News 100903: Education, LCH & Clearing Fees, CXE, HK, SFE, ICAP MTF

What is the point of school?

“The only time my education was interrupted was while I was at school”

Sir Winston Churchill

“Education is what is left after you have forgotten everything that you were taught at school”

Albert Einstein

http://www.stpauls.qld.edu.au/09_web/srcfiles/gazette-june-10.pdf

(An introductory comment from the Headmaster in the newsletter of my old school…I suspect in Churchill’s terms St Pauls probably consider they did little to interrupt me during our shared time)

“If we teach today as we taught yesterday, we rob our students of tomorrow”

John Dewey

http://www.stpauls.qld.edu.au/09_web/srcfiles/gazette-dec09-web.pdf

Enough about education….what about clearing fees?

Yes, LCH has slashed clearing fees…to 10p…from 10p…somewhere between 10p and zero.

The full rate table and link is below, draw your own conclusions.

As ever I’m disappointed with the media reporting of this. I haven’t seen one comment that actually goes into any analysis on transparency or relativity.

I assume the fees only apply to Ltd business. (we know I’m correct in this).

I’ve also done an EMCF comparison. Very simple back of the envelope stuff just to ensure I understand it. (see below)

At the end of the day the message I take from this is loud and clear: competition is the critical catalyst for change.

Has anyone kept a history of the LCH rate card from 2006 to present? That would make for interesting reading or a nice graph at the very least.

Work the numbers for yourself…and think of the context too in light of overall industry volumes….if you divide the ‘whole of market’ size by 150K how many participants are sustained at 150K plus trades per day? What about whole of market divided by current number of participants?

More market stats out on Chi-X Europe (CXE) and they’ve appointed an advisor.

HK legislation changes…and competition carve out.

Farewell SFE…to be replaced by ASX 24.

ICAP getting into the MTF game via interest rates.

CFTC gathering data? Stop it.

Some more quotes I couldn’t resist

“The only true wisdom is in knowing you know nothing."

--Socrates, Greek philosopher

*** Not fair, I confess to knowing nothing…but I feel none the wiser for it.

Spoon feeding in the long run teaches us nothing but the shape of the spoon.

EM Foster

Pleasure in the job puts perfection in the work.

Aristotle

Attitudes are contagious. Is yours worth catching?

Unknown

And my lovely Wobblies?....

In the current form of win one, lose one….I’m going to take a leap of faith…WALLABIES to win at altitude. Yahhooo.

Every team must turn a corner.

This week sees the start of Spring here (although the weather does not appear to be aware) so of course Autumn up there.

Fear not, we’ll make good use of the sunshine down here, meanwhile, enjoy the shorter days.

Fathers Day this Sunday.

I’m full of anticipation…socks or jocks…and I get to pay for dinner!

Have a great w/end all,

S

http://clearingandsettlement.blogspot.com/

MARKETS

Monthly MiFID MTF Monitor: August 2010

http://thefinanser.co.uk/fsclub/2010/09/monthly-mifid-mtf-monitor-august-2010.html

BLOOMBERG: Chi-X Europe Said to Hire Lexicon as Takeover Adviser to Trading Platform
By: Nandini Sukumar
09/01/10
Chi-X Europe Ltd. will hire investment bank Lexicon Partners Ltd. to advise on takeover proposals after saying last week that an unidentified company made an approach to acquire it, according to two people with knowledge of the situation.

01/09/2010 15:19:00

NYSE EURONEXT ACQUIRES QUARTERLY BOARDROOM TITLE, CORPORATE BOARDROOM MEMBER

Nyse Euronext has moved into publishing with the acquisition of quarterly magazine Corporate Board Member.

More on this story: http://www.finextra.com/news/fullstory.aspx?newsitemid=21750

*** I wonder if you get a discount on your listing fees for an exclusive interview?

HK competition bill to thwart exchange rivals

http://thetradenews.com/trading-venues/exchanges/4993

The impending introduction of new cross-sector competition legislation in Hong Kong, first proposed in 2006, could fix the Hong Kong stock exchange’s trading monopoly in stone.

In brief: The role of supervising financial markets has been transferred from ASX Limited to the Australian Securities and Investments Commission and, as a result, ASX Limited has undertaken a re-branding of the operating rules and various entities associated with it.

http://www.aar.com.au/pubs/cg/cucgsep10.htm

*** Farewell SFE (Sydney Futures Exchange) which has been renamed ASX 24. I did like the name SFE, it gave a little away about the nature of the business…ASX 24 sounds more like a massage parlour.

