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Eurex Exchange releases results of proprietary HFT research

Eurex Exchange releases results of proprietary HFT research

First Published in Automated Trader Magazine Issue 29 Q2 2013 : Sponsored Articles

Eurex Exchange is the first exchange in Europe to share part of its proprietary quantitative research on high- frequency trading (HFT) with the public. Key findings of this research include:

(a) HFT participants played an important and beneficial role during one of the most extreme market situations Eurex Exchange has seen in recent years,

(b) HFT participants play a unique and indispensable role in the recovery of market quality right after large trades, and

(c) Eurex Exchange did not find evidence of abusive HFT activity


Eurex Group continuously invests in deepening its understanding of the structure and dynamics of the markets it operates. Its proprietary data contains a wealth of information on each individual order, down to the level of trader ID and microsecond granularity timestamps. This data uniquely allows the exchange to conduct extremely granular research, which is more important than ever considering the public debate. The analysis is a contribution to much needed empirics in the discussion on HFT.

Defining HFT

Key to the credibility of any research on HFT activity is a solid process to identify which order flow is – and which is not – of HFT origin. Eurex Group argues that HFT is a technologically advanced implementation of a great variety of trading strategies – some of which already existed prior to the existence of electronic trading platforms. Therefore, the exchange’s HFT selection process is based on the technical (instead of functional) characteristics of its participants’ order flow. More specifically, the exchange’s research looks at the inter-arrival time of messages, measured by the number of microseconds between any two consecutive messages from any two different participants.

To understand the underlying logic of the research, imagine a world wherein participants in a market place would not react on the exact same events when making investment decisions. In this world, the speed with which one reacts on any opportunity would generally not matter; there is no other participant hunting for the same opportunity. Therefore, from a system perspective, transaction arrival at the central exchange system would be uncorrelated. There would be a predictable number of observations with a small inter-arrival time and a somewhat smaller number of observations with a higher inter-arrival time. The expected number of observations for any inter-arrival time would be given by a Poisson distribution. In reality, trading activity is partly correlated and, since the rise of HFT, especially on a micro-second time frame. Therefore, there are observations in excess of what might be expected based on the Poisson distribution, particularly in the 0-100 microsecond time frame. These excess observations for very short inter-arrival times serve as a proxy for the ‘HFT-ness’ of a participant.

HFT participants provide important liquidity during periods of extreme market volatility

On 25 August 2011, Eurex Exchange experienced one of the most challenging market situations in its history. An institutional investor (not an HFT participant) offloaded a 6,000 contract DAX® Futures position in a 20 minute period, causing tremendous price pressure. For comparison, the average turnover increased from 300 contracts per minute to more than 1,700 contracts per minute. As a result, the market in DAX® Futures briefly lost more than four percent of its value, making the event look much like the U.S. ‘Flash Crash’. However the situation was different in two very important respects.

Dr. Randolf Roth

Dr. Randolf Roth

Firstly, although liquidity became more expensive, it did not dry up. Spreads widened and the number of available contracts declined, but these are natural consequences of increased demand. Arbitrage (against e.g. EURO STOXX 50® Index Futures, SMI® Futures, etc.) allowed participants to transfer liquidity from correlated instruments to DAX® Futures and vice versa. Trading continued in an orderly fashion, and the volatility interruption that halts trading when prices move too fast was not triggered.

Secondly, HFTs continued to be an important source of liquidity throughout the event, supplying 30 to 50 percent of the contracts available at the best bid and offer. Contrary to what one might expect, their aggregate participation was not skewed to one side or the other. Of course, only an execution proves the relevance of an order. Therefore, it is also important to note that the HFT share of passive executions remained stable and high. Furthermore, contrary to popular belief, the majority of the aggressive side of those executions were not HFT participants. Last, but not least, HFT liquidity was spread out over several price levels at all times, reducing the price impact for large aggressive orders.

