The aftermath of the financial crisis will be the defining industry driver in the year ahead, according to Rob Hegarty, a market structure specialist at the global clearing, settlement and information group, DTCC. Speaking at a gathering of industry heads in London, Hegarty identified ten factors that would define the way the financial community regrouped following what he described as a “year few would forget, although most would like to.”
The single biggest driver for the financial markets is the aftermath of the financial crisis. All other industry drivers pale in comparison. This aftermath is bringing issues such as more robust regulatory structures, risk management, differentiation in a risk-averse era and employee morale, acquisition and retention, to the forefront.
Across the industry we’re seeing pressure on revenues and a renewed drive for corporate profitability, among many forced consolidations. While there has been a lull inconsolidations in recent months, we expect to see this activity pick up as firms jockey for position as we emerge from this crisis.
There will also be a rapid global electronic trading evolution, a re-evaluation of the role of derivatives and how they are traded, cleared and settled, and a fresh look for hedge funds as they adapt to this new environment.
Strategic responses…and resultant technology initiatives
The predominant “strategic” response from the industry has, in fact, been very tactical: to analyse positions and dispose of toxic or dubious positions as quickly aspossible. Simultaneously, firms have been developing strategies that focus on either survival or – for the smart, brave or lucky – capitalising on the financial crisis to grow their business. Thankfully, this is not an industry that likes to look in the rear view mirror for too long.
Improving risk management controls and reporting capabilities are seen as essential, but not particularly as a technology problem. The risk issues related to the financial crisis are primarily policy and procedural issues. Once these are in place, firms can move forward with technology solutions, although at the moment we’re still seeing firms curtailing IT spending.
Looking forward, these firms are looking to develop new markets and sell products in new asset classes, as well as to invest in the trading infrastructure to manage crossborder trading.
On the technology side, firms are looking at IT governance strategies to rationalise expenditure and to integrate different systems on the back of mergers or acquisitions. A lot of resources are being channeled into this area. We’re also seeing the development of models to measure risk across every aspect of the business, and to build a more client-centric data management system.
Risk and regulation – front and centre
Whether it’s a strategic or technology response to the crisis, overwhelmingly the common denominators are the importance of risk and regulation. This stems back to September 2008 as the world reeled following the collapse of Lehman Brothers and the acquisition of Merrill Lynch by Bank of America.
This was the point at which we knew that the industry had to be redefined and we knew that risk and regulation would be front and centre. Everyone was talking about risk, but the point we were making was that risk can be defined in many ways, with very different meanings. If you want to manage risk, you have to understand the kind of risk you’re dealing with.
At TowerGroup, they developed a 10-point summary of risk ranging from the most obvious – operational risk – to reputational risk. Firms were starting to understand that every risk, if not properly managed, leads to reputational risk. And in the climate we were dealing with, a firm’s reputation is paramount.
Turning to the impact of regulators, the most complex aspect is the sheer number and jurisdictions of the regulators: US-based, Europe-based and Asia-based. It’s been widely reported that Citi – with its diverse business lines and global footprint – has a reporting structure into 140 different regulatory bodies globally. This certainly can create roadblocks and hurdles if not managed properly. So the question is: can the vast number of regulators balance the needs of their global constituents?
Comments from the G7 meeting in October 2008 gave a strong indication that global leaders were addressing this point. The number one takeaway at this meeting was a commitment to ‘take decisive action and to use all available tools to support systemically important financial institutions and to prevent their failure’. If there was any doubt that regulators would be taking a more active stance, that statement eliminated it.
At TowerGroup we digested these comments and developed what we saw as the ‘four constants of regulation’. These were that regulators would regulate around entities – for example being regulated on the basis of the type of firm you are (e.g. exchange, broker, etc); around activities – such as short-selling; around products such as swaps – and balancing the need for product innovation with the need to monitor; and around asset classes like equities or commodities.
The major headache for the regulators will be how to do all this in concert across the globe. The risk is that rather than reducing the number of regulatory bodies, we may even see an expansion. The Federal Reserve will likely take a leadership role in this initiative, and there is even talk of an international regulatory body – although I suspect we are many years from this – if ever.
