News 110121: Floods, dolls and crocs, CXE No2, FCIC, the multi asset race......and blue bottles

Well, this week-end is the Big Swim, yep, the biggest of the season.

I hope it is nothing like last week-ends Mona Vale swim – blue bottle carnage.

(For clarity, Blue Bottles are stinging jelly fish, not the bottles left behind after new year celebrations)

Some gruesome photos here: http://www.oceanswims.com/default2.asp?active_page_id=260

Well, the floods have come and gone (as they do).

Now we’re left with the clean up bill…read tax.

Flood cost to top $5.6b

Taxpayers earning over $50,000 a year will be hit with a new levy to help pay the estimated $5.6 billion bill for the floods.

http://www.smh.com.au/business/levy-to-pay-for-56b-flood-bill-20110127-1a64x.html

…I do not think this is a wise move by a coalition Government desperate for re-election.

Bye bye Julia and labour.

A couple of interesting ways to look at the Floods:

Before and after photos:

http://www.abc.net.au/news/infographics/qld-floods/beforeafter.htm

Link to a satellite map of Brisbane at the height of the flood. The map allows you to zoom in on any street or area you may be concerned about. It was a great help in identifying where aid was needed and how best to get there.

http://www.nearmap.com/?ll=-27.502181,153.031998&z=12&t=k&nmd=20110113&source=embed

And this being Australia….

Pair rescued after ride on inflatable doll hits a snag

http://www.heraldsun.com.au/news/victoria/pair-rescued-after-ride-on-inflatable-doll-hits-a-snag/story-e6frf7kx-1225988977158

…hey, who wouldn’t swim into a baited croc trap?

Men showed 'absolute stupidity' by swimming into baited crocodile trap

http://www.news.com.au/travel/men-showed-absolute-stupidity-by-swimming-into-baited-crocodile-trap/story-e6frfq7r-1225813864969#ixzz1BGrzqMkF

with this I loved the related story also….

Bikini girls' dance of death near crocs

http://www.dailytelegraph.com.au/travel/bikini-girls-dance-of-death-near-crocs/story-e6frezhr-1225799538759

(2 photos here).

Enough, onto the news:

Congratulations to Chi-X Europe on market share.

Yes, Mongolia is exciting for its unproven mineral reserves. As a destination for LSE’s Millennium platform?....ummm, not very exciting.

PAVE?...ya gotta be brave.

The ASIC consultation paper, though very long is very comprehensive.

CP 145 is worth reading: http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/cp-145.pdf/$file/cp-145.pdf

The ASX response….ummm, I can think of better things to read than self contradictory reports.

Maybe start with the full 662 page report of the Financial Crisis Inquiry Commission http://fcic.gov/

DCSX: Dutch Caribbean Securities Exchange….amazing, wherever next?....Mongolia?

2011 will be the year of / race to multi asset trading with all the MTFs seeking to cover both equities and derivatives.

With this race will come about a lot of mis-information. The number one mis-understanding I anticipate is the old red herring about portfolio margining, correlations and margin offset.

Equities have a 3 day settlement cycle. Derivatives have a 3 month cycle and a tenure virtually as long as you like. The risk profiles are vastly different. Collateral is also very different from margin. Equity options and equity correlations are different to index options and interest rate options etc. etc. Take the time to familiarise yourself with the issues.

Nice ISDA report.

CFTC running out of space to store data…is just the sort of useful information they should tweet about.

A little more on the swims….but nothing to say about the cricket.

Sure we’re winning some one dayers but I’m still sulking about the test matches.

Avalon swim was great. The surf looked big at the start but had settled down by the finish.

An excellent run out on the expressway rip and then out past the headland to join another nice south running current.

The trick here was to angle towards the headland at the start (away from the finish). Once you passed the headland and rounded the buoy it was easy to join the current and just get nicely swept along to the next buoy / turning point. This was a ‘fast’ swim.

Water was circa 19 degrees which kept everyone moving along. The visibility was superb.

Good report and photos here:

http://www.oceanswims.com/default2.asp?active_page_id=257

Results here:

http://results.au.eventdirector.net/View.asp?EventID=4440&Bib=0289

Warriewood to Mona Vale was a fearful swim.

It started off innocuous enough….a hot day, a fairly calm surf, crystal clear waters after the break…and warm water.

Out through the break not too bad, then into a bit of a current and a fairly choppy swim around the headland.

…then the carnage began. About 50 meters prior to the final turning buoy, blue bottles…and lots of ‘em. Always a greater risk with warmer waters.

If you want to see why this is my nemesis of the seas have a look at some of these gruesome snaps (before the blistering starts)…

http://www.oceanswims.com/default2.asp?active_page_id=260

Somehow, despite water safety pulling out a guy right in front of me, I was ‘unstung’. Sobering walk on the beach through the corridor of the wounded. Nothing you can do other than ice and lots of fresh water. Ouch, ouch, ouch….and scary.

Nasty little blow ins are such a a pain in the beach

http://www.smh.com.au/news/national/sun-sand-surf--with-a-sting/2006/01/30/1138590443494.html

Have a great w/end all….and heres hoping for cooler waters during the Big Swim,

S

http://clearingandsettlement.blogspot.com/

Platforms

Chi-X Europe second largest European trading venue in 2010

Chi-X Europe, the pan-European multilateral trading facility (MTF), was ranked as the second largest equity exchange by value traded in 2010, according to industry body the Federation of European Securities Exchanges (FESE), behind the London Stock Exchange Group (LSEG) and just ahead of exchange operator NYSE Euronext.

http://www.thetradenews.com/trading-venues/mtfs-ecns/5657

CHI-EAST COMPLETES HONG KONG, JAPAN AND SINGAPORE ROLL OUT

http://www.finextra.com/news/announcement.aspx?pressreleaseid=37536

LSE STABLE IN Q3; TURQUOISE DERIVATIVES ROLL-OUT A PRIORITY

http://www.finextra.com/news/announcement.aspx?pressreleaseid=37631

LSEG Signs Strategic Partnership with Mongolian Stock Exchange

London Stock Exchange Group ("LSEG") and the Mongolian State Property Committee ("SPC") announced January 18 that they have signed an exclusive Strategic Partnership...(more)

http://www.asiaetrading.com/lseg-signs-strategic-partnership-with-mongolian-stock-exchange/

PAVE-ing the way for competition in Spain

Pave will use fellow alternative trading venue Equiduct’s trading platform, in addition to leveraging the market making experience of Equiduct shareholders Citadel Securities and Knight Capital.