HFTs increase their participation in liquidity provision after large trades

Eurex Exchange keeps close contact with end users of its trading system, such as buy side investment firms. Discussions with traders at these firms have proven to be invaluable input for decisions regarding market structure and trading system design. The exchange takes their concerns about market structure very seriously and investigates specific issues wherever possible. An often heard criticism is that HFT liquidity is spurious; “Whenever I try to hit it, it’s gone before my order reaches the exchange”.

To verify or falsify this claim, Eurex Exchange took all add, modify and delete orders and rebuilt the historical order book in EURO STOXX 50® Index Futures for several days from 2012. The exchange defined “large trades” as trades that were 10 to 20 times the 10-minute moving average trade size. In EURO STOXX 50® Index Futures, such trades occur between 400 and 500 times per day. For each 100 milliseconds (ms) in the two seconds around these trades, Eurex Exchange analysed the contracts available at the best price level on the side of the order book that was affected. Based on that, it was possible to calculate the share of contracts provided by HFTs and by non-HFTs respectively (adding up to 100 percent).

Passive HFT activity development around liquidity gaps

Passive HFT activity development around liquidity gaps

Each grey lines depict the daily average market share of HFTs on the relevant side of the BBO before and after a large trade (10 times the trailing 10 minute average) in the front month Eurostoxx future. The blue line is the average of these averages. The graph shows that HFTs do not reduce their participation right before large trades and increase (rather than reduce) their market share of the relevant side of the BBO after large trades.
Bernard Hosman

Bernard Hosman

The results can be found in the figure below. The grey lines represent the combined market share of the exchange’s top 40 HFT participants, whereas the blue line is the average of the grey lines. Remarkably, instead of reducing their participation, it can be seen that on average, HFTs significantly increase their share of contracts on the best price level of the side of the order book where a large trade occurs. Furthermore, it can be seen that the participation of HFT users does not change in the second prior to the execution of the large order. Therefore, the claim that HFT participants revoke their liquidity before a large trade hits the order book does not, in general, hold true.

Strong competition among HFTs yields remarkable improvement in market quality resilience at Eurex

Over the past few years Eurex Exchange has seen a substantial increase in HFT activity. The exchange wanted to quantify the effect of increased competition among liquidity providing HFT participants on market quality. One of the areas it expected to see market structural changes was the resilience of the market; in other words: How fast does the market recover after a large trade? What happens after large trades hit the order book is extremely important as most trading is highly correlated; a slow recovery means unnecessary sub-optimal executions.

Spread resilience

Spread resilience

The grey lines show daily averages for the spread recovery paths in 2010 and 2012. The blue lines are averages for 2010 and 2012. Compared to 2010, the liquidity in the DAX30 futures became much more resilient. The averages converge around 500ms from the big trade.

To quantify the recovery process of market quality, the exchange measured the spread (in ticks) for each millisecond in the two seconds before and after the large trades that caused the spread to widen. Such events happen several hundred times a day in the front-month DAX Futures. Based on these measurements the exchange calculated daily averages for eight similarly volatile days in 2010 and 2012 (grey lines in the graph above).

The chart shows the recovery paths relative to the average pre-trade spread to account for the effect of differences in intra-day volatility; a spread recovery of four ticks is more significant if the initial spread was one tick than if the initial spread was ten ticks. The top blue line is the average of the spread recovery paths in 2010 and the bottom blue line represents those paths in 2012. The most obvious difference between 2010 and 2012 is the significant improvement in the speed of the recovery that took place. Another observation is the fact that the recovery process in 2010 only started after 5-10 ms whereas in 2012 a much faster reaction can be observed. The exchange’s working hypothesis, supported by some early findings, is that these 5-10 ms was the minimum reaction time of some exchange participants, which – at that time – provided the lion’s share of the liquidity in DAX® Futures.

Continuing research

According to the study, high-frequency trading activity is an important positive contributor to overall market quality and stability. The exchange will continue to analyse HFT activity and will share the findings with the industry.

