FactSet Acquires Revere Data


FactSet Acquires Revere Data
Thursday, September 05, 2013

http://www.factset.com/news/revere

FactSet Research Systems Inc. (NYSE: FDS | NASDAQ: FDS), a leading provider of integrated financial information and analytical applications to the global investment community, today announced it has acquired Revere Data, LLC.

FactSet acquires Revere

Over the last decade, Revere has built a dynamic industry taxonomy that offers investors a unique way to classify companies and analyze how they fit in the global economy. Revere also offers a robust database of supply chain relationships that helps investors identify companies’ interrelationships and mutual dependencies, as well as a comprehensive geographic revenue exposure database to manage geopolitical and macroeconomic risk.

“Revere’s data solutions help refine interesting ideas and strategies so investors can better identify opportunities and measure risk exposure throughout the global equities and derivatives markets,” explains Phil Snow, Senior Vice President, Director of Global Content Sales at FactSet. “The addition of Revere’s specialty data complements FactSet’s commitment to provide clients with unique and insightful content sets.”

“At Revere, our data sets help unlock and maximize value for our customers and partners,” explains Kevin O’Brien, Chief Executive Officer of Revere Data. Adds Vivian Ramos, Chief Operating Officer, “We’re delighted to join FactSet as we share a common goal: to deliver innovative products that offer clients actionable insight.”

The acquisition of Revere is not expected to have a material impact on fiscal 2014 diluted earnings per share.

About FactSet
FactSet, a leading provider of financial information and analytics, helps the world’s best investment professionals outperform. More than 48,000 users stay ahead of global market trends, access extensive company and industry intelligence, and monitor performance with FactSet’s desktop analytics, mobile applications, and comprehensive data feeds. The Company has been included in FORTUNE’s Top 100 Best Companies to Work For, the United Kingdom’s Great Places to Work and France’s Best Workplaces. FactSet is listed on the New York Stock Exchange and NASDAQ (NYSE: FDS | NASDAQ: FDS). Learn more at http://www.factset.com, and follow us on Twitter: http://www.twitter.com/factset.

About Revere
Revere Data, LLC, is the leading provider of industry classification and supply chain specialty data, analytics, and index solutions for the global financial services industry. Revere’s data is invaluable for traditional to alternative asset managers seeking alpha generation opportunities and better risk management capabilities. Index owners and fund sponsors use Revere to create innovative investment products for customers ranging from institutions to retail investors.

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NZX Launches Natural Gas Market


NZX Launches Natural Gas Market

http://www.mondovisione.com/media-and-resources/news/nzx-launches-natural-gas-market/#85732

Date 02/09/2013
NZX is pleased to announce that having received the necessary operating approvals, its spot gas market is now open for trading.
The launch of NZX’s gas market has been dependent on successful completion of an Interconnection Agreement with Maui Development Limited, the owner and operator of the Maui Pipeline.
The market features monthly, weekly, daily and intraday products focused on a ‘virtual welded point’ on the Maui pipeline. The chosen architecture is intended to concentrate liquidity and is compatible with existing shipping arrangements.
The final rules for the new market are now available, and participants may now register for the market, and commence trading.
NZX Head of Energy Erich Livengood commented: “We are delighted to receive the necessary operating approvals for the new gas market, and look forward to working closely with industry participants in coming months to grow and develop this important market.
“Potential participants will now be reviewing the final rules and market requirements, and we will be working with them to register and begin trading from today.”
The market is hosted at gas.nzx.com
NZX initially announced it would operate a gas market on 5 March 2013.
NZX continues to look for opportunities to use its existing market operations infrastructure to enable a broad range of industries to better manage their risk.

DCE ACCELERATES YARN’S DEVELOPMENT (courtesy of etradingasia)


DCE ACCELERATES YARN’S DEVELOPMENT

http://asiaetrading.com/dce-accelerates-yarns-development/

Wang Tiankai President of the China Textile Industry Federation, CTIF
CCTA and CATA Hold “Expert Forum on Yarn Futures”

Recently, the China Cotton Textile Association (CCTA) and the China Commercial Circulation Association of Textile and Apparel (CATA) held the “Expert Forum on Yarn Futures” in Dalian to discuss the development of the yarn futures and the contract rules of yarn futures of Dalian Commodity Exchange (DCE) with the attendance of more than 30 leading officials and experts from industry organizations and the enterprises of spinning, weaving and distribution. Wang Tiankai, President of the China Textile Industry Federation (CTIF), attended the forum and made the concluding speech, and the forum was presided over by Xia Lingmin, Vice President of the CTIP. It was the common call of all the forum attendees to introduce the yarn futures timely in a bid to form the fair market prices and provide the enterprises with a hedging instrument under the new situation of the government intensifying the regulation of the cotton market and the imported yarn having impact on the domestic market. The listing of the yarn futures with great significance is expected to serve the industries effectively.

