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

Dark Pools in Danger ?

Increasing regulatory supervision and calls for transparency on one side and  the threaten proliferation of “unregulated and opaque”  Dark Pool and crossing networks by large institutions, have increased the calls by exchanges and exchange federations to review regulation and even ban them.

While the global debate is in full swing, China has clearly distance it self from any alternative trading venues in the country and prohibited the access to any “non-transparent” trading venues like dark pools for it’s QDII (Qualified Domestic Institutional Investors).

Below Article highlight the current trends and voices

SEC to extend probe into dark pools 09.10.2009

The Securities and Exchange Commission is to extend its regulatory probing of dark pools to include issues surrounding high frequency trading, direct market access and co-location.

What’s the Matter with Dark Pools, 02.10.2009

Dark pools are on the regulatory front burner. They’re seen as competing with the displayed markets, even as they’ve captured a segment of trading from the desks of broker-dealers’ upstairs.

The Securities and Exchange Commission is now bearing down on issues related to trading in dark pools and how much flow can execute in individual pools without triggering obligations to the rest of the marketplace. To provide some perspective on this broader discussion….

LSE and Turquoise an Item: Official, 01.10.2009

When we suggested here a few weeks back that the London Stock Exchange take a look at on-the-block Turquoise as a possible solution to its ‘TradElect problem’ it was slightly tongue in cheek. After all, we knew the LSE was in talks with MillenniumIT and it looked on paper as if an approach to Turquoise would amount to the exchange losing face to an upstart rival.

Dark Pools 2009: Not So Dark Anymore AITE Group, 30.09.2009

Only two things about dark pools are clear at this time: their overall market share continues to grow, and regulatory intervention appears inevitable.

London Stock Exchange to leave FESE  30.09.2009

But the move is a sign that a recent criticism by some of the world’s largest exchanges of the large banks’ off-exchange activities is not shared by some exchanges, which see their interests increasingly aligned with those same banks.

n a letter to Eddy Wymeersch, chairman of the Committee of European Securities Regulators, Ms Hardt said FESE believed the banks’ dark pools were “unregulated venues” operating with “full opacity”. The European equities market was “becoming a dealer market”.

Chi-X Global alleges ‘fear card’ move by ASX 30.09.2009

The head of Chi-X Global, the equities trading platform, on Wednesday accused the Australian Securities Ex­change of playing the “fear card” after the exchange’s chairman spoke of the dangers of allowing multiple share trading venues.

New ideas fail to lift mood over dark pools 24.09.2009

Yet even as dark pools continue to generate eye-catching ideas, controversy is raging over their very existence. In Europe, the issue is pitting exchanges against big banks in a new battle over control of billions of dollars in share trading orders.

Exchanges call on G20 to tackle dark pools 23.09.2009

The World Federation of Exchanges (WFE) has urged G20 leaders to press for market reform to tackle the uneven playing field and eroded price discovery it claims has been caused by the emergence of alternative trading platforms such as dark pools.

In a letter sent to Mario Draghi, head of the financial stability board at the Bank for International Settlements ahead of the G20 summit in Pittsburgh, the WFE calls for more uniform rules between exchange-traded and “less-regulated” markets.

The WFE warns: “The heightened opacity of certain market operations in many countries inhibits price discovery and may lead to negative outcomes, such as increased volatility.”

“Taken together, the combination of the absence of a level playing field between execution venues and decreased market transparency is an unsettling development,” says the letter, signed by William Brodsky, chairman of the WFE.

The exchanges call on G20 leaders to agree on ways to avoid “regulatory arbitrage” to ensure market participants do not just go to countries with weak rules.

Source: Finetik, 01.10.2009

Filed under: Australia, Exchanges, FiNETIK Articles, Japan, News, Risk Management, Trading Technology, , , , , , , , , , , , , , , ,

Impact of growing Market Data Volums – Shanghai Stock Exchange

See Market Data Volums Presenations (download) as presented on October 18th, 2007 in Shanghai to China’s financial information vendor and user community. Trend and Solutions in of the growing market data volum.  An event jointly organized between SSE Infonet (Shanghai Stock Exchange) and FISD

Source: 18.10.2007 FiNETIK, Stephan Stadelmann

Filed under: Asia, China, Data Management, Data Vendor, Exchanges, FiNETIK Articles, Library, Market Data, Standards, , , , , , , , , , , ,

Asian Exchanges – The Awakening (Part III): All Change at the Ho Chi Minh Stock Exchange

By Stephan Stadelmann, FINETIK

Published in AsiaMarketsIT.com in Your Say At 01 Sep 2007 15:49:37

Ho Chi Minh Stock Exchange (HOSE) is the new name of HoSTC (Ho Chi Minh Securities Trading Centre), as of August 8 2007. And it is not only the name that has changed. Following the transformation, HOSE is considering plans for its equitisation, and at the same time plans to sell shares to foreign investors.

