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

December 28, 2009 • 4:22 am 1

Brazil: BM&FBOVESPA Exchange News and Events December 2009

BM&FBOVESPA and SunGard developing clearing and margin support for US Futures Commission Merchants

BM&FBOVESPA and SunGard are working to expand the automated clearing support for BVMF’s financial and agricultural futures and options exchange-traded derivatives — within SunGard’s GMI clearing and accounting solution. SunGard’s collaboration with BM&FBOVESPA will provide US-based FCMs with the ability to process and clear BM&FBOVESPA trades using GMI.

GMI’s new BM&FBOVESPA derivatives module is expected to be available in the second quarter of 2010 to help clients automate the process of loading trades, performing bookkeeping functions, and calculating margins and fees. GMI’s trade load functionality will help US FCMs to seamlessly import cleared trades from Brazil directly into their GMI systems. GMI will also provide clients with BM&FBOVESPA initial and variation margin calculations to help firms monitor daily charges and fees, and reconcile information.

 Stock index focused on carbon emissions

BM&FBOVESPA and the Brazilian Development Bank (BNDES) announced during the 15th United Nations Climate Change Conference (COP15), in Copenhagen, the development of the Carbon Efficient Index, that will be structured in 2010 based on the Brazil Index 50 (IBrX-50), which is composed by the 50 most traded stocks at BM&FBOVESPA. The objective of this index is to stimulate listed companies to reduce their emissions of greenhouse gases (GHG) and adopt environmental practices. The index will be weighed by the inventory of GHG emissions that result from all the activities associated to a company.

Stock index to measure financial sector

The Brazilian Securities, Commodities and Futures Exchange will begin, on 4 January 2010, to calculate and disclose the BM&FBOVESPA Financial Index, in real-time. This is the Exchange’s 15th stock index and it will trade under the ticker symbol IFNC. The IFNC index will measure the returns on stocks from the most representative companies of the Brazilian financial sector. These include banks, financial institutions, asset management firms, credit card issuers, insurance companies, among others.

 DMA trading volume increases in 2009

Direct Market Access (DMA) trading of the derivatives market segment at BM&FBOVESPA reached a total of 71,236,761 contracts traded, with 7,434,360 trades carried out through the GTS trading platform, from January to December (until 12/21). Currently, 42 brokerage houses are authorized by the Exchange to offer DMA access and 25 Independent Software Vendor (ISV) solutions have been certified. The volumes registered by access modality during 2009 are as follows:

Traditional DMA
46,583,083 contracts traded, in 4,649,949 trades.
DMA via order routing with CME Globex
14,063,583 contracts traded, in 2,415,164 trades.
Via DMA Provider
9,627,543 contracts traded, in 209,057 trades.
DMA via co – location
962,552 contracts traded, in 160,190 trades.

 The Bovespa Segment doubles its daily trading volume to 1.5 million transactions

The average daily volume of the Bovespa Segment has jumped from 750,000 to 1.5 million transactions. This increase is the direct result of the expansion of BM&FBOVESPA’s technological facility, which has increased its data processing capacity, enhanced its algorithms and established a new set of rules and calculations for the settlement process. This new model has reduced the volume of settlement transfers by 70%. In November the average daily trading volume was 381,225.

Mini contracts have a new risk management structure

BM&FBOVESPA has implemented a new risk management model for the Coffee, Live Cattle, US Dollar and Ibovespa futures mini contracts, which are traded on the WebTrading (WTr) platform. With the simplification of this new risk management model, several procedures have been changed, among which we highlight the utilization of settlement, risk management and collateral models that are identical to those utilized for the standard contracts, with no need to pledge collateral in advance when trading.

 Exchange’s contracts are among the most liquid in the world

According to the Futures Industry Association (FIA), BM&FBOVESPA offers two of the world’s most traded futures contract in the world. The U.S. Dollar Futures is currently ranked the number one exchange traded currency futures contract and the One-day Interbank Deposit Futures is the fifth highest traded interest rate futures contract. On the equity side, the Brazilian Exchange holds approximately 89% of Latin America’s derivatives market volume and is the 5th market in capital raising activity in 2009, according to the World Federation of Exchanges.

Trading costs has new web page for derivatives markets

BM&FBOVESPA has launched a new web page for its derivatives trading costs. The page provides the trading costs related to transactions carried out in the Exchange’s derivatives markets. Users can now search BVMF’s trading costs by market, commodity, modality, and expiration date. In order to access the new trading costs page, click here.

Flexible options on iShares Ibovespa Index Fund contracts

BM&FBOVESPA has authorized, as of 12/07/2009, Flexible Call and Put Options on iShares Ibovespa Index Fund (BOVA11) for trading. This new OTC derivatives contract allows financial institutions to structure an array of investment strategies for their clients like, protected capital, for example. For further information, click here

 BM&FBOVESPA market performance – November 2009

BM&F Segment
Derivatives markets in the BM&F segment (including financial and commodities derivatives) totaled 27,422,967 contracts and BRL 1.76 trillion in volume in November. That compares to 34,670,732 contracts and a volume of BRL 2.38 trillion in October. The daily average of contracts traded in the derivatives markets in November was 1,443,314, compared to 1,500,242 in the previous month.

Bovespa Segment
In November 2009, equity markets (Bovespa segment) reached a total volume if BRL 122.99 billion, in 7,243,282 trades, with daily averages of BRL 6.47 billion and 381,225 trades, respectively. In October, total volume reached BRL 154.25 billion, with 9,161,252 trades. October daily averages reached BRL 7.34 billion and 436,250 trades.

Source: BM&FBOVESPA, 25.12.2009

Filed under: BM&FBOVESPA, Brazil, Energy & Environment, Exchanges, Latin America, News, Trading Technology, , , , , , , , , , , , , , , , ,

December 23, 2009 • 12:41 am 0

CMA announces LatAm Investments available on Trade HUB

CMA the leading Market Data, Order Management and Connectivity provider of Latin America continue to grow its ON-NET LatAm capital markets community of participating exchange trading institutions announces the addition of LatAm Investments to the CMA Trade HUB.

