History of the World Part III

Those of us who have been in the industry for a while will remember what became known as the “Battle of the Bund” back in the early 1990s.The quick version is that newly formed DTB (now Eurex) managed, in just a few months, to repatriate trading in the benchmark Bund futures contract from London based incumbent, LIFFE. It did this by deploying screens across the London market... Read More

The chlorine dipped chicken of capital markets

I read Phil Stafford’s great article in the FT yesterday about the continued spat between the UK, Europe and the US over the fate of the vast Euro denominated swaps market in a post-Brexit world. The core issue here is all about where this stuff should be cleared but, yet again, common sense plays second fiddle to short-term economic self-interest and politics. Common sense should... Read More

Clear and present danger?

There has been a lot of talk about how the LSE/DB1 merger might create a “too big to fail” clearing house. This seems to be missing the point somewhat as both LCH and Eurex Clearing are already too big to fail. Imagine the fallout if either of these were to go through some sort of disorderly meltdown – would the UK or German governments really just sit back and watch? The... Read More

Has the futures industry just been Uberised?

A seemingly innocuous news item from my good friend John Detrixhe at Bloomberg got us all chatting here at Fidessa Towers this morning. The story was about how Eurex Clearing was going to allow large buy-sides direct membership of its derivatives clearing house. The rationale for this is entirely logical as today’s regulations treat client capital as a risk asset and therefore... Read More

Slicing up the merger mania cake

One of the great things about industrial logic is that it’s easy to slice it up in so many different ways. This appears to be exactly what is happening with the DB1 LSE merger and the rumoured counterbids from ICE and possibly others. Reuniting Liffe (now owned by ICE) with its original clearing house (LCH, now majority owned by LSE) would be powerful, especially when you throw... Read More

Germany and the UK show the way

The pixels were barely dry on my last blog post on the regulatory impact of a potential Brexit on the City of London, when news broke that LSE Group was in talks with Deutsche Börse over a “merger of equals”. The LSE has done a great job under Xavier’s stewardship of positioning itself for the practical realities of the industry today, which are all predicated on the premise... Read More

Blockchain – the saviour of global finance?

At a recent event I was asked to pick three technologies that could really upset the capital markets applecart. Blockchain, the distributed ledger technology that underpins Bitcoin, was one of those that I selected. The best way to think about Blockchain is that it solves for the trust problem when two parties wish to transact with each other. It achieves this by distributing the... Read More

Clear danger ahead

As the regulators push us towards centralised clearing for OTC derivatives they may actually be making the world distinctly less safe. At face value it makes obvious sense; if one party defaults the CCP steps in. As always, though, the problem lies in the detail but this time not too far below the surface. The first problem concerns the efficient use of margin. As CCPs start to... Read More

Where there’s muck there’s brass

I don’t venture to the north of England often, but I do have a work colleague who hails from Yorkshire – the origin of the phrase “where there’s muck there’s brass”. Its basic meaning is that there is often good money to be made from doing the dirty jobs, and it seems like this is particularly true of global financial markets these days. The glamour and machismo of ... Read More

All set for a clear summer

There was an interesting footnote to the FT article on NYSE Euronext’s final shareholders’ approval of the ICE deal yesterday. It talked about how ICE Clear will be taking over clearing for Liffe as of 1st July. This is more than just a bit of corporate housekeeping and may well shape whether we really see competition in European derivatives trading. Right now Liffe... Read More

Clearly better?

An interesting few days in London last week at the annual derivatives bash, IDX. Naturally much of the debate and discussion was on the impending collision of the OTC and exchange-traded worlds that Dodd-Frank and EMIR are determined to orchestrate. Unlike equities, the worlds of OTC and exchange-traded derivatives have gone merrily down parallel, but separate, tracks. The regulators... Read More

The attraction of OTC clearing

Had an interesting week in the sunshine at the FIA annual conference at Boca Raton, Florida. Not surprisingly, the main topic was the move to bring the worlds of exchange traded and OTC derivatives together. This has been mandated by politicians/regulators on both sides of the Atlantic and will lead to the creation of a multitude of electronic platforms known as SEFs in the US and... Read More

European fragmentation in focus

It’s been interesting to watch the European MTFs jockeying for position over the summer. Seems like Chi-X is continuing to grow its market share of all European indices fairly steadily, whilst the relative market shares of Bats Europe and the LSE’s Turquoise could be starting to invert. This could possibly be down to Turquoise’s spangly new matching platform attracting the... Read More

Is it time for smart clearing?

When MiFID first emerged into the mainstream, many of us focussed on developing smart routing systems that could navigate the new fragmented liquidity landscape. Over time, these smart routers have become increasingly sophisticated and now take into account both lit and dark venues and assess them against a dazzling array of metrics. Left behind in the gold rush was the seemingly... Read More