Moscow Exchange and Eurex to cooperate on FX trading


Moscow Exchange and Eurex to cooperate on FX trading

http://www.automatedtrader.net/news/at/144391/moscow-exchange-and-eurex-to-cooperate-on-fx-trading

First Published 21st August 2013

Next step in partnership between Moscow Exchange and Deutsche Börse Group/Futures on EUR-RUB and USD-RUB to trade on Eurex.

Moscow Exchange and Eurex, the derivatives arm of Deutsche Börse Group, have signed a cooperation agreement for the trading of foreign exchange (FX) derivatives. Through this new element of the partnership between Deutsche Börse and Moscow Exchange, Eurex Exchange will launch Euro/Russian Rouble and U.S. Dollar/Russian Rouble FX futures on its trading system in Q4 2013.

Alexander Afanasiev, Chief Executive Officer of Moscow Exchange, and Andreas Preuss, Deputy CEO of Deutsche Börse and CEO of Eurex, signed a cooperation agreement for the new derivatives products in Frankfurt/Main today. Both partners will also jointly promote the launch of these two FX futures.

“We continue to deepen our partnership with Deutsche Börse, and are working together closely to provide our market participants with new instruments. Today we agreed to launch Rouble FX futures in Frankfurt. This opens up exciting new trading and hedging opportunities for investors. Also, this autumn, Moscow Exchange will launch futures on five German blue chip stocks. Cross-listing arrangements between Deutsche Börse Group and Moscow Exchange allow our clients to build new trading strategies and better manage their risks. We believe that our joint initiatives with Deutsche Börse will strengthen national markets and facilitate the continued development of Frankfurt and Moscow as financial centers”, said Moscow Exchange CEO Alexander Afanasiev.

“We are very pleased to have reached the next milestone of our partnership. This new cooperation fits perfectly into our goal to constantly expand our product offering as it will complement our planned FX product suite”, said Andreas Preuss, Deputy CEO, Deutsche Börse and CEO, Eurex.

Eurex will launch FX futures and options for six currency pairs on 7 October 2013. According to today’s agreement, Eurex’s product suite will be complemented with cash-settled futures for both Euro/Russian Rouble and U.S. Dollar/Russian Rouble currency pairs in Q4 2013. Upon expiry, Eurex’s Rouble futures will be settled using settlement prices provided by Moscow Exchange. This procedure is intended to reinforce the integrity of the futures contracts and provide investors with confidence that the settlement price is both fair and accurate.

In Q2 2013, the average daily volume for both products on the Moscow Exchange amounted to over 2 million contracts with a notional value of US$2.1 bn. In 2012, U.S. Dollar/Russian Rouble futures were the third most popular foreign exchange futures contract globally among traded currency futures, according to the Futures Industry Association.

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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.

UCITS’ collateral access for clearing “heavily restricted”


UCITS’ collateral access for clearing “heavily restricted”

UCITS funds that are struggling to access collateral to post as margin for cleared OTC derivatives trades should be granted initial margin exemptions for non-cleared bilateral contracts, a European buy-side association insist.

Limits on borrowing, collateral repackaging and use of the repo market by UCITS makes it difficult for them to comply with the European market infrastructure regulation (EMIR), which requires OTC derivatives to be centrally cleared.

The EMIR rules means that buy-side firms will have to post initial and variation margin for the first time, leading market participants to fear a potential collateral shortage when clearing requirements kick in.

Vincent Dessard, regulatory policy advisor at the European Fund and Asset Management Association (EFAMA), said the cumulative impact of OTC reforms would restrict UCITS from having collateral for clearing.

“UCITS funds have to deliver collateral just like any other market participant, but they are the sole market participants that don’t have access to credit capabilities,” he said. “As a result, they are bound to use their own fund assets, leading to a collateral dry out.”

UCITS funds are considered suitable for retail investors and have been established in accordance with successive European Union directives on undertakings for collective investment in transferable securities (UCITS), which can be freely marketed across the member states.

According to statistics provided by Strategic Insight, an Asset International company, UCITS account for 65% of all portfolios across local European and cross-border mutual funds and 79% of assets under management.

