When was the last time a significant exchange merger came to fruition? Over the past year, all we’ve seen is the dissolution or outright rejection of prominent merger plans by regulatory bodies. The Australian government effectively denied a proposal to merge the Australian Securities Exchange and Singapore Exchange. Plans for the Toronto Stock Exchange (TSX) to unite with the London Stock Exchange (LSE) were scuttled when nationalistic feeling seemingly dissuaded the necessary two-thirds of voters from approving the deal. The most noteworthy by far – the highly anticipated cross-Atlantic “super-merger” between the New York Stock Exchange (NYSE) and Deutsche Börse – reached its own end when European regulators raised significant objections to the merged entity’s likely stranglehold on derivatives market share in Europe. Read more»
This blog post originally appeared on AsiaEtrading.
Trading in Hong Kong remains a challenging endeavor for global investors. As authorities work to eradicate insider trading, Hong Kong has served as an informal test case for exploring how far the free market ethos can go before it begins to scare off investors. Read more»
Interested parties have now had time to digest the European Commission’s October MiFID 2/MiFIR proposals, and major questions have been raised by a wide range of people. Looking briefly at the main areas of debate: Read more»
Is it too great a leap to think that a Pan-Latin American regional exchange is now clearly in sight?
Unifying small- and medium-sized exchanges to attract and better serve investors has been tried before, and has proved successful. Euronext, originally combining the stock exchanges of Amsterdam, Brussels, Lisbon and Paris and later merging with NYSE, is a good example; so is the CEE Stock Exchange Group (CEESEG), which ties together the exchanges of Budapest, Ljubljana, Prague, and Vienna to serve Central and Eastern European economies. Might something similar be in prospect for Latin America?
It’s hard for me to believe that Thanksgiving has come and gone—the kick-off to the holiday season of 2011. Thanksgiving often gets trampled or left behind in retailers’ race to get to the lucrative finish line of Christmas. However, I think we should reflect on this past Thanksgiving, and take time to stop and take inventory of the many blessings we have as individuals and as a nation. Let’s look at some of the key exchanges across the globe – and lay out what each of these exchanges can be thankful. Read more»
When I graduated college and began my first job as a fresh-faced innocent with two new suits, a shiny pair of shoes and apple cheeks, my first boss sat me down to impart some words of wisdom to me. The first things he told me was, “a healthy dose of cynicism goes a long way in this business”. Now it could have been any business he was talking about, but I was marginally on Wall Street at the time running index funds in a bank trust department in the sleepy Midwest.
On a recent visit to Turkey it became clear to me how strongly the country has advanced recently in its drive to build bridges with Western markets, bolstering the view that Turkey is emerging as a regional leader. Read more»
By Philippe Carré, Global Head of Connectivity, SunGard’s Global Trading business
As I wrote in my last blog, the session ‘New investment opportunities: trading emerging markets in Egypt and the Pan Africa region’ at this year’s SunGard London attracted a lot of interest. Having looked at Qatar, Egypt and the Middle East, I would like now to cast an eye over the vast continent of Africa, the “terra incognita” of electronic trading. Read more»
Exchange Traded Funds (ETFs) have exploded in popularity with both retail and institutional investors since they were first introduced back in 1993. There is a lot of education available on the advantages of using ETFs and how to best allocate assets with them. There is, however, very little education available on how to effectively trade ETFs. This point was driven home during the flash crash of May 6th, with ETFs accounting for more than 60% of all canceled trades during that time period.
In the last year, ETFs have over-taken mutual funds in Assets Under Management (AUM) and new classes have emerged. Both retail and institutional use of ETFs continue to grow, and there are no signs of this slowing down. ETFs trade nothing like a single stock or mutual fund, however, some investors trade them assuming they have the same qualities. Contrary to popular belief, ETFs are not mutual funds that trade like a stock. ETFs trade in a similar fashion when compared to individual stocks with such provisions as placing limit orders, short-selling and protecting the downside with stop-loss orders – all features that are not available for mutual funds.
