Wednesday, February 22, 2012

OTC recap, Fidessa down under, dark liquidity? more like a murky billabong, Plus, BATS, Eurex Miss.....North Bond'ee Classic.

This weeks piccie:

A busy week!

This week Fidessa came to town to promote their new white paper:

Beauty and the Best - the perils and opportunities of Best Execution in a multi-market structure

The panel was actually better than I expected.
Down here, panellists sometimes really say it as it is.
Some of the points that were aired, and that I agreed with or at least feel worthy of further debate:

Exchanges are investing to attract HFTs to the detriment of investing in markets, innovation, product, etc. Is the consequence of this ‘hunger to cater for the HFTs speed’ a push of technology costs onto other participants who need to keep investing in the technical arms race just to 'stand still'. What is the opportunity cost of capital deployed in the technology arms race versus other market quality improvements?
Anyone got any regional and international statistics on orders per trade? Someone said 10 to 12 orders / trade in Aust. And over 100 in US.
I think I laughed out loud when Ben Radclyffe at DB referred to a Dark Pool as a “murky billabong”. Splendid!
Ben went on to question the impact of the current regulatory focus of taking liquidity out of the dark and putting back in the lit. Could this unintentionally result in volatility on the lit market? The dampening effect the Dark offers on blocks would now be exposed to the velocity...and feeding / volatility of the lit.

In other news:
Plus tests the market...with itself.
ASX switches on ALC
After Eurex say goodbye to NYSE they farewell Miss.
And I must say, I love what BATS is doing with free listing for high volumes (sloppy journalism on the headlines).

Aussie and Canada have a lot in common. Vast countries, commodity based (digging holes in the ground), relatively low populations 30myn ish, British law, colonial etc. Our capital markets are going through similar reform throwing up the usual suspects of fragmentation, sovereignty and materiality. It makes perfect sense for our national regulators to be getting closer together as we grapple with similar issues.

Umm, anyone could tell you it is tough out there in corporate land. But ASIC has given us the numbers. The big issue is that credit remains on the nose. I love the new term dis-leveraging by the unconventional economist.

This excellent site was recommended to me for Aussie Custody Rankings:
I’ve posted this on the where I have a tab for Aussie links.

This urban myth also appealed:
Famous Violinist Joshua Bell Plays At Metro Station

Well, with a 100% call in last weeks 6 Nations, the predictable form will continue:
Italy (Home) will be good sports and give England a win, France (H) will continue mining their vein of form and beat Ireland, and Wales (H) will hammer Scotland.
Meanwhile, the Super Rugby trials are underway in the Southern hemisphere.

Just registered, for the North Bondi Classic, you’ve got to love the risk warning... “Ocean swims are demanding and potentially dangerous events. Risks include drowning, natural obstacles, man-made or -controlled obstacles, and marine attack.”
What exactly is “marine attack?”..Sharks, stingers...the Thunderbirds...where does it end?
Although this event is really only preparation for one of my favourite swims of the season:
The cliff side odyssey of Tamarama to Clovelly

Next week I want to get back to some clearing and interoperability remarks following the EMCF fee announcement.

Have a great weekend all,



Curbing Contagion: Options and Challenges for Building More Robust Financial Market Infrastructure

This is an excellent paper from Tim Lane, Deputy Governor of the Bank of Canada, presented at Sibos 2011, and a nice round up of OTC clearing issues.

Year-to-date, the top three rankings remain unchanged for 2011:
1. UBS takes the top spot, with total trading volume of $113.3 billion or 12.7 per cent of market share, followed by
2. Citigroup at $98.1 billion (11 per cent) and
3. Deutsche Bank at $77.9 billion (8.7 per cent).
4. Macquarie is fourth for the year, with a cumulative total of $70.9 billion (8 per cent), while
5. Goldman Sachs is fifth at $66.8 billion (7.5 per cent), and
6. Credit Suisse takes sixth place at $61.6 billion (6.9 per cent). Rounding out the rankings are
7. Morgan Stanley at $56.1 billion (6.3 per cent),
8. Commonwealth at $44.5 billion (5 per cent),
9. JPMorgan at $39.6 billion (4.4 per cent),
10. Merrill Lynch at $37.3 billion (4.2 per cent) and
11. RBS at $27.8 billion (3.1 per cent).
AUSTRALIAN FINANCIAL REVIEW: UBS Leads Brokers as Exchange Rate Crimps Volumes
Note: These rankings are ‘old’ from last year, but the point is about concentration of the liquidity in the lit market amongst the “Top 12”

The Aussie OTC market is somewhat more concentrated, for example there are only 13 banks active in Interest Rate Derivatives

Bank of America-Merrill Lynch, Barclays Capital, BNP Paribas, Citi, Credit Suisse, Deutsche Bank AG, Goldman Sachs & Co, HSBC Group, J.P. Morgan, Morgan Stanley, The Royal Bank of Scotland Group, Societe Generale, UBS AG, Wells Fargo Bank, N.A.

