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Derivatives: Struggling Into the New Era – Outlook 2013/14

The past few years have been challenging for the global economy but it seems as though the derivatives industry sustained more than its share of insults and injuries over the past year or so. Still reeling from the trauma of MF Global in October of 2011, exchange-traded volume went into its first nosedive in decades.

Urgent regulatory requirements added intense cost and time pressures to company staffs that were already stretched. A non-clearing FCM, Peregrine Financial, collapsed in scandal. OTC derivatives struggled with complex regulatory mandates and weak volume.

Perhaps the only positive for the year was that mergers and acquisitions at both the macro and micro level imply that innovation and creativity are still powerful industry drivers. That in turn suggests that the creative dynamism that has characterized the derivatives industry for so many years still has some innings to go.

Read the detailed report about Derivatives market outlook, challenges and issue of big deals, exchange mergers and new start ups, customer protection, Regulatory,Extraterritorial and Tax problems  and more. 

Source: WEF 25.04.2013 by Nicolas Ronalds

Filed under: Asia, Brazil, Exchanges, Risk Management, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Brazil: Foreign investors exempetion from paying 2% IOF tax on equity trades BM&FBOVESPA

The Brazilian government has repealed a tax placed on foreign investors trading equities, in a move which domestic exchange BM&F Bovespa believes is sure to stimulate trading activity in the country.

The IOF tax, which stood at 2% for equities since its launch in October 2009, has now been eliminated. The tax was also removed for debt instruments that have a tenor of four years or longer.

The levy was introduced by the Brazilian government in order to help it control the rapid appreciation of the Brazilian real. It was initially set at 2% for all initial investments made by foreigners in fixed income and derivatives transactions. The tax was increased to 6% for fixed income transactions in October 2010.

“We are not easing our currency policy. If there is any risk of the currency appreciating, we will increase the IOF on derivatives,” Brazilian finance minister Guido Mantega is reported to have said at a press conference today.

The announcement by the Brazilian government had an instant positive impact on equities prices in the country, with shares in BM&F Bovespa surging by almost 7% today.

“By reducing the IOF to 0% on foreign investments for equities, the government has sent a clear message about the importance of the capital markets as a way to support local companies,” Sergio Gullo, chief representative for BM&F Bovespa in EMEA, told “The removal of the tax will encourage more foreign investment to our market.”

The removal of the IOF tax may also help to bring more high-frequency trading (HFT) to Brazil, the increase of which BM&F Bovespa has identified as a key aspect of its growth strategy. Gullo says that the exchange believes HFT will reach 20% of overall equity trading volumes in the next few years.

As part of its plans to attract HFT, BM&F Bovespa has partnered with US exchange operator CME Group to develop Puma, a new US$200 million multi-asst class trading platform. The new platform will be able to process 200 million messages per day and offer an average round-trip latency of 1.1 milliseconds.

“The removal of the tax has very little downside and it appears that the Brazilian government is not concerned about the effect of equity trading on currency appreciation,” said Danielle Tierney, analyst at consultancy Aite Group. “It will be more of a positive for HFT firms than traditional market participants. The exchange should have no trouble in reaching its 20% HFT target.” Source: Trade News, 01.12.2011

São Paulo, December 01, 2011 – BM&FBOVESPA considers the measure that the Brazilian government announced today as bang on target, demonstrating an understanding that the Brazilian market is going through a moment of great opportunities and also constitutes a fundamental instrument for companies’ growth and the development of the country.

Between 2004 and 2011, Brazilian companies held 232 public share offerings, of which 138 were IPOs. These operations resulted in a total of BRL 370.7 billion raised, which went towards these companies’ growth projects, contributing towards a significant increase in job creation and incomes in Brazil. It is important to bear in mind that around 70% of this volume came from foreign investors.

Brazil’s capital market has a great capacity to attract foreign investment, due to its credibility built on strong regulatory foundations and on best practices in corporate governance.

In this manner, BM&FBOVESPA believes that with the government measure to exempt the IOF tax on operations by foreign investors, there will be an even more favorable picture for the more than 40 companies that are waiting for the right moment for their share offerings to raise the resources they need for their investments and growth in 2012.

Source: BM&FBOVESPA, 2.12.2011

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

Finamex launches Algorithms with US Equities in the Mexican market

Finamex, a full-service independent broker dealer from Mexico City, and leading provider of innovative trading solutions, has released four opportunistic market trending algorithms for use by Direct Market Access (DMA) clients. The main idea is to allow clients to effectively gain arbitrage profits while mitigating collocation and/or their own strategy development costs.

Finamex’s latest release of arbitrage algorithms have been designed to build opportunities on fungible domestic equities displayed in the Mexican exchange marketplace. Execution calculations work through pre-programmed algorithms built on leveraging theoretical quote pricing as the primary driver of behavior, speed and momentum.

There are a variety of features to how the Finamex arbitrage algorithms provide opportunities with US equities in the Mexican market:

1. Hunter – is an algo which seeks to take advantage of sudden inefficiencies between the equities of foreign listed symbols in Mexico versus their originating market (such as the QQQ or AAPL on the Nasdaq or NYSE markets). The Hunter algorithm computes required data-sets and adjusts itself independently within defined price spreads on the Mexican Stock Exchange (Bolsa Mexicana de Valores: BMV).

2. Ghost – has a characteristic of lying dormant until a desired buy/sell signal appears with a non-previously indicated ask/bid price then it executes contrarily. Similarly with the Finamex “Hunter” algo, Ghost receives the side, quantity and spread parameters of opposing bids/offers satisfying spread parameters of its local market yet quickly hitting IOC type status. This feature helps in the recognition of desired price opportunities without revealing trade strategy intentions by its clients.

3. Scaled – uses a two-spread metric like the Hunter algo, with a signal that triggers in a suddenly inefficient environment. The Scaled algo strategy is seen on a big spread definition, called a “base.” Scaled reacts instantaneously when a lower spread, called the “target”, is satisfied on the other side. Unlike the Finamex “Ghost” algo, the Scaled algo’s intentions are exposed but move immediately when the target spread is satisfied. The Scaled strategy allows other market participants to preview this algo’s activity, causing them to sometimes take a glance on the board, which in turn drive executions over the spreads.

4. Market-maker – a next generation algo intended to provide liquidity and act as a market maker within the local Mexican marketplace. Market-maker absorbs the last trade, adds an indicated spread and automatically places or replaces the order with an indicated quantity. In combination with pegging and short-sell models, the Marketmaker algo is highly beneficial for market making strategies and for acting on market divergences.

