FiNETIK – Asia and Latin America – Market News Network

Asia and Latin America News Network focusing on Financial Markets, Energy, Environment, Commodity and Risk, Trading and Data Management

September 30, 2008 • 11:24 pm 0

Obstacles remain to effective DMA in India

There is still work to be done before the full potential of direct market access (DMA) trading in India can be realised, according to Asian electronic trading solutions provider Tora Trading and global bank Morgan Stanley.

On 22 September, Tora became the latest firm to offer DMA connectivity to India for clients using its TORA Compass platform. Tora worked with Morgan Stanley to deploy the required FIX and DMA connections.

However, Scott Field-Marsham, managing director and head of electronic trading in Asia at Morgan Stanley, thinks sell-side technology needs to advance further to allow companies to take full advantage of DMA in India. “The baseline capabilities are there, but the sell-side has not yet developed all the tools and technology platforms required to support electronic execution,” he told theTRADEnews.com. “The exchanges have taken the right first steps. It’s now up to the sell-side to build out their trading platforms.”

There are also regulatory hurdles that need to be cleared before traders can make the most of DMA in India, according to Chris Jenkins, managing director of Tora Trading. “India has regulated direct market access flow as if it were regular retail flow, which means that it is not quite as simple as in certain other markets,” said Jenkins. “A bigger problem may be the delays that can occur in regulatory approval process before firms can offer DMA services in India.”

Nevertheless, the Indian regulatory environment is becoming more favourable to DMA. Jenkins noted that the country has relaxed the authentication rules, and although this will require greater investment in technology from the buy-side, it also removes a high-touch, manual step from the DMA process.

Morgan Stanley’s Scott’s Field-Marsham (managing director and head of electronic trading for Asia at Morgan Stanley, Ltd., Hong Kong),regarded the regulatory environment and other obstacles – such as the adoption of FIX connectivity – “as a function of the development cycle”, and expects to see a growth in the use of execution algorithms and algorithmic trading platforms in India by Q4 2008.

“I think the large brokers are interested both in bringing new trading opportunities in India to their global clients, and in servicing new local clients,” added Tora’s Jenkins. “With Indian regulations forcing local asset managers to spread their business between brokers, there is potentially a lot of flow on offer.”

Source: The Trade News, 26.09.2008

Filed under: Asia, FIX Connectivity, India, News, Trading Technology , , , , , , , ,

• 10:20 am 1

Brazil: BM&F BOVESPA Global Order Routing through GLOBEX

CME Group, the world’s largest and most diverse derivatives exchange, and BM&FBOVESPA, the largest exchange in Latin America, have announced that the order routing of BM&F derivatives products on CME Globex® is scheduled to begin September 30.

The order routing linkage will enable customers in more than 80 countries using the CME Globex electronic trading platform to now trade BM&FBOVESPA products directly, including futures and options on One Day Inter-Bank Deposits, the Bovespa Stock Index, which is pending regulatory approval, and commodities such as Arabica coffee, live cattle and corn.

Starting in the fourth quarter of 2008, BM&FBOVESPA customers will have the ability to trade CME Group products directly through their BM&FBOVESPA connections, including CME Group futures and options on interest rates, equity indexes, foreign exchange, commodities and energy and metals products.

“Our agreement with BM&FBOVESPA is another example of CME Group’s commitment to expand our global offerings and services to our customers, and we want to thank the customers and employees who have worked so hard in recent weeks to make this a reality,” said CME Group Executive Chairman Terry Duffy. “As one of the world’s leading financial exchanges, CME Group will continue to offer products to investors worldwide using the most up-to-date technology that add customer and shareholder value.”

“The CME Group and BM&FBOVESPA cross-equity investment and strategic alliance is the first ever arrangement between a major global exchange and the premier exchange in Latin America,” said Craig Donohue, CME Group Chief Executive Officer and a member of the BM&FBOVESPA board of directors. “With Brazil’s position as the world’s tenth largest economy and with BM&FBOVESPA offering some of the most successful and liquid Latin American futures and options products, we are pleased to expand our customers’ access to these important markets. We also look forward to the establishing the next phase of our strategic partnership when CME Group products will be directly accessible to customers trading on the BM&FBOVESPA platform.”

“As the largest Latin American economy, Brazil has a sophisticated financial system which uses state-of-the art technology, speeding up transactions and providing them with security by employing efficient regulatory, self-regulatory and risk control systems. The Brazilian financial and capital market has been strongly developing in the last few years. Today it offers a variety of highly complex products which attract both domestic and foreign investors. This is evidenced by the impressive capital inflows that were registered during the last IPOs. All of this stresses the high potential that an international financial marketplace has to flourish in Brazil,” said Gilberto Mifano, Chairman of the BM&FBOVESPA Board of Directors.

