The Securities Industry and Financial Market Association (SIFMA) published its recommendations for changes to the US cash equities market structure that promises enough pain for broker-dealers as well as exchanges and alternative trading system operators.

Since reporting on it earlier this week, I am still trying to wrap my brain around the impact SIFMA’s proposed changes would have if the market adopts them.

Besides implementing kill switches, expanding the reporting requirements to the Financial Industry Reporting Authority and reducing/eliminating maker-taker fees, SIFMA recommends that the securities information processors (SIPs), the organizations that gathers all of the market data for NYSE- and Nasdaq-listed stocks from each exchange and reporting facility and aggregates it into consolidated feeds, should first update their data processing infrastructures “so that the SIPs provide the fastest commercially available services for data aggregation and distribution.”

After the SIPs make the necessary upgrades, SIFMA suggest throwing all of it out- baby, bathwater and all- in favor of having it replaced by competitive vendors, which would replace the SIPs with their own aggregated offerings. It would be similar to how the US Securities and Exchange Commission (SEC) retired the out-date Intermarket Trading System (ITS) in favor of private direct links between exchanges as part of its 2005 Regulation NMS market reforms.

Besides being an industry owned and operated market utility, that is where the similarities between the roles of the ITS and SIPs end. The ITS was a network, whose function easily could be replaced with another network provider. The SIPs are not just making an aggregated market data feed. They are making THE aggregated market data feed. You know, the one to which the regulators always refer.

Take that away then what will take its place?

Aggregating market data is not a clean business. It needs to be scrubbed and have any data outliers addressed. It is not possible for two market data aggregators to deliver feeds that are completely consistent tick by tick, much less half a dozen of them.

This is not to say that the SIPs have implemented the perfect method to aggregate market data feeds. They have not, but at least they are industry owned and not operated as for-profit businesses, which makes them perfect as the objective record for the market.

Any other arrangement would open up a regulatory can of worms.

 

 

 

Tags: , ,

I apologize for not updating the blog as much as I should. It’s just been a crazy time for the past few months.

That should change in a few weeks when I exchange my freelancer’s lifestyle for a new job as the US editor for Global Custodian and The Trade.

More details to come.

Tags:

Sean Debotte has been named president and CEO of Canadian equities and fixed-income alternative trading system (ATS) operator Omega Securities, corporate officials announced today.

Debotte first joined Omega in 2011 as director of business development. He replaces Brian Crew, who departed in October 2012- the same month that Omega began opening its planned Lynx ATS to industry testing.

Officials expect that the new platform will go live on February 3, but are still waiting for the Ontario Securities Commission (OSC) to sign off on the market’s Dynamic Pricing Model that determines a maker/taker rebate for each security based on its previous month’s trading volume.

The new ATS will use the same order entry and market data protocols as the Omega ATS and will not charge market data, subscription or connectivity fees.

The only other difference, say officials, is that Lynx will use broker attribution as a default setting.

Tags: , , ,

It’s only a matter of time before more investors move away from foreign-exchange (FX) swaps to FX futures, according to the latest research from Kevin McPartland, head of market structure and technology advisory service at analyst firm Greenwich and friend of the blog.

He attributes the coming migration due FX swap’s higher regulatory and margin costs, even though regulators exempted them from many swap requirements, and the lack of need by financial users for custom FX swap products compared to their corporate counterparts.

Check out his blog for more opinions and analysis on the OTC derivatives marketplace.

 

 

Tags: , , ,

The post-trade industry utility Omgeo announced a leadership change earlier today with the planned departure of CEO Marianne Brown in the second half of February.

This is the first major management change for the company since the Depository Trust & Clearing Corp. (DTCC) acquired Thomson Reuters’ half of the joint venture in October.

Brown joined Omgeo in 2006 after being the chief executive of the Securities Industry Automation Corp.(SIAC). Industry veteran Paula Suasville Arthus will take on the role of president and CEO of Omgeo and report to Andrew Gray, managing director and head of core business management at DTCC. Prior to her new appointment, Sausville Arthus has been managing director, chief of staff and head of enterprise planning at DTCC

I’ll be curious to see what direction the DTCC plans to take its wholly owned subsidiary now that Omgeo does not have to keep a for-profit parent owner and an industry utility parent owner simultaneously.

Will DTCC let Omgeo maintain some semblance of independence or will it become a DTCC brand, like what happened to financial-intranet provider Radianz when Thomson Reuters sold it to BT in 2005?

Tags: , ,

« Older entries