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.

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List of TMX ATRIUM TRADING VENUES


TMX Atrium has a wide range of customers including venues, buy side, brokers, clearers, ISVs, market data vendors.

TMX Atrium covers a wide range of the financial community.

Venue City Country
Alpha Trading Toronto Canada
BATS Europe London UK
BATS US Weehwken USA
BME Madrid Spain
BOX Secaucus USA
CBOE Secaucus. USA
CNSX Toronto Canada
Borse de Luxembourg Luxembourg Luxembourg
Burgundy. Stockholm Sweden
CHI-X Canada Toronto Canada
CHI-X Europe Slough UK
CME Chicago USA
Deutsche Boerse Frankfurt Germany
Direct Edge Secaucus USA
Equiduct London UK
FX All Weehwken USA
FXCM Bergen USA
HotSpot Jersey City USA
International Sec Exchange New York USA
LMAX London UK
London Metal Exchange London UK
Match Now Toronto Canada
Montreal Exchange Toronto Canada
Moscow Exchange Moscow Russia
NASDAQ OMX (Nordic) Stockholm Sweden
NASDAQ OMX (US) Carteret USA
Oslo Bors London UK
Nordic Growth Markets Stockholm Sweden
NYSE Euronext (Europe) Basildon UK
NYSE Euronext (US) Mahwah USA
Omega ATS Toronto Canada
Pure Trading Toronto Canada
Sigma-X London UK
TOM Stockholm Sweden
TRAD-X London UK
TSX Toronto Canada
Warsaw Stock Exchange Warsaw Poland

EQUINIX METRO REPORT 2013


New York & Chicago

The World’s Most Advanced Financial Ecosystems

Take an in-depth look at the financial ecosystems inside Equinix campuses in two of the largest markets in the world.

Fill out the form to receive each in-depth report:

Exchanges & Trading Platforms
Market Data Feeds
Carriers & Connectivity Options
Facilities Overview
You can also request a meeting to discuss your firm’s infrastructure strategy and review our deployment planning tools.

Available at http://info.equinix.com/MetroReport_LandingPage.html?media=BOBS_NCmetros_nletter

To write, or not to write? – The Dilemma for ISVs and their role in the success of a new trading platform,


http://www.fow.com/Article/3154709/Themes/26528/To-write-or-not-to-write.html

To write, or not to write?

12 February 2013

Nasdaq’s new trading platform NLX is gearing up for launch in London. Sentiment is shifting in favour of the prospects for the MTF. This highlights the dilemma for ISVs and their role in the success of a new trading platform, argues William Mitting.

Six months ago you would have struggled to find anyone in London who thought that NLX, the new London-based exchange from Nasdaq OMX, would succeed.

The prevailing wisdom was the plan to launch six interest rate contracts replicating the most liquid on Liffe and Eurex was too simplistic, the margin efficiencies intangible and the distraction of regulation and rising costs elsewhere too great to guarantee the involvement from the banks and prop trading firms that it needs for a successful launch.

Today all the talk in London is of NLX. After six months of painstaking road-showing and collaboration with local participants by Charlotte Crosswell and her team at NLX there is a real buzz about the launch around the City.

Much of that buzz is coming from the proprietary trading houses. Attracted by the lower fees, the lower participation from HFTs expected on the platform and the belief that the banks, who are expected to benefit from the margin efficiency enabled by portfolio margining across the yield curve, will provide liquidity, London’s largest prop houses are increasingly talking up the prospects of the MTF.

This rapid shift in sentiment poses a challenge for those ISVs who made the call not to write to the MTF for its launch. The highest profile among those ISVs is Trading Technologies, which is not expected to be ready for the launch of NLX.

FOW understands that TT has been in negotiations with NLX over writing to it but has not yet reached agreement on how that will be funded. TT and NLX declined to comment on any negotiations. Initially this was widely viewed as a significant blow to NLX’s chances, but as the buzz around the platform grows, some are asking if TT has made a mistake.

Jeff Mezger, head of market connectivity, told FOW that TT had “not ruled out connecting to NLX” at its launch and see the benefits of margin efficiency but was currently focused in-flight projects such as the connection to Eris Exchange and its beta stage MultiBroker platform.

“We take into account a number of factors when prioritising the projects we work on. For exchange projects we take into account exchange location, familiarity with the exchange platform, connectivity costs, client interest, exchange volume, asset classes, products traded and the changing regulatory environment.

“We also take into account what other projects we have in flight and the availability of resources to work on the project.”

This dilemma of whether to connect to a new trading platform is a relatively new phenomenon in derivatives markets but will become more of an issue as new platforms launch in the wake of industry efforts and new regulations aimed at opening up competition.

All ISVs have limited manpower and resources to write to new platforms and the decision of whether to do so is often made with little visibility as to whether that platform will succeed.

