Stock exchange consolidation
Another day, another blockchain distributed ledger technology (DLT) report*. Today’s comes from the World Federation of Exchanges, which provides us with a survey of what financial market infrastructure types are thinking about DLT. And, interestingly enough, the bulk of the survey is dedicated to unknown, unknowns. Since DLT hype is exclusive to all other media outlets on the internet, we won’t feel bad about highlighting some of the real concerns being raised by market practitioners in the space with respect to DLT rollout.
Shareholders in the London Stock Exchange will vote today on a merger with Deutsche Boerse to create a pan-European exchanges champion. The deal has been cast into doubt by the Brexit referendum, according to some commentators. LSE investors can be expected to vote Yes, not least because the drop in the value of sterling has increased the value of the 46 per cent stake they will take in the merged entity.
Back in the late 90s, during one of the first attempts to forge a merger or some sort of alliance between the London and Frankfurt stock exchanges, an internal competition was launched to find a name for the new entity. The prize was a weekend for two, all expenses paid, in either London or Frankfurt, depending on the winner’s abode. In the event, all the entries came from the Deutsche Boerse side; none at all came from the LSE. But in any case, a winning entry was never chosen because the whole plan fell foul of board level egos. And every merger plan since has fallen on similar grounds.
- Jim Millstein discusses the financialisation of America
- Alphachat is on hiatus this week
- Benn Steil explains the Marshall Plan
- Marcel Fratzscher on the dark side of the German economy — now with transcript!!
- Marcel Fratzscher explores the dark side of the German economy
- Emi Nakamura on calculating inflation
- Stephanie Kelton explains how the government budget affects the economy and the mechanics of student debt forgiveness
- Jonathan Knee explains 25 years of Wall Street’s evolution
- Marcus Noland explains the North Korean economy
- Brad Setser explains how corporate tax policy affects the balance of payments
- Michele Wucker explains “Gray Rhinos”
- Listen - The "gray rhino" theory
- James Heckman tells us why IQ is overrated
- Mihir Desai explains the wisdom of finance — Now with transcript!
- Mihir Desai explains the Wisdom of Finance
- Can we avoid another financial crisis?
- Hirschmania, the final chapter
- The life and speeches of Sadie Alexander
- Kim Rueben on the fiscal impact of immigration
- A sit down with Adair Turner
A new hemp derivatives market?
Hindsight is a wonderful thing. The US Treasury is planning to increase the amount of data available in the opaque US government bond market, having sent out a request for information in January to solicit responses about precisely what data policymakers and regulators should have access to, and what should be disseminated to the public. The aim is to crack open the Treasury market, prompted by the wild price swings on 15 October 2014 that continue to confound the agency.
A brand spanking new trading platform has just received temporary registration from a US regulator to trade derivatives. But on paper, it looks suspiciously like an existing derivatives trading platform that would also be a key competitor. FTSef, owned by Flextrade, intends to trade FX non-deliverable forwards, where a currency exchange rate is agreed at the time of the trade for a future date and the settlement value is the difference between the agreed rate and the spot price. To do so, FTSef submitted an application to the Commodity Futures Trading Commission to become a registered swap execution facility. On Tuesday, it received temporary registration.
Officials from the SEC have been out with axes and clubs across 24 states and also Canada, effectively putting 128 inactive penny dreadfuls or Pink Sheets out of their corporate misery. Trading suspensions on Monday brought the number of micro cap companies suspended since the regulator began Operation Shell-Expel in 2012 to 800 — some 8 per cent of the OTC market, where all these previously traded.
We’ll admit that this is disappointing news. We have pixels to fill and this company has done us proud. Worthington, the wannabe global conglomerate built on a legal claim against Rangers football club, has been told it will have to reapply for its main market listing in London…
Markets: Asian markets were broadly positive on hopes of a robust US second quarter gross domestic product report due out later today. Tokyo markets were subdued after data released on Wednesday showed a 3.3 per cent decline in Japanese industrial production from May to June. (FT’s Global Markets Overview)
Fans of schadenfreude may enjoy the following press release from Barclays, dated February 26, 2013, to publicise that … Barclays LX now #2 US dark pool LX is what Eric Schneiderman, the US state attorney-general, describes as a “dark pool full of predators – there at Barclays’ invitation”. His lawsuit alleges that Barclays was putting high-frequency traders in front of institutional investors, while sending bumf to the institutions that claimed the HFTs were being weeded out.
One doesn’t need Michael Lewis to point out that the world of order flow (and asset transfer) is murky. Purposefully so. Getting data on the sector, somewhat unsurprisingly, is not that easy. One of the few companies that does assess the market and shares those findings with journalists is Rosenblatt Securities (albeit, with conditionality). But even this, to some extent, is only an estimate because not all market participants share their data with Rosenblatt. In Europe, meanwhile, there is also the problem of double counting amidst the consolidated OTC figures, which means the figures against which dark pool activity is compared against can be unfairly drowned out.
