G’day All,
Yikies, I can’t believe the week has gone. (Sorry, I sent this Friday 25th, just forgot to post to blogspot)
Sibos. (Swift International Banking Operations Seminar)
The McKinsey view: Be in Asia or be irrelevant.
Nice but I think the missing aspect of this (and a lot of the week) is context and materiality.
Asia is certainly full of potential – on materiality todays wallet size and tomorrows potential are different things.
And in context – one of the best questions for me on the week was when are we going to have a common character set (Chinese, Japanese, Korean, Western).
In Europe we get so caught up on single currency, single economic zone, MiFID, common(ish) political objectives, and by and large one commercial language we kinda over look Asia still has no interoperability on language – let alone currency.
Will have to do more on Sibos next week.
The Sydney dust storm was hard to capture.
http://theaustralian.newspaperdirect.com/epaper/viewer.aspxVisibility was literally this bad and the dust made everything look orange. I woke to an orange sun rise and it just stayed that way. Weird.
'Best job in the world' is no holiday
TIM RICHARDS Writing about your every move while on the road can be a double-edged sword, as the "best job in the world" winner Ben Southall has quickly discovered.
http://www.smh.com.au/digital-life/mobiles/best-job-in-the-world-is-no-holiday-20090915-font.htmlhttp://www.islandreefjob.com.au/
I still feel “dark pools” get a bad rap just because of their name. More education required. But come on, an order type called “Hide to Comply” is hardly helpful to the public perception of the debate.
For those that follow Market Infrastructure, and the CPSS-IOSCO recommendations I found the RBA paper a good read. Happy to comment on this if you have questions. For those covering operational risk I recommend Section 6 from page 49.
Yippee Lloyds. Good to see securitisation re-opening.
Interchange fees. Normally I’d ignore this, but the fines in Hungary resonate with the local authorities here not trusting self regulation. Gouging springs to mind.
Canary Wharf 4.3 byn claim is just ridiculous. If Lehman was paying rents like that no wonder they went under, thing is, it’s unbelievable. Yet again it smacks of insolvency practitioners lining their own pockets at the expense of creditors.
Our poor little Koalas. L
Luckily I was travelling so I didn’t see the last wallaby game. What a relief!
Great w/end all,
(sorry have to be brief on news this week)
S
Platforms
CHI-X EUROPE AND LIQUIDNET SUPERNATURAL TO INTERCONNECT
http://www.finextra.com/fullpr.asp?id=29815
FFASTFILL EXTENDS MIDDLE OFFICE SERVICES TO JAPAN EXCHANGES
http://www.finextra.com/fullpr.asp?id=29797
New Hide to Comply Order Type Added to Citi's LavaFlow ECN http://advancedtrading.com/crossingnetworks/showArticle.jhtml;jsessionid=SKMACLMJGDRSHQE1GHRSKH4ATMY32JVN?articleID=220100519&_requestid=407824
LSE UPDATES ON STAFF CUTS AND IT AHEAD OF HALF YEAR RESULTS
http://www.finextra.com/fullpr.asp?id=29904
LSE to use "partnerships and acquisitions" to expandLondon Stock Exchange CEO Xavier Rolet said the exchange will expand its business through "partnerships and acquisitions". Rolet said he is striving to lower clearing costs as part of a way to reduce overall costs of dealing in FTSE shares on the exchange. Financial Times (tiered subscription model) (24 Sep.)
JASDAQ STARTS USING OSAKA SECURITIES EXCHANGE PLATFORM
http://www.finextra.com/fullpr.asp?id=29894
Controversy rages regarding dark pools despite innovationDark pools are continuously coming up with innovative, eye-catching ideas, but they have failed to shake the controversy surrounding their existence. The Federation of European Securities Exchanges claimed in a letter to the Committee of European Securities Regulators that dark pools run by banks are "unregulated venues" that operate with "full opacity". Banks said the federation is simply exploiting concerns highlighted by the crisis to persuade authorities to require stock trades to be routed through regulated exchanges. Financial Times (tiered subscription model) (24 Sep.)
Clearing
CME AND CITADEL DITCH CDS TRADING PLATFORM PLAN TO FOCUS ON CLEARING CME Group and Citadel have abandoned plans to launch a credit default swaps (CDS) trading platform and will instead focus on offering clearing services for the $27 trillion market.
Full story: http://www.finextra.com/fullstory.asp?id=20518
GLOBAL ASSOCIATION OF CENTRAL COUNTERPARTIES ELECTS EXECUTIVE COMMITTEE
http://www.finextra.com/fullpr.asp?id=29908http://www.ccp12.org/
· Clearing house alert on up to 15 brokerages http://www.rba.gov.au/PaymentsSystem/StdClearingSettlement/Pdf/2008-09-report-clrg-settlment-facilities.pdf
Policy
EU'S MIFID REVIEW TO LOOK AT DARK POOLS
The migration of share trading from regulated platforms to dark pools is to be examined by the European Commission as part of a wider review of the Markets in Financial Instruments Directive (MiFID).
Full story: http://www.finextra.com/fullstory.asp?id=20519
Nice list of failed US banks (94 in 2009 to date)
http://www.fdic.gov/bank/individual/failed/banklist.html
HUNGARY FINES VISA, MASTERCARD AND BANKS OVER INTERCHANGE FEES Visa, MasterCard and seven of the biggest banks in Hungary have been fined a total of $10.42 million by the country's competition authority for running an interchange fee cartel.