“We’re putting in place all of these free strategies for clients who want to access the Mexican stock market with an almost-zero setup price. Our goal is to take Mexico to a higher level in the emerging markets priority list of global investors,” states Hector Casavantes, head of Electronic Trading at Finamex. “We wanted to offer automated algo strategies in order to let investors know how active and easy this market can be to trade. All algorithms were architected with profitability in mind. They’re highly customizable, completely auditable and comprehensive, fully meeting our clients’ demands”.

“With the addition of these tools, we’ve further enhanced our suite of algorithmic-trading products beyond our well-known execution algos in VWAPs, TWAPs, Implementation Shortfall and POV, “Roberto Larenas, Head of Equity Markets at Finamex added. “While we are aware that these algos are more opportunistic, we are still keeping our business model as pure-agency. Buy-side firms are increasingly requesting new tools, new ideas, and new ways to exploit opportunities in emerging markets. Finamex is fully committed in addressing these demands with our best-of-the breed solutions

Source: A-Team, 14.11.2011

Filed under: BMV - Mexico, FIX Connectivity, Latin America, Mexico, Trading Technology, , , , , , , , , , , , , , ,

Brazil:BM&FBOVESPA joins TradingScreen’s TradeNet

São Paulo — May 05, 2011, TradingScreen, the premier provider of global execution management systems (EMS), announced today that it has completed certification by the BM&FBOVESPA to provide low latency multi-asset class direct market access (DMA) order flow through its trading platform from its local data center in São Paulo.

TradingScreen’s expansion of its Brazilian markets offering will bring the local and global Buy Side community full coverage of listed financial instruments supported by BM&FBOVESPA, including commodities and financia l derivatives. The creation of this local trading node is a milestone in market access efficiency and outlines the strong commitment of TradingScreen to continue to be the reference ASP trading system and the leader in presence and connectivity in all markets around the world.

TradingScreen brings its community of global sell side participants and leading regional brokers to a common environment. The benefit to clients is an exceptional reach across counterparties, products, geography and services ranging from execution to algorithmic trading services, prime brokerage and clearing. Its ASP (Application Service Provider) model enables a rapid deployment and activation of users into live trading through a flexible range of execution management interfaces screen, FIX or API based.

The new TradingScreen solution will allow International Institutional investors to access Brazilian markets through local Brazilian and international brokers connected to Trade Net, TradingScreen’s global proprietary multi-broker network using a broker intermediated or broker sponsored model. The integration will also provide the opportunity for the local Asset Manager community to avoid high latency linked to long round trip to foreign data centers.

TradingScreen supports its LATAM operations from local offices in São Paulo and provides 24×6 client support in Portuguese covering all the main financial centres across the globe.

Commenting on the agreement, Philippe Buhannic, CEO of TradingScreen said:

“Our buy side and sell side clients had long been requesting a low latency, local access to the BM&FBOVESPA infrastructure based on an ASP model. TradingScreen has made this possible while maintaining its proven simplicity of deployment. We are very happy to lead the markets once again to new levels of efficiency.  The client’s feedback on this implementation has been phenomenal.”

“Adva nced connectivity resources greatly facilitate cross-border communication and trading on a global scale within the current financial scenario. Creating a common and safe environment which connects investors to Brazilian markets is a step forward in positioning Brazil as an international financial hub for equities, commodities and other futures contracts,” added Cícero Vieira Neto, BM&FBOVESPA Chief Operating Officer.

Source: Trading Screen, 05.05.2011

Filed under: BM&FBOVESPA, Brazil, Exchanges, FIX Connectivity, Latin America, Trading Technology, , , , , , , , , , , ,

Financial Market Predictions for 2011 by BlackRock’s Bob Doll

Market Risks Will Be “To the Upside”
As Improving Economic Growth,
Consumer/Business Confidence Boost Stocks
US Real GDP Will Hit All Time High in ’11,
Marking Economy’s Transition from Recovery to Expansion
 Stocks Will Outperform Bonds and Cash as Flows to Equities Accelerate
New York, January 5, 2010 –- US stocks in 2011 will record a third straight year of double digit percentage returns, the first time this has occurred in more than a decade, according to Robert C. Doll, Chief Equity Strategist for Fundamental Equities at BlackRock, Inc. (NYSE: BLK). In the new year, risk assets in general and equities in particular will draw strength from continued improvement in US economic growth—in particular, a more sustainable growth path—coupled with improved business and consumer confidence, and a less hostile capital markets attitude in Washington, D.C., according to Doll. “By the close of 2011, the S&P 500 Index will be at 1,350-plus, a target that implies that the market will appreciate at least in line with corporate earnings,” Doll said. The S&P 500 Index closed out 2010 last Friday, Dec. 31, at 1,257, rising over 15% for the year. “Our expected gains for the equity markets for 2011 are not much different from what we expected for 2010,” he said. “What’s different for 2011 is that market risk will be more to the upside than was the case in 2010.” The possible upside factors include an acceleration in jobs gains, a surprise in real GDP, earnings exceeding expectations as occurred in 2010, and Washington D.C. beginning to address the nation’s fundamental debt and budget problems.

 On the other hand, Doll’s “what can go wrong?” list includes the possibility of credit problems resurfacing (including US housing, sovereign nations, and state and local governments), commodities price increases causing profit margin pressure, inflation fears, a greater than expected rise in interest rates, undue emerging markets tightening to curb asset bubbles, and currency and capital flow concerns leading to protectionist trade wars.

 Additionally, Doll indicated that the magnitude of the market return since the August 2010 lows (US stocks rose over 20% from mid August through the end of the year) means equity markets may have come too far, too quickly. “I do have a concern that the exceptionally strong returns we have seen over the last couple of months may mean that we ‘borrowed’ some of 2011’s returns in late 2010,’ Doll said.

 “The upside possibilities could lead to stock market appreciation of 10% to 20% more than we expect,” Doll said. “The downside issues could result in low double-digit percentage loss.”

 US Real GDP Hits All Time High in 2011
 Doll has been publishing his annual “10 Predictions” for the year ahead in the financial markets and the economy for over a decade.

 In 2011 the ongoing cyclical recovery will continue, Doll believes, but economic growth will continue to proceed at a less-than-normal pace due to the structural problems that continue to face most of the developed world.

 In the United States, although the recovery remains subpar, real GDP will move to new all time highs sometime during 2011’s first half, Doll said. “Real final sales will increase from around 2% to almost 4% as the impact of the government stimulus program and inventory restocking wanes,” he said. “The good news is that this kind of growth is more sustainable and therefore ‘higher quality.’

 “Hitting a new high for real GDP also means, of course, that the economy will have moved into a truly expansionary mode,” he said.

