High-frequency trading concerns return to the fore


High-frequency trading concerns return to the fore

http://www.efinancialnews.com/story/2013-07-18/high-frequency-trading-concerns-return?omref=email_TradingTechnology

High-frequency trading has risen to the forefront of hedge fund regulatory concerns, according to a new report.

High-frequency trading concerns return

High-frequency trading concerns return

While the level of regulatory concern remains far from 2011 levels, it has increased since last year, according to the report, which was published yesterday by research firm Tabb Group. The research was based on conversations with 63 head traders of US hedge funds, managing $301 billion in total assets.

The research said: “In light of the public debate and media scrutiny of market structure issues, such as exchange order type disclosure, the hash crash, and early looks at machine readable economic indicators, concerns over high frequency trading have risen. Meanwhile, with initial registration costs in the rearview mirror, compliance costs concerns have dropped off.” (See graph bottom-right)

Top of the list is uncertainty regarding how hedge funds will be treated under mandatory registration with the US Securities and Exchange Commission for managers running $100 million or more, and the implications of Form PF, which requires them to provide information on the hedge funds they run to the Financial Stability Oversight Council, the report found.

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Perseus Brazil Debuts Market-To-Market Liquidity Platform LiquidPath®


Perseus Brazil Debuts Market-To-Market Liquidity Platform LiquidPath®

http://perseustelecom.com/services/products/liquidpath-brazil/

LiquidPath® combines the Perseus award winning connectivity solutions with the Perseus global market-to-market ultra low-latency network. LiquidPath is a fast and cost effective solution for the deployment of the necessary equipment needed to be staged in foreign markets so that customers do not have to manage the complexities of having “feet on the street” in new emerging markets.

Perseus Telecom customers see a variety of advantages when choosing LiquidPath:

Through efficient and high-performance trading infrastructure ideal for staging Market Data, Order Management (OMS) as well as Algorithmic and High-Frequency-Trading equipment, customers can benefit from state 0f the art equipment ready to be turned on as a service.

Due to complex and static environments Perseus can offer proximity services for Direct Market Access (DMA) platforms, helping customers getting trading with exchanges or counter parties fast, saving time and money.

Customers can enjoy having balanced IT investments with LiquidPath® making it easier to plan and allocate IT expenditures for trading emerging or foreign markets.

“Liquidity Infrastructure” for local and global buy-side, sell-side and service vendors looking to access the Brazilian Securities marketplace.

LiquidPath combines the Perseus award winning fastest connectivity solution with the Perseus Global Market-to-Market ultra low-latency network . LiquidPath is a fast and cost effective solution for the deployment of trading infrastructure into foreign markets so that your firm does not have to manage the complexities of local “feet on the street” in new markets you may want to trade.

Perseus Telecom customers see a variety of advantages when choosing LiquidPath:

Efficient and high-performance trading infrastructure ideal for staging Market Data, Order Management (OMS) as well as Algorithmic and High-Frequency-Trading equipment.

Complex and static environment optimal in colocation and proximity services for Direct Market Access (DMA) platforms. Well balanced IT investments – support for planning of IT expenditures.

LiquidPath Brazil

Perseus Telecom Brazil helps customers meet their requirements for low-latency market access and cost efficient IT products and services saving both time and money.

Infrastructure

  • Exchange proximity colocation
  • Hardware as a service
  • Ultra-low latency connectivity
  • Elasticity (up and downsizing)
  • Managed and Professional Services

Connectivity

  • CT1 – 1st BVMF DC (30µs)
  • CT2 – 2nd BVMF DC (5ms)
  • SP2 / RJ1
  • Internet / Last Mile
  • Global Liquidity Centers Access

Market-To-Market

3-Market-To-Market

HIGH PRECISION TRADING IN COMPLEX MARKETS

Perseus Telecom is an award winning global provider of connectivity and services. We work with best of breed fiber assets globally. Perseus provides customers with the right

network solution at the right price. Whether connecting trading desks to exchanges, establishing global wide area networks, or connecting from Europe and North America to emerging markets in Latin America, Asia and Africa; our customers have the competitive advantage that comes with innovation and experience in finance, banking, technology, law, e-commerce, multi-site enterprise, pharmaceutical, media and telecom sectors.

