ICE, non binding...and a very merry festive season.

G'day and the very best of the festive season to one and all.

The ICE / NYSE story takes the cake this week. I've only had a look at the headlines but I can't see much on the clearing impact of the deal. Given how well established ICE Clear is I would expect this to put plans for NYSE Euronext derivatives clearing on hold.

Again, deals are structured around the growth sectors. LSE looking at Swapclear and ICE at derivatives. Poor old equities, must be feeling unloved (or at the very least commoditised). Funny thing is, I'm bullish on equities as an oversold asset class.

The essential part of the ASX announcement for OTC plans is...Non-binding.

I’ve also had calls from a couple of agents and one firm that are looking for a mid level clearing “experts”. If you know anyone that is looking to continue in the Clearing field just drop me a line (and or CV) and I’ll simply forward your details to the interested parties. No promises or rewards, just happy to act as a mailbox router.

Anyway, enough from me.

Have a very merry festive season….and amongst all the cheer…have a glass of water too!

Scott. s.riley.mail@gmail.com

www.clearingandsettlement.blogspot.com

Platforms
ICE agrees NYSE Euronext takeover IntercontinentalExchange has agreed to buy NYSE Euronext, its 208-year-old rival, in an $8.2bn deal that will make the energy and commodities bourse one of the world’s largest derivatives markets operators. http://www.ft.com/cms/s/0/41f4d2ec-4a9f-11e2-9650-00144feab49a.html#ixzz2Fj8i0A9p
London Stock Exchange Group 2012 Yearbook The Yearbook explores the breadth of ourdiversified business, from raising capital through to trading, technology and market data. It also includes insightful, opinion-led articles on subjects such as regulation, financial education and the wider role of capital markets. http://www.londonstockexchange.com/about-the-exchange/year-book/year-book-2012.htm

Clearing
LSE may cut offer for LCH.Clearnet by £180m The London Stock Exchange is haggling to change the terms of its agreed €463m (£376m) acquisition of a majority stake in the clearing house LCH.Clearnet, reportedly seeking to reduce the buy-out price by as much €200m. http://www.telegraph.co.uk/finance/markets/9746396/LSE-may-cut-offer-for-LCH.Clearnet-by-180m.html
ASX recruits seven domestic and international banks for OTC clearing initiative ASX announces that seven domestic and international banks in Australia have signed non-binding commitments to help develop ASX's new OTC Interest Rate Derivatives Clearing Service. http://www.finextra.com/News/Announcement.aspx?pressreleaseid=47878&goback=%2Egde_2026241_member_198154416
CCP interoperability consultation paper in the pipeline ESMA (European Securities Markets Authority) has confirmed that the consultation paper is expected to be released on December 20. The December 20 date is dependent on approval being sealed at an internal ESMA board meeting on December 18. ESMA could not release any further details on the consultation paper other than to confirm it will cover interoperability. http://myinvestorcircle.com/news/ccp-interoperability-consultation-paper-pipeline?goback=%2Egde_2026241_member_196871630
Oslo Børs VPS Holding: Agreement to sell Oslo Clearing to SIX group Oslo Børs VPS Holding has agreed to sell 100% of Oslo Clearing to Swiss SIX group at a price of approximately NOK 180 million, assuming freely available cash or book equity to amount to about NOK 120 millions. http://www.oslobors.no/ob_eng/Oslo-Boers/About-us/Press-room/Press-releases

CME Clearing Europe expands its metals offering CME Clearing Europe, has added two new over-the-counter (OTC) iron ore contracts for clearing. This expansion of products is in line with CME Clearing Europe's commitment to helping customers manage their risk associated with China's construction industry. These new products build on CME Group's virtual steel mill suite of products. http://www.ftseglobalmarkets.com/news/cme-clearing-europe-expands-its-metals-offering.html?goback=%2Egde_2026241_member_196934720
ICSD row threatens European collateral GC Pooling baskets are currently traded and cleared through Eurex but only the assets held by Clearstream, the international central securities depository (ICSD) owned by Eurex’s parent firm Deutsche Börse Group, can be used for these transactions. http://www.thetradenews.com/news/Asset_Classes/Derivatives/ICSD_row_threatens_European_collateral.aspx
Wall Street finds a foreign detour around U.S. derivatives rules