Concentration of OTC Derivatives among Major Dealers
Broken out by products, the G14 group holds 82 percent of interest rate derivatives, 90 percent of credit default swaps, and 86 percent of equity derivatives.

Implementing OTC Derivatives Market Reforms


Struggling UK exchange operator Plus Markets has put itself in the shop window, commencing a formal sales process to identify potential investors.

New ASX data centre goes live
The $32 million, 1000-square-metre Australian Liquidity Centre (ALC) was initially scheduled to launch in November with 100 ASX cabinets and 500 cabinets for its trading customers.
Co-location customers of the ALC include ABN Amro Clearing, Citi Group, Goldman Sachs, Incidium, Instinet, PipeNetworks, Optus Business, Morgan Stanley and Deutsche Bank.

Swiss-German derivatives exchange Eurex is to move to an entirely new trading platform in a phased migration beginning in December 2012.
The new platform will be developed internally and based on Deutsche Börse Group's proprietary global trading architecture, which is already in use at the International Securities Exchange



What does DTCC know about policy developments?
They’ll tell you here:


12-17MR ASIC releases third market supervision report
ASIC today issued its third report on the supervision of Australian financial markets and market participants.

12-21MR Australian Securities and Investments Commission, Quebec Autorité des Marchés Financiers, Ontario Securities Commission, Alberta Securities Commission and British Columbia Securities Commission sign regulatory cooperation arrangement
ASIC, the Quebec Autorité des marchés financiers, the Ontario Securities Commission , the Alberta Securities Commission and the British Columbia Securities Commission have announced a comprehensive arrangement to facilitate their supervision of regulated entities that operate both in Australia and Canada.

12-20MR Corporate insolvencies continue to rise over 2011
Statistics released by us showed that corporate insolvencies rose over the 2011 calendar year, with external administration appointments increasing 9.2% from the previous year.

Credit on the nose

By Unconventional Economist
Earlier this month, the Reserve Bank of Australia (RBA) released its credit aggregates data for the month of December, which revealed that overall private sector credit is growing at the slowest pace since the 1990-91 recession, with mortgage credit growing at the slowest rate in the dataset’s 34-year history

The state of corporate governance in India


Goldman Sachs is preparing to spin off its Redi Technologies unit, inviting other banks and brokers to take a stake in the business, according to Dow Jones.
Goldman's move to widen the investor base in the unit is seen as part of a shift away from single dealer platforms from buy side clients, who are demanding streamlined access to multiple brokers from their desktops.


Macquarie expands shared tech team
Macquarie Group hopes to extend the successful creation of a shared services function within its Macquarie Securities Group (MSG) and Fixed Income, Currencies and Commodities (FICC) group out to the rest of the organisation.
In 2010, the group started sharing some of the technology systems between the two divisions of the organisation, including derivatives and treasury product Calypso as well as trading and investment product Fidessa.

Intersuisse/ Austock securities buyout goes ahead
Singapore backed Intersuisse Holdings has successfully purchased the securities arm of the Austock Group after nearly two months of talks, resulting in a number of management changes

THOMSON REUTERS REPORTS Q4 LOSS THANKS TO $3BN GOODWILL CHARGE Thomson Reuters has swung to a fourth quarter operating loss thanks to a $3 billion goodwill impairment charge related to its struggling financial services business.


Does social media really hurt job seekers?
Facebook is the most dominant social-media platform used to screen candidates, with 41 per cent of employers using it to check the background of applicants. LinkedIn followed with 31 per cent; Twitter was used 14 per cent of the time; and YouTube and MySpace were reviewed in 7 per cent of cases

Nigerian letter scam.
Advance fee fraud can also be called a ‘foreign money transfer scam’ or ‘419 fraud’, which refers to the section of the Nigerian Criminal Code dealing with fraud. However, the scammers can operate from any country.

Nigerian Letter or “419” Fraud
The Nigerian government is not sympathetic to victims of these schemes, since the victim actually conspires to remove funds from Nigeria in a manner that is contrary to Nigerian law. The schemes themselves violate section 419 of the Nigerian criminal code, hence the label “419 fraud.”

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