Full story: http://www.finextra.com/fullstory.asp?id=20535
At its meeting on 21 August, the Payments System Board considered whether the conditions have been met for the removal of interchange regulation. The Board was not yet satisfied that such conditions have been met.
http://www.rba.gov.au/MediaReleases/2009/mr-09-18.html
Lloyds' deal helps reopen securitisation marketsLloyds Banking Group sold £4 billion worth of mortgage-backed bonds to institutional investors, the first substantial mortgage-securitisation deal since the market dried up with the credit crunch. The deal, which included more than 513,000 prime UK residential home loans, was twice oversubscribed. HBOS wrote the mortgages before it merged with Lloyds TSB. The Independent (London) (24 Sep.) , Telegraph (London) (23 Sep.)
Participants
BNP PARIBAS PRIME BROKERAGE UNIT SELLS COLOCATION BUSINESS TO OPTIONS IT BNP Paribas' prime brokerage division has sold its hedge fund outsource technology business to vendor Options IT. Financial terms of the deal were not disclosed.
Full story: http://www.finextra.com/fullstory.asp?id=20521
Investment Technology Group In Asia08/09/09 12:36 from Asia Etrading BlogInvestment Technology Group (ITG) reported that during the second quarter of 2009 which was released July 30 that they had realigned its organizational structure from three distinct businesses to four. The International Operation was split..
FIDELITY INVESTMENTS LAUNCHES CANADIAN CLEARING UNIT
http://www.finextra.com/fullpr.asp?id=29911
ANZ snaps up rest of ING Danny John 10:29AM Banking group will buy the remainder of its wealth management joint venture with ING for $1.8 billion.
Canary Wharf files $4.3bn claim against Lehman for unpaid charges Canary Wharf Group has lodged a $4.3bn (€2.9bn) claim with PricewaterhouseCoopers (PwC), the UK administrators of Lehman Brothers, for unpaid rent and other charges linked to the bankrupt firm’s London headquarters. (The Independent)
AIDS-like retrovirus threatens Australia's koalas with extinctionUp to 50 percent of the koalas are also infected with chlamydiosis, made all the more deadly by the retrovirus, which can compromise the animals' immune systems
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
G’day All,
Lots of platform developments this week but the Barclays Transaction Reporting issue caught my eye.
I don’t want to comment on the actual process that lead to Barclays getting a fine.
But 2.5 million quid is a might whack for a transgression.
And here I think about materiality, proportionality and proceeds.
First of all I wonder how many of these transaction reports are “used” as opposed to filed.
(Yes, I appreciate this would not have come to light if the reports were not used, but if the reports were being used actively, maybe some of these transgressions would have come to light earlier).
Next, what is the materiality of all these transaction reports, as highlighted by the Reuters story, where fragmentation is cited as a post MiFID issue. (also The Trade story)
Personally, I’m a great believer in transaction reports, but I don’t feel I can stand back and reconcile total transaction reports verses total trades / liquidity claimed by all the various platforms, brokers, pools etc.
Then we have issues with the cost and price of accessing this data (even with the issues of validation, enrichment and quality).
Next, we have a nice white paper by Eurex. I appreciate this is a different asset class, but how effective is the industry at capturing OTC data (obviously there are some self serving conclusions in the paper).
Now, if 2.5 million quid was going to be spent, on researching, qualifying and improving transaction reporting. OK, this is a constructive step to take, and sorry, Barclays just happened to be there on the morning they were handing out tickets.
But I don’t get that feeling. I feel that this is a mighty whack to send a signal “we bite”.
By all means Bite, but use that for the betterment of the markets you serve, not just for the sake of it.
Platforms – headlines speak for themselves.
DirectEdge stays on my radar. I wonder about the common equity investors (Citadel) in DirectEdge and Equiduct.
LSE and Millennium. I didn’t predict that.
I notice PATS in Indonesia – congratulations to them. Anyone know what happened to CapCo (they used to run the CCP there)?
Clearstream – why would you want to drag all that bad publicity back out of the closet? Stop It.
Euroclear – a big win for the users – transparency finally arrives. Imagine charging 4.3p for “netting”. Congratulations to the innovation in the industry that has encouraged some defensive pricing.
LCH deal back in the news. Something has to give.
Van der Moolen. Never nice to see the passing of a great name.
HK moves to T+2 and look at some of those Asian exchanges returns.
For those technology watchers – Photonic Chips are the way to go. (especially if we want to get to 10,000 times faster)
I highly recommend this and found this very informative.
I’ll be at Sibos next week and look forward to meeting as many as I can.
Awful how quickly the agenda fills up. How long till Speed dating is introduced?
As such, there’ll be no news from me next week.
Love old Leonardo – study without desire spoils the memory, and it retains nothing that it takes in.
(few of my teachers would like to share a tale or two with Leo)
Have a great weekend, wherever you are, and don’t forget the nippers.
(Sorry, Boks to lose to the Kiwis at home)
S
http://clearingandsettlement.blogspot.com/
Platforms
QUOTE MTF LAUNCHES INTO CROWDED MARKET
Hungary-based Quote MTF has become the latest trading platform to enter the crowded post-MiFID European securities market.
Full story: http://www.finextra.com/fullstory.asp?id=20447
BATS in its first week of inverted pricing for UK securities posted 5.9% market share in the FTSE 100, up roughly 180 basis points (bp) from its average August share of 4.11%. NASDAQ OMX, which also launched a discounted routing fee for UK securities beginning this week, reported no market share change.
Source: BMO Capital Markets Corp.
PRESS RELEASE: Kendall Law Group Announces Shareholder Investigation Into NYFIX, Inc.9/2/09DALLAS -- Kendall Law Group, led by a former federal judge and former US Attorney, announces a shareholder investigation concerning the proposed acquisition of NYFIX, Inc. (Nasdaq:NYFX) by NYSE Euronext for possible breaches of fiduciary duty by the Board of Directors.