Continuous Trading, at Last

Also with the transformation comes a flurry of tighter rules and finally the long-postponed introduction of continuous trading. That said, it will be limited to one session, between two end-of-session matching sessions, in contrast to HaSTC (Hanoi Securities Trading Centre), which has been trading continuous matching for a while.

The several previous attempts to introduce continuous matching sessions were not successful because many of the securities brokers were technologically not ready to deal with continuous matching. This inhibitor seems at least partly to have been resolved.

At the same there has been a flood of applications for securities brokerage licences, and if all should be approved by early to mid-next year there would be around 150 securities house in the market (up from about 50 currently), fighting for a piece of the US$30-100 million daily trading volume.

Where as in the US and Europe low latency is the hot topic currently, with companies offering services and products to support financial institutions battling for milliseconds per transaction, in Vietnam brokers still have to shuffle papers before they manually enter trades on the trading floor. At times this means they are missing orders due to time constraints, and they are also inhibited by just the human limit on numbers of orders that can be entered. As a result what can’t be done today will be done tomorrow and investors are kept waiting.

Setting the Scene for a Technology Arms Race

To ensure that HOSE (and HaSTC) can grow and expand in trading volume and system development (Vietnam’s exchanges are expected to capitalise 50 per cent of the country’s GDP by 2010), it has extended its membership qualification to include technological, customer service and other requirements.

This has sparked a technology arms race among the leading securities houses and the new ones, which are dead serious about snatching away a part of the market share of the top five brokers that control around 90 per cent of the 250,000 trading accounts.

Add to this the fact that currently there are only eight empty desks available on the HOSE trading floor, which translates into 24 broker seats. Normally a new broker gets two seats, so there is only room for 12 more firms to join. The number of firms that have been granted in-principal new licences is already much higher than that and many more are still waiting for approval.

HOSE has however confirmed that in early 2008 the trading floor will become obsolete and securities houses will have their trading stations connected directly to the bourse trading systems. That is, for those that are ready.

Filed under: Exchanges, FiNETIK Articles, FIX Connectivity, Library, Market Data, News, Risk Management, Trading Technology, , , ,

Asian Exchanges – The Awakening (Part II): FIX in China

By Stephan Stadelmann, FINETIK

Published in AsiaMarketsIT.com, on 01 May 2007 10:37:01

Back in 2005, I attended the first FIX Conference held in Shanghai. Although great numbers of local attendees showed up curious to learn about FIX, most local participants did not see much benefit in FIX for China.

Regardless of the bureaucrats’ strive to carefully loosen the tight network of regulations, China’s markets hit record lows and a fiercely competitive battle between securities houses squeezed margins. Little or no money was left to invest, making it an environment of bare survival. This was the situation less than two years ago despite the hype in the foreign press about China, which continued through all this time.

Despite this turbulence below the surface, the Shanghai Stock Exchange (SSE), the Shenzhen Stock Exchange (SZSE) and the China Securities Regulatory Commission (CSRC) understood the importance of FIX, and bought into the vision that a unified, standardised exchange trading protocol and interface would simplify infrastructure for market participants and exchanges in the long run. They also appreciated such unification would drive down IT expenditure, including support and maintenance, for the diverse market participants in China’s vast financial market, and prepare them for foreign competition.

In March 2003, the SSE and SZSE started to jointly develop a Chinese version of the FIX protocol called Standardized Trading Exchange Protocol (STEP), and in November 2003, CSRC set up the STEP Sub Committee, with founding members CSRC, SSE, SZSE, Shanghai Futures Exchange (SHFE), HuaXia Securities, GuoXin Securities and TaiYang Securities. The committee was given the task of building a standardised protocol, considering first and foremost the needs of the Chinese markets. In 2005, SSE joined the global FIX Protocol Limited (FPL) organisation and in 2006 FPL’s subcommittees for exchanges and ECNs.

Today, the STEP protocol is being implemented, based on FIX 4.4 with some minimal exchange specific variations in the SSE and SZSE versions. In other words FIX.