ICAP to launch interest rate swaps MTF

http://www.automatedtrader.net/headlines/55294/icap-to-launch-interest-rate-swaps-mtf

31/08/2010 16:11:00

ICAP TO LAUNCH MTF FOR INTEREST RATE SWAPS

Inter-dealer broker Icap is to launch an electronic market for trading Euro interest rate swaps, with support from market makers Barclays Capital, Deutsche Bank and JPMorgan.

More on this story: http://www.finextra.com/news/fullstory.aspx?newsitemid=21748

31/08/2010 15:39:00

BLOOMBERG TO SHED LIGHT ON DARK POOL ORDER FLOW

Bloomberg Tradebook is seeking to address buy side wariness of dark pools and thwart high frequency gaming by showing traders where their orders are being filled in real time.

More on this story: http://www.finextra.com/news/fullstory.aspx?newsitemid=21747

CLEARING

LCH.Clearnet cuts fees further

Tue, 2010-08-31 10:59

Clearing house LCH.Clearnet plans to introduce free equity clearing for members that clear more than 150,000 trades a day on average. The new tariff is part of a restructuring of the central counterparty’s equity clearing tariff, due to be implemented on 1 October 2010, and will give members clearing more than a daily average of 50,000 trades a marginal cost of 1p per trade up to 75,000 trades, after which the marginal cost will fall to 0.5p.

*** Is competition a catalyst for change?

*** The actual fee schedule is available here:

http://www.lchclearnet.com/fees/ltd/transactions/equityclear.asp

*** One for transparency? (I don’t understand why the article is silent on the 10p rate band).

From	0	10,001	20,001	40,001	50,001	75,001	150,001
Price	10p	7p	5p	4p	1p	0.5p	0p

Example

3,300,000 trades / 21(Days in the Month) = 157,142 (Average Daily Volume)
10,000 trades at 10p = £1,000
10,000 trades at 7p = £700
20,000 trades at 5p = £1,000
10,000 trades at 4p = £400
25,000 trades at 1p = £250
75,000 trades at 0.5p = £375
7,142 trades at 0p = £0
Total £3,725 x 21 = £78,225

EMCF fees

http://www.emcf.com/upload/uploads/Regulation%20fees%20and%20penalties%20100903.pdf

*** 3 eurocents for first 100K trades then 1 eurocent.

*** So, 157K ADV = 21 x (100K x 3cents + 57.142K x 1 cent) = 21 x (3K + 571.42) = 75K euros.

OK, I geddit.

POLICY

02/09/2010 15:16:00

FUTURES BODY TAKES ON CFTC OVER DATA GATHERING PROPOSALS

The Futures Industry Association has slammed regulatory proposals to gather more account information from market participants as "premature" and overly burdensome for the industry.

More on this story: http://www.finextra.com/news/fullstory.aspx?newsitemid=21755

*** What can you say? Agreed w/ FIA (I’ve not even read it), let common sense prevail…CFTC gathering data? Nah, it just sounds wrong.

PARTICIPANTS

MORGAN STANLEY LAUNCHES MS POOL IN AUST.

http://www.theaustralian.com.au/business/city-beat/morgan-stanley-expands-its-e-trading-capabilities/story-fn4xq4v1-1225911575812

JPMorgan plans to end all proprietary trading, a source says
JPMorgan Chase is working toward ending all proprietary trading to comply with the Dodd-Frank act, a source said. The bank has informed commodity traders that their division will be closed. Most of the traders affected are in London. Citigroup sold its proprietary-commodity business, called Phibro, last year, while other companies are still considering what to do with similar businesses. Bloomberg (8/31) , CNBC (8/31) , The Wall Street Journal (9/1)

IT hiring intentions point to skills crisis

http://www.misaustralia.com/viewer.aspx?EDP://1283126677546&section=news&xmlSource=/news/feed.xml&title=IT+hiring+intentions+point+to+skills+crisis

DRUNKEN MORTGAGE WORKER ACCUSED OF SHOOTING COMPANY SERVER An American mortgage firm staffer has been arrested after allegedly getting drunk and shooting the company's computer server.

Full story: http://www.finextra.com/news/fullstory.aspx?newsitemid=21743

*** This could almost be funny…the only problem with this story….is that if you are crazy enough to shoot a server…where is the next line of demarcation for a human? In my humble view guns belong to farmers and military….and only in the police as part of a tactical response unit (i.e. not on the beat).

Scott Riley

Business Development

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

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

* scott.riley@au.abnamroclearing.com

News 100827: CXE offer, PLUS Algo, PAVE, Lehman, IOSCO DMA, Cocoa.

No comment I’m afraid on CXE offer. Time will tell.