Javelin OTC Derivatives Establishes Presence in Telx’s Chicago Data Center


Javelin OTC Derivatives Establishes Presence in Telx’s Chicago Data Center

http://low-latency.com/article/javelin-otc-derivatives-establishes-presence-telxs-chicago-data-center/?utm_source=weekly&utm_medium=email&utm_campaign=ll_13-06-20

Telx, a leading provider of global interconnectivity, cloud enablement services and datacenter solutions, today announced at SIFMA Tech 2013 that Javelin Capital Markets, an OTC derivatives execution platform, has leveraged Telx’s network & interconnection rich Cloud Connection Center, “CHI1” at 350 East Cermak Road, Chicago, Illinois, providing Javelin with access to Telx’s extensive Financial Services community. As a colocation and interconnection client in Telx’s strategically located data center in downtown Chicago, Javelin can now offer Telx’s financial community high-performance connectivity to derivatives execution platforms for Interest Rate Swaps and Credit Default Swaps. Javelin offers both anonymous electronic and voice-hybrid methodologies for trade execution.

Newly formed Swaps Execution Facilities (SEFs), that have emerged as aspects of Dodd-Frank become implemented, are incorporating their services in secure data center environments. Low-latency connectivity is a critical component for the OTC Derivatives market linking SEFs and Central Counterparty Clearing (CCPs). With CCPs being located in Chicago, the proximity of Telx’s CHI1 facility at 350 East Cermak provides financial customers with high-performance and flexible connectivity to Javelin as well as to other SEF engines from a single location.

“As aspects of Dodd-Frank become cemented in the financial community, the need to establish SEFs in secure environments is a crucial step for our eventual classification as a Swap Exchange Facility,” said Michael Black, MD of Infrastructure of Javelin. “Telx’s ability to provide us with access in their premier Chicago facility, and their proximity to the clearing venues, swaps execution facilities, and buy-side participants put us in a strong market-leading position to service current and future clients.”

“We are excited to have Javelin join the expanding Telx financial ecosystem in our CHI1 facility. Javelin’s secure exchange platform with a state of the art user interface is well positioned in the rapidly changing OTC Derivatives market,” said Shawn Kaplan, general manager of Financial Services for Telx. “In recent months we have seen an increasing number of trading systems turn to Telx and our CHI1 facility, most recently with the announcement of Sky Road joining Telx’s financial community. Javelin and other industry leading financial institutions at 350 East Cermak benefit by connecting with other financial institutions in the facility, which allows them to offer their full suite of services with flexible connectivity to current and future clients.”

Telx’s CHI1 facility, located in the South Loop of the Chicago Central Business District, provides customers with the financial eco-system at 350 Cermak, one of the leading financial eco-systems in the world. As the operators of the “Meet-Me-Room,” and one of the largest colocation providers at the CHI1 facility at 350 Cermak, Telx provides industry leading data center and connectivity services for the global financial community.

Attendees at SIFMA Tech 2013 in New York City can register to attend Telx’s grand opening event of its new flagship data center, NJR3 in Clifton, New Jersey on June 19, 2013 from 3:00 p.m. to 7:00 p.m. Round-trip transportation will be provided by Telx for all registered guests. The event will feature a keynote address by NFL Legend Phil Simms, along with public remarks Clifton Mayor James Anzaldi, State Senator Nia Gill, and Telx’s Executive Vice President of Engineering and Construction Michael Terlizzi. Cocktails and refreshments will be served, and tours of the new data center will be given.