Jobs slashed at NYSE's newest acquisition Nyfix, a maker of trading technology, just sold itself to NYSE Euronext for 95% more than its market value. The bad news is, 40% of its workers will be jobless when the deal closes in the fourth quarter.
Second MTF up for sale
Global exchange group NYSE Euronext is considering the sale of NYFIX’s Millennium and Euro Millennium dark pools
http://www.thetradenews.com/trading-venues/mtfs-ecns/3549
Direct Edge's market share hits new high
Rolet casts doubt over Baikal future amid regulatory scrutiny Baikal, the London Stock Exchange’s proposed “dark pool” venture “might not work” amid regulatory scrutiny over such platforms and the inability of most such structures in Europe to earn profit, Xavier Rolet, LSE chief executive, has said. (Financial Times)
LSE ADMITS BAIKAL MAY FAIL
London Stock Exchange CEO Xavier Rolet has admitted the bourse's new pan-European MTF and dark pool, Baikal, "might not work" in the face of growing regulatory scrutiny.
Full story: http://www.finextra.com/fullstory.asp?id=20463
Rolet speeds LSE technology revolution Xavier Rolet, chief executive of the London Stock Exchange, has set an ambitious target for scrapping the exchange’s trading system by suggesting a replacement may be confirmed as early as this month. Rolet started a review of the exchange’s technology strategy days after joining the group three months ago. Last week he said the process was nearing a conclusion.
LSE CLOSES IN ON TRADELECT REPLACEMENT
Sri Lankan vendor MillenniumIT has emerged as the surprise favourite to provide the replacement for the London Stock Exchange's TradElect platform.
Full story: http://www.finextra.com/fullstory.asp?id=20451http://www.millenniumit.com/capital_market_solutions/index.php#Our customers include:
American Stock Exchange
Bank of Ghana
Botswana Stock Exchange
Capital Markets Authority of Kenya
Central Depository System of Mauritius
Central Securities Depository of Kenya
Colombo Stock Exchange
Dar es Salaam Stock Exchange
ICAP Plc
London Metal Exchange
Lusaka Stock Exchange
Nairobi Stock Exchange
Perimeter Financial Corporation
Stock Exchange of Mauritius
Securities Depository Agency of Croatia
Uganda Securities Exchange
RTS AND NYSE ARCA PUSH EUROPEAN EQUITY TRADING
http://www.finextra.com/fullpr.asp?id=29449
INDONESIA COMMODITY AND DERIVATIVES EXCHANGE SELECTS PATSYSTEMS TECHNOLOGY
http://www.finextra.com/fullpr.asp?id=29427
09/09/2009 11:11:00
NYSE EURONEXT TO SELL OPTIONS MART STAKE TO DEALER CONSORTIUM
Nyse Euronext has agreed to sell a "significant" equity stake in one of the company's two US options exchanges to a consortium of market makers, including BofA Merrill Lynch, Barclays Capital, Citadel Securities, Citi, Goldman Sachs, TD Ameritrade and UBS
More on this story: http://www.finextra.com/fullstory.asp?id=20457
Chi-Tech Selects FTEN's Risk Controls for Pan-European Trading ServiceChi-Tech integrates FTEN into MarketPrizm offering to provide risk management as HFT grows ...
PLUS GETS £5.5M MIDDLE EAST INVESTMENT
Plus Markets says a group of investors from the Middle East has agreed to invest up to £5.5 million for a 19% stake in the UK small and mid-cap exchange.
Full story: http://www.finextra.com/fullstory.asp?id=20444
PLUS MARKETS PLANS LIQUIDITY SCHEME
http://www.finextra.com/fullpr.asp?id=29444
MEXICAN EXCHANGE IN TALKS TO SELL STAKE TO CME GROUP Bolsa Mexicana de Valores is in preliminalry talks to sell a minority stake to Chicago-based derivatives exchange operator CME Group.
Full story: http://www.finextra.com/fullstory.asp?id=20452
GOLDMAN SACHS BACKS CLS/ICAP FX JV
http://www.finextra.com/fullpr.asp?id=29483*** Traiana & CLS
1. Catalyst: Photonic Chip - ABC TV ScienceThe science of photonics promises to remove bottlenecks and speed up the entire Internet by sending information with light rather than tardy little ...www.abc.net.au/catalyst/stories/2675781.htm - Cached - Similar
Clearing
Banks agree to route more derivatives through clearinghousesJPMorgan Chase, Barclays, UBS, Citigroup and several other major financial institutions agreed to accelerate their use of central clearinghouses for over-the-counter derivatives. The banks said they will start sending more credit default swaps and interest-rate derivatives through clearinghouses in October and December, respectively. The move comes as regulators in Europe and the US aim to clamp down on the $450 trillion market. Reuters (08 Sep.) , The Wall Street Journal (09 Sep.)
09/09/2009 12:00:00
EUROPEAN COURT UPHOLDS CLEARSTREAM MONOPOLY ABUSE CHARGE
Europe's second-highest court has upheld a monopoly abuse charge brought by the European Commission against Deutsche Börse's settlement arm Clearstream five years ago.
More on this story: http://www.finextra.com/fullstory.asp?id=20460
EUROCLEAR DEPUTY CEO IGNACE COMBES TO RETIRE
http://www.finextra.com/fullpr.asp?id=29400
Euroclear follows MTFs with fee cuts Euroclear, Europe’s largest settlement house, plans to cut the fees it charges for some post-trade services in the UK, in the latest fillip for the country's equity traders, who have seen their costs fall dramatically since the launch of several new trading venues.