 In this environment, the Federal Reserve is unlikely to increase interest rates in 2011. “Assuming our growth outlook is correct, the Fed is likely to keep rates at near-zero through the year, although we think it’s possible that by the end of 2011 the futures curve may begin to price an increase into the markets,” Doll said.

 Unemployment Dips to 9 Percent

 Job growth also will improve as 2011 progresses, with unemployment falling to around 9% from the current 9.8% rate. “We believe the removal of the Bush tax cut uncertainties and the fears of a double dip recession as well as improved confidence will lead to more hiring,” Doll said.

 The likely employment trend in 2011 is historically associated with solid market performance, Doll said. “Compared with any other time, equity market returns have been most ebullient when unemployment rates have been high and falling,” he said.

 Stock On Pace to Outperform Bonds, Cash

 As they did in 2010, stocks will outperform both bonds and cash in 2011, Doll said.

 “Stocks pulled ahead of bonds in 2010’s fourth quarter, and we expect that trend to continue in 2011,” he said. “Interest rate risk will be to the upside, given accelerating economic and job growth, the revival of business capital investment, the likelihood that bonds inflows will slow, and fading deflation fears.”

 Because the recovery remains “sub par,” the Federal Reserve will likely remain accommodative, which will probably result in some further steepening of the yield curve, Doll believes. Equities are likely to take over from fixed income as the preferred asset class, both in terms of price appreciation and investor flows.

 US Markets Set to Continue Their Dominance

 In an outcome that surprised many, the United States was one of the world’s strongest markets, and US stocks outperformed the MSCI World Index in 2010—a trend Doll expects will be maintained in the new year. “Strong balance sheets and free cash flow income statements will likely lead to significant increases in dividends, share buybacks, merger and acquisition activity, and business reinvestment,” he said. “Companies delivering earnings with solid growth prospects will likely lead the way, as high intra-stock market correlations continue to fall.”

 At the same time, differences between developed and emerging markets will be less pronounced in 2011 than before, Doll believes. “The gap between higher growth rates in the developing world and the lower ones of the developed world will likely shrink somewhat in 2011, causing continued less differentiation in equity returns.”

 Predictions for 2011

 Here are Doll’s predictions for 2011 with his full commentary on the key trends.

 1.     US growth accelerates as US Real GDP reaches a new all time high.

Not only is US growth likely to be stronger in 2011 than it was in 2010, but more importantly, the quality of growth will improve. Economic growth in 2010 was based heavily on government stimulus and inventory rebuilding. Both of these factors will be less significant in 2011 than they were in 2010, meaning final demand is going to make up the slack. In particular, we believe that real final sales will increase from around 2% to almost 4%. This sort of growth is healthier for the economy and more sustainable. Additionally, we believe that economic growth in 2011 will be supported by an increase in money growth, a steeper yield curve and easing credit conditions. Nominal gross domestic growth in the United States already reached a new all time high in 2010, and we expect real GDP growth to also reach a new high at some point during the first half of 2011. Despite this outlook, however, we would caution that growth levels will still remain below trend.

2.     The US economy creates two to three million jobs in 2011 as unemployment falls to 9%.

We expect improved job growth as 2011 progresses, finally making some dent in the unemployment rate. Our prediction represents a clear acceleration over the 1 million plus number of new jobs that were created in 2010 and, in effect, would represent a doubling in the rate of jobs growth. It takes approximately 125,000 jobs per month to accommodate new entrants into the labor force and our view is growth will be noticeably higher than that, averaging 175,000 to 250,000 per month. We believe the removal of the Bush tax cut uncertainties and the fears of a double-dip recession as well as improved confidence will lead to more hiring. Leading indicators of hiring, including hours worked, productivity, initial jobless claims and profitability all point to more jobs. We note with interest that new hiring plans on the part of corporations have improved as well. Historically, equity market returns have been most ebullient when unemployment rates have been high and falling than at any other time.

 3.     US stocks experience a third year of double-digit percentage returns for the first time in over a decade as earnings reach a new all time high.

The last time the stock market had three annual double-digit percentage gains in a row was the late 1990s. Our view is a double-digit percentage return again for 2011 is certainly possible. We expect earnings growth to continue to be better than economic growth, stocks are reasonably inexpensive and confidence levels are improving. We are using a 1,350 target as a floor for our 2011 S&P 500 forecast, which is consistent with expected earnings gains. Our view is that the risks in 2011 are more to the upside when compared with the downside risks of 2010 meaning that, if anything, our 1,350 target may be overly conservative. Should business and consumer confidence levels continue to improve, if credit problems remain manageable and if politicians remain reasonably capital markets friendly, then we could see some valuation improvements, which could push market prices even higher. Regarding the earnings component of this prediction, operating earnings per share achieved an all time high of $91.47 for the S&P 500 in June 2007, and we believe corporate earnings will exceed that number sometime around the middle of 2011. We note that in recent months earnings revisions have again turned positive after faltering in mid 2010.

 4.     Stocks outperform bonds and cash.

While stocks did outperform bonds and cash in 2010, it wasn’t until the fourth quarter that stocks pulled ahead of bonds. We expect that environment to continue in 2011. Assuming that stocks have any sort of positive return in 2011, they will outperform cash investments, since short-term interest rates (and cash returns) are essentially stuck at just over 0%. The bigger question is bonds, but we believe that interest rates are likely headed higher given accelerating economic and jobs growth, the revival of business capital investment, the likelihood of bond fund inflows slowing and deflation fears fading. At present, there is still a wide gap between the S&P 500 earnings yield and BAA corporate bond yields in favor of stocks, and we expect that gap to close somewhat in 2011 as stocks outperform bonds.

 5.     The US stock market outperforms the MSCI World Index.

Before 2010, there was a multi-year pattern in which the MSCI World Index outperformed US stocks. In a surprise to many, that streak ended last year with US stocks beating the MSCI World Index in 2010 by nearly 400 basis points. We think 2011 will mark the second year of US outperformance. Compared with the rest of the world, the United States is benefitting from more fiscal and monetary stimulus, and has a more innovative economy and better earnings growth prospects, all of which should help US stock market performance. We also expect that emerging market economies will perform well, but that the gap between emerging and developed economies is likely to narrow in 2011 (which should also help US stocks on a relative basis). In other markets, we expect Europe will continue to struggle with credit and sovereign funding issues and Japan’s secular growth problems will likely remain.

