SEF protocols central to market choice


Swap execution facilities (SEFs) may be the cornerstone of G-20-inspired Dodd-Frank Act rules on OTC derivatives, but how they operate and whether they will attract sufficient liquidity remains unclear.

via Pocket http://thetradenews.com/USA_Features/The_Big_Idea/SEF_protocols_central_to_market_choice.aspx March 26, 2013 at 06:29PM

Swap futures could offer greater hedging options


Swap futures may offer market participants greater hedging options, while divergent block trading rules could have a significant impact on liquidity, a report has stated.

via Pocket http://thetradenews.com/USA_news/Asset_Classes/Swap_futures_could_offer_greater_hedging_options.aspx March 26, 2013 at 06:23PM

BT launches service offering from CME Group’s Aurora data centre


http://www.automatedtrader.net/news/data-news/142372/bt-launches-service-offering-from-cme-groups-aurora-data-centre

First Published Monday, 25th March 2013 from Automated Trader : Data News

BT Radianz managed hosting services and cloud platform now available from CME Group’s data center in Aurora

BT has signed an agreement with CME Group, the derivatives marketplaces, to enable the BT Radianz Cloud community access to CME Group’s trading and market data services. In addition, the BT Radianz Cloud platform has been extended into CME Group’s data center in Aurora, Illinois, where BT can also now deliver BT Radianz managed hosting services.

The new agreement builds upon an existing relationship that has provided members of the BT Radianz Cloud community with access to CME Group markets via connectivity in E. Cermak Road, Chicago since 2006.

Members and customers of CME Group will have managed access to CME Group’s Market Data Platform (MDP) that provides data for its futures and options market, as well as third-party real-time data from Dubai Mercantile Exchange (DME), Standard & Poor’s (S&P) Cash Indices, Minneapolis Grain Exchange (MGEX), BM&F Bovespa (BM&F) and Korea Exchange (KRX).

BT Radianz services now also provide access to CME Group’s Globex order entry platform, CME Direct in Europe, and access to CME Group’s exchanges which include Chicago Mercantile Exchange (CME), Chicago Board of Trade (CBOT), New York Mercantile Exchange (NYMEX), Commodity Exchange Inc. (COMEX) and Kansas City Board of Trade (KCBOT).

Tom Regent, president, global banking & financial markets, BT Global Services, said: “The derivatives market and the foreign exchange market are truly global and investors increasingly want to access the major trading platforms wherever they are in the world. The addition of these CME Group services to the BT Radianz Cloud is a major step for us and reinforces our commitment to supporting the many thousands of financial institutions that rely on BT services.”

Tom Regent, president, Global Banking & Financial Markets, BT Global ServicesTom Regent, president, Global Banking & Financial Markets, BT Global Services

“The derivatives market and the foreign exchange market are truly global and investors increasingly want to access the major trading platforms.”

CFTC’s Chilton proposes compromise on SEF initiatives


A leading member of the U.S. Commodity Futures Trading Commission (CFTC) recently proposed a new method that market participants looking to clear swaps transactions can use to solicit prices from swap execution facilities (SEFs).

via Pocket http://derivative-news.fincad.com/derivatives-regulations/cftcs-chilton-proposes-compromise-on-sef-initiatives-5847/ March 22, 2013 at 06:49PM

Most active AIM discussions


Equity, index and currency market data provided by Interactive Data. Interactive Investor Trading Limited, trading as “Interactive Investor”, is authorised and regulated by the Financial Services Authority.

via Pocket http://www.iii.co.uk/markets/ March 18, 2013 at 09:14PM

Cinnober rolls out new SaaS marketplace technology for banks and brokers


The leading financial technology supplier Cinnober recently launched a fully managed marketplace service, TESS™ Connect & Go, targeting trading-intensive banks and brokers.

via Pocket http://www.bobsguide.com//guide/news/2013/Feb/28/cinnober-rolls-out-new-saas-marketplace-technology-for-banks-and-brokers.html February 28, 2013 at 06:23PM

Achieving connectivity through the complete trade lifecycle


Good connectivity can help lower the latency barriers that regulation is imposing, says Dan Barnes Read more: connectivity OTC latency SEFs FIX Protocol technology Imagine a series of concentric circles; in the centre is a matching engine at an exchange; in the next ring are the client connecti

via Pocket http://www.fow.com/Article/3159889/Achieving-connectivity-through-the-complete-trade-lifecycle.html February 25, 2013 at 06:46PM

FIX Protocol Ltd Publishes Guidelines To Advance Trading Practices In Response To Exponential Growth In Electronic Bond Trading


FIX Protocol Ltd (FPL), the non-profit, industry standards organisation at the heart of the global electronic trading community, today published recommended best practices and accompanying implementation guidelines for the electronic trading of bonds.