 

Carolina Capital Markets, Inc. – Fixed Income Trading – Soft Dollars – Client Commission Arrangement – Bond Calculator


CCM’s clearing agent is BB&T. CCM’s outside legal counsel for SEC & FINRA regulations is Pickard & Djinis LLP.

via Pocket http://www.ccmfit.com/ June 10, 2013 at 07:21PM

Asset Manager PEAK6 Selects SunGard for a comprehensive Portfolio Management and risk system


Asset Manager PEAK6 Selects SunGard for a comprehensive Portfolio Management and risk system

http://www.derivsource.com/articles/asset-manager-peak6-selects-sungard-comprehensive-portfolio-management-and-risk-system

PEAK6 Advisors LLC (“PEAK6”), a Chicago-based asset manager specializing in alternative investments, has gone live with SunGard’s Front Arena and Monis solutions. The solutions help PEAK6 better service its clients by providing customized portfolio and risk management, valuations and trade processing.

SunGard’s Front Arena and Monis help increase operational efficiency by allowing PEAK6 to concentrate on what they do best – delivering returns and achieving agile growth.

“We wanted to ensure we are conducting ongoing due diligence by offering our investors a well-defined investment management system that can handle our assets under management in an efficient way. SunGard’s Front Arena and Monis help mitigate our internal risk and automate our validation processes – giving our investors piece of mind.” – Scott Kramer, chief technology officer, PEAK6

The implementation was completed in less than four months and PEAK6’s requirements were met in terms of open architecture and highly configurable functionalities.

Sun rises on Miami Options Exchange:


Sun rises on Miami Options Exchange:

http://www.jlnoptions.com/2013/05/sun-rises-on-miami-options-exchange.html

Shelly Brown and Doug Schafer talk about the new Miami Options Exchange

The much anticipated Miami Options Exchange launched December 7, 2013, making it the 11th options exchange in the United States. Jim Kharouf, editor-in-chief of John Lothian News, spoke with Shelly Brown, senior vice president, strategic planning and operations with MIAX Options, and Doug Schafer, executive vice president, chief information officer and director of the exchange at the Options Industry Conference in Las Vegas last week. They say MIAX’s 72-person team has two things that differentiate it from the pack – speed and a regulator approval-pending order function that’s designed to tighten quotes and reward market makers for tighter quoting. They also touched on its next two exchanges that will be based in Miami, with a Latin American view.

Q: You launched on December 7. Can you tell us about the rollout since then for MIAX?

SB: We launched with single symbol on December 7, 2012 and then added two more, two weeks later. We worked with the SEC to have a very conservative schedule to start with. We believed the system was very solid and confident. We did a tremendous amount of stress testing, but at the same time did not want to be a disruption to the marketplace. We ran those three symbols until the end of December and did that for several reasons. All three of those symbols were running on the same trading engine. Our system runs on 24 trading engines.

In January we started adding additional symbols and we were up to 100 symbols on more engines. Then we reevaluated which symbols to roll out with our specialists and added another 100 or so in January through February. In March, we added another 250 names and rolled out more in April. We now have about 610 or so.

Q: What is the market structure and market maker system you have in place?

SB: When we looked at the options market, we saw that pro-rata exchanges held about 75 percent of the market. So it made a lot more sense to go after that part of the market, rather than the price-time exchanges. I was at Susquehanna before I joined MIAX and Doug was at PHLX [Philadelphia Options Exchange] before coming here. One thing that was different about PHLX from the other pro-rata exchanges is that they have two allocation tiers – public customers first and then professionals in a pro-rata model. PHLX was a different allocation model altogether with three allocation tiers – public customers first, market makers second, then professional traders. So there is a better incentive for market makers to make better markets at PHLX than at other exchanges because they are not competing with the pros on the pro-rata allocation. We chose that path, so we’re most like PHLX.

We have nine market makers, all top tier firms.

Q: There are a lot of exchanges out there today. What did you have to do to convince them to come on board with PHLX?

SB: All market makers want to trade against retail order flow. Some firms that we’ve named as our members have retail order flow available to them through an affiliated router, consolidated order flow or buying other firms’ internal order flow. Those market makers are looking to trade against their order flow in a fair fashion. This isn’t designed for pure internalization. It’s designed with a directed order flow model, so they can direct orders to themselves and capture 40 percent of an order when they are on the market.