 6.     The US, Germany and Brazil outperform Japan, Spain and China.

2010 was a year in which geographic allocations played an important role in determining investors’ overall portfolio returns, and we think 2011 will see a continuation of this trend. From our perspective, we favor markets that have evidence of accelerating economic momentum and low levels of inflationary threats. We also prefer to avoid markets that are facing significant credit risks. As a result, we are predicting that a basket of US, German and Brazilian stocks would outperform a basket of Japanese, Spanish and Chinese stocks. As we indicated in our fifth prediction, there are a host of reasons to favor US stocks, including its improving quality and quantity of economic growth. Germany is exhibiting strength in manufacturing and exports and Brazil is benefitting from a rapidly growing middle class and solid consumer spending levels. On the other side of our equation, Japan is suffering from persistently slow growth and Spain has a troubled banking system and ongoing credit woes. Regarding China, we expect economic growth will remain strong, but that market is in the midst of a tightening cycle designed to combat inflation—an environment that does not bode especially well for market performance.

 7.     Commodities and emerging market currencies  outperform a basket of the dollar, euro and yen.

As long as global growth is at least reasonably strong (as it was in 2010), commodities prices should appreciate in 2011. We believe that oil could top $100 per barrel at some point during the year due to better macro demand and continued inventory declines and since gold is “the only currency without debt,” gold prices are likely to move higher over the course of the year (albeit at a slower pace and more irregularly than it has over the past couple of years. Additionally, industrial commodities such as copper should benefit from continued global growth and urbanization in emerging markets. As we indicated earlier, we expect the growth differential between emerging market countries and developed markets will narrow in 2011, but we remain preferential toward emerging market currencies over a basket of the dollar, euro and yen.

 8.     Strong balance sheets  and free cash flow lead to significant increases in dividends, share buybacks, mergers & acquisitions and business reinvestment.

Corporations in America are doing very well. Balance sheets are strong and income statements are showing high levels of free cash flow. This backdrop led to high levels of M&A activity and business reinvestment in 2010, and in the year ahead we are calling for double-digit increases in dividends, buybacks, M&A and business reinvestment. We believe the key to getting this prediction right is for business confidence to improve, signs of which became evident toward the end of 2010. In addition we would argue that unlocking the 2+ trillion dollars of cash on corporate balance sheets is a significant key to better and more sustained US GDP growth.

 9.     Investor flows move from bond funds to equity funds.

Should the economic and market backdrop play out as we expect, we should see fixed income flows slow and equity fund flows pick up materially in 2011. This would reverse a multi-year trend in which investors have been embracing bond funds and shunning equity funds. Indeed, we began seeing this reversal happen in the fourth quarter of 2010 when equities began to noticeably outperform fixed income. Flows tend to follow prices, and we would expect that during the course of this year, we will see a noticeable slowdown in bond fund flows and the switch into equity funds. The “era of fear” that we have seen in equities in the last couple of years is in contrast to the “era of greed” we saw in the late 1990’s.

 10.  The 2012 Presidential campaign sees a plethora of Republican candidates while President Obama continues to move to the center.

Election seasons  seem to grow longer every cycle, and already there appears to be a long list of potential GOP presidential candidates. While it is impossible to know exactly who will run, our view is that many will declare their intention to run for president during 2011. Meanwhile, after a very difficult election for President Obama in November of last year, his move toward the political center is likely to continue as  he attempts to be more business- and capital markets friendly. It is clear that elections are decided by independents and the President needs to increase his support within the independent ranks significantly in order to have a chance for reelection.

 The 2010 Scorecard

 In 2010, risk assets continued the choppy advance they began in 2009. “The S&P 500 ended the year up a double-digit percentage and close to our 1,250 target, as US stocks outpaced most developed markets and many important emerging markets,” Doll said.

 Real GDP growth continued in a positive direction but remained subpar compared with most recoveries. In the United States, jobs growth was not strong enough to reduce the unemployment rate.  Inflation remained a non-issue in the developed world but began to rear its ugly head in some emerging economies. Government deficit spending and debt levels continued to haunt investors but corporate financial health remained remarkably strong both in balance sheet and income statement terms. “Corporations produced fantastic earnings gains despite mediocre economic growth,” Doll noted.

 “To sum it up, although we missed on a couple of the predictions made one year ago, most did come to pass,” he said.

 1.     The US economy grows above 3% in 2010 and outpaces the G-7.

Score = Correct

Although final fourth-quarter growth numbers will not be available for a while yet, economists are currently revising their estimates upward, and it looks like GDP will have grown in the fourth quarter by around 3%. Also, it is looking like US growth for all of 2010 should just clear the 3% hurdle. Among other G-7 countries, other than Canada, no other country’s growth level will surpass that of the United States.

2.     Job growth in the United States turns positive early in 2010, but the unemployment rate remains stubbornly high.

Score = Correct

It would have been almost impossible to have phrased this prediction any better, since this exactly described what happened on the labor market front in 2010. Employment growth did turn positive toward the end of the first quarter, but gains were not strong enough to lower the unemployment rate.

 3.     Earnings rise significantly despite mediocre economic growth.

Score = Correct

When we made this prediction at the beginning of the year, our point was that earnings improvements would outpace the broader improvements in the overall economy, and that is exactly what came to pass. In many ways, the degree to which corporate America weathered slow levels of economic growth, ongoing credit issues and a still-troubled financial system was quite a surprise.

 4.     Inflation remains a non-issue in the developed world.

Score = Correct

While there have been some inflationary concerns in areas of the developing world, for the developed markets, deflationary pressures persisted through 2010. We acknowledge that in the years ahead, inflation may become a concern given high deficits and some of the structural problems facing the United States, but such an environment is not likely to develop in the near future.

 5.     Interest rates rise at all points on the Treasury curve, including fed funds.

Score = Incorrect

This is a prediction that we will have to mark in the “incorrect” column for this year. Some might say that we were not exactly wrong on this call, but just early since interest rates have begun to climb strongly over the last several weeks. For the year as a whole, however, credit concerns, quantitative easing and deflationary issues pushed the yield curve lower. On the fed funds front, rates are likely to remain lower for some time, and we have no expectation that the Fed will raise the fed funds rate at any point in the coming months.

 6.     US stocks outperform cash and Treasuries, and most developed markets.

Score = Correct

The broad asset class call we made at the beginning of the year has come to pass. With US equity market returns well into the double-digits, US stocks handily outperformed Treasuries (which came in at less than 10%) and cash (which returned just over 0%). With few exceptions, US stocks also outperformed other developed markets.

 7.     Emerging markets outperform as emerging economies grow significantly faster than developed regions.

Score = Correct

Economic growth in emerging markets has been much stronger than in the developed world, and emerging markets on balance have outperformed. The degree of outperformance, however, was narrower than we expected.