MTFs will be charged €0.10 per execution by Iberclear, a fee not levied on the BME or in any other European market. In addition, MTFs are required to report the registration split, i.e. allocation of the shares to the relevant trading participant, two days after the trade by 15.00, while the BME has until 19.00.

http://thetradenews.com/node/5656

Swiss Exchange members will gain access to Liquidnet
Swiss Exchange members will soon have access to Liquidnet, a trading platform for asset managers, as a dark pool, so they can anonymously trade large blocks of European listed shares. "Having access to this additional liquidity will greatly simplify and accelerate our members' trading activities," said Swiss Exchange CEO Christian Katz. Reuters (20 Jan.)

Swiss Exchange Finalizes Fees for MTF Data Use / SIX Exfeed to launch new real-time data service for non-display information usage

http://www.six-swiss-exchange.com/media_releases/online/media_release_201101130820_en.pdf

Fee schedule here:

http://www.exfeed.com/download/information/pricelist.pdf

Deutsche Börse picks Cinnober for market surveillance

Deutsche Börse is to implement market surveillance technology provided by trading solutions firm Cinnober, on its cash market Xetra and the derivatives market Eurex Exchange.

http://www.thetradenews.com/operations-technology/trading-tools/5672

ALGO GROUP LINKS TO QUOTE MTF

http://www.finextra.com/news/announcement.aspx?pressreleaseid=37564

High-Frequency Trading Is 77% of UK Market

High-frequency trading has a solid hold in the UK Markets at 77 percent of transactions, according to a study by Tabb Group.

http://www.advancedtrading.com/articles/229100205?cid=nl_at_daily

NYSE will launch "bond liquidity provider" program in March
NYSE Euronext said the Securities and Exchange Commission approved a "bond liquidity provider" program on its trading venue for fixed-income securities. The program will launch in March. "This is a major step forward in providing fixed-income price transparency to retail investors through an inclusive, open-access fixed-income exchange," said Kevin Molloy of NYSE Euronext. Securities Technology Monitor (1/24)

SGX Targets Non-Display Fee Dodgers

FINANCIAL TIMES: Singapore to Adopt Pre-Trade Risk Controls
By Kevin Brown 01/26/11
The Singapore Exchange is to become the first Asian bourse to introduce pre-trade risk controls aimed at minimising the danger of a crash caused by high-speed electronic traders with direct access to the market.
It also comes ahead of the SGX’s planned introduction in August of Reach, a new S$250m (US$195m) trading system that it says will be the world’s fastest, with a “door-to-door” order response time of 90 microseconds.
Clearing members will also be required to agree and monitor limits with direct traders on the mix of long and short positions that can be taken, and on credit arrangements for trading on margin.
Gan Seow Ann, SGX president, said the initiative would “strengthen our marketplace by enhancing the capability of our members and their customers to manage risk exposure more effectively. It will further promote direct access to the SGX trading platform, thereby widening our market reach and distribution.”
The SGX announcement follows the acquisition by Nasdaq OMX, the US exchange operator, of FTEN, a privately held US company specialising in pre-trade risk management. The deal was seen as a reflection of the increasing focus on pre-trade risk control.

SGX Reach World's Fastest Trading Engine to Launch on 15 August

Singapore Exchange (SGX) said January 19 it is launching SGX Reach, the world's fastest trading engine, on 15 August 2011. With its ultra-low latency and significantly higher...(more)

http://www.asiaetrading.com/sgx-reach-world%E2%80%99s-fastest-trading-engine-to-launch-on-15-august/

ASX response to CP145

http://www.asxgroup.com.au/media/PDFs/110121ASX_Submission_to_ASIC_CP_145_(final).pdf

HKEx’s major challenges and priorities

Hong Kong Exchanges and Clearing Limited (HKEx) has begun the second year of its Strategic Plan 2010-2012, focusing on three key components: accelerating its platform infrastructure upgrade and necessary market structure reforms, reinforcing its position as a global listing venue by promoting international listings, and developing its renminbi (RMB) capability and Mainland compatibility.

http://www.hkex.com.hk/eng/newsconsul/hkexnews/2011/1101112news.htm

Presentation by HKEx Chief Executive Charles Li at Annual Media Luncheon

http://www.hkex.com.hk/eng/newsconsul/hkexnews/2011/documents/1101113news.pdf

COMPUTERSHARE LAUNCHES CROSS-BORDER SETTLEMENT IN HONG KONG

http://www.finextra.com/news/announcement.aspx?pressreleaseid=37532

EQUILEND EXECUTION ACCOMMODATES CCP

http://www.finextra.com/news/announcement.aspx?pressreleaseid=37474

DCSX GOES LIVE WITH TRAYPORT

Trayport, a leading provider of exchange trading systems worldwide, today announced that its client, the Dutch Caribbean Securities Exchange (DCSX) (www.dcsx.an), has gone fully operational. The news coincided with DCSX's inauguration ceremony held on 20th January which was attended by dignitaries from Aruba, Curacao, the Netherlands and Saint Marten

http://www.finextra.com/news/announcement.aspx?pressreleaseid=37556

Clearing

ICE clearinghouses have handled $15 trillion in CDS
ICE Trust, IntercontinentalExchange's North American credit default swaps clearinghouse, recently crossed the $9 trillion mark in cleared swaps. ICE Clear Europe, meanwhile, has cleared $6 trillion. ICE Trust launched in March 2009, while ICE Clear Europe started in July 2009. "In a little less than two years, ICE and its clearing members have made substantial progress toward increasing stability and transparency in the CDS market, and in reducing systemic risk globally," said Scott Hill, senior vice president and chief financial officer at ICE. Securities Technology Monitor (26 Jan.)

ISDA PUBLISHES EQUITY DERIVATIVES TRANSPARENCY STUDY

http://www.finextra.com/news/announcement.aspx?pressreleaseid=37630

The International Swaps and Derivatives Association, Inc. (ISDA) today published two independent studies on transparency in the over-the-counter (OTC) equity derivatives market.

