Congratulations to EMCF!
I don’t think their announcement of fee cuts to 3 euro cents (and the 1 cent for volume) got as much recognition as it deserves. To put this into context, let us think of where we were in 2006, pre MiFID. What was the average price paid to clear a European equity? North of 60 euro cents is not an unreasonable guesstimate. Remember fee schedules based on notional values, order sizes, etc. etc. Since 2007 EMCF has introduced transparency, consistently delivered volume based fee reductions, rationalisation of pricing, harmonisation of process….making cross boarder…domestic. What is more, these prices, and this business model stands on its own economic merits. There is no retrocession…no cross subsidy of clearing fees from other asset classes or products...etc.
In 2006 a derivative contract was cleared at LCH for 3 pence. A derivative has a longer tenure and a more complex risk profile, yet it was cleared at a fraction of the price of an equity. How different that is today. Now you clear an equity contract for less than a derivatives one….and that kinda makes sense. When we started in 2006 no one hoped to believe we could achieve clearing fees at these levels in this timeframe. But we have.
So…congratulations to the users / participants. To Chi-X Europe and the rest of the MTFs. The flow providers. The distributed network of developers and vendors. And of course to the EMCF team and management. Europe is a better place for it…and what better time to reduce industry costs than during a GFC?
Chi-X Europe continues to grow and consolidate.
Congratulations to Chi-X Global on Japan license and on the market improvements they have already been a catalyst for in Australia.
A nice flash crash summary at: http://www.nanex.net/20100506/FlashCrashAnalysis_Intro.html
Lots of noise also about consolidated trade tape. I think this is a good thing. The exchanges know it is a good thing too. They charge for it. I confess I don’t yet know the answer…but the status quo is not the right answer. Something must change and it should be driven by the mantra of transparency and utility. I do believe ‘regulatory’ intervention could assist this process, but I certainly do not believe regulators should have anything to do with the operation, management or any other aspect of the day to day practicalities of a consolidated tape.
Where I’m following the Tour de France:
http://tdf.sbs.com.au/tdf2010/?cid=23218
And the long awaited Tri-Nations begins….
Round 1: NZ to win at home against SA.
I’ll also continue to support the Dutch in the World Cup…and I continue to hate the Vuvuzela (which now appears to have its own radio station).
http://www.vuvuzela.fm/
A billion is a difficult number to comprehend, but one advertising agency did a good job of putting that figure into some perspective in one of it's
releases.
A billion seconds ago it was 1959.
A billion minutes ago Jesus was alive.
A billion hours ago our ancestors were living in the Stone Age.
A billion days ago no-one walked on the earth on two feet.
A billion Pounds ago was only 13 hours and 12 minutes, at the rate the UK government is spending it.
And for those visiting Sydney, this is really useful if you want to avoid running in the rain.
I learnt this after getting drenched today.
http://www.bom.gov.au/products/IDR713.loop.shtml#skip
Hup Holland Hup!
Have a great w/end all.
S
Platforms
Monthly MiFID MTF Monitor: June 2010
http://thefinanser.co.uk/fsclub/2010/07/monthly-mifid-mtf-monitor-may-2010.html
Chi-X Japan’s PTS license granted; trading expected to begin July 29
http://www.chi-x.asia/resources/apac/file/Chi-X%20Japan%20Receives%20Launch%20Approval_7%20July%202010.pdf
BATS Exchange Reports 11% US Market Share, Sets Tape B Record in June
Press Release
BATS Global Markets, an innovative financial markets technology company, announced that BATS Exchange set a monthly matched market share record in Tape B securities for the second consecutive month, while BATS Europe set new monthly market share records in several different indices in June.
http://jlne.ws/cJuqny
BATS Options, Still Small, Finds Momentum In June
By Jacob Bunge, Of DOW JONES NEWSWIRES
The nascent options exchange from BATS Global Markets nearly doubled trading volume in June, as the platform completed a month of trading in all options symbols and lifted restrictions on market makers.
http://jlne.ws/9ZfT0N
LSE Sets New Migration Schedule for MillenniumIT Data, Trading Platform
Inside Market Data - Exchange Data
http://www.waterstechnology.com/inside-market-data/news/1721015/lse-sets-new-migration-schedule-millenniumit-data-trading-platform
In a letter dated July 1, the exchange told clients that it has completed development of the new technology platform, but has postponed the go-live date by around two months in response to client requests for "a sufficient window to continue their development and testing."
LSE Group pushes back Millennium migration over NYSE date clash
The migrations to the platform are later than had been planned, due to a potential clash with NYSE Euronext’s intended move to its new Basildon data centre in September, which would have caused strains on common customers’ IT resources. The LSE and Turquoise changeovers will now take place in November and October 2010 respectively.
http://www.thetradenews.com/asset-classes/equities/4768
*** Ahh, that makes more sense.
NYSE Technologies and Markit Group said Thursday they will consolidate their pools of data on trading in over-the-counter stocks in Europe.
http://www.securitiesindustry.com/news/-25762-1.html?ET=securitiesindustry:e2036:171544a:&st=email&utm_source=editorial&utm_medium=email&utm_campaign=SIN_DailyClose_060310
NYSE Euronext strikes a deal for data on European OTC trades
NYSE Euronext formed a joint venture with Markit, a data provider and trade processor, to route more information on over-the-counter trades from Europe through the former's system. The move comes as European officials review the Markets in Financial Instruments Directive. "This is not meant to pre-empt regulators but to respond to the issues our customers have voiced in a proactive fashion," said Mark Schaedel, senior vice president of global data products at the technology arm of NYSE Euronext. Reuters (01 Jul.)
Its Amazing What a Little Exchange Competition Will Do
While it was widely expected and long overdue on March 31, 2010 Chris Bowen the Minister for Financial Services, Superannuation and Corporate Law announced that the Australian Government did, at long last,...(more)
ASX Group Monthly Activity Report - June 2010
Press Release
http://jlne.ws/biBigb
ASX raids investor fund
Patrick Durkin
Friday 9 July 2010
The Australian Securities Exchange will pay $3.14 million to back the Australian Securities and Investments Commission's new role of market supervision. However, money will come from the National Guarantee Fund, meaning the funds will not be available to assist victims of corporate failures affecting Opes Prime, Lift Capital or Sonray Capital. The Australian Shareholders Association says the fund should remain. ASX rival Chi-X has queried whether it was possible to request the fund to pay its ASIC fees.
http://afr.com/p/national/asx_raids_investor_fund_aFfNhnl1spcHJZHW803Q6N
ASIC ready for market supervision
ASIC welcomed the announcement today by the Minister for Financial Services, Superannuation and Corporate Law, the Hon Chris Bowen MP, of a 1 August 2010 start date for the transfer to ASIC of the market supervision role now being performed by the Australian Securities Exchange (ASX). 10-151MR. 8 Jul
http://www.asic.gov.au/ASIC/asic.nsf/byHeadline/10-151MR%20ASIC%20ready%20for%20market%20supervision?opendocument
ICE COMPLETES CLIMATE EXCHANGE ACQUISITION
http://www.finextra.com/news/announcement.aspx?pressreleaseid=34706
Cantor cuts
Cantor Fitzgerald's Hollywood Stock Exchange, which was hoping to sell futures based on movie box office results, laid off most of its staff yesterday, according to TheWrap.com. The HSX plan got ensnared in a Capitol Hill roadblock when lobbyists persuaded lawmakers to write a ban on such futures into FinReg legislation.
http://jlne.ws/bHU0L7
**** Not a happy ending.
Analysis of the "Flash Crash"
http://www.nanex.net/20100506/FlashCrashAnalysis_Intro.html
http://www.nanex.net/20100506/FlashCrashAnalysis_CompleteText.html
NYSE EURONEXT WINS WARSAW TECHNOLOGY TENDER Nyse Euronext has won a beauty parade to provide a new trading platform for the Warsaw Stock Exchange.