“The start of the order routing with the CME Group initiates the global expansion of BM&FBOVESPA and represents the complete electronification of our markets, including broader global distribution of our equities products such as stocks, options, forwards and ETFs, on a parallel track with our futures products. The Brazilian market has matured, counting on the most up-to-date technology and efficient tools to meet demands. With this partnership, BM&FBOVESPA, which is the world’s third largest exchange in market capitalization, hopes to expedite the construction of a large financial and commodity market in South America, and it certainly has the means to become the liquidity hub for this market,” explained Edemir Pinto, BM&FBOVESPA Chief Executive Officer. “I would like also to thank the IT teams at CME Group and BM&FBOVESPA for their commitment with the deadlines.”

Source: CME / BM&F – BOVESAP 29.09.2008

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• 10:12 am 0

Tianjin Climate Exchange TCX opens headquarters CNPC, TPRE, CCX

The China National Petroleum Corporation Asset Management Company, Ltd. (CNPC-AM), Tianjin Property Rights Exchange (TPRE) and Chicago Climate Exchange (CCX) announced the opening of the headquarter offices of the Tianjin Climate Exchange (TCX), China’s first integrated exchange for trading of environmental financial instruments. As a joint venture between CNPC-AM, the City of Tianjin and CCX, TCX intends to establish China as a pre-eminent center for environmental finance and the application of market-based mechanisms to environmental management and natural resource protection. TCX will design and develop standardized financial products that will advance the stated environmental goals of the 11th Five Year Plan of China to reduce sulphur dioxide emissions and water pollutants, as well enhancement of energy efficiency, among other initiatives. TCX will afford Chinese financial institutions, trading desks and industrial companies an opportunity for linkage to international markets and provide price transparency and world-class product design.

The Tianjin Climate Exchange will establish and operate an electronic emissions trading platform and auction facility based in the city of Tianjin, China. Tianjin is a special development zone designated by the State Council of China as a center for financial innovation, and the development of an emissions exchange is a component of the Binhai Comprehensive Report Plan approved in March 2008. TCX will be located on Financial Square in the heart of Tianjin’s new Binhai economic zone.

Summing up, Dr. Sandor said: “The Tianjin Climate Exchange three-party venture maximizes the special advantages of each of us: Tianjin has had the vision to establish a center for financial innovation; CNPC-AM has understood the strategic importance of emissions management to its own businesses; and CCX has been a pioneer in establishing new environmental markets worldwide. At CCX, we are significantly proud of our new landmark partnership with CNPC and Tianjin, because it marks the birth of full-fledged environmental markets in China and a historic milestone on behalf of the people of China and the world.”

Source: Mondovision 29.09.2009

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• 4:29 am 0

Asia-Pacific: Best-Execution Regulations on the Way?

While the U.S. and European Union have rules mandating that brokerages find the best possible price for clients, there are currently no equivalents in the Asia-Pacific region. That could change, however, as algorithmic trading, technology advances and buy-side pressure nudge the more developed economies in that direction.

“The buy side is taking increasing control of the trading process and the concept of best execution is gaining traction, although we are still some years behind the U.S., and to a lesser extent Europe, in terms of the availability of alternative trading venues,” said Gabe Butler, director of sales in Hong Kong for New York-based agency brokerage Investment Technology Group (ITG). There are more than 40 alternative trading systems (ATSs) in the U.S., and a bevy of platforms have been launched in the EU since the Markets in Financial Instruments Directive (MiFID) became effective late last year.

Australia

In Australia, the Investment & Financial Services Association–a trade group representing buy-side firms–issued guidance in 2006, but the country has not yet made best execution a regulatory requirement. Brokers, however, are taking the idea seriously, due in part to buy-side demand.

Steven Hammerton, head of portfolio trading and direct execution at UBS Securities Australia in Sydney, noted that “UBS has been strictly in compliance with best execution, and we think it’s something very important to our clients. We’ve been investing heavily to achieve best execution.” Hammerton pointed to the firm’s algorithms, which are “written in a way to help you achieve best execution in a fast-moving market.”

The growing use of algorithmic trading and direct-market access (DMA) in Australia this year has increased volatility and widened spreads, which “has resulted in the standard deviation of estimated trading cost more than doubling,” said David Broadfield, analyst at ITG and author of a recent report on Australian market microstructure. “This highlights the importance of execution to the overall investment process and the potential danger of failing to adopt best-execution practices.”

Fund managers need to pay attention to hidden costs, said Michael Corcoran, ITG’s Sydney-based director of trading. Research shows that obvious costs–broker commissions and tax–are staying close to 18 basis points, said Corcoran, whereas hidden costs raise that to 48 basis points. “They will have to more aggressively reduce the hidden costs within their portfolios if they want to stay in the game,” he said, adding that advanced trading methods can help bring those costs down once they are identified.

The game is about to change in Australia, as regulators are expected to open the Australian Stock Exchange up to competition from ATSs. Among those waiting for final approval are the AXE electronic communications network-owned by the New Zealand Exchange and a consortium of investment banks–Liquidnet Australia and Instinet–backed Chi-X.