FINACIAL NEWS: Euroclear Follows MTFs with Fee Cuts By Tom Fairless9/3/09 Euroclear, Europe’s largest settlement house, plans to cut the fees it charges for some post-trade services in the UK, in the latest fillip for the country's equity traders, who have seen their costs fall dramatically since the launch of several new trading venues.Brussels-based Euroclear said it will reduce the fees it charges investors to offset share trades executed on rival stock markets from November. The company will cut its average trade-netting fee by 58%, from 4.3p to 1.8p per transaction, with some users paying less than 1p.
*** the big win here is transparency, at long last Euroclear will start to let people know how much they actually charge for netting (as opposed to transaction reporting SDRT (stamp duty) or other.
Consortium could gain controlling stake in LCH.ClearnetLCH.Clearnet, one of the most prized post-trade businesses in the world, is in talks to buy out many of its shareholders and possibly give a controlling stake to a consortium of banks and inter-dealer broker Icap, sources said. LCH.Clearnet has been at the centre of an ownership battle for months, and the development is the first indication that a resolution might be in the making. Financial Times (tiered subscription model) (10 Sep.)
Participants
BARCLAYS FINED £2.45 MILLION FOR TRANSACTION REPORTING FAILURES The Financial Services Authority (FSA) has fined Barclays Capital Securities and Barclays Bank £2.45m for failing to provide accurate transaction reports to the watchdog and for "serious weaknesses" in systems and controls in relation to transaction reporting.
Full story: http://www.finextra.com/fullstory.asp?id=20450
Fragmentation of share-trading data remains issue in EuropeFinancial industry officials in Europe said the Markets in Financial Instruments Directive has opened up opportunities and given investors a greater number of choices, but it has also led to fragmentation of share-trading data. While some market participants said the fragmentation is a serious issue, others said it is a consequence of increased competition. In the US, regulators tackled fragmentation by requiring trading platforms to route prices through a consolidated tape. Europe has no plans for a similar solution. Reuters (08 Sep.)
Markit BOAT to cut pan-European data price
As the European Commission (EC) gathers evidence for its MiFID review, a survey by The TRADE has found that 68% of European buy-side heads consider their clients to be worse off since its implementation, while only 16% think the directive has improved their ability to attain best execution.
Eurex draws up wider plan for OTC derivatives European futures group Eurex has thrown down the gauntlet to international regulators by proposing a blueprint to overhaul the over-the-counter derivatives market.
The 48 page blue print is available here:
http://www.eurexchange.com/download/documents/publications/WPDerivativesMarketBlueprint.pdf
UBS CONNECTS TO BURGUNDY
http://www.finextra.com/fullpr.asp?id=29488
GOLDMAN SACHS BACKS CLS/ICAP FX JV
http://www.finextra.com/fullpr.asp?id=29483
MORGAN STANLEY BECOMES ELX FUTURES FOUNDING PARTNER
http://www.finextra.com/fullpr.asp?id=29475
11/09/2009 10:54:00
BARCAP TAKES MINORITY STAKE IN TRADEWEB; UNVEILS FX TRADING TOOLS
Barclays Capital has taken a minority equity stake in TradeWeb, a provider of online markets owned by Thomson Reuters and a group of dealer-brokers. The size of the stake, nor the amount paid, was disclosed.
More on this story: http://www.finextra.com/fullstory.asp?id=20471
Van der Moolen files for bankruptcy in Amsterdam Van der Moolen Holding’s 117-year old history ended on Wednesday after the Dutch brokerage filed for bankruptcy in the Court of Amsterdam following its inability to secure a buyer. (Financial Times)
Read story
Policy
IOSCO urges enhanced regulation of securitisation, CDS marketsThe International Organisation of Securities Commissions issued a report that recommends changes to bolster transparency and oversight of the credit default swaps and securitisation markets. IOSCO's recommendations include a requirement that originators or sponsors retain long-term exposure to securitisations. "IOSCO acknowledges that financial innovation will always be a hallmark of a vibrant financial system. However, such innovation need not, and should not, occur at the cost of investor protection and market confidence," said Kathleen Casey of IOSCO. Investment Executive (Canada) (04 Sep.)
*** I agree with “eat what you kill”
OTC regulators face the 'Grand Canyon' of resource gaps US regulators looking at reforming the vast market for over-the-counter derivatives have become the latest to be told they face a funding headache in their bid to bring tougher oversight to a corner of the financial services industry.
09-168AD ASIC seeks comment on credit rating use in disclosure documents http://www.asic.gov.au/ASIC/asic.nsf/byHeadline/09-168AD%20ASIC%20seeks%20comment%20on%20credit%20rating%20use%20in%20disclosure%20documents?opendocumentConsultation Paper 117 Consent to quote credit ratings in disclosure documents and PDSs will help guide ASIC’s review of its class order relief to find an appropriate balance between:
making credit ratings available to retail investors;
promoting the accountability of credit rating agencies to investors; and
giving credit rating agencies better control of the use of their ratings.
The consultation paper seeks to obtain more information about:
how important credit ratings are to retail investors;
how common is the use of credit ratings in disclosure documents and advertising to retail investors;
how do credit rating agencies control the use of credit ratings; and
what are the practicalities and costs of requiring and giving consent to cite credit ratings in disclosure documents.
Regional
Asias Exchanges Favour Shareholders Over MembersAugust 30th, 2009
Comments by By Steve Edge
Recently, the premier bourses of Asia reported their financial results as is prudent for publicly listed companies. Not surprisingly they all reported a decline in revenue in “harsh conditions”. However, they were all profitable. Not only that but gross profit margins were in the mid 70% range akin to a growth company or more precisely a monopoly. What was telling about the financial results was the dividend payout ratio (the percentage of net after tax profit paid to shareholders in the form of a dividend) all stood at 90%. Asia’s exchanges clearly put their shareholders ahead of their Members.
