September 19 2016

elb2In Today’s Exchange Invest


Breaking: ASX Melts Down.


Brutally surmised by the Sydney Morning Heraldthus: “What a remarkable day. There was no shortage of scorn and a lot of funny memes in reaction to the ASX’s technical woes and its bumbling reactions, but here’s hoping that the bourse gets its act together in time for tomorrow’s open.”


More below…




Meanwhile in Bigworld, the latest victim of overhype is not a reality tv star but rather the ‘primus inter-mediocrates’ German leader or as the excellent John Hulsman puts it: “Reality has finally caught up with Germany’s disastrous Chancellor Merkel.


Public Markets

Technical Glitch Closes ASX
The Australian


PLY: This statement was put out by ASX as Exchange Invest raced to pixel:


MEDIA ALERT – Statement from ASX Managing Director and CEO, Dominic Stevens


“Today, ASX encountered issues with our equities trading system, ASX Trade. What happened today does not meet the high standards of operations and system reliability that we set ourselves, and that our customers should rightly expect of us. We apologise for the disruption.


“The primary issue arose from a hardware failure in the main database used by the system.  This had a number of knock-on consequences that affected the operation of the market.  These included a delay to the market open and the decision to close the market early due to ongoing issues that impacted the proper functioning of the trading platform.


“The issues were not in any way related to cyber security. ASX is now focused on ensuring that the market re-opens on schedule tomorrow morning.


“Today, I will be speaking to customers to apologise, and to discuss what learnings we can draw to ensure this doesn’t happen again.”


PLY: A fascinating piece of news coming hot on the heels of rumours that (as could be broadly expected of a new CEO), Dominic Stevens has ordered a review of ASX IT only days ago. The meltdown itself does not look good from the outside. Failures are one thing but the level of frustration in the Australian marketplace today was driven by what appeared to be an ASX spooked by the tech failure (and apparently serially confused as to what that failure was), to the point where decisions made under duress don’t appear to have been helpful to the market. (This is a mild understatement of the realpolitik as described by various market participants I hasten to add).


Readers may wish to compare the rich irony that perhaps a little of that hotly rumoured ‘SGX-style meltdown indecision’ may not have been appreciably worse than the ultimate result which saw ASX panic the Australian market into enforced closure on occasion when alternative venues could have functioned viably. Having gone from login problems to a bad upgrade and a myriad of other reasons during the clearly fraught day for IT folks, the loss of face for ASX is bad enough but in the bigger picture, there are clearly issues arising which demonstrate why the current Antipodean ‘bodge up,’ er, competitive/regulatory framework, is an impediment to competition. On the competitive front alone, ASIC needs to act to enable markets to function regardless of how badly the incumbent Victorian monopolist is capable of (dys-) functioning.


At a corporate level this is a disaster for ASX just as it tries to plug holes in the monopolist’s damn which is being pricked from all sides. On a macro level, this is a disaster for Australia as the capital formation, trading and overall financial centre status of Australia is being endangered by the actions of a behemoth which looks entirely ill-suited to the modern digital age in all aspects.


Meanwhile – irony of ironies – ASX also published this:


ASX’s Replacement of CHESS for Equity Post‑Trade Services: Business Requirements


The consultation paper outlines ASX’s plans to introduce ISO 20022 messaging standards with the system that replaces CHESS.  It also seeks feedback on a suite of enhancements to current functionality that could be introduced as part of the development of a replacement system. ASX invites stakeholders to provide feedback on their requirements for the system that replaces CHESS, including the relative importance of existing CHESS functions that could be carried forward and the existing CHESS functions or processes that may not meet their needs.


Written submissions in response to the consultation paper are due by Friday, 28 October 2016.


PLY: No time to review in the race to pixel but clearly the questions are how this interacts with the blockchain movement et al. Expect more comment on this in due course but meanwhile the ASX IT snafu is centre stage for now, despite the busy sporting week in Australia.


Deutsche Börse LSE Tie-Up Faces Brussels Deeper Probe
Financial Times


PLY: Unsurprising news but at least the FT with its impeccable Brussels ties is advanced confirming what has been said for more than six months:  that the DB1-LSE takeover will require at least a second level enquiry into antitrust.


Latin America: Brazilian Brokers Wave The Offside Flag
Euromoney magazine


PLY: Interesting angle on the Brazilian market structure where BM&F Bovespa profits but many brokers struggle.


LSE Curve Undercuts Rivals On Fees, Blocks
FOW magazine


PLY: Understandable that LSE Curve will try to compete on price as it lacks too many other competitive advantages as it tries to muscle into derivatives.


ICAP & the Buy-side
Friday Newsletter


The ICAP Sponsored Access Model (ISAM) is poised to go live, allowing asset managers to trade fixed income on the inter-dealer market…


PLY: As per my comment last week, “On IDBs and their history of bank-centricity… For those who wonder why they ought to be reading the intermittent gems on Exchange Invest Premium, consider that I outlined these dynamics in April 2014 in “ICAP Explores A New Universe.” $300 per user / year to be 2 and a bit years ahead of the curve sounds like a fair deal to me…”


Derivatives Reforms Demanded By G20 Show Little Results – 7 Years On
Financial News (subscription)


PLY: The universe is changing but as always slower than anticipated and with QE making a textbook style yield curve rarer than the Pikachu in Pokemon Go, it will be a while yet this post OTC revolution… might help too if we could lose the agitprop bilge by large market players who brazenly refuse to understand the complexities of open access and CCPs too of course.