We looked at the allocation models of all the pro-rata exchanges and tried to take the best of each of those models and combine them in a single place to give them the opportunity to trade against as much of that order flow as possible, but still have a competitive market against that flow. For example, for our PLMMs or version of a specialist, if an order is directed to them, or if one comes in that is non-directed and is a 5-lot or under, they get 100 percent of that order. The same program exists at ISE and PHLX, CBOE and I believe AMEX has it.

With the directed model, if an order is directed to a market maker and he is matching another single market maker he gets the greater of pro-rata, or 60 percent. If he is matching two or more market makers, he gets the greater of pro-rata or 40 percent.

Then we did something different. We had a huge advantage coming in starting from scratch, specifically designing and building a system for options trading, and building a new rule set with no existing constituents. We asked, “What could we do to support the market making community to help them make the best markets, trade against their own flow and protect themselves?”

We built a system that is incredibly fast – many times faster than our closest competitor. And its not just a speed advantage for market makers from a high frequency perspective, but a speed advantage when something happens. How do you reduce negative expectancy and optimize the ability to trade with the profitable order flow? Speed is a huge thing and when S&Ps make a major move up or down, market makers need to be able to play defense as well as offense.

The second thing is that we have single-sided quotes instead of double-sided quotes. Say you want to submit a quote to CBOE or PHLX on SPIDERS, with a front-month on the option of $5 to $5.03 and then make a big jump to the upside. I want to get my $5.03 offer out of the way as fast as I can. Well, at the other exchanges, you have to put in a two-sided quote in, say, $5.05 to $5.25 offer. MIAX quotes are single sided, so traders can move all their call offers up and put bids down and play defense before they move their call bids up or put offers down to play offense.

DS: Basically, no matter how fast you are, you are still at a disadvantage to some by not making a continuous market to all the products. So you need to be as smart as you can, as quick as you can, to get out of the way. That’s what we are shooting for.

And as far as the system, its also about reliability. It’s one thing for the market maker or even someone sending an order into the system to say you are fast, but if you are not consistently fast and dependably fast, then people won’t count on it. What we hear back is that when participants need to be fast, they are not always fast. And that’s one of the big things we solved, figuring out how to keep that dependant latency regardless of when the market is busy. That’s why we quote stats about the first 10 minutes of trading and no one else will – because they are horrible. When the market goes nuts, you are going to have the best experience from a performance standpoint with us.

Q: That is one of the big issues in the industry right now, how to deal with trading at the open. It can be a lousy customer experience.

SB: We’ve tried to deal with that too. There isn’t degradation of service under load. That reduces negative expectancy trades. Also, with the speed factor, you will see your fill on MIAX before you see your fill on any other exchange. The trade and reporting to both sides happens so fast there is a hedging advantage if you are sweeping all the markets. You will be able to hedge what you did on MIAX before you even know you traded on some of the other exchanges.

So much has been taken away from the market makers over the years. Granted the pendulum was way too far over 20 years ago, but the reality is that technology has leveled the playing field in a lot of ways. Non-market makers have become far more sophisticated, better educated and have far better technology. Some order flow can be very toxic, so you want to reduce that for market makers.

We want fair markets and are 100 percent in alignment with the SEC. But at the same time, we can build a system that allows market makers to be more aggressive than they otherwise could be.

And there are risk protections we have for market makers. When I was on the trading floor on the CBOE making markets in the OEX, I was making markets in 1,000 options but I could only make markets one trade at a time. We built that logic into the trading system so a market maker can say, “I only want to trade 200 percent of my quoted volume in a class.” So if he is 100 up in quoted options, 300 up in the out-of-the-monies, 50 up in the in-the-monies, and he trades 50 in-the-monies, that’s 100 percent of his quote and his new count. If he trades 50 of his 100 at-the-monies, that’s another 50 percent, so now he’s up to 150 percent. If he makes another trade that takes him over his threshold, we’d have to take all his quotes out of the marketplace in that stock and he has to come into the market with fresh quotes. That gives him the chance to refresh his quote book. That’s not unique. Other exchanges have a similar mechanism, but ours is built within the trade mechanism. It’s extremely fast, reliable and it has protections.