The funds have borrowing limits of 10% of net asset value on a temporary basis, and can’t repackage collateral because of restrictions on the use of assets within other sub-funds.

ESMA’s ‘Guidelines on ETFs and other UCITS issues’ released in December last year has also closed the door on the repo market, with regulator stating cash collateral received by a fund could not be used for clearing obligations.

Perry Braithwaite, adviser product regulation at the Investment Management Association (IMA), said as a result, “UCITS funds are heavily restricted in terms of where they are going to get their collateral from”.

“It’s something that we have raised with the European Commission and ESMA, but don’t know what the outcome is going to be.”

Braithwaite said UK-domiciled funds weren’t as affected as others in Europe, as they were less likely to use repos or OTC derivatives.

Exemptions

EFAMA’s Dessard said the association had also been in touch with ESMA and the International Organisation of Securities Commission (IOSCO), which is currently working on margin requirements for non-cleared OTC derivatives trades that are set to be published by late-August.

He is calling for IOSCO to give funds an exemption on posting initial margin for bilateral trades.

“We are very well aware that there will be changes in the market. We do welcome them in terms of safety, but we are very much under the impression that institutions investors, especially funds, were not taken into account with all the rules that are being prepared and set in place.”

Dessard said if nothing were done, asset managers would shift to “streamlined, plain vanilla instruments”.

“They will no longer finance growth in Europe and small and medium enterprise development,” he said.

SEI selects Calastone for automated order routing


SEI selects Calastone for automated order routing

http://www.automatedtrader.net/news/at/143748/sei-selects-calastone-for-automated-order-routing

Calastone chosen to provide order routing service for SEI’s UK business

Fund services provider SEI has chosen Calastone to provide its order routing service for the UK business.

SEI will now move toward automated order processing for transactions across its retail fund range and goals-based Strategic Portfolios.

The move aims to provide faster turnaround times for order confirmations and contract notes which will allow SEI and client counterparties to reduce processing time and operational risk.

Calastone’s system allows all parties in the process – third party administrator, distributor or platform to choose which messaging format they wish to communicate with, the order message is then routed and translated by Calastone into the preferred format, as determined by SEI.

Andrea Hohlachoff, Head of Asset Management Solutions at SEI, said the business had already witnessed the operational benefit of working with Calastone.

She added: “We are pleased to have selected Calastone as our connectivity partner and have been impressed by their flexibility in providing us with the facility to process fund orders electronically with our clients. We very much look forward to expanding the use of the order routing service and enabling more of our clients to benefit from the system.”

In addition, SEI will be able to follow each order through the entire lifecycle of the trade, using Calastone’s Execution Management Systems (EMS), a web-enabled graphic user interface (GUI) which allows users a real-time view of the transaction. The EMS also has the ability to flag any potential restrictions, which otherwise would have to be dealt with manually.

Paul Jacobs, UK Sales Director at Calastone, said: “We are looking forward to working with SEI to help improve efficiencies and mitigate operational risk during their order routing activity. We hope the industry continues to recognise the clear benefits of moving away from manual processes.”

Singapore Precious Metals Exchange (SGPMX), the world’s first physical precious metals exchange with peer-to-peer bullion trading capabilities integrated into the trading platform