Full story: http://www.finextra.com/news/fullstory.aspx?newsitemid=21558
Clearing
EMCF TO CUT ITS CLEARING FEES AND INTRODUCE VOLUME DISCOUNTS
http://www.finextra.com/news/announcement.aspx?pressreleaseid=34599
As from 1 July 2010, EMCF will charge €0.01 for all executions in excess of 100,000 per Clearing Participant per day and €0.03 for the first 100,000 contracts cleared, across all markets. This is a significant reduction of the already competitive clearing fee rate of €0.03 per contract cleared for the UK market, with all other markets priced at €0.05 per contract.
Nasdaq OMX challenges vertically-integrated exchange model
Jochumsen added that the door is still open for other trading venues that want to take a stake in EMCF.
http://www.thetradenews.com/trading-venues/exchanges/4784
European CCPs expect interoperability by end-2010
http://www.thetradenews.com/regions/europe/4778
LCH.CLEARNET AND LME TEAM ON OTC GOLD POST-TRADE SERVICES
http://www.finextra.com/news/announcement.aspx?pressreleaseid=34651
Over 50 Tons of Gold at Deutsche Boerse Commodities
Press Release
Deutsche Boerse Commodities: Deutsche Boerse Commodities' gold reserve backing the Xetra-Gold bearer bond has grown to 50.038 tons. Each unit of the security is backed by exactly one gram of physical gold held in the vaults. At a price of E32.54 (Xetra price on 30 June) per unit of Xetra-Gold or per gram of gold, the current value of gold in custody is more than E1.6 billion.
http://jlne.ws/a4roqg
BNY MELLON BECOMES CLEARING MEMBER OF IDCH
http://www.finextra.com/news/announcement.aspx?pressreleaseid=34686
Bankers voice concerns about clearinghouse collateral
Some risk managers at banks are concerned about the range of collateral accepted by central counterparties as more over-the-counter derivatives trades are about to be routed through clearinghouses. Meanwhile, some dealers are welcoming the idea of broadening the range of eligible collateral, according to Risk magazine. Risk.net/Risk magazine (07 Jul.)
*** One: Collateral should be liquid – of such high quality it is readily realised.
*** Two: The most informed people on acceptable collateral are the users (those pledging the collateral).
*** Wrong way risk is an interesting angle (e.g. an equity CCP taking equity collateral).
08/07/2010 10:50:00
XTRAKTER PLANS EUROPEAN TRADE REPOSITORY
Just days after US-based Depository Trust & Clearing Corporation outlined plans to launch a European trade repository, Euroclear-owned Xtrakter says it might develop its own.
More on this story: http://www.finextra.com/news/fullstory.aspx?newsitemid=21584
DTCC BUYS REFERENCE DATA FIRM AVOX; PLANS EUROPEAN TRADE REPORTING REPOSITORY The Depository Trust & Clearing Corporation (DTCC) has acquired Avox, a UK-based reference data firm majority-owned by Deutsche Börse in a cash deal valuing the business at a "low double digit million GBP figure".
Full story: http://www.finextra.com/news/fullstory.aspx?newsitemid=21560
Policy
The best possible outcome from the MiFID review for buy-side traders would be the introduction of consolidated post-trade tape, according to the latest theTRADEnews.com monthly online poll.
http://www.thetradenews.com/regions/europe/4771
*** CESR is acting as a technical advisor to the EC as part of the MiFID review. On 13 April 2010 it released a consultation paper which supported a mandated tape, noting that “...without further regulatory intervention, market forces are unlikely to deliver an adequate and affordable pan-European consolidation of transparency information.”
**** I agree. Too many vested and fragmented interests with market forces now. A clear regulatory mandate is required in this area to deliver an economy of scale.
08/07/2010 11:23:00
EUROPEAN EXCHANGES FIGHT REARGUARD ACTION AGAINST CONSOLIDATED TAPE
European stock exchanges are promising to eliminate fees on 15-minute delayed data by the end of the year as they step up their campaign against the introduction of a mandatory consolidated tape for EU market data.
More on this story: http://www.finextra.com/news/fullstory.aspx?newsitemid=21585
Full statement from FESE available here:
http://www.fese.eu/_mdb/news/FESE%20Statement_Equity%20Market%20Data_FINAL.pdf
*** FESE members try to defend monopoly pricing for recharging the data provided by their customers.
AMF (Autorité des marchés financiers) CALLS FOR TIGHTER REGULATION OF MTFS
http://www.finextra.com/news/announcement.aspx?pressreleaseid=34666
More interesting, the actual AMF press release includes the composition of the working group (incl. NYSE and no MTF representation)
http://www.amf-france.org/documents/general/9510_1.pdf
The full findings are available here (NB: French readers only!):
http://www.amf-france.org/documents/general/9452_1.pdf
*** I didn’t read anything in this coming down hard for a consolidated tape.
CESR plans to outline its position on MiFID II, MTFs and dark pools
Eddy Wymeersch, chairman of the Committee of European Securities Regulators, said the group is scheduled to meet on 16 July, then offer its take on the Markets in Financial Instruments Directive, multilateral trading facilities and dark pools. After that, CESR's comments will be considered by the European Commission and the European Parliament. HedgeFundsReview.com
List of banks covered by the 2010 EU-wide stress test exercise
the 91 banks represent 65% of the EU banking sector.
http://www.c-ebs.org/documents/Publications/Other-Publications/Others/2010/ST_FollowupPR.aspx
ICMA Regulatory Policy Newsletter Third Quarter 2010
http://www.icmagroup.org/ICMAGroup/files/7a/7a6d520e-e06e-4f40-8062-f8d6d21ffd79.pdf
Other
Bank of America Merrill Lynch Rolls Out Global Liquidity Platform
Bank of America Merrill Lynch has launched a global liquidity platform, a centralized hub it said offers ...
Daily chart: Leaders of the fee world
http://news.economist.com/cgi-bin1/DM/y/eCJuU0bscdF0Mo0GhOd0EI
*** Politicians pay V’s GDP.
EXTINCTION COUNTDOWN
Rights wronged: North Pacific right whale nearly extinct in Bering Sea
One of the world's only two populations of North Pacific right whale has declined to the point where it will probably not survive
http://www.scientificamerican.com/blog/post.cfm?id=rights-wronged-north-pacific-right-2010-07-06&sc=CAT_ENGYSUS_20100708
*** Utterly sad.
Corporate "firewalk" ends in tears
http://www.smh.com.au/executive-style/management/corporate-firewalk-ends-in-tears-20100707-10073.html
*** I guess they call it common sense (or self preservation) for a reason…
Don’t bother just to be better than your contemporaries or predecessors.
Try to be better than yourself.
William Faulkner
A good listener is the wisest of persons.
WGP
I have opinions of my own – strong opinions – but I don’t always agree with them.
George Bush
People do not change with the times; they change the times.
PK Shaw
The respect of those you respect is worth more than the applause of the multitude."
--Arnold Glasow,
American author
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
Showing posts with label Fees. Show all posts
Showing posts with label Fees. Show all posts
Monday, July 19, 2010
Friday, May 15, 2009
AMCF News: LCH, Fees, ICAP consortium
Well, it is Friday night and I’m in the office too late!
These last 2 weeks have seen a flurry of announcements and I try and digest them from afar (and without the subtleties of all the sub plots).
As I pondered this earlier in the week I started with fees – and below are some thoughts on that.