Rapid expansion of cross boarder trading preceded by exponential growth with the Mexican, Brazilian and other regional LatAm exchanges have been brought together through a mutual interests in multi-asset, multi-regional trading strategies. Recognizing the need to bring trading communities together from Europe and North America with key South American banks and broker dealers, CMA has developed a global network that certifies trading protocols and provides a deep set of Latin American market information for real-time trading of equities, options, futures and foreign exchange.

LatAm Investments, LLC is the latest organization to join CMA’s Global Trade HUB global network. LatAm Investments is a key player enabling North American and European institutions looking to send order flow South-Bound while providing essential expertise in the US markets for Latin American firms routing order flow North-Bound.

“CMA provides a strong foundation for our firm’s trading strategies with clients as they are able to provide all of the tools, market information and reach we require to access our key market opportunities and customers,” said Mr. Joe Cantatore, SVP of LatAm Investments, LLC. “CMA’s expertise is unique in market data, order management and the level of understanding to help enable client connections within the Latin American capital markets community. Through our partnership with CMA, we can offer more flexible and profitable relationships with our primary market participants” Mr. Cantatore adds.

Source: CMA, 21.12.2009

Filed under: Brazil, Chile, Data Management, Latin America, Market Data, Mexico, News, Trading Technology, , , , , , ,

December 19, 2009 • 2:02 am 0

BM&FBOVESPA launches stock index to measure returns on Brazilian financial sector

The Brazilian Securities, Commodities and Futures Exchange will begin, on 4 January 2010, to calculate and disclose the BM&FBOVESPA Financial Index, in real-time. This is the Exchange’s 15th stock index and it will trade under the ticker symbol IFNC.

The IFNC index will measure the returns on stocks from the most representative companies of the Brazilian financial sector. These include banks, financial institutions, asset management firms, leasing companies, credit card issuers, and insurance companies, among others. The index’s theoretical composition will be reevaluated every four months.

The new index will enable the diversification of investment strategies, as well as allow the possibility of launching new financial derivatives, like Exchange Traded Funds (ETFs). Currently, the Exchange offers four ETFs that track the performance of Ibovespa, IBr-X 50, Mid-Large Cap, and Small Cap Index.

Basic Criteria

The index portfolio includes stocks whose added negotiability indexes represent 98% of the total value of all individual negotiability indexes, during the twelve months preceding the reevaluation. They must also have a minimum of 95% trading session presence throughout the period.

The same company can have more than one type of stock included in the portfolio, as long as each stock type meets separately the inclusion criteria.
Companies with less than twelve months of listing are eligible only if they have more than six months of trading, and if they have a minimum of 95% trading session presence measured in the six months preceding the reevaluation.

The definitive portfolio will be divulged on January 4th, 2010, together with BM&FBOVESPA’s other indexes.

Source: MondoVisione, 18.12.2009

Filed under: BM&FBOVESPA, Brazil, Exchanges, Latin America, Market Data, News, , , , ,

December 19, 2009 • 1:28 am 0

Shanghai Stock Exchange Corporate Bond 30, Overseas-listing A Shares, State-Owned 100 Indices Launched

The Shanghai Stock Exchange (SSE) and China Securities Index Co., Ltd. (CSI) have recently announced that nine new indices will be launched on the first trading day of 2010, namely, the SSE Corporate Bond 30 Index, the SSE Overseas-listing A Shares Index, the SSE Local State-owned Enterprises 50 Index, the SSE State-owned Enterprises 100 Index, the SSE Large & Mid & Small Cap Growth, Value, Relative Growth and Relative Value Indices and the SSE Shanghai Enterprises Index. All these indices will provide more targets for such index products as index funds and ETFs.

The SSE Corporate Bond 30 Index, the first real-time bonds index in China, is composed of 30 high-quality, large-scale and high-liquidity enterprise bonds from the SSE. The index, giving priority to the liquidity of the constituents, has adopted the weight restriction rule to reduce the influence of some constituents with large issuance volumes on the index. Besides, the duration matching rule is also designed to keep the deviation of the duration for the index and that for the market at or below 10%. The SSE Corporate Bond 30 Index is significant for the bond market development as it offers high-quality targets for bond ETFs and other bond products. On December 16, 2009, the index closed at 100.38, 0.38% higher than the beginning of the year.

A few overseas listed companies, upon returning to the A-share market in succession since 2006, have become an important sector in the A-share market and exerted a growing influence on the market. The constituents of the SSE Overseas-listing A Shares Index are listed companies’ stocks in the SSE 180 Index that are simultaneously listed on the SSE and exchanges outside the mainland. The 37 constituents boast the A-share total market capitalization and negotiable market capitalization of RMB9.1977 trillion and RMB4.5783 trillion, respectively, accounting for 50.38% and 40.79% of that of the SSE, respectively.

The SSE State-owned Enterprises 100 Index, composed of 50 constituents of the SSE Central SOEs 50 Index and 50 of the SSE Local State-owned Enterprises 50 Index, could reflect the overall performance of the listed companies of state-owned enterprises in Shanghai. Constituents of the SSE Local State-owned Enterprises 50 Index are 50 most typical stocks selected from listed companies in Shanghai that are controlled by local state-owned assets supervision and administration commissions, governments and state-owned enterprises.

The compiling method of the SSE Large & Mid & Small Cap Style Indices, basically the same with that of the SSE 180 Style Indices, is to select among the SSE Large & Mid & Small Cap Index the stocks of 150 companies with most remarkable growth features as the constituents of the growth indices, and the stocks of 150 companies with most remarkable value features as the constituents of the value indices. In terms of the SSE Shanghai Enterprises Index, with the constituent universe covering companies registered in Shanghai, have the constituents of 50 companies taking the lead in liquidity, scale and representativeness to reflect the overall market performance of Shanghai-based companies’ stocks.

Source: MondoVisione, 18.12.2009

Filed under: Asia, China, Exchanges, News, , , , , ,

December 18, 2009 • 11:01 pm 0

Ten Trading Technology Trends and Tools for 2010

Despite the continued economic downturn, many buy- and sell-side firms still opened their wallets in the search for best-of-breed technology solutions. In order to decrease latency and increase speed, countless firms both big and small, bulge-bracket and boutique, have upgraded trading platforms, invested in latency management solutions, or set themselves up at co-location facilities.

