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A CESR analysis sees room for better compliance with IFRS disclosures
November 2, 2009--CESR publishes today an analysis (Ref. CESR/09-821) of the compliance of European financial institutions with disclosure requirements related to financial instruments. For the purposes of the analysis, CESR reviewed the 2008 year-end financial statements of 96 listed banks and/or insurers, including 22 companies from the FTSE Eurotop 100 index.
The findings revealed that, in some areas, a significant proportion of companies failed to comply with mandatory disclosure requirements relating to financial instruments, for example regarding the use of valuation techniques and on relationships with special purpose entities (SPEs).
Source: CESR
New TABB Group Research Shows Dark Trading in Europe is on the Rise
Buy-Side Traders Say Better Aggregation and More Innovation Needed to Optimise Execution
November 2, 2009--As the SEC in the US puts pressure on measuring and defining dark pool activity, the same debate is occurring in Europe, where buy-side equity traders are having a love-hate relationship with the dark. Trading in dark environments is estimated by TABB Group, the capital markets research and consulting firm, at 4.1% of daily turnover in major European markets, forecast to increase 7% in 2010 as buy side traders acquire the knowledge, tools and insight to increase their confidence to trade where they cannot see.
According to Miranda Mizen, a principal at TABB and author of a new research report, “Trading in the Dark in Europe: Choice and Complexity on the Cusp of Change,” trading in the dark is just scratching the surface of its potential in Europe.” Although the infrastructure for trading in a multi-layered, pan-European marketplace is largely in place, the buy side is still adopting and upgrading tools, the sell side is expanding the intelligence of algorithms and traders tell TABB that they need time to adjust.
Across the market, algorithms are becoming better at preventing information leakage, and spotting crossing opportunities and liquidity aggregators is gaining in sophistication. Data is available to those who know what they want, when they want it and have the means to process it when they receive it. Still, in a European marketplace very much in flux, the buy side is picking through a plethora of algorithms, leading TABB Group to pinpoint eight questions buy-side traders should ask about their broker’s dark strategy to determine what, where, when and how their order is being traded.
According to Mizen, the pending regulatory review in Europe should add clarity, review the MiFID waivers and remove the ambiguity around dark environments, thereby anchoring dark trading as a legitimate alternative that complements the lit markets. “Regulation may restrict unfettered expansion of dark environments by raising the bar on competition, but it will also marginalise those with paltry liquidity.” Current reporting standards, the spectre of a regulatory review and lack of volume in some have created uncertainty about how much volume is traded in the dark, and a reluctance to share.
TABB Group estimates there are 33 dark environments operated by a combination of brokers, lit multi-lateral trading facilities (MTFs) and exchanges but the large choice “does not de facto add to the quality of the dark environment,” says Mizen. Unless regulation becomes a barrier, TABB Group believes the number of dark environments will continue to increase but “as liquidity splinters, this will work against the buy side as liquidity becomes harder to find without leaking information,” and this increases the need for smarter aggregation.
Knowledge, tools, visibility and standardisation create greater demand for differentiation and innovation, and this will result in the concentration of liquidity in the more sophisticated environments. If providing transparency in the marketplace and shedding light on the mechanics sounds juxtaposed when it comes to dark liquidity, it is because this is a work in progress. “The best is yet to come as innovation takes off in earnest and the stakes are raised to attract order flow into the dark; but only the most sophisticated will be able to show the kind of value for which the buy side is willing to pay a premium,” concludes Mizen.
The 25-page report with 12 exhibits is an in-depth analysis of interviews with 16 head buy-side traders in Europe and the US, and incorporates data and analysis on dark trading from TABB Group’s “European Equity Trading Study 2009: Counterparties, Capital and Control,” where 53 head traders across the major markets of Europe were interviewed. It covers estimated daily turnover in Europe; dark environments throughout the execution chain; multiple types of dark environments; protecting order flow through three areas of innovation, e.g., functionality, aggregation and visibility; ownership structures for dark environment; choosing between trading in lit or dark environments or both; and estimated growth of dark trading in Europe, 2005-2010.
The report can be downloaded by TABB Group Research Alliance Equity clients and pre-qualified media at http://www.tabbgroup.com/login.aspx.
For an Executive Summary or to purchase the report, go to http://www.tabbgroup.com or write to info@tabbgroup.com.
Source: TABB Group
FSA chairman says 'no silver bullet' to address 'too-big-to-fail' challenge
November 2, 2009-There is no ‘silver bullet’ to address the problem of banks being ‘too-big-to-fail’, but instead the answer lies in a combination of different policies between which trade-offs can be made, according to Adair Turner, speaking this morning at the FSA’s Turner Review Conference.
Reviewing the range of options to deal with large systemically important banks, Lord Turner argued that several had achieved consensus support, in particular, higher capital standards, the need to reduce interconnectedness in derivatives markets and the development of firms’ resolution and recovery plans (‘living wills’).
Lord Turner, therefore, focused on two issues where controversy still remains, namely, the narrow banking debate and the appropriate approach to the risks created by cross-border operations.