As DCE submitted the application to the China Securities Regulatory Commission (CSRC) for the establishment of the yarn futures project this February, the emerging of the development of the yarn futures has drawn great attention from the textile industry. Li Zhengqiang, General Manager of DCE, briefed the forum on the 20 years’ development of DCE and the original purpose of developing the yarn futures at DCE. He said that in the construction and development of the futures market, DCE has always kept to the orientation toward serving the real economy, guarding against the market risks, safeguarding the principle of “openness, fairness and equality” in the market, and “equal emphasis” on both developing new products and supporting existing products. As the enterprises of the textile industry are faced with various market risks during the economic transition, DCE has applied for the establishment of the yarn futures project on the basis of thorough research to materialize the principle of serving the real economy by offering the relevant products on the futures market and providing the entity enterprises with risk management instruments. He also said that in the course of development, listing and operation of the products, DCE has always prioritized the contact with the industrial enterprises and the service, support and encouragement for the enterprises to make use of the market, and the same principle will be upheld in the development and listing of the yarn futures.

Zhu Beina, President of the CCTA, said that previously DCE and the CATA had jointly carried out survey and demonstration for the development of the yarn futures, visited enterprises of various sizes in textile distribution, cotton yarn production and weaving through purchase of yarn, and solicited the opinions of relevant national ministries and commissions. It was widely believed in the visits and exchanges that the listing of the yarn futures would be conducive to the development of the textile industry and related enterprises. As the spinning is the foundation for the textile industry, it was hoped that the introducing of the yarn futures could enhance the power of China, an important yarn manufacturer, in speaking in the market, the authoritative yarn price index could be released to serve the enterprises when the time is ripe and function as guidance in the international market, and the relevant textile enterprises could get aid in effectively predicting and judging the market. In the survey, it was suggested that the problems such as the subject matter of the yarn trading and the manners of delivery should be settled in the designing of the contract rules, and it was hoped that the cotton yarn market could maintain a steady running in the future so as to ensure the entity enterprises could successfully achieve the hedging objective and effect.

In his concluding speech, President Wang of the CTIF said that the CCTA, the CATA, and DCE had made a lot of effective efforts in the development of the yarn futures; at the forum the cotton spinning enterprises welcomed and supported the listing of the yarn futures with some enterprises even more eager for the futures to be launched as soon as possible, and the listing of the futures was in line with the current situation of the cotton yarn market. In particular, Wang pointed out that in the futures market, the CTIF was more concerned about the enterprises’ attitude and whether the risks of the futures market could be put under control effectively. The functions of the futures market could not be achieved without speculation but the market must not have too much speculation. In this regard, we were deeply impressed by DCE’s high level and capacity of risk control. He also said that at the forum the attendees provided pertinent opinions and suggestions on the contract rules, and to improve the operation effect after the listing of the contract, it was suggested to organize the knitting and other yarn-dependent enterprises to further the specialized research. He also hoped that DCE and the CTIP could maintain active communication and in-depth cooperation and push forward the relevant work.
Enterprises need the yarn futures under the new situation. In recent years, under the influence of the factors such as the national policy of cotton purchase and storage, the quota system of imported cotton, the impact of imported yarn, the weak downstream demand, the appreciation of the RMB exchange rate, the rising labor costs, and the financing difficulties of the SMEs, the domestic textile enterprises are in the face of various difficulties in business. According to the sources, in the first half of 2012, the textile enterprises in some regions reported a loss of RMB 2,000 in producing a ton of yarn, 105 key enterprises recorded a drop of 52.1% in profits year on year, and nearly half of the SMEs had to halt production due to too high costs.

According to an enterprise representative from Hubei Province, the implementation of the national policies of purchase and storage in the last two years has resulted in the disagreement of the prices of cotton yarn and cotton, and with the lingering weak demand and the coming of the off-season, the enterprises are faced with high risks with no hedging means. Since March 2011, the spot price of yarn has fallen from the highest RMB 39,200 per ton to RMB 25,400 per ton, a drop of more than 30%, and with the fierce price fluctuations, the enterprises need the yarn futures to manage risks. Experts from cotton and textile enterprises in Hebei Province, Jiangsu Province, and Fujian Province believe that China is a large yarn producer and consumer in the world. The continuously severe fluctuation of yarn prices in recent two years has made it necessary for yarn to be listed in futures market. They said that their companies both produce and consume cotton yarn and they can lock profits in advance through futures market. If used wisely, such method can help them to achieve zero-inventory operation, thus playing a positive role in solving the capital occupying issue and in speeding up the capital turnover of the enterprises. Meanwhile, the launching of yarn futures will help to expand enterprises’ operational channel.

Providing the market with open and transparent prices to lead production is also one of the common concerns of the attending enterprises. Representatives of the manufacturing and circulation enterprises from Guangdong, Dalian and other provinces said that futures market has two basic functions, namely, price-finding and hedging. Under the current situation of the yarn industry, the yarn futures should first give full play to its price-finding function and form an open, transparent, and leading price. As there exist numerous varieties and different prices in the yarn market, a representative price is badly needed to guide the market operation. And it is hoped that the launching of yarn futures will greatly promote the current operational order of the cotton and textile market.

The representatives also believed that from the industrial level, China has over 4,000 above-scale manufacturing enterprises. However, the output volume of the largest cotton manufacturing enterprises only takes up 2% of the total. And the launching of cotton yarn futures will help to facilitate the structural adjustment and the industrial upgrading of the industry through price information. It is the common aspiration of the attending representatives to forge a star variety, build an international market pricing center, and better serve the industry development. They all believed that as China’s manufacturing and consuming volume of yarn takes up about 50% of the total in the world, there will be broad development prospects for the yarn futures. Besides, DCE has relevant experience in successfully developing the plastic, coke, and other varieties which have failed or have not been developed in foreign countries. It is hoped that the yarn futures will become a star variety after its launching and thus help to make DCE an international market pricing center.