But the race to have the best technology that will slice latency down to microseconds—and eventually, nanoseconds— is far from over.  In interviews with Securities Industry News, industry experts pointed at technology solutions the buy and sells sides are expected to spend their dollars in the New Year.

Networking (both intra- and inter- data center). Growing market data message rates and shrinking latency have made networks a key focus of the sell side, said Kevin McPartland, senior analyst with the Tabb Group.  “Upgrades of data center network equipment and purchases of long distance bandwidth will accelerate driven by current bandwidth requirements and future capacity planning,” explained McPartland. “And looking beyond bandwidth and transmission speed, reliability is tremendously important as downtime in today’s market is unacceptable.”  The core goal: Reduce the number of hops or other factors that introduce network inefficiencies.

Multi-asset-class platforms. Mutating asset classes is the future – different ways to trade traditional asset classes, going electronic, and new types of listed derivatives and structured products will be the norm, said Lloyd Altman, a senior executive in Accenture’s Capital Markets Industry division. “The multi-asset class problem is really affecting the buy side more than anyone else,” he said. “[There are traditional institutional asset management and hedge funds that are employing multi-asset strategies in order to generate alpha… everyone on the buy side is multi-asset class at this point. The question is will they need to replace what they have with something that’s new, or will they continue to modify what they have—it depends on the nature of how they use technology and whether they view themselves as technologists.”

Commoditizing high-frequency trading. Turnkey high-speed algorithmic trading systems will be a trend in 2010 as more players enter the high frequency trading business, explained Paul Zubulake, senior analyst with Aite Group. “We’re seeing a lot of people leaving large broker dealers and starting up their own small businesses related to trading,” he said. “If you’re a new group and want to start out on your own it’s not that easy to just dive into that business, so what’s happening is there are a few firms out there selling their technology and setting you up to trade… it’s an interesting story for next year.”

Latency management. The quest to squeeze more latency and provide more throughput is still creating opportunities for network, data center, and niche technology providers, said Accenture’s Altman. “It feels at times like squeezing a toothpaste tube to find one more use, and it is asymptotic on the latency front as we approach zero,” added Accenture’s Altman. “Whoever can advertise that they can get their first with the trade wins, and they can charge for that as a service. At some point it will not matter anyone, but we’re not there yet.”

Co-location. “Putting trading systems under the same roof as matching engines “is at the top of our priority list,” said Frederick Scuteri, senior vice president of prime brokerage services at institutional brokerage Cuttone & Co. “We’re seeing a lot of interest in many buy-side firms, especially the black box/high frequency trading shops looking for sponsored access to the different exchanges and alternative trading systems (ATSs). That game itself is a low-latency game, and co-location is a very big component of the success of that business. That’s something we’re full throttle on both with the NYSE and some other vendors and exchanges as well.”

Risk management for sponsored access. This ties in with the whole co-location story, said Feargal O’Sullivan, managing director of high performance messaging with NYSE Technologies, the commercial technology arm of NYSE Euronext. “Risk management for sponsored access is the idea of being able to allow buy side firms to use a broker ID and get access to markets directly without having to go through the broker systems but with the risk management that’s required before you allow them to do that,” explained O’Sullivan, noting that NYSE Technologies offers a risk management gateway.  “It’s an additional step of latency that’s required to ensure that traders are not taking unjustified risks and bring the market down.”   Added Aite’s Zubulake: “Pre-trade risk management in all asset classes will become a pre-requisite, or regulatory mandate, for trading.”

Central clearing. Over-the-counter, or OTC, products are going to central clearing, which will increase the demand for proper data management, said Zubulake.  This is a trend that is already happening, with the Chicago Mercantile Exchange having begun clearing credit default swaps through CME Clearing on Dec. 15. “You’re taking a business that was purely a voice business… and now instead of having a one-to-one trade you’re going to have the trade done on that basis but it will be cleared through the central clearer. There will be multiple counterparties.”

Data loss prevention (DLP) technology. DLP, which is made up of systems that identify, monitor and secure data whether it’s in use, is on the upswing, according to Jim Routh, KPMG’s chief information security officer. Several major vendors including Symantec and McAfee have emerged as leaders in this relatively new market and are currently selling these offering as integrated suites rather than individual products.

Data profiling. Data profiling, which examines data in an existing database, collects statistics and information about that data and determines if it can be used for other purposes, provides a deeper, broader and speedier insight to data analysis than the more traditional approaches. Garry Katz, a senior vice president and information architect at SmithBarney/Citigroup, says this technique is getting increasing play, becoming an “essential tool’’ in trading.

Virtualized solutions. JP Morgan Chase & Co. is currently deploying technologies, which create “virtual desktops” within its network – and even virtual networks within its overall network capacity. The selling points here include reduced support costs, improved security, greater agility and more streamlined application deployment. As a result of its virtualized network, JP Morgan’s data centers will evolve “from application-based silos to unified fabrics that allow for greater agility and utilization while improving the bottom line,” said Cory Shull, VP of investment architecture at JP Morgan, in a statement.

Source: Securities Industries, 17.12.2009

Filed under: Corporate Action, Data Management, Market Data, News, Risk Management, Services, Trading Technology, , , , , , , , , ,

December 17, 2009 • 12:06 am 0

BMV Mexican Stock Exchange – Market Performance Report November 2009

Click here to download BMV_Mexican_Stock Exchange’s market performance report for November_2009

Source: BMV , 15.12.2009

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Filed under: BMV - Mexico, Exchanges, Latin America, Mexico, News, , , , , , , , , ,

December 16, 2009 • 9:47 am 0

BM&FBOVESPA And BNDES Announce Development Of Stock Index Focused On Carbon Emissions – Based On The IBrX-50 Index, The Carbon Efficient Index Will Weigh Companies’ GHG Emissions

The Brazilian Security, Commodities and Futures Exchange (BM&FBOVESPA) and the Brazilian Development Bank (BNDES) announced today, during the 15th United Nations Climate Change Conference (COP15), in Copenhagen, the development of the Carbon Efficient Index. The objective of this index is to stimulate listed companies to reduce their emissions of greenhouse gases (GHG) and adopt environmental practices. The index will be weighed by the inventory of GHG emissions that result from all the activities associated to a company.