Look ahead
Looking ahead, two issues will continue to dominate. Firstly, a complete reset of regulation has been pushed to the forefront by the crisis, and is now one of the most significant drivers in the industry. It will happen one region at a time, rather than being a grand global effort. Only once each region – the US, Europe, Asia – has got its house in order are we likely to see any coordination between these areas.
Secondly, risk management is being redefined. It’s now more about policy and procedure, than technology, although we do expect to see spending on risk management technologies picking up in the second half of the year.
Rob Hegarty was speaking at an FPLorganised event in London on 15 July, hosted by Nomura.
Assessing The Aftermath – Risk And Regulation Top The Agenda In A Search For Solutions
Big Brother is not watching you (yet)
By John Cameron
Better FIX-assisted auditing tools could transform the way regulators monitor the industry
10pm, 1994 The children are in bed. It’s been a busy day.
Time to kick back, glass of red in hand, and relax.
The phone rings. “We need you back in the office.”
“Why?”
“We’ll tell you when you get here”
“Can’t it wait until tomorrow?”
“No.”
I enter the office. It’s full of faceless men in dark suits. I know none of them. Despite being dragged in, in the middle of the night, nobody wants to tell me why.
The ‘suits’ it seems are from the regulator. It appears that one of our traders made a lot of money that day, and it’s attracted their attention. It was never made clear exactly what they suspected – some kind of insider trading, maybe front running a client – but they weren’t happy, and they were looking for evidence.
That’s why they needed me. Over the previous year, I had written a system which handled the whole trading cycle, from capturing a customer order taken by the sales person, passing it on to a trader, assisting the trader to work orders into the market, then allocating and booking the trades and confirming the completed orders back to the customer by fax, telex or whatever. It was called Trafic (French spelling).
Trafic had been a great success and, at the time of the incident, all orders and trades passed through the system. Every operation by a sales person or trader, and every trade coming back from the market (an early fully electronic exchange) was recorded and time-stamped.
In addition, all phone calls to the sales and trading desks were recorded and time-stamped on magnetic tape. The person responsible for managing the tapes had also been called in. Between the two of us we could reconstruct the exact sequence of events during the day down to the nearest millisecond.
This is what interested the regulators. Theoretically, our records could provide damning evidence against the trader.
Over the past 25 years, computers and automation have increasingly made it possible to provide such a detailed audit trail. The problem was that the transaction data was encoded and stored in a format that I had chosen. There was no standard, so I made up my own. I had yet to write a convenient audit program that could display and analyze the data. As a result, the regulators had no choice but to call me in to extract and interpret the data they wanted to examine.
I hadn’t heard about FIX back then in 1994. If I had, the story might have been very different.
Establishing a common language
FIX is a communications protocol. In other words it defines how messages can be reliably exchanged between two communicating parties, making sure that messages arrive intact, in the correct order and without any being lost.
However, FIX is also a data standard. It defines the detailed content of the messages being sent. Each type of data in FIX is associated with a unique number – the “tag number”. For example, the quantity of an order is defined to be tag number 38. As such, a FIX message is simply a list of tag numbers and their corresponding values. FIX also defines the allowable values for different kinds of data. It specifies that an order to buy is represented by the value “1” in the special data field with tag number 54. An order to sell, stores the value “2” in this field.
This may all seem trivial – and a little arbitrary. Why not, for arguments sake, use “B” for buy or “S” for sell. (Trafic was built for the French market, so it used “A” for buy – acheter – and “V” for sell – vendre.) However, what is most important about FIX is not the way it choses to represent data (tag=value) or the precise values chosen that the data can take. What is most important is that FIX establishes a common standard for financial data.
This standard is now everywhere. Pretty much all financial software, anywhere in the world, understands FIX. Had I known about it back in 1994, it is likely that I would have stored all transaction data according to the FIX data standard. It would have been something that the regulators would have been able to decifer themselves – and I would have got a better nights sleep.