PAVE comes to Spain to topple BME? Topple might be a bit heavy, but if the locals are mobilising then infrastructure is getting to where it needs to be.
At first I didn’t pay much attention to the PLUS markets story…but the link with Algo technologies makes it all rather more interesting.
A nice piece in The Trade on how brokers differentiate their dark pools.
Now I like to think I keep up with most things CCP..and then someone sent me a link to the CCP12 web site: http://www.ccp12.org/
Much more content there than last time I looked. Well done! (overlooking some of the page fails). Buried in the CCP12 papers is a nice one on the response to did Lehmans lose money?

http://www.ccp12.org/f/CCP+Default+Management+and+the+Collapse+of+Lehman+Bros+-+FINAL.pdf

(this was triggered in a linkedin thread
http://www.linkedin.com/groupItem?view=&gid=2026241&type=member&item=19753120&qid=722f88b8-8ae6-4b62-a906-52c55028b36e&goback=.gmp_2026241)

If you don’t want to read the 8 page paper…you can buy some Lehmans stuff here:
http://www.christies.com/eCatalogues/index.aspx?id=C73D2719B558F8BF852577080046ACEC

Hats off to John Harris. I applaud and admire his use of free speech.
I’m a bit sceptical on these levys for banks. I don’t mind banks being forced to hold provisions and liquidity reserves etc…but the governments have hardly proven them trustworthy custodians of their citizens money either.
IOSCO publishes its paper on DMA. The 8 lowest common denominators in trying to articulate common sense.
Well done UBS and DB. DBATS made me smile.
As a former Cocoa grader I read the Finanser story with interest.

And as for my wobblies? I don’t plan on staying up late Saturday night. Why?
The Wallabies have won only twice at altitude in 17 encounters - Johannesburg in 1963 and Bloemfontein in 1933 - and have lost 11 straight matches on the Highveld.
*** Oh well. Forgive me, but I don’t hold out much hope for our boys next w/end.
Kiwis to win this w/end. (well, last w/end now…and they did).

Joy is the daughter of peace. --Finnish proverb

Have a great w/end all.
S
http://clearingandsettlement.blogspot.com/

TRADING

Chi-X Europe's Suitor Reported to be BATS
http://www.securitiestechnologymonitor.com/news/chi-x-europe-takeover-inquiry-25993-1.html?ET=securitiesindustry:e2089:180658a:&st=email&utm_source=editorial&utm_medium=email&utm_campaign=SIN_DailyClose_060310
BATS' owners include Bank of America, Citigroup Inc., Morgan Stanley, Credit Suisse, Deutsche Bank, Getco LLC, JPMorgan Chase & Co., the estate of Lehman Brothers Holdings Inc., Lime Brokerage LLC, Tradebot Systems Inc. and Wedbush Morgan Securities. Chi-X Europe has some overlapping owners, including Citigroup, Bank of America, Getco, Morgan Stanley and Credit Suisse. Instinet Holdings, which is in turn owned by Japan's Nomura Holdings, owns 34 percent.

UBS’s dark MTF overcomes regulatory hurdle
http://www.thetradenews.com/trading-venues/mtfs-ecns/4963

16/08/2010 11:24:00
BATS GETS SEC GREEN LIGHT FOR SECOND US EXCHANGE
Bats Global Markets says it will launch its second US equities exchange in the next couple of months after receiving regulatory approval from the SEC. More on this story: http://www.finextra.com/news/fullstory.aspx?newsitemid=21701

SMX To Go Live August 31 Singapore Mercantile Exchange (SMX), the first pan-Asian multi-product commodity and currency derivatives exchange, announced August 17 that the Exchange will go live for trading... (more)

SPAIN SET TO GET FIRST MTF A group of Spanish "financial executives" say they will launch the country's first multilateral trading facility (MTF) early next year. Full story: http://www.finextra.com/news/fullstory.aspx?newsitemid=21732

Spanish MTF aims to topple BME Plataforma Alternativa De Valores Españoles (PAVE) has been set up by a group of Spanish financial executives and claims that it will offer trading that is at least 66% cheaper than current trading costs in Spain
http://www.thetradenews.com/trading-venues/mtfs-ecns/4964

World Federation of Exchanges July 2010 statistics now available.
http://www.world-exchanges.org/statistics

Plus Markets moves into the derivatives market
London's Plus Markets, a junior stock exchange, has launched the Plus Derivatives Exchange, which will start trading interest rate swaps. The company said it is striving to create "an innovative exchange venue in London, which brings together primary and secondary market listings, with trading flow from the retail and professional investment communities, across multiple asset classes". Financial News Online (U.K.) (subscription required) (25 Aug.)