Addressing ‘narrow bank’ proposals which seek to separate utility banking from casino banking, Lord Turner argued that an extreme narrow banking model, with retail banks investing only in government securities, was certainly practical but failed to address the crucial issue of booms and busts in credit supply and as a result, could actually increase financial instability. But he suggested that the objectives behind a ‘new Glass Steagall’ distinction between commercial banks and proprietary trading were desirable and could be pursued by appropriate capital requirements and the use of resolution and recovery plans to drive internal distinctions between retail and trading activities.
Lord Turner stressed that:
"It is essential to progress this argument beyond the top line slogans, for or against narrow banking, and get down to details. The extreme narrow banking proposal is clearly doable in practical terms, but I believe could produce a financial system even more vulnerable to instability than the one we have today. In contrast the ‘new Glass Steagall’ divide is in principle attractive, but arguably best pursued through the capital requirements we place on trading activities rather than through an attempt to write a law prohibiting some activities and allowing others."
Turning to the approach to large cross-border banks, Lord Turner said that a crucial issue was the appropriate balance between regulatory focus on whole group capital and liquidity versus focus on the soundness of standalone national subsidiaries. He argued that the more standalone approach could be an answer to the “too-big-to-rescue” challenge. If each country was responsible for resolving problems in the local operations of a global group, rather than responsibility resting solely with the home nation of the group’s headquarters, an inevitable consequence would be host countries imposing stronger local capital and liquidity standards, creating standalone national subsidiaries. Whilst some commentators have argued this could lead to a harmful restriction of capital flows, Lord Turner said that this has not been demonstrated and that authorities in several emerging markets believed that standalone national subsidiaries helped guard against harmful volatility.
Lord Turner concluded:
"It is important that these ideas are challenged and others put on the table. This is why the paper we produced on 22 October is a discussion paper not a conclusions paper, and why we hope, through this conference and subsequent initiatives, to stimulate a wide ranging debate on these complex issues."
Contributing to the debate on these issues at today’s conference were Philipp Hildebrand, forthcoming Governor of the Swiss National Bank, Shyamala Gopinath Deputy Governor of the Reserve Bank of India, António Horta-Osório Chief Executive of Abbey National plc, Josef Ackermann Chairman of the Management Board and the Group Executive Committee of Deutsche Bank and Hector Sants, FSA chief executive.
Source: FSA.org
October trading in securitised derivatives up 18 percent at Boerse Stuttgart
November 2, 2009--Total exchange turnover more than 12 percent up on previous month/ Trading in securitised derivatives shows second consecutive monthly increase/ Volume of corporate bonds traded more than double figure for October 2008
November 2, 2009--According to the order book statistics, EUR 8.6 billion of securities were traded in October 2009 at Boerse Stuttgart, Germany’s leading exchange for retail investors, equivalent to a rise of over 12 percent on turnover for the previous month. From January to October 2009, trading volume as a whole was down approximately 20 percent on the same period in 2008.
“The stock markets have been reporting strong gains since March with global increases in the region of 60 percent. In October, many retail investors seem to have taken a more sceptical view of future developments following these enormous upward movements of the market, and from the middle of the month onwards they increasingly benefited from gains.” observed Dr Rolf Deml, Managing Director of Baden-Wuerttembergische Wertpapierboerse.
read more
Source: Boerse Stuttgart
Sahara Sun 'to help power Europe'
November 2, 2009--A sustainable energy initiative that will start with a huge solar project in the Sahara desert has been announced by a consortium of 12 European businesses.
The Desertec Industrial Initiative aims to supply Europe with 15% of its energy needs by 2050.
Companies who signed up to the $400bn (£240bn) venture include Deutsche Bank, Siemens and the energy provider E.On.
read more
Source: BBC
116 Billion Euros Turnover at Deutsche Börse’s Cash Market in October
15 million trades executed on Xetra/ Total volume of 130 billion euros traded on all stock exchanges in Germany
November 2, 2009--In October, 115.6 billion euros were traded on Xetra® and on the floor at Börse Frankfurt – a decrease of 57 percent year-on-year (October 2008: 270.3 billion euros). Of the 115.6 billion euros, 108.0 billion euros were traded on Xetra, a decrease of 58 percent year-on-year (October 2008: 255.1 billion euros). 7.5 billion euros were traded on the floor.
Turnover in German equities amounted to 96 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. 93 percent of foreign equities traded on stock exchanges in Germany were traded on Xetra and on the floor in Frankfurt.
In October, 15.2 million transactions were executed on Xetra, a decrease of 50 percent against the same period last year (October 2008: 30.2 million).
According to the Xetra liquidity measure (XLM), SAP AG was the most liquid DAX® blue chip in October with 6.1 basis points (bp) for an order volume of 100,000 euros. HeidelbergCement AG was the most liquid MDAX® stock with 19.4 bp. The most liquid ETF was the db-x-trackers II EONIA T.R. 1C with 0.3 bp. The most liquid foreign stock was Total S.A. with 16.5 bp. XLM measures liquidity in electronic securities trading on the basis of the implicit transaction costs. It is expressed in basis points (1 bp = 0.01 percent); a low XLM denotes high liquidity in a security.