The first paper describes the structure, participants, products and existing forms of pre- and post-trade transparency for equity OTC derivatives. This is complemented by a quantitative study which analyzes differences in pricing amongst dealers and between dealers and end-users.

Full report here:

Trade Transparency in OTC Equity Derivatives Markets

http://www.isda.org/

SLIB PARTICIPATES IN LCH.CLEARNET CASH CLEARING PLATFORM PILOT

http://www.finextra.com/news/announcement.aspx?pressreleaseid=37525

Policy

FCIC Releases Report on the Causes of the Financial Crisis
Full 662 page report of the Financial Crisis Inquiry Commission.

http://fcic.gov/

America's FINANCIAL CRISIS INQUIRY COMMISSION produced its final report into the events that led to the banking system's meltdown in 2008. It concluded that the crisis was "avoidable" and spread the blame far and wide among policymakers and bankers. The commission's Republican members delivered a dissenting report, which gave greater weight to global factors. - See article

http://news.economist.com/cgi-bin1/DM/t/eCVlg0dHglU0Mo0PJPe0E5

Who's NOT to Blame for the Financial Crisis? High-Frequency Traders

http://www.securitiestechnologymonitor.com/news/high-frequency-traders-not-to-blame-for-crisis-26897-1.html?ET=securitiesindustry:e2262:171544a:&st=email&utm_source=editorial&utm_medium=email&utm_campaign=STM_BNA_08302010_012711

Europe considers bond buybacks to tackle its debt crisis
European governments are considering allowing indebted nations to borrow from the European Financial Stability Facility and use the money buy up their debt at depressed prices. The move could help Greece and other struggling countries reduce their debt burdens. Jean-Claude Trichet, president of the European Central Bank, and other European leaders have called for making the rescue fund more flexible. Bond buybacks would be an example of increased flexibility. The Wall Street Journal (21 Jan.) , Reuters (20 Jan.)

Economic Contribution of UK Financial Services 2010
This annual report from TheCityUK brings together data showing the contribution that financial services make to the UK economy. Key findings

in the report include:

- Financial services 10% share of UK GDP is higher than other major economies

http://www.thecityuk.com/media/197387/economic%20contribution%20of%20uk%20financial%20services%202010.pdf

Derivatives 2010

OTC derivatives markets The notional outstanding value of OTC derivatives contracts fell by 3.5% to $583 trillion in the six months to

end-June 2010. Notional value was broadly stable in 2009, following an 11% drop from the peak of $673 trillion in June 2008 (Chart 1, Table 1).
http://www.thecityuk.com/media/196632/derivatives%202010.pdf

Volcker said he backs regulators' study on his rule
Paul Volcker, former chairman of the Federal Reserve, welcomed the study released by regulators offering recommendations for implementation of the rule named after him. "My sense is that the Report of the Financial Stability Oversight Council lays out an appropriate approach toward implementing the ban on proprietary trading by banking institutions and limiting their investment in hedge and equity funds," Volcker said. "The emphasis on prohibiting proprietary trading activities throughout a banking entity and appropriately distinguishing prohibited proprietary trading from 'permitted activities' is welcome." Read SIFMA's statement about the FSOC study of the Volcker rule. The Wall Street Journal (1/19)

Goldman, Others Warn of Swap Trade Concerns
The U.S. government's plan to drive derivatives through transparent trading venues could sap investor ...

Getco LLC, for example, is now considering whether to expand its market making business into swaps, Elizabeth King, associate general counsel at the big electronic trading firm, told the conference.

Brad Levy, managing director in Goldman Sachs' Principal Strategic Investments Group, said the clearing of swaps should likely be the focus as the market "sequences" into a new landscape, since it was core to the Dodd-Frank legislation.

http://www.wallstreetandtech.com/trading-compliance/229100274?pgno=2

CFTC ROUNDTABLE TO DISCUSS SWAP DATA RECORDKEEPING AND REPORTING

Staff of the Commodity Futures Trading Commission (CFTC) will hold a public roundtable on January 28, 2011, from 9:00 am to 5:00 pm to discuss issues related to swap data recordkeeping and reporting requirements.

http://www.finextra.com/news/announcement.aspx?pressreleaseid=37507

TECHNOLOGY SPENDING CUTS COULD SEE CFTC RUN OUT OF DATA STORAGE - O'MALIA The Commodity Futures Trading Commission is on course to run out of room to store its data by October because of an £11 million technology budget cut, Commissioner Scott O'Malia has claimed.

Full story: http://www.finextra.com/news/fullstory.aspx?newsitemid=22201

*** Are these the same people that want us to send them more data?

'Double Secret Strategy': Reform Opponents Trying to Starve Regulators

Tom Steinert-Threlkeld

Commodity Futures Trading Commission member Bart Chilton told insittutional investors Wednesday that opponents of changes wrought by the Dodd-Frank Wall Street Reform Act are trying to block implementation of resulting rules by starving regulators of funding.

http://www.securitiestechnologymonitor.com/news/chilton-charges-opponents-strategy-secret-reform-26894-1.html?ET=securitiesindustry:e2260:171544a:&st=email&utm_source=editorial&utm_medium=email&utm_campaign=STM_BNA_08302010_012711

CFTC OPENS TWITTER ACCOUNT

Twitter allows users to post messages of no more than 140 characters.

http://www.finextra.com/news/announcement.aspx?pressreleaseid=37506

Surviving disaster with social media

Gerry McCuskerThe flood disaster is providing huge insights into how government, businesses and individuals are communicating more than ever via social media. There are lessons for comms teams everywhere. 