“With the regulatory changes, there will be more electronic exchanges in the future,” said UBS’s Hammerton, adding that his firm will be well positioned to seek liquidity from those destinations. “We have invested in smart-order routing technology and will be able to offer clients smart DMA, which routes to the exchange with the best price,” he said.

Japanese ATSs

In Japan, “buy-side firms still have to go through brokers because direct connections to the exchanges are not available inside Japan,” explained Neil Katkov, Tokyo-based head of Asia research for Celent. “Less competition leads to an opaque market, where investors can’t be well protected.” For example, he said, several large local brokers are internalizing trades and benefiting from wide spreads.

“There is not much in the way of best-execution regulation, like in the U.S. and Europe,” said Katkov. Japan’s Financial Services Agency is only now beginning to make such initiatives a priority, he added, recently passing execution rules that will protect participants in pension plans. The regulators, however, are looking at adopting broader rules, in the style of MiFID or Regulation National Market System in the U.S.

Until then, the buy side will continue turning to alternative trading platforms, noted Katkov. Asia’s first crossing network, JapanCrossing, was launched in 2001 by New York-based agency broker Instinet, which is now a subsidiary of Nomura Holdings. But such venues–called private trading systems in Japan–have not been able to grab more than a 1 percent market share due to the existing exchanges’ chokehold.

Still, platforms such as Japannext and Monex Nighter are seeing increased volumes and vendors including MetaBit, TradingScreen, Tora Trading Services and Bloomberg are offering advanced connectivity. “Trading on such platforms is increasing because it gives buy-side investors a choice among quotes and, therefore, potentially better execution,” said Katkov.

No Plans in Hong Kong

DMA is available in Hong Kong and algorithmic trading is in demand, but best-execution regulations are not yet in the works. In a June speech, Martin Wheatley, chairman of the Hong Kong Securities and Futures Commission (SFC), noted that Hong Kong doesn’t need a Reg NMS because “we do not have alternative trading venues here where investors can trade Hong Kong securities.” But, “given the trends in the marketplace and the advances in technology, the SFC and other regulators in the region do need to keep an eye on the international development of this issue.”

ATSs are allowed under the current laws, but a key concern “is the accompanying fragmentation of previously centralized trading,” continued Wheatley. “These types of trades contribute to reducing liquidity in the reference market, simply by virtue of the fact that fewer orders get posted there. This in turn raises difficult questions about the extent to which the broker’s client is really achieving best execution.”

BlocSec operates a pan-Asian block trading platform that went live in Japan, Singapore and Hong Kong in May. Ned Phillips, CEO of BlocSec, a subsidiary of Hong Kong-based CLSA Asia-Pacific Markets, said that he sees growing interest in alternative platforms in Asia. BlocSec, which currently has 75 clients in Hong Kong, plans to expand to Australia and Korea next.

Ben Kwong, COO of Hong Kong brokerage KGI Securities Co., said that local brokers are “heavily investing in trading technologies.” KGI, for one, plans to invest HK$30 million ($3.8 million) this year to improve its trading platform because “it is the best way to save money,” said Kwong. “The average trading cost in Hong Kong is about 25 basis points, compared with 15 basis points with electronic trading.”

Korea Slow to Change

In Korea, best-execution rules are still in the distant future. Instinet and Samsung Securities in March launched Korea’s first crossing network. In July, Investment & Securities Co. became the country’s first firm to offer algorithmic trading capabilities to international clients, adopting event processing technology from Progress Software Corp.’s Apama division. Algorithms have yet to be widely adopted in the market, according to Gyun Jun, analyst from Seoul-based Samsung Securities.

Source: SecuritiesIndustry.com, 22.09.2008 by Wang Fangqing see full report at Securities Industry News

Filed under: Asia, Australia, Exchanges, Hong Kong, India, Japan, Korea, Library, News, Singapore, Trading Technology , , , , , , , , , , , , , , , , , ,

September 29, 2008 • 10:27 am 0

Singapore overtakes Hong Kong in list of best financial centres

Singapore and Hong Kong have swapped places in the City of London’s Global Financial Centres Index (GFCI), sitting in the top five alongside London, New York and Zurich.

Singapore now ranks third in the overall top financial centres list, rising by 26 points, more than any other top 20 centre. It overtakes Hong Kong, which is now in fourth place.

The GFCI questionnaire asked which centres are likely to become more significant in the next few years. People anticipate Asia will challenge the main leading centres the most.

However, in this survey, London takes the top spot, while New York comes in second place and Zurich in fifth.

Dublin is the highest-placed European ‘offshore’ finance centre on the list, ranked 13th out of the 59 international centres listed.

Clustered together, Jersey (14th), Luxembourg (15th) and Guernsey’s (16th) rating scores are split only by decimal places.

The survey found the offshore and niche centres continue to grow in importance. Nine of the GFCI top 25 centres are niche.