FIX as an integrator
FIX was originally designed as a standard way that a broker’s clients could send their orders and receive back their trades electronically. Today, brokers also commonly use FIX to communicate with electronic markets, such as stock exchanges.
However, FIX is not just used for external communications. Many organizations now use FIX for routing orders and trades between the different internal programs used for order processing. These days it is almost inconceivable that any commercial financial software would be successful without the ability to “talk” FIX. Equally, it is unlikely that custom software written in-house would be designed without a FIX capability.
This makes FIX the natural “glue” for integrating the numerous programs that typically run within any financial organization.
Even old “legacy” software that knows nothing of FIX will typically be integrated into an organization by writing a wrapper around it that translates its proprietary external communications into FIX.
So, increasingly, FIX tracks the whole life cycle of an order or trade within an organization, and even across multiple organizations.
日本のカメ型アプローチの強み – 超スローペースのアプローチは 日本での最良執行に向けた最高の方法だろうか？
By Peter Twist
ウ サギとカメの寓話による教えのとおり、スタートダッシュで一番となることが必ずしも最高の結果をもたらすわけではありません。トレーディング･コミュニ ティのメンバーの多くは、日本の市場はその重要性にもかかわらず、国際的な水準から大きく遅れを取っているという見方をしています。しかし、IND-X Securites社のピーター・ツィスト氏のレポートのように、「静観して待つ」というアプローチが日本の成功には必要なのかもしれません。
最 近では、トレーディングについて議論をすれば、必ず様式化された「最良執行」についての持論を持ち出す人がいるように見受けられます。独立した執行場所の 数が右肩上がりに増加するにつれ、最良執行に対するこだわりが世界的な流行りとなっているようですが、これはそもそも目新しいことなのでしょうか？ファン ド・マネジャーがさまざまなレベルで直接関与するようになったことにより、トレーディング・コミュニティではこうした議論が常に、ほぼ間違いなく最前線で 行われてきました。しかしここでまた、急に関心が高まっているのはなぜでしょうか？最良執行についての話題に関する基本的な問題には、何か根源的な意味が あるに違いありません。では、「最良執行」とは何でしょうか？
こ の問いには誰でも答えることができると思いますが、全員を満足させてくれる唯一の定義はありません。また、異なる動機がいくつも存在することによって、解 釈の幅も大きくなります。ある程度のコンセンサスが期待できると思われるセグメントの中でさえも、意見は細かく分かれます。例えば、長期の保有戦略をとっ ている機関投資家のファンド･マネジャーと、逆に、レイテンシーを気にしながら投資を行う個人投資家のような短期のモメンタム投資家とでは大きな違いがあ ると思われます。最良執行の定義だけでは、ある執行場所をわざわざ選ぶ本質的な理由にはならないとはいえ、全員の合意が得られなければ、最も熱心なグルー プが利己的に執行場所を支持することになりかねません。
日本は差を縮めているか？
こ れまで、新しい取引形態の導入において日本が先陣を切ったことはありませんでした。むしろ、日本では（地域の小規模な取引所のいくつかも含め）主要な証券 取引所よりも対応が遅く、さらに代替取引という面では、今でもほとんど提供されているサービスはありません。現在、PTS（私設取引システム）や同様の認 可取引所が利用可能となり、大手のブローカーは競合するいくつかの取引場所で運用を行ってはいるものの、成功の度合いはまちまちとなっています。