Q: How about customer protections?

SB: We will never have an obvious error. The trade engine won’t allow that trade to happen. One of the ways we do that is what we call a collar. When an order comes in, it can trade at the NBBO, or routed away to the NBBO, or one-tick through the NBBO if we’ve cleared the other markets, but we will never go more than one tick. When we were at PHLX, probably 90 percent of our errors were the result of an oversized order that was entered into the market, trading at a price and the market makers going $5 wide and then it traded at the $5 away price. Everyone knew that occurrence was happening. If the customer doesn’t know about it within 20 minutes and calls the exchange about an obvious error, he gets screwed. It shouldn’t have happened.

And if they review it inside 20 minutes and bust, now you have a market maker who just got out of the way. He didn’t do anything wrong but he did a trade and hedged it, and now you’re going to take that trade away and he has a naked hedge. And he could lose without that hedge.

Our perspective is, we don’t make a lot of money per contract; we’re not traders. We’re providing a service and you can see it in our fee schedule. If a 1,000 lot comes in and the last 300 lots are way outside, let the order go back to the broker and make a second responsible decision about where that order should go and at what price it should trade. If you want to send it back to us, that’s fine. But we don’t want to put your customer at risk at a price that is likely not their intent.

Our system will never let that trade happen. We’ll give the order back to the firm and give them a choice about what they want to do. Some firms have asked if we can make it 2 ticks wide, or 10 cents, so we are looking at possibly enhancing the system to do those sorts of things. As Thomas Peterffy (CEO of Interactive Brokers) said, “If your rules can define obvious errors, why don’t you just build your obvious error rule into the system?”

Q: What’s next on the priority list?

SB: In our rules we have something called priority quotes. As the rule is currently written, that is any market maker quote that is two-sided and no wider than $5. It’s a very loose standard. So we’re matching the behavior of the other exchanges. You can quote as wide as you want, be on the NBBO quote and offer it away if you just want to be a volatility buyer.

The intent is to modify that priority quote rule to incentivize market makers to quote tighter. So take an option that quotes in nickel increments. This is still being discussed, but we may look at the bid/ask spread at the NBBO of the prior day. And let’s say 80 percent of the day it was a nickel wide and the other 20 percent of the day it was a dime wide. So you have an average spread of about 6 cents. We may say, for today, the bid/ask spread for priority quotes in that option is 10 cents.

So three of us are all market makers. We’re all trading in that option. And you’re in that option at $2.00 to $2.05, and are on the NBBO on both sides, Doug here is $2.10 on the bid but not on the offer and I’m 2 bid at $5. I’m on the bid, but I’m $3 wide. An order comes in to sell 10 at $2.00. Today the three of us would split it, with one of us getting 40 percent via pro-rata. If we had priority quotes with tighter spreads, your $2.00 to $2.05 is a priority quote, and Doug’s $2.10 is a priority quote. My 2 bid at $5 is a non-priority quote and I don’t get allocated with the market makers. I am now considered a professional interest. It enhances the allocation for the two of you, while making tight markets. It’s an incentive for you to make tight markets and becomes an incentive for better liquidity for our customers. And it rewards the market makers who are really acting like market makers by providing continuous 2-sided quotes.

It’s not an allocation change. It doesn’t give the priority any advantage. What it does is take the non-priority quoter out of the market maker allocation. In a sense, we’re redefining on the fly how a market maker is defined in our trading engine. To be clear, this is still pending SEC approval.

That is the main functional innovation that sets MIAX apart from the other exchanges. The other innovation is the technical innovation. Those two set us apart from our competitors.

Q: With several months now under your belt, what are your expectations for market share or volume?