The Carbon Efficient Index will be structured in 2010, based on the Brazil Index 50 (IBrX-50), which is composed by the 50 most traded stocks at BM&FBOVESPA, weighed by free float. The weight of each stock on the new index will be based on the company’s participation on the IBrX-50 index and also its GHG emissions efficiency. This is measured by the relation between these GHG emissions and the company’s revenue, the smaller this relation is, the greater the efficiency.

Therefore, companies with more GHG emissions efficiency, in relation to the other companies of the same sector in the portfolio, may have a bigger weight in the new index, in comparison to their participation in the IBrX-50 index. On the other hand, less efficient companies, in terms of GHG emissions, will have a reduced participation in the new index.

The index’s goal is to motivate the most heavily traded Brazilian companies to measure and manage their GHG emissions; to bring more transparency about these emissions; and create an investment opportunity for environmentally aware investors. Both BNDES and BM&FBOVESPA firmly believe that this collaboration will help foster a sustainable corporate environment and prepare companies for a future economy of low carbon emissions.

Source: MondoVisione, 16.12.2009

Filed under: BM&FBOVESPA, Brazil, Energy & Environment, Exchanges, Latin America, News, , , , , , , , , , , , ,

December 16, 2009 • 9:42 am 0

Brasil Mata Viva And Markit Announce Brazilian Environmental Alliance – 13 Million Pending Issuance Units Listed On Markit’s Environmental Register

Markit, a leading, global financial information services company, and Brasil Mata Viva, a Brazilian standards framework for certifying carbon credits from avoided deforestation and Reduced Emission from Deforestation and Degradation (“REDD”), today announced an alliance with a new environmental market in the Brazilian State of Goiás.

The market is being developed with the coordination of the consulting firm IMEI Consultoria e Treinamento Ltda (IMEI) and Bolsa de Títulos e Ativos Ambientais do Brasil (BTAAB – Environmental Bonds and Assets Exchange of Brazil), a Goiânia-based financial exchange for the trading of environmental-related credits. IMEI and BTAAB have selected Markit’s Environmental Registry as the registry system for carbon credits resulting from the State’s projects of avoided deforestation and REDD.

The listed credits will be created and validated in Brazil under the standards framework established by IMEI and BTAAB known as Brasil Mata Viva. Markit will provide the secure online registry facility for the efficient and transparent issuance of credits, as well as ownership transfer and retirement certification. The robust offering provided by Markit’s global environmental registry will help facilitate the sale and ongoing success of the Brasil Mata Viva Credits.

Maria Tereza Umbelino, Executive Director of IMEI, Consultoria e Treinamento Ltda, said: “This new alliance with Markit will provide credibility to the environmental assets created by the Brasil Mata Viva Program. Markit’s secure and transparent credit registry will faciliate the provision of and access to reliable information about the credits available to the market.”

Ary Santos, Superintendent of the Brazilian Institute of the Environment and Renewable Natural Resources (IBAMA) and a representative of the Ministry of Environment in the Brazilian State of Goiás, said: “Brasil Mata Viva has been working in cooperation with and along the guidelines required by the State’s forestry conservation and restoration program under our coordination (Prolegal). We support their work with Markit’s internationally recognized carbon registry and the transparency they bring to this program.”

Today, 13 million Pending Issuance Units (PIUs), which will be validated according to the Brasil Mata Viva standards framework, will be issued on Markit’s Environmental PIU Registry. PIUs represent a contractual right to an emission reduction credit that is in process of being verified. Large scale projects, particularly those related to REDD, can take long periods of time to generate their issued credits. The market uses PIUs to facilitate the sale and management of expected credits. These 13 million PIUs represent the saving or replacement of approximately 40,000 hectares of forest and managed lands in the state of Goiás.

Helen Robinson, Managing Director of Markit’s Environmental Registry, added: “The development of the Brasil Mata Viva Program and the creation of an exchange on which to buy and sell these carbon credits, confirms the commitment of Brazil in its focus on reducing emissions. Forestry preservation and restoration is a key focus in climate discussions and Markit is pleased to support this innovative program designed to protect Brazilian forests.”

Source:MondoVisione, 16.12.2009

Filed under: BM&FBOVESPA, Brazil, Energy & Environment, Exchanges, Latin America, News, Risk Management, , , , , , , , , , , , , ,

December 11, 2009 • 8:28 am 0

ETF: BlackRock ETF Landscape Industry Review November 2009

BlackRock has just published the November 2009 edition of its monthly ETF Landscape Industry Review. This report is a review of the Exchange Traded Funds (ETFs) and Exchange Traded Products (ETPs) industry through the end of October 2009.

At the end of October 2009 the global ETF industry had 1,859 ETFs with 3,327 listings and assets of US$941.85, from 97 providers on 40 exchanges around the world.

Download report hereBlack Rock ETF Lamdscape November 2009

Source: MondoVisione, 11.12.2009

Filed under: Argentina, Asia, Brazil, China, Hong Kong, India, Indonesia, Japan, Korea, Latin America, Library, Malaysia, Mexico, News, Risk Management, Singapore, Thailand, , , , , , , , , , , , ,

December 11, 2009 • 7:54 am 0

Dark Pools: HKEx chairman slams dark pools

Ronald Arculli joins the ranks of those criticising alternative trading platforms for creating an unfair playing field.

Much has been said and written in recent months about dark pools, and on Wednesday the chairman of Hong Kong Exchanges and Clearing threw his hat into the ring. Not surprisingly, Ronald Arculli is not in favour of such trading platforms, which only require prices to be published after a transaction is complete.

He set out his stall in a speech at the Foreign Correspondents’ Club in Hong Kong titled ‘Roles and Challenges of Stock Exchanges’. Highlighting the benefits of exchanges (good risk management, transparency, liquidity fairness, a reliable infrastructure and central counterparty services, among other things), he said they demonstrated their worth during the crisis: “Almost all exchanges continued to function normally and remained open during the turmoil.”