Then I tried to put this in context with the LCH bid.
Basically, I just don’t think equity clearing is relevant.
I think the bid is about potential, earnings growth (OTC / CDS etc.) and keeping appropriate stuff ‘off’ exchange.
The Duffie / Zhu paper has some merits (Does a CCP reduce risk?).
I think the US is knee jerking too far towards ‘on exchange’ mandatory.
Mandatory is a good word in the context of optimising CCP.
Given this, I think the best outcome would be for LCH.CN to engage with the consortium.
Those areas with potential and growth will be acquired and invigorated.
The rump of the commoditised business, like equities, will be commoditised and long overdue decisions will finally be made.
The LCH.CN accounts for 2008 are not out yet.
They’re due, and they’ll make interesting reading for those of us who have watched the reform of our capital markets these last 12 months.
Please excuse the below drafting, it’s just snippits as they come to mind during the week.
Have a great week-end.
And a quote of interest: Never compete, create. (Earl Nightingale).
S
http://clearingandsettlement.blogspot.com
Fees.
In last Friday’s (8th May) blog I mentioned fees.
LCH.CN SA: there is still an ad valorem kicker in all fees along with a quarterly banding fee (from 0 to 150K / qtr).
So, your floor fee is 5 cents, your max is 60 cents.
http://www.lchclearnet.com/fees/sa/products/cash_markets.asp
LCH.CN Ltd: we still have 18 bands (which implies two different types of cross subsidy 1. between small and large users and 2. between liquid and illiquid securities).
This cross subsidy is also refereed to as: The bands are structured to incentivise growth and reward those members that use the service.
There is also the question of EUI ‘clearing fees’ : Those Exchanges that choose to use the CCP services of EUI will be subject to an additional EUI CCP services fee that will be passed through at cost.
The applicable per trade fee will be applied to the member’s average daily volume over the month
http://www.lchclearnet.com/fees/ltd/transactions/equityclear.asp
The average daily number of trades was 695,574, an increase of 11 per cent on the previous April, and up by four per cent compared with the first quarter of 2009.
http://www.londonstockexchange.com/NR/exeres/D3B0E261-7362-411F-929E-9D389BA3FCE6.htm
If we look at these two a little more closely:
The LCH.CN Ltd equity clear tariff is cheapest on Band ‘R’ or ADV of 240K.
Yet the LSE claim their total, for all products, blue chip & illiquids, is 700K.
Lets allow for some double counting for clearing (buy side / sell side) and single count for trading platform.
So basically, even if the entire LSE market (1.4myn cleared sides) was cleared by 6 participants, only 5 CPs would qualify for the cheapest rate.
A quick look at the LCH.CN Ltd web site shows 42 equity clear participants
http://www.lchclearnet.com/membership/ltd/current_membership.asp
The rate bands / volume assumptions can also be checked against the LCH home page (Mar volumes, all equities, 34.7myn – you guess the ADV)
I remain a steadfast advocate of transparency and unit pricing.
There is still way too much complexity and ambiguity in the service propositions.
The job of the new entrants has begun, and performed well, but is still far from done.
It looks like interoperability gets a push too.
This is great, but again, I think overly complex.
http://www.tradeturquoise.com/press/turquoise_lch.pdf
http://www.tradeturquoise.com/press/six_x_clear.pdf
(This week BATS, Chi-X, Turquoise, and NYSE Arca Europe each announced that customers will have the choice to use LCH.Clearnet as a clearing counterparty in addition to their existing CCPs.)
Nasdaq OMX offers competitive Nordic clearing with SIX x-clear and EuroCCP deals
Hans-Ole Jochumsen, President, NASDAQ OMX Nordic. "The ability to choose a CCP will allow price and service advantages to our customers, and ultimately drive trading velocity on our Nordic markets."
Nasdaq OMX Group (Nasdaq:NDAQ) has announced that it has entered into Memorandum of Understanding agreements with Central Counterparty (CCP) clearing service providers SIX x-clear and EuroCCP in order to support a competitive clearing model on its Nordic markets.
http://www.automatedtrader.net/algo-trading-news-10778.xhtm
I’m of a view each CP should get to choose their CCP (and the ambiguous pricing model that suits them or their vested interest).
To do this, each trading platform should choose a ‘primary’ CCP. (I wanted to use the term ‘default’ CCP, but that can conjure up the wrong image).
We need and deserve certainty and finality.
However, when a CCP wants to interoperate, all the trade flows of the ‘primary’ and interoperating CCP should be open.
(This allows choice by the CP, not mandate by the trading platform).
Icap joins £740m bid for LCH.Clearnet
By Jeremy Grant
A consortium of 11 banks and Icap, the interdealer broker, has submitted a €11 per share cash offer for LCH.Clearnet, valuing the clearing house at about €830m (£740m). The bid was submitted on Friday, according to people familiar with the matter, marking the latest twist in the fate of Europe's largest independent clearer.
http://www.ft.com/cms/s/376d646c-3dc2-11de-a85e-00144feabdc0,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F376d646c-3dc2-11de-a85e-00144feabdc0.html&_i_referer=http%3A%2F%2Fsearch.ft.com%2Fsearch%3FqueryText%3Djeremy%2Bgrant
*** Critics of the consortium question whether it is in the best interest of market participants for Europe's largest clearer to fall into the hands of a private consortium made up of the largest dealers in the OTC business. However Larry Tabb, chief executive of Tabb Group, a consultancy, said: "LCH. Clearnet's profitability is an expense to the dealers, so there will be a natural tendency to hold down costs." One person familiar with the consortium's intentions said profits at LCH.Clearnet would be capped at a certain level, with the excess rebated to customers.
LCH.Clearnet Board Is Said to Weigh ICAP-Led Bid of $1.2 Billion This Week
LCH.Clearnet Group Ltd.’s board will consider a takeover offer this week of as much as $1.2 billion from a group of brokers and banks led by ICAP Plc, according to two people familiar with the matter.
http://www.bloomberg.com/apps/news?pid=20601208&sid=avLful3tzevw&refer=finance
11/05/2009 10:44:00
ICAP CONSORTIUM MAKES EUR830M LCH.CLEARNET BID - FT
A consortium of 11 banks and interdealer broker Icap has launched an EUR830 million bid for LCH.Clearnet just weeks after the Depository Trust and Clearing Corporation called of its pursuit of the London clearing house, according to the Financial Times.
More on this story: http://www.finextra.com/fullstory.asp?id=20014
*** the clearer is reportedly still considering buying out its 123 shareholders and converting into a user-owned utility in a bid to scuttle the consortium. After the conversion, LCH.Clearnet would invite shareholders to buy back in, making use of the clearer conditional on being a shareholder.
LCH.Clearnet up against clock as obstacles pile onBecause the Depository Trust & Clearing Corp. recently walked away from its bid for LCH.Clearnet, it increased the likelihood that a consortium of banks and Icap will take over the London clearer. The move also revealed that time is running short for the clearer as challenges to its market position mount. Standard & Poor's analyst Miguel Pintado said the clearer faces "a dynamic operating environment, which offers threats and opportunities to the group's competitive position". Financial Times (04 May.)
**** Pierre Francotte, Euroclear chief executive, says: “I think what has renewed urgency is for LCH.Clearnet to have a credible plan for integration now they are going to be discussing the two remaining options on the table.”
Meanwhile, competition is intensifying. Last month EMCF, jointly owned by Nasdaq OMX and Fortis, cut clearing fees for UK equities by 40 per cent. Mr Francotte says: “LCH.Clearnet must look for ways to secure its client base and its business flows.”