SB: We’re really pleased with our market share today. We’ve had no errors caused by the system, no system problems to date. Our customers are happy with the speed and turnaround times, trades and routers. We knew there would be no ramp up in volume until we hit some critical mass, and I believe we’re there now. The next thing that has to happen is the firms need a reason to route orders to us. One, the order flow providers, as they do evaluation of system performance, will start to see better hit rates, better turnaround times, fewer errors – and that’s going to cause them to send more orders to MIAX.

We are long volatility in that, as volatility returns to the market and market making firms who are also order flow providers have problems on other markets due to capacity and systems speed, they will bring flow to the faster exchanges.

It may take an event for that to happen, such as a prolonged period of volatility. Until then, the volume growth will be a slow growth slope. And until we get priority quotes in place, there’s not a lot differentiating MIAX from the other exchanges, except system performance.

We have five pro-rata exchanges and I’d like 1/5th of that volume. But that’s not realistic, other than at CBOE which was the first exchange. I don’t think another new exchange got more than 2- or 3 percent in the first year. But we knew there would be some events that would be positive for us.

Q: What is your game plan now?

SB: We would love more market makers and order flow providers. We have 19 order flow providers connected already in addition to the nine market makers. Every firm has access, be it direct or through another smart router for best execution. Some key drivers are key functionality like priority quotes, rules and systems implications, additional functionality such as a price improvement auction, crossing mechanism, and complex orders. All those things are in the plans over the next 12 months or so, pending SEC approvals.

Q: Tell me about the staff and management team at MIAX.

SB: I think the amount of market knowledge that Doug and his team have is a unique knowledge set. The two of us, along with senior team members, can talk about topics that I don’t think our competitors can match. There are other great guys out there and they used to rely on their committees for that. Now that the structure of exchanges has changed, and those committees don’t exist, it’s hard to get competitors in a room together and talk about what they want. I grew up with these firms and traded on the floor with them. We can talk about what is good and bad. And with the way we’ve built the system, we can be much more agile.

DS: We’ve created a different type of culture, and it’s tied to a systems testing perspective, with our patent pending testing tool that we built. We test the system every night from midnight until 2 a.m. And part of that process of building 650,000 test scenarios is that our business development team, our trading operations desk and the systems people are all using these use cases. So it helps in a couple of ways. If we have a crisis, everyone in that room from trading ops to business strategy and systems knows how the systems work. From a customer service perspective, we built our national operation center in Princeton, NJ, that handles system security, trading operations, system and network operations. They all communicate when we have a problem.

One of the problems with other exchanges is that the network guys never understood the applications or how the business made money. But at MIAX that culture is forced because the process requires that everybody physically deliver something in the form of use cases that then get put into the system. So if the business team thinks one thing and even writes words on the requirements, until you implement the code, I don’t really know what he meant and he doesn’t know what I’m thinking. By both of us putting our use cases in, we avoid a misunderstanding.

SB: We’ve taken that to another level as well. Market regulation is input into the use cases and our legal team maps every rule to a use case. So not only does the system do what the business wants it to do, it does what the rules say its supposed to do. And that’s something very different.

Q: Lastly, you get a lot of questions about having “Miami” in your name, especially since you are headquartered in Princeton, New Jersey. Can you explain?

SB: We do get a lot of questions about the ties to Miami. We have plans to open an equities and futures exchange and that will be headquartered in Miami and will focus on Latin American listings in the US. Miami is the hub for Latin America and that was the original vision of the partners who founded the company. When Doug and I joined, it seemed the better opportunity today for profit and innovation is in options. The equity exchange will be next and it will be in Miami. We don’t have a launch date yet, as we have these items we want to complete on the options exchange first. The focus right now is, let’s perfect the options market to the best of our ability.