In response to customer requests, Eurex Exchange has posted three videos on its website that detail its analysis of HFT. These include:

• HFT and non-HFT participation during an extreme market situation

• A three dimensional representation of HFT activity

• Zooming into HFT participation during micro shocks

The videos can be viewed at: > Technology > High-frequency trading

For more information about technical issues surrounding HFT, please contact:

Bernard Hosman , T +49 69 211 1 3195 or

For more information about legal issues surrounding HFT, please contact:

Randolf Roth , T +49 69 211 1 2793 or

Major clearing brokers confirm support for CCS new derivatives reporting standard

Major clearing brokers confirm support for CCS new derivatives reporting standard

BofA Merrill Lynch, Barclays, J.P. Morgan and UBS announce support for ISDA Clearing Connectivity Standard–reporting-standard

New York – The International Swaps and Derivatives Association (ISDA), and Sapient Global Markets have announced that four OTC derivatives clearing brokers: BofA Merrill Lynch, Barclays, J.P. Morgan and UBS, have confirmed their support for the Clearing Connectivity Standard (CCS) initiative to standardize reporting for cleared OTC derivatives.

As part of the Dodd-Frank Act of 2010, the U.S. Commodity Futures Trading Commission (CFTC) has mandated certain OTC derivative products be centrally cleared. June 10 is the second of three CFTC mandated clearing implementation dates for the industry in 2013.

CCS is an industry standard that helps improve OTC derivatives reporting and communication for asset managers, clearing brokers, custodians, and service providers. In 2012, CCS was endorsed by ISDA, which has worked with Sapient Global Markets to further develop the standard for industry-wide adoption. Custodian banks BNY Mellon, J.P. Morgan, Northern Trust and State Street have supported the standard to satisfy reporting requirements.

The new derivatives reporting standard is expected to be used by the clearing broker community to transmit information about cleared OTC derivatives trades and margins to their asset manager clients, custodians and service providers. The ISDA CCS Steering Committee and Working Group are composed of the main clearing firms, who represent the core of the industry and also committed to generating the file in due course.

Ray Kahn, Head of OTC Clearing at Barclays, said: “The CCS format will simplify and align margin and portfolio reconciliation process. We’re pleased to join the core group of market participants in supporting and adopting this standard, as we see it as a solution that will help to drive post trade efficiencies for our clients.”

“As the industry moves to implement mandatory clearing, the absence of a formal standard for formatting and transmitting margin and position data was a significant hurdle to achieving efficient and cost effective connectivity between market participants,” said Andres Choussy, Global Co Head of OTC Clearing at J.P. Morgan. “We are pleased that this industry collaboration has successfully produced this standard as this will facilitate operating in the new market environment.”

TIBCO buys StreamBase

TIBCO buys StreamBase

StreamBase acquisition strengthens TIBCO event processing & real-time analytics.

Palo Alto, California – TIBCO Software has acquired StreamBase Systems the privately held provider of event processing and real-time analytics software. Financial details of the transaction were not disclosed.

With the aquisition of StreamBase TIBCO will add streaming capabilities to its event processing portfolio, enabling big data to be processed in real-time to provide an event-based alternative to batch-centric big data architectures.

“StreamBase has developed a powerful and easy-to-use offering to monitor, understand, and act on event streams in real-time for one of the most performance-intensive industries in the world today,” said Matt Quinn, CTO of TIBCO Software. “This combination extends our event-processing abilities and provides a terrific opportunity to address a growing number of use cases for data in motion – in financial services and beyond.”

“TIBCO sets the standard in low latency messaging, enterprise integration and visual and computational analytics. Now with streaming event processing and real-time analytics from StreamBase, TIBCO’s big data platform is the most capable in the industry,” said Mark Palmer, CEO, StreamBase Systems. “StreamBase has revolutionised how organisations use real-time data by speeding application development to enable companies to analyse data and take immediate action. We look forward to bringing this significant business advantage to the wide set of industries and customers TIBCO serves.”

Kusiri overview – transforming Client On Boarding, KYC, KYB, AML&Risk Management.


Kusiri is an information retrieval company and data platform. Our products help organisations to maximise their return on data and help researchers and analysts do their jobs more quickly and effectively. Our specialist teams are based in  London.