Yarn futures have basic qualifications for listing. “During the market research at the earlier stage, we found that the yarn futures have already obtained the basic qualifications for listing. First, the yarn market has a high marketization level with full price competition and no market monopoly; second, there is a sound standard for yarn, which brings great convenience for yarn checking; third, the current yarn futures trading is very smooth without any policy restriction.” said Zhu Beina, Chairman of the CCTA, when introducing the research and investigation of the yarn futures faced with the expectation of enterprises.

An official of the agricultural products division of DCE further introduced the developing and listing requirements of the yarn futures. He said that apart from its high marketization level and its convenience for standardizing, the cotton yarn variety has other advantages in terms of its market constitutions, such as its large market scale, sufficient delivery amount, frequent price fluctuation, high regional correlation, convenience for storage and transportation, and clear trading flow. Therefore, its listing is of great feasibility. In recent years, DCE has strengthened its efforts on screening relevant variety system in the fields of “agriculture, farmer, and rural area”. It has chosen the yarn variety as its key strategic variety for researching and developing and set up a yarn futures research group to promote relevant work in the latter half of 2012. Since the beginning of this year, DCE has, cooperated with the CTIF, gone deep in the cotton and textile enterprises of various provinces and cities to do study and research and participated the industrial conference organized by the CTIF to exchange views on developing yarn futures with spot enterprises. At present, based on the earlier research, DCE has initially formed the contract and rule design plan for the yarn futures and will submit it to the current symposium for discussion.

At the symposium, the attending representatives discussed the existing plan and put forward advices and suggestions on contract rules, delivery quality, and improving inspection method. According to the current plan, the DCE yarn futures contract will initially make the carded 32 yarn and the carded 40 yarn as the trading objects and expand the delivery scope through the premium and discount. Given the actual situation and the developing trend of the spot market, DCE will establish the futures delivery quality standard based on the international standards. And considering the manufacturing characteristics of the spot enterprises, DCE will set up 12 contract months for the convenience of spot enterprises’ operation.

“Hope that industrial enterprises can come up with more advices and suggestions. Contract rule design is only the first step of a variety’s listing in the market. The major indicator to test a contract is whether enterprises can accept and effectively use the contract after the variety’s launching. We hope to forge an everlasting variety and we will have long-term cooperation with the industrial circle afterwards. Next, having fully absorbed all advices and suggestions, DCE will further its research and demonstration in the cotton and textile industry and continue to improve the contract rule, so as to make the yarn variety to be listed as soon as possible and better serve the industry.” said Li Zhengqiang at the end of the symposium.

inShare

Post-trade outage drives pre-trade regulation


Post-trade outage drives pre-trade regulation

http://www.thetradenews.com/USA_news/Operations___Technology/Post-trade_outage_drives_pre-trade_regulation.aspx

For the first time in the modern era, issues related to the post-trade formation and dissemination of a consolidated quote brought trading in Nasdaq-listed stocks and equity options based on those stocks to a halt for approximately three hours on 22 August.

Unlike Nasdaq OMX’s infamous May 2012 Facebook initial public offering (IPO) failure, which involved Nasdaq OMX exchange systems and eventually cost the company US$10 million in fines from the US Securities and Exchange Commission (SEC), Thursday’s trading outage is thought to involve systems which route securities data to the exchange.

“Over the next few days, Nasdaq OMX is in the unenviable position of being seen by the public as the source of the problem, even though we do not know where the failure occurred,” explains Robert Stowsky, senior analyst with industry research firm Aite Group. “It could have been a problem at the securities information processor (SIP) or in one of the exchanges contributing data to the SIP.”

The role of SIPs in the US equities markets is to collect equity trade quotes and completed trade data for eventual distribution and publication.

In the case of Nasdaq OMX, it administers the SIP used to create the consolidated quote for Tape C securities, which consist of Nasdaq-listed equities, and is managed by the OTC/UTP operating committee, which represents the 12 US exchanges that trade Nasdaq-listed securities and the Financial Industry Regulatory Authority (FINRA) that operates the Trade Reporting Facility, which is used by alternative trading facilities (ATFs) to report their trades.

A separate industry organization, the Consolidation Tape Association, oversees the formation and dissemination of the Tape A and Tape B consolidated quotes, which consist of securities listed on the New York Stock Exchange (NYSE) and American Exchange (Amex) respectively.

“This is more a market infrastructure issue rather than a single-exchange issue,” adds Stowsky. “It just happens that Nasdaq OMX maintain the Tape-C SIP in this case.”

According to the limited information provided by Nasdaq OMX, which declined requests for comment, the SIP administrator began to notice a degradation in quote and trade distribution due to a connectivity issue. Nearly 75 minutes after Nasdaq OMX first identified the issue, the exchange halted trading in all Tape C securities. It then halted trading in all options trading based on those securities 12 minutes later. It was not until 51 minutes after Nasdaq OMX halted its trading of Nasdaq-listed securities that it implemented a regulatory halt in trading of all Tape-C securities.