About a year ago, the “flash crash” of May 6th showed one glaring issue facing the Exchange-Traded Funds (ETFs) market. This issue stared directly at investors who lacked the knowledge on how to effectively trade ETFs. To properly trade an ETF, the investor must have an understanding of how an ETF is constructed, what securities comprise the underlying basket, and how these underlying securities trade.
Often times, due to this lack of this understanding, an ETF will trade at significant disparity from its NAV. If investors have an accurate read of the NAV and understand the real liquidity, they are then empowered to set an appropriate limit order and potentially trade the ETF where it should be traded. This gives investors the advantage of being an informed buyer and may protect them from buying too high, or selling too low.
To understand the fair price of an ETF, investors must know:
- The real-time Net Asset Value (NAV) of the underlying basket; and
- The Average Daily Trading Volume (ADTV) is not an accurate reflection of the actual liquidity of the ETF; and
- The ADTV in addition to each underlying securities liquidity is the true ETF liquidity.
In addition to this, investors can take advantage of the cost-savings opportunities provided by trading ETFs when compared to other investment vehicles such as mutual funds that charge redemption fees and front-end or back-end load that are not applicable in the ETFs.
Lastly, investors should find an agency ETF price and size discovery trading platform that provides the tools and information to trade ETFs at a more favorable execution price while also finding hidden liquidity, and has a number of built-in safeguards designed to prevent orders from being executed when the ETF price deviates too far from the NAV. During the flash crash, investors who had the knowledge and the tools to effectively trade ETFs were safe when executing orders on May 6th 2010.
Global, international, emerging markets… these are words that I hear and use often throughout the day. It was interesting and enlightening to listen to analyst, Meredith Whitney’s keynote presentation at SunGard’s New York City Day as she made the case that there were states in the US that have such clean balance sheets and manifold resources that they should be viewed in a new light.
Instead of relegating them to “fly-over” or “rust belt” status, Whitney suggests that these sections of the US—mostly the central states, the northeast and Texas—be seen as “emerging markets,” ripe for investors and entrepreneurs. Whitney makes a strong argument that these states escaped the long-term ravages of the Great Recession and are ready for an influx of investors and entrepreneurs. They are the breeding grounds of great potential for commodities, agri-business and manufacturing, which she argues are the new “growth engines of the US economy.” These engines will eclipse our rapidly fading mix of home ownership and leverage, undercut by receding mortgage and consumer debt.
From 1990 to 2010, consumer debt grew by 277% and mortgage debt grew by 305%, Whitney said. The states that benefitted greatly from this debt spree California, Florida, Arizona and Nevada represented 21% of US GDP in 2010 and 20% of employment. Interestingly, while consumer spending grew by 48% from 1999 to 2009, state and local government spending went up at a higher rate—64%—during the same period. As defaults, delinquencies and unemployment increase, however, the coastal states have become a burden on GDP.
Late last year, Whitney went so far as to predict that many troubled states and municipalities in the US would suffer defaults and, ultimately, cause dire consequences for the municipal bond markets. Many of her critics point out that the sky hasn’t fallen and that her scenario is full of overkill. Municipal bond calamities aside, I’m glad Whitney compels us to look beyond the comfort zone of conventional wisdom.
It might be a stretch but like Whitney rediscovering emerging markets out of frequently ignored US states, it’s possible that trading firms could do something similar for their trading strategies.
For instance, a serious review of the transaction processes for trading equities, debt, foreign exchange and other key instruments could help a firm boost P/L by uncovering operational efficiencies. The review could also spur new thinking about additional sources of revenue previously overlooked. Have all cross-asset possibilities been investigated? Are there low-latency and direct market links that could facilitate new opportunities? Have trading algorithms evolved to the point where it makes sense to use them to extract more from current markets or as important tools for breaking into new markets? Do the markets once relegated to the “rust belt” and “fly-over” categories for trading now represent much better opportunities than the flashier markets that are dangerously overleveraged? In our current climate, the accepted rules of thumb may actually obscure capital markets opportunities.
Whitney’s presentation and her vision make a persuasive case that firms can no longer blindly rely on conventional wisdom. So, while it’s essential to explore all global opportunities, it’s also a good idea to step back and see if there are prospects hiding in plain sight that would be foolish to pass up.