REVAMPED PLUS PLOTS PATH TO PROFIT
http://www.thetradenews.com/trading-venues/exchanges/4965
Following a strategic review announced in March, PLUS aims to cut its costs by 40% to below £5 million in 2011, primarily by replacing incumbent IT providers such as Nasdaq OMX, whose facilities management agreement will lapse at the end of Q4 2010, with a combination of in-house technology and a range of services from Algo Technologies, the trading solutions vendor headed by ex-Chi-X Europe chief operating officer Hirander Misra, including a low-latency trading platform for the wholesale market.

25/08/2010 10:58:00
PLUS SIGNS WITH ALGO TECHNOLOGIES FOR SYSTEMS OVERHAUL
Plus Markets has signed for market data and connectivity systems from Algo Technologies, with a deal for the vendor's matching engine also in the pipeline. More on this story: http://www.finextra.com/news/fullstory.aspx?newsitemid=21731

GREATER VIGILANCE SHINES LIGHT ON BROKER DARK POOL DIFFERENCES
Eleanor Jenkins, vice president and head of liquidity strategy at Morgan Stanley, notes that high broker crossing rates could also indicate that a wider range of external participants have access to client flow
http://www.thetradenews.com/regions/americas/4966

CLEARING

This is a recurring question: Did any CCP lose money on Lehmans? –
Yes, HKEx subsidiary Hong Kong Securities Clearing Company Limited (HKSCC) The bankruptcy of the Lehman Brothers Group in the US led Hong Kong’s Securities and Futures Commission (SFC) to issue a restriction notice on Lehman Brothers Securities Asia Limited (LBSA), a Clearing Participant of wholly owned HKEx subsidiary Hong Kong Securities Clearing Company Limited (HKSCC), on 16 September of last year. This effectively prohibited LBSA from settling any of its positions in HKSCC’s Central Clearing and Settlement System (CCASS) and completing settlements with its customers (excepting returning fully paid shares to customers). As a result, HKSCC had to fill a $2.5 billion funding gap in a very tight credit market to fulfil its settlement obligations as the central counterparty. It had to close out LBSA’s total outstanding positions of $3.5 billion created before the restriction notice, resulting in a loss of approximately $160 million for HKEx, which in turn will be an added claim in the LBSA insolvency. http://www.hkex.com.hk/eng/newsconsul/newsltr/2009/documents/2009-01-07-e.pdf INTER-

DEALER BROKERS WARN OF 'MONOPOLISTIC' RISKS IN NEW SWAP CLEARING RULES
US inter-dealer brokers have called on regulators to ensure fair access to newly-created Swap Execution Facilities as the Securities and Exchange Commission and Commodity Futures Trading Commission meet to discuss governance and conflicts of interest in the clearing and listing of swaps. More on this story:
http://www.finextra.com/news/fullstory.aspx?newsitemid=21719
*** Julian Harding, executive director at Tradition and chairman of the WMBAA, comments: "Direct or indirect impediments created to enhance a clearing organisation's affiliated trading platform would frustrate Congressional intent. Competition in execution, with its attendant benefits to all participants, is inherently encouraged in the legislation but would be stifled as a result of such monopolistic tendencies."
*** I think he makes a very valid point.

LCH.CLEARNET NAMES MICHAEL DAVIE CEO, SWAPCLEAR
http://www.finextra.com/news/announcement.aspx?pressreleaseid=35240

RELIGARE TECHNOVA ACQUIRES MAJOR STAKE IN CHASE COOPER 18 Aug 2010 ... Religare Technova Global Solutions Pty Ltd (RTGS) has acquired a major stake in London-based Chase Cooper Ltd by forming a strategic ...
http://www.domain-b.com/companies/companies_r/religare_ent/20100818_religaretechnova.html http://www.religaretechnova.com/index.html
http://www.chasecooper.com/

POLICY

SEC COMMENT: JOHN HARRIS Subject: File No. S7-11-10 From: John Harris Affiliation: Chief Executive Officer, BondMart Technologies, Inc. August 12, 2010 The Commission's consolidated audit trail concept is despicable, a Big Brother/Total Information Awareness program for financial transactions. If made effective, this vile scheme would invade the privacy of every American transacting in U.S. securities markets. It would constitute a permanent and ever-growing tax on trading, as the volume of data forcibly extracted from consumers grows inexorably in storage ad surveillance systems. It would erect anti-competitive barriers to entry into exchange and related businesses, insulating incumbents and retarding innovation in the process. It is difficult to conceive of a more monstrous, arrogant, destructive proposal from an agency with a rich tradition of monstrous, arrogant, and destructive proposals. Shame on you for promulgating this trash. Do your fellow Americans a favor and resign in shame. That's what you should have done months ago for your complicity in the massive financial frauds of Madoff and the large investment banks.
http://www.sec.gov/comments/s7-11-10/s71110-58.htm
*** Ahhh, I love it!