The SIP managed to resolve the issue in 30 minutes, said Nasdaq OMX officials and began a phased re-start of trading at approximately 15:25 ET.

Although trade resumed prior to the closing bell, the industry and investors found it quite disconcerting.

“Any system that is as strategic to the operation of the US equities markets, such as a market utility like the SIP, that required 100% up-time should have had ‘hot’ failover capabilities,” said William Karsh, a special advisor at the National Stock Exchange (NSX). “Every system, which is critical to the US market system, should have this capacity.”

Karsh suggests that the SIP administrator or oversight committee put together plans or have processes in place to prevent similar events in the future. “If any participant acts in a manner that jeopardises a system’s performance and affects fellow users of the system, there should be a way to block the participant so that behavior does not cause the system to fail,” he adds.

The failure follows other serious technology problems for Goldman Sachs, which released a rogue algorithm on 20 August, which caused havoc with its options trading.

Goldmans’ algorithm sent erroneous options orders in the early minutes of the trading day and could cost the investment bank up to US$100m. Exchanges are currently in the process of identifying which order should be cancelled and the full cost may not be known for some time.

Regulatory knock-on

The trading outage comes at a time when the SEC is focused on trading systems and technology, having recently ended the comment period of its proposed Regulation Systems Compliance and Integrity (Reg SCI) on July 8.

If the regulation is implemented as written, it will replace the SEC’s voluntary compliance system for developing, testing and maintaining systems critical to the operation of the US equities market.

Aite’s Stowsky, sees the regulators sharing some culpability in the trading outage due to the SEC’s implementation of Regulation NMS, which created the current market structure.

Whenever there is an industry utility, it introduces a potential single-point of failure, he says and doubts if the distributed market structure has been tested rigorously.

“My experience in the industry is that organisations tend to squeeze the testing and quality assurance as they approach product delivery deadlines.”

Stowsky is also sure that politicians, and hence the regulators, will be following the reasons for the trade outage closely since it affects the perception of the US equities market as a fair and well run market.

“Anything that shakes that view will move to the top of their legislation or regulatory priority list.”

ITUNES FOR FX (courtesy of the TABB Group)


iTunes for FX
At the top of foreign exchange traders’ wish list is a trading system with a clean, intuitive interface that can simplify and streamline their workflow and help them execute their strategies.
I’ve been talking to lots of FX traders recently, asking what was top on their wish lists for FX. Most of the answers fell into one of a few categories: “Better liquidity, particularly on broken date rolls”; “easier connectivity”; “real straight-through processing”; and the like. But the one that really made me think was: “iTunes for FX.”

“Why iTunes?” I asked.

The trader’s answer was logical and far-reaching: “If there were an FX trading system that worked half as well as iTunes, it would rule the world,” he answered.

“Just think about the iTunes process,” he continued. “You can take any CD you have, rip it into iTunes and, once it’s digital, you can manage it much more efficiently. Second, I can access just about any music I want at a reasonable price through the iTunes store. Do you have any idea how hard it is to integrate into any one of the OMSs, EMSs or ECNs? It takes weeks or months, and most are clunky.”

He added, “But what I really like about iTunes is the ability to make playlists. All I have to do is spend a little set up time—very little, actually—and I can store music for whatever purpose I want—workouts, parties, etc.”

“And how does that relate to FX?” I asked.

“Don’t you see? Eighty-five percent of what I do in FX is pretty routine, and I have standard strategies. If I’m looking to hedge a new trade, I’ll always look to hedge to the same roll date that month with all my other trades in that currency. I can net more efficiently and it’s easier to keep track that way. If I receive an order from the equities desk for a large spot trade and it’s before 11am, I’ll just give it to a dealer to execute flat vs. the WM mid. And so on. I wish I could just hit a playlist for ‘do all my rolls,’ spread it around my top five to eight dealers, and have everything taken care of according to rules I set up.”

“How hard is it for you to do now?”

“Well, it’s a major pain in FX. No one has an adequate rules engine that can integrate all my internal communications. If I want things a certain way, now I have to beg my OMS or EMS provider to make a change, or I have to program macros myself and patch stuff together. In iTunes it is easy to make a playlist. In fact, there’s even a ‘Genius’ mode in which the software can make playlists for you based on what’s in your library and what others have done.”

“But you just said that playlists—or rather, pre-formatted work routines—would be good for 80% of what you do. What about the other 20%?” I asked.

“I don’t have to reduce everything to simple rules, but I’d be thrilled if I could spend my effort on just the difficult stuff. In iTunes, if I want to deviate from the playlist and go manual, I still can access anything in my library, on any device. It is all available on my desktop, my laptop, my phone and my iPad, anywhere I am, because it’s all synched in the cloud. I can switch from playlists to any other mode in one click. In FX, I once counted and it took me 17 mouse clicks just to get a single trade done – and I am generally doing 50 to100 trades a day. Just give me iTunes in FX.”

“OK, I get it. But that still implies you know just what to go for in your library at any time. How do you learn anything new according to your analogy?”

“Well, you don’t really. But you can do all the old stuff better.”

“So what you’re saying is, what you really need is iTunes with Pandora.”

