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Post-MiFID Market Surveillance: New Obligations and Opportunities
Post-MiFID Market Surveillance:
New Obligations and Opportunities
Executive Summary
Surveilling the markets has always been part and parcel of trading, and changes in surveillance needs have been evolutionary. Yet the metamorphosis of market structure that has been facilitated by the changes that have occurred since the introduction of MiFID are so comprehensive, that changes in market surveillance needs more closely resemble a revolution than an evolution.
As the universe of players, venues and data has expanded overnight, surveillance products need to be overhauled to keep up. The simpler, orderly picture, neatly framed, with relatively simple technology requirements capable of handling and observing discrepancies in trading activity off a single data stream, has disappeared. Competition and algorithmic trading are redefining trading behaviour, and the fragmentation of liquidity across different regulatory jurisdictions requires surveillance programmes to be re-thought. As exchanges launch MTFs, new MTFs come to market looking for hockey-stick paths of growth, and brokers look to optimise execution in their internal crossing networks, there is new pressure on surveillance systems that are an exact fit for purpose and a commercially viable solution.
Alongside the demand for market surveillance is the need to prove market integrity, show best execution and create a competitive edge.
While the participants examine the risk/reward trade offs and technology alternatives and this is creating an opportunity out of what was an arcane regulatory function. The wealth of information that is captured with electronic trading can be analysed and leveraged, as products spill over from surveillance to analytics. This will make it easier to provide snapshots of best execution on demand, distribute dashboards to clients who are hungry for better visibility, and use market replay tools to understand, educate and improve execution strategies.
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Source: TABB Group
STOXX Indices To Be Renamed
March 1, 2010--- STOXX Limited, the leading provider of European equity indices, today announced that the “Dow Jones” prefix will be removed from the names of all of its indices, effective immediately. Additionally, name changes have been made to the regional indices for Europe, as well as to the theme indices.
“With its innovative approach to regional indexing, STOXX has become the leading European index provider. While the Dow Jones brand contributed to this success in early days, STOXX now finally has the opportunity to grow globally. We are certain that our heritage of innovation and quality will help us repeat the European success on a global level,” said Hartmut Graf, chief executive officer, STOXX Limited. “Today, we are taking the first step towards the future with the removal of the Dow Jones prefix and the restructuring of our index naming conventions.”
The “Dow Jones” prefix is being removed from all STOXX indices to reflect the entity’s new ownership structure: In December 2009, Deutsche Börse and SIX Group acquired the share of STOXX Limited previously owned by Dow Jones & Company. The use of the Dow Jones brand in the names of licensed financial products is permitted until the end of 2010.
In addition to this change, all regional STOXX indices covering the European markets will include “Europe” in their names. Examples are the STOXX Total Market Index, STOXX 50 Index or STOXX 600 Index and their respective sector indices, which will be renamed STOXX Europe Total Market Index, STOXX Europe 50 Index and STOXX Europe 600, respectively. Index names for indices covering the Euro-zone, Asia/Pacific or American regions -- like the flagship index EURO STOXX 50, the STOXX Asia/Pacific 600 Index, STOXX Americas 600 Index and their respective sector indices;
as well as the global STOXX Global 1800 Index, remain unchanged. Furthermore all theme indices will include a regional description to reflect their composition, e.g. the STOXX Grand Prix Index and STOXX Football Index will become the STOXX Global Grand Prix Index and STOXX Europe Football Index, respectively. The new naming conventions are meant to provide better regional identification of indices as the STOXX index family will be enhanced globally.
For a complete list of new index names and corresponding symbols, please visit http://www.stoxx.com/download/data/vendor_codes.xls.
Source: STOXX
Regulation must not stifle lending
March 1, 2010--Regulation must not stifle lending or hold back economic recovery the British Bankers' Association said tonight.
Responding to Lord Mandelson's annual Mansion House speech BBA chief executive Angela Knight said she welcomed the First Secretary of State's comment that the economic recovery could be threatened if banks face new regulations, combined with tighter capital and liquidity requirements, from different directions at the same time.