SSE tested its STEP engine as early as 2006 and will be deploying the engine to its market participants as part of the New Generation Trading System (NGTS), which will be operational later this year. SZSE will follow shortly, and both exchanges will be ready by the end of 2007.

However not all members will be ready or are willing to embrace STEP from the beginning. Large brokers and asset managers and those with foreign involvement will be the first to accept the new protocol. Smaller brokers and those in the process of restructuring are hesitant to accept and deploy STEP.

Concerns remain among some of China’s market participants about STEP, specifically with regard to performance in handling order volume, reliability and local support. So NGTS will provide direct market access (DMA) in parallel through two protocols, one being STEP and the other being the SSE’s current proprietary exchange protocol.

As a logical consequence, market data will follow, in FIX compatible format, once NGTS has been released into production.

All of this will happen – in the best case scenario – in time to coincide with Qualified Foreign Institutional Investors (QFIIs) successfully pushing China to allow DMA from overseas.

Rumour has it that a few of the QFIIs are already preparing for DMA into the Chinese markets, which represents no technical issues, but has not legally been deregulated. For Chinese domestic brokers and asset managers (regulated differently from foreign QFIIs) DMA is legally possible. However, SSE’s exchange members are required to separate reports to regulators for domestic and foreign order flow and hence QFII orders need to stop at the local executing brokers’ desks.

The writing is on the wall!

It used to be said that when US markets sneeze, Asian and European markets will get the flu. However, this might change. The sharp drop in China’s markets in February could be a portent: for the first time in decades, US markets suffered a drop caused by another country’s exchange, and not vice versa. We might have passed a historical turning point, and China’s exchanges seem to be preparing to take on the challenge.

Filed under: Asia, China, Exchanges, FiNETIK Articles, FIX Connectivity, Indonesia, Library, Malaysia, Thailand, Trading Technology, Vietnam, , , , , , , , , , , , ,

Asian Exchanges – The Awakening (Part I)

By Stephan Stadelmann, FINETIK

Published in AsiaMarketsIT.com on 01 Apr 2007 12:35:53

The Asian Century

During the past decade, Asia has fallen periodically in and out of favour with investors globally. Excitement has been followed by caution, which has been followed by excitement once again. Today’s focus on Asia, which owes much credit to the rise of the Chinese and Indian markets, shows signs of becoming a stable period of global investment into Asia. It is no coincidence that some analysts have called this the “Asia Century”. Against this backdrop, the exchanges in the Asia-Pacific region have lagged behind their US and European competitors (with perhaps the exception of the Australian Stock Exchange (ASX)).

However, with hindsight, this could turn out for the better for Asia’s exchanges, as it gives them ample opportunity to study the ingredients of past successes and failures. Governments in Asia are much more involved in the business of exchanges than in Western countries, and the process of deciding on change, and how to execute such change, can be cumbersome, and might follow paths that are not always obvious to the observer, or to external firms that decide to pitch for any business with Asian exchanges. However, once Asian exchanges have decided to make change, they tend to be genuinely determined to carry it through.

Challenges and Opportunities

The challenges and opportunities facing the exchanges and their market participants in what is the fastest growing part of the world are substantial.

Let’s look at China, where 2.5 million new investor accounts were added to the Shanghai Stock Exchange (SSE) in 2006 alone, making a total of 41 million accounts. The Shanghai and Shenzhen Stock Exchange exceeded a combined 80 million registered accounts in Q1 2007, and there is no slowdown in sight. SSE’s existing trading system is scheduled to be replaced in Q3 2007 with new generation trading systems designed to accommodate at least 80 million accounts, 20,000 order matches per second and a scalable minimum of 63 million executions a day. The new systems will cater for multiple asset classes such as cash equities, funds, warrants, bonds and financial and commodity derivatives.

Another much talked-about market is Vietnam’s HoSTC (Ho Chi Min Securities Trading Centre). HoSTC is at a very different crossroads on its path to growth and deregulation from that of the SSE, but there are similarities. HoSTC is also doubling its number of trading accounts, and the pilgrimage of foreign institutional and retail investors into Vietnam is ongoing. The demand for investing into the exchange manifests itself in some very peculiar forms: for example, travel agents in Japan sell tour packages to Vietnam that offer tourists the opportunity to open “a trading account (on HoSTC) after your tour of the Museum of American War”. Such tactics aside, the order placement, matching and trade execution processes on HoSTC are still extremely laborious and manual today. By May 2007, continuous trading will be introduced, and by mid-2008 a new trading system with electronic direct market access (DMA) is scheduled to be in place.