That threw the trader for a loop. “I don’t know Pandora; what’s that?” he asked me.

“Pandora is essentially where you teach the machine what you like. You start it with a theme—say, music by an artist. Then, based on that information, it picks similar music based on an analysis of what others like. So if you pick a blues artist, like B.B. King, it will play you a B.B. King song and then another similar blues tune by someone else, which you either give a thumbs up or a thumbs down. Based on that feedback, it gives you another song, which you grade, then another and another. After a while it improves from a 65% hit ratio up into the 90+% range, constantly expanding your repertoire with new artists you didn’t know before. And if a song comes up that you don’t like, you give it the thumbs down, and Pandora immediately cuts out that song and replaces it, and the process starts again,” I explained.

“Now that would be cool,” he responded. “Give me iTunes for FX plus Pandora!”

And that’s what we’re creating now at BuysideFX. Like an Apple product: beautiful design, deep but intuitive feature sets, with feedback loops that make it better and better with every trade. Stay tuned … and if you have features you’ve identified to make FX trading simpler and better, give us a call and let’s discuss it.

Nasdaq OMX’s European derivatives subsidiary eyes new products


Nasdaq OMX’s European derivatives subsidiary eyes new products

http://www.efinancialnews.com/story/2013-08-23/nasdaq-omx-nlx-third-party-listings?omref=email_TradingTechnology

23 Aug 2013 Updated at 12:40 GMT

 

As Nasdaq OMX’s US securities market deals with the fallout from a three-hour outage on its platform yesterday, across the Atlantic its new European derivatives subsidiary is looking for ways to build its business, potentially through the listing of new third-party contracts.

NLX, which launched in June and offers trading in popular long and short-term interest rate derivatives, said it would be willing to consider listing instruments developed by external providers.

Charlotte Crosswell, chief executive of NLX, told Financial News earlier this week: “At NLX, we have the infrastructure, vendors and route to clearing already in place. It’s relatively easy for us to list new products quickly. This gives us the flexibility in how we approach listing new types of products. You might have a new product that works well, but then you need to have the industry backing and bring it to market at the right time – it can be challenging.”

The move comes as US-based Eris Exchange is considering ways to bring its interest rate contracts to Europe and as GMEX Group, a new derivatives venture run by former Chi-X Europe chief operating officer Hirander Misra, is looking at creating new methodologies for developing products across multiple asset classes.

The emerging regulatory environment for swaps trading is presenting opportunities for firms to develop new types of derivatives that offer alternatives to over-the-counter derivatives.

The rules will push OTC derivatives that can be standardised onto electronic trading platforms and through clearing houses. This has led some to look to products that replicate OTC exposures through an exchange-traded contract.

Under the Dodd-Frank Act, the obligation to clear swaps has already kicked in for most US market participants. Exchanges including Eris and CME Group have launched swap futures that mimic interest rate swap contracts in an exchange-traded environment. Mandated trading of OTC derivatives contracts on trading platforms known as swap execution facilities will start in the US from October 2.

The swap futures from Eris and CME are still gaining traction, say market participants.

Nasdaq-listed stocks were halted for almost three hours on Thursday because of a problem with the Securities Information Processor, a system that consolidates and disseminates prices to US markets, according to a statement from Nasdaq OMX.

The glitch impacted the data feed that distributes pricing information for securities listed on Nasdaq and is not believed to be linked to the exchange’s core technology. The bourse said it had resolved the issue within 30 minutes and spent the remainder of the time coordinating with other market participants and regulators to ensure the orderly resumption of trading.

NLX runs on Genium Inet technology, which incorporates the platform that Nasdaq acquired when it purchased the OMX Group of Nordic exchanges in 2007. Nasdaq’s US markets run on Inet, which it bought from agency broker Instinet in 2005.

–write to anish.puaar@dowjones.com and follow on Twitter @anishpuaar

Reuters – Swaps clients plan US bank exodus


http://www.reuters.com/article/2013/08/12/markets-credit-idUSL2N0GD1JA20130812

 

NEW YORK, Aug 12 (IFR) – US banks are at risk of losing overseas swaps market share as European clients have begun making every effort to avoid getting caught up in costly cross-border derivatives rules that were finalised by the CFTC last month, and come into effect this October.

European hedge fund and asset managers are threatening to transfer their swaps trading activities away from branches of US banks and towards European competitor houses to ensure they avoid the reaches of Dodd-Frank, which mandates an array of costly compliance measures, including the central clearing of standardised over-the-counter derivatives.

Many European clients would rather ditch their US bank relationships than bear that cost – just one of the unintended consequences of bad rule-writing according to dealers.

“It’s the one rule that risks the most competitive disadvantage,” said a lawyer at a US dealer. “There’s no way these clients are going to clear with us at this stage.”

Swaps executed by a European client with the foreign branch of a US bank will be required to clear through a central counterparty starting on October 9 – the date that an exemption from compliance with the CFTC’s recently finalised cross-border guidance will expire.

US banks say the deadline is unreasonable and compliance will be near-impossible. And at least one of the CFTC commissioners sympathises.

“My frustration has consistently been with the Commission establishing arbitrary dates that we pluck out of thin air to establish compliance without asking, ‘is this possible?'” said CFTC commissioner Scott O’Malia.