Germany approves a levy on banks to cover future crises The German government expects a levy imposed on banks to cover future financial crises to raise about €1 billion annually. Germany is following in the footsteps of the UK and France, but there has yet to be consensus on a global bank tax. Analysts said Germany's levy will eat into profits of the banking sector starting next year. Read AFME's comments on balance-sheet levies. BBC (25 Aug.) , The Wall Street Journal/Dow Jones Newswires (25 Aug.)
*** This is all very nice…but where does it end? 20 yrs time we’ll have some huge contingency fund built from a mutual basis…and someone will say it is surplus to requirements…and the government will repatriate the fund as a simple tax….if you have to have a fund…impose a provision on the banks…but why do you need the money in the governments pocket?

IOSCO PUBLISHES PRINCIPLES FOR DIRECT ELECTRONIC ACCESS TO MARKETS
13/08/10 The Technical Committee of the International Organization of Securities Commissions (IOSCO) has published a Final Report – Principles for Direct Electronic Access to Markets (DEA Principles) – containing principles designed to guide intermediaries, markets and regulators in relation to the areas of pre-conditions for direct electronic access (DEA), information flow and adequate systems and controls. Principles for Direct Electronic Access to Markets

1. Pre-Conditions for DEA

Principle 1 Minimum Customer Standards Intermediaries should require DEA customers to meet minimum standards, including that: Each such DEA customer has appropriate financial resources; Each such DEA customer has appropriate procedures in place to assure that all relevant persons: Are both familiar, and comply, with the rules of the market; and Have knowledge of and proficiency in the use of the order entry system used by the DEA customer. Market authorities should have rules in place that require intermediaries to have such minimum customer standards.

Principle 2 Legally Binding Agreement There should be a recorded, legally binding contract between the intermediary and the DEA customer, the nature and detail of which should be appropriate to the nature of the service provided. Each market should consider whether it is appropriate to have a legally binding contract or other relationship itself and the DEA customer.

Principle 3 Intermediary’s Responsibility for Trades An intermediary retains ultimate responsibility for all orders under its authority, and for compliance of such orders with all regulatory requirements and market rules. In those jurisdictions where a DEA customer is permitted to sub-delegate its direct access privileges to another party (a sub delegate), the intermediary continues to be ultimately responsible for all orders entered under its authority by the sub delegate and should require the sub-delegatee to meet minimum standards set for DEA customers in general. There should be a recorded, legally binding contract between the DEA customer and the sub-delegatee, the nature and detail of which should be appropriate to the nature of the service provided.

2. Information Flow

Principle 4 Customer Identification Intermediaries should disclose to market authorities upon request and in a timely manner the identity of their DEA customers in order to facilitate market surveillance. In those jurisdictions where sub-delegation is permitted, the intermediary also has such responsibility to the market authorities with respect to any sub-delegatees.

Principle 5 Pre and Post-Trade Transparency Markets should provide member firms with access to relevant pre and pos-trade information (on a real time basis) to enable these firms to implement appropriate monitoring and risk management controls.

3. Adequate Systems and Controls

Principle 6 Markets A market should not permit DEA unless there are in place effective systems and controls reasonably designed to enable the management of risk with regard to fair and orderly trading including, in particular, automated pre-trade controls that enable intermediaries to implement appropriate trading limits.

Principle 7 Intermediaries Intermediaries (including, as appropriate, clearing firms) should use controls, including automated pre-trade controls, which can limit or prevent a DEA customer from placing an order that exceeds a relevant intermediary’s existing position or credit limits.

Principle 8 Adequacy of Systems Intermediaries (including clearing firms) should have adequate operational and technical capabilities to manage appropriately the risks posed by DEA. Full report available here:
http://www.iosco.org/library/pubdocs/pdf/IOSCOPD332.pdf

PARTICIPANTS

Citigroup to Start Singapore Dark Pool Stock Trading in 2011
Citigroup Inc., the third-biggest U.S. bank, says it will start so-called dark pool electronic trading in Singapore early next year to meet growing demand in Asia. The bank is expanding its... (more)

ASIA TARGET FOR DEUTSCHE DARK POOL TRADING
Deutsche Bank is to offer dark pool trading in Hong Kong via an internal crossing network and liquidity-searching algorithm that will file client orders across multiple off-exchange trading venues in Asia. Full story:
http://www.finextra.com/news/fullstory.aspx?newsitemid=21724
*** D-Bats! Deutsche Bank Automated Trading System….so close to Deutsche Better Alternative Trading System.