日 本がこれまで持ち続け、少なくとも近い将来に持ち越すであろう問題の中心は、国内／オンショアと海外／オフショア間のトレーディング・モデルの分断にある と考えられます。皮肉なことに、現地当局が新たな最善の取引方法を海外のブローカーに強制しているわけではなく、それどころか日本で営業している海外のブ ローカーの多くが市場に対して変革を要求しています。世界経済で日本が果たしている役割の重要性を考えると、この状況には期待と同じくらいの驚きを覚えま す。
海外と国内の利便のバランス
し かし国内では、インターネットをベースとしたいくつかの個人向けプラットフォームが動き始めたことを背景に、世界で起こっている変化が更にゆっくりとした ペースで進みつつあります。近年、日本においては個人投資家は市場を牽引してきた存在であり、規制当局が新しいアイデアと国内外の利便の間にはバランスが 必要と考えるのは当然のことです。問題は、日本にとってそれがどのような意味を持つかという点です。要は、高度に自動化が進んだ新しい取引形態であって も、日本で牽引力を伴うほど著しい進展を見せるようになるまでには時間がかかるということです。大手投資機関の努力により、新たな取引形態は日本で導入は されましたが、これによって満足したのは取引人口の3分の1に過ぎませんでした。
国 内経済の問題は見過ごされるべきではありませんが、日本が既存の取引所をより厳しい競争の中へ解放するつもりであれば、需要の程度とこの先の長い道のりを 認識する必要があります。つまり、市場への参加コストを下げるためにはまだやるべきことがあり、現在提唱されており、他の国際市場で取引面での革新の原動 力となっている執行サービスとリサーチ･サービスのアンバンドリングといった変化を受け入れるためにも、まだやるべきことがあるということです。
と はいうものの、日本にはメリットもあります。他の国際市場で広く見られる取引はまだ導入されておらず、そのために清算や決済の手続きは比較的単純なフロー が維持されています。グローバルな変化に日本が後れを取るべきではないことは明白ですが、その慎重で抑制されたアプローチは必ずしも悪いものではないとい えます。
国内資本へのアクセス
日 本にいる外国の投資家にとっては、巨額ではあるものの大体が保守的な国内の資金にいかにアクセスするかが、最も高いハードルとなっていました。国内資金は 主に投信ファンド（ミューチュアル・ファンド）または特金ファンド（投資信託）を通して保有されており、これらの商品はそのオンショア的性質のために、真 に進展させようとすれば、複雑でコストのかかるものとなっています。例えば、こうした投信や特金といったオンショア・ファンドが取引に約定平均値を受け入 れ始めたのはここ数年のことです。それまでは執行結果の数字をにらみながら取引を行っていました（つまり、ファンドは証券コード6758のソニー株を 10,000株購入しようとしても加重平均値の25.11円では買うことはできず、実際の単元単位で購入し、取引を計上していたため、1,000株単位で 10回に分けて購入しなければなりませんでした）。
日 本では、今ではDMA（ダイレクト・マーケット・アクセス）が認められるようになったため、いくらか進展が見られるようになり、取引のレイテンシーとキャ パシティが向上しました。しかし、FIXの導入が徐々に進んできたこともあり、将来起こりえる進展の内容について十分に検討すれば、まだまだ重大な課題が 残っています。
アンバンドリングの世界への参入
最 近の国際的な変化を背景に大きなパワーとなっているのは、ステークホルダーの負担で行うサービスについて、あるいはステークホルダーが支払う報酬に関して もっとオープンにすべきという、ファンド・マネジャーに対する要求です。日本ではまだアンバンドリングの概念を受け入れるに至っていませんが、規制当局は 問題点を詳細に洗い出しており、今は日本でこのプロセスを導入するための最善の方法を検討する準備を進めている段階です。この件に関し、金融庁から今年の 年末までに指示が発表されると見られており、市場は期待を持って待機しています。
国 際的な取引市場においては、コミッション・シェア契約（CSA、米国ではCCS／クライアント・コミッション契約）の形態がすでに一部で確立されており、 オルタナティブ投資に関するリサーチ･サービスによって世界中で見込める利益は大幅に増加すると思われます。しかし、どちらもまだ日本では導入されていま せん。これら二つの領域は、日本のブローカーに大きな恩恵をもたらすものです。オルタナティブ・リサーチを行うことで、まさにその性質上、競合する大手投 資機関よりも啓蒙的で有益な考えを持つことが可能となります。その意味では、リサーチ会社がCSA（最新の技術を用いて執行を行い、手数料分は分離口座に 保有される契約）を通じて商品に対する報酬を受け取ることができれば、リサーチ会社では現在手にしている以上の報酬を受け取れることに気がつくでしょう。 CSAを利用すれば、報酬の中に質の劣る売買執行サービスを含める必要がなくなるため、リサーチ･サービスの価値を高く維持することが可能となります。
Backing the tortoise – Is Japan’s slowly, slowly approach the best route to the best best execution?
