 2011

News: HK margin, Dark, TRS, S&Poor....KBW & C2S

G’day All,

One, I’ve gotta dash to Kevin Wilson.

Two, there is a City to Surf to run this weekend.

At 85,000 people this is the world’s largest fun run.

Three, we have a busy w/end of Internationals:

Fiji v Tonga, Lautoka

France v Ireland, Bordeaux

Italy v Japan, Stadio Dino Manuzzi,

Wales v England, Millennium Stadium, Cardiff

South Africa v Australia, Durban

USA v Canada, Glendale

With Australia coming out winners along with, Fiji, France, Italy, England and USA

Some observations.

Equity margining continues to take hold in Asia with HK joining the trend.

LSE buys TRS. In my view TRS should be a utility, not a profit centre.

Greifeld’s right. Technology will drive consolidation.

S&P downgrades US....I assume they downgraded themselves at the same time as DTCC et al.

I just have soooo little respect left for the credibility of the ratings agencies and their vested interests.

Interesting moves in Canada on Dark Liquidity.

2012 will be the year of the Dark. G-20 needs some sort of uniform resolution on this.

Context, materiality and proportionality all need to play a part. I doubt common sense will get much of a chance.

(BTW, 2011 for me is the year of MTFs going into derivatives).

Surprised that HSBC didn’t get retail into the dark.

I could rant about Anders Breivik. I do believe there is an element of our own media being responsible for germinating and generating this type of ideology (and the media then take no responsibility or accountability).

Have a great week-end all.

For those in London, grab a flat screen for me too!

You guys riot over the weirdest things.



HK to introduce margining of equities

The following is a summary of the article (the article has been posted in the Chinese-language section of the HKEx website).

(2) Reforming the Clearing Houses’ Risk Management Measures and Raising Their Capital Adequacy

As a result, we propose reforming our clearing houses’ risk management measures, including, among other things, introducing margining in the securities market clearing house – a mechanism we have lacked for a long time – and having a dynamic guarantee fund for each of the three clearing houses. The proposal includes measures (such as granting credits) to alleviate the impact on brokers, especially the small and medium-sized brokers.

Presentation by HKEx Chief Executive Charles Li and Chief Financial Officer Samuel Wong on 2011 Interim Results

Chi-X Japan Celebrates One Year Anniversary with Continued Growth

Chi-X® Japan Limited, a wholly-owned subsidiary of alternative trading venue operator Chi-X Global Inc., announced its trading results for July 2011. For the month of July

Turnover (JPY) 530 billion
Trades 636,351
Shares Traded 730 million

Nikkei 225 Market Share
by Value 2.79%
by Volume 2.72%

Korea FSC To Overhaul Financial System

III. Reform of Capital Markets Infrastructure
1. A license system will be introduced to allow new stock exchanges or an alternative trading system (ATS). Financial investment business providers will be able to operate an ATS with an approval from the FSC. If trading volume through an ATS exceeds a certain threshold, the ATS operator will be able to ask for a permission to become a stock exchange, which is additionally required to carry out self-regulatory functions in listing and market supervision.

2. The proposed revision creates a new category of “clearing business for financial investment transactions” and lays a legal foundation for establishing a central counter party (CCP). By introducing a license system for a clearing business provider, it aims to provide clearing services for a variety of products (e.g. OTC derivatives, securities lending, RPs). For OTC derivatives transactions that can significantly affect markets if defaulted, they will be mandatorily required to be cleared through clearing houses.

3. Regulations on credit rating business, currently under the Credit Information Act, will be governed under the FSCMA, given that credit rating business has an important role in bond markets. In addition, the revision will expand the business scope of credit rating companies, while strengthening their responsibility for investor protection and public disclosure requirements.

EUROPEAN COMMISSION PROBES NYSE EURONEXT/DEUTSCHE BÖRSE DEAL The mega-merger between Nyse Euronext and Deutsche Börse faces an extended investigation by the European Commission amid concerns over the impact of a tie-up on competition in clearing and derivatives trading.

Full story:

LSE chief fears exchange merger will hit City voice

He said that while the UK's Financial Services Authority had a seat on the European Securities Markets Authority, the new pan-European watchdog set up in Paris in January, it had 8 per cent of the group's vote.

He said that although the UK represented two-thirds of financial services activity in Europe, there is a "clear mismatch and a risk."

LSE BUYS FSA'S TRANSACTION REPORTING SERVICE The London Stock Exchange has agreed a £15 million cash deal to buy the Financial Services Authority's Transaction Reporting Service (TRS).

Full story:

Greifeld: Technology Will Drive Consolidation of Exchanges

Technology ‘synergy’ will drive any future consolidation of exchanges in Asia, Europe and North America, according to Robert Greifeld, chief executive of the Nasdaq OMX Group. Nasdaq OMX in the second quarter dropped a bid to take over NYSE Euronext.

The INET technology also is in place at NASDAQ OMX's U.S. equities and options platforms including The NASDAQ Stock Market, NASDAQ OMX BX, NASDAQ OMX PHLX and The NASDAQ Options Market as well as NASDAQ OMX's Nordic and Baltic markets.

Nasdaq OMX Group's CEO Discusses Q2 2011 Results - Earnings Call Transcript

CA Chevreux Seeks Approval for European MTF

CA Chevreux has become the latest broker-dealer in Europe to file an application with the U.K’s Financial Services Authority to convert its crossing network into a multilateral trading facility, said two sources at UK brokerage firms in London.

The new BLINK MTF would include all eligible CA Cheuvreux internal flow and orders will be executed at the best bid and offer prices, said sources. Officials at CA Cheuvreux were unavailable for immediate comment.