LEHMAN
http://www.christies.com/eCatalogues/index.aspx?id=C73D2719B558F8BF852577080046ACEC *** memorabilia has a price.

FINANCIAL TIMES: Dutch Lift Lid on a High-Frequency Universe By Jeremy Grant 08/25/10
Jelle Elzinga, a former options pit trader, is a board member of Optiver. Speaking from the company’s glass-fronted office in Amsterdam’s Zuidas business district, he says: “There is a misperception that HFTs are speculators who move the markets to extremes. Inside its trading room, the layout is like many bank-dealing rooms: rows of desks with computer screens. Yet there are no telephones because Optiver has no clients and, like its rivals, trades using its own money. Optiver does not disclose how much money it makes but Mr Elzinga says the group has never had a lossmaking year. That has helped it grow from its Dutch base to employ 600 people across Amsterdam, Paris, Sydney, Hong Kong, Taipei and Chicago, the US city that is home to similar market-making firms that grew out of the trading pits there – such as Getco and Peak6, both Optiver rivals. Traders come straight out of university and candidates will not even be considered for interview unless they pass an eight-minute test designed to weed out those weak on split-second numeracy. “We might ask ‘What is 0.3 divided by 0.0005?’ – that sort of thing,” Mr Elzinga explains. He admits that Optiver “tends not to have views on, or a lot of knowledge about, stocks in terms of how companies are doing”. The company will hunt for tiny aberrations in the relationship between two assets. Or its traders may use algorithms to buy and sell similar financial instruments simultaneously to benefit from a discrepancy in their price relationship – for example, as between the shares of BP, the oil company listed in London, and the company’s American Depositary Receipts in New York. This is usually called “statistical arbitrage”. Mr Elzinga says this is a small part of the business. “It is not at the centre of Optiver’s strategy.”

OTHER

GOING COCOA DOWN IN ARMAJARO
http://thefinanser.co.uk/fsclub/2010/08/going-cocoa-down-in-armajaro.html
*** as a former cocoa grader this story appeals

Intel will make the largest acquisition in its four-decade history, spending $7.7 billion on McAfee http://wallstreetandtech.com/data-security/showArticle.jhtml?articleID=226800453&cid=nl_wallstreettech_daily

Sit-ups aren't the answer to a six-pack. Abdominal exercises will strengthen your core but… …
if you want the pack to be seen, you've gotta be lean.
http://blogs.theage.com.au/executive-style/allmenareliars/2010/08/20/middleagemana.html

Scott Riley Business Development 8th Floor | 50 Bridge Street | Sydney | Australia | 2000 (Off)+61 (0)2 8916 9634 (Mob): +61 (0)418 117 627  scott.riley@au.abnamroclearing.com

News 100813: Aust, HK Hours, BCNs, ETFs, C2S

Well, the worlds biggest fun run has come and gone. I’m delighted to report it was a fun run.

Running amongst a squadron of storm troopers is ‘different’, but one of the highlights for me was jogging along with a couple of ‘super heros’ (batman and spiderman) with their supa soakers. Said super heros were cheered on by some enthusiastic kids at the sideline only to be super soaked. They then jeered…”I hate spiderman”. Ahhh, the youth of today, so fickle.

And the course:

http://www.endomondo.com/workouts/2038225

(it only took 7 mins to get to the start line after the gun went off).

ASX results.

Aussie market reforms.

NYSE continues to cash in on Liffe

Short lunch hour appears to be big news…for Macca’s in HK.

SBI reduces fees and picks up volume.

Why do some quarters insist on assuming CCPs are the answer to everything OTC?

Broker Crossing Networks are good. Curtailing them at 0.5% is not good.

It is a near-universal truth that creditors recover more from a going concern than a liquidated entity.

ETFs are material and relevant.

Couldn’t cover all the reading this week…oh well…if it’s important it’ll surface again.

Months that start with a Sunday…always have a Friday the 13^th.

Superstition is foolish, childish, primitive and irrational -- but how much does it cost you to knock on wood?"

--Judith Viorst,
American author, journalist and psychoanalysis researcher

Have a great week end all,

S

http://clearingandsettlement.blogspot.com/

(sorry to those that follow the web site, my postings are a little behind. What am I doing on my w/ends?)