It also highlights the fact that tax environment is now being noted as a crucial area of competitiveness by a greater proportion of respondents to the GFCI questionnaire.

In the asset management subsector, specialist centres such as Jersey, Guernsey, Edinburgh and Dublin all move up the rankings compared with the main GFCI, said the report.

Peter Niven, chief executive of Guernsey Finance, said the island’s improved ranking in the main index “reflects the fact that since the last report we have enhanced our offering to clients through the introduction of a new trust law, new company law and new company registry, while also stepping up our promotional and marketing activity both in existing markets like London as well as new jurisdictions such as China.”

Elsewhere in the international arena, Dubai is cited as the place financial companies are most likely to open a new office, despite its current relatively low ranking of 23rd in the GFCI.

The report suggested the rise in importance of Dubai has meant other Middle Eastern countries, including Bahrain (43rd) and Qatar (45th) are also gaining profile.

The GFCI rated 59 financial centres using 57 instrumental factors and 24,014 financial centre assessments, surveying 1,406 financial services professionals.

Of the 59 centres in the GFCI list, 25 have risen in the rankings, while 22 have fallen and 12 remain static, including London and New York.

Source: International Investments 26.09.2009

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September 28, 2008 • 9:27 pm 0

China Allows Short Sales, Margin Loans to Help Market

China’s cabinet agreed to let investors buy shares on credit and sell borrowed stock to help develop Asia’s second-largest market after prices and trading volumes slumped, an official familiar with the plan said.

The State Council signed off on a China Securities Regulatory Commission plan submitted this month to allow margin lending and short selling, said the official, who declined to be identified as he isn’t authorized to speak on the issue.

China’s action contrasts with regulators in the U.S., Europe and Australia that have banned short selling in the past week to shore up financial shares battered by the global credit squeeze. China’s government is betting the changes will boost trading without spurring further declines after state share buybacks helped the CSI 300 Index rebound from a two-year low.

“It’s quite positive for the market and will help attract fresh capital into equities,” said Wu Kan, a fund manager in Shanghai at Dazhong Insurance Co., which oversees the equivalent of $285 million. “Given the current level the index is standing at now, I do think some investors will buy low through margin trading so as not to miss the boat.”

Index Futures
Short selling may accelerate the introduction of stock- index futures that will allow investors to short contracts on the CSI 300 to hedge risk. The China Financial Futures Exchange published rules in June 2007 that said investors would be required to put up 10 percent of a contract’s value to buy, sell or short sell CSI 300-based futures. No date was given at the time for when the products will start trading.

Key Task
Short selling and margin lending “will attract inflow of some capital into the stock market, but won’t help reverse the market trend unless expectations about corporate earnings growth improve,” said Wu Youhui, a strategist at GF Securities Co. in Guangzhou. “Brokerages will benefit most as they’ll have a new source of income.”

It will take several days for the paperwork to go through, and the plan will be announced before the week-long National Day holiday next week or right after it, said the official.

Brokerages
According to the rules, only selected brokerages are allowed to handle margin trades as part of a pilot program. They must have three years trading history and net assets of no less than 1.2 billion yuan for the past six months.

The regulator stated that only companies with market values greater than 800 million yuan and with stable share prices are eligible to be sold short.

Source: Bloomberg 26.09.2008 : Zhao Yidi in Beijing at at yzhao7@bloomberg.net; Zhang Shidong in Shanghai at szhang5@bloomberg.net

Filed under: Asia, Australia, China, Exchanges, Hong Kong, India, Japan, News, Singapore, Trading Technology , , , , , , , , , , , , , , , , ,

September 27, 2008 • 8:09 pm 0

Chinese regulator says US lending was ‘ridiculous’

TIANJIN, China – U.S. lending standards before the global credit crisis were “ridiculous” and the world can learn from China’s more cautious system as it considers financial reforms, the top Chinese bank regulator said Saturday.

Beijing curbed mortgage lending in 2003 and 2006 to keep debt manageable amid a real estate boom, while American regulators responded to a similar situation by letting credit grow, said Liu Mingkang, chairman of the Chinese Banking Regulatory Commission.

“When U.S. regulators were reducing the down payment to zero, or they created so-called ‘reverse mortgages,’ we thought that was ridiculous,” Liu said at a World Economic Forum conference in the eastern Chinese city of Tianjin.

He said debt in the United States and elsewhere rose to “dangerous and indefensible” levels.

Liu’s comments were unusually pointed criticism of U.S. financial regulation for a Chinese official. They added to suggestions by countries that are under U.S. pressure to liberalize their financial markets that Washington’s model might not be ideal.

China has based its reforms on the U.S. system but has moved gradually. It has kept its financial markets isolated from global capital flows, prompting complaints by its trading partners.

As China made changes, “a lot of the time, we learned that what we had learned from our teacher the day before was wrong,” Liu said, referring to the U.S.