“The cross-border guidance should have required notice and a comment period to find out if the time periods for compliance are adequate. We claim to be having a comment period but I suspect that anyone who does so will have their comments completely ignored.”

Conversely, the October clearing deadline comes two months before the CFTC forces US branches to comply with the rest of the agency’s transaction-level requirements, such as trade execution, documentation, and real-time public reporting.

“The CFTC is asking us to pull a rabbit out of a hat,” said an executive at the London branch of a US bank. “They have offered ‘substituted compliance’ but the European rules are not even done yet. Nobody in their right mind thinks we can demonstrate substituted compliance by the deadline.”

 

AFFILIATED ALTERNATIVE

For end-user clients, mandatory clearing can be a costly business. Clients must negotiate and document relationships with clearing houses and clearing member banks, and are required to post initial margin against all swaps that are passed through the system.

The CFTC guidance provides that foreign branches of US banks could apply to substitute their home country compliance for US rules in cases such as these if the rules were considered “comparable and comprehensive”.

It is likely to be the longer-term answer for most European branches of US houses, but the European rules for clearing are not yet finalised, leaving nothing concrete for comparison.

Some banks are moving to plan B, which involves transferring all client relationships from their foreign branches to affiliates – a separate legal entity that would protect European funds from the clearing mandate.

But that would not be easy, considering that firms such as JP Morgan have more than 10,000 clients booked through their UK branches.

“There are a number of impediments; it’s very difficult to move clients to another legal entity. Plus, many of those affiliates have regulators of their own who will raise concerns about wholesale transfers of clients,” said the lawyer.

 

NO-ACTION REQUEST

US banks say they have sent the Commission requests for an extension to the deadline, by way of no-action relief or some other format. Given the Commission’s penchant for issuing no-action relief – the agency has issued more than 100 in connection with Dodd-Frank to date, a pushback of the compliance date seems possible – if not likely.

If history is anything to go by, the CFTC is likely to keep the industry in suspense until the eleventh hour.

“There’s no rhyme or reason for how the no-actions are issued,” said O’Malia. “It creates a confusing ad hoc process that leaves a lot of people trying to understand a lot of moving parts when we are not following the Administrative Procedure Act. We’re using and abusing the no-action relief system.”

The development represents another trough in the often tumultuous process of aligning cross-border implementation of new rules for the OTC derivatives market between Europe and the US.

For the past two years, US banks have been warning that the CFTC’s hurried pace in implementing the rules of Dodd-Frank would put US dealers at a competitive disadvantage.

Just over a year ago, the agency issued proposals that would have forced branches of US banks to comply with all transaction-level requirements in July of this year.

But European entities and US lawmakers levied heavy criticism of CFTC chairman Gary Gensler’s approach to international harmonisation of derivatives rules.

In response, Gensler pledged closer co-ordination with European regulators in a joint statement with the EC’s internal market and services commissioner Michel Barnier just before the original proposals were due to take effect.

The scaled-back proposal reduced the CFTC’s powers in determining whether foreign regulations could be substituted for US rules and issued no-action relief for most requirements until European regulators could catch up.

But the proposal may still have over-reached, according to banks. Whether the US banks are able to move their clients over to affiliates in time or the agency issues a no-action relief remains to be seen, but for the moment banks are facing a significant cross-border dislocation.

JPMorgan Commodities Exit May Sap Liquidity Until Others Step in


JPMorgan Commodities Exit May Sap Liquidity Until Others Step in

http://www.bloomberg.com/news/2013-07-27/jpmorgan-commodities-exit-may-sap-liquidity-until-others-step-in.html