"What banks are looking at is: can they put their business with non-U.S. counterparties through a London entity, and will the regulators in the UK accept all the business coming through those entities?" said Mark Austen, chief executive of the Asia Securities Industry & Financial Markets Association. Lawyers say the answer may be yes, for now - at least until foreign regulators, also mindful of avoiding another financial crisis, catch up with Washington and impose similar rules. Gareth Old, a lawyer at Clifford Chance in New York, said the CFTC had made it clear that any swaps traded with the foreign affiliate of a U.S. bank would not count toward the $8 billion "de minimis" threshold for identifying a swap dealer. "This is a very, very important exclusion. It means that non-U.S. financial institutions can continue to trade with at least a unit of a U.S. bank ... without running the risk of being a U.S. person," Old said http://uk.news.yahoo.com/wall-street-finds-foreign-detour-around-u-derivatives-211144120--sector.html?.tsrc=yahoo
Policy
DTCCMEDIA STATEMENT ON CME REQUESTED DCO RULE CHANGE AND AMENDMENTS TO CFTC REPORTING FAQ
New York, NY, November 29, 2012 -- The U.S. Commodity Futures Trading Commission’s (“CFTC”) rules and interpretations of the Dodd Frank Act have made it clear for nearly a year that clearinghouses must provide open access and that data repositories cannot bundle other services as the CME Group Inc. (“CME”) proposes. In fact, the CME is proposing that as a condition for using their clearing services, market participants must agree to report their trade data to the clearinghouse's own captive swap data repository (SDR). http://www.dtcc.com/news/press/releases/2012/cme_statement.php

Participants

Macquarie gains in broker battle The survey highlighted yet another fall in the average size of commissions paid per institution, with the figure declining for a sixth year in a row to just $4.8 million. The average commission has now fallen 66 per cent since 2008, when average commissions topped $10.9m. http://www.theaustralian.com.au/business/financial-services/macquarie-gains-in-broker-battle/story-fn91wd6x-1226539976523

Broker Newedge says may split execution, clearing (Reuters) - French broker Newedge, owned by Credit Agricole (CAGR.PA) and Societe Generale (SOGN.PA), said it was considering a split of its asset execution and clearing businesses as part of a wider restructuring aimed at making it more competitive. The derivatives specialist, which has been up for sale for the past year, also plans to "simplify" its activities and geographical reach to focus on core strengths. http://www.reuters.com/article/2012/12/13/us-newedge-restructuring-idUSBRE8BC15W20121213
Stuff
RWC 2015 Draw http://www.rugbyworldcup.com/

6 Simple Rituals To Reach Your Potential Every Day1.
Drink a glass of water when you wake up. Your body loses water while you sleep, so you’re naturally dehydrated in the morning.
2. Define your top 3.. What’s your "Top 3" today?
3. The 50/10 Rule. Solo-task and do more faster by working in 50/10 increments. Use a timer to work for 50 minutes on only one important task with 10 minute breaks in between.
4. Move and sweat daily. Regular movement keeps us healthy and alert.
5. Express gratitude. Gratitude fosters happiness.
6. Reflect daily. Bring closure to your day through 10 minutes of reflection.
http://www.fastcompany.com/3003586/6-simple-rituals-reach-your-potential-every-day
An asset heavy life consumes - space, time and money. http://www.businessinsider.com/mary-meeker-2012-internet-trends-year-end-update-2012-12

Securitisation, collateral and....coming in from the cold!

G'day All,

Busy days relocating to the UK and getting the feet back on the ground. I used to "push" the blog out to those on my MS Outlook distribution list, however I have now migrated over to Android (in an attempt to be more mobile). So if you are picking this up (via LinkedIn or a web site feed), please let me know if I need to update or amend my distribution list.

Am I missing the ocean swimming? Absolutely! In the meanwhile I've taken up running in London. First couple of attempts were alright...then the temperature started to drop and I'd get back from a run with my fingers curled into a claw...which would leave me stabbing the key at the door trying to get in. Since then I've invested in a pair of "running" gloves. (coincidentally I notice these gloves work just as well when I break into a walk!)

As for London, it’s amazing how much is going on. The big trends I notice are in the clearing infrastructure space and the collateral securitisation space. The transformation and mobilisation of collateral will be the next big industry challenge.

In the clearing space I think this will play out more about the liquidity of capital (e.g. CME / Euroclear story) rather than the eligible collateral criteria (e.g. Nasdaq story).

As expected, LCH looks to extend the swapclear franchise down under. I still don't anticipate this initiative will extend to Aussie equities (primarily due to wallet size of the Aussie market).

There has been some debate about the Royal hoax call from Aussie radio station 2dayFM. Obviously despicable. Personally I think the DJs should at least face some sort of serious charge…even manslaughter. Then they can hold out their defence that they couldn’t have reasonably expected a life to be lost. That fact that these DJs have now ‘disappeared’ to avoid any public backlash irks me. They were all too quick to gloat about their success.
Someone in the UK mentioned the Samaritans had said that suicide was a culmination of events, not usually with a single trigger. I haven’t seen the story and I don’t think it is any type of defence. I can just imagine the crescendo of events from tweets to broadsheets.
My brother mentioned that hoaxes and pranks have long been banned in the mining industry. Simple…there is always a fall guy (person).
The other view I resonate with is that these DJs don’t have the skills and abilities to entertain the audience with their own wit…so they resort to ridiculing others (and the tragedy being the best hoaxes are taken up by the most trusting…which is kinda what you want from a hospital).
I’m delighted to be boycotting anything to do with:     
http://www.southerncrossaustereo.com.au/radio
(Channel 7, 2day FM, Triple M etc.) 