ASX Ltd (FY08/09)Gross profit margin of 74%Net Earnings per share $1.83Dividend per share $1.65
HKEx Ltd (HY09)Gross profit margin of 77%Net Earnings per share $2.05Dividend per share $1.84
SGX Ltd (FY08/09)Gross profit margin of 77%Net Earnings per share $0.29Dividend per share $0.26(All dollar values are quoted in local currency)
http://www.asiaetrading.com/blog/asias-exchanges-favour-shareholders-over-members/
Hong Kong Exchanges and Clearing Limited (“HKEx”) unaudited consolidated results for the six months ended 30 June 2009 as follows:
Participantship Opens to Overseas Clearing Houses and Central Depositories
In order to provide an additional and lower cost option to overseas market participants who are holding Hong Kong-listed securities as custodians, and to facilitate more order flow to Hong Kong, overseas clearing houses and central depositories (collectively, “CSDs”) can now apply to become Clearing Agency Participants (“CAPs”) of Hong Kong Securities Clearing Company Limited (“HKSCC”) in respect of those Hong Kong-listed securities. CSDs will manage their accounts in the Central Clearing and Settlement System (“CCASS”) electronically through CCASS terminals installed in their jurisdictions, and they will be subject to Hong Kong laws and the participant agreement to be executed with HKSCC. For due diligence purposes, HKSCC will follow the international practice and require CSDs to submit independent legal opinion on their eligibility, under the laws of their jurisdictions, to become CAPs.
T+2 Finality for Stock Exchange Trades
Securities trades executed on the Stock Exchange are currently settled in CCASS on T+2 while the money settlement is completed in the morning of T+3. HKEx plans to implement T+2 Finality for Stock Exchange Trades to reduce the overnight counterparty risk created by the
settlement time gap. With the support of the Hong Kong Monetary Authority and Hong Kong Interbank Clearing Limited, a model has been proposed to effect money settlement at the end of T+2 so as to bring finality of securities and money settlement for Stock Exchange Trades and Settlement Instructions (“SIs”) on the same business day. HKEx is currently seeking feedback from certain banks and clearing house participants on the proposed model for market consultation around the end of third quarter this year.
http://www.hkex.com.hk/news/hkexnews/090812news.pdf
An excellent joke (apart from the potential character assassination). The American version is unsurprising, but I thought it funny the Welsh were in on the act with their “Mr Jones”.
http://www.hoax-slayer.com/cosgrove-female-interviewer.shtml
It is a portion of an ABC radio interview between a female broadcaster and General Cosgrove who was about to sponsor a Boy Scout Troop visiting his military Headquarters. FEMALE INTERVIEWER:So, General Cosgrove, what things are you going to teach these young boys when they visit your base?GENERAL COSGROVE:We're going to teach them climbing, canoeing, archery and shooting. FEMALE INTERVIEWER: Shooting! That's a bit irresponsible, isn't it?GENERAL COSGROVE:I don't see why, they'll be properly supervised on the rifle range.FEMALE INTERVIEWER:Don't you admit that this is a terribly dangerous activity to be teaching children?GENERAL COSGROVE:I don't see how. We will be teaching them proper rifle discipline before they even touch a firearm. FEMALE INTERVIEWER:But you're equipping them to become violent killers.GENERAL COSGROVE:Well, Ma'am, you're equipped to be a prostitute, but you're not one, are you?
It just all depends on how you look at some things...Judy Wallman, a professional genealogy researcher in southern California, was doing some personal work on her own family tree.
She discovered that Congressman Harry Reid's great-great uncle, Remus Reid, was hanged for horse stealing and train robbery in
Montana in 1889. Both Judy and Harry Reid share this common ancestor.The only known photograph of Remus shows him standing on the gallows in Montana territory:
On the back of the picture Judy obtained during her research is this inscription: 'Remus Reid, horse thief, sent to Montana Territorial
Prison 1885, escaped 1887, robbed the Montana Flyer six times. Caught by Pinkerton detectives, convicted and hanged in 1889.' So Judy recently e-mailed Congressman Harry Reid for information about their great-great uncle.
Believe it or not, Harry Reid's staff sent back the following biographical sketch for her genealogy research: "Remus Reid was a famous cowboy in the Montana Territory ...... His business empire grew to include acquisition of valuable
equestrian assets and intimate dealings with the Montana railroad. Beginning in 1883, he devoted several years of his life to
government service, finally taking leave to resume his dealings with the railroad. In 1887, he was a key player in a vital
investigation run by the renowned Pinkerton Detective Agency. In 1889, Remus passed away during an important civic function
held in his honor when the platform upon which he was standing collapsed."
…and oh what a pleasure to see the Wallabies rise to the occasion. I’d not predicted the win so delighted to be proven wrong. Nice way to mark Robbie Deans (Kiwi coach) 50th.
Study without desire spoils the memory, and it retains nothing that it takes in."
--Leonardo Da Vinci, scientist, inventor, author
Without labour nothing prospers."
--Sophocles, Greek playwright and philosopher
Lessons on running a smooth settlement system - Financial TimesBy Jennifer Hughes
20 August 2009 - Amid the chaos caused by Lehman Brothers’ collapse last year, a single €300m ($427m) missing payment might seem small beer.
But the travails of KfW, the German bank, were the exception that proved how well the currency markets functioned throughout the market turmoil – an example market insiders feel is overlooked by the authorities as they search for solutions to settlement risk elsewhere in the markets.
KfW allowed a €300m payment for a currency swap to go out to Lehman Brothers the day the US behemoth collapsed and never got the dollars it was owed in return.
Settlement risk in the currency markets – trading across borders and round the clock – has long been a high-priority issue for regulators. It was in fact the FX issues caused by the 1974 collapse of a private German bank that gave the problem its colloquial name – Herstatt risk.