 8.     Healthcare, information technology and telecommunications outperform financials, utilities and materials.

Score = Incorrect

This is a prediction that came down to the wire, as going into the last week of the year we were slightly in the “correct” column on this one. Unfortunately (for our predictions scorecard) we were wrong on this call, if only barely, since a basket of healthcare, information technology and telecommunications stocks very slightly underperformed a basket of financials, utilities and materials stocks.

 9.     Strong free cash flow and slow growth lead to an increase in M&A activity.

Score = Correct

Strong free cash flow and strong balance sheets allowed companies to put their cash to work by ramping up merger-and-acquisition activity. Dividend increases and share buybacks also increased strongly this year.

 10.  Republicans make noticeable gains in the House and Senate, but Democrats remain firmly in control of Congress.

Score = Half-correct

We got the first part of this sentence correct, but the second part wrong, since Republicans did, of course, take over the House of Representatives. In retrospect, there was a much larger non-incumbent wave that dominated the midterms than we expected.

 Final 2010 Scorecard:

Correct:           7

Half-Correct:    1

Incorrect:         2

Total:               7.5/10

Opportunities  for Investors

 The start of a new year is always a good time to review your investment goals and asset allocation with your financial professional, and to make portfolio changes where necessary. With that in mind, following are some ideas investors may wish to consider:

 Retain equity overweights: A combination of supportive fiscal and monetary policy, decent economic growth, low inflation, strong corporate earnings and decent valuations should be a recipe for stock prices to move higher in 2011. As such, retaining overweight positions in equities relative to cash and bonds could be beneficial.

 Focus on free cash flow: One of our primary investment themes for the coming year will be to focus on companies that have high levels of free cash flows, and we are seeing opportunities across capitalizations, investment styles and geographies.

 Think about geography: As indicated by our overall market outlook and our specific predictions, we expect US stocks to continue to outperform most other global markets. US economic growth should be stronger than almost any other developed market, as should corporate earnings growth. At the same time, it remains important to keep some allocation to better-positioned international markets, including emerging markets.

 Stay with commodities: Gains will likely be uneven, and volatility in the commodities markets is likely to remain high, but long-term investment in commodities continues to make sense.

 Remember that gains will be harder to come by: In many ways the “easy money” in this bull market has already been made. The year ahead will likely see ongoing volatility and heightened dispersion between the winners and the losers. In this sort of environment, selectivity will be critical.

Source: BlackRock, Carral Sierra, 05.01.2011

Filed under: Asia, Latin America, News, , , , , , , , , , , ,

BlackRock Forecast: 2011 may be a rerun of 2010 for global economy

London, December 22nd, 2010 – Richard Urwin, Head of Investment within BlackRock’s Fiduciary Mandate Team, believes 2011 is likely to be another positive year for global equities and other risk assets, despite persistent headwinds.

Expanding on this view, Richard offers the following outlook for the global economy in 2011:

  • Inflation risk remains low in developed economies, but is more pronounced in emerging markets: For the developed economies, 2011 is expected to be a year in which central banks see inflation as too low rather than accelerating. Low inflation does not imply deflation. Indeed, if deflation risk were to rise, so should the degree of monetary stimulus from central banks.  While the inflation risk in emerging economies is significant, inflation is unlikely to accelerate substantially.
  • Economic growth should continue through 2011: Global growth could be more balanced with developed markets contributing more to growth next year as the momentum built up in the second half of 2010 continues. For instance, growth in Germany, Japan and the UK in recent quarters has averaged between and 3% and 4%.
  • The demise of the euro is a very low probability event: The most significant event to affect financial markets in 2010 was arguably the European sovereign debt crisis. This is likely to have a significant influence on markets well into 2011 and beyond, given that southern Europe faces an extended period of retrenchment. However, the demise of the euro is very improbable.
  • There is no sign of irrational exuberance in equity market valuations: On the contrary, equity multiples towards the end of 2010 appear modest by historical standards. We believe the market reflects concerns about the length and strength of the global economic recovery. In these circumstances, additional returns to risk assets do not require utopian outturns, rather an environment in which challenging news is simply not quite as challenging as expected.
  • Equity returns in 2011 will be heavily dependent on the global cycle: Valuations are not so supportive that equity markets could rise on material growth disappointments, even if these stop short of recession. In addition, corporate earnings growth could slow from the strong rates of the past year or so.  Similarly, with a moderately favourable cyclical background, most forms of credit should outperform sovereign bond returns.
  • The low level of bond yields implies low returns to bonds in the medium term: However, for yields to back up significantly in 2011, one of two conditions would have to apply. Either global growth or inflation picks up enough so that central banks abandon their easy-money policy and raise interest policy rates sharply, or concerns over large and sustained budget deficits increase.
  • Policy rates in developed economies are expected to be kept low: We doubt that animal spirits will recover in 2011 even if global savings fall significantly. Hence, the catalyst for significant increases in bond yields during 2011 appears lacking. This suggests that government bond yields, excluding those in peripheral euro zone countries, will remain at stretched valuations for an extended period, delivering negative real returns.

Richard commented:  “In some respects, 2011 may feel like a re-run of this year.  Equities are likely to grind higher – with emerging market equities outperforming modestly rather than spectacularly, partly as a result of currency appreciation in these markets – while commodities could make further gains as supply/demand imbalances persist.

“The most marked difference in returns from 2010 could emerge in the sovereign debt market, with the headwind of very low yields. While diversification into corporate bonds and other non-government debt could add value, the scope for material spread narrowing is more limited. In short, 2011 could be another year where many investors find it difficult to take investment risk.  It is, however, likely to pay off.”

Notes to Editors:

Richard Urwin, Managing Director, is the head of Investments within BlackRock’s Fiduciary Mandate Investment team (FMIT). Mr. Urwin is responsible for asset allocation and manager selection within the fiduciary client base.

Source: BlackRock, 22.12.2010

Filed under: News, , , , , , , , , ,

Mexico’s Scotiabank Inverlat, Automates Mutual Fund Operations with the Charles River Investment Management System

Streamlines workflows; ensures compliance for all local/international securities and debt instruments

October 21, 2010 – Charles River Development (Charles River), a front- and middle-office investment software solutions provider, today announced that Scotiabank Inverlat, S.A. (Scotiabank Mexico), one of Mexico’s largest banking groups, has implemented the Charles River Investment Management System (Charles River IMS) across its Scotia Fondos subsidiary. The multi-phased project, delivered on-time, is part of Scotia Fondos’ initiative to automate its domestic and international mutual fund (Fondos de Inversion) operation with 16 different portfolio options on a single, consolidated platform.

