News: Crikey Access Independence Dent, PureMatch, Hello PDQ, Plus a kerfuffle.....JPM Corp Cup and Heron report

I totally forgot about the JPM Corporate Challenge this week. (I knew I was supposed to keep up the running in training for something). Anyway, a great event put on by JPM.

http://register.jpmorganchasecc.com/chasecc/results/show_individual.tcl?sub_event_id=41440&series_year=2011&result_id=1911487

I did around 34:47 in ’09, so satisfied with 32:35 this year.

The official race report is up from the Heron Island swim:

http://www.oceanswims.com/default2.asp?active_page_id=337

Next swim is the Dawny which I like as it gives you a chance to swim around Cockatoo island in Sydney harbour:

http://www.oceanswims.com/Events.asp?EventID=275

Then what I hope is the last run of the year:

http://www.varietysantafunrun.com.au/NSW/

I don’t usually worry about hackers etc. (why would you bother?)...but this offended my sensibilities.

Outrageous! By all means knock out the Dax...but leave sport out of politics!

(The only time politics is acceptable in sport is when the Aussie government is buying Olympic gold medals through direct subsidy of our sportspeople....other countries doing this is of course cheating).

HACKERS CONFUSE GERMAN STOCK EXCHANGE WITH FRENCH RUGBY SITE

Hackers have knocked out a French rugby club fansite, mistaking it for Deutsche Börse's Dax portal.

More on this story: http://www.finextra.com/news/fullstory.aspx?newsitemid=23131

Australia lacks the satirical richness of the UK. We do have something in the vein of “private eye” with some objective journalism from crikey.com. I liked their story of the firm that did some of the lobbying for the ASX / SGX deal. I thought the access economics paper woeful at the time. Looks like it’s not the first time they’ve written to order rather than content.

Now that CXA has come to market, ASX launches purematch. (could be co-incidence?) The perfect trading book for blue chip names. Just fancy that!

I do like PDQ. Now that we’ve pretty much commoditised the price / time priority CLOB (you know, central limit order book), these variations on a theme will be the next differentiators.

Plus what a kerfuffle at Plus.

Rothschild (typical floor broker) only saw my position on Dodd Frank about 147 years before me. I hate frontrunners!

(http://en.wikipedia.org/wiki/Front_running)

My heartfelt congratulations to the EMCF team. 1 billion contracts....and that only in year to date.

Another landmark in the European landscape. Jolly good show chaps. Bravo!

Bitterballen and tulips all round!

(and why not make your own.... http://www.youcook.ca/blog/2010/02/hhh-bitterballen/)

Have a great week end all,

Whatever your leisure, make it a pleasure!

S

s.riley.mail@googlemail.com
http://clearingandsettlement.blogspot.com/

Platforms

ASX-SGX: why the combination is in Australia’s national interest

http://www.asxgroup.com.au/media/PDFs/20101206_ASX_SGX__AccessReport.pdf

Access is an economic consultancy (these days part of Deloitte) that hires itself out to anyone who wants an ‘independent’ economic research report to strengthen their case. And Access isn't shy about taking sides on major public debates.

There was its intervention, paid for by the Distilled Spirits Council of Australia, in the alcopops debate, labelled "as dodgy as a three-day-old kebab" by Nicola Roxon. Then there was its pro-industry efforts to sway the debate over carbon pricing – for the Australian Industry Greenhouse Network and the states – and its work for the big miners over the RSPT (on both the industry's current tax rate and the apocalyptic consequences of the RSPT), just to name a few.

http://www.businessspectator.com.au/bs.nsf/Article/Access-Economics-budget-forecasts-Deloitte-Austral-pd20111107-ND5F4?OpenDocument&src=pmm

11–250AD ASIC confirms ASX readiness to launch PureMatch
ASIC today confirmed it is satisfied that the ASX, prospective participants and data vendors are ready for ASX’s new order book, PureMatch, to commence operating from 28 November 2011.