SINGAPORE, July 3, 2013 /PRNewswire/ — Singapore Precious Metals Exchange (SGPMX), the world’s first physical precious metals exchange with peer-to-peer bullion trading capabilities integrated into the trading platform, launched in Singapore today, amid Singapore’s drive to encourage gold trading in the country. As part of the launch, SGPMX also announces the entry into an MOU with Certis CISCO which will act as the custodian for bullion storage.
Certis CISCO has been providing secure and trusted storage of precious metals for renowned banks and international couriers since 1986. Storage with Certis CISCO will enable SGPMX to provide the platform for private individuals, traders and institutions to buy, sell, store and exchange precious metals including gold and silver bullion, without incurring high spread margins. The exchange allows traders to buy and sell precious metals securely and conveniently, supporting real-time transactions with internationally recognised mints. This addresses private investors’ issues with liquidity, and also eliminates the costs of assaying precious metals when traders purchase or sell the holdings.
Victor Foo, CEO and founder of SGPMX, said, “SGPMX aims to cater to the rising demand for consolidated end-to-end precious metals trading in Asia. As one of the region’s largest trading hubs and the fastest growing wealth centre in the world, Singapore is well-placed to capture 10 to 15 per cent of world trade in gold bullion in the next decade. Our platform will help address bullion trading challenges faced by personal wealth investors, traders and institutions today.”
“In recent years, industry players have opened storage vaults, started delivery services for precious metals from mints, and opened new trading desks for gold to meet investor demands. What makes us unique is that SGPMX brings together all elements under one platform, making it easy for our 11,000 and growing customer base to order, store, transport and trade physical precious metals with the same ease as trading in other financial instruments,” Foo added.
Certis CISCO will act as the custodian for all bullion products traded and stored through SGPMX platform.
Chua Chwee Koh, Senior Executive Vice President & Chief Operating Officer of Certis CISCO, said, “We are pleased to seal this MOU with SGPMX and provide our highly-secure vaults for the storage of bullion. As the largest trusted and secure logistics service for cash and valuables in Singapore, our facilities are fully insured and allocated to individual investors. Our vaults are installed with sophisticated security and surveillance system and are closely monitored round-the-clock by computerised security control systems to give full protection over stored bullion, making us the most reliable custodian for SGPMX in Singapore.”
SGPMX is privately held and independently funded. The company is fully Syariah compliant, and is compliant to regulations of the Singapore Companies Act.
Media Contacts
Jacintha Ng
The Hoffman Agency
SGPMX@hoffman.com( mailto:SGPMX@hoffman.com ) +65-6361-0250

Knight-Getco outlines European bond blueprint as KGC Holdings


Knight-Getco outlines European bond blueprint

http://www.efinancialnews.com/story/2013-07-02/knight-getco-kcg-lays-out-european-blueprint?omref=email_TradingTechnology

One of the most senior European executives at the new trading company formed by the merger of Getco and Knight Capital has said the group is aiming to play an “important and strong” role in fixed-income markets, as they undergo an equity-like transformation.

Knight-Getco outlines European bond blueprint

The two firms today formally began operations under a new listed company called KCG Holdings, which in one sweep has become one of the world’s largest broking and electronic marketmaking firms.

Albert Maasland, formerly head of Knight Capital’s international business, and now KCG’s London-based global head of execution services and venues, said the combined group had bold plans for Knight’s Bondpoint platform.

Speaking to Financial News, Maasland said: “We expect to play an important and strong role in the electronification of fixed-income markets. Bondpoint has strong penetration in the US, and we’re already seeing customers, private banks and retail brokers use the platform here.”

Fixed-income instruments are less liquid than equities, so investment banks have traditionally taken these securities being sold in the market onto their books until they could find a buyer. However, regulatory pressure has made it prohibitively costly for them to fulfil this role, while the G20’s reform agenda is promoting greater electronic trading and central clearing.

 

According to the latest New York Federal Reserve data, dealer holdings of corporate bonds have shrunk to a fraction of their previous size over the past five years. That has led to concerns of liquidity crunch, resulting in several banks and asset managers, such as Goldman Sachs, BlackRock and Detusche Bank, attempting to build electronic bond platforms. While many of these ventures have struggled to build liquidity, Maasland said that KCG’s independent status was a factor that could work in its favour.

He said: “I think we’re going to see a pulling together of a number of platforms in the fixed-income space, and we want to play a strong part in that process.”

The comments come a day after Getco ̶ a high-frequency trading and electronic marketmaking firm based in Chicago ̶ and New Jersey-based broker Knight closed a $1.8bn merger deal. The deal was first struck in December, about five months after Knight suffered a $461m loss as the result of a trading error, with Getco one of five firms that came to the broker’s rescue.

Maasland is one of KCG’s 12-person global management team and reports to Daniel Coleman, Getco’s former chief executive who will take up that role at KCG.