Deakin's Ross Monaghan says that in crisis situations, social media should be deployed to help in three key phases:
1) pre-event 2) during and 3) recovery.

http://www.businessspectator.com.au/bs.nsf/Article/Surviving-disaster-with-social-media-pd20110121-DAQQV?OpenDocument&src=kgb

Participants

Credit Suisse’s Light Pool Addresses Institutions’ Concerns
With all the talk about high-frequency trading, Credit Suisse's Light Pool, an electronic communications network (ECN) that boasts slowing down trades, seems to be bucking a trend.

http://www.iimagazine.com/Article.aspx?ArticleID=2750086

ABN AMRO JOINS LCH.CLEARNET SWAPCLEAR

http://www.finextra.com/news/announcement.aspx?pressreleaseid=37513

ABN AMRO TAPS ATOS ORIGIN FOR FINANCIAL TRANSACTION PLATFORM

http://www.finextra.com/news/announcement.aspx?pressreleaseid=37634

Instinet has begun the regulatory filing process to launch a Canadian ATS. ICX (Instinet Canada Cross) will consist of two dark pools: a pre-market, VWAP (Volume Weighted Average Price) cross, and Instinet BLX, an algo-friendly dark pool that seeks to "build" block trades by combining the liquidity aggregation benefits of point-in-time crossing with the flexibility of a continuous market. ICX, which is expected to launch in the first half of 2011*, is based on Instinet's proven, liquid, globally-deployed dark pool model, and will be powered by Instinet's proprietary matching technology that was designed to maximize speed, performance

and reliability

INSTINET LAUNCHES CANADIAN PLATFORM

http://www.finextra.com/news/announcement.aspx?pressreleaseid=37600

FIDESSA TO CREATE 90 BELFAST JOBS AFTER RECEIVING £1M FROM INVEST NI Trading technology vendor Fidessa says it will add a further 90 staff to its Belfast operations after securing nearly £1 million from Invest Northern Ireland.

Full story: http://www.finextra.com/news/fullstory.aspx?newsitemid=22185

Stuff

Life is under no obligation to give us what we expect."

--Margaret Mitchell, American author

Whenever people say we mustn't be sentimental, you can take it they are about to do something cruel. And if they add, we must be realistic, it means they are going to make money out of it."

--Brigid Brophy, British writer

Figures for 2010 showed that GENERAL MOTORS sold more vehicles in China than in the United States for the first time.

The imminent trial of ALLEN STANFORD for an alleged $7 billion Ponzi scheme was put on hold, following psychiatric advice that he is mentally unfit for a hearing.

*** Ya don’t say!

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 110114: Qld soaks it up, Europe worries about liquidity leakage, the ashes are sunk, ownership and goverance keeps coming up, dutch and Ava'lon.

G’day All from the land down under and welcome to 2011.

During the ‘break’ I had a quick look at my distribution list (and sorting of contacts / groups) and noticed some omissions. FYI I just post my emails at http://clearingandsettlement.blogspot.com/ . So for those that are interested, it’s all there.

This week-end I’ll be going on a ‘Dreamy sojourn on the Pittwater peninsula’, otherwise know as the Avalon Beach Surf Swim.

http://www.oceanswims.com/Events.asp?EventID=99

As it happens, Ocean Swimming is a booming sport in Aust. The lure of the ocean swim :

http://www.smh.com.au/executive-style/fitness/monster-wave-of-support-for-a-sport-with-deep-satisfaction-20110106-19hmy.html

As a Queenslander, I have more than a passing interest in the flood developments. I’m pleased to report none of my Brisbane family and friends have been harmed. As for material losses….that will become clearer over time as communications resume and the flood waters recede. I must that those of you who asked. It is hard to know how to communicate an event of biblical proportions.

An area bigger than Texas and California making up more than 75 percent of Queensland has been declared a disaster zone.

http://www.businessweek.com/news/2011-01-11/brisbane-floods-worsen-as-queensland-death-toll-climbs-to-21.html

To put European countries in perspective with US states try this site.

http://goeurope.about.com/od/europeanmaps/l/bl-country-size-comparison-map.htm

Queensland is Australia's second largest state measuring more than 1.72 million square kilometers, 25% of Australia's land mass, which is four times the size of Japan, nearly six times the size of the UK and more than twice the size of Texas in the US.

http://www.australearn.org/destinations/australia/regions/queensland/

FYI, the Netherlands is 37.3K sq KMs, so about 46 Hollands in Queensland alone. Or think of 4 UK’s being declared a disaster ‘zone’…with probably the area of one of them still immersed. (Let’s not get into if that is a good thing or a bad thing).

There is some remarkable footage at:

http://www.abc.net.au/news/video/

News Video | Tue, 11 Jan 2011 14:19:00 +1100

Toowoomba resident captures the extraordinary moment when the Chalk Lane Creek overflowed, carrying away cars.

*** Can’t see a direct link for this one, but it gives a real flavour.

And who would have thought…all this rain and it still didn’t help us in the cricket.

….shame on me. I forecast 3:1, just got the teams the wrong way round. Before the floods started the local press was giving Ponting and the boys a real serve. Excellent, they deserved to be lambasted. Now their just forgotten. I was lucky enough to hit the beaches just after New Year but unfortunately this meant I missed the Barmy Army in full flight at the Sydney test. I would have enjoyed seeing that. Good on ‘em I say. Great to see them genuinely delighted to win so convincingly against an opposition that in hindsight they overrated. We’ve managed to clear the prima donnas out of our Rugby team…just in time to start on our cricketers.

Now, the real news:

More snippets on the CXE (Chi-X Europe) / BATs combination. I do believe this is the best combination.

I do sincerely believe ASX and SGX will give the combination a sincere and good try…I just personally can’t see the deal happening in the current Aussie political environment. How does the deal need to change in order for it to happen? I dunno. But ownership thresholds and governance will have a role to play.

NXZ takes an axe to AXE. I guess the syndicate participants had their axe to grind and now they have their desired result: the threat of competition has reduced fees. Personally I would of held onto the shell company…just in case.

I don’t expect HKEx to fall into the net of the new competition rules….although the law makers remarks are encouraging.

I found the piece on India exchanges interesting. Yet again it comes back to ownership and governance models.

ICE withdrawing its clearing application took me by surprise. Still, a nice piece in the WSJ. And what crops up?....the theme of ownership and governance.

I’m glad CFTC continues to consider the ownership and governance model in light of Dodd Frank.

Why is the right ownership and governance model? Well that is another rant and needs to be taken in context. Competition and commoditisation have a role to play, as does user owned and user governed for utility services and of course to cap it all we need independence etc. It’s a fine balance but it certainly is not a ‘one size fits all’ model.