Scotia Fondos’ users benefit from advanced decision-making and analysis tools, automated portfolio management and trading, and real-time, pre-trade compliance monitoring for all asset classes, including equities, money market, mutual funds, as well as Mexican corporate and government fixed income instruments, such as Bonos, CETES and UDIBONOS. During the initial project, Charles River automated Scotia Fondos’ equity portfolio management and trading operations, as well as compliance monitoring. The second phase consolidated capabilities across the firm’s fixed income operations.

“We required a state-of-the-art system and a vendor with proven experience in supporting the needs of Mexico’s asset managers; Charles River delivered both,” said Ernesto Diez, Director General, Scotia Fondos. “Our portfolio managers can now stay ahead of the market by analyzing and rapidly implementing changes to portfolios. We can also validate that our portfolios comply with all mandates – at any time and for any asset class.”

Support for Mexico’s numerous local market requirements was critical to the project. Charles River IMS allows Scotia Fondos to manage and execute trades for all Mexican government and corporate debt instruments. The firm’s mutual fund traders can also execute stock lending, support repurchase agreements and rebalance against Mexican indices. In addition, Charles River’s open architecture makes it easy for Scotia Fondos to integrate with its proprietary accounting system, as well as back-office providers, such as Bloomberg for real-time pricing, and Mexican Stock Exchange-owned Valmer for risk data.

Charles River IMS supports region-specific security types and associated workflows, including Mexican corporate and government bonds. In the near future, Scotia Fondos will continue with the implementation of Charles River IMS’ advanced derivatives exposure calculations and coverage functionality helping clients comply with Mexican regulations, such as Comision Nacional Bancaria y de Valores (CNBV) rules, by monitoring and managing pre- and post-trade exposure to derivatives instruments. Charles River’s pre-built compliance libraries contain over 1,700 regulatory and general example rules across 35 regulatory bodies of 20 countries, including comprehensive rule libraries for Mexico.

“Charles River offers asset managers in Mexico sophisticated, yet easy-to-use solutions for expanding their operations into new asset classes and markets – delivering a competitive advantage that supports business growth,” said Spiros Giannaros, Vice President of Sales, Americas, Charles River Development.

Charles River supports five client firms in Mexico, and serves over a dozen firms across Brazil, Chile, and Panama.

Source: CRD, 21.10.2010

Filed under: Brazil, Chile, FIX Connectivity, Latin America, Mexico, News, Risk Management, , , , , , , , , , , , ,

BM&F Bovespa raises CME stake; plans new e-trading platform

BM&FBOVESPA S.A. (“BVMF”) hereby announces to its shareholders (in compliance with the provisions of article 157, paragraph 4, of Brazilian Corporate Law No. 6404/1976 and CVM Instruction No. 358/2002 of the Brazilian Securities and Exchange Commission) that on this date it has entered into a Memorandum of Understanding with the CME Group, Inc. (“CME”), which controls the Chicago Mercantile Exchange (CME), New York Mercantile Exchange (NYMEX), Board of Trade of the City of Chicago, Inc. (CBOT) and Commodity Exchange, Inc. (COMEX), for the creation of a global preferred strategic partnership with an aim to: (i) pursue strategic investments and commercial opportunities with other international exchanges, on a shared and equal basis; (ii) jointly develop a multi-asset class trading platform for the trading of equities, derivatives, fixed income securities and other exchange-traded or OTC-traded assets; (iii) increase its ownership interest in CME to 5%, equivalent on this date to approximately one billion U.S. Dollars (USD1 billion); and (iv) receive a seat on CME’s Board of Directors.

1. BVMF and CME as Global Preferred Strategic Partners

BVMF and CME will work together as “global preferred strategic partners” to jointly identify strategic investments and commercial partnerships with leading equities and derivatives exchanges. BVMF and CME will seek to make these investments and/or partnerships on a shared and equal basis, subject to legal and regulatory restrictions, as well as to the relationship history and specificities of both BVMF and CME in connection to the other exchange where the investment and/or the partnership will be made.

However, when it is not possible or appropriate for BVMF and CME to co-participate, such as when a legal or regulatory restriction applies; or when the third-party exchange of interest is not willing or is unable to partner with either BVMF or CME; or if joint participation is impracticable, the Exchange which holds the leading investment or partnership position will continue the transaction alone.

In order to operate their global preferred strategic partnership, BVMF and CME will hold joint quarterly meetings of their senior executives (Strategic Committee), in order to analyze the potential investment opportunities and commercial partnerships of BVMF and/or CME with any other exchange throughout the world, as well as the attributes, affinities and contributions each might have in connection with the third-party exchange targeted for investment and/or partnership.

2. New Unique and Integrated Multi-Asset Class Trading Platform for Equities, Derivatives, Foreign Exchange, Fixed-Income Securities, Other OTC Products and Block Trading

Based on technology derived from the CME Globex® trading system, as well as on new technology to be jointly created by the parties, BVMF and CME will jointly develop a new electronic trading platform, with capacity to process transactions in less than one millisecond. This new platform will house all of the following BVMF segments under the same infrastructure:

  • Individual equities (cash market);
  • Derivatives based on equities; equity indices, interest rates, exchange rates and commodities;
  • Spot foreign exchange currency;
  • Spot government bonds;
  • Spot private bonds; and
  • Other OTC derivatives.

The new platform will also include a trading system for large blocks of shares (block trading).

The first to be developed will be the derivatives module, which until the beginning of 2011 will replace the Global Trading System (GTS), which is the current electronic trading system utilized by BVMF for its financial and commodity derivatives segment. The second module will be implemented by year-end 2011 to replace the Mega Bolsa, SISBEX and BovespaFIX trading systems currently used by BVMF for the equities, federal government bond and private bond markets, respectively.

Both BVMF and CME will have the right to make commercial use of the new electronic trading system and will share revenues resulting from this commercialization. BVMF will be entitled to commercialize the new platform freely in South America, Central America, Mexico and China. This will apply to other countries as well, where commercial use may occur as long as it is associated with an investment transaction, subject to certain restrictions pertaining to product listing by the exchange where an investment has been made.

BVMF and CME will have co-ownership of the new multi-asset class trading platform, sharing their intellectual properties, as well as the derived enhancements, upgrades and software, as co-authors through cross, perpetual and irrevocable licenses.

As an additional reflection of their new partnership, CME will transfer to BVMF all knowledge that is needed for the operation and development of the new platform, based on the CME Globex® technology. With this transfer BVMF will become fully independent and autonomous to also commercialize the new platform in certain regions and under certain conditions.