Private Markets


In India, A 141-Year-Old Searches for Its Niche


PLY: Some bald data ahead of the IPO while BSE makes progress on new international market:


BSE To Start Mock Trading October For International Exchange


Russian Market Settlement Agency Woos Chinese Investors


UCC, PAN Obligatory For Transaction On Commodity Bourses: SEBI
The Hindu


PLY: Helpful single points of reference for markets and counterparties to be mandatory.


Gibraltar SX Gains HMRC Recognition
securities lending times


The Gibraltar Stock Exchange (GSX) has been acknowledged by the board of the UK’s HM Revenue & Customs (HMRC) as a ‘Recognised Investment Exchange.’ which follows recognition by ESMA in March 2015.




PLY: crowdfunding now, a rare financial project: R5 is a new institutional Liquidity pool for eNDF’s and EMFX, which focuses on leading the market change from voice to screen


The SEC & Market Structure: Five Things to Watch
Bloomberg BNA


PLY: As she is close to being arrested by electoral cyclicality, Chairman White, here are the priorities she may or may not manage before the basketballer in chief calls time on his administration.


Special Section: FTI, NSEL, India at the Crossroads

PLY: FTIL and MCX both up 1.5%


Maharashtra Government Delaying Forensic Analysis Of NSEL-FTIL Servers
India Today



Goldman Sachs Files Blockchain Patent for Foreign Exchange Trading


PLY: Welcome to the wonderful world of distributed ledger technology where we cooperate and make a brave new world…er, subject to patent?

More Banks Join Sentinel As Initiative Prepares For MiFID II Implementation – Project Sentinel Numbers Increase As Initiative Starts Work With Its Short-Listed Technology Partners


PLY: You can just imagine the Monday morning sense of dread where huddles of lifelong middle managers are wondering which is the better career keeper, the place on the Blockchain DL play your boss just invested into… or the MIFID II group?


Seriously, anything which reduces costs overall are to be applauded if Sentinel can pull this cooperative effort of preparing for MIFID II which remains an utterly nebulous and unconvincing piece of added bureaucracy for little or no proven gain.


WISeKey to Launch a Blockchain Center of Excellence in Mauritius to Develop A Blockchain Platform
Business Wire (press release)

PLY: No prizes for guessing how many middle managers would gladly swap NYLON et al for a spot distributing their ledger tanlines in Mauritius.

ICAP Plans To Streamline SSI Processing Through Automation (subscription)


PLY: standard settlement instructions (SSIs) FYI.

Ripple Adds Several New Banks To Global Network – Customers Conduct Real Money Pilots In Move Toward Commercial Deployments
Ripple Raises $55 Million In Series B Funding – New Strategic Investors Including Banks Will Enable Ripple To Accelerate Customer Adoption



The US Government’s Take On Bitcoin



Vietnam to Launch Derivatives Market in Early 2017
Jakarta Globe


PLY: GMEX enabled Vietnamese derivatives market preparing for launch.


Russia’s SPIMEX To Launch Crude Export Futures Trading End-Nov
bunkerworld (subscription)


Russia’s St Petersburg International Mercantile Exchange (SPIMEX) is on track to launch the first crude export futures contract at the end of November.


LSE To Launch ‘RFQ’ For ETFs
ETF Strategy


Sebi Reverses Stand On Self-Trades

PLY: Logical rollback from SEBI: “The markets regulator will give the benefit of doubt to entities that have carried out self-trades, or orders that match each other but does not result in ownership change, reversing an earlier stance that all such transactions were manipulative.
As many as 270,000 of the average 12.2 million orders executed in a day in the derivatives trading segment are self-trades, according to stock exchange data. Such trades can happen when dealers from the same brokerage trade using the same client code.”




TMX Group Is In Its Own Index…Concerns After ‘erroneous alert’

PLY: In some ways it was the S&P jumping ship from Montreal Exchange which triggered the realisation an MX takeover by TSX was on the cards way back when the Canadian Marketplace Agreement was running out. Now the blithering incompetence on somebody or other’s part of suggesting the TMX was out of its own major index isn’t a great reflection on S&P while those who believe in omens may say it somewhat surmises the feeling of general malaise around the TMX itself, despite the opportunities which abound.

FTSE Mondo Visione Exchanges Index Up 2.3% In August, Up 8.8% Year-To-Date, Up 12.6% Over 12 Months


PLY: Interesting picture of the exchange industry – wonder when recently listed Zagreb SE will be joining the index?


Career Paths


According to Reuters: BM&FBovespa SA, Brazil’s sole financial exchange, has tapped Jose Ribeiro de Andrade (currently head of Latin America fixed income and currency at bank of America Merrill Lynch) as SVP for products and clients. In the meantime, Cícero Augusto Vieira Neto, SVP for clearing, custody and operations, will handle Andrade’s responsibilities according to a government filing.

PLY: Interesting hire by BM&F. I am off to Brazil fleetingly myself next week.


Jane Hamilton has left Traiana to join IHS Markit as an MD of business development for foreign exchange


MIAX Options Exchange Announces Hiring of Joe Bracco as Its Senior Vice President

PLY: Great hire by MIAX, adding the former SVP, Head of Institutional and Strategic Relations for BATS Global Markets, Joe Bracco as SVP.

Skilled Java Developer at Cinnober Financial Technology AB (Umeå, Sweden)


Other Stories

Britons Losing Thousands To Binary Betting Companies
International Business Times UK
PLY: The tragedy of the retail over sell which is as much driven by a failure of financial education and ironically, over-regulation of the legitimate players creates a better opportunity for the fraudsters. Sad that binary options – a rather nifty niche tool is sullied as a product too as we know where political narrow-mindedness is likely to end when faced with a bandwagon. On which note, we’ve arrived back at the mediocrity of politics wherein we began today discussing Angela Merkel… Ho hum…

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