PLATFORMS

ASX RESULTS

Trading – Cash markets (including equities, interest rates and warrants trades)

The All Ordinaries Index closed at 4507.4 points on 30 July 2010, a rise of 4.2% over the course of the month. The index has fallen 7.7% in the calendar year-to-date.

• Total cash market trades for July 2010 were 10.8 million, up 8% on the pcp.

• Average daily trades for July 2010 of 488,998 were 13% higher than the pcp.

• Total cash market traded value was $97.8 billion in July 2010, down 4% on the pcp, with a daily average value of $4.4 billion, in line with the pcp.

• In July 2010 the average value per trade was $9,089, down 11% on the pcp of $10,236. The percentage of traded value crossed was 26% (28% in the pcp).

http://www.asx.com.au/about/pdf/20100805_asx_monthly_activity_report_july_2010.pdf

ASIC Market integrity rules

The Corporations Amendment (Financial Market Supervision) Act 2010 provides for a new type of rule called market integrity rules. These rules are made by ASIC and apply to market operators, market participants, other prescribed entities and financial products traded on the relevant markets.
The following ASIC market integrity rules were made on 1 August 2010 and are based on legislation and regulations as at 1 August 2010. Our approach in making market integrity rules has been to not change the substance of the pre-existing obligations that apply to participants of the relevant markets at this time.
http://www.asic.gov.au/ASIC/asic.nsf/byHeadline/Market%20integrity%20rules?opendocument

Derivatives Lead the Show at NYSE Euronext

NYSE Euronext said its average daily volume in derivatives contracts increased 17.5 percent in July, worldwide, versus a year ago. But the exchange operator and technology supplier said its volume in derivatives fell 13.6 percent from a month ago. And its volume in equities transactions in the United States fell, both year over year and month against previous month.

http://www.securitiestechnologymonitor.com/news/-25904-1.html?ET=securitiesindustry:e2067:171544a:&st=email&utm_source=editorial&utm_medium=email&utm_campaign=SIN_DailyClose_060310

Hong Kong exchange considers extending trading hours
Hong Kong Exchanges and Clearing is considering aligning its trading day with mainland China's markets by extending its hours, CEO Charles Li said. The trading day would start a half hour earlier, at 9.30am, and reduce the noon break from two hours to one. The trading day would still end at 4pm. The move would be another step toward integrating securities markets in China with the rest of the world. Bloomberg (11 Aug.)

Hong Kong brokers react to plans to halve their lunch breaks
Bloomberg (13 Aug.)

SBI Japannext Sees Substantial Volume Increase in July

SBI Japannext, Japan's largest Proprietary Trading System (PTS) operator, saw notional value traded increase nearly 75% approaching pre-Arrowhead levels. "It is largely due to reduction in our commission rate from 0.4 bps to 0.2 bps.” cited Chuck Chon, CTO SBI Japannext.

http://www.asiaetrading.com/sbi-japannext-sees-substantial-volume-increase-in-july/

Emerging markets welcome high-frequency traders
High-frequency trading is being scrutinised in the US after the "flash crash" of 6 May, but emerging markets are opening their arms to the strategy, according to The Economist. High-frequency trading accounts for 30% of derivatives trades on the Singapore exchange, up from 10% in 2008. Exchanges must invest heavily to satisfy technology needs of high-frequency traders, but overseas expansion makes sense for the traders, the magazine notes. The Economist (12 Aug.)

** nice piccie!

CLEARING

Dutch Pension Plans Oppose Central Clearing of Derivatives

The three main lobbying groups for pension plans in the Netherlands are asking the European Commission for an exemption to a requirement in pending legislation on derivatives and market infrastructure that all firms trading in over-the-counter derivatives act through centralized clearinghouses.

http://www.securitiestechnologymonitor.com/news/-25908-1.html?ET=securitiesindustry:e2067:171544a:&st=email&utm_source=editorial&utm_medium=email&utm_campaign=SIN_DailyClose_060310

Regulatory Announcement - SGX seeks to widen participation in clearing of OTC financial derivatives
6 August 2010 – Singapore Exchange (SGX) is consulting the public on its proposal to extend its Central Counterparty Clearing Services for Over-the-Counter Traded Financial Derivative (OTCF) contracts to participation from non-bank financial institutions.