via Pocket http://www.mondovisione.com/media-and-resources/news/fix-protocol-ltd-publishes-guidelines-to-advance-trading-practices-in-response-t/ February 19, 2013 at 04:33PM

CFTC May Survey the Market On Proper Controls


CFTC COMMISSIONER SCOTT O’MALIA ACKNOWLEDGES THE UNCERTAINTY CREATED BY REGULATORS AND OFFERS HIS VISION FOR A SAFE MARKET IN AN EXCLUSIVE INTERVIEW WITH TABB GROUP FOUNDER AND CEO LARRY TABB BEFORE THE TABBFORUM FIXED INCOME EVENT IN JANUARY
 
Larry Tabb: The CFTC is in the middle of a lot of very controversial issues right now, and we are really lucky on TabbFORUM today to have CFTC Commissioner Scott O’Malia, Commissioner of the CFTC. One of the hot discussions today at the TabbFORUM Fixed Income event is the movement of futurization of swaps. I want to ask Scott: What’s your thought on the futurization of swaps? How is this progressing? Is the Commission comfortable with the progression of this? We have the futurization discussion tomorrow down in Washington — what do we expect to come from this?
 
Commissioner Scott O’Malia: It’s a great question, and I appreciate you asking, and we will at the Commission have that discussion. The movement occurred the first day that we had defined both what a swap dealer was and what a swap was, and market participants had to begin counting and complying with the new rules. That first day on Oct. 15, the energy markets moved entirely to the futures markets. So we have an interesting dynamic and we’re trying to understand: Is this a permanent move? Will it impact other asset classes — CDX, interest rate products, credit products? And what are the attributes that lead to it?
 
My own belief is that we’ve created a regulatory environment in the swaps market with a lot of uncertainty. We haven’t completed all of our rules — we have not defined what a SEF is; you don’t know what you’re transacting on. And then you’ve created some regulatory uncertainty around swap dealers — how do you count? Who must comply? And then the regulatory burden itself.
 
Tabb: On the futures side, it’s pretty much fully defined.
 
O’Malia: Yeah, it’s no surprise — this is, I think, a logical move in terms of a regulatory play, to move to a well-defined, well-understood market in the futures space. The other question is cost: We have margin rules that are more expensive in credit and interest rate products 
 
Tabb: In the swaps world —
 
O’Malia: Correct. So you have some very financial decisions being made here that are probably very logical.
 
Tabb: One of big things that’s happening in the next couple of days is, the Peregrine issue is coming to closure. Can you talk a little bit about what we’re doing post-Peregrine to make sure that our futures market and our commodities markets are safer from issues like this?
 
O’Malia: Well, Jan. 31 is a big day in our space. We do have, as you noted earlier, the Futurization Roundtable, which is an important discussion with the market. Russ Wasendorf, who was the CEO of Peregrine, who made off with $215 million of customer funds over a 20 year period, will be sentenced tomorrow. And that’s a good thing. The bad news is those funds — we haven’t recovered them all, and those customers have lost. The other element is, the trustees are working out a solution for MF Global to return over 90% of the money.
 
Tabb: That news came out yesterday. And it looks like they’re going to get a good, substantial chunk of that money back. That’s great.
 
O’Malia: And that’s a good news story.  The element that I’m very focused on is, how do we prevent this from happening again? We have two completely different incidences at an FCM where customers lost money. And I think we need a technology solution.  You’re part of the technology advisory committee, and I appreciate your contribution to that. And we called an emergency meeting in July.  And we said, What is a technology solution to surveil customer funds to make sure that nobody can get away with it and nobody can move money without the customers knowing? 
 
The good news is, the industry responded and has paid for a technology solution that will push out all of the data regarding customer funds, and we can match that against the FCM accounts and make sure that we have good balances. We’re going to be able to get 1% tolerances to make sure that we understand where the money is and how it’s moving.  That will give us an immediate understanding if there’s any funny business going on, and we can catch it, we can move on it. We don’t need three days in MF Global, we don’t need 20 years — the start that Peregrine had.
 
Tabb: Well, it would be great to see a lot of these issues resolved. One of the things that we talked just briefly about was the technology committee. The CFTC is very advanced in terms of developing a high frequency trading subcommittee. What is the status of that? Where are we with the HFT committee, and what do we think will come of that?
 
O’Malia: The subcommittee did us a huge favor and delivered us a very robust, credible solution on “What is HFT?”
 
Tabb: Actually I think that was my group. (laughs)
 
O’Malia: You were on that subcommittee, so I greatly appreciate that hard work, and I know it involved a lot of meetings, because it’s a difficult subject. The next step is to really understand how this is — once we have that definition, we can go into the market and study it and understand the behavior and figure out what needs to be done related to their trading behavior.
 