Overview of TrueEX


About trueEX

The world’s first CFTC-designated, Dodd-Frank compliant exchange for interest rate swaps

New York-based trueEX LLC operates the first swaps exchange approved by the Commodity Futures Trading Commission (CFTC) as a Designated Contract Market (DCM). The trueEX DCM was designed from the ground up as the first Dodd-Frank compliant swaps exchange. The Company will initially trade interest rate swaps, will add other liquid derivatives to its portfolio and is the first to provide back loading, termination, rebalancing and compaction services for the IRS (interest rate swaps) market.
trueEX was founded by its CEO, Sunil Hirani who also founded Creditex, the first electronic trading platform for credit default swaps (CDS). In 2008, Mr. Hirani sold Creditex to Intercontinental Exchange, where he subsequently led the initiative to acquire The Clearing Corporation (TCC) which allowed ICE to clear credit derivatives globally. Mr. Hirani and members of the trueEX management team also launched T-Zero (now ICE Link) and led the initiative to create Credit Event Fixings and Delta Neutral Auctions (DNA). For further information http://www.trueEX.com.

REGULATION

trueEX LLC, a Commodity Futures Trading Commission (CFTC) Designated Contract Market (DCM), was approved as a DCM on September 25, 2012. Initially, trueEX will offer electronic execution of interest rate swaps via proprietary trading technology, and it will later expand its offerings to include additional liquid derivatives.

trueEX will offer a choice of clearing houses for clearing interest rate swaps, something that has not previously been available on any regulated exchange. Additionally, trueEX has contracted with National Futures Association (NFA) to provide regulatory services as part of its overall compliance function.

The CFTC is an independent agency established through an Act of Congress in 1974 with the mandate to regulate commodity futures and options markets in the U.S. Most recently, its responsibilities have been expanded by the Dodd-Frank Wall Street Reform and Consumer Protection Act to provide comprehensive regulation to the swaps marketplace. trueEX and its participants will operate under this new regulatory framework, which is intended to bring much needed transparency and price discovery to a previously unregulated segment of the derivatives market.

RULEBOOK

Click here to view a PDF of the trueEX Rulebook
http://www.trueex.com/trueex-rulebook-04-08-2013.pdf

Investment Industry Regulatory Organization of Canada (IIROC) – Rule Review for Self-Regulatory Organizations


Self-Regulatory Organizations (SROs)

A Self-Regulatory Organizations (SRO) is an entity that is organized for the purpose of regulating the operations and the standards of practice and business conduct of its members and their representatives with a view to promoting the protection of investors and the public interest. The Securities Act (Ontario) provides the OSC with the power to recognize SROs. There are currently two SROs recognized by the OSC: the Investment Industry Regulatory Organization of Canada (IIROC), and the Mutual Fund Dealers Association of Canada (MFDA). IIROC was created from the combination of two SROs, the Investment Dealers Association of Canada (IDA) and Market Regulation Services Inc. (RS).

Investment Industry Regulatory Organization of Canada (IIROC)

The IDA and RS combined their regulatory operations into IIROC effective June 1, 2008. IIROC regulates investment dealers and trading activities on debt and equity marketplaces in Canada.

Mutual Fund Dealers Association (MFDA)

The MFDA is the national self-regulatory organization for mutual fund dealers in Canada.

Investment Dealers Association (IDA)

The OSC has continued to recognize the IDA as an SRO for a period of time to perform limited complaint handling, investigation and disciplinary actions.

Market Regulation Services Inc. (RS)

The OSC has continued to recognize RS as an SRO for a period of time to perform limited complaint handling, investigation and enforcement functions.

The IIROC rules are below:-

2013

 

2012

 

2011

 

2010

 

2009

 

2008

What the ICE/NYSE Merger Means for the Industry courtesy of the TABB Group


With each passing day, the acquisition of NYSE Euronext by ICE seems more likely to receive final approval. Here are 5 ways the deal will impact the capital markets.

February 15, 2013, marked the end of the Hart-Scott-Rodino Act waiting period in the acquisition of NYSE Euronext by IntercontinentalExchange(ICE). With each passing day, the acquisition seems more likely to receive final approval. As we await the next phase of regulatory approval from the SEC, we wanted to share a few thoughts on how we believe the acquisition will impact current clearing, reporting and trading operations, as well as how the two exchanges can benefit from the merger.