Mrs Knight said that banks were already acting to improve their own controls and to strengthen their balance sheets. She agreed with Lord Mandelson that action on regulation needed to be co-coordinated and action taken in step internationally.
Source: British Bankers' Association
Boerse Stuttgart achieves a trading volume of EUR 7.3 billion in February
Trading in international equities increases by 114 percent in a year-on-year comparison/ turnover in securitised derivatives at previous year's level/ volumes more than treble for participation certificates
March 1, 2010--Boerse Stuttgart's order book statistics showed a trading volume of EUR 7.3 billion in February 2010. Trading in equities saw some strong growth and with a volume of EUR 709 million (98 percent) had almost doubled in comparison with February 2009.
International equities accounted for a volume of EUR 187.4 million. This means that turnover was up by 114 percent compared with February 2009. Turnover in German equities reached EUR 521.5 million, equivalent to a growth of 94 percent in comparison with February 2009.
In February 2010 private investors' trading activities in securitised derivatives was at the same level as in February 2009 (EUR 3.8 billion) and 5 percent down on the previous month's figures. In the area of securitised derivatives, trading in leverage products amounted to EUR 2.0 billion while investment products rose by 10 percent as compared with February 2009 (EUR 1.8 billion).
In February trading with fund units accounted for a volume of EUR 509.6 million, an increase of 69 percent in a year-on-year comparison. Investors showed a particular interest in passively managed funds, known as ETFs, which achieved a trading volume of EUR 419 million. Trading in ETFs was 6 percent up on the previous month's figure and 74 percent higher than in February 2009. Bond trading, the second-biggest asset class at the Stuttgart Stock Exchange, achieved a volume of EUR 2.1 billion.
Trading volumes in participation certificates trebled in comparison with the figure for February 2009, reaching EUR 74.7 million "This sharp increase in volumes can mainly be attributed to turnover in the participation certificates issued by banks, which reflects investors' increasing confidence in the banking sector," said Oliver Hans, Managing Director of Baden-Wuerttembergische Wertpapierboerse.
Source: Boerse Stuttgart
Exchange Council of the Frankfurt Stock Exchange Resolves Introducing Xetra Specialists for Equities and Fixed-Income Securities
Transitional period for lead broker-based trading until March 2012/ Deutsche Börse’s economic role ensured/ In future, exclusively „Xetra specialists“ active in the Trading Hall/ Frank Gerstenschläger confirmed in office for a three-year term
March 1, 2010--On Monday, the Exchange Council of the Frankfurt Stock Exchange (FWB) resolved unanimously to terminate lead-broker based floor trading on the regulated market with effect as of 28 March 2012. The lead brokers at the Frankfurt Stock Exchange support this transition.
Once the transitional period has expired, trading on the regulated market of the Frankfurt Stock Exchange will be conducted exclusively via the Xetra electronic trading system. Specialists who ensure sufficient liquidity in electronic trading will replace lead brokers. For some time now, the specialist model has been successfully used for trading structured products on Scoach as well as in fund trading on Xetra. Even when floor trading is terminated in 2012, the Trading Hall at the Frankfurt Stock Exchange will remain. Xetra specialists are also required to be present in the Trading Hall.
In taking this move, the Exchange Council addresses the development in the Frankfurt Stock Exchange’s competitive and regulatory environment in recent years. Issuer and trading participant requirements for a modern trading venue, along with increasing national and international competitive pressure as well as current regulatory and market developments have, in particular, called presence trading into question. In order for the Frankfurt Stock Exchange to remain competitive, it is necessary to further improve trading quality through performance-oriented specialists who provide liquidity. This measure is intended to ensure international investor access to all tradable securities. The Exchange Council’s adoption of the resolution for floor trading to be completely replaced by specialists in the fully electronic trading system Xetra by March 2012 will achieve these goals.
Dr Lutz Raettig, Chairman of the FWB Exchange Council, said: "In adopting this resolution, we ensure that the Frankfurt Stock Exchange can optimally fulfill its economic function as a stock exchange under considerably changed market conditions as well.”