Then, Herstatt Bank was paid Deutschmarks in European time but had not paid out the dollars it owed in US trading hours before it closed its doors.
The fact that KfW was almost the only headline-worthy FX settlement issue during the financial crisis underlines the smooth-running of the market and means it has been one less headache for regulators. But as they and politicians seek solutions to some of the trading risks highlighted by the crisis for other over-the-counter markets, currency experts wonder why their model, tested on the biggest market there is, is largely being ignored.
Currency markets have always been a little bit special. Known as a distinct asset class in recent years, FX is considered by regulators to be the most systemically important market because of its central role in the global payments system and because of the staggering sums traded round the world each day.
If the FX market gummed up, the global economy would be affected instantly because without a price, banks would struggle to exchange currencies across borders for even the smallest trade flows.
The market is also the exception that proves the rule whereby all policymakers talk global but often end up acting locally.
Currencies are sovereign, but by their nature they are traded across borders, making the market impossible to oversee on a purely national basis.
The market is made more complicated still by the fact that currencies are often settled in different timezones, meaning one bank could have paid its dollars to a counterparty, but would have to wait perhaps another full day to get, say, its yen in return.
As a result, regulators have worked together and over the years increased the pressure on the industry to solve its settlement risk issues. In 2002 it launched Continuous Linked Settlement, or CLS Bank, the multilateral system owned by a group of banks whereby members settle hundreds of billions worth of transactions each day.
“Spot” FX for immediate settlement is not traded on an exchange, but over-the-counter in bilateral deals. Exchanges are being touted by politicians and regulators as the solution to settlement risk in a range of over-the-counter markets including for credit derivatives, but the spot FX world is a working example of a market that, through CLS, has largely dealt with settlement risk without using an exchange as a central counterparty.
“The fear for the market is that politicians unwittingly draw FX into their deliberations over other over-the-counter asset classes,” says one official.
CLS processes trades in real time for settlement for most of the main banks today, handling about 50 per cent of global FX trading volumes. The system matches both sides of a trade – it does not stand as a central counterparty – and then nets each member bank’s total obligation. If KfW had settled its Lehman trade through CLS, it would have got its €300m back since if CLS can not reconcile both sides of a deal, the funds are returned.
CLS was not always appreciated by the market; almost all banks saw it as a high-cost utility in its early days and had to be bullied into developing the system by central banks who oversaw the whole market. Now, these same players are enthusiastic.
“When they saw counterparties could fail and these risks were not in fact theoretical, the real value of CLS got through. Many people in the industry have now got this risk reduction religion, so to speak,” said Rob Close, chief executive of CLS.
Market insiders are now addressing the risk caused by the growing bottleneck between deal and settlement.
“We’re trading in milliseconds in the front office but we’re only settling that in the back office on a daily basis,” said Zar Amrolia, global head of FX at Deutsche Bank.
A new system due to launch later this year is designed to take care of that by aggregating each trade ticket and settling them in bunches rather than risking that a large number of trades might get delayed in a traffic jam in the back office. This could be done as often as every 30 minutes.
The new platform is a joint venture between Traiana, the ICAP-owned post-trade network operator and CLS. Gil Mandelzis, chief executive of Traiana, thinks the system can be applied to other asset classes – reducing settlement risks and in the process, increasing capacity. “I absolutely think the FX model can in part be applied to other asset classes. It hasn’t been studied enough to see what works,” he says. “We don’t have a silver bullet. We come up with new ideas all the time. But what we have done is not limited to the world of FX.”
Scott RileyEMCF 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
G’day All,
Where has the week gone?
Chi-X…I think this is a bit sensationalised. I thought that was the idea? Increase volume, reduce cost.
T increases urgency of sale…(the good old variable are price, time & product)
Nyfix deal in general is unsurprising. T and Euro millennium (thanks spell check) on the market at the same time is less convenient.
(I liked the Tabb report on this – in full below)
Local infrastructure changes in Aussie. Improvement in settlement process to be applauded. Harmonisation is more about SFE / ASX merger hangover and ASX optimisation of their cost base (at least in my view) rather than driven by participant desires. Somewhere in this lot was a derivatives fee hike.
I’m still reeling after: Revenues 538myn, Post Tax profit 313myn.
http://www.asx.com.au/about/shareholder/index.htm
Nice piccies of Nomura’s new gaff here: http://www.watermarkplace.co.uk/downloads/
(Am I alone in not ever getting the “Typical Office” view?)
And another story Instinet’ers will love – the sausage exchange, maybe I should open the Aussie branch, the sausage sizzle (a la BBQ)…nah, the boy scouts have already got that one sewn up.
CTFC / SEC. Stop it. Get on with it. Just do this and get it over with. At the end of the day, where there is no overlap, the ‘agency’ will have appropriate divisions.
..and how very nicely put (SIFMA/LIBA/ISDA): As long as risk itself is not standardised, then tailored instruments will remain important.
I had a meeting with some guys from KPMG this morning.
One of them mentioned during some form filling in the office the question arose: “do you have dependent children?”.
He responded: “is there any other type?”
I kinda understand that.
…but this is oh so true…
When a thing is funny, search it carefully for a hidden truth."
--George Bernard Shaw,Nobel laureate in literature
On that note, have a great week-end all.
…and yes, the wallabies will lose 7 on the trot, but hey, who watches rugby these days?
S
http://clearingandsettlement.blogspot.com/
Platforms.
CHI-X EUROPE LATEST TO SLASH FEES
Multilateral trading facility Chi-X Europe has outlined plans for an aggressive pricing promotion this autumn as the battle for equity market share across the continent continues to rage.