 

As well as the group’s voice-driven institutional trading businesses, Maasland will oversee Bondpoint, its FX platform Hotspot, the KnightMatch equities platform, and Getco’s equities venues in the US and Europe, GetMatched.

Despite speculation that some of these platforms would be sold off, Maasland said “we like these businesses, they make sense, and they support our premise of helping firms to access liquidity efficiently across asset classes and across geographies”.

The new group will have just under 200 people working in Europe, Maasland said. He declined to comment on cost-cutting plans. In previous regulatory filings in the US KCG said it expects that combining electronic trading systems will save it up to $110m over three years.

Following a difficult first quarter for both companies – Knight reported a $9.4m loss, while Getco lost $9.3m – Maasland was optimistic for the year ahead.

 

He said: “It is a really, really tough market at the moment and there is excess capacity. But we bring a unique proposition created by two specialist firms: Knight’s client-centred approach and Getco’s technological expertise. Clients will get best of both worlds”.

Vietfund Management taps Deutsche Bank for custody, fund services


The Asset – Magazine-Vietfund Management taps Deutsche Bank for custody, fund services.

Hyperion Asset Management joins Calastone


Hyperion Asset Management joins Calastone

http://www.automatedtrader.net/news/at/142925/hyperion-asset-management-joins-calastone

Sydney – Calastone, the independent transaction network for the superannuation and managed fund industries, has announced that Hyperion Asset Management has joined their Global Funds Transaction Network.

Hyperion, an Australian equities fund manager, is Calastone’s 81st Australian client. Their membership of Calastone automates the flows from participating platforms and custodians into Hyperion Funds.

Hyperion Asset Management’s Managing Director, Tim Samway said “Hyperion welcomes the automation of this manual process with the reduced risks and the increased levels of accuracy and timeliness it brings.”

Calastone went live in Australia in November 2011 with automation of fund application and redemption transactions. More than 40% of the market have now joined the Calastone network.

Calastone MD, Australia, Shannon Sweeney, said that the industry had been wholeheartedly supportive of the move to automation. “The industry has long recognised the risks involved in manual processing,” she said.

“These processes – which are still in use – can result in typing errors in the registry system of the fund or platform, and faxes do go missing or are incomplete or sent in duplicate. It’s also a timing issue – slow processing, lack of transparency and a delay in identifying an issue or error.”

Mr Samway said “that the immediate benefit to Hyperion clients is the provision of intraday cash flow reporting to the firm’s portfolio managers. The sooner we are apprised of large cash flows the sooner we can transact on behalf of our clients.

“Beyond reducing the errors that can occur with manual processing, better automation in the investment chain in managed funds will remove barriers to investment,” continued Ms Sweeney, “Calastone is also working with wealth management, broker execution and SMSF software providers to close this gap in the future.”

Union Bank of Taiwan selects Calastone’s TDCC service


Union Bank of Taiwan selects Calastone’s TDCC service

http://www.automatedtrader.net/news/at/142899/union-bank-of-taiwan-selects-calastones-tdcc-service

Taiwan/Hong-Kong/London – Union Bank of Taiwan has become the second distributor to sign up with Calastone through the new Taiwan Depository & Clearing Corporation (TDCC) fund service.

This announcement follows last month’s implementation of Far Eastern International Bank on Calastone’s TDCC service with 10 offshore fund houses distributing in Taiwan including Aberdeen, Alliance Bernstein, Barings, Fidelity, JP Morgan Asia, Pinebridge, Schroders, Old Mutual and Threadneedle.

Mr. Hann-Tsau Tsai from Union Bank of Taiwan said, “We pride ourselves in constantly making sure we find the most efficient and cost effective systems for our clients and we are pleased to choose Calastone for their award winning global fund transaction network. Calastone was the obvious choice for us, given their outstanding offshore Fund manager and transfer agent coverage and their proven track record in automating fund transactions globally. We have been impressed with the way they have smoothly handled the implementation and roll-out of Far Eastern International Bank with ten Fund managers on the TDCC network and we look forward to working with Calastone and all our Fund manager partners to maximize offshore fund automation rates and enhance our service levels to our clients.”