Arculli also remarked that governments worldwide have recognised the “unique value” of exchanges, with a number of moves afoot to standardise over-the-counter contracts and move them onto exchanges. This is in stark contrast to well publicised concerns of regulators, such as the US Securities and Exchange Commission, as to whether dark pools create unfair advantages for some in the market. Arculli believes they do and clearly outlined his concerns.

Firstly, these platforms lack transparency, as they show buy and sell orders and deals that are not transparent or available to the general investing public, he argued, effectively creating a two-tiered market. They are typically run by broker-dealers and large market-makers looking to save on transaction costs and fees, and do not alert the broader market of impending deals which could affect a stock’s equilibrium.

Powerful technology can be used to conduct high-frequency algorithmic trading in dark pools through both on- and off-exchange platforms to profit or arbitrage on small price differences, said Arculli. This has resulted in dark pools accounting for 12% of market trades in the US now, up from 1.5% just five years ago, while in Europe they account for some 4% of equity trades. In Asia, these venues make up a much smaller percentage of the average daily turnover, he added, but in a globalised marketplace, they still raise significant concerns.

Besides transparency, another issue is that the proliferation of alternative platforms means liquidity is increasingly fragmented, diverting volumes away from publicly traded exchanges, he said. Smaller companies may suffer as high-frequency traders tend to prefer larger, more liquid shares. Such fragmentation not only affects effective price discovery, said Arculli, but also increases price volatility and adds to surveillance difficulties.

Moreover, the lack of regulation and transparency of dark pools could result in notable systemic risk, he said, citing the problems surrounding Lehman Brothers and AIG last year. “As dark pools typically lack a central counterparty, the default of a large participant could have severe consequences on market stability,” he said.

In addition, these platforms raise concerns over company ownership. “Arguably when shares are held only for fractions of a second, it is no longer about participating in the ownership of a company or ensuring it is well run,” he said. “The opaqueness of trading, and its fragmentation have negative implications for effective corporate governance.”

Arculli suggests the rise of such platforms set up by investment banks might indicate a trend towards the re-mutualisation of stock trading. Originally stock exchanges tended to be set up as associations by their trading members, he said, but have since de-mutualised and become commercial, often listed, corporate entities to better serve their stakeholders.

“Now as the bigger trading participants are getting together again to create their own networks, is the trend reversing?” said Arculli. “Complicating matters even further, some exchanges have decided to join the fray and team up with large institutions to set up their own dark pools.” Singapore Exchange’s recent tie-up with Chi-X is one such example. Other trading platform providers, such as Liquidnet, are also working on expanding into Asia.

Arculli went on to say that regulators in the EU and the US have been reviewing dark pools and considering stricter measures to ensure a fair and stable trading environment. Investors — especially institutional ones — are seeking better, faster and cheaper services for more computerised methods of trading. Hence, he added, exchanges must continue to offer better execution and more efficient pre- and post-trade services to stay competitive, while protecting investors.

Despite his worries, Arculli, said, competition is welcome. China, for example, has the capacity and the need for more than one successful financial centre. But he added a caveat.

“We welcome challenges that strengthen our markets and make them more effective and efficient,” said Arculli. “But we are concerned by those that increase systemic risk or disadvantage a certain segment of investors to the benefit of others.”

Source: AsianInvestor.net, 11.12.2009

Filed under: China, Exchanges, Hong Kong, News, Risk Management, Singapore, Trading Technology, , , , , , , , , , , , , , , , , ,

December 11, 2009 • 2:31 am 0

BM&FBOVESPA Authorizes Trading of Flexible Call and Put Options on iShares Ibovespa Index Fund (BOVA11) Contracts – New OTC Derivatives Permits The Structuring Of Different Investment Strategies

The Brazilian Securities, Commodities and Futures Exchange has authorized, as of 12/07/2009, Flexible Call and Put Options on iShares Ibovespa Index Fund (BOVA11) for trading. This new OTC derivatives contract allows financial institutions to structure an array of investment strategies for their clients like, protected capital, for example.

The BOVA11, is one of the four Exchange Traded Funds (ETFs) offered by BM&FBOVESPA. They track the performance of Ibovespa, IBR-X 50, Mid-Large Cap Index, and Small Cap Index, indexes developed and calculated by the Exchange.

The new contract is registered in the derivatives OTC market, under the code FBC, for flexible call options, and FBP for flexible put options. Each contract corresponds to the share value multiplied by the number of shares to be freely agreed upon between the parties, subject to the minimum trading lot of 100 shares.

Flexible option contracts allow the counterparties a greater flexibility in defining transaction characteristics such as: contract size, expiration date, traded premium, and strike price – all subject to the limits established by BM&FBOVESPA.

The contracts may be registered with or without the guarantee feature. In the first option, the Exchange acts like the central counterparty. The financial instrument also offers the inclusion of barrier price types that allow the activation or deactivation of exercise rights and obligations.

For further information, click here.

ETFs complete one year of trading with a BRL 3.8 billion turnover

ETFs iShares Ibovespa (BOVA11), iShares MidLarge Cap (MILA11), and iShares Small Cap (SMAL11) completed, at the beginning of December, a year of trading at BM&FBOVESPA. During this period, in 39,200 transactions, 73.4 million quotas were traded that totaled a financial volume of BRL 3.8 billion.

Since it tracks the Exchange’s principal index (Ibovespa), the BOVA11 was the most traded ETF, with a financial volume of BRL 3.74 billion, representing 83.8% of the total traded by all four ETFs. Along the year, 72,683 quotas of BOVA11 were traded in 38,780 trades, with daily averages of BRL 14.1 million, 274 quotas, and 146 trades.