By Peter Twist
As the fable of the hair and the tortoise taught us, being the fastest away from the blocks does not guarantee the best result. Most in the trading community agree that Japan has lagged behind international standards, despite the importance of its market. However, as Peter Twist of IND-X Securites reports, taking a look-and-wait approach may be Japan’s path to success.
These days, it seems impossible to have a discussion about trading without someone alluding to the concept of a more formalised “best execution” mantra. Fuelled by the ever increasing number of independent execution venues, the obsession with best execution might have become a global fad, but is it anything new? Arguably, the practise has always been at the forefront of all those within the trading community, aided by varying degrees of direct involvement from fund managers. Yet, if this is the case, why is there suddenly so much interest? The fundamental issue surrounding the topic of best execution has to be the underlying meaning. What is best execution?
Everyone has an answer, but there is no single definition that satisfies all parties, and divergent motives allow for significant freedom of interpretation. Even within segments where one might expect a degree of consensus, there is scope for fragmentation. For instance, fund managers who fall into the long term buy and hold category could differ markedly from shorter term momentum investors who could, in turn, be diametrically opposed to the latency play individuals. While the definition of best execution isn’t, in itself, a reason for choosing one execution venue over another, the lack of unanimity only serves to support the self-serving world of best endeavours.
Japan catching up?
Historically, Japan has never been at the cutting edge of new trading landscapes. Rather it has often been slow to move beyond the primary exchanges (including some of the smaller, regional exchanges), and still offers very little in terms of alternative venues. While PTS or similar licenses are now available, and some leading brokers have applied to operate competing venues, there have been varying degrees of success.
The core issue for Japan has always been, and – at least for the foreseeable future – looks set to be, the divide between its domestic / onshore and its foreign / offshore trading models. The irony is that new best trading practices are not being forced onto the foreign broker by the local authorities, but rather the high number of foreign brokers operating in Japan are forcing change onto the markets. Given the importance Japan plays within the global economy, this is as surprising as it is expected.
Balancing foreign and domestic interests
Domestically, however, any changes that occur are happening at a much slower rate on the back of the onset of a number of retail focused, i-net based platforms. Retail investors have been a leading force in Japan for some time, and it is only natural that regulators need to balance newer ideas with both foreign and domestic interests in mind. The question is: What has this meant for Japan? The upshot is that, despite new trading landscapes with their high degree of automation, significant advances have been slow to gain traction in Japan. The efforts instigated by the bulge-bracket firms may have been implemented in their local Japan operations, but this only caters for up to a third of the trading population.
While Japan’s domestic economic woes should not be overlooked, the country still needs to recognise the demand and the long-road to travel if it is to open up the established exchanges to greater competition. In short, it has to do more to bring down the costs of participating in its markets, and it has to do more to embrace changes currently being advocated, such as the unbundling of trading and research that has driven trading innovations in otherinternational markets.
한국 증권사가 나아갈 방향은? – 전자 거래의 인기 가 점점 높아지고 있지만 여전히 남 아 있는 장애물
By Jamie Kim
한 국은 세계적인 경제력을 보유하고 있음에도 불구하고 전자 거래 역량을 강화하고 해외 투자 커뮤니티와 투자자를 유치하는 데 여전히 어려움을 겪고 있다. FIXGlobal은 미래에셋 증권의 제이미 김(Jamie Kim)이 한국에서의 전자거래 발전 상황과 개선이 필요한 부분에 대해 얘기한 내용을 게재한다.