From a technology perspective, the global FIX protocol standard has been accepted by stock exchanges in the Asia-Pacific region. However, though interest is on the rise, adoption in practice is slow. Exceptions to this are ASX, leading the way in Asia (using FIX for trading and market data), followed by the Singapore Stock Exchange (SGX). Bursa Malaysia (BM) and the Stock Exchange of Thailand (SET) are following, by launching FIX connections to their trading terminals. China’s Shanghai and Shenzhen Stock Exchanges are leveraging the concept of the FIX protocol, albeit in a modified form: they are using what they term STEP, Securities Trading Exchange Protocol, for their internal benefit.

Legacy System Replacement

There is a need for most if not all exchanges in Asia to replace their current legacy systems. This requirement is being driven by the demands of inflowing investments that compel the exchanges to cope with high volume growth and demand for DMA. While foreign market players are the driving force, domestic participants are increasingly starting to engage in DMA, and domestic trading volumes are also on the rise. Asia’s exchanges are also under pressure to extend their product ranges for foreign investors. This, coupled with the need to increase trading capacity, further confirms the trend to replace legacy systems. The Asia-Pacific region is an increasingly competitive environment in which markets are fighting for an increased share of incoming investments, and one highly visible marketing strategy is to publicise plans to replace and upgrade legacy exchange systems. This may, to some extent, explain why some of the more conservative exchanges seem to be executing such replacement projects half- heartedly in the eyes of foreign market participants and the international software firms that are trying to win these exchanges’ lucrative and prestigious technology replacement projects.

Asia endeavours to be self-sufficient. As a result, its exchanges believe there are opportunities to promote and sell their own trading technologies to other exchanges within the region. For example, SET, BM and Korean Stock Exchange (KRX) are becoming de facto technology vendors to emerging markets like Vietnam. At the opposite end of the spectrum, FT India, a trading systems technology provider, has emerged as a dominant exchange in India with MCX (Multi Commodity Exchange), and owns part of DGCX (Dubai Gold & Commodity Exchange). FT India is currently expanding its activities through active involvement with other exchanges in the region, providing consulting and trading systems.

Market Data

On the market data side, the SSE Infonet business of the Shanghai Stock Exchange launched in Q2 2006 a new level 2 market data feed with a new stringent business model for the exchange data industry. The Hong Kong Exchange (HKEx) and SSE Infonet have now agreed to distribute each others’ market data feeds for cross-listed and specifically selected stocks. Similarly, the Tokyo Stock Exchange and the New York Stock Exchange have agreed to a cross-continental distribution of some of their data.

Another hot topic within the Asian exchange industry is the merging of separate exchanges for cash products, financial derivatives and commodities derivatives, with all the implications of such moves for products and technology.

Last but not least, the expectation of cross-country exchange mergers and alliances has been fuelled by a recent flurry of (often vague) memoranda of understanding between several exchanges in Asia and European and US exchanges wishing to create a presence in Asia.

The activities among Asia’s exchanges in 2006 and early 2007 are only the tip of the iceberg. Stay tuned…

Stephan Stadelmann is a founding partner  of FINETIK Partners.
http://www.finetik.com

Filed under: Asia, Australia, China, Data Vendor, Exchanges, FiNETIK Articles, FIX Connectivity, Hong Kong, India, Japan, Korea, Library, Malaysia, Singapore, Thailand, Trading Technology, Vietnam, , , , , , , , , , , , , , , ,

METABIT and NextView sign Multilingual Asian Order Routing and Market Data Pact.

Singapore, April 16, 2007 – NextVIEW Pte Ltd (NextVIEW), the leading Pan Asian financial information vendor and MetaBit Systems Co., Ltd. (MetaBit), specialist provider of FIX DMA trading solutions, have signed a Memorandum of Understanding during Singapore’s ATIC Asian Traders and Investors Convention on 14/15 April, to leverage their services and offer information data services with FIX compliant institutional DMA and algorithmic trading in Asian markets. With this strategic alliance, NextVIEW and MetaBit will cater to the needs of buy sides across Asia, who trade equities, derivatives, and commodities across multiple markets throughout the region. Clients will be able to interactively combine NextVIEW’s real-time market data and charting tools with MetaBit’s XiliX intuitive DMA trading platform.