On the Eurozone…I don’t think it is wrong to charge rescued nations a debt premium….I do think it is wrong to charge them at penalty rates.

The AFM position paper of HFT is out. I have a lot of respect for the Dutch regulators who I think punch to or above their weight in Europe.

I must stress, all these opinions are entirely my own and not those of anyone else in my distributed professional and social network blah blah.

Have a great week-end all.

S

http://clearingandsettlement.blogspot.com/

Trading

FINANCIAL NEWS: Bats Closes in on Chi-X Tie-Up
By Tim Cave
01/10/11
The two companies revealed last month they had entered into exclusive talks lasting until February 11, and such a tie-up does not come as a great surprise given the more-than-50% crossover in shareholders between the groups.

According to sources, an agreement is likely to take the form of a share swap, with investors in Chi-X Europe in line to exchange five of their shares for one share in the merged business.
Once this has been secured, Bats will then have to negotiate a successful integration with Chi-X Europe, a takeover process that, according to sources, can take up to nine months.

Liquidity spillage is key post-merger challenge for BATS, Chi-X

The talks are expected to result in an all-share deal valued at around US$300 million.

By its own admission, BATS Europe has a breakeven mark of around €88 billion in monthly turnover, but its 6.2% share of pan-European trading during 2010 left the firm with an average monthly turnover of just €41 billion, according to data provider Thomson Reuters. Last August, BATS Global Market’s vice president of global communications, Randy Williams, confirmed that BATS Europe needed “around €4 billion worth of turnover in Europe per day to be consistently profitable” and predicted a €3.8 million 2010 loss for the MTF based on prevailing volumes.

Chi-X Europe’s breakeven is estimated at around €100 billion in monthly turnover, but the MTF averaged €130 billion per month last year and achieved a 2010 pan-European market share of 16.6%. As such, Chi-Europe reported a profit every month last year.

Broadly speaking, there are three sources of liquidity leakage during a merger of trading venues:

First, the volume of trading by the two merging venues will suffer some net reduction as arbitrage business conducted between the markets vanishes.

Second, liquidity may also dissipate as trading systems are recalibrated to take account of the change in number of available destinations.

Third, rival trading venues are likely to try to take advantage of any disruption to attract liquidity through price promotions.

http://www.thetradenews.com/trading-venues/mtfs-ecns/5596

BATS HIRES UNDERWRITERS AHEAD OF POSSIBLE IPO - WSJ Exchange operator Bats Global Markets could be set to embark on an initial public offering after hiring underwriters, according to the Wall Street Journal.

Full story: http://www.finextra.com/news/fullstory.aspx?newsitemid=22140

LCH.CLEARNET AND CHI-X EUROPE LAUNCHES CFD CLEARING

http://www.finextra.com/news/announcement.aspx?pressreleaseid=37335

SGX chief says ASX bid will go ahead: report

(FINANCIAL SERVICES) Bocker pledges to give merger 'a sincere and good try'. 28 Dec 2010 11:18 AM read more

http://www.businessspectator.com.au/bs.nsf/Article/SGX-CEO-says-will-press-ahead-with-bid-to-buy-ASX--CK275?OpenDocument&src=eiw&ir=4

A 2011 wishlist for the Singapore stock market
AsiaOne
IT'S customary at this time of the year for observers and commentators to draw up a wishlist of changes and improvements they would like to see in the new year. So without further ado, here is some food for thought on how to take the Singapore market to its next level of development.

First, the launch and flourishing of a proper domestic derivatives market that includes structured warrants, options and possibly futures on the major indices and single stocks.

Second, we'd like to see regulators go after all manipulators, including the large and not just the small. One of the biggest complaints from brokers is that SGX disciplinary action is almost exclusively directed at small retail brokers and almost hardly ever at the big institutions.

Third, details of all investigations and actions should be made transparent and publicised. Stated differently, the exchange should do away with the private censure that it sometimes employs when disciplining listed companies and instead make all such action public.

http://business.asiaone.com/Business/News/My%2BMoney/Story/A1Story20110106-256784.html

NZX winds up JV market on Aust securities

January 14, 2011 - 7:54AM

NZPA

New Zealand sharemarket operator NZX is winding up its joint venture effort to offer a high-speed, low-cost market for trading securities listed on the ASX.

NZX said on Friday that it, along with the other shareholders of electronic communications network company AXE ECN -- Citigroup, Macquarie, Merrill Lynch, Goldman Sachs and Commonwealth Bank -- had decided to stop operations of AXE ECN as a trading entity and wind up the company.

"After a review and careful assessment of the market today, AXE does not see opportunities for its business model to generate sustainable economic returns."

AXE was established in 2006, and made its original application for an Australian Markets Licence in early 2007.

NZX wrote down the entire value of the investment in AXE ECN to zero in June 2009, saying it made the move given the ongoing reluctance of the Australian government to address the granting of a licence.

http://news.smh.com.au/breaking-news-business/nzx-winds-up-jv-market-on-aust-securities-20110114-19q5v.html

South China Morning Post: HKEx tops world for trading costs
10 January 2011
By Amanda Lee

…

Lawmakers are debating a bill that would inject more competition into the economy by reining in business practices such as price-fixing and abuse of market power.
But the stock exchange, nearly 6 per cent owned by the Hong Kong government, which controls about half the board seats, looks likely to be exempt from the new law.

….