Source: MondoVisione, 09.12.2009

Filed under: BM&FBOVESPA, Brazil, Exchanges, Latin America, News, Risk Management, , , , , , ,

December 11, 2009 • 1:53 am 2

ETF Securities: Commodity ETC Assets Triple Over Past 12 Months To $17bn As Demand For Gold, Energy, Agriculture And Other Hard Assets Surge

  • Record breaking year for commodity ETCs, with assets up over $11bn to $17bn
  • ETCs tracking agriculture and industrial metals show highest buy/sell ratio
  • Physically-backed precious metal holdings – gold, silver, platinum, palladium – reach historic highs
  • ETFS Copper (COPA) up 118% in 2009 to end-November, the best performing ETC, followed by ETFS Physical Palladium (PHPD) up 96% and ETFS Zinc (ZINC) up 81%
  • ETFS Industrial Metals (AIGI) best performing commodity basket in 2009, up 67% YTD
  • ETFS Forward All Commodities DJ-UBSCI-F3SM (FAIG) up 268% over the past 10 years, the top performing major asset class over the period

Commodities bounced back strongly this year following the recent credit crisis, with ETFS Forward All Commodities DJ-UBSCI-F3SM (FAIG) up 20% year-to-date and 268% over the past 10 years based on data to the end of November. ETFS Industrial Metals (AIGI) was the best performing ETC, with YTD growth of 67%. Industrial metals significantly outperformed developed market equities, outperforming the Dow Jones Euro STOXX 50 by 37 percentage points since the start of 2009. Industrial metals have also outperformed bonds, cash and real estate over the same period as the global recovery has become more entrenched and market appetite for plays on the recovery has accelerated. The precious metals sub-sector was the next best performing major sector, with ETFS Physical Silver (PHAG), ETFS Physical Platinum (PHPT) and ETFS Physical Palladium (PHPD) all returning over 60% YTD.

Commodities remain the best performing major asset class over a 10 year horizon, with ETFS Forward All Commodities DJ-UBSCI-F3SM (FAIG) registering cumulative growth of 268%, compared to a 10% rise in the Dow Jones Euro STOXX 50, a 13% rise in the FTSE 100, a 6% rise in property1 and 75% return on bonds2. This outperformance was achieved with lower average annual volatility than equities over the same period (see table below).

Asset Class Returns Compared (YTD, and Past 10 years)

YTD 10 Years Volatility3
ETFS Industrial Metals 67% 178% 23%
ETFS Forward All Commodities DJ-UBSCI-F3SM 20% 268% 15%
FTSE 100 37% 13% 23%
Dow Jones Euro STOXX 50 30% 10% 24%
US Tracker 1-10 Yrs Bond Index 0% 75% 4%
UK EPRA Real Estate Index 21% 6% 25%

Source: Bloomberg
1 Property: proxied by the UK EPRA Real Estate Index
2 Bonds: Proxied by US Tracker 1-10Yrs Bond Index
3 Calculated using the annual volatility of daily returns from 30th November 1999 to 30th November 2009

2009 has been a record breaking year for commodity inflows, with assets under management (AUM) in ETF Securities’ ETCs and ETFs rising over $11 billion to $17 billion over the past 12 months. Physical gold and long natural gas ETCs have seen the largest investment demand YTD, with inflows of $2 billion and $1 billion respectively since the start of 2009.

In terms of investor positioning, agriculture ETCs such as ETFS Agriculture DJ-UBSCISM (AIGA) had the highest buy/sell ratio of any sector in the 11 months ended November with a ratio of 3.2. This is consistent with steady inflows into agriculture ETCs in 42 of the 48 weeks to end-November. Industrial metals had the next strongest buy:sell ratio at 2.7, coinciding with the sharp rise in industrial metal prices in 2009. Although energy ETCs have seen the second largest inflows in 2009 YTD, their buy/sell ratio was one of the lowest at 1.8 as extremely strong oil inflows in the first four months of the year and the surge of inflows into natural gas ETCs since May were partially offset by outflows in May and June from ETCs tracking shorter-dated oil futures returns.

Source: ETF Securities

Industrial metals were the strongest performing sector in 2009, up 67% to the end of November. Gains were led by a 118% rise in ETFS Copper (COPA) and an 81% rise in ETFS Zinc (ZINC). ETFS Aluminium (ALUM) remained the weakest of the industrial metals, but still managed a 24% return in the 11 months ended November. Flows into industrial metals accelerated in 2009, taking industrial metal assets to almost twice their previous peak level seen in H1 2008. Robust Chinese demand, coupled with stronger manufacturing activity in developed economies, has underpinned investor interest in industrial metals.

Top 10 Long and Short ETC Performance

Top 10 Longs YTD (End November 09)
ETFS Lead* (LEED) 125.8%
ETFS Copper (COPA) 118.3%
ETFS Physical Palladium (PHPD) 95.9%
ETFS Zinc (ZINC) 80.8%
ETFS Gasoline (UGAS)
ETFS Physical Silver (PHAG)
ETFS Industrial Metals DJ-UBSCISM (AIGI)
ETFS Silver (SLVR)
ETFS Physical Platinum (PHPT)
ETFS Sugar (SUGA)		 74.4%
68.1%
67.3%
62.4%
60.6%
56.5%
Top 10 Shorts YTD (End November 09)
ETFS Short Natural Gas (SNGA) 69.1%
ETFS Short Lean Hogs (SLHO) 16.1%
ETFS Short Livestock DJ-UBSCISM (SLST) 14.5%
ETFS Short Live Cattle (SLCT) 9.3%
ETFS Short Wheat (SWEA)
ETFS Short Corn (SCOR)
ETFS Short Energy DJ-UBSCISM (SNRG)
ETFS Short Grains DJ-UBSCISM (SGRA)
ETFS Short Agriculture DJ-UBSCISM (SAGR)
ETFS Short All Commodities DJ-UBSCISM (SALL)		 8.6%
-2.7%
-6.9%
-9.7%
-16.3%
-19.3%

Source: ETF Securities

* ETFS Lead saw 126% growth based on simulated returns based on the underlying DJ-UBS Lead Sub-IndexSM. This product was listed in November 2009.

Within precious metals, the best performing commodities were metals tied to the industrial cycle, with ETFS Physical Palladium (PHPD) up 96%, ETFS Physical Silver (PHAG) up 68% and ETFS Physical Platinum (PHPT) up 61%. Gold prices reached fresh historic highs in 2009, breaching the $1200/oz mark by the start of December. Interest in physical gold holdings was extremely strong, up 1.9 million ounces (31 %) in the 11 months to the end of November. This marks the second year of rapid growth in physical gold holdings, which have more than doubled (up 4.2 million ounces, or $5 billion at current gold prices) since the start of 2008. Total assets in ETF Securities’ physically-backed gold ETCs stood at $9.5 billion by the end of November 2009, making them the largest ETF/ETC holdings in Europe and the second largest ETC/ETF holding in the world. Other physical precious metal ETC holdings also posted new historic highs in 2009, with physically-backed silver, platinum and palladium ETCs seeing their metal holdings (in ounces) reach the highest levels since inception by the end of November.