LCH.Clearnet formulates response to consortium bid LCH.Clearnet is planning to reply to a €830m ($1.1bn) offer from a group of 11 banks and Icap, by offering joint discussions targeted at merging elements of the bid with the clearer's own proposal for a new structure. (Financial Times)
Initial 2003 merger terms were Euro 1.2byn. (600myn Clearnet and LCH respectively)
http://www.lchclearnet.com/Images/SA%20R&A%202003_tcm6-44286.pdf
LCH.Clearnet Group will share benefits between users and shareholders by allocating 70 per cent of pre-interest and tax profits that exceed €150 million in any given year.7
http://www.oft.gov.uk/shared_oft/mergers_ea02/lch.pdf
2007 equity volumes: 314,013K (single count) or 628,026K (double count)
http://pages.lchclearnet-email.com/page.aspx?qs=330c754b5e92df74dd1c3652cef7c09158ddc38a5ad1adb07df323da4bab54b85e3b06e2f0e6d78923923c57672e9d2c81de4bb9f226200ea3f7c8c3536dc4b1e499c7f2f0b9abb88a8735cf480831011b968ef1ace83bb4
2007 equity revenue: 172.8myn
http://www.lchclearnet.com/Images/Group%20Report%202007_tcm6-44285.pdf
Gives average cost per cleared contract (2007) of 27.5 cents.
So, unless fees have come down 80% since then, we have some way to go.
(2007 are latest publically available figures).
US REGULATORY REFORMS TO DRIVE AUTOMATION IN OTC TRADING The US Treasury has proposed a series of regulatory reforms designed to improve transparency in over-the-counter derivative trading and encourage a market-wide shift to exchange-based electronic platforms.
Full story: http://www.finextra.com/fullstory.asp?id=20033
Top Four Derivatives Dealers Account for 94% of ContractsThe top four derivatives dealers in the United States — units of JPMorgan Chase, Bank of America, ...
Great News: A Central Clearing House For Credit Default Swaps ...
I also disagree with how Duffie and Zhu measure the benefits of netting, but we'll spare ... What Is A Central Counterparty? Rather than provide a one line, ...www.businessinsider.com/great-news-a-central-clearing-house-for-credit-default-swaps-might-help-the-market-2009-5 - 62k - Cached - Similar pages
Finextra: CDS clearing plans badly flawed say researchers
22 Apr 2009 ... Instead, Duffie and Zhu suggest that the clearing house should clear a ... 22/01/09 European Commission ready to mandate central clearing for CDS deals - Reuters. 14/11/08 US regulators sign CDS counterparty clearing MoU ...www.finextra.com/fullstory.asp?id=19949 - Similar pages
SIFMA supports US government's proposal for derivativesUS Treasury Secretary Timothy Geithner unveiled a plan to improve oversight of derivatives markets. The proposal includes federal oversight for major dealers as well as requiring credit default swaps and other over-the-counter derivatives to be traded on exchanges. SIFMA and other trade groups indicated their support. "It is important that new regulatory measures preserve the usefulness of derivatives as risk-management tools for American businesses, and we look forward to working with the administration to ensure that outcome," SIFMA president Timothy Ryan said. CNNMoney.com/Fortune (13 May.) , The Wall Street Journal (14 May.) , Financial Times (14 May.)
Single Market News No 54 – Financial Crisis The newsletter includes an interview with David Wright on the causes of the financial crisis. “As far as we know, our banks and financial institutions purchased at least one trillion Dollars worth of US sub-prime assets and probably a lot more.
Although many multilateral trading facilities (MTFs) have had to revisit their business plans following the recent dip in equity trading activity, Olof Neiglick, CEO of Nordic MTF Burgundy, is confident his venue will not suffer the same fate.
Read the Interview
Burgundy will employ a maker-taker pricing structure, which rewards liquidity posters and charges those who remove liquidity. For the 15 most-traded instruments, the rebate for posting liquidity will be 0.15 basis points, while the charge for removing liquidity will be 0.3 bps. The next 35 most-traded stocks will rebate members 0.1 bps for passive orders and charge 0.3 bps for aggressive orders, while mid- and small-caps and exchange-traded funds will be charged at 0.1 bps for passive orders and 0.3 bps for aggressive orders.
http://www.thetradenews.com/node/3153
11/05/2009 15:21:00
ADVENT INVESTS $170.6 MILLION ON 30% STAKE IN BRAZILIAN DEPOSITORY
Private equity firm Advent has bought a 30% stake in Brazilian fixed income and OTC derivatives clearing house Cetip, from a number of local financial-market participants.
More on this story: http://www.finextra.com/fullstory.asp?id=20017
08/05/2009 11:07:00
DIRECT EDGE TO CONVERT TO STOCK EXCHANGE STATUS
US stock trading venue Direct Edge has filed applications with the Securities and Exchange Commmission to convert into two national securities exchanges later this year.
More on this story: http://www.finextra.com/fullstory.asp?id=20010
*** Direct Edge broke the ten per cent threshold for matched market share in US stock trading last month for the first time, and now claims to be the third-largest stock market operator in the world.
Omega ATS Looks for Summer Flow
By Nina Mehta
In Canada, where competition against the dominant Toronto Stock Exchange has achieved a measure of success only in the last quarter, a small alternative trading system called Omega ATS is seeking to rock the boat with radical pricing. Omega is currently Canada's smallest displayed market.
http://www.tradersmagazine.com/news/-103748-1.html
NASDAQ OMX SELLS ORC SOFTWARE STAKE
Market operator Nasdaq OMX has divested its 25% stake in Swedish derivatives trading technology company Orc Software through an accelerated bookbuilding offering.
Full story: http://www.finextra.com/fullstory.asp?id=20026
SunGard Acquires ICE Risk Solution
SunGard has acquired the ICE Risk commodity trading solution from IntercontinentalExchange (NYSE: ICE). ICE Risk is a real-time position-keeping and risk management system that captures and values exchange-traded and cleared products across multiple trading venues. ICE Risk also provides exchange connectivity with real-time trade feeds. The acquisition, the terms of which were not disclosed, is not expected to have a material impact on SunGard’s financial results.
http://www.sungard.com/pressreleases/2009/kiodex051109.aspx
08/05/2009 11:32:00
GOLDMAN SACHS, MORGAN STANLEY AND UBS IN EUROPEAN DARK POOL AGREEMENT
Goldman Sachs, Morgan Stanley and UBS have agreed a deal that will allow their clients to access each bank's European dark pools.
More on this story: http://www.finextra.com/fullstory.asp?id=20011
The Big Flaw of the CDS Big BangGuest Blog: By Kevin McPartland, TABB GroupIs the CDS Big Bang setting us up for another Big Bust?
http://www.wallstreetandtech.com/blog/archives/2009/05/the_big_flaw_of.html?cid=nl_wallstreettech_daily
OTC, Central Clearing or Exchange-Traded: Choosing the Right PathIncreasing capital reserve requirements for OTC self-cleared products would change the economics of the ...
NYSE Liffe to launch FTSE 100 dividend index futures
Amsterdam, Brussels, Lisbon, London, New York, Paris, Monday, 11 May 2009 – NYSE Liffe, the European derivatives business of NYSE Euronext, announced today that it will launch a new standard, cash-settled futures contract based on the FTSE 100 Dividend Index, from Wednesday 13 May 2009.
http://www.euronext.com/fic/000/047/725/477250.pdf
Stress Test: Compare the 19 banks that were tested:
http://online.wsj.com/article/SB124172766940997563.html?mod=dist_smartbrief#project%3DSTRESS0409%26articleTabs%3Dinteractive
*** best information / presentation idea of the week by far!
Stress tests might lead to $500 million in feesDuring the first quarter of this year, underwriting fees reached a record low, but bankers are expecting a spike after the government's stress tests of the nation's 19 largest banks. Financial institutions are poised to earn in excess of $500 million for helping banks raise capital to make up for shortfalls found through the tests and to repay the government for funds received through the Troubled Asset Relief Program. Financial Times (5/12) , The Wall Street Journal (5/11)
*** nice!
12/05/2009 10:46:00
TOKYO COMMODITY EXCHANGE TRADING HALTED AFTER NEW PLATFORM HIT BY GLITCH
Connectivity problems forced the Tokyo Commodity Exchange (Tocom) to suspend all trading for over three hours today, just a month after a new technology platform developed by Nasdaq OMX went live.