Hong Kong's chief executive will have the final say, but in the meantime, the government is likely to face tough questions from legislators. Lawmaker Regina Ip Lau Suk-yee said the government should not exempt the exchange from the competition law without a thorough study of the consequences.
"In sum, I object to its automatic exclusion," Ip said in an e-mailed response to questions. "The Hong Kong stock exchange is no doubt a monopoly, and it is worth investigating whether Hong Kong's economy would benefit if there is more competition to HKEx."

http://topics.scmp.com/news/hk-news-watch/article/HKEx-tops-world-for-trading-costs

See also:

http://www.chinadaily.com.cn/bizchina/2009-05/21/content_7913341.htm

Eric Yip leaves HKEx

Hong Kong Exchanges and Clearing Limited (HKEx) announced today (Monday) that Eric Yip, Deputy Chief Operating Officer, has decided to tender his resignation to pursue an opportunity in investment management. To facilitate a smooth transition, Mr Yip will leave HKEx at the end of March 2011.

http://www.hkex.com.hk/eng/newsconsul/hkexnews/2011/110103news.htm

India weighs new rules for hot stock exchanges

At a recent seminar, SEBI Chairman C.B. Bhave appeared to side at least with the proposal that exchange profits be capped. "Profit maximization for market infrastructure institutions [such as stock exchanges] will not be encouraged," he said. "Proper mechanisms need to be put in place to discourage profit maximization."

http://online.wsj.com/article/SB40001424052970203525404576049163472993824.html

BLOOMBERG: Korea Tightens Derivatives Rules After Nov. 11 Tumble
By Saeromi Shin
01/11/11
South Korea’s financial regulators will limit the number of derivative equity contracts an investor can hold as authorities continue investigating the cause of a plunge in the Kospi Index on Nov. 11.

http://www.bloomberg.com/news/2011-01-11/korea-tightens-derivatives-rules-after-nov-11-tumble-update1-.html

FINANCIAL TIMES: Laos Securities Exchange to Start Trading
By Tim Johnston
Laos Securities Exchange, the world’s newest bourse, is due to start trading on Tuesday with two listed stocks and bold plans for expansion.
Trading will open with shares in EDL-Generation, which is controlled by the state-owned power company Electricite du Laos, and Banque Pour Le Commerce Exterieur Lao, a state-owned bank.

Patsystems selected by Vietnam Commodity Exchange
Singapore: 11 January 2011 – As a further win for its exchange technology offering, Patsystems is pleased to announce that it has been selected as the key technology provider for the newly established Vietnam Commodity Exchange (VNE).

Algo Group To Lease SSET's London Dark Fiber Network
Plans to provide extreme low-latency services to algorithmic trading firms as well as connectivity to ...

http://www.wallstreetandtech.com/articles/229000378?cid=nl_wallstreettech_daily

COLT PARTNERS LSE FOR PROXIMITY HOSTING SERVICE

http://www.finextra.com/news/announcement.aspx?pressreleaseid=37334

LSE SAYS HUMAN ERROR CAUSED TURQUOISE OUTAGE The London Stock Exchange says human error, rather than foul play, caused an outage at its Turquoise trading platform in November that resulted in a delayed technology migration.

Full story: http://www.finextra.com/news/fullstory.aspx?newsitemid=22145

BURGUNDY RECEIVES EXCHANGE AUTHORISATION

http://www.finextra.com/news/announcement.aspx?pressreleaseid=37370

QUOTE MTF ADDS ADAM FARKAS TO SUPERVISORY BOARD

http://www.finextra.com/news/announcement.aspx?pressreleaseid=37358

NYSE EURONEXT TESTING MTF FOR EUROPEAN CORPORATE BONDS Nyse Euronext has set up a strategic committee that will assist and advise on the creation of a pan-European Multilateral Trading Facility (MTF) for corporate bonds.

Full story: http://www.finextra.com/news/fullstory.aspx?newsitemid=22155

NYSE Euronext Begins Doubling Capcity of Options Exchanges

By Tom Steinert-Threlkeld

NYSE Euronext said it completed the first phase of an upgrade of the technology underyling its two U.S. options exchanges, which it expects will double their capacity.

Upon completion of the capacity upgrade, NYSE Arca and NYSE Amex each will be capable of processing 1 million orders and 8.4 million quotes a second with sub-millisecond average acknowledgment (ACK) times, NYSE Euronext said. That is up from the 500,000 orders and 4.2 million quotes before the upgrade began.

Currently, NYSE Arca and NYSE Amex options combine “open-outcry” trading facilities with advanced electronic trading platforms. The upgrade will improve each exchange’s core matching engines and add a variety of functionality. The foundation will be NYSE Technologies’ Universal Trading Platform.

http://www.securitiestechnologymonitor.com/news/nyse-euronext-doubling-capacity-options-exchanges-26762-1.html?ET=securitiesindustry:e2233:171544a:&st=email&utm_source=editorial&utm_medium=email&utm_campaign=STM_BNA_08302010_011111

80,000 Mutual Funds Set to Begin Trading on German Exchange

By Tom Steinert-Threlkeld

Deutsche Börse and Clearstream said they began their joint effort at introducing exchange trading in mutual funds.

As of Thursday, Jan. 13, more than 80,000 investment funds that are currently on Clearstream's order routing platform, Vestima+, can be introduced for trading on Deutsche Bank’s cash market, Xetra, by funds specialists.

After execution, the funds will be settled through Clearstream's post-trade facility for mutual funds, the Central Facility for Funds (CFF).

ELX Sets New End-Of-Day Total Market Share Record In U.S. Treasury Futures
New York, Jan 10, 2011 – ELX Futures, L.P. (ELX), a leading electronic futures exchange, announced today that it has established a new end-of-day (3 p.m. EST) trading record for total market share in its U.S. Treasury futures contracts, with an electronic share at 5% on January 10, 2011.

http://www.elxfutures.com/News-Events/ELX-Sets-New-End-of-Day-Total-Market-Share-Rec-%281%29.aspx

Five Minutes with Neal Brady
Neal Brady has spent the last five months or so working to get the Eris Exchange up and running as the first swaps futures exchange created after Congress passed the Dodd-Frank financial reform bill ordering swap trades onto public exchanges. As the deadline looms on finalizing Dodd-Frank, Eris aims to be the venue of choice for clearing services to reduce systemic risk in the over-the-counter market. Thus far, the new exchange for interest rate swap futures has handled over $19 billion in notional value since trading started in August.
Q: How did you get involved with the Eris Exchange?
Brady: I was previously managing director and head of business development globally for the CME. While I was at CME I was very involved in a variety of initiatives related to OTC clearing and trading. After leaving CME to run a venture fund where I was involved with many of the Eris founding partner firms, we began discussing with CME the possibility of clearing an interest rate swap futures product as a way to broaden access to the OTC interest rate swap market and respond to the new regulatory environment. I've been in the exchange and derivatives business for a long time and founded a venture several years back called Liquidity Direct which was eventually acquired by the CME. A number of proprietary trading firms were involved in that earlier venture as well as founders and partners, and that's how I ended up being involved with Eris.
Read the entire interview on MarketsWiki at http://www.marketswiki.com/mwiki/Five_Minutes_With_Neal_Brady