China’s state-owned banks have avoided the turmoil roiling Western markets. Chinese banks hold bonds from failed Wall Street house Lehman Brothers, but they are a tiny fraction of their vast assets.

Liu compared Washington’s proposed US$700 billion plan to revive credit markets to fast food and said the world needed to look at longer-term solutions.

“Fast food is convenient. This US$700 billion package must ease the concerns and build up confidence. But if you only take this, it doesn’t agree with your stomach. You should think about Chinese slow cooking and slow food,” he said.

Liu called for governments to create international standards and regulatory systems for globalized financial markets. He said Beijing has signed information-exchange agreements on financial regulation with 32 other countries since the turmoil began.

Liu pointed to China’s experience with real estate and the collapse of a stock market boom.

As stock prices in China soared, banks were ordered to make sure customers were not using loans or credit cards to finance speculation. As a result, Liu said banks have suffered no rise in loan defaults even though stock prices have plummeted 63 percent since the October 2007 peak.

“We Chinese can share our own experiences with all the market practitioners,” Liu said. “Maybe our experience cannot be applicable to developed markets fully. But still, I think it might be useful and helpful to those in emerging markets.”

Chinese and foreign businesspeople at the World Economic Forum, the Chinese leg of the forum based in Davos, Switzerland, said the credit crisis is likely to increase the influence of China and other emerging economies in the world financial system, though Wall Street will retain its leading role.

“I believe this kind of regional financial strength will play a bigger and more important role,” said Jiang Jianqing, chairman of state-owned Industrial & Commercial Bank of China Ltd., the world’s biggest commercial lender by market capitalization.

“Right now the market is very unitary,” with U.S. bonds dominating global holdings, Jiang said. “This kind of a unitary, overcentralized market is something we need to change.”

Still, he said, Wall Street’s “dominance will continue.”

The European Union trade commissioner, Peter Mandelson, defended the global capital markets structure, warning that drastic change might hurt prosperity.

“The capital market system, fundamentally, is not flawed,” Mandelson said. “We are not looking for some alternative, and I hope that people in the emerging markets, in China for example, are not looking for an alternative to properly functioning capital markets.”

The crisis is likely to reduce resistance in the West to investments by government funds as companies urgently seek capital, said Thomas Enders, CEO of the European aircraft producer Airbus Industrie.

Critics have questioned the possible political motives of state-run funds and an EU official warned last year they might face restrictions if they fail to disclose more information about their goals and tactics.

“I would dare to predict that, yes, one of the big changes we will see is greater acceptance of sovereign wealth funds,” Enders said.

Source: AP 26.09.2008 JOE McDONALD,AP Business Writer

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September 26, 2008 • 10:27 am 1

Mexico Bailout Mistakes May Provide Lessons for U.S. Lawmakers

Sept. 25 (Bloomberg) — U.S. legislators, under pressure to vote quickly on a $700 billion rescue fund for the U.S. financial system, may want to heed the missteps Mexico made more than a decade ago when its banks collapsed.

Mexico’s bailout, which the government said was needed to protect savings and homeowners, ended up costing taxpayers an estimated 20 percent of gross domestic product and slowed growth as credit dried up for consumers and small businesses instead of being re-activated. Many of the mistakes were rooted in a lack of oversight, said Bernardo Gonzalez-Arechiga, who served as a commissioner from 2002 to 2003 on the bailout agency, now known as the Bank Savings Protection Institute.

‘There’s a basic similarity, as it happened in Mexico, in the sense that the federal government is attempting to have an extremely broad capacity to conduct all types of activities with very weak oversight by Congress,” Gonzalez-Arechiga, a former head of Mexico’s derivative market, said in an interview.

Mexico is still paying on bonds it used to buy bad debt from banks that faced failure after the currency fell as much as 65 percent in December 1994 and Treasury-bill rates shot up to more than 80 percent. The government wasn’t able to ease the credit crunch, and the bailout also altered Mexico’s financial system, eventually putting the country’s four largest banks and 77 percent of all banks by assets in foreign hands.

U.S. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke are asking Congress to approve $700 billion for the government to buy bad loans, improving banks’ balance sheets so they can continue loaning to consumers and businesses. The plan calls for eventually selling the assets to recover part or all of the money used in the rescue.

Grave Threats
Bernanke warned on Sept. 24 that the U.S. financial system faces “grave threats” if a rescue package isn’t approved.

The Treasury and Federal Reserve should seek an outside opinion on the breadth of the crisis to avoid having to come back to Congress for more funding, Gonzalez-Arechiga said. Mexico failed to grasp the magnitude of its financial crisis and was forced to introduce four debtor-relief programs that ended up treating different individuals unevenly, he said.

“Very often the politicians and government officials have an incentive to underestimate the extent of the problem,” he said.

According to a Mexican congressional auditor’s report, the bank bailout cost the government 1.25 trillion pesos ($99.7 billion) or 17 percent of the economy from 1995 through 2004. The government only recovered 43.6 billion pesos from the assets backing bad loans, the report said.