Enough of a rant! Wishing one and all the festive cheer of the season (and right now, that means retail madness).

http://www.buzzpatrol.com/brightons-wrong-christmas-lights-video-goes-viral/

Enjoy the jingles and sing alone….just ignore Aussie DJs!

Scott.
s.riley.mail@gmail.com
clearingandsettlement.blogspot.com


Platforms

NASDAQ OMX SIGNS BURSA MALAYSIA TO TECH; AGREES TO BUY THOMSON REUTERS' PR AND IR UNITS
Bursa Malaysia has selected Nasdaq OMX's X-Stream Inet technology to power its securities market trading.
Full story: http://www.finextra.com/News/FullStory.aspx?newsitemid=24373

NASDAQ OMX EXPANDS ITS EUROPEAN DERIVATIVES PUSH
Nasdaq OMX will buy a 25% stake in The Order Machine and acquire an option for an additional 25.1%.
Smart Execution has helped TOM secure a market share of approximately 15 percent for single stock options in the Netherlands. The Netherlands is one of the most developed options markets in Europe with a trading volume of 75 million contracts in 2011.
NASDAQ OMX will act as market operator for TOM, and will provide a Genium Inet based trading platform in London, according to an 8 year contract the two firms have signed. The partnership also builds on TOM's current usage of NASDAQ OMX-powered market technology, specifically, Marketplace for Hire (M4H), which is a multi-market, multi-asset marketplace solution for trading.
http://finance.yahoo.com/news/nasdaq-omx-acquires-25-dutch-215800053.html

ASIC CHOOSES FIRST DERIVATIVES MARKET SURVEILLANCE SYSTEM
The Australian Securities and Investment Commission (Asic) has selected First Derivatives to design, build and host a new market surveillance system.
http://www.finextra.com/News/FullStory.aspx?newsitemid=24378


Clearing

CCPS DO NOT CONFORM
Stock, options and futures exchanges own 60 percent of recognised CCPs, said the report. “This ownership structure makes CCP activity part of the strategic direction of the exchange itself; decisions made at the exchange level trickle down as opposed to CCP decisionstrickling up.”
Boards of industry representatives or outside parties run the remaining 40 percent.
http://www.securitieslendingtimes.com/securitieslendingnews/industryarticle.php?article_id=218417

RELIEF FOR DEALERS AS BASEL REINS IN CAPITAL FOR CLEARED TRADES.
Dealers were also pleased to see the paper clarify the treatment of bilateral exposures to a CCP. A member's own cleared exposures will attract a weight of 2%, but the bank will not have to apply the sameweight to trades it has cleared on behalf of clients unless it also guarantees clients against losses in the event of a CCP default. Most do not – meaning client clearing portfolios will not be bundled in with a member firm's own trades when calculating capital for trade exposure to a CCP.
Clearing members do still have to treat client trades as bilateral exposures, and calculate capital accordingly – including Basel III's credit value adjustment (CVA) charge for derivatives counterparty risk. Those exposures will be mitigated by the initial and variation margin clients post to their clearing firm, but dealers had worried the costs could still stack up. The new rules reduce that effect by allowing clearing members to assume a defaulting client's positions can be closed out in five days rather than 10, as is the case for uncleared trades.
http://www.risk.net/risk-magazine/news/2195578/relief-for-dealers-as-basel-reins-in-capital-for-cleared-trades

MARGIN REQUIREMENTS ON NON-CENTRALLY CLEARED SWAPS COULD INCREASE
RISK, ACCORDING TO ISDA ANALYSIS
NEW YORK, November 27, 2012 – The International Swaps and Derivatives Association, Inc. (ISDA), today published an analysis of initial margin (IM) requirements for non-centrally cleared OTC derivativesunder current regulatory proposals.
http://www2.isda.org/news/margin-requirements-on-non-centrally-cleared-swaps-could-increase-risk-according-to-isda-analysis-association-issues-margin-analysis-and-urges-regulators-to-resolve-extraterritoriality-issues

Useful comments on this press release at:
http://www.secfinmonitor.com/sfm/isda-on-initial-margin-for-non-cleared-swaps-great-analysis-but-not-the-most-sellable-conclusion/?goback=%2Egde_2026241_member_191149331