More on this story: http://www.finextra.com/fullstory.asp?id=20020
WATERS: Getting the Best of Execution Capital markets firms can now no longer ignore the reality of best execution. But despite an increasingly competitive trading landscape in Europe, MiFID still appears some way off from achieving its goals. By Joe Morgan
THE TRADE NEWS: Quote MTF Aims to Attract SOR Flow with Pricing ModelBy Staff5/13/09Quote MTF, a Hungarian-based pan-European trading venue, is confident of securing liquidity from smart order routers (SORs) from launch because of its pricing model, which it claims will be the cheapest in Europe.The platform will charge 0.14 basis points for removing liquidity and will not pay a rebate for posting it. By comparison, rival MTF Chi-X Europe charges 0.3 bps for removing liquidity and rebates 0.2 bps for adding liquidity.
Securities Lending Remakes Itself in Wake of Market Crisis
By Carol E. Curtis
As the financial services industry has retrenched, the securities lending market has faced diminished liquidity, less demand due to deleveraging, and a shrinking pool of hedge funds, according to research firm Aite Group.
There are also fewer prime brokers and borrowers, says Aite in a report issued today, and even fewer lenders, “some of whom will be reevaluating their business-line viability.” The net effect, says the study, is a more cautious and aware beneficial owner, “concerned about a concentration of borrowers, counterparty risk, program risk-reward balance and program expenses in the belt-tightening economic climate.”
Denise Valentine, a senior analyst at Boston-based Aite and author of the report, noted that a major problem for the stock-loan market is that participants have lost money, which historically has not happened. Beneficial owners may have invested collateral in instruments that are now under water, said Valentine, and cannot return the collateral without taking a loss. “People stuck in that scenario have to keep the deal open,” she explained. To other participants, that is a deterrent--“There is reduced participation, and an exit by some people.”
Source: J.P. Morgan TicDB
Summary – week 19
· Liquidity fragmentation in Europe last week reached an all time high of 17.7%, driven by the UK and Germany.
· Ireland (73.1%), UK (30.6%), Germany (21.1%), France (20.8%) and Netherlands (18.8%) were the most fragmented markets in percentage terms.
· UK ($3.4bn), Germany ($1.6bn), France ($1.5bn), Netherlands ($0.4bn) and Italy ($0.4bn) were the most fragmented in terms of Displayed Liquidity traded away from the primary market.
· Chi-X achieved average daily turnover (ADT) of $5.5bn, equivalent to 12.2% of flow in Chi-X names. HSBC ($157m, 18.8%), Total (115m, 19.5%) and BP ($112m, 25.0%) had the highest ADT.
· ADT on the Turquoise Displayed Order Book was $1.3bn, its highest level since Week 12. Market share in Turquoise names was 2.9%. HSBC ($61.5m, 7.4%), BP (45m, 10.0%) and Vodafone ($33m, 7.4%) had the highest ADT.
· BATS achieved ADT of $0.9bn, its highest level since launch. Market share in BATS names was 2.1%. HSBC ($31m, 3.7%), E.ON ($25m, 3.9%) and Arcelormittal ($23m, 3.3%) had the highest ADT.
· Nasdaq OMX achieved ADT of $149.3m, a second successive new high.
· 8 stocks traded more than 20% ADV on Dark venues. See Figures 7 – 10 and Tables 8 - 9 for further details.
THIS week it is a step away from being politically correct for Strictly Boardroom and a dive into scientific controversy. Allan Trench reviews Ian Plimer’s new book – Heaven and Earth, which promotes the case against human-induced global warming – and finds it very compelling indeed.
It is now approaching 20 years since your scribe departed the mainstream academia of Oxford University’s Earth Science department to join the “real world” of the mining industry. Reading Ian Plimer’s latest book, Heaven and Earth, had me hankering back to those good old days of long hours writing journal articles for little but the self satisfaction of pushing back the frontiers of science. It was a privilege back then to study the work of the great modern day geoscientists. Ian Plimer’s book demonstrates that he sits right up there with the best. Why? Because authors that are capable of pulling together diverse lines of evidence from broad areas of science to apply them to a unifying theme are few and far between. Plimer is clearly one of this rare breed. But geologists among readers would know that fact already. Incidentally, Oxford’s Earth Science department sits adjacent to the Oxford University Museum, venue to the famous Huxley-Wilberforce debate in 1860 on Darwin’s On the Origin of Species. Reading Plimer’s book suggests the time has come for another landmark Oxford debate – this time one focused on the cases for and against human influences on global warming. No doubt Ian Plimer would attend – and so should Al Gore and his cameras. The problem is that the general public, the media – and perhaps most critically the politicians – are a long way off the pace when it comes to understanding the complex science of climate change, and as Plimer argues convincingly, are no longer giving real scientific debate on the subject any airplay. Seven-second taglines on the news all reinforce the notion of human induced climate change – but that the debate is far from over. If only people knew.For example, news reels showing ice-flows breaking up imply a human source to warming. But that’s just what ice-flows do at the margin – they break up – perfectly naturally.I went into this book with an open mind and I finished the book in Plimer’s camp. Anyone with an open mind – and certainly those of a scientific persuasion – should read it Here are some of Plimer’s conclusions in sound-byte form through the medium of frequently asked questions:
· Is the speed and amount of modern climate change unprecedented? No.
· Is dangerous warming occurring? No.
· Is the temperature range observed in the 20th century outside the range of normal variability? No.
· Does the sun influence the Earth’s climate? Yes. (In fact, if there is one overarching conclusion from the book it would be “It’s the sun, stupid”)
· Do volcanoes change climate? Yes.
· Do wobbles in the Earth’s orbit change climate? Yes.
· Have past climate changes driven extinction? Yes and no.
· Is warming melting the polar ice caps and valley glaciers? Yes but no
· Do human emissions of carbon dioxide create sea level rise? No.
· Will the seas become acid? No.
· Does sea level rise kill coral atolls? No.
· Are humans forcing changes in ocean currents? No.
· Do thermometer measurements show the planet is warming? No.
· Do other temperature measurements show the planet is warming? No.
· Is atmospheric carbon dioxide of human origin increasing? Possibly.
· Is atmospheric CO2 approaching a dangerous level? No.
· Do higher sea temperatures cause more hurricanes? No.
· Do clouds influence climate? Yes. If you are involved in the mining industry, then read this book. If you are not in the mining sector at all, then read this book. I wonder if Ian Plimer has sold the film rights to Heaven and Earth.Allan Trench is Adjunct Professor of Mine Management & Mineral Economics, Western Australian School of Mines and a Non-Executive Director of several resources sector companies. He is the Perth representative for CRU Strategies, the consulting division of independent metals & mining advisory CRU group (allan.trench@crugroup.com).
Scott Riley
EMCF Business Development
European Multilateral Clearing Facility
8th Floor 50 Bridge Street Sydney Australia 2000
((Off)+61 (0)2 8916 9634 È(Mob): +61 (0)418 117 627
* scott.riley@au.fortis.com
These last 2 weeks have seen a flurry of announcements and I try and digest them from afar (and without the subtleties of all the sub plots).