Pennies on the Dollar
The government issued Treasury notes to buy the bank loans at book value and then got pennies on the dollar with they resold them, said Rogelio Ramirez de la O, the founder and president of Ecanal, a Mexico City-based economic consulting firm.

Meanwhile, Mexican banks profited on the Treasury bills they received in exchange for bad loans, giving them a steady source of income and less incentive to provide loans to small businesses and consumers. Credit plummeted for more than a decade, delaying a recovery in wages and employment. The banks’ outstanding loans dropped by more than half to 1.08 trillion pesos at the end of 2004 from 2.22 trillion pesos a decade earlier.

“It was a great trade for the banks. For a while, the biggest asset in their balance sheets was government paper,” said Alonso Cervera, a senior economist with Credit Suisse in New York, who has covered Mexico since 1995. “They made a lot of money on these instruments.”

Don’t-Pay Culture

The U.S. also needs to safeguard against consumers and businesses adopting an attitude that they don’t need to meet their obligations because of the rescue, said Christopher Palmer, chief of global emerging markets for Gartmore Investment Management in London. Many Mexicans stopped paying on home, car and other loans after the government announced it was bailing out the banks, creating a phenomenon that Mexican bankers at the time labeled the “culture of not paying.”

“The lasting legacy of the Mexican crisis is that credit functions dried up because of this culture of not paying,” Palmer said. “That’s what Washington needs to be the most on the lookout for.”

The lack of capital in the Mexican financial system finally was resolved when foreign banks, such as Citigroup Inc., Banco Bilbao Vizcaya Argentaria SA, Banco Santander SA and HSBC Holdings PLC bought the country’s four largest banks.

“The main lesson is not to follow the Mexican example,” said Ramirez de la O, who advised former presidential candidate Andres Manuel Lopez Obrador during the 2006 election campaign. “The Mexican rescue was much more wild and disorderly. It lent a lot to corruption because it was open-ended.”

Although Mexico’s tab exceeded original forecasts, the country did end up with tougher regulations that put the banks on more solid footing, Cervera said.  “The banks are now in very good shape,” Cervera said.

Source: Bloomberg 25.09.2008, Thomas Black in Monterrey, Mexico, at tblack@bloomberg.net.

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• 10:18 am 0

City Of São Paulo Sells Carbon Credits For €13.689 Million At The 2nd Auction Held At BM&FBOVESPA

The second auction of Certified Emissions Reductions (CERs), held by the São Paulo Municipal Government, took place today, September 25th at BM&FBOVESPA. A total amount of 713,000 CERs were auctioned in a single lot under the terms of the Clean Development Mechanism – 454,343 CERs from the Bandeirantes landfill Energy Project and 258,657 CERs from São João landfill Energy Project.

Mercuria Energy Trading, from Geneva, bought the lot at €19.20 per metric ton of carbon. The São Paulo Municipal Government received an equivalent of €13.689 million for the carbon credits (approximately BRL37 million), representing a premium of 35.21% in comparison to the minimum bid of €14.20 per ton. Ten institutions were authorized to take part in the auction – eight of them placing bids.

The Mayor of São Paulo, Gilbert Kassab, and BM&FBOVESPA’s Chairman, Gilberto Mifano, were present during the auction, which was held at the Exchange.

Source: BM&F BOVESPA 25.09.2008

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September 23, 2008 • 6:39 pm 0

Brazilian Broker Liquidez Selects ORC for Trading and Connectivity Solutions

Orc Software the leading global provider of technology for advanced derivatives trading and connectivity, today announced that Liquidez, one of Brazil’s largest futures brokers, has selected Orc’s trading and connectivity solutions to connect customers to local markets. This deal was booked Q2 2008.
Liquidez will use Orc Trader and Orc CameronFIX to directly trade the BM&F, Brazil’s derivatives exchange. In addition, Orc CameronFIX will allow Liquidez to receive customer order flow from customers in Brazil and around the world and direct this order flow to BM&F.

BM&F, the fourth largest derivatives exchange in the world, earlier this year announced their intention to launch a direct market access (DMA) initiative based on the FIX protocol standard.

“As BM&F moved towards offering FIX based market connectivity, we knew that we needed to act quickly to allow our customers to take advantage of this direct market access,” notes Ernesto Pinto of Liquidez. “We have grown to be one of Brazil’s largest futures brokers by implementing the services and technology that our customers demand. By choosing Orc for our trading and connectivity solutions, we believe we will be able to continue to serve our customers well in trading the Brazilian markets. In addition, with Orc CameronFIX, we have the flexibility to allow our customers to trade on markets outside of Brazil based on their demands and requirements.”

“We are happy to have Liquidez join our growing Brazilian client base,” says Steve Lukes, VP of Americas Sales for Orc Software. “Liquidez is on the fore-front of the Brazilian market and represents the new wave of firms that are deploying our advanced derivatives trading and connectivity solutions to meet the new market dynamics in Brazil.”