                       Connect, Collect& Protect

The power of the world’s data at your disposal– transforming Client On Boarding, KYC, KYB, AMLRisk Management.

The task of sourcing and extracting data from multiple sourcesin order to truly understand your customer, or to cost effectively manage risk and compliance obligations can be daunting, slow and increasingly costly.  In today’s Big Data world the information you need is not just in databases inside your firewall – relevant data must be found in multiplesources and file types, including in databases, e mails, online social networks, web sites, web search engines, newspaper archives, news feeds and other sources. 


Each different data source has its own means of access and retrieval. This can be challenging and time consuming using conventional tools and methods. Failure to source all relevant data from difficult-to-reach web sites and other sources, could lead to flawed on-boarding and client maintenance decisions. Failure to ensure you on-board and retain only the right clients for your business could cost significantly in terms of profits, resources and reputational damage. These are strategic issues and Kusiri provides analysts with a strategic platform to optimiseon-boarding and client maintenanceworkflow and help removeCOB and AML risk.

Kusiriprovides enterprise search solutions to deliver effective data acquisition from multiple sources, and formats… simultaneously


Kusiri CAMRA 2.5 integrates structured and unstructured data sources regardless of their means of access.  The platform enables  youto easily collect distributed data and transform it into a single data stream so that you can analyse and process big-data quicklythrough a single, normalised data stream that is generated dynamically.CAMRA is designed to“integrate everything” APIs, databases, deep web, file stores, web sites,etcfrom whichever infrastructure silos they originate. Kusiri provides connectors into potentially thousands of data sources and types that are searched  simultaneously to maximise scope and reduce data acquisition times to a fraction of that needed usingtraditional methods. Additional data sources can be added with no additional processing time overhead. The Kusiri system is integrated into your workflow or datastore via a single data API. It isdesigned to run on-premise or in the cloud, and our system architecture for data processing  means that performance is governed by CPU power – not network or source latency.


The Kusiri platform is an integrated hardware and software solution.  It is supplied on a dedicated server cluster (Appliance) that is available for use within minutes of being plugged into a power supply and network access.  There is no additional hardware requirement and no need for any operating system configuration.  All the required software is pre-installed and an administrator chooses the components that need to run via an administration console, through which the appliance can be remotely managed. 




Kusiri technology is used in a variety of sectors including Financial Institutions and Audit Firmsto enable them to better support their critical research and investigation workflow with dramatically increased speed and effectiveness, and at optimum cost. The Kusiri system ‘landscape’ is easily integrated with customers’ analysis and on boarding workflow so that existing best practice can be enhanced with superior decision support data from a single source.

Anti Money Laundering (AML)

AML activity is estimated to be the worlds second largest business sector after Oil & Gas, at around $2 trillion. To protect banks, businesses, governments and individuals, regulatory obligations mean that institutions must deploy systems and processes to detect and report money laundering. Kusiri technology enables organisations to capture, monitor and analyse relevant data from the widest necessary range of sources, to help minimiseoperational and reputational risk as well as protecting customers and shareholders’ interests.

Know Your Customer (KYC)

Engaging in new business relationships and On-Boarding can be risky. Managing risk across new & existing clients is critical to business performance and reputation. In order to properly complete the necessary searches and investigationsnecessary to reduce risk and comply with KYC regulations, your business needs fast and regular access to multiple data sources combined with Kusiri technology. Trusting Kusiri to automate data acquisition from any and all relevant sources can empower your organisation to achieve the highest levels of governance, compliance and competitiveness




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Kusiri is an information retrieval company and data platform. Our products help organisations to maximise their return on data and help researchers and analysts do their jobs more quickly and effectively. Our specialist teams are based in  London.



© 2013 Kusiri Limited.

All rights reserved.


Kusiri, CAMRA, and all other related logos and product names are either registered trademarks or trademarks of Kusiri Limited in the United Kingdom, the United States and/or other countries.  All other company, product and service names are the property of their respective holders and may be registered trademarks or trademarks in the United States and/or other countries. 