For the complete implementation of each phase of the new platform, including the acquisition of all the related underlying technology and intellectual rights, BVMF investments, over the next 10 years, are estimated for the amount of USD175 million (one hundred and seventy five million United States Dollars) at a present value of USD100 million (one hundred million United States Dollars).

3. Increase of BVMF’s Ownership Interest in CME

BVMF will raise its equity stake in CME from the current 1.8% to 5% of CME’s equity capital, placing each company on an equal footing with respect to its equity investment in the other.

This investment by BVMF, which is equivalent to approximately USD620 million, is subject to BVMF shareholder approval, for which in due course a shareholders’ meeting will be called. Adding this amount to BVMF’s current stake in CME brings its total investment to approximately USD1 billion, subject to lockup restrictions until February 26, 2012. This is the same lockup restriction timeframe that applies to the original cross investment.

4. BVMF Representation in CME’s Board of Directors

For the full implementation of their new partnership, CME and BVMF will nominate and recommend to their respective shareholders the election of a representative from each exchange to the other Board of Directors. Therefore, during the time that their minimum reciprocal investments are held, each exchange will have a representative in the other exchange’s Board.

5. Other Joint Opportunities

i. Mutual Cooperation in Central Counterparty Services for OTC Derivatives – BVMF and CME will prospect mutual opportunities to develop the central counterparty services they provide for the OTC derivatives markets. Such opportunities may include netting agreements, collateral management, and the use of CME ClearPort ® technology and know-how for registration, settlement and risk management of OTC derivatives transactions.

ii. Multilateral Order Routing and Market Data Distribution System – BVMF and CME will jointly develop multilateral order routing and/or market data distribution systems for the equities and derivatives markets of both current and future global partner exchanges.

6. Term

The global preferred strategic partnership has an initial term of fifteen (15) years, with the relevant strategic and commercial aspects being realigned on its 5th and 10th anniversaries. During this time, it will continue in effect for as long as each party holds a two percent (2%) minimum stake in the other party’s capital.

7. Expansion and Internationalization of the Equities Segment

The current CME partnership and the development of a new state-of-the-art multi-asset class trading platform will provide BVMF with the best of conditions to support the increase in order flows resulting from the ongoing expansion and development of the Brazilian capital market, as well as the future increase in order flows that will come from the order routing system that NASDAQ OMX is currently developing. Through this system, the connected U.S. broker-dealers will be able to send buy and sell orders for individual equities traded at BM&FBOVESPA, and the connected Brazilian brokers will also be able to send buy and sell orders for individual equities traded at NASDAQ OMX. Therefore, this partnership consolidates BVMF initiatives to provide its users with a solid technological infrastructure, in order to guarantee a globally aligned connection, which is geared towards the broad development of the Brazilian capital markets.

Source:BM&FBOVESPA, 12.02.2010

Brazil’s BM&F Bovespa is increasing its stake in Chicago’s CME Group to five per cent, at a cost of $620 million as part of an agreement between the two exchanges that will also see them jointly develop a multi-asset class electronic trading platform.

The pair, who already have an alliance, say they will become “global preferred strategic partners”, with the Brazilian outfit paying $275.12 per share to increase its stake and put a representative on the CME Group board.

CME Group, which already holds a stake of about five per cent in BM&F Bovespa, will also repurchase up to 2.35 million shares of its common stock to offset the dilution from the issuance of shares to its partner.

In addition, the two will build an electronic trading platform that will be deployed by BM&F Bovespa for use in its cash equities and derivatives markets. Slated to launch early next year, it will be based on technology derived from the CME Globex trading system and able to process transactions in less than one millisecond.

BM&F Bovespa says it expects to spend around $175 million on the related underlying technology and intellectual rights for the system over the next 10 years.

The agreement will also see both given the opportunity to license the platform to other exchanges internationally and they will work together on strategic investments and commercial opportunities.

Edemir Pinto, CEO, BM&F Bovespa, says: “I have no doubt that, after this partnership and based on technology derived from the CME Globex trading system, as well as on new technology to be jointly created by the parties, this new BM&F Bovespa technological standard will produce a system to meet the high performance requirements of the world’s most demanding traders in multiple products.”

Craig Donohue, CEO, CME Group, adds: “Our proposed transaction with BM&F Bovespa will further expand the breadth of our technology and distribution capabilities into the global cash equities and options markets, while strengthening our strategic partnership and enhance our mutual opportunities to invest in and partner with the world’s leading multi-asset class exchanges.”

Source: Finextra, 12.02.2010

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

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, , , , , , , , , , , , ,

Managed Market Data Services: Performance and Efficiency – A-TEAM & NYSE Technology

Market infrastructure is evolving at a pace that even the most technology-savvy financial institutions find challenging. New execution venues are popping up everywhere fragmenting liquidity and creating cross-dependencies between primary and derivative marketplaces. The move to fast markets and trading automation is cutting response times and increasing data volumes. Markets have shown a 70% increase in volume over the last year alone.

Update latencies of less than 10 microseconds are now possible — even commonplace. Market data rates in excess of 20 billion update messages per day are on the near horizon. With a universe of more than 250 real-time markets trading in excess of 40 million instruments and derivatives, developing and delivering a market data system for today’s markets is, at best, problematic.

Never before have financial institutions faced a more pressing need for flexible data acquisition solutions. And the requirement applies across the board: From the largest tier 1, bulge bracket firms, to the pluckiest speciality execution firm, firms of all shapes and sizes are seeing the market data management requirement leap to the top of their priority lists.

This white paper provides an analysis of the challenges facing market data technologists everywhere. It looks at the platform requirement, outlines total cost of ownership considerations, and discusses the relative merits of a managed or hosted service approach like NYSE Technologies’ SuperFeed™.

Source: A-TEAM November 2009

Market Data Managed Services: Performance_and_Efficiency Oct.2009 A-TEAM & NYSE Technology

Filed under: Data Management, Data Vendor, Library, Market Data, News, Reference Data, Standards, , , , , , , , , ,

ETF Landscape: Barclays Global Investors Annual Review Of Institutional Users Of ETFs In 2008

Barclays Global Investors has just published our Annual Review of Institutional Users of ETFs which looks at the use of ETFs by institutional investors globally who have reported holding one or more ETFs in their mutual fund holding disclosures, or in different filing sources including 13F, 13D and 13G, proxy or other declarable stakes during any of the four quarters of 2008 based on data compiled by Thomson Reuters.

Please click here to download the document.

In the four quarters of 2008 a total of 2,926 institutional investors worldwide have reported using one or more ETFs. Over the past 11 years, the number of institutional users has increased 1,673%. This represents a CAGR of 29.9%.