Orc Trading provides the competitive edge to trade from a single platform capable of running thousands of complex trading strategies simultaneously. Orc Trading is used by financial firms worldwide for enhanced trading, pricing and risk management on electronically traded derivatives.

The world’s leading banking and financial firms rely on the high performance trading capabilities of the Orc CameronFIX – the only globally proven FIX platform for brokers, fund managers, exchanges and software vendors across the securities, investment, banking and finance industries.

Source: ORC 22.09.2008

Filed under: BM&FBOVESPA, Brazil, Exchanges, FIX Connectivity, Latin America, News, Trading Technology , , , , , , , , , , , , , , ,

September 15, 2008 • 7:53 am 0

DMA India: Excessive paperwork to hit smooth takeoff of DMA trading

MUMBAI: Too much of paperwork in terms of agreements with clients to avail the direct market access facility (DMA) may well slow down the pace of algorithm trading in India, say institutional investors. Algorithm, or program trading, is the backbone of DMA that will help players capitalise on the available arbitrage or hedging opportunities.

FIIs who were given the green light by SEBI in April this year to avail DMA facility, are finding the going slow due to the time taken to get their end clients to sign up on additional agreements.

Apart from this, FIIs also need additional approval from the exchange for the algorithm they will use for trading.

DMA, is an electronic facility offered by brokers to their clients, enabling them to place orders directly into an exchange-traded system. Currently, all investors – both institutional as well as retail – place their orders with brokers who, in turn, enter them into the exchange’s system. With DMA, clients can directly place their orders into the exchange system, using their broker’s infrastructure. Very popular abroad, DMA allows funds using algorithm or program trading to have direct control over their orders.

“India has some inconsistencies in that. Apart from submitting approvals for DMA, we also need approval on the algorithm that we will use for trading from NSE,” said an FII.

Algorithmic trading or program trading refers to orders that are automatically placed in the market by software programs, built on certain mathematical models. In its simplest form, algorithmic trading could be based on a program designed to detect an arbitrage opportunity between the cash and the futures market and placing orders real time to capitalise on any anomalies in pricing.

“For our external clients, it’s a matter of extra eight-10 pages of paperwork that need to be signed. This slows down the process, by when we would be good to go,” said the head-equity at the Indian arm of a foreign brokerage.

Several FIIs have been meeting with NSE and BSE seeking to operationalise their DMA facility. “The exchange is looking for assurance that the algorithm being used by the end client to brokers are stable and does not involve significant market impact,” said an institutional broker. On their part, FIIs are looking for increased ‘throughput’, meaning whether the exchange can handle increasing traffic and whether the execution of an order would be on time and efficient. On their part, given the new IT migration, NSE would be able to handle 3-4 times the peak trades they are handling at present, say officials.

While DMA is new to India, globally the system has succeeded in garnering a substantial share of the daily turnover. For FIIs like Credit Suisse, today roughly 40% of their business flowing into the Asia-Pacific region is going through DMA. “For markets like India, trading via DMA would mean increased volumes, liquidity, narrowing spreads. In fact, India is probably one of the easier market to trade in terms of narrow spreads (7 bps on an average and that is the narrowest in Asia),” said Brook Teeter, director of equities, (advance execution services) at Credit Suisse (Hong Kong).

“That makes electronic trading in India very good as it makes our algorithms work very efficiently. Now you will see increased volumes in India for overseas clients funds such as hedge funds and large institutions who will want to trade in India because of the anonymity it provides. We will see new entrants to the market. And those who were not trading in India will come in because of the anonymity,” he added.

Amongst those who currently have the DMA facility are Macquarie, Lehman, CLSA and Credit Suisse shortly.

Source: The Economic Times, 12.09.2008

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September 11, 2008 • 5:12 am 0

CME signes agreements with Osaka and Korea Exchanges

CME and OSKA signed MOU

CME Group has signed a memorandum of understanding with the Japan’s largest derivatives market, the Osaka Securities Exchange, under which both parties will jointly develop new products and services. The agreement is part of the US derivatives exchange’s plans to expand its global footprint to the BRIC countries.

CME Group has long been planning to expand into markets including Brazil, Russia, India, China and Korea via partnership agreements with local counterparts. It has already established a partnership with the Korea Exchange and is currently working on proposals for the local futures market.

The Japanese exchange is also looking at expanding its global coverage, Michio Yoneda, president and CEO of Osaka Securities Exchange, explains: “We hope this new partnership will advance the presence of Osaka Securities Exchange throughout the world. Especially, the futures products on the Nikkei Stock Average, which are listed on both of our exchanges and well established as a benchmark of the Japanese market, have an intrinsic potential for further growth through mutual cooperation.”

CME and KRX signed 5 years contract for KOSPI 200 futures

CME Group and the Korea Exchange (KRX) have signed a five year agreement for the KOSPI 200 futures contract to be listed on CME Globex, the electronic trading platform of CME Group.