As I pondered this earlier in the week I started with fees – and below are some thoughts on that.
Then I tried to put this in context with the LCH bid.
Basically, I just don’t think equity clearing is relevant.
I think the bid is about potential, earnings growth (OTC / CDS etc.) and keeping appropriate stuff ‘off’ exchange.
The Duffie / Zhu paper has some merits (Does a CCP reduce risk?).
I think the US is knee jerking too far towards ‘on exchange’ mandatory.
Mandatory is a good word in the context of optimising CCP.
Given this, I think the best outcome would be for LCH.CN to engage with the consortium.
Those areas with potential and growth will be acquired and invigorated.
The rump of the commoditised business, like equities, will be commoditised and long overdue decisions will finally be made.
The LCH.CN accounts for 2008 are not out yet.
They’re due, and they’ll make interesting reading for those of us who have watched the reform of our capital markets these last 12 months.
Please excuse the below drafting, it’s just snippits as they come to mind during the week.
Have a great week-end.
And a quote of interest: Never compete, create. (Earl Nightingale).
S
http://clearingandsettlement.blogspot.com
Fees.
In last Friday’s (8th May) blog I mentioned fees.
LCH.CN SA: there is still an ad valorem kicker in all fees along with a quarterly banding fee (from 0 to 150K / qtr).
So, your floor fee is 5 cents, your max is 60 cents.
http://www.lchclearnet.com/fees/sa/products/cash_markets.asp
LCH.CN Ltd: we still have 18 bands (which implies two different types of cross subsidy 1. between small and large users and 2. between liquid and illiquid securities).
This cross subsidy is also refereed to as: The bands are structured to incentivise growth and reward those members that use the service.
There is also the question of EUI ‘clearing fees’ : Those Exchanges that choose to use the CCP services of EUI will be subject to an additional EUI CCP services fee that will be passed through at cost.
The applicable per trade fee will be applied to the member’s average daily volume over the month
http://www.lchclearnet.com/fees/ltd/transactions/equityclear.asp
The average daily number of trades was 695,574, an increase of 11 per cent on the previous April, and up by four per cent compared with the first quarter of 2009.
http://www.londonstockexchange.com/NR/exeres/D3B0E261-7362-411F-929E-9D389BA3FCE6.htm
If we look at these two a little more closely:
The LCH.CN Ltd equity clear tariff is cheapest on Band ‘R’ or ADV of 240K.
Yet the LSE claim their total, for all products, blue chip & illiquids, is 700K.
Lets allow for some double counting for clearing (buy side / sell side) and single count for trading platform.
So basically, even if the entire LSE market (1.4myn cleared sides) was cleared by 6 participants, only 5 CPs would qualify for the cheapest rate.
A quick look at the LCH.CN Ltd web site shows 42 equity clear participants
http://www.lchclearnet.com/membership/ltd/current_membership.asp
The rate bands / volume assumptions can also be checked against the LCH home page (Mar volumes, all equities, 34.7myn – you guess the ADV)
I remain a steadfast advocate of transparency and unit pricing.
There is still way too much complexity and ambiguity in the service propositions.
The job of the new entrants has begun, and performed well, but is still far from done.
It looks like interoperability gets a push too.
This is great, but again, I think overly complex.
http://www.tradeturquoise.com/press/turquoise_lch.pdf
http://www.tradeturquoise.com/press/six_x_clear.pdf
(This week BATS, Chi-X, Turquoise, and NYSE Arca Europe each announced that customers will have the choice to use LCH.Clearnet as a clearing counterparty in addition to their existing CCPs.)
Nasdaq OMX offers competitive Nordic clearing with SIX x-clear and EuroCCP deals
Hans-Ole Jochumsen, President, NASDAQ OMX Nordic. "The ability to choose a CCP will allow price and service advantages to our customers, and ultimately drive trading velocity on our Nordic markets."
Nasdaq OMX Group (Nasdaq:NDAQ) has announced that it has entered into Memorandum of Understanding agreements with Central Counterparty (CCP) clearing service providers SIX x-clear and EuroCCP in order to support a competitive clearing model on its Nordic markets.
http://www.automatedtrader.net/algo-trading-news-10778.xhtm
I’m of a view each CP should get to choose their CCP (and the ambiguous pricing model that suits them or their vested interest).
To do this, each trading platform should choose a ‘primary’ CCP. (I wanted to use the term ‘default’ CCP, but that can conjure up the wrong image).
We need and deserve certainty and finality.
However, when a CCP wants to interoperate, all the trade flows of the ‘primary’ and interoperating CCP should be open.
(This allows choice by the CP, not mandate by the trading platform).
Icap joins £740m bid for LCH.Clearnet
By Jeremy Grant
A consortium of 11 banks and Icap, the interdealer broker, has submitted a €11 per share cash offer for LCH.Clearnet, valuing the clearing house at about €830m (£740m). The bid was submitted on Friday, according to people familiar with the matter, marking the latest twist in the fate of Europe's largest independent clearer.
http://www.ft.com/cms/s/376d646c-3dc2-11de-a85e-00144feabdc0,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F376d646c-3dc2-11de-a85e-00144feabdc0.html&_i_referer=http%3A%2F%2Fsearch.ft.com%2Fsearch%3FqueryText%3Djeremy%2Bgrant
*** Critics of the consortium question whether it is in the best interest of market participants for Europe's largest clearer to fall into the hands of a private consortium made up of the largest dealers in the OTC business. However Larry Tabb, chief executive of Tabb Group, a consultancy, said: "LCH. Clearnet's profitability is an expense to the dealers, so there will be a natural tendency to hold down costs." One person familiar with the consortium's intentions said profits at LCH.Clearnet would be capped at a certain level, with the excess rebated to customers.
LCH.Clearnet Board Is Said to Weigh ICAP-Led Bid of $1.2 Billion This Week
LCH.Clearnet Group Ltd.’s board will consider a takeover offer this week of as much as $1.2 billion from a group of brokers and banks led by ICAP Plc, according to two people familiar with the matter.
http://www.bloomberg.com/apps/news?pid=20601208&sid=avLful3tzevw&refer=finance
11/05/2009 10:44:00
ICAP CONSORTIUM MAKES EUR830M LCH.CLEARNET BID - FT
A consortium of 11 banks and interdealer broker Icap has launched an EUR830 million bid for LCH.Clearnet just weeks after the Depository Trust and Clearing Corporation called of its pursuit of the London clearing house, according to the Financial Times.
More on this story: http://www.finextra.com/fullstory.asp?id=20014
*** the clearer is reportedly still considering buying out its 123 shareholders and converting into a user-owned utility in a bid to scuttle the consortium. After the conversion, LCH.Clearnet would invite shareholders to buy back in, making use of the clearer conditional on being a shareholder.
LCH.Clearnet up against clock as obstacles pile onBecause the Depository Trust & Clearing Corp. recently walked away from its bid for LCH.Clearnet, it increased the likelihood that a consortium of banks and Icap will take over the London clearer. The move also revealed that time is running short for the clearer as challenges to its market position mount. Standard & Poor's analyst Miguel Pintado said the clearer faces "a dynamic operating environment, which offers threats and opportunities to the group's competitive position". Financial Times (04 May.)
**** Pierre Francotte, Euroclear chief executive, says: “I think what has renewed urgency is for LCH.Clearnet to have a credible plan for integration now they are going to be discussing the two remaining options on the table.”