Institutional investors in 42 countries have reported using at least one ETF in 2008. The United States, the United Kingdom, Canada, Spain and Switzerland have the largest number of institutional users and account for 83%.

Over half of the largest institutional investors (those with assets over US$10 Bn) report using one or more ETFs, while less than a quarter of institutions with assets under US$250 Mn report using ETFs. The overall penetration rate is still very low at 6.7% of reporting institutions.

Source: MondoVisione, 24.11.2009

Filed under: Asia, Events, Exchanges, Latin America, News, Services, , , , , , , ,

CMA launches Latin America algo trading offering

CMA the leading Market Data, Order Management and Connectivity provider in Brazil has officially launched CMA Algoritmos onto its Trade Hub platform.

CMA can now provide algorithmic trading as a part of its portfolio of leading LatAm capital markets services and applications. CMA product offerings are currently in use throughout Latin America by over 17,000 workstations, 75 brokers with access to over 100 global exchanges.

CMA Algoritmos is a sophisticated suite of solutions particularly designed for and by the Brazilian trading market with uses throughout Latin American, Europe and North America. The user simply defines trading strategies, customizes triggers while being able to utilize many common methodologies such as SpreadMaker, VWAP, TWAP, QuickBasket, Best Offer, Volume Tracker and Financial Summary as a few examples.

CMA has enabled Algoritmos onto CMA Trade Hub, the largest network of services and applications utilizing all versions of FIX in Latin America, so that any interested trading party Buy-Side or Sell- Side in North America, Europe or beyond would have instantaneous access to broker dealers for execution.

The CMA services and applications on Trade Hub are utilized by more than 17,000 workstations from 60 brokers and many of their clients in Brazil as well as 15 other brokers and their clients throughout: Argentina, Chile, Peru, Colombia, Mexico and Spain. The addition of Algoritmos makes trading Equities, Futures, Options and Foreign eXchange in Latin American Capital Markets even more lucrative.

Source: FINEXTRA, 23.11.2009

Filed under: Argentina, BM&FBOVESPA, BMV - Mexico, Brazil, Chile, Colombia, Exchanges, FIX Connectivity, Latin America, Mexico, News, Peru, Trading Technology, , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Mexican Stock and Derivatives Exchanges BMV & MexDer launch Co-location

Bolsa Mexicana de Valores Group (BOLSA), which owns BMV, the Mexican stock exchange, and MexDer, the Mexican derivatives exchange,  announced today that it launched Co-location service on November 12th, which is offered to all the trading members.

Click here for  detailed BMV_ Co Location and Transaction Services

The new service allows members to colocate trading equipment and proprietary algorithms next to the BOLSA Central Trading Engine, allowing members “to have electronic traders back in the trading floor”. This is a unique opportunity for high frequency traders and algo traders to execute derivatives and equity trades at the lowest latencies available in the market.

The BOLSA’s cross border indicators show an increase in the volume and number of trades executed through Sentra Capitales since 2004, indicating that the Mexican market is also following the trend of automated trading and order execution. As such, the Co-Location service meets the speed requirements for cross border trading, offering latencies below 1 millisecond.

The service envisions the installment of cross border servers for members of BMV, MexDer and real-time information distributors next to the BOLSA Central Trading Engine to increase transmission speed along with top-line service, ongoing monitoring to networks and redundancies at each point of service.

Members of the BMV and MexDer, as well as cross border information distributors, Bursatec and other technology suppliers attended the launching event.

In the financial industry, where trading execution speed is of the utmost importance, the service of Co-Location places you right next to your partner, in the same physical center, offering speed and reliability in their transactions. This project follows the trend to further adopt international standardization practices.

Source:Bolsa Mexicana de Valores Group, 19.11.2009

Press Feedback:

Grupo Bolsa in co-location push, FT 20.11.2009

The move is a further sign of the growing popularity of co-location – where brokerages physically place their servers as close as metres away from an exchange’s matching engine to help shave milliseconds off the time needed to execute trades.

The co-location service meets the speed requirements for cross-border trading, offering latencies – the speed of confirming the trade – below one millisecond, Grupo Bolsa said.

Filed under: BMV - Mexico, Data Vendor, Exchanges, Latin America, Market Data, Mexico, News, Risk Management, Trading Technology, , , , , , , , , , , , , , , ,

BMV- Mexican Stock Exchange changes Crossing Rules

The Mexican Stock Exchange authorities announced on November 19th that starting on November 30, new rules for crossing stock on the BMV will be implemented.

As of November 30, crosses of 50% of the average daily traded volume of the last six months in a particular stock, will be able to be crossed “clean” (without interference from other brokers) as long as the cross is executed at a price between the bid and the offer.

Source: IXE, 20.11.2009

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

Bursa Malaysia introduces Direct Market Access for Equities Marke

Bursa Malaysia today introduced Direct Market Access (DMA) for the equities market which is aimed to enhance trading efficiency and accessibility for market participants. With this, the Exchange will be providing a complete DMA infrastructure for both the equities and derivatives markets. The DMA for derivatives market was successfully launched in April 2008.

Bursa Malaysia Berhad’s Chief Executive Officer, Dato’ Yusli Mohamed Yusoff said, “DMA is a critical component for Bursa Malaysia to remain competitive in the global investment arena. We are committed to investing in the right technologies to promote market accessibility and liquidity, as well as increased trading efficiencies. This will enable us to meet the requirement for growth and alignment with international trading practices.”

“We are confident that similar to our experience with DMA derivatives, DMA equities will attract new segment of trading participation given its increased accessibility and low latency. Market participants will also be able to enjoy greater connectivity and more control of their orders via the DMA infrastructure for equities market,” he added.

The benefits of DMA:

  • It is a ‘zero-touch electronic trading’ solution which enables investors to route orders directly to the Exchange for immediate execution.
  • It will significantly reduce the time for orders to be sent and matched from the previous average of three (3) seconds per transaction to a fraction of a second.
  • It has the ability to support algorithmic and block trading which allows institutional investors greater control through using pre-determined order conditions.
  • It provides greater access to international investors as Bursa Malaysia allows ‘Sponsored Access’ for institutional investors.
  • It enables market participants to connect their own trading front-end to the Financial Information Exchange (FIX) DMA Gateway.
  • It allows market participants to install their own servers in the Exchange’s data centre through the co-location hosting service where faster order management can be processed and lower latency when trading.

For further information and details on DMA Equities, please contact Bursa Malaysia via email at

Source: Bursa Malaysia, 09.11.2009

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