User Features Summary

  • Unlimited datasources into a single results table for analysis
  • Query Phrase Lists Directory for shared team tasks
  • Comprehensive deep search data acquisition options
  • Clone / Batch Queries – accelerated investigation tool
  • Results Preview to help accelerate analysis and decision support
  • Identify Meaning – entities and topics for sentiment analysis
  • Research Management–  embed research methodology into system
  • Multiple simultaneous projects for increased productivity


NICE launches first automated communications surveillance system

NICE launches first automated communications surveillance system

Solution offers compliance management system to address requirements under the Dodd Frank Act

Ra’Anana, Israel – NICE Systems has introduced its Proactive Compliance Solution for Trading Floors, which enables financial institutions to monitor and investigate trade interactions.

Aiming to facilitate compliance with regulatory requirements, such as the Dodd Frank Act that mandate a complete audit trail for conducting comprehensive and accurate trade reconstructions, the solution uses analytics technology to identify infractions, detect and mitigate risk, and manage day-to-day compliance.

“The Dodd-Frank Act is generating a storm of new regulations globally that forces trading floors to look for advanced solutions for proactive compliance,” said Yochai Rozenblat, President of the NICE Customer Interactions Group. “NICE’s innovative technology offers valuable cross-channel insights that enable financial organizations to makes sense of the vast amount of information exchanged during trade communications in order to more effectively manage compliance.”

The NICE Proactive Compliance solution for trading floors combines NICE’s speech analytics technology with Attivio’s Active Intelligence Engine, to deliver near real-time insights on all interactions occurring across trade communications. If an infraction takes place, the system automatically generates an alert. The information gathered can also be leveraged by organizations to analyze and understand emerging risks in order to help prevent infractions from occurring in the future.

The solution also includes the indexing of all interactions, including calls, emails, and chats, as well as an intelligent investigation processes that automatically highlights compliance risks within these multi-channel communications. Using these capabilities, organizations can easily filter and search through every type of interaction in order to reconstruct trades for investigation and audit when necessary.

Thomson Reuters acquires Pricing Partners

Thomson Reuters acquires Pricing Partners

Thomson Reuters acquires OTC derivatives pricing analytics provider, Pricing Partners

Paris – Thomson Reuters has acquired Pricing Partners SAS, the software developer and provider of OTC (over-the-counter) derivative pricing analytics and services.

The acquisition of Pricing Partners is intended to enhance Thomson Reuters Pricing Service (TRPS) pricing abilities for structured notes, interest-rate, equity, credit, commodities and FX derivatives, as well as hybrid products, adding derivative products valuation, pricing tools and risk analytics to TRPS.

“In today’s economic environment, regulatory requirements and continued economic recovery pressures are driving demand for independent and transparent evaluated pricing services that are specialized to offer local market expertise,” said Debra Walton, managing director and head of Enterprise Content at Thomson Reuters. “The acquisition of Pricing Partners strongly positions Thomson Reuters to meet the changing needs of our European and global client base.”

“Pricing Partners has built a strong brand with an impressive offering and client base in Europe with a growing presence in Asia,” said Neil Masterson, managing director and head of Investors at Thomson Reuters. “This acquisition builds on our commitment to providing our clients with the independent, neutral pricing services they need and represents another step forward in our vision to connect and power the global financial community.”

Thomson Reuters and Pricing Partners already have an established and successful working relationship under which Thomson Reuters has used Pricing Partners Price-it®, a proprietary financial library covering all major asset classes: interest rates, equity, inflation, credit, foreign exchange, commodities, life insurance and hybrid products, to provide pricing services through its proprietary delivery platform, Thomson Reuters DataScope, reaching over 2300 clients worldwide on a daily basis.

“Pricing Partners is delighted to have found a strong industry leader in Thomson Reuters who will use our critical talent and expertise to grow and serve our customer base,” said Eric Benhamou, CEO, Pricing Partners. “Thomson Reuters is a proven partner and shares our vision of the growth opportunities that exist in the evaluated pricing space.”

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