The energy sector saw mixed performance over 2009, with a 74% rise in ETFS Gasoline (UGAS) and a 44% gain in ETFS Brent 1mth (OILB) offset by a 57% drop in ETFS Natural Gas (NGAS). In H1 2009 sharp falls in oil prices attracted almost $1 billion of inflows into long oil ETCs between January and May. There was some profit taking on these positions subsequently, coinciding with $1.4 billion in inflows into long natural gas ETCs. These flows suggest some rotation in investor positioning within the sector as natural gas prices have underperformed their oil counterparts.

Agriculture saw a sharp divergence in returns with ETFS Softs (AIGS) up 34% in the 11 months to the end of November, compared to a 1% gain in ETFS Grains (AIGG). ETFS Softs were boosted by a 57% rise in ETFS Sugar (SUGA) and a 29% rise in ETFS Cotton (COTN). ETFS Soybeans (SOYB) was up 25% while ETFS Wheat (WEAT) was down 20% and ETFS Corn (CORN) was down 9%. Agriculture saw the most consistent and third largest inflows (behind energy and precious metals in 2009 totalling over $1 billion YTD. Historically low levels of inventories, together with a number of weather-related crop disruptions this season, have helped underpin investment demand in agriculture in 2009.

Nicholas Brooks, Head of Research and Investment Strategy, commenting on the 2009 performance numbers said: “Demand for commodity ETCs has been incredibly strong in 2009. ETF Securities assets under management nearly tripled to $17bn over the past 12 months on the back of strong and steady demand for gold and other physically-backed precious metal ETCs as well as energy, agriculture and industrial metal ETCs. Assets under management are now over 70% higher than they were in July 2008 before the financial crisis broke out. Most of the demand has been for long exposure, with investors’ building their holdings of “hard assets” both for their potential price-supportive long-term supply-demand fundamentals, as well as their potential to hedge against inflation and currency debasement risks as government finances deteriorate and central banks keep the liquidity taps open.

Source: MondoVisione, 09.12.2009

Filed under: Library, News, Risk Management, , , , , , , , , , , , , ,

December 11, 2009 • 1:36 am 0

Bursa Malaysia Selects Thomson Reuters For Data Distribution Platform

Thomson Reuters today announced it has been selected by Bursa Malaysia to deliver a new data distribution platform to support their growing trading business. Under the terms of the agreement Thomson Reuters will provide its enterprise platform for high performance information management and real time market data dissemination, improving the services offered by the exchange to brokers.

Following an intensive evaluation phase, Bursa Malaysia selected Thomson Reuters based on the performance and scalability of its solutions to establish an effective and reliable data management platform for the Exchange. The offering combines the latest versions of Thomson Reuters Market Data System and direct feed technology to deliver a low latency, fully redundant and highly scalable real time platform. The platform integrates incoming data feeds from Bursa Malaysia and publishes them for distribution to their members. Market participants will gain unparalleled performance for price discovery, transparency and price improvement.

Lim Jit Jee, Chief Information Officer of Bursa Malaysia said, “As our market grows bigger and more sophisticated, there is greater need to ensure that our data distribution platform caters to speed and scalability of the changing landscape. This new market data gateway from Thomson Reuters will be beneficial to our customers as it allows the Exchange to package market data according to our customers’ needs, as well as ensure that information is distributed in an expedient manner.”

Edward Haddad, Managing Director, ASEAN, South Asia & Pacific, Thomson Reuters, said: “By providing Bursa Malaysia a complete data delivery solution, Thomson Reuters is reinforcing its commitment and ability to provide market leading technology, data, and support services to global exchanges. We are delighted to collaborate with Bursa Malaysia in support of their evolving infrastructure.”

This agreement further underlines Thomson Reuters ability to provide exchanges and electronic trading platform providers with flexible, high performance technology and content solutions to support their business needs.

Source: MondoVisione, 09.12.2009

Filed under: Asia, Data Management, Data Vendor, Exchanges, Malaysia, Market Data, News, Trading Technology, , , , , , , , ,

December 9, 2009 • 10:01 am 1

Asigna, The Mexican Derivatives Exchange (MexDer) Clearing House, And The Options Industry Council Sign Licensing Agreement To Provide Options Education In Mexico

Asigna, The Clearing House of MexDer, the Mexican Derivatives Exchange, and The Options Industry Council (OIC), a world leader in options education based in Chicago, announced today that they have entered into a licensing agreement to develop an educational program for Mexican investors and financial advisors.

This is the first educational collaboration for OIC in Latin America. As the Mexican marketplace has grown, so has the demand for new products such as options. With the help of its clearing members and MexDer, Asigna will deliver options education based on OIC’s content for investors and advisors mainly through live seminars and access to website material from www.optionseducation.org.

“Working with Asigna illustrates that international interest in the U.S. options market continues to expand,” said Gina McFadden, OIC President. “Through our partnership with Asigna, OIC can now reach Latin American investors with the important initial step to understanding the benefits and risks of options.”

“This agreement with OIC is an extension of various efforts of MexDer and Asigna to increase awareness and use of Mexico’s financial and listed derivatives markets. We believe OIC’s broad experience in the industry will help to promote the advantages of using listed financial options instruments for hedging,” said Luis Téllez, Chairman of MexDer and Asigna.