LCH.CLEARNET EXTENDS OTC CLEARING TO DOWN UNDER
Four of Australia's five domestic banks have submitted letters of intent to use LCH.Clearnet's SwapClear to clear interest rate swaps.
http://www.securitieslendingtimes.com/securitieslendingnews/article.php?article_id=218459

NASDAQ SHAKES UP ELIGIBLE COLLATERAL
NASDAQ OMX Derivatives Markets is making a number of changes to its list of eligible collateral,
http://www.securitieslendingtimes.com/securitieslendingnews/article.php?article_id=218458

CME CLEARING EUROPE GETS ON EUROCLEAR’S COLLATERAL HIGHWAY
Euroclear Bank and CME Clearing Europe have signed an agreement to help mutual clients fulfil their collateral obligations to meet initial margin requirements at CME Clearing Europe...
http://www.securitieslendingtimes.com/securitieslendingnews/article.php?article_id=218456


Policy

NEW RULES FOR DARK POOLS AS REGULATORS CRACK DOWN ON HIGH-FREQUENCY TRADING
A new rule on extreme trading will take effect as part of a welter of regulatory changes through to June 2014, by which time all high-frequency trading offices in Australia must have "kill switches" installed to prevent rogue algorithmic trades disrupting the market.
The rules include a requirement, to come in force from June, that brokers must demonstrate a "meaningful price improvement" before they can conduct a trade away from the public or "lit" market.
http://www.theaustralian.com.au/business/markets/new-rules-for-dark-pools-as-regulators-crack-down-on-high-frequency-trading/story-e6frg916-1226520717959

A BLUEPRINT FOR A DEEP AND GENUINE ECONOMIC AND MONETARY UNION: Launching a European Debate
The Communication, was presented by its President at a press conference on 28 November 2012 as "the Commission's contribution to the report of the 'four presidents' on the next steps for economic and monetary union." It provides the Commission's vision for a strong and stable architecture in the financial, fiscal, economic and political domains of the currency union.

Section 1 provides background information on the EMU,
Section 2 looks at the measures that have been taken so far to deal with the crisis in the eurozone,
Section 3 puts forward proposals the Commission thinks necessary for a deep and genuine EMU and
Section 4 considers questions of democratic legitimacy and accountability that arise in the context of a more integrated currency union.
http://ec.europa.eu/commission_2010-2014/president/news/archives/2012/11/pdf/blueprint_en.pdf

UK OBSERVATIONS
ECONOMIC AND MONETARY UNION - EUROPEAN SCRUTINY COMMITTEE
Conclusion
1.27 However we are deeply concerned about the possible implications for the UK of what is proposed. In addition to the issue of a threat to the single market for financial services, already exemplified by the current Banking Union proposals….
http://www.publications.parliament.uk/pa/cm201213/cmselect/cmeuleg/86-xxiv/86xxiv.pdf

REMARKS BY DAVID WRIGHT: SECRETARY GENERAL OF IOSCO
- “there will be many more big capital and securities markets in the world because they are needed for economic development which is powering ahead in Asia, parts of Latin America and beginning also in Africa…. Brazil, India, China, Indonesia, Singapore, Hong Kong, Russia, Turkey and Mexico to name a few will have much bigger markets than today.”
- “all the fast growing regions of the world fully realize that they cannot rely on the international banking system to support their economic development ambitions.”
- “banks will be permanently restrained in the future with much higher levels of capital and lower leverage.”
- “These trends taken together, mean a major global expansion of market based financing and securities markets is going to happen – replicating in many ways the U.S financial model.”
http://iosco.org/library/speeches/pdf/20121210-Wright-David.pdf

CHALLENGES FOR CENTRAL BANKING - MONETARY POLICY AND FINANCIAL STABILITY
Glenn Stevens
Governor, RBA
http://www.rba.gov.au/speeches/2012/sp-gov-121212.html


Participants

UBS 'rogue trader' Adoboli found guilty of one count of fraud
http://www.finextra.com/News/FullStory.aspx?newsitemid=24297

https://maps.google.co.uk/maps?q=southwark+crown+court&hl=en&ll=51.508529,-0.080681&spn=0.007572,0.021136&fb=1&gl=uk&hq=southwark+crown+court&hnear=southwark+crown+court&cid=0,0,17636622228696887449&t=m&z=16
(I though the trial would be in the Square Mile...but it's just on the other side of the river Thames)


Stuff

We’re getting a new Euro!
http://www.ecb.int/euro/banknotes/europa/html/index.en.html
(No images until 10th Jan)

The number of Euronotes in circulation has doubled in a decade...
http://www.ecb.int/stats/euro/circulation/html/index.en.html