Meanwhile, competition is intensifying. Last month EMCF, jointly owned by Nasdaq OMX and Fortis, cut clearing fees for UK equities by 40 per cent. Mr Francotte says: “LCH.Clearnet must look for ways to secure its client base and its business flows.”
LCH.Clearnet formulates response to consortium bid LCH.Clearnet is planning to reply to a €830m ($1.1bn) offer from a group of 11 banks and Icap, by offering joint discussions targeted at merging elements of the bid with the clearer's own proposal for a new structure. (Financial Times)
Initial 2003 merger terms were Euro 1.2byn. (600myn Clearnet and LCH respectively)
http://www.lchclearnet.com/Images/SA%20R&A%202003_tcm6-44286.pdf
LCH.Clearnet Group will share benefits between users and shareholders by allocating 70 per cent of pre-interest and tax profits that exceed €150 million in any given year.7
http://www.oft.gov.uk/shared_oft/mergers_ea02/lch.pdf
2007 equity volumes: 314,013K (single count) or 628,026K (double count)
http://pages.lchclearnet-email.com/page.aspx?qs=330c754b5e92df74dd1c3652cef7c09158ddc38a5ad1adb07df323da4bab54b85e3b06e2f0e6d78923923c57672e9d2c81de4bb9f226200ea3f7c8c3536dc4b1e499c7f2f0b9abb88a8735cf480831011b968ef1ace83bb4
2007 equity revenue: 172.8myn
http://www.lchclearnet.com/Images/Group%20Report%202007_tcm6-44285.pdf
Gives average cost per cleared contract (2007) of 27.5 cents.
So, unless fees have come down 80% since then, we have some way to go.
(2007 are latest publically available figures).
US REGULATORY REFORMS TO DRIVE AUTOMATION IN OTC TRADING The US Treasury has proposed a series of regulatory reforms designed to improve transparency in over-the-counter derivative trading and encourage a market-wide shift to exchange-based electronic platforms.
Full story: http://www.finextra.com/fullstory.asp?id=20033
Top Four Derivatives Dealers Account for 94% of ContractsThe top four derivatives dealers in the United States — units of JPMorgan Chase, Bank of America, ...
Great News: A Central Clearing House For Credit Default Swaps ...
I also disagree with how Duffie and Zhu measure the benefits of netting, but we'll spare ... What Is A Central Counterparty? Rather than provide a one line, ...www.businessinsider.com/great-news-a-central-clearing-house-for-credit-default-swaps-might-help-the-market-2009-5 - 62k - Cached - Similar pages
Finextra: CDS clearing plans badly flawed say researchers
22 Apr 2009 ... Instead, Duffie and Zhu suggest that the clearing house should clear a ... 22/01/09 European Commission ready to mandate central clearing for CDS deals - Reuters. 14/11/08 US regulators sign CDS counterparty clearing MoU ...www.finextra.com/fullstory.asp?id=19949 - Similar pages
SIFMA supports US government's proposal for derivativesUS Treasury Secretary Timothy Geithner unveiled a plan to improve oversight of derivatives markets. The proposal includes federal oversight for major dealers as well as requiring credit default swaps and other over-the-counter derivatives to be traded on exchanges. SIFMA and other trade groups indicated their support. "It is important that new regulatory measures preserve the usefulness of derivatives as risk-management tools for American businesses, and we look forward to working with the administration to ensure that outcome," SIFMA president Timothy Ryan said. CNNMoney.com/Fortune (13 May.) , The Wall Street Journal (14 May.) , Financial Times (14 May.)
Single Market News No 54 – Financial Crisis The newsletter includes an interview with David Wright on the causes of the financial crisis. “As far as we know, our banks and financial institutions purchased at least one trillion Dollars worth of US sub-prime assets and probably a lot more.
Although many multilateral trading facilities (MTFs) have had to revisit their business plans following the recent dip in equity trading activity, Olof Neiglick, CEO of Nordic MTF Burgundy, is confident his venue will not suffer the same fate.
Read the Interview
Burgundy will employ a maker-taker pricing structure, which rewards liquidity posters and charges those who remove liquidity. For the 15 most-traded instruments, the rebate for posting liquidity will be 0.15 basis points, while the charge for removing liquidity will be 0.3 bps. The next 35 most-traded stocks will rebate members 0.1 bps for passive orders and charge 0.3 bps for aggressive orders, while mid- and small-caps and exchange-traded funds will be charged at 0.1 bps for passive orders and 0.3 bps for aggressive orders.
http://www.thetradenews.com/node/3153
11/05/2009 15:21:00
ADVENT INVESTS $170.6 MILLION ON 30% STAKE IN BRAZILIAN DEPOSITORY
Private equity firm Advent has bought a 30% stake in Brazilian fixed income and OTC derivatives clearing house Cetip, from a number of local financial-market participants.
More on this story: http://www.finextra.com/fullstory.asp?id=20017
08/05/2009 11:07:00
DIRECT EDGE TO CONVERT TO STOCK EXCHANGE STATUS
US stock trading venue Direct Edge has filed applications with the Securities and Exchange Commmission to convert into two national securities exchanges later this year.
More on this story: http://www.finextra.com/fullstory.asp?id=20010
*** Direct Edge broke the ten per cent threshold for matched market share in US stock trading last month for the first time, and now claims to be the third-largest stock market operator in the world.
Omega ATS Looks for Summer Flow
By Nina Mehta
In Canada, where competition against the dominant Toronto Stock Exchange has achieved a measure of success only in the last quarter, a small alternative trading system called Omega ATS is seeking to rock the boat with radical pricing. Omega is currently Canada's smallest displayed market.
http://www.tradersmagazine.com/news/-103748-1.html
NASDAQ OMX SELLS ORC SOFTWARE STAKE
Market operator Nasdaq OMX has divested its 25% stake in Swedish derivatives trading technology company Orc Software through an accelerated bookbuilding offering.
Full story: http://www.finextra.com/fullstory.asp?id=20026
SunGard Acquires ICE Risk Solution
SunGard has acquired the ICE Risk commodity trading solution from IntercontinentalExchange (NYSE: ICE). ICE Risk is a real-time position-keeping and risk management system that captures and values exchange-traded and cleared products across multiple trading venues. ICE Risk also provides exchange connectivity with real-time trade feeds. The acquisition, the terms of which were not disclosed, is not expected to have a material impact on SunGard’s financial results.
http://www.sungard.com/pressreleases/2009/kiodex051109.aspx
08/05/2009 11:32:00
GOLDMAN SACHS, MORGAN STANLEY AND UBS IN EUROPEAN DARK POOL AGREEMENT
Goldman Sachs, Morgan Stanley and UBS have agreed a deal that will allow their clients to access each bank's European dark pools.
More on this story: http://www.finextra.com/fullstory.asp?id=20011
The Big Flaw of the CDS Big BangGuest Blog: By Kevin McPartland, TABB GroupIs the CDS Big Bang setting us up for another Big Bust?
http://www.wallstreetandtech.com/blog/archives/2009/05/the_big_flaw_of.html?cid=nl_wallstreettech_daily
OTC, Central Clearing or Exchange-Traded: Choosing the Right PathIncreasing capital reserve requirements for OTC self-cleared products would change the economics of the ...
