nach oben

Erschienen in:

2021 | OriginalPaper | Buchkapitel

1. Trading, Clearing, Custody, and the Worldwide Evolution of Exchanges as Unique Organizations

verfasst von : Reto Francioni

Erschienen in: Equity Trading Round-Up

Verlag: Springer International Publishing

Einloggen

Aktivieren Sie unsere intelligente Suche, um passende Fachinhalte oder Patente zu finden.

search-config

KI-gestützte Suche

Aus

Abstract

There is a singular battle among exchanges that never ends. This battle is an eternal fight for the lifeblood of any exchange—it is for liquidity and order flow! And, by the same token, institutional investors at the other end of the value chain—that is, hedge funds, mutual funds, and other big investors—are also fighting each other for the generation of order flow.

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

über 102.000 Bücher
über 537 Zeitschriften

aus folgenden Fachgebieten:

Automobil + Motoren
Bauwesen + Immobilien
Business IT + Informatik
Elektrotechnik + Elektronik
Energie + Nachhaltigkeit
Finance + Banking
Management + Führung
Marketing + Vertrieb
Maschinenbau + Werkstoffe
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

über 67.000 Bücher
über 340 Zeitschriften

aus folgenden Fachgebieten:

Bauwesen + Immobilien
Business IT + Informatik
Finance + Banking
Management + Führung
Marketing + Vertrieb
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

Nächstes Kapitel Coping with Liquidity Provision

In the US markets, for example, brokers are clearly competing to capture the order flow of retail investors, either by matching transactions off exchange and capturing the spread, or else oftentimes by routing the flow to an exchange that pays the most competitive rebate within the regulatory rules.

http://www.clearstream.com/clearstream-en/

A central securities depository, or CSD, is a special financial entity that keeps securities, such as shares, either in certificated or uncertificated, that is, so-called dematerialized form, so that ownership can be easily transferred through book entry, rather than by the transfer of physical certificates. An ICSD is an international securities depository.

The description, “just another company” could also equally be applied in the plural form for exchange organizations.

The then-chairman, Alan Greenspan, in a speech at the American Enterprise Institute during the dot-com bubble of the 1990s, coined the phrase “irrational exuberance,” as a clear warning of how the market might then be overvalued.

See, Irrational Exuberance, Robert J Shiller, Princeton University Press (2000).

The speaker is referring to the transformation of exchanges into organizations with advanced technological capabilities alongside other services, as he goes on to explain in more detail.

In the 1990s, LIFFE, the London Financial Futures Exchange, saw its dominance wane in the trading of German government bonds futures, or the Bund. LIFFE lost ground to the Frankfurt-based Deutsche Terminbörse. This shift became known as the “Battle of the Bund.” Eurex, created in 1998, ultimately won in this grand market battle.

The “front-end” is describing the electronic connectivity platforms, linking the exchanges with their customers for order routing, exchanges services and other functions.

The well-documented global financial crisis of 2007 and 2008 was tied in the USA to subprime mortgage lending. As a reminder, the fall of Lehman Brothers, a global banking behemoth, in September 2008, almost brought the world’s financial system to its knees. The worst recession in 80 years followed, but it took massive amounts of fiscal stimulus in the USA to avoid a downward economic spiral, according to financial historians.

“A central counterparty clearing house (CCP) is an organization that exists in various European countries to help facilitate trading done in European derivatives and equities markets. These clearing houses are often operated by the major banks in the country to provide efficiency and stability to the financial markets in which they operate. CCPs bear most of the credit risk of buyers and sellers when clearing and settling market transactions.” Source:Investopedia

The dot.com bubble was an economic bubble of excessive speculation, roughly from 1997 to 2001, characterized by a period of extreme growth in the adaptation of the Internet by businesses and consumers. The bubble collapsed during the period 2000–2002.

See, Top Accounting Scandals. Consumer Finance Institute (CFI). https://corporatefinanceinstitute.com/resources/knowledge/other/top-accounting-scandals/

See, footnote 9.