The Exchange Council welcomes the mutually agreed initiative of the lead brokers to end floor trading even earlier than 28 March 2012. As soon as a smooth transition to the specialist model has been ensured, the Exchange Council will discuss moving up the planned 28 March 2012 transition period deadline to end floor trading.
Furthermore, the Exchange Council confirmed Frank Gerstenschläger as chairman of the FWB board for a three-year term.
Source: Deutsche Börse
Xetra Turnover up by 25 Percent in February
14.3 million trades executed on Xetra/ Total volume of 114.6 billion euros traded on all stock exchanges in Germany
March 1, 2010-- In February, 103 billion euros were traded on Xetra and on the floor at Börse Frankfurt – an increase of 23.5 percent year-on-year (February 2009: 83.4 billion euros). Of the 103 billion euros, 96.9 billion euros were traded on Xetra, an increase of 25 percent year-on-year (February 2009: 77.2 billion euros). 6 billion euros were traded on the floor, a decrease of 1.6 percent (February 2009: 6.1 billion euros).
Turnover in German equities amounted to 87.9 billion euros, while foreign equities turnover stood at 12 billion euros. Xetra and the floor at Börse Frankfurt accounted for 97 percent of the transaction volume in German equities on all stock exchanges in Germany. 92 percent of foreign equities traded on stock exchanges in Germany were traded on Xetra and on the floor in Frankfurt.
In February, 14.3 million transactions were executed on Xetra, an increase of 9 percent against the same period last year (February 2009: 13.1 million).
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Source: Deutsche Börse
Average Daily Volume of 10.6 Million Contracts at Eurex and ISE in February
Interest rate derivatives segment at Eurex grew by 36 percent y-o-y/ Eurex ADV increased by 8 percent y-o-y
March 1, 2010--In February 2010, the international derivatives exchanges of Eurex Group recorded an average daily volume of 10.6 million contracts (Feb 2009: 10.7 million).
Of those, 7.45 million were Eurex contracts (+ 8 percent) and 3.15 million contracts were traded at the U.S.-based International Securities Exchange (ISE). In total, 149.0 million contracts were traded at Eurex and 59.8 million at the ISE.
In its largest product segment – equity index derivatives – Eurex recorded a small increase and achieved 67.1 million contracts (36.3 million index futures and 30.8 million index options), compared with 66.5 million contracts the year before. Futures on the EURO STOXX 50® Index stood at 31.3 million contracts and 22.9 million on the options of this index.
Source: Eurex
FSA finalises new framework for financial penalty-setting
March 1, 2010--The Financial Services Authority (FSA) has today published its new penalties policy, which establishes a consistent and more transparent framework for the calculation of financial penalties, and which could see enforcement fines treble in size.
Under the new framework, fines will be linked more closely to income and be based on:
Up to 20% of a firm’s revenue from the product or business area linked to the breach over the relevant period;
Up to 40% of an individual’s salary and benefits (including bonuses) from their job relating to the breach in non-market abuse cases; and
A minimum starting point of £100,000 for individuals in serious market abuse cases.
view the Enforcement financial penalties Feedback on CP09/19 document
Source: FSA
ECX Monthly Report - February 2010
March 1, 2010--TRADING VOLUMES: 2010 ECX volumes continue to grow – February’s total showed a modest year-on-year increase to reach 458,942 contracts, up 10% on January. Screen traded volumes continue to climb with EUA Futures alone trading over 10,000 contracts per day (a total of 200,193 contracts during the month).
PHASE III TRADING: The Dec 13 Futures contract became increasingly active; it traded every day and total volume hit 15,150 contracts – open interest has reached 16,549,000 tonnes in the Dec 13 and 715,000 tonnes in the Dec 14. ECX Dec 13 options are scheduled to be introduced in March.
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Source: ECX
Pan-European ETF AUM reaches all-time high
March 1, 2010--Assets under management in the pan-European exchange-traded funds segment showed a high growth pattern over the year 2009, gaining 47.37 per cent to EUR162.49bn, research by Lipper has found.
The report says this movement was not surprising, since in the positive stock market environment all asset classes—with the exception of money market funds—enjoyed inflows.
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Source: ETF Express
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