한 국은 경제 및 금융 시장이 비교적 성숙되어있음에도 불구하고 한국거래소에서 증권을 거래하는 것은 그렇게 간단하지가 않다. 이는 거래 과정에서 복잡함과 많은 제약사항을 마주하는 해외 투자자들의 경우에는 더욱 그러하다. 온라인 거래가 점차 대세로 자리를 잡아가고 있지만, FIX를 공통 프로토콜로 채택하는문제는 잘 구축되어 있는 국내 전자거래 기술에 가로막혀 진전을 보지 못하고 있다.
거 래 프로세스를 개략적으로 살펴보면 이러한 문제의 예를 볼 수 있다. 첫째로, 한국거래소(KRX)에서는 공인 받은 기업만이 거래를 할수 있다. 개인 투자자가 거래를 하려면 먼저 공인된 이들 기업 중 한 곳에 계좌를 개설해야한다. 두 번째 장애물은 온라인 거래든, 오프라인 거래든 현금을 먼저 예치해야만 주문을낼 수 있다는 것이다. 주문을 내면 시스템이먼저 이 예치금 입금 여부를 확인한 다음 거래소에서 제공하거나 증권 중개업체에서 개발한전산화된 주문 전달 시스템을 통해 해당 주문을 거래소로 전송하게 된다.
한국의 증권회사는 서면이나 전화, 팩스 또는온라인을 통해 고객의 주문을 받는다. 온라인거래의 경우 증권회사는 주문 유형에 대해 투자자와 사전에 계약을 맺어야 하고 KRX에서제시하는 요건을 준수해야 한다.
투 자자는 HTS(홈 트레이딩 시스템), PDA, 휴대전화 또는 ARS(자동응답시스템)를 통해온라인 거래를 할 수 있다. 대한증권업협회(KSDA)에 따르면 온라인 거래 프로세스가 완전히 자동화되어 있기 때문에 HTS가 거래 채널로 가장 많이 사용되고 있다고 다.
증 권회사가 접수한 온라인 주문은 수동으로재입력하는 단계를 거치지 않고 곧바로 한국거래소의 거래 시스템으로 전송된다. 대형 증권사는 일반적으로 온라인 거래 플랫폼을 자체 개발하여 사용하고 있는 반면, 소규모 회사들은 한국증권거래소(KSE)의 자회사인KOSCOM이 제공하는 시스템을 사용할 수 있다.
온라인 거래의 촉진 요인과 장해 요인
온 라인 거래의 인기가 높아지고 있는 데는 여러 요인이 있을 수 있다. 즉, 규제 시스템의 변화와 급속한 기술 발전, 높은 PC 보급률, 그리고 자사 고객을 대상으로 온라인 거래를 적극권장하고 있는 증권사들의 노력 등을 들 수 있다.
한 국의 거래 시장은 미국 시장과 비교했을 때상대적으로 스프레드 폭이 넓고 유동성이 부족하며 전자 거래 물량이 적다는 점이 그 특징이다. 하지만, 이런 상황은 빠르게 변화하고 있다. 한국 (및 아시아 전역)의 시장 확대와 전자거래에 대한 수요 증대로 인해 유동성이 계속증가하고 있다. 이러한 추세는 분명 다양한 거래 전략을 만들어낼 뿐 아니라 점점 더 정교한거래 인프라를 필요로 하게 된다.
이 러한 요인들은 점차 입지를 넓혀가고 있는대형 투자은행과 기술의 진보까지 더해져 아시아 지역에서 거래를 모색 중인 사람들에게 절호의 기회를 제공할 수 있다. 투자 업계에서는전자 거래가 진입 장벽을 낮추고 효율성을 높이며 리스크를 줄여줄 뿐 아니라 증권사가 거래 물량의 급격한 증가를 저렴한 비용으로 실시간 처리하는데 도움이 된다는 인식이 점차확산되고 있다.