Full story: http://www.finextra.com/fullstory.asp?id=20427
BATS EUROPE INTRODUCES 'MARKET ON CLOSE' SERVICE
http://www.finextra.com/fullpr.asp?id=29383
Turquoise sets deadline for sales shortlist High-profile trading system Turquoise, which two weeks ago began a review of its strategic options, has set an aggressive deadline to move ahead with its sales plan, pledging to have presented to its board a shortlist of “two or three” alternatives before the end of this month.
NYSE Euronext to spend about $144 million for NyfixNYSE Euronext will pay about 95% more than Nyfix's recent closing price of 86 cents to acquire the electronic brokerage. The deal is likely part of "NYSE's ambition to become a more important source of transaction infrastructure, beyond just providing marketplaces and related market data," said Ed Ditmire, an analyst at Fox-Pitt Kelton Cochran Caronia Waller. Bloomberg (8/27) , The Wall Street Journal (8/28)
*** Also of interest, the advisors and Millennium divestment
Summary (Thx JPM!)
· Liquidity fragmentation in Europe last week was up 0.4% to 22.1%, driven by UK and Germany.
· Ireland (67.8%), UK (36.4%), Netherlands (24.7%), France (25.2%), and Germany (24.5%) were the most fragmented markets in percentage terms.
· UK ($2.7bn), France ($1.6bn), Germany ($1.4bn), Netherlands ($0.5bn), Italy ($0.6bn) and Switzerland ($0.5bn) were the most fragmented in terms of Displayed Liquidity traded away from the primary market.
· Chi-X achieved average daily turnover (ADT) of $5.0bn, equivalent to 13.8% of flow in Chi-X names. Total ($93m, 20.8%), Arcelormittal ($83m, 19.4%) and Unicredit ($79m, 4.7%) had the highest ADT.
· ADT on the Turquoise Displayed Order Book was $1.7bn. Market share in Turquoise names was 4.6%. Nestle ($33m, 8.4%), HSBC ($27m, 9.2%) and Roche HLDG ($27m, 10.3%) had the highest ADT.
· BATS achieved ADT of $1.0bn. Market share in BATS names was 2.9%. France Telecom ($29m, 8.5%), Unicredit ($29m, 1.7%) and ENI ($23m, 5.6%) had the highest ADT.
· Nasdaq OMX achieved ADT of $238.94m.
· 27 stocks traded more than 20% ADV on Dark venues. Swiss Block achieved ADT of $68.61m.
Clearing
Derivatives notices: market information documents: enhancing australia's equity settlement system; and central counterparty (ccp) harmonisation and linking[market information documents: enhancing australia's equity settlement system; and central counterparty (ccp) harmonisation and linking ]
Markit launches derivatives JV Markit, the London-based financial data group, has launched a joint venture with the biggest US clearing house aimed at simplifying trading of over-the-counter derivatives, as regulators press for measures to reduce risk in the vast OTC markets.
Regional
Hong Kong regulator discusses enforcement activityMartin Wheatley, CEO of Hong Kong's Securities and Futures Commission, discusses how the regulator of markets has ratcheted up its enforcement efforts and why. He also disuses the emergence of dark pools in Asia, the minibond crisis and how Hong Kong is leading the way on short-selling rules. The Wall Street Journal (28 Aug.)
Oxford Properties eyes further London investments after Nomura deal Oxford Properties, the property unit of the Ontario Municipal Employees Retirement System, is seeking fresh investments in offices in the City of London and the West End after signing up Nomura as a tenant at its Watermark Place scheme. (The Daily Telegraph)
Policy
Trade groups urge G-20 to ensure reforms promote open marketsSIFMA issued a joint statement with a trio of other financial trade groups from around the world pressing finance ministers from the Group of 20 nations to ensure that regulatory reforms do not distort competition, hinder market entry or spur regulatory arbitrage. "It is critical that the G-20 finance ministers remain committed to ensuring that reforms are developed and implemented in a manner that promotes open markets and the free flow of capital," SIFMA, along with the Investment Industry Association of Canada, the Japan Securities Dealers Association and the London Investment Banking Association, said in a statement. Read the full news release. Nasdaq.com/Dow Jones Newswires (03 Sep.) , Investment Executive (Canada) (03 Sep.)
CFTC, SEC work toward finding common groundAs the Securities and Exchange Commission and the Commodity Futures Trading Commission prepare to share supervision of the over-the-counter derivatives market, the regulators are attempting to come together on their rule books. The task might be more difficult than it appears because the heads of major exchanges differ on harmonizing the regulators, and the agencies' philosophies on regulating markets also differ. The Wall Street Journal (9/3) , The Bond Buyer (free content) (9/3)
SIFMA, LIBA, ISDA support initiatives on derivatives marketsAlong with the London Investment Banking Association and the International Swaps and Derivatives Association, SIFMA praised efforts outlined by the European Commission to improve derivatives markets. "We have a simple message from all those that use these vital risk-management products," said Robert Pickel, executive director and CEO of ISDA. "The real economy faces diverse risks and depends on privately negotiated derivatives to address them effectively. As long as risk itself is not standardised, then tailored instruments will remain important." Read the full news release. Forbes/Reuters (02 Sep.)
SEC Summary: Madoff Intimidated ExaminersThe Executive Summary of SEC Inspector General David Kotz's internal report on the agency's failings ...
http://advancedtrading.com/regulations/showArticle.jhtml;jsessionid=W2HHNJDMVP0BZQE1GHRSKH4ATMY32JVN?articleID=219501094&_requestid=12157
The SEC Madoff report
http://i.cmpnet.com/financetech/download/SECInspectorGeneralSummary.pdf**** Great the Madoff report is available…caution, 10MB size.