This new service offered by two companies that are both home to Asia, represents an attractive value proposition to institutional investors who trade across international borders into Asian markets.

Initially, the service of interactively leveraging NextVIEW’s market data and charting terminals with XiliX, will be provided for markets in Japan, Hong Kong, Australia, Taiwan, Korea and Singapore, with ASEAN and Indian markets to follow. This will represent a multi-asset offering, spanning cash equities, index futures and options, and commodity futures.

“Teaming with MetaBit will create an excellent value added proposition to NextVIEW’s existing clients that increasingly look to convert analytics and real-time market information into an order, placed directly on Asian exchanges,” says Stephen Lai, NextVIEW CEO, “NextVIEW is an Asian information service provider that is unique and has been looking for a partner that is equally focused on Asia, with a deep understanding of the region’s needs.”

“The planned offering with NextVIEW will be the first truly Pan-Asian solution by providers that have their origin in Asia,” says Daniel Burgin, MetaBit CEO, “MetaBit and NextVIEW both have an intrinsic know how of local markets, with services to complement each other. By combining financial information with cross market DMA connectivity, XiliX will further grow as a multi-asset, multi-market trading solution, catering to the needs of domestic market participants as well as overseas investors trading into Asia.”

About NextVIEW Pte Ltd

NextVIEW Pte Ltd (NextVIEW) is the leading Pan Asia financial information vendor that provides real-time streaming market data, news and analytics solutions, decision support tools to securities brokerage firms, financial services institutions and private traders in more than 10 countries in Asia.

NextVIEW’s Investor Education division actively partners with the leading and emerging securities exchanges, international, regional and local securities brokerage firms in Asia to provide timely and relevant educational programs in English, Chinese, Thai, Vietnamese and other Asian languages.

Headquartered in Singapore, NextVIEW operates direct offices in Kuala Lumpur, Bangkok, Hong Kong, Shanghai, Ho Chi Minh City and will open its first India office in Mumbai during the first half of 2007.

NextVIEW is an authorized data vendor of major financial and commodity exchanges from USA, Europe and Asia, such as CME, CBOT, NYMEX, COMEX, LIFFE, SGX, Bursa Malaysia, Stock Exchange of Thailand, Agricultural Commodity Exchange of Thailand and Thailand Futures Exchange and regional distributor of Dow Jones Equities, Commodity and Forex news. For more information please visit http://www.thenextview.com

About MetaBit

MetaBit is the provider of MLH (Market Liquidity Hub), an Asian broker portal that currently provides buy sides Direct Market Access (DMA) to nineteen brokers and access to eleven exchanges. The MLH, powered by the world leading CameronFIX platform, is accessible through MetaBit’s intuitive buy side trading tool XiliX, or via the FIX Protocol. MetaBit is the only provider of pure FIX market connectivity to TSE, OSE, JASDAQ and TOCOM. MetaBit actively promotes FIX throughout Asia and offers FIX testing and certification services to the industry.

Partners include leading network and hosting provider BT Radianz, number one FIX platform provider Cameron Systems, market data and trading consultancy specialist FINETIK Partners, and renowned FIX testing and certification system provider Greenline Financial Technologies. XiliX and MLH are registered trademarks of MetaBit. For more information please visit http://www.meta-bit.com

Filed under: Data Vendor, FiNETIK Articles, Japan, News, Singapore, Trading Technology, , , , , , , , ,

Asia Reference Data Survey, London Stock Exchange

Explicit survey of the Asian reference data landscape, survey done on behalf of London Stock Exchange

Asia Reference Data Survey 2006 – English

Asian Reference Data Survey 2006 – Chinese

Asian Reference Data Survey 2006 – Japanese

Source: Finetik, 10.04.2006

Filed under: Data Management, Data Vendor, Exchanges, FiNETIK Articles, Library, Market Data, Reference Data, Risk Management, , , , , , , , , , , , , , , , , , , , , , , ,

Exchange Data Products – Opportunities and Challanges

White paper discussing opportunities and challenges in productising reference data, market data, disclouser information, news,etc. from an exchange perspective and how to build and structure profitable information products. Exchange Information Productisation – Opportunities and Challanges

Source:FiNETIK,  Partners, March 2003

Filed under: Asia, Data Management, Data Vendor, Exchanges, FiNETIK Articles, Library, Market Data, Reference Data, Singapore, Standards, , , , , , ,

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