Clearing

SECURITIES TECHNOLOGY MONITOR: ICE Trust Withdraws Application to be Named Swaps Clearer
By Tom Steinert-Threlkheld
InterContinental Exchange has withdrawn the application of its ICE Trust U.S. subsidiary to be declared a derivatives clearing organization, on an expedited basis.
“Upon review of the ICE application, the (Swaps & Derivatives Market Association) finds several areas of concern where ICE is not incompliance with the express provisions of the Dodd Frank Act,’’ that calls for the creation of derivatives clearing organization, the association said, in its comment.
“Specifically, ICE’s membership artificially links execution to clearing which results in limited clearing broker participation. In addition, ICE goes beyond its clearing mandate by restricting the methods of swap execution, and the free trading of swaps, by requiring that all trades be executed through a dealer member,’’ said James Cawley, co-founder of the association.

http://www.securitiestechnologymonitor.com/news/ice-trust-withdraws-application-swaps-clearing-26671-1.html

Derivatives Rules on ICE
Wasn't Dodd-Frank supposed to reduce systemic risk?
WSJ Opinion Journal
Two years ago we warned against concentrating all of the risks in the credit-default swap (CDS) market inside a clearinghouse called ICE Trust. Now it appears that even the managers of ICE Trust are coming around to our point of view. A few days before Christmas, this largest of CDS clearinghouses quietly withdrew its federal application to be . . . a CDS clearinghouse.

In other words, clearing arrangements do not eliminate risks; they transfer them from the two trading parties to the clearinghouse. But the Obama Administration and the authors of Dodd-Frank claimed to believe two things that aren't true: that the structure of the derivatives market—as opposed to housing or monetary policies—was a root cause of the financial crisis, and that clearinghouses would eliminate risk from derivatives.

But two weeks ago, ICE rescinded its application to the CFTC. The company would only say that "given the significant changes proposed to the commission regulations" for derivatives-clearing organizations, it decided to wait until it is required to come under CFTC jurisdiction later this year.

An immediate seal of approval from the commission would have allowed ICE to seek many new customers, so why would this company want to leave money on the table?

Probably because ICE would have had to admit weaker members into its clearinghouse. CFTC's new rules allow clearing members to have less capital than they are required to hold under ICE's existing rules.

http://online.wsj.com/article/SB10001424052748704694004576019851275439150.html?mod=googlenews_wsj

Financial News: In praise of dark pools of liquidity

10 January 2011

By Xavier Rolet

….

Infrastructure is in fact different from other services: if a motorway operator charged excessive fees and failed to keep up with the maintenance, would you build five motorways on the same route to promote greater efficiency? Or would you seek another way to fix the under-performing operator?

Parties debate central bank liquidity for CCPs
The push to clear some over-the-counter derivatives trades through central counterparties has raised many questions and concerns. Some regulators are calling to give CCPs access to central bank liquidity. Major CCPs said the access is not needed. "Access to central bank liquidity is not necessary," said Roger Liddell, CEO of LCH.Clearnet. "We have a huge amount of liquidity, and we manage it very conservatively." Meanwhile, central banks are hesitant to provide such access. Risk.net/Risk magazine (10 Jan.)

14 Pacific Firms Adhere to Protocol on Derivatives Reconciliation

Fourteen of the largest financial firms in the Asia-Pacific region have agreed to follow a set of recommendations published by the International Swaps and Derivatives Association for how to reconcile portfolios in over-the-counter derivatives.

The fourteen firms are Bank of Tokyo-Mitsubishi; Deutsche Bank; Mizuho Corporate Bank; Morgan Stanley & Co; Morgan Stanley & Co International; Morgan Stanley Capital Group; Morgan Stanley Capital Services; Morgan Stanley MUFG Securities; National Australia Bank; Nomura Securities; Standard Chartered Bank; Sumitomo Trust and Banking Company; and UBS.

http://www.securitiestechnologymonitor.com/news/isda-asia-pacific-otc-derivatives-portfolio-reconciliation-26719-1.html?ET=securitiesindustry:e2235:171544a:&st=email&utm_source=editorial&utm_medium=email&utm_campaign=SIN_DailyClose__011211

Policy

CFTC delays vote on clearing, trading governance
* Vote delayed on first of final Dodd-Frank rules
* Rule to be considered at another meeting-spokesman
* Had been expected to stand pat on bank voting limits
By Sarah N. Lynch and Roberta Rampton
WASHINGTON, Jan 12 (Reuters) - The U.S. futures regulator said on Wednesday it would delay plans for a vote to finalize regulations aimed at limiting the voting power of banks on clearing and trading venues, a key vote that had been slated for a Thursday hearing.
http://jlne.ws/hWJy1I

CFTC Delays Vote on Ownership, Governance Rules for Swaps Market
By Silla Brush
The U.S. Commodity Futures Trading Commission delayed a vote on rules that would limit bank ownership and control of clearinghouses and trading systems in the $583 trillion swaps market.
Bloomberg
http://jlne.ws/hyVUbW

Lehman case reveals a gap in swaps-deal interpretations
The International Swaps and Derivatives Association has a single master agreement used by parties involved in derivatives trades in London and New York, but how that agreement is interpreted can vary significantly between the two places, according to The New York Times. The bankruptcy case of Lehman Brothers Holdings demonstrates the wide range of interpretations. NYTimes.com/DealBook blog (1/7)

Euro zone's debt crisis is close to spiralling out of control
Yields on Portugal's debt jumped, and contagion is starting to hit Belgium as well as Spain -- indications that the debt crisis that has been plaguing the euro zone could be spreading. The European Central Bank aimed to push down yields by buying Portuguese, Irish and Greek bonds, but the ECB has not widened emergency purchases to other nations. The situation leaves Belgium on its own. Telegraph (London) (10 Jan.) , Reuters (10 Jan.) , The Wall Street Journal (11 Jan.)

The interest rate charged on rescue packages should be slashed to allow EMU debtors to claw their way out of their traps. The fund is currently charging Ireland 5.7pc for rescue loans – which were arguably forced upon it – even though the EU raised the money at an average 2.59pc. The punitive rate has caused bitterness in Ireland.