Usually one or a number of customers will help to fund the connection, sometimes the platform or exchange will pay the majority of the cost and for “dead certs” the ISV will fund it in the knowledge that it will see a return on investment. However, what constitutes a dead cert is becoming less clear as markets proliferate.

Steve Grob, director of group strategy at Fidessa, said: “The whole dynamic of ISVs connecting to venues has changed since Mifid was introduced back in 2007. Volumes that were concentrated in two or three exchanges were spread over multiple platforms.”

This altered the economics of connectivity as it meant that brokers were having to spread the same volumes over multiple venues and this inevitably led to downward pressure on gateway pricing. At the same time, the number of platforms launched with uncertain prospects is increasing.

When Liffe launched its Connect platform at the turn of the century, many ISVs wrote to it and made a decent return doing so. As the derivatives market becomes more fragmented thanks to Dodd Frank and EMIR, it is harder to predict which platforms are worth the investment.

“The challenge is picking the markets that have the best chance of success,” says Steve Woodyatt, chief executive of Object Trading, which will connect to NLX on day one.

Hamish Purdey, the chief executive of Ffastfill, which is also going live from day one, agrees: “It takes significant commercial judgement. Any ISV has competing priorities and the challenge is finding the ones with the greatest return on investment.”

For fledgling exchanges, a major ISV writing to it can provide a significant boost and it is not unheard of for exchanges to pay large sums to global ISVs to write to them. However, this is rare and in most instances ISVs must make a call on the commercial benefits of connecting to a new exchange.

The fact that the cost of switching to a new provider can be high means that if a large ISV does not write to an exchange, its customers, if unwilling to fund the connection themselves, are often left with no options and the decision not to connect can be contentious.

However, as competition grows in terms of connectivity providers and software-as-a-service operations makes the process of switching provider less arduous, a shift in sentiment in terms of the market’s perception of the need to connect to an exchange can potentially wrong foot ISVs.

RTS has announced publically that it will write to NLX from launch and FOW understands that Fidessa, Sungard, Object Trading, Stellar and Orc are also among those ISVs providing day one access.

TT and Marex’s STS are among the notable absences from day one trading (although FOW understands STS will be up and running shortly afterwards) but there is still some distance to run and TT could still commit before the launch date, which is expected for early Q2. However, the NLX example has brought to the fore a very modern dilemma for ISVs in the derivatives business.

A great thesis to read – Derivation of a general purpose architecture for automatic user interface generation


URI: http://hdl.handle.net/2100/1305
http://hdl.handle.net/10453/20405

Abstract:

Many software projects spend a significant proportion of their time developing the User Interface (UI), therefore any degree of automation in this area has clear benefits. Research projects to date generally take one of three approaches: interactive graphical specification tools, model-based generation tools, or language-based tools. The first two have proven popular in industry but are labour intensive and error-prone. The third is more automated but has practical problems which have led to a lack of industry adoption. This thesis set out to understand and address these limitations. It studied the issues of UI generation in practice using Action Research cycles guided by interviews, adoption studies, case studies and close collaboration with industry practitioners. It further applied the emerging field of software mining to address some of these issues. Software mining is used to collate multiple inspections of an application’s artefacts into a detailed model, which can then be used to drive UI generation. Finally, this thesis explicitly defined bounds to the generation, such that it can usefully automate some parts of the UI development process without restricting the practitioner’s freedom in other parts. It proposed UI generation as a way to augment manual UI construction rather than replace it. To verify the research, this thesis built an Open Source project using successive generations of Iterative Development, and released and promoted it to organisations and practitioners. It tracked and validated the project’s reception and adoption within the community, with an ultimate goal of mainstream industry acceptance. This goal was achieved on a number of levels, including when the project was recognised by Red Hat, an industry leader in enterprise middleware. Red Hat acknowledged the applicability and potential of the research within industry and integrated it into their next generation products.

Description:

University of Technology, Sydney. Faculty of Engineering and Information Technology

Winner of the John Makepeace Bennett Award – Australasian Distinguished Doctoral Dissertation 2013

Big data complexity theory


20121230-135439.jpg

Complexity theory is an interesting topic.

If you think of the diagram attached as a high level regression analysis then the next step in complexity theory is that any thing added will cause adjustements to the model,and thereby make the day more concise and more malleable.

If applied to Financial Services of cross asset trading then algorithms based on the complexity combined with prices will prove extremely useful.

Carl

Big data trend


20121230-134944.jpg

This is a Big Data volume trend.

Initial exponential growth is obvious but as new technology persists this will grow in unison with multiple TECHNOLOIES.

Cloud is of course the 1st trend tech.

Discussion on the next levels of invasive as will be invaluable.

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