Source: MondoVisione, 08.12.2009

Filed under: BMV - Mexico, Exchanges, Latin America, Mexico, News, Risk Management, , , , , , , , ,

December 7, 2009 • 10:59 pm 0

VAM: Vietnam Monthly Market Analysis- November 2009

November was dominated by the State Bank of Vietnam announcing a slew of new measures in a proactive attempt to put a halt to feared emerging macroeconomic imbalances. The measures include:
  • A one off VND devaluation of roughly 5.4% in the VND/USD reference rate effective on 26 November 2009,  combined with a reduction in the official forex trading band over the reference rate from ±5% to ±3;
  • A 1% base rate hike from 7% to 8% effective on 1 December 2009;
  • Potential mandatory purchases of USD from State-Owned Enterprises (SOEs) and other exporters.
The VND devaluation signals that the SBV is moving towards a more free floating currency regime as the new rate should theoretically allow the official forex traders to come in line with rates in the black market easing USD demand concerns. It will also help ease potential balance of payment issues as the trade deficit in the first 11 months of this year is estimated to have reached USD10.3 bn. The interest rate hike is an effort to ease credit growth, which stood at 33% YTD through October, 3% higher than the Governments full year 30% target.  High credit growth, increasing commodities prices, and base effects led to an increase in the YoY inflation rate from 3% in October to 4.4% in November, and the Government does not intend to make the mistake of allowing runaway inflation again. The third measure will help to improve USD liquidity and hopefully alleviate forex concerns. VAM Monthly News Letter November 2009

On a positive note, Novembers macroeconomic indicators demonstrate Vietnam is still in a strong recovery phase. YTD retail sales and industrial production growth rates when compared to the same period last year are 7.3% and 18.5% respectively. Exports improved slightly from -13.8% YTD growth in October to -11.6% in November, although the trade deficit for November is once again estimated high at nearly US$2bn.

The market was expectedly down for the month finishing at 504.12, or -14.1% MoM. Main reasons for the market negative reactions during the month were the Governments announcement at the beginning of the month of cracking down on improper usage of the interest rate subsidy program that was entering into the equity market; the SBVs announcement of the new measures toward month end; and the looming debt crisis in Dubai which has spooked global investors.

Our View – In the current environment, we expect companies with hard currency revenues and local cost base, such as aquaculture exporters, to do well. On the contrary, importers and manufacturers with imported inputs serving the local market will have difficulties maintaining their margin in the face of the VND depreciation. Also, the recent interest rate hike is sparking some fear about further tightening, especially when inflation has been creeping up. The 30% credit growth cap is another concern not only for banks performance, but also for the private sector, which often faces funding road blocks when tightening occurs. We are cautious about companies with high leverage as they would be the first casualties in a rising interest rate environment. These include companies in the high-capex industries, namely Cement, Shipping, Rubber tyres, Real estate, and Oil & gas. We much prefer companies that have little or no debt

Sector Valuation Table

Industry group

Weight %

1M %

3M %

YTD %

2009PE

2010PE

2011PE

2014PE

P/B

Dvd Yield

ROE

Gross Margin

Op Margin

Net Margin

Net D/E

Vietnam Market

100.0%

-24.1%

-23.4%

15.0%

15.6

14.6

12.3

8.1

3.2

2.2

20.5

34.4

24.8

26.3

1.9

Automobiles & Components

1.4%

-17.0%

16.3%

283.8%

10.6

11.4

8.7

3.5

4.9

0.4

38.1

18.5

11.0

8.5

1.1

Banks

24.4%

-25.4%

-29.0%

26.5%

12.7

11.7

10.2

6.8

2.1

1.8

13.4

41.1

30.6

22.6

6.6

Capital Goods

4.1%

-19.1%

2.6%

116.0%

11.6

11.4

10.4

7.6

3.4

2.9

28.8

30.5

20.5

18.3

0.4

Commercial Services & Supplies

0.2%

-29.2%

4.9%

51.6%

-

-

-

-

-

-

-

-

-

-

-

Consumer Durables & Apparel

1.1%

-13.5%

-16.6%

43.7%

13.2

14.0

12.2

9.3

2.6

1.7

17.6

5.5

3.0

2.0

-0.2

Consumer Services

2.1%

-14.3%

-36.0%

-15.8%

-

-

-

-

-

-

-

-

-

-

-

Diversified Financials

5.4%

-29.1%

-11.2%

119.2%

18.8

19.9

18.3

13.5

2.3

-

13.6

32.5

24.8

119.7

-0.3

Energy

5.6%

-12.4%

-12.7%

2.2%

12.7

10.8

11.1

7.4

4.1

3.1

31.1

25.7

20.7

16.0

1.6

Food, Beverage & Tobacco

10.3%

-11.0%

-36.4%

17.4%

12.1

11.6

10.3

7.0

4.8

3.2

33.9

32.6

18.4

19.9

-

Household & Personal Products

0.2%

-19.4%

24.8%

67.1%

37.8

23.1

19.2

7.8

0.8

1.1

3.6

23.8

7.1

3.0

1.0

Insurance

6.6%

-25.5%

-31.0%

-36.0%

20.1

16.8

14.8

10.0

1.7

3.6

8.7

24.5

2.0

9.5

-0.9

Materials

9.6%

-20.7%

-17.9%

35.0%

10.7

10.8

9.6

7.8

3.5

2.8

26.1

28.1

22.6

21.5

-0.2

Pharmaceuticals & Biotechnology

1.5%

-18.2%

-8.3%

10.3%

18.9

10.7

9.1

4.9

3.6

2.1

17.4

44.4

10.7

8.7

-0.2

Real Estate

17.8%

-28.5%

-1.7%

8.3%

28.0

26.5

19.0

11.3

4.5

0.8

21.7

48.3

41.1

33.5

1.3

Retailing

3.8%

-15.1%

-12.1%

41.7%

12.3

11.3

10.4

6.1

3.7

2.6

26.8

11.3

6.8

4.8

-

Transportation

2.2%

-21.8%

-1.4%

120.9%

13.6

16.4

17.8

7.2

1.8

1.0

13.4

21.0

16.2

12.7

0.5

Utilities

3.7%

-28.7%

8.9%

70.5%

7.9

7.1

6.1

6.3

1.6

5.9

19.9

40.6

38.7

39.8

0.5
* The Sector valuation table is calculated by VAM in-house Company Analysis System  VCAS.
** Vietnam Market comprises of both the Ho Chi Minh Stock Exchange (HoSE) and the Hanoi Stock Exchange (HNX).
Source: VAM, 07.12.2009

Filed under: Exchanges, News, Risk Management, Vietnam, , , , , , ,

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