For a comprehensive account of dark pools and there opposite in lit markets, see Dark Pools: Fear of the Dark. Third Way. Lauren Oppenheimer, John Vahey. August 28, 2013. http://www.thirdway.org/report/dark-pools-fear-of-the-dark

As the authors explain: “Dark pools are private, electronic stock trading venues that allow buyers and sellers of a stock to be matched anonymously. In a dark pool, prices are not displayed to investors—stock prices are dark. Dark trading is an alternative to trading on a “lit” exchange, like the New York Stock Exchange (NYSE), where traders benefit from visible prices.”

The Pittsburgh Summit 2009 was the third meeting of various heads of state and governments to discuss financial markets and global economics, this time gathering in Pittsburgh.

See, footnote 10.

IT, acronym for investment technology

A perfect textbook example outlining the scope of integration and diversification is the 2012 acquisition of NYSE Europe by Atlanta-based rival IntercontinentalExchange (ICE).

”Provides for diversification among multiple asset classes and expands ICE’s reach into new markets, including the world’s largest asset class—interest rates—at current cycle lows.” Source: BusinessInsider. SOLD: NEW YORK STOCK EXCHANGE GETTING ACQUIRED FOR $8.2 BILLION. Linette Lopez.

http://www.businessinsider.com/new-york-stock-exchange-acquired-2012-12

See, footnote 4.

See, footnote 10.

The Dodd–Frank Wall Street Reform and Consumer Protection Act (commonly referred to as Dodd–Frank ACT) was signed by President Barack Obama, on July 21, 2010, in response to the financial crisis of 2007–2008. “An Act to promote the financial stability of the United States by improving accountability and transparency in the financial system, to end ‘too big to fail’, to protect the American taxpayer by ending bailouts, to protect consumers from abusive financial services practices, and for other purposes,” according to the long title of the Act.

See, Financial Conduct Authority for more on EMIR. https://www.fca.org.uk/markets/emir

For related material on the topic offering further insight and explanations, see, Central Clearing of OTC Derivatives: bilateral vs multilateral netting. Statistics & Risk Modelling. Roma Cont, Thomas Kokholm. Vol 31, No, 1, 3-22, March 2014. https://arxiv.org/abs/1304.5065

“Novation is the act of replacing one party in a contract with another, or of placing one client or obligation with another. It extinguishes (cancels) the original contract and replaces it with another, requiring the consent of all parties involved.” Source: Investopedia.

Basel 111, agreed in 2010–2011, is the worldwide voluntary regulatory structure on bank capital adequacy, stress testing, as well as on market quality risk.

See, footnote 10.

Quantitative Easing, or QE programs adapted by governments worldwide in the wake of financial crisis, and achieved through bond purchase and liquidity programs to stimulate economic growth.

Some of the drive for this industry change described by Allan Grody came from the Financial Stability Board. http://www.fsb.org/

For further background, see, Nondiscriminatory Access to Market Infrastructures and Benchmarks. Association for Financial Markets in Europe (AFME). September 2012. https://www.afme.eu/globalassets/downloads/briefing-notes/briefing-note-mifir-openaccess.pdf

Market structure developments in the clearing industry: Implications for financial stability Report of the Working Group on Post-trade Services. Bank for International Settlements, Committee on Payment and Settlement Systems. November 2010 https://www.bis.org/cpmi/publ/d92.pdf

CCP “Interoperability” is described thus:

“Where a trade is made/matched between two parties on a trade platform and each party chooses a different CCP to clear their trade then a balance contract automatically arises between the two CCPs on the same terms to ensure that each party retains a balanced book. The two CCPs are therefore said to ‘interoperate’ in managing the risk and settlement obligations arising between them.” Source: LCH.

Titel: Trading, Clearing, Custody, and the Worldwide Evolution of Exchanges as Unique Organizations
verfasst von: Reto Francioni
Verlag: Springer International Publishing
Buch: Equity Trading Round-Up
Print ISBN: 978-3-030-51014-5

Electronic ISBN: 978-3-030-51015-2

Copyright-Jahr: 2021
DOI: https://doi.org/10.1007/978-3-030-51015-2_1

Springer Professional

Abstract

Bitte loggen Sie sich ein, um Zugang zu Ihrer Lizenz zu erhalten.

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft+Technik"

Springer Professional "Wirtschaft"