Bitcoin futures – the best idea ever?
I read yesterday that Cboe is bringing forward the launch date for its Bitcoin futures contract in a bid to usurp its rivals at the CME. This set me thinking about the likely impact of these contracts on the price of Bitcoin itself. As my good friend John Lothian has always maintained, futures markets are all about risk transfer and not irresponsible gambling (as some in the mainstream... 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
The Tomorrow People
Josh was in high spirits, trading had been good that day. He had downloaded an algo app overnight that allowed him to arb Google dollars against Apple iCoins. It was no longer any use, of course, as by now everyone else had downloaded it too. But his edge had been that his simulator had processed it faster than anyone else. This was required by the regulator to check it contained... Read More
GMEX – going to eleven?
The announcement that new derivatives exchange GMEX has received investment from SocGen reopened the debate here as to the future of rates trading and who the likely winners are going to be. Reliable data is hard to come by on exactly what is happening to OTC volumes and where they are going. Such evidence as does exist seems to show a steady increase in SEF volumes, although this... 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
The Future of Best Execution
I was chatting with a few work colleagues last Friday about best execution and derivatives. They confidently asserted that without real fungibility (i.e. the ability to trade the same instrument on different venues), price comparison is not possible and so any notion of best-ex was pretty meaningless. By coincidence, I was later looking at the wording in the best-ex policy of... Read More
Build vs Buy becomes Rent vs Collaborate
An interesting couple of days at the International Derivatives Expo in London this week. Alongside the usual debate on OTC clearing, algo tagging and other regulatory conundrums, I was on a panel looking at the changing face of vendor relationships. What is evident is that the build vs buy debate has reached a new dimension as the economics of the FCM business, combined with the... Read More
Ready, SEF, go
If 2013 was the year we spent forming our responses to the new rules for the derivatives industry, then 2014 will be the year we see if we got it right. Central to this will be how liquidity is dispersed amongst the new SEF platforms that have emerged in response to Dodd-Frank Title VII. The aim of the regulators is, as always, a noble one – to make derivatives safer by forcing... Read More
Why the big exchanges need to visit Amsterdam
My friend Nandini Sukamar at Bloomberg broke a story yesterday that Eurex is to compete with CME Europe by offering competitive FX contracts. So it looks like we are going to see a few more spats as the big boys vie for control over the European exchange-traded derivatives market. The CME is looking to launch its own competitive products to Eurex, and NASDAQ NLX is taking on both... 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
A question of life and SEF
There has been a lot of debate around the role of SEFs in the global derivatives market. Some commentators are even claiming that the whole concept is dead and buried before the rules have even been finalised. But debating the viability or otherwise of SEFs is completely missing the point. The right question is how will standardised and custom derivatives contracts trade and clear... Read More
“It’s fragmentation, Jim, but not as we know it” – why Dodd-Frank won’t work
Interesting last week to see that GFI has applied to the CFTC to become a futures exchange. This follows on from ICAP’s purchase of Plus Markets (now ISDX) and so it surely can’t be too long before the other IDBs follow suit and execute their own regulatory hedges too. What they are worried about is that the regulatory regime around swaps seems to favour futurisation rather... Read More
In defence of derivatives
FragVision Episode 7 looks at the common misconceptions about the derivatives industry and the likely impact of some of the new regulations that it is having to get to grips with. Click here for the full list of FragVision episodes. .wistia_embed { height:364px !important; width:640px !important; } Read More