Here’s an unintended consequence of the government shutdown that the Republicans may not have envisioned: commodity market turmoil. John Kemp of Reuters makes the excellent point on Wednesday that the shutdown, if it continues, will soon hit important government data statistics services such as the CFTC’s weekly commitments of traders report and even potentially the EIA’s weekly inventory figures.
The Italian government has not collapsed in a flurry of post-bunga bunga recrimination, at least not yet. With the ECB standing ready, the debt markets are calm, and investors in the banks are feeling good about improvements in asset quality and the direction of earnings.
The FT’s Arash Massoudi: Trading in stocks listed on the Nasdaq including Apple, Google and Facebook were halted just after midday in New York as the second-largest US stock exchange by volume experienced technical issues, causing chaos and confusion among traders and market participants.
From the London Stock Exchange on Monday… As part of a reorganisation of London Stock Exchange Group’s (“LSEG”) Italian legal entities earlier this year, a valuation report was prepared for the specific purposes of the reorganisation and was filed with the Companies Register of the Milan Chamber of Commerce and has recently been made public. This report included a LSEG revenue projection for the year ending 31st March 2016 of €1.4Bn with 12% annual LSEG revenue growth from the start of FY14. It also included 5 year (FY14 to FY18) financial projections for the Italian legal entities together with historic information for such entities for the 9 months to 31 December 2012.
It’s streaming from the LSE and is ostensibly about what economists and policymakers should take from the financial crisis. However, if we were cynical folk we’d suggest this makes a nice opportunity for Bernanke and King to get together, have some wine and go all Norman-Strong. Our eye’s on the ground tell us such luminaries as Carney and Yellen are also in attendance. Anyway, enjoy, we know all the LSE alums here who made us post this will…
Fiscal Cliff ‘Plan B’ collapses || ICE to buy NYSE Euronext || Bolder UK bank reforms encouraged || Ex-banker arrested in US over Olympus fraud || US planning Whale sanctions || US banks may face rise in bad loan provisions || Khuzami to leave SEC || Research in Motion shares slump
‘Plan B’ collapse draws fiscal cliff nearer: Republican House leaders failed to get a vote held on a ‘Plan B’. The failure has led to increased pessimism over whether a deal can be struck, and “marks a serious miscalculation on the part of Mr Boehner, who hoped the measure’s passage would increase his leverage in talks with Barack Obama”. It was unclear how efforts to reach agreement would proceed, with the House adjourned until December 27 and the Senate, apart from meeting for a few hours this afternoon, effectively doing the same. (Financial Times)(Washington Post) Asian shares and US futures slumped on news of the ‘Plan B’ collapse, while the Yen rose. (Bloomberg)(Financial Times)
ROUND-UP FT markets round-up:“An apparent pause in the substantive negotiations on the US fiscal cliff is leaving many equity benchmarks becalmed near recent highs. The FTSE All-World equity index is up 0.1 per cent as Wall Street’s S&P 500 closes 8 points higher at 1,444, kept aloft by a rebounding Philly Fed factory activity survey and stronger-than-expected US home sales data. The FTSE Eurofirst 300 closed fractionally firmer after the Asia-Pacific region was also barely changed. The euro is up 0.1 per cent to $1.3242 – earlier flirting with an eight-month high near $1.33 – as the dollar index drops fractionally.” (Financial Times)
The photo above was taken by Bloomberg’s Nick Summers, and it shows a large part of Lower Manhattan is now without power, having been shut off by Con Edison to “protect both company and customer equipment, and allow for quicker restoration after Hurricane Sandy passes”.
NYSE Euronext Statement on Closure of U.S. Markets on Monday Oct. 29 and Pending Confirmation on Tuesday, Oct. 30, 2012 NEW YORK–(BUSINESS WIRE)–In consultation with other exchanges and market participants, NYSE Euronext (NYX) will close its markets on Monday, Oct. 29, 2012 and pending confirmation on Tuesday, Oct. 30, 2012. We support the consensus of the markets and the regulatory community that the dangerous conditions developing as a result of Hurricane Sandy will make it extremely difficult to ensure the safety of our people and communities, and safety must be our first priority. We will work with the industry to determine the next steps in restoring trading as soon as the situation permits.
Back in early 2011, a very intriguing thing happened in the oil markets. As if by magic — (well, over the period of about a couple of months) — the market collectively and spontaneously moved from using WTI as its primary benchmark for pricing product spreads over to the Brent contract. The era of the “Brent crack” was born.
If you read some of the regulations written recently, you may be forgiven for thinking that central clearing is the solution to all the risks in the over-the-counter (OTC) derivatives market. Some rules mandate clearing for certain market participants and trades, while others impose higher capital requirements for staying outside of the system. There is, of course, an implicit assumption in all of this that central clearing is an unequivocally good thing. If only it were that easy. In fact, there are lots of issues with OTC derivatives clearing. Today, we’ll just look at one aspect: that of margin.