In early 2010 Japanese investment bank Nomura switched its NX BCN into an MTF. UBS followed suit with UBS MTF in November and Goldman Sachs went live with Sigma X-MTF in April 2011.


An Organised Multilateral Trading Facility for European bonds.


FirstPEX, Europe's first, interactive auction platform to trade privately-owned shares and investments is being launched today in the UK by the highly-regarded Swiss-based technology firm LPO Ventures


European banks start to make clearing more competitive
Europe's leading investment banks have increased the competitiveness of clearing as BATS Europe and UBS MTF started offering clients options in terms of their clearing provider. "Consolidating clearing and settlement ... for cash equities offers significant benefits for investors, particularly those operating in multiple markets," UBS MTF CEO Robert Barnes said. Reuters (10 Aug.)

Bank of America Merrill Lynch (BAC.N), Citigroup (C.N), Credit Suisse (CSGN.VX), Morgan Stanley (MS.N) and Nomura (9716.T) endorsed the moves by BATS and UBS MTF by signing up last Wednesday to use EuroCCP, the smallest of the clearers.

S&P Downgrades DTCC Subsidiaries

Just hours after it said that Standard & Poor's downgrade on the U.S. government debt would not impact its valuations on collateral, Depository Trust & Clearing Corp was hit with its own downgrade by S&P. S&P downgraded its triple-A rating on three DTCC subsidiaries Depository Trust Company, Fixed Income Clearing Corp and National Securities Clearing Corp to double A+, the same as U.S. government debt.

ISDA: Swap Clearinghouses Should Face Risk Controls

The International Swaps and Derivatives Association (ISDA) is warning regulators that central clearinghouses should be subject to strict risk management guidelines if they are to be given “open access” to trading platforms.


Full 8 page paper available:



Joint Canadian Securities Administrators/Investment Industry Regulatory Organization of Canada

Staff Notice 23-311

Regulatory Approach to Dark Liquidity in the Canadian Market

Complexity, Concentration and Contagion

Prasanna Gai, Andrew Haldane and Sujit Kapadiaz

1 August 2011

This paper develops a network model of interbank lending in which unsecured claims, repo activity and shocks to the haircuts applied to collateral assume centre stage. We show how systemic liquidity crises of the kind associated with the interbank market collapse of 2007-8 can arise within such a framework, with funding contagion spreading widely through the web of interlinkages. Our model illustrates how greater complexity and concentration in the …nancial network may amplify this fragility. The analysis suggests how a range of policy measures –including tougher liquidity regulation, macro-prudential policy, and surcharges for systemically important financial institutions could make the financial system more resilient.


Penson announced on Friday it was looking for a capital injection through a strategic partner or a trade sale after its parent Penson Worldwide Inc revealed a bigger than expected loss.

DOW JONES NEWSWIRES: HSBC Puts Retail Investor Dark Pool On Ice
HONG KONG—Banking giant HSBC Holdings PLC put its plans to launch Hong Kong’s first-ever dark pool for retail investors on ice, it said Tuesday, dimming prospects for the development of alternative liquidity pools in the Chinese territory.
The U.K.-based bank said it decided to launch its controversial StockMax dark pool, which was originally marketed to retail customers, to institutional and professional investors only for now.


In a SPIEGEL interview, bestselling Swedish crime writer Henning Mankell talks about his reaction to the Utøya massacre, the absurdity of Anders Breivik's ideas and the need to engage in dialogue with the right wing.,1518,777778,00.html#ref=nlint

Babbage: Facebook's rural Oregon data centre turns the high desert to its advantage

England's beaming: Time to suck it up and admit Poms are No.1

England are so close to achieving the No.1 Test ranking that her majesty is rummaging down the back of the royal sofa looking for MBEs.

Today's surprise is the story of how the Knights Templar invented modern banking and made the Swiss the best bankers in the world.

Scott Riley

Business Development

ABN AMRO Clearing

8th Floor | 50 Bridge Street | Sydney | Australia | 2000

((Off)+61 (0)2 8916 9634 È(Mob): +61 (0)418 117 627


1 comment:

Anonymous said...

In your email of Friday 12 August 2011 ( you said “Greifeld’s right. Technology will drive consolidation”. I do not agree with this statement. In my view the main motive for consolidation of exchanges is the search for reduced cost of liquidity, which is expected to lead to greater volume: economic theory suggests that as trading activity increases the cost of liquidity will decline. Available evidence, although limited, supports this view: see the paper by Goss, B.A. and S.G. Avsar, “Increasing returns to liquidity in futures markets”, Applied Economics Letters, Volume 5, 1998, pp. 105-109, which uses Sydney Futures Exchange data for Bank Accepted Bills futures,10 Year Bonds futures, Share Price Index futures, and AUD/USD futures. There is support for the “increasing returns” hypothesis for the majority, but not for all, of the contracts studied.

Technology, of course, does have an important role to play: e.g. technological innovation may be critical in the timing of a takeover bid. Also, technology is important in enabling the anticipated lower costs of liquidity from increased volume, to be realized.

One can gain further insights into this process by considering the reverse hypothesis: suppose that the cost of liquidity increased as trading activity increased. In that case there would be a clear disincentive to consolidation.

One of the main implications of this process is that following increased volume, the subsequent decline in liquidity costs tends to attract further trading volume, which in turn lowers liquidity costs further. Thus large exchanges tend to grow at the expense of medium and smaller exchanges. A further implication of this process is that a straight copy, by a new platform, of a successful contract on another exchange, is likely to fail, because the competitive advantage in liquidity lies with the first exchange.

Best wishes,

Barry A. Goss

Futures Markets Research Associates Pty Ltd