Junk
Star ex-Goldman trader plans Facebook-style property portal Anton Kreil, the former Goldman Sachs trader behind the popular BBC TV show Million Dollar Traders, will launch hablib.com, a Facebook-style portal that plans to assist property owners sell homes without paying an average 1.5% commission fee to estate agents. (The Daily Telegraph)
*** Anything that is uncomfortable for estate agents is good news.
Disney surprised Hollywood with its purchase of Marvel Entertainment for $4 billion. Films based on Marvel’s comic-book characters, such as Spider-Man and the X-Men, have drawn some of the biggest audiences of recent years. Although Marvel is committed to current projects with other studios, Disney hopes that its catalogue of 5,000 action-heroes will eventually provide material for many blockbusters, as well as the increasingly lucrative accompanying licensed merchandise. See article*** inevitable I guess. Still, it saddens a part of me.
Laid- Off German Banker Opens Fast Food Joint Thomas Brausse used to trade stocks for a living in Frankfurt. Now, after being laid off as a result of the financial crisis, he sells French fries and sausages from a lunch truck -- and is delighted with his new career.
http://www.spiegel.de/international/business/0,1518,646794,00.html#ref=nlint
I had a meeting with some guys from KPMG this morning.
One of them mentioned during some form filling in the office the question arose: “do you have dependent children?”.
He responded: “is there any other type?”
I kinda understand that.
An unhurried sense of time is in itself a form of wealth."
--Bonnie Friedman, author
=====================THE TRADE NEWS: MTF Consolidation to Diverge from US Path, According to TABBBy Staff9/2/09Any consolidation among Europe’s multilateral trading facilities (MTFs) will find few parallels with the acquisition of US ECNs by exchange groups in the mid-2000s, according to Larry Tabb, founder and CEO of research consultancy TABB Group.Two pan-European MTFs – consortium-backed Turquoise and Euro Millennium, owned by recently-acquired technology provider NYFIX – are currently looking for buyers, but Tabb suggests that established European exchange groups might not be first in the queue.“Consolidation in the US was a trading platform issue as well as market share issue,” said Tabb. “NYSE did not have a platform that could compete with Archipelago, so they bought it. When Nasdaq bought INET, they bought a better platform and market share.”Europe’s leading exchange groups – Deutsche Börse, London Stock Exchange Group, Nasdaq OMX and NYSE Euronext – all have sufficiently strong technology platforms not to want to buy purely to secure a new trading platform, Tabb asserted.In December 2005, the then member-owned New York Stock Exchange voted to acquire Chicago-based electronic trading venue Archipelago. Days later, Nasdaq completed the acquisition of the INET ECN from agency broker Instinet. Turquoise, the MTF launched by nine global investment banks in September 2008, appointed stakeholder UBS to find a potential buyer last month. On 27 August, NYSE Euronext confirmed that the acquisition by its subsidiary, NYSE Technologies, of NYFIX, a US-based connectivity-to-transactions technology provider, left the exchange group considering external partners among the strategic options for NYFIX’s dark pools, Millennium, a US-based venue, and Euro Millennium.The art of M&A is a relatively new one for stock exchanges to master and Tabb believes that Europe’s exchange groups may draw another reason for caution from the experience of NYSE and Nasdaq in purchasing domestic rivals.“Consolidation is good from a cost standpoint, but bad from a revenue standpoint,” said Tabb. “If you consolidate two platforms you don’t get twice as much volume on one platform, you get maybe 1.5 times the volume. To that extent, you’re better off running multiple market models so that there is an arbitrage between markets that increases volumes rather than decreases it.”However, the MTFs will not be short of suitors. Tabb believes that a buyer could come from three potential sources: an existing player that needs more penetration; an outside entity that wants to establish a London presence; or local exchange that does not have a London-based MTF.Of the largest four equity exchange groups in the US, only Direct Edge has not yet launched a London-based MTF. In January, CEO William O’Brien told theTRADEnews.com that the firm would only consider overseas opportunities where the firm could differentiate itself from the competition. “We are not going to look to engage in new areas where we are a me-too player,” he said.With a 4.66% share of pan-European order book trades, according to the latest weekly analysis from the Fidessa Fragmentation Index, Turquoise controls the second-largest market share of any MTF behind Chi-X and just ahead of BATS Europe. Tabb suggests that a change of ownership could provide the necessary stimulus to make Turquoise a profitable business in the longer term.“The main goal of Turquoise was to put pressure on the local exchanges to reduce prices, increase speed and offer more flexible terms. To that extent, it has been successful,” said Tabb. “But consortium ownership is not the most efficient operating infrastructure. By selling Turquoise off, it becomes possible to bring a set of more focused management talent in to change the business model and get Turquoise running more profitably and gaining more market share.”In the US, consolidation marked a slowdown in the pace of innovation in the view of many market participants. The sale of INET to Nasdaq led directly to 13 traders leaving Kansas City-based proprietary trading firm Tradebot to form BATS Trading. But Tabb is optimistic that changes in ownership among Europe’s MTFs will not put a brake on the pace of change in Europe’s equity trading markets.“New players are coming into the market, new trading strategies are being developed and enhancements are being made to market structures,” he said. “But what may change is where innovation comes from. Some of the broker-dealers may not have the budgets that they once had, so you might see the high-frequency guys beginning to drive change.”If the US is showing a lead to Europe, it may be in the field of regulation. In recent months, the US Securities and Exchanges Commission has voiced its concerns on use of ‘flash’ orders and the post-trade reporting practices of dark pools. The European Commission will complete its review of the impact of MiFID in 2010. The Committee of European Securities Regulators, the body charged with ensuring consistent securities regulation across Europe, is conducting ongoing consultations on the use of pre-trade transparency waivers by European dark pools. “I think we will see more investigations into the appropriate market structures and order types and how should the markets work in a more open access way,” said Tabb.=====================
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