PureMatch is an alternative order book that will operate in parallel to ASX TradeMatch, the primary existing ASX order book through which trading in ASX takes place. PureMatch will provide an alternative mechanism for trading of the most liquid cash market products which are traded on ASX’s TradeMatch.

http://www.asic.gov.au/asic/asic.nsf/byHeadline/11%E2%80%93250AD%20ASIC%20confirms%20ASX%20readiness%20to%20launch%20PureMatch?opendocument

New Equity Trading Venue Inserts Speed Bump

With the PDQ trading platform, an order is paused for a set period of time – 20 milliseconds — and in that time liquidity can be aggregated through an electronic crowd competing for orders, says Ross, who is a former options traders on the CBOE and also the former CEO of GETCO

“Institutions are annoyed with the high frequency trading guys, as they feel they are being gamed, while the HFT firms are concerned that institutions have better fundamental information in the short term,” he says. HFT shops that post first in the lit markets are subject to “adverse selection” by the institutions, he claims.

While PDQ’s electronic equity venue pauses the auction, it collects responses from the algorithmic liquidity responders and creates an order book based on price/time priority and then it executes the order against the book. The pause also enables PDQ to from a book with more size and better prices, contends Ross.

http://www.wallstreetandtech.com/electronic-trading/231902698?cid=nl_wallstreettech_daily

DB, NYSE Preparing Concessions for Europe's Regulators

NYSE Euronext and Deutsche Boerse have begun working on concessions to present to European regulators, after talks over the last two days with the European Union’s competition commission.
The two days of meetings “failed to alleviate antitrust regulators’ concerns about the $7 billion deal,’’ Bloomberg reported Thursday afternoon.
The European Union has set a November 17 deadline for proposing remedies.

http://www.securitiestechnologymonitor.com/news/deutsche-boerse-nyse-euronext-concessions-eu-29536-1.html?ET=securitiesindustry:e3017:171544a:&st=email&utm_source=editorial&utm_medium=email&utm_campaign=STM_BNA_08302010_111011

VARDY RESIGNS FROM PLUS MARKETS

Plus Markets chairman Giles Vardy has stepped down following a shareholder-led revolt to forcibly oust him from the role Full story: http://www.finextra.com/news/fullstory.aspx?newsitemid=23150

LSE SIGNS DELHI STOCK EXCHANGE TO MILLENNIUMIT PLATFORM The Delhi Stock Exchange (DSE) has signed for equity, derivatives, FX trading and clearing technology from the LSE's MillenniumIT unit.

Full story: http://www.finextra.com/news/fullstory.aspx?newsitemid=23148

In addition, Hirander Misra, the former Chi-X Europe COO who over the summer quit Algo Technologies, the fintech vendor he helped set up, is in the frame to lead a revamped DSE, says the FT.

EUROPEAN ENERGY EXCHANGE SELECTS TRAYPORT GLOBALVISION

http://www.finextra.com/news/announcement.aspx?pressreleaseid=41909

Osaka Securities Exchange denies TSE-OSE merger reports

http://atmonitor.co.uk/news/newsview.aspx?title=osaka-securities-exchange-denies-tse-ose-merger-reports

HKEx Publishes its 2011 Third Quarter Results

http://www.hkex.com.hk/eng/newsconsul/hkexnews/2011/Documents/111111news.pdf

Clearing

EMCF CLEARS ONE BILLIONTH EQUITY TRANSACTION

http://www.finextra.com/news/announcement.aspx?pressreleaseid=41934

BM&FBOVESPA TAPS CINNOBER FOR CLEARING OVERHAUL Brazilian exchange operator BM&FBovespa has licensed technology from Swedish vendor Cinnober for a major revamp of its clearing operations.

Full story: http://www.finextra.com/news/fullstory.aspx?newsitemid=23142

Stuff

“The few who understand the system, will either be so interested from it’s profits or so dependant on it’s favours, that there will be no opposition from that class.”
- Rothschild­, London, 1863.

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