1. Need for Physical Trading Floor

The future format of the NYSE trading floor seems to be on the minds of everyone. There are analyst speculations that ICE’s CEO, Jeffrey Sprecher, will close the trading floor, as was done to the New York Board of Trade in 2012 four years after it was acquired by ICE. However, according to interviews, Sprecher has expressed intentions to keep the physical trading floor intact.

[Related: “It May Be ‘Bye-Bye to the Big Board,’ But the NY Times Should Get Its Story Right”]

Both companies have robust electronic trading, and Sprecher has acknowledged the value of NYSE’s legacy in voice brokering. As technology continues to dominate the exchange space, there has been recognition of the value of voice brokering (by which the NYSE is defined). The market has ironically become too complex to rely only on computer-to-computer trading, showing the physical trading floor still provides an intrinsic value in keeping an orderly marketplace.

2. Impact on Clearing

US-based firms that are major players in the derivative space will benefit by having a local trading and clearing venue, through reductions in clearing costs and operational risks. Typically, coordinating multiple back-office processes and reconciliations between the US and UK calls for duplicate efforts, resulting in back-to-back bookings to flatten balance sheets and delays in handling breaks; having the ability to manage these operational processes will make for a more efficient process.

Title VII of the Dodd Frank Act, which requires central clearing for certain derivatives contracts, has limited NYSE’s presence in the US-based interest rate swaps clearing business. Currently, the NYSE has a small presence in the US-based interest rate swap clearing business, due to a lack of access to a central clearinghouse, now mandated by the Dodd-Frank Act. Through the acquisition, NYSE will be able to benefit from ICE’s presence in European fixed income derivative trading and clearing.

3. Impact on Market Participants

Reductions in clearing costs can translate into cost savings for market participants. Just last year, ICE had to increase its trading and clearing fee due to “regulatory burdens,” and with the merger of NYSE Euronext, ICE will also have to compete with other exchanges on transaction costs. Even if fees increase after the merger, market participants would still fare better than if the two companies operated independently. This newly merged exchange will be able to offer a larger array of products and services, so that market participants can look to fewer companies for trading execution and clearing services, thereby decreasing expenses associated with initial client on-boarding.

4. Impact on Reporting

NYSE’s core data products make U.S. market data free and available, using consolidated tapes, giving transparency to last-sales price and quotes. It also sells its non-core data products to analytics traders, researchers and academics. ICE will be able to leverage NYSE’s experience in data reporting, as it looks to setup its own swap data repository (SDR), in order to meet CFTC mandates for real time swap reporting.

[Related: “Commissioner O’Malia Talks Derivatives Reform: Assessing and Improving the Change”]

ICE has already set up a registered SDR — and the ICE Trade Vault, which will offer both recordkeeping and reporting services for credit default swaps. However, as reporting requirements go live for additional asset classes, it will be necessary to offer data recordkeeping and reporting services to these as well. This is where NYSE’s existing core data products can benefit ICE.

5. Benefits in Merging of Exchanges

Although ICE and NYSE’s product offerings differ vastly, the functions of trading, clearing and settlement demands often overlap, and both are registered with the CFTC as designated contract markets. Efficiencies can be gained when these two exchanges tackle the requirements in swaps reporting and recordkeeping, external business conduct rules and documentation standards in this era of heightened standards for SIFI. As regulatory mandates increase the operating costs for exchanges, it is becoming prudent to explore additional mergers.

MFDV-CalPERS Announces First Partnership Under Multi-Asset Class Partners Program – Standard Life Investments Will Manage $500 Million In New Fund


The California Public Employees’ Retirement System (CalPERS) is investing $500M with Edinburgh, Scotland-based Standard Life Investments as part of its Multi-Asset Class (MAC) Partners Program.

via Pocket http://www.mondovisione.com/media-and-resources/news/calpers-announces-first-partnership-under-multi-asset-class-partners-program-s/ March 23, 2013 at 01:21PM

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