The terms of the agreement include the creation of a telecommunications hub in Seoul and will mark the first time the KRX has embarked on a third party agreement for its KOSPI 200 product.

More than 30 million KOSPI 200 futures, based on the KOSPI 200 stock index of the largest South Korean companies as measured by market capitalisation, traded through July of 2008. Under the proposed agreement, CME Group will match the trades, with the KRX continuing to clear and settle their products. A memorandum of intent was signed between the two exchanges last year.

The contract, which will trade from 2am to 3pm local time Chicago, or 5pm to 6am local time Seoul, will be offered on the same platform as CME Group products, including derivatives on: the S&P 500, Nasdaq-100, Dow Jones Industrial Average, MSCI Emerging Markets and MSCI EAFE stock indexes; Eurodollars, US Treasury bonds and notes; foreign exchange; grains and livestock; energy; metals; weather and real estate.

“The addition of the KRX’s KOSPI 200 contract onto CME Globex will be an important part of our continued global expansion,” says CME group executive chairman Terry Duffy.

“This agreement with the KRX is another example of CME Group’s continued expansion into the Asia marketplace,” adds CME group CEO Craig Donohue. “Asia is a critical market and key area of focus for our long term growth strategy. By adding the KOSPI 200 futures to CME Globex, we will increase worldwide access to this important benchmark product.”

Chairman and CEO of the KRX Jung-hwan Lee says: “This agreement for trading of KOSPI 200 futures on CME Globex will further strengthen the strategic cooperation between the CME Group and the KRX, and together, the two organisations plan to lead the global derivatives market.”

Source: A-Team Asian Markets, 09.09.2008

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September 9, 2008 • 5:24 am 0

Mexican Broker GBM – Broadens DMA Capital Flows To And From Mexico

Tradeware Global Corp., a leading broker-neutral solution provider for electronic access to over 90 equity markets worldwide, today announced that it is live with Mexican broker GBM (Grupo Bursátil Mexicano). GBM will serve to generate order flow into the GlobalX network as an originating and executing broker.

Tradeware’s GlobalX broker-to-broker network serves as a neutral “liquidity grid” for global order flow, with a full settlement support in place. It enables brokers to trade globally on an agency basis, thus increasing the efficiencies of cross-border trading.

Grupo Bursátil Mexicano, S.A. de C.V. is a leading company in the Mexican financial market, offering technologically advanced DMA and Portfolio Trading. Through its model of co-investment with clients and capital commitment, it focuses on companies that have strong fundamentals and long-term investment potential. Its investment philosophy is to provide timely and valuable analysis on mid-cap companies that are under-covered by the majority of global firms. The firm has subsidiaries in Mexico, Brazil, and the U.S.

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September 8, 2008 • 8:53 am 0

Asian Traders and Investors Conference 2008 国際分散投資フェア

The Asia Trader & Investor Convention (ATIC) is the largest platform for Asia’s local investors and traders. An average of 6000 visitors gather in different cities to learn and be educated about the latest strategies, products and services offered by local and international Exchanges, Brokerage Firms, Banks, Asset Management Firms, Information Service Vendors and other financial service providers.

Tokyo, 1-2 November 2008 Sponsor Opportunities 国際分散投資フェア

Ho Chi Min City, 31 May – 1 June 2008
Mumbai, 12-13 April, 2008
Kuala Lumpur, 22-23 March, 2008
Singapore, 1-2 March,2008
Bangkok, 12-13 January

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September 5, 2008 • 12:35 am 0

China likely to allow REITs as property policy eased

BEIJING (Reuters) – China may introduce property trusts this year, giving developers a much needed new source of funding, according to a top industry association official who believes Beijing is easing its tough stance as the property market cools.

The move could come as part of a government change of tack to ease tight monetary policies, many of which have been aimed at the property industry, according to Nie Meisheng, president of the China Real Estate Chamber of Commerce.

Beijing intensified a campaign late last year to clamp down on bank loans to the property sector, asking for higher down payments from homebuyers, as part of a wider effort to curb inflation and rein in runaway growth.

The steps hit home sales — down 50 percent in Beijing, Shanghai and Shenzhen in July from a year earlier — and prices in some areas of Guangdong province have fallen 25 percent.

Nie said the measures were aimed at cutting the industry’s dependence on bank loans, which account for half of developers’ funding, but added that Beijing was keen to ensure the property market did not collapse and hurt the broader economy.”When one door closes, others will open,” she said.

China has given the green light to big developers, such as China Vanke, Poly Real Estate and China Merchant  to issue corporate bonds or new shares to replace loans coming due and to fund further expansion this year.

Setting up real estate investment trusts (REITs) – securities that pay rent from their property as dividends – will provide developers with a new avenue for funding, allowing them to effectively sell finished commercial buildings to investors.

Source: Reuters, 02.09.2008 for full article click here

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