"We think the EFSF should charge its own average funding cost, or even below it, offering an interest rates subsidy," said Frank Engels, Barclays' Europe economist. "This should be done under IMF-style conditionality to prevent moral hazard."

Mr Engels said the European Investment Bank should buttress the policy with €30bn of spending on infrastructure projects to underpin growth in the debt-stricken states.

http://www.telegraph.co.uk/finance/financetopics/financialcrisis/8251389/EMU-debt-crisis-edges-ever-closer-to-the-core.html

AFM evaluates use of high-frequency trading (HFT) in European financial markets

he Netherlands Authority for the Financial Markets [Autoriteit Financiële Markten, or “AFM”] sees no grounds for restricting the use of ”high-frequency trading” (HFT). The AFM sees HFT not as a separate strategy, but as a technique for applying short-term trading strategies that have been in use for years. This assessment changes if HFT were to be used to implement an illegal trading strategy, but in this respect as well HFT is no different from other trading strategies. The AFM reaches this conclusion in its study on the role of HFT in the European financial markets published today.

http://www.afm.nl/en/professionals/afm-actueel/rapporten/2010/hft-rapport.aspx

Full report available here:

http://www.afm.nl/layouts/afm/default.aspx~/media/files/rapport/2010/hft-report-engels.ashx

CESR MORPHS INTO ESMA; ELECTS MANAGEMENT BOARD

http://www.finextra.com/news/announcement.aspx?pressreleaseid=37379

FPL Releases Standardized Guidelines for Risk Management
http://www.fixprotocol.org/documents/5537/FPLEquityRiskControls_final.pdf

Dutch regulator for top finance watchdog job
By Nikki Tait in Brussels, James Wilson in Frankfurt and Brooke Masters in London - Financial Times
A Dutch regulator is set to become the first head of the new influential watchdog which will oversee securities markets in the European Union, while a Portugese official will take the top position at its counterpart overeeing the bloc's insurance and pension industry.
http://jlne.ws/epSpwf

ICMA Regulatory Policy Newsletter First Quarter 2011

http://www.icmagroup.org/Emails/icma-regulatory/ICMA-Policy-Newsletter-110112.html

Participants

FINANCIAL NEWS: Nomura Shelves Plans to Offload Instinet
By Michelle Price
1/10/11
Japanese bank Nomura has shelved plans to sell its global agency brokerage subsidiary Instinet and is considering rolling the company into its investment bank’s growing equities business, according to several sources.

Morgan Stanley to Spin Off Prop Trading Unit
Morgan Stanley will spin off its proprietary trading business into an independent firm in 2012, joining ...

http://www.wallstreetandtech.com/articles/229000478?cid=nl_wallstreettech_daily

Banks prepare for Volcker rule as SIFMA study raises concerns
The Financial Stability Oversight Council is preparing to issue proposed regulations related to the Volcker rule, which restricts proprietary trading by banks. Some industry observers say the Volcker rule has already been too watered down to do much good. However, a study commissioned by SIFMA shows that a restrictive approach to the rule could threaten some bank practices. The Politico (Washington) (1/12)

Credit Suisse plans to launch stock-trading venue Light Pool
Credit Suisse Securities runs the largest equity dark pool in the world and now plans a stock-trading venue called Light Pool. The U.S. network will start operating by the end of March, said Dan Mathisson, who leads the broker's electronic-trading division. "There's a real need for a new kind of displayed market where all the rules are set with long-term investors in mind," Mathisson said. Bloomberg (1/11)

ABN Amro Clearing Adds Access to Chi-X Europe

The access comes as ABN Amro expands the market coverage of its tick-TS TradeBase MX platform, it said.

http://www.securitiestechnologymonitor.com/news/abn-amro-clearing-chi-x-europe-26779-1.html

Responding to criticism last year that it had not acted in the best interests of its clients before the financial crisis, GOLDMAN SACHS produced a report into its business and the steps it would take to become more open. Among the changes, Goldman has split its trading business in two (so it now has four reporting divisions rather than three), which creates a new investment and lending group that will spell out the profits it has made with its own money. - See article http://news.economist.com/cgi-bin1/DM/t/eCU4z0dHglU0Mo0NvmO0EH

Stuff

Ken Griffin Writes Letter to Investors For 20th Anniversary of Citadel
GuruFocus.com
Similarly, almost a decade ago, when no one thought Citadel could be a meaningful player in theoptions space, we launched an electronic options market-making business. Back then, our competitors predicted that 'no one will want to trade with a hedge fund.' Today, we transact approximately 30 percent of the market volume and are the leading options market maker in the United States
http://jlne.ws/gaz4SB

I. Hire the Best People and Create a Culture of Opportunity

II. Take Calculated Risks

III. Embrace Opportunities

IV. Never Lose Sight of What is Important

10 Easy Ways to Improve Your Prospects in 2011:

1. Do less social networking and more real networking.

2. Forget 2010. learn what you can from the experience and move on.

3. Quit whining.

4. Stop stressing and deal with it.

5. Put the gadgets down.

6. Have more fun.

7. If it isn’t working, change it.

8. Take care of yourself.

9. Take risks.

10. Stop wasting your time.

http://www.bnet.com/blog/ceo/10-easy-ways-to-improve-your-prospects-in-2011/6359

'I Am Deeply Sad and Don't Know How to Go On'
Two out of the 10 Somali pirates on trial in Hamburg for hijacking a German container ship testified for the first time this week. Their stories provided a glimpse of the hardships of life in their lawless homeland.

http://www.spiegel.de/international/world/0,1518,738881,00.html

Bridging the gap between our online and offline social network

Paul Adams, Google UX team on social networks.

http://www.slideshare.net/padday/the-real-life-social-network-v2?from=embed

*** I found this piece on groups / social networks interesting.

The unifying force driving businesses to Twitter today is a simple concept: Consumers don't like being ignored and businesses know they need to listen."

--Ben Grossman, communication strategist

*** In my view Ben, consumers that rely on a 156 character (or whatever) tweet are twits.

Let’s hurry to love people, they leave so quickly…”

Jan Twardowski

Scott Riley

Business Development