향후 전망
이 러한 추세는 분명 더 많은 글로벌 증권회사와 해외 고객들을 한국으로 불러 모으는 계기가 될 것이다. 그러나 한국이 국제 거래 시장으로서의 가능성을 완전히 실현하려면 세가지분야에 보다 큰 역점을 두어야 한다. 즉, 규제환경에 대한 일관성을 개선하고, 기술 인프라를 업그레이드하고, 국제 거래 커뮤니티의 기대치에 부합하는 공통 프로토콜을 채택해야한다. 비용에 대한 우려와 우수한 OMS 공급업체의 부재에도 불구하고 FIX가 이러한 문제들을 자연스럽게 해결할 수 있는 대안이 될 것으로 보인다. 우리는 한국 시장의 많은 다른 분들과 함께 이렇게 진행되기를 기대하는 바이다.
KRX – 2008년에 이룬 새로운 발전들
몽골증권거래소 거래 시스템 업그레이드
KRX와 몽골증권거래소(MSE)가 MSE의 거래 인프라를 업그레이드하기 위한 계약을 체결했다. 2006년의 협약을 기반으로 체결된 이번 계약은 몽골 기업의 KRX 상장을 촉진할 뿐 아니라 상호 관계를 더욱 확대할 것으로 기대된다.
캄보디아에 증권거래소 설립
2008 년 1월 22일 KRX는 2009년 안에 캄보디아 최초의 주식 시장을 설립하기로 하는 계약에 서명했다. 새로 설립되는 증권거래소는 공동합작의 형태로 캄보디아 정부가 지분의 55%를 보유하고 KRX가 45%를 보유하게 된다. 캄보디아는 아직 세계 최빈국 중 하나지만 탄탄한의류 및 관광 산업을 바탕으로 지난 3년 동안 연평균 11%의 경제 성장을 기록했다.
10년 국고채 선물(KTB Future)을 위한 시장 조성자 제도(Market Maker System) 도입
금 리파생상품의 거래를 활성화하기 위해 KRX는 2008년 2월 9개의 선물 거래 업체와 10년 국고채 선물을 위한 시장 조성자 제도 계약을체결했다. 시장 조성자는 상품에 대한 입찰을 제출하고 견적을 요청함으로써 유동성을 개선하는 의무를 지게 된다.
돈지육 선물 거래 시작
2008 년 7월 KRX는 돼지 사육 농가와 투자자들이 가격 변동성 및 관련 리스크를 관리할 수 있도록 한국 최초의 농업파생상품인 돈지육 선물을 도입했다. 한국의 연간 돈육 생산은 원화로 3조 6,000억원(미화 35억 5,000만 달러)에 달한다. 돈육 시장은 쌀 시장에 이어 한국에서두 번째로 큰 농산품 시장이며, 2007년의 가격 변동성이 27%로 KOSPI의 23%에 비해 높은 편이었다.
FTSE, 한국 증시를 선진시장(Developed Status)으로 재분류
2008 년 9월 18일 FTSE 그룹은 2009년 9월 GEIS(global equity index series)에서 한국을 “선진신흥시장”에서 “선진시장”으로 재분류한다고 발표했다. FTSE의 결정은 글로벌 시장 참여자들이 한국 자본 시장의 법률과 규정이 글로벌 표준에 부합한다는 것을 인정했다는 의미이다.
글로벡스(Globex)에 KOSPI200 선물 교차 상장 합의
2008년 11월 KRX와 CME 그룹은 2009년 9월부터 CME의 글로벡스 플랫폼에 KOSPI200 선물을 상장하기로 합의했다. 이 교차 상장이
시행되면 세계 투자자들은 하루 24시간 시스템에 액세스하여 KOSPI200 선물을 거래할 수 있게 된다. 주문은 CME 그룹의 글로벡스 플랫
폼에서 이루어지지만 거래의 정산 및 결제는 KRX에서 수행하게 된다.
말레이시아 증권거래소(Bursa Malaysia)를 위한 금융 상품 거래 시스템 개발
KRX는 2008년 10월 말레이시아 증권거래소의 이슬람 상품 거래 시스템(CMH) 개발 프로젝트를 수주하는 데 성공했다. 2007년 9월에는
말레이시아 증권거래소에서 시장 조성자(market-maker) 시스템 개발에 대한 의뢰를 받았었다. KRX는 말레이시아 증권거래소의 CMH 개
발이 KRX의 시장 시스템을 중동 국가를 포함한 다른 이슬람 국가에 수출할 수 있는 계기가 될 것으로 기대하고 있다.