NYSE Liffe to launch FTSE 100 dividend index futures
Amsterdam, Brussels, Lisbon, London, New York, Paris, Monday, 11 May 2009 – NYSE Liffe, the European derivatives business of NYSE Euronext, announced today that it will launch a new standard, cash-settled futures contract based on the FTSE 100 Dividend Index, from Wednesday 13 May 2009.
http://www.euronext.com/fic/000/047/725/477250.pdf
Stress Test: Compare the 19 banks that were tested:
http://online.wsj.com/article/SB124172766940997563.html?mod=dist_smartbrief#project%3DSTRESS0409%26articleTabs%3Dinteractive
*** best information / presentation idea of the week by far!
Stress tests might lead to $500 million in feesDuring the first quarter of this year, underwriting fees reached a record low, but bankers are expecting a spike after the government's stress tests of the nation's 19 largest banks. Financial institutions are poised to earn in excess of $500 million for helping banks raise capital to make up for shortfalls found through the tests and to repay the government for funds received through the Troubled Asset Relief Program. Financial Times (5/12) , The Wall Street Journal (5/11)
*** nice!
12/05/2009 10:46:00
TOKYO COMMODITY EXCHANGE TRADING HALTED AFTER NEW PLATFORM HIT BY GLITCH
Connectivity problems forced the Tokyo Commodity Exchange (Tocom) to suspend all trading for over three hours today, just a month after a new technology platform developed by Nasdaq OMX went live.
More on this story: http://www.finextra.com/fullstory.asp?id=20020
WATERS: Getting the Best of Execution Capital markets firms can now no longer ignore the reality of best execution. But despite an increasingly competitive trading landscape in Europe, MiFID still appears some way off from achieving its goals. By Joe Morgan
THE TRADE NEWS: Quote MTF Aims to Attract SOR Flow with Pricing ModelBy Staff5/13/09Quote MTF, a Hungarian-based pan-European trading venue, is confident of securing liquidity from smart order routers (SORs) from launch because of its pricing model, which it claims will be the cheapest in Europe.The platform will charge 0.14 basis points for removing liquidity and will not pay a rebate for posting it. By comparison, rival MTF Chi-X Europe charges 0.3 bps for removing liquidity and rebates 0.2 bps for adding liquidity.
Securities Lending Remakes Itself in Wake of Market Crisis
By Carol E. Curtis
As the financial services industry has retrenched, the securities lending market has faced diminished liquidity, less demand due to deleveraging, and a shrinking pool of hedge funds, according to research firm Aite Group.
There are also fewer prime brokers and borrowers, says Aite in a report issued today, and even fewer lenders, “some of whom will be reevaluating their business-line viability.” The net effect, says the study, is a more cautious and aware beneficial owner, “concerned about a concentration of borrowers, counterparty risk, program risk-reward balance and program expenses in the belt-tightening economic climate.”
Denise Valentine, a senior analyst at Boston-based Aite and author of the report, noted that a major problem for the stock-loan market is that participants have lost money, which historically has not happened. Beneficial owners may have invested collateral in instruments that are now under water, said Valentine, and cannot return the collateral without taking a loss. “People stuck in that scenario have to keep the deal open,” she explained. To other participants, that is a deterrent--“There is reduced participation, and an exit by some people.”
Source: J.P. Morgan TicDB
Summary – week 19
· Liquidity fragmentation in Europe last week reached an all time high of 17.7%, driven by the UK and Germany.
· Ireland (73.1%), UK (30.6%), Germany (21.1%), France (20.8%) and Netherlands (18.8%) were the most fragmented markets in percentage terms.
· UK ($3.4bn), Germany ($1.6bn), France ($1.5bn), Netherlands ($0.4bn) and Italy ($0.4bn) were the most fragmented in terms of Displayed Liquidity traded away from the primary market.
· Chi-X achieved average daily turnover (ADT) of $5.5bn, equivalent to 12.2% of flow in Chi-X names. HSBC ($157m, 18.8%), Total (115m, 19.5%) and BP ($112m, 25.0%) had the highest ADT.
· ADT on the Turquoise Displayed Order Book was $1.3bn, its highest level since Week 12. Market share in Turquoise names was 2.9%. HSBC ($61.5m, 7.4%), BP (45m, 10.0%) and Vodafone ($33m, 7.4%) had the highest ADT.
· BATS achieved ADT of $0.9bn, its highest level since launch. Market share in BATS names was 2.1%. HSBC ($31m, 3.7%), E.ON ($25m, 3.9%) and Arcelormittal ($23m, 3.3%) had the highest ADT.
· Nasdaq OMX achieved ADT of $149.3m, a second successive new high.
· 8 stocks traded more than 20% ADV on Dark venues. See Figures 7 – 10 and Tables 8 - 9 for further details.
THIS week it is a step away from being politically correct for Strictly Boardroom and a dive into scientific controversy. Allan Trench reviews Ian Plimer’s new book – Heaven and Earth, which promotes the case against human-induced global warming – and finds it very compelling indeed.
It is now approaching 20 years since your scribe departed the mainstream academia of Oxford University’s Earth Science department to join the “real world” of the mining industry. Reading Ian Plimer’s latest book, Heaven and Earth, had me hankering back to those good old days of long hours writing journal articles for little but the self satisfaction of pushing back the frontiers of science. It was a privilege back then to study the work of the great modern day geoscientists. Ian Plimer’s book demonstrates that he sits right up there with the best. Why? Because authors that are capable of pulling together diverse lines of evidence from broad areas of science to apply them to a unifying theme are few and far between. Plimer is clearly one of this rare breed. But geologists among readers would know that fact already. Incidentally, Oxford’s Earth Science department sits adjacent to the Oxford University Museum, venue to the famous Huxley-Wilberforce debate in 1860 on Darwin’s On the Origin of Species. Reading Plimer’s book suggests the time has come for another landmark Oxford debate – this time one focused on the cases for and against human influences on global warming. No doubt Ian Plimer would attend – and so should Al Gore and his cameras. The problem is that the general public, the media – and perhaps most critically the politicians – are a long way off the pace when it comes to understanding the complex science of climate change, and as Plimer argues convincingly, are no longer giving real scientific debate on the subject any airplay. Seven-second taglines on the news all reinforce the notion of human induced climate change – but that the debate is far from over. If only people knew.For example, news reels showing ice-flows breaking up imply a human source to warming. But that’s just what ice-flows do at the margin – they break up – perfectly naturally.I went into this book with an open mind and I finished the book in Plimer’s camp. Anyone with an open mind – and certainly those of a scientific persuasion – should read it Here are some of Plimer’s conclusions in sound-byte form through the medium of frequently asked questions:
· Is the speed and amount of modern climate change unprecedented? No.
· Is dangerous warming occurring? No.
· Is the temperature range observed in the 20th century outside the range of normal variability? No.
· Does the sun influence the Earth’s climate? Yes. (In fact, if there is one overarching conclusion from the book it would be “It’s the sun, stupid”)
· Do volcanoes change climate? Yes.
· Do wobbles in the Earth’s orbit change climate? Yes.
· Have past climate changes driven extinction? Yes and no.
· Is warming melting the polar ice caps and valley glaciers? Yes but no
· Do human emissions of carbon dioxide create sea level rise? No.
· Will the seas become acid? No.
· Does sea level rise kill coral atolls? No.
· Are humans forcing changes in ocean currents? No.
· Do thermometer measurements show the planet is warming? No.
· Do other temperature measurements show the planet is warming? No.
· Is atmospheric carbon dioxide of human origin increasing? Possibly.
· Is atmospheric CO2 approaching a dangerous level? No.
· Do higher sea temperatures cause more hurricanes? No.
· Do clouds influence climate? Yes. If you are involved in the mining industry, then read this book. If you are not in the mining sector at all, then read this book. I wonder if Ian Plimer has sold the film rights to Heaven and Earth.Allan Trench is Adjunct Professor of Mine Management & Mineral Economics, Western Australian School of Mines and a Non-Executive Director of several resources sector companies. He is the Perth representative for CRU Strategies, the consulting division of independent metals & mining advisory CRU group (allan.trench@crugroup.com).
Scott Riley
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