Deutsche Bank AG was the DAX stock with the highest turnover on Xetra in October at 6.9 billion euros. HeidelbergCement AG was the top MDAX stock at 1.9 billion euros, while Deutsche Wohnen Bank AG led the SDAX® stocks at 66.8 million euros and Aixtron AG headed the TecDAX® at 981.8 million euros. At 1.8 billion euros, the iShares DAX was the exchange-traded fund with the highest turnover.
On all stock exchanges in Germany 130.1 billion euros were traded in October according to orderbook turnover statistics – a decrease of 56 percent compared year-on-year (October 2008: 293.4 billion euros). This total includes 119.1 billion euros in equities, warrants and exchange-traded funds, as well as 10.9 billion euros in fixed-income securities.
Source: Deutsche Börse
Deutsche Börse: Deutsche Börse launches pan-European blue chip trading on “Xetra International Market”
Key markets to be linked up gradually/
Coverage of DJ EURO STOXX 50 equities by mid-January 2010
November 2, 2009--Deutsche Börse has launched the initial phase of its pan-European trading segment “Xetra International Market” (XIM). As of today, Xetra participants can trade European blue chips via XIM and settle the transactions in their domestic market. The first stocks to be available for trading on XIM are the most liquid ones from Belgium, France and the Netherlands. These will be joined in a few weeks by stocks from Finland and Spain, and in mid-January 2010 by the Italian blue chips.
By introducing the individual markets progressively until mid-January 2010, Deutsche Börse is addressing the requirements of the market participants. All processes, systems and interfaces for trading, clearing and settlement can now be checked per domestic market along the entire process chain and integrated gradually.
By the end of the initial phase, a total of 96 equities in the trading currency EUR will have been accepted into the XIM trading segment. These will comprise the stocks from the DJ EURO STOXX 50® index and highly liquid stocks from other indices.
Transactions executed on Xetra International Market will be offset via Eurex Clearing and settled cost-effectively in the respective domestic markets. Clearstream forms the interface between Eurex Clearing and the domestic markets enabling it to use the latter's settlement liquidity.
Due to top market quality, the competitive price model, and the low set-up costs for participants, XIM will significantly strengthen Deutsche Börse’s competitive position on the European equities trading market. Deutsche Börse Group uses economies of scale for the new trading segment on Xetra and in the clearing house as XIM is set up on the existing infrastructure, generating hardly any additional costs in system operation. Deutsche Börse thus expects XIM to be a very sustainable business model.
Source: Deutsche Börse
CESR publishes an update on the assessement of the proposals for MiFID pre-trade transparency waivers
Octoner 30, 2009--The MiFID compliance of these functionalities has been assessed at CESR level on the basis of the new joint process that CESR launched in February 2009.
at CESR level on the basis of the new joint process that CESR launched in February 2009. The table(Ref. CESR/09-324) includes information on a new assessments made at CESR level regarding an application for a waiver to be granted on the basis of the MiFID Implementing Regulation that CESR considered not to be compliant with MiFID.
Source:
New Source ETC Launched on Xetra
October 30, 2009--An additional exchange-traded commodity from the ETC offering of Source Commodity Markets has been admitted to trading on Xetra®.
ETC name: S&P GSCI Enhanced Crude Oil Source T-ETC
Asset class: commodity
ISIN: XS0454792184
Management fee: 0.49 percent
Distribution policy: accumulating
Benchmark: S&P GSCI TM Crude Oil Enhanced Total Return Index
With the S&P GSCI Enhanced Crude Oil Source T-ETC, investors will be able to participate in the performance of the WTI Crude Oil futures contract for the first time. The S&P GSCI Crude Oil Enhanced TR Index is designed to alleviate the impact of negative roll returns which might occur when exchanging future contracts that are due to expire. The index applies a dynamic rolling rule when determining into which new expiration a WTI Crude Oil futures contract is rolled.
The product offering in Xetra’s ETC segment comprises 137 exchange-traded commodites, making it the largest offering of all European stock exchanges. The average monthly trading volume in ETCs amounts to around 400 million euros.
Source: Deutsche Börse
British Offshore Financial Centres
October 30, 2009--The final report of Michael Foot’s Review of the opportunities and challenges facing the British Crown Dependencies (Guernsey, Isle of Man, Jersey) and six Overseas Territories (Anguilla, Bermuda, British Virgin Islands, Cayman Islands, Gibraltar, Turks and Caicos Islands) was published on 29 October.
The recommendations made to these jurisdictions cover: the quality and extent of economic planning; meeting international standards on tax transparency, financial sector regulation, and tackling financial crime; ensuring that deposit protection schemes can be understood by depositors; considering whether an Ombudsman scheme is justified; and crisis prevention and resolution measures.
These recommendations provide benchmark standards against which each of the jurisdictions can assess their performance and consider what action may be necessary to ensure a sustainable future. The report suggests that the jurisdictions should periodically publish reports on how the benchmark standards are being met, or on how and when they will be met.
View Final report of the independent Review of British offshore financial centres
viw the Deloitte Report-Understanding Corporate Usage of
British Crown Dependencies and
Overseas Territories
Source: HM Treasury
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