A decision by JPMorgan Chase & Co. (JPM) to exit its physical commodities business would temporarily reduce market liquidity before other companies quickly take its place, according to analysts and traders.
New York-based JPMorgan, the largest U.S. bank, said yesterday that it’s “pursuing strategic alternatives,” including the sale or spinoff of its commodities business, after an internal review. The statement came three days after a congressional hearing investigated whether deposit-taking banks should be allowed to trade raw materials such as oil and industrial metals.
1:48:06
July 23 (Bloomberg) — Joshua Rosner, managing director at Graham Fisher & Co., Tim Weiner, global risk manager of commodities and metals at MillerCoors LLC, Saule Omarova, a law professor at the University of North Carolina at Chapel Hill, and Randall Guynn, head of Davis Polk & Wardwell LLP’s financial institutions group, testify at a Senate subcommittee hearing on U.S. banks, financial rules and commodity trading. The panel is led by U.S. Senator Sherrod Brown, an Ohio Democrat, who is among lawmakers and regulators who say banks can drive up prices when they control both the physical products and the financing. (Source: Bloomberg)
1:10
July 23 (Bloomberg) — Senator Sherrod Brown of Ohio, Graham Fisher & Co.’s Joshua Rosner, Davis Polk & Wardwell LLP’s Randall Guynn and Senator Elizabeth Warren of Massachusetts comment during a Senate Banking subcommittee hearing on the ability of some U.S. banks to own and trade raw materials. (Excerpts. Source: Bloomberg)
JPMorgan owns and trades financial and physical commodities including crude oil, natural gas and power, and describes itself as “one of the world’s leading energy market makers.” The bank may be the first to exit physical commodities, though others may follow if regulations are changed, as suggested by Senator Sherrod Brown, an Ohio Democrat whose subcommittee of the Senate Banking Committee held the July 23 hearing.
“It looks like they want to get ahead of what appears to be a new wave of regulation that will limit the activities of the banks in the commodities sphere,” said John Kilduff, a partner at Again Capital LLC, a New York hedge fund that focuses on energy.
Regulators need to take a “long, hard look at the practice of banks holding physical commodities,” Brown said in a statement before the hearing. JPMorgan’s decision to consider selling or spinning off its commodities business is “good news for consumers and taxpayers,” he said in an e-mail yesterday.
Liquidity Drop
While the exit of JPMorgan and other banks may reduce liquidity in the short term, they will be replaced by commodities-trading firms such as Switzerland-based Glencore Xstrata Plc. (GLEN), Kilduff said.
“Maybe JPMorgan is just getting ahead of the game a little bit,” said Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors. “Commodities have been part of their business, but not a big driver of their revenue. If Goldman or Morgan Stanley (MS) decides to get out of commodities, people will definitely take more notice of that.”
The effect on the market of JPMorgan’s exit may depend on whether the commodities business finds a new life, either on its own or in the arms of a buyer.
“If JPMorgan were to sell or spin off the physical commodities business and it became a new entity, the impact on the market would be minimal,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston. “If JPMorgan were to just shut it or sell to someone with the same business, that may sap liquidity from the market.”
Metal Warehouses
The congressional inquiry came three weeks after the London Metal Exchange said it wants to help unclog growing queues at repositories, which companies ranging from beer makers to wire fabricators say have reduced the availability of aluminum and copper.
At the same time, prospects for gains in commodity prices may be dimming. Analysts at banks from Citigroup Inc. to Goldman Sachs Inc. have said the decade-long commodity bull market is ending after higher prices spurred expansions at mines, farms and oil fields.
Increased regulatory scrutiny of banks and commodities, along with the outlook for lackluster gains in many raw materials, provides a “one-two punch,” to bank commodity businesses, John Stephenson, who helps oversee about C$2.7 billion ($2.6 billion) at First Asset Investment Management Inc. in Toronto, said in a telephone interview.
“The banks are saying ‘I don’t need the hassle, and there’s no money to be made anyhow,” Stephenson said. “If it was the only game in town, and you were printing money, and there were just a few pesky regulators hanging around, that would be another thing. But with the light being shone now, the implications are very negative.”
To contact the reporters on this story: Edward Welsch in Calgary at ewelsch1@bloomberg.net; Joe Richter in New York at jrichter1@bloomberg.net.
To contact the editors responsible for this story: Dan Stets at dstets@bloomberg.net; Steve Stroth at sstroth@bloomberg.net.

Anova Technologies founder and CEO discusses wireless connectivity in the new book “Architects of Electronic Trading”


Anova Technologies founder and CEO discusses wireless connectivity in the new book “Architects of Electronic Trading”

Microwaves in Trading: Conquering Resistance

July 18, 2013 10:33 AM Eastern Daylight Time
CHICAGO & NEW YORK & LONDON–(BUSINESS WIRE)–Anova Technologies, CEO and Founder, Michael Persico sat down with Stephanie Hammer late in 2012 to discuss microwaves for her book “Architects of Electronic Trading; Technology Leaders Who Are Shaping Today’s Financial Markets,” which released last month. Ms Hammer’s book examines and highlights technology leaders in the financial industry, offering readers a glimpse into coming trends and innovations.

“Availability issues can cause staggering financial losses, as well as missed opportunities”
Mr. Persico’s interview with Ms Hammer is detailed in the chapter “Microwaves in Trading: Conquering Resistance.” It serves as a wireless primer whereby readers will gain insights into the physics of radio frequencies, as well as an overview of their usage in the financial industry. Further details include: how microwaves work, certain deployment obstacles, development drivers, and most importantly, game changing innovations.

When asked, “What’s next in microwave?” Mr. Persico touched on the Anova RFConnect laser upgrade, officially launched Q1 of 2013.

We feel strongly that the integration of free space optics with millimeter waves will put wireless transmissions on par with fiber-optic cable in terms of availability – and continue to surpass it in terms of speed. Free space optics entails the use of lasers to transmit data in free space, or air. Anova and its joint venture partner, which owns over 30 patents on this technology, commercialized this out of a decade-long project for the U.S. Department of Defense (DOD). We intend to deploy this technology both in the metro area and over the long haul to optimize the entire route from Chicago to New York. This is highly notable as it is the first new technology to be developed in the RF space in decades. The real benefit here is that this equipment, by virtue of its interwoven signals will increase the current availability of wireless networks from 95 percent to 99.99 percent. (Excerpted with permission of the publisher, Wiley, from Architects of Electronic Trading: Technology Leaders Who Are Shaping Today’s Financial Markets by Stephanie Hammer, June 2013.)