I think, and would like to see, kind of a survey of the market, a gap analysis, if you will. And we’ve prepared the first round of that, to survey the market about, what are the appropriate controls, the pre-trade functionality, to make sure the HFTs traded in the market — or any automated trading system, not solely HFT, but every single one has a baseline of good controls and best practices to make sure that their trades going into the market are good, well-tested and robust.
 
At the same time, the market has in place — those at the exchange level, I mean — has in place good controls already. We need to make sure that we have a good gap analysis to see if there is anything that is missing.
 
Tabb: So if there is a problem, we can kill it immediately. We really need greater confidence, I guess macro-wide, so if something occurs like what happened at Knight, it gets caught.
 
 O’Malia: It’s not unlike anything to do with driving a car. You want to make sure you have seatbelts and airbags and good proper controls. We can’t guarantee you will not get in a traffic accident, but we can give you good roads to drive on, and we can give you the safest cars you can protect yourself with. That’s the way I view the way we ought to trade and how you trade with algorithms in the futures market.
 
Tabb: Interesting. So before we break, what do you see coming down the road? What are the things that the Commission is kind of thinking about, that’s out there, that we think is important to look at?
 
O’Malia: The next step should be SEF. We’ve defined what a trade repository is; we know what a clearinghouse is. Now the important element is, how will these transact, how will swaps transact onscreen? My goal is to make sure we have a very robust yet flexible trading venue.
 
Tabb: So we’re not trying to fit everything into one narrow definition?
 
O’Malia: What we’ve learned is that one size does not fit all in this market, so I think we need to be flexible and provide no excuse for anybody not to transact on a screen. We don’t want to get rid of the bilateral deals — that’s an element that is certainly central to this market. But you can transform it and bring it to a screen and get better pricing and get better market data out there. So I think they’re very important, and we just have to have a good flexible platform that will allow everyone to find their market, and at the price they want.

 

CFTC’s O’Malia calls for savvier technological surveillance


http://www.automatedtrader.net/news/automated-trading-news/142080/cftcs-omalia-calls-for-savvier-technological-surveillance

New York – Commissioner Scott O’Malia of the Commodity Futures Trading Commission said the CFTC must develop new surveillance capabilities to watch not only the futures and options markets but also the swaps markets.

“From the beginning of my term, I have been focused on automating every aspect of the surveillance and oversight of markets under our jurisdiction,” O’Malia said at an industry event.

“Unfortunately, the current CFTC vision for investing in new technology is anything but innovative. Technology is a second-order priority when it comes to allocating scarce resources,” he said.

Addressing the oversight of automated trading strategies, including high-frequency trading, O’Malia called for a realistic and more comprehensive approach.

“I recognise that we can’t put the genie back in the bottle and hope that HFT traders will magically disappear from our market. They provide an enormous amount of liquidity and they are here to stay. At the same time, we should develop a better understanding of their trading methodologies and develop market structures to prevent a liquidity crisis or runaway markets similar to the Flash Crash of May 6, 2010,” he said.

A draft concept release to apply testing and supervision requirements to traders and exchanges currently only looks at gaps in the federal rules and proposes to “federalise” some of the existing market-based solutions, he said.

“We need to develop solutions that are more thoughtful and more cognisant of existing developments in the market,” he said, adding that he was hopeful that a revised draft will better identify what federal action is warranted.

On another note, O’Malia said the regulatory body may vote as early as mid-February on a suite of rules for how swaps will transact on exchange and that he has developed a four-part checklist for the final rule on swap execution facilities (SEFs).

“The Commission published the proposed SEF rules in January 2011. The proposal was a decent start, but a broad range of market participants – from buy-side asset managers and commercial end users to sell-side dealers and even prospective SEFs – expressed concern that it did not provide the necessary flexibility for less liquid swaps to be executed on the SEF platforms,” he said.

O’Malia said the first item in his checklist was that a final rule should allow for flexible methods of execution including request for quote systems (RFQs) and limited voice-based systems. “While I am supportive of the overarching objective of promoting pre-trade price transparency, let’s make sure that everybody, whether buy-side, sell-side or commercial firm, can find what they want and in the size and price they want on a SEF,” he said.

A second item on the checklist was that the CFTC should not copy the rules for designated contract markets (DCMs). “Congress specifically stated that a SEF is not a DCM, and we shouldn’t attempt to adopt and implement identical rules.”

Checklist item number three called for the CFTC to adhere to the statute or risk litigation and delay. He said Dodd-Frank’s definition of a SEF explicitly allows for swap transactions to be executed “by any means of interstate commerce”, and said the agency had failed to provide a clear role for the execution of swap transactions over the telephone. “At a minimum, the final SEF rules must provide some way for telephone and electronic systems to work together.”

His fourth item on the checklist was for the CFTC to develop a clear pathway for timely approval of temporary SEF licenses. “I believe the Commission must develop a uniform, consistent and efficient application process, instead of the ad-hoc, inconsistent and sometimes contradictory approaches it took in the SDR (swap data repository) realm.”

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