Eurex에 KOSPI200 옵션 일일 선물 거래 상장 합의
KRX와 유럽 파생상품거래소인 Eurex는 2008년 12월 Eurex에서 KOSPI200 옵션 일일 선물을 거래하기로 하는 계약에 서명했다.
KOSPI200 옵션 일일 선물은 한국 시간으로 야간(즉, 오후 5시 ~ 오전 5시)에 Eurex에서 거래 및 결제가 이루어진다. 2010년 1월에 만료
되는 이 국가간 거래 계약을 통해 투자자들은 현물 및 파생상품 포지션과 관련된 리스크를 관리할 수 있게 되고, KRX 파생상품 시장에 대
한 외국 투자자들의 참여도 촉진할 수 있을 것으로 기대된다.
출처: KRX 2008 통계연보
Narrowing the gap – China is looking to balance domestic needs with international experience. Could FIX be the solution?
By Shi Liang
One of the advantages of being a late starter is that you get to see what everyone else is doing and assess the best model for you. This has been the case in China, where its financial markets didn’t evolve their way into electronic trading; rather they simply started with it. The question now is whether China will join much of the rest of the world in speaking FIX, or whether it will continue with its homegrown protocols.
China took advantage of its status as a relative late bloomer among the world’s financial markets, by building a high-capacity, fully electronic trading infrastructure from the outset. As its capital market liberalization plans unfolded in the 1990s, the authorities were quick to realise that a highly-automated, paperless, technology-driven marketplace was the key to encouraging efficiency, standardization, accuracy and straight through processing (STP).
As such, both the Shanghai and Shenzhen stock exchanges, launched in 1990 and 1991 respectively, were established on these principles and set the foundation and standards for highspeed electronic trading. The result was rapid growth in the country’s investment community, as well as a boost to the domestic financial technology companies, that moved swiftly to keep pace with the demand for high-speed trading.
While China’s markets are still, comparitvely speaking, in their infancy in terms of breadth and depth, this early groundwork has created one of the most highly automated trading systems in the world. While other emerging markets are still struggling to move on from legacy infrastructures or manual trading processes, China has instantly catapulted into the realm of fully STP and virtually seamless T+1 clearing and settlements in its domestic equity markets.
Since the 90s, China’s capital markets have continued to evolve, mainly through a combination of gaining experience from the international financial markets, and domestic innovation.
Automated, but not standardized
However, in keeping with several Asian exchanges, China’s marketplaces have their own unique proprietary protocols. So, while trading in Mainland China’s various marketplaces may be completely electronic, there is no single, standardized messaging standard used to transact. These factors have, to some extent, stymied its potential to develop.
Shanghai and Shenzhen stock exchanges both use their own unique protocol, while the exchange gateways to the order entry systems and network are operated via their communication subsidiaries, STOCOM (Shanghai Stock Communication Company) and SSCC (Shenzhen Securities Communications Company). Similarly, the Dalian and Zhengzhou Commodities Exchanges, as well as National Interbank trading platform, each have their own interfaces.
Still a way to go …
When China joined the World Trade Organisation in 2001, it made clear that its preference was for a prudent and steady approach in the liberalization of its economy. The approach for the financial market was twofold: sustainable development, without threatening the development of the domestic financial sector; and allowing China’s investors to gain experience in global markets without getting burnt.
While China has made incredible progress, there is still an extremely wide gap between its domestic set-up and that of the international markets. In particular, with the absence of alternative liquidity venues, its heavily-regulated stock exchanges (and its tight integration with the depository) and efficient clearing system, it is understandable that many Chinese investors still shy away from alternative venues and complex products.
To achieve this sustainable development sought by the Mainland authorities, many in the investment community are increasingly looking for ways to bring in more foreign technology, expertise and knowledge and it seems that FIX is one of the tools that