Category Archives: Current Events

Gloves Come Off at SEFCON V

The era of good feelings definitely is over for the over-the-counter (OTC) derivatives market judging by the tone of the conversations at yesterday’s SEFCON V.

“It’s to be expected,” said  a beaming Chris Ferreri, chairman of the Wholesale Brokers’ Association Americas (WBAA) and who hosted the event. “Last year, we all were trying to accomplish the same thing. But with ‘made available to trade’ in place, we are all competitors now. Isn’t great?”

The zingers flew wild and free during the conference’s first panel on what the industry has learned over the first year of swap execution facility (SEF) trading.

Representatives from Bloomberg, Credit Suisse, the DTCC’s Data Repository, Thomson Reuters,  tpSEF and UBS shared some rather candid thoughts and information during the verbal free for all.

Although the UBS offers a SEF aggregation service, it currently does not connect to Bloomberg SEF or tpSEF.

And when it comes to differentiating the SEFs that have sizable liquidity, it is all about the bells and whistles that they offer, according to Bloomberg’s Nathan Jenner and Thomson Reuters’ Jodi Burns.

However, the SEF operators might want to cool their technology pitch to swap dealers and institutional investors, suggested PIMCO’s Ric Okun, who spoke on a later SEF-technology panel.

The rest of the day’s discussions addressed the future of cleared foreign-exchange (FX) non-deliverable forwards (NDFs) and the benefits and shortcomings of central limit order book (CLOB) versus request for quote (RFQ) execution.

When an audience member asked Commodity Futures Trading Commission (CFTC) Chairman Timothy Massad whether the regulator developed a sense when NDFs would be available to trade, Massad stated that the CFTC “has not taken a view on it yet.”

Whether it will be before 2017, when the EU’s rules should go into effect, no one knows.

At least the one panel, which consisted of representatives from BGC Derivatives Markets, Bloomberg, Squire Patton Boggs and London-headquartered Wholesale Broker Market Association (WMBA), came to a consensus that NDFs probably will clear like US dollars and euros. They bandied about an 80-20 ratio, but could not agree on which currency represented which percentage.

The most heated conversations, unsurprisingly, related to CLOB and RFQ execution models. It definitely is the Mac versus PC and open-sourced software versus licensed software debate for the industry.

Supporters of RFQ won the day in terms of their loudness and liquidity, but consider the membership of the WBMAA.

CLOB supporters were optimistic that liquidity on their systems would pick up when interest rate volatility and its related volume returns to the market.

They also believed that as swaps dealers widen their RFQ spreads due to regulatory capital restraints, that it may drive investors to the CLOB platforms.

It is not clear if there will be a SEFCON VI, but the OTC industry still has a lot to do in terms of data consistency and quality, according to the DTCC.

A standardized instrument symbology across all SEFs would be a good place to start, suggested KCG’s Isaac Chang.

 

 

Is Tech Driving Business Growth?

This might be heresy for a financial technology blog, but is technology driving business growth in the capital markets?

I ask this because I had an organizational call for a panel discussion I’m moderating during Linedata Exchange New York on October 7 this morning.

The panel,  entitled “Truth or Myth? What Drivers Really Play a Role in Growing the Business Today?”, promises to be an interesting conversation with Jeff Scannell, vice president of trading technology at State Street Global Markets; Ryan Bateman, director of technology at Sands Capital Management; Jonathan Wang, head of business development at TPG-Axon Capital;  and Dushyant Shahrawat, research director at CEB TowerGroup.

It was relatively easy to cover the capital markets from a technological perspective before the 2008 financial crisis. Reporters only had to ask technologists how the specific investment would generate more money for the firm or how would it save the firm money, which could be used to make more money.

After 2008, Dodd-Frank, EMIR and Basel III, reporters started to add a third uncomfortable question: “How will this investment keep the company from being fined by regulators and appearing on the evening news?”

Over the past six years, I have not heard many technologists discuss how IT investments drive business growth. Instead, they have returned to the bearish mantra of doing more with less while throwing available resources at the middle and back offices.

It’s no longer a matter of capturing alpha, but controlling costs and improving internal efficiencies. Hence, why hosted-platforms, outsourcing, cloud computing and their management are the topics of the day.

Looking at my inbox, emails pitching trade reporting, margin management and risk analytics outnumber trade-execution pitches on  low-latency messaging, trading algorithms or smart order routing, at least six or seven to one.

Until some level of volatility comes back to the markets, most firms are left treading water and updating their middle and back offices and it will not change until the US Federal Reserve and the other central banks take their feet off the interest-rate brakes. Then we will see the pendulum swing back to greater investments in the front office.

Am I wrong?

Let me know.

 

 

 

 

Once more into the breach, dear friends, once more…

I know Wall Street’s grapevine is second to none when it comes to job changes and departures, but I’d like to update those who have not heard the news: After a few months at Asset International as the first joint US editor for The TRADE and Global Custodian, I’m back to freelancing.

The role always was an experimental one and not all experiments work out, hence the term.

There are some great people on both publications and I’ll miss working with them daily.

In the meantime, I finally can give this blog the attention that it deserves.

 

New Job, Similar Focus

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.

Omega Securities Mints New CEO

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.