Availability, or uptime, has quickly become a major concern in the wireless sphere. As speeds converge across providers, it will ultimately become the true differentiator. RFConnect’s availability is projected to be 99.99% over a 10KM link. This equates to a total downtime of less than one day per year, versus competitors’ downtimes of 888 to 2976 hours per year (37 to 124 days per year) over the same paths. “Availability issues can cause staggering financial losses, as well as missed opportunities,” Mr. Persico stated. “Particularly painful is when you miss an open, or worse, a leading economic indicator because your RF system is down. Most of the providers today are claiming 95% or better for their uptime SLA, but in reality those networks are likely operating in the 85% uptime range if you remove their trading hour carve-outs and use recent microclimate weather data. However, FSO alters that disappointing reality permanently by now giving firms an availability that is akin to fiber through the air.”

Mr. Persico was honored to share insights in “The Architects of Electronic Trading.” He also participated in the book’s panel “Technology Trends that Matter,” that was held in Chicago in early June. When asked about her interview with Mr. Persico, Ms. Hammer responded, “I make the case in my book that tech leaders excel at communicating the business value of technology. Mike Persico does just that. A gifted teacher, he explains the relevance of microwaves for latency-sensitive market participants in approachable terms. What’s more, his take on enhancing availability of microwaves with laser optics gives readers important perspective on the future of microwaves in the trading space.”

About Anova Technologies: Anova Technologies is the preeminent fiber and wireless exchange connectivity provider, exclusively focused on electronic and algorithmic trading clients. With a dedicated team of engineers and physicists, Anova invented today’s millimeter wave design and deployment standards for trading networks. A champion of self-disruption, Anova continues to push the boundaries of technology for the financial markets, most recently upgrading its RFConnect to a hybrid laser millimeter wave network. Anova’s proprietary networks span all major exchanges throughout the US, Canada, Europe, and South America.

Contacts

Anova Technologies
Denise Heitz
Marketing Consultant
312.540.9594 xt 103
denise@anova-tech.com
http://www.anova-tech.com

New Role for Buy Side in Corporate Bond Market: Liquidity Providers


New Role for Buy Side in Corporate Bond Market: Liquidity Providers

http://tabbforum.com/opinions/new-role-for-buy-side-in-corporate-bond-market-liquidity-providers?utm_source=TabbFORUM+Alerts&utm_campaign=12c4c4b950-UA-12160392-1&utm_medium=email&utm_term=0_29f4b8f8f1-12c4c4b950-271568421

Full document at:-
http://www.scribd.com/mobile/doc/154736561

New Role for Buy Side in Corporate Bond Market: Liquidity Providers?
With the shift in the corporate bond market from voice to electronic trading, and from capital facilitation by dealers to agency facilitation, will the largest institutional investors commit their own capital to replace that which has been withdrawn by dealers?
Corporate bond markets are being radically changed by a confluence of factors: new Basel III capital and liquidity rules, the MiFID requirements on transparency in bond markets, and the availability of innovative new platforms based on equity and FX market technology. These factors have already led to a reduction in capital commitment by dealers, even prior to the regulatory implementation of Basel III.

[Related: “In Search of Liquidity: The Transformation of the Corporate Bond Market”]

The shift from voice to electronic trading and from capital facilitation by dealers to agency facilitation are well established trends, but RFQ mechanisms are likely to continue to be necessary due to the clear differences between equities and FX on the one hand and most corporate bonds on the other. A key question is whether the largest institutional investors themselves might now choose to commit capital to replace that which has been withdrawn by dealers and to do this by making prices through order-driven and RFQ platforms. This would enable them to buy at the bid and sell at the offer, thereby taking out the spread. An increasing number of platforms are now All-to-All, thus enabling the buy side to act as capital providers.

For more on the technological innovation in and transformation of the corporate bond market, see Professor Scott-Quinn’s complete research paper, “European Corporate Bond Trading – the role of the buy side in pricing and liquidity provision,” below.

Institutional large-in-scale (LIS) crossing networks for bonds, such as Liquidnet provides for equities, and the use of reference pricing should enable investment institutions to transact with each other without broker-dealer, MDP or SDP intermediation. However, under recent draft proposals for MiFIR, European regulators have introduced a volume cap mechanism that may have a dramatic effect on dark trading in Europe – whether in equities or, in the future, in bonds. Regulatory control will be based on a (low) cap on the percentage of trading that can go through mechanisms using a reference price. This would seem to be only the most recent of a number of retrograde steps taken by the EU in terms of its implications for market liquidity.

The combination of Basel and EU regulation certainly has the potential to counter all the efforts of individual governments and the G30 to encourage corporations to raise finance for economic expansion through bond markets rather than through fragile banking systems in order to reduce systemic risk. At this stage it is too early to say if higher costs and reduced position taking by broker- dealers in response to regulatory change will result in higher funding costs for issuers of corporate bonds in Europe or if the innovations we discuss in the paper below may be able to offset at least some of these additional regulatory costs. Certainly at the moment, there is little sign on this side of the Atlantic that regulators are heeding the sentiment of SEC Commissioner Daniel Gallagher, who hoped that “the Commission … will understand the differences and interplay amongst the equities, debt and credit markets so that we can be a more sophisticated regulator of those markets.”

Professor Brian Scott-Quinn is Chairman and Director of Banking Programmes at the ICMA Centre, Henley Business School, and a former practitioner in the eurobond secondary market. Deyber Cano, a research assistant to Professor Scott-Quinn at the ICMA Centre, contributed to the paper.

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