Union Bank of Taiwan has also selected Calastone for their real-time order management system (EMS) delivered in Mandarin and providing transparency over fund order statuses and confirmations, as well as their dedicated Mandarin speaking production and client servicing team based in Hong-Kong and London and covering Asian and European business hours.

Sebastien Chaker, Head of Asia for Calastone said, “With several million manual orders being processed annually, Taiwan is the top automation priority for our Global Fund manager clients and in response Calastone has made significant investments in technology and human resources to tailor our service for the Taiwan market. Our Asian and European based client service and implementation teams have been coordinating and working hand in hand with Taiwan distributors, the TDCC, Fund managers and their respective transfer agents to ensure a smooth transition to a fully electronic dealing environment in Taiwan. We are now looking forward to enabling the Union Bank of Taiwan on our global fund transaction network, while at the same time adding additional offshore Fund managers to remain ahead of the game in Taiwan and deliver one hundred percent offshore funds coverage for distributors selecting our service.”

Clearstream introduces DVP settlement solution in Russia


Clearstream introduces DVP settlement solution in Russia

http://www.atmonitor.co.uk/news/newsview.aspx?title=clearstream-introduces-dvp-settlement-solution-in-russia

Published on   May 30, 2013

As momentum continues in the reform of Russia’s capital markets, Clearstream is keeping pace and is supporting the set-up of an effective settlement framework by delivering its improved settlement solution and introducing municipal bonds via its direct link to the new Russian Central Securities Depository (CSD), the National Settlement Depository (NSD).

This week, Clearstream goes live with its new delivery versus payment (DVP) settlement solution – the market’s preferred settlement choice since it is more efficient, more secure and offers more real time settlement compared to the free of payment (FOP) option. For DVP settlement, a clear link is established between a securities transfer system and a funds transfer system that ensures delivery occurs only as and when payment occurs. This move by Clearstream is helping to pioneer a shift within the market from its current system of settling in cash batches, to a system which is closer to real-time settlement. The extent to which real-time securities settlement becomes a real possibility will still depend on the decision by Russian market participants to move away from the batch system for local cash transfers.

Clearstream this week also introduces Russian municipal and regional bonds for settlement via the NSD and extends settlement deadlines for its free of payment (FOP) settlement service by several hours (from 13:55 to 17:20 CET summer time). These steps reflect good pace in Clearstream’s – and the wider market’s – settlement and custody services development since the establishment of the NSD as CSD for Russia at the end of last year. As a next milestone, Clearstream plans to introduce settlement for Russian corporate bonds and to enhance its access model for Russian equities as soon as local legislation allows for this.

Jeffrey Tessler, Chief Executive Officer of Clearstream, said: “I am delighted we keep developing and enhancing our settlement and custody services in the Russian market. Our new delivery versus payment settlement solution is an exciting milestone as it helps pave the way for the Russian market to move more towards a real time settlement environment, keeping up with other capital markets around the world as part of Russia’s capital market reform.”

Eddie Astanin, Chairman of the Executive Board, National Settlement Depository, commented: “Switching to delivery versus payment (DVP) using the link between the National Settlement Depository and Clearstream will create additional opportunities for foreign investors who conduct transactions with Russian fixed income instruments. We are happy to see a high rate of technological development of Clearstream’s link, which in turn is contributing to the development of the national infrastructure and, as a consequence, makes the Russian financial market more attractive and competitive.”

Clearstream’s services in Russia

Clearstream offers a comprehensive service taking full advantage of the new Russian securities law and market infrastructures refocus, including custody and settlement for the following instruments:

Equities – held in omnibus form via Clearstream’s local agent bank Deutsche Bank Moscow’s link with the NSD and deliverable free of payment (FOP) in the local market;

OFZ bonds and municipal bonds – held in omnibus form via Clearstream’s own direct link with the NSD;

Delivery versus payment (DVP) multicurrency settlement against all Clearstream Banking Luxembourg and Clearstream Banking Frankfurt international central securities depository customers;

Delivery versus payment (DVP) settlement against all NSD counterparties in Russian rubles for OFZ bonds and municipal bonds.

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