On 21 April 2010, SGX made a proposal to allow Bank Clearing Members (BCMs) to participate in the clearing of OTCF contracts through SGX-DC. SGX is now proposing to admit non-bank financial institutions as General Clearing Members (GCMs) to clear their proprietary positions in similar contracts once admission and other relevant requirements are satisfied.

http://www.sgx.com/wps/wcm/connect/cp_en/site/press_room/news_releases/regulatory+announcement+sgx+seeks+to+widen+participation+in+clearing+of+otc+financial+derivatives?presentationtemplate=design_lib/PT_Printer_Friendly

LSE's Derivatives Push Weighs New Approach To Fees, Clearing

London Stock Exchange Group PLC (LSE.LN) plans to introduce a new approach to trading fees as part of a bold effort to create a pan-European derivatives platform early next year, according to people familiar with the situation.

The home of the benchmark FTSE 100 share index aims to launch futures and options tied to major European share-trading indexes with a so-called "maker-taker" pricing plan, and a clearing model that would allow users to combine their stock and derivatives portfolios

http://online.wsj.com/article/BT-CO-20100708-704126.html

POLICY

FINANCIAL NEWS: Traders Fear New Restrictions on Use of Crossing Networks
By Tim Cave
8/9/10
Estimates on what the proposed limit of BCN (Broker Crossing Networks) activity will be vary between 5% and 0.5% of total European equity trades, but Bowley believes it is likely to be nearer the bottom of the scale. “It would seem unlikely that a size limit is set on BCN activity that doesn’t have an impact on some venues, otherwise what is its point,” he said.

*** I agree. 5% is too high…but 0.5% is too low. BCNs do add value and should be embraced.

AFME examines how "bail-ins" would work in practice
A study by AFME indicates that if regulators had used "bail-in" capital -- bonds that are forcibly converted to equity -- senior Lehman Bros debt holders likely would have recovered most of their investments. "It's a near-universal truth that creditors recover more from a going concern than a liquidated entity," said Gilbey Strub, managing director at AFME. "Bail-in capital could also help stem the contagion effect." Financial Times (tiered subscription model) (12 Aug.) , Telegraph (London) (13 Aug.)

*** I agree: "It's a near-universal truth that creditors recover more from a going concern than a liquidated entity,"

BlackRock Seeks Uniform Circuit Breakers for Stocks and ETFs

http://www.securitiestechnologymonitor.com/news/sec-blackrock-etf-25932-1.html?ET=securitiesindustry:e2077:171544a:&st=email

By Tom Steinert-Threlkeld

The head of the BlackRock product team for exchange-traded funds in the United States urged the Securities and Exchange Commission and Commodity Futures Trading Commission to establish circuit breakers across all exchanges that were uniform for both stocks and ETFs.

Noel Archard, a managing director at investment adviser BlackRock in charge of its iShares ETF business, told a joint advisory committee of the SEC and CFTC that is addressing issues raised by the May 6 Flash Crash that reforms should include:

Uniform “circuit breakers” for stocks and ETFs across all exchanges,

Exchange trade error cancellation rules which are less arbitrary and more transparent,

Clearer guidelines for inter-market order routing rules,

A replacmeent of “stop loss” orders with “stop loss limit” orders to specify a limit price, and and

Expanding the role of lead market makers to ensure orderly market functioning.

ETFs have become widely accepted investment vehicles for both institutional and retail investors, Archard noted. There are currently 985 exchange traded products available in the US market with $797 billion in assets invested. They represent 30% of the total volume traded on national exchanges, he said.

OTHER

J.P. Morgan Joins EuroCCP as general clearing participant
EuroCCP and J.P. Morgan Worldwide Securities Services announced today that J.P. Morgan has become a general clearing participant (GCP) in EuroCCP, which provides clearing and settlement services for a wide range of European markets.
http://www.securitieslendingtimes.com/securitieslendingnews/article.php?article_id=303

*** Interesting. EuroCCP still gaining traction 3years after launch. I am bias, hence I’m not sure about the claim of EuroCCP being a driver in the reduction of fees. Fee reductions are driven by wallet size (materiality) in my view.

OSAKA SECURITIES EXCHANGE DISCIPLINES DEUTSCHE BANK OVER ALGO TRADING ERROR Deutsche Bank has been hit with an "admonition" by the Osaka Securities Exchange over a problem with a trading algorithm in June that saw sell orders worth Y16.7 trillion made by mistake.

Full story: http://www.finextra.com/news/fullstory.aspx?newsitemid=21688

*** Big difference between an order and a trade (executed / filled order).

France digs deep for nuclear waste
http://www.nature.com/news/2010/100810/full/466804a.html

Geologic storage of long-lived radioactive material is moving closer to reality in Europe

*** An observatory, created jointly in April with France's agricultural research agency, INRA, will monitor this ecosystem for at least a century.

Scott Riley

Business Development

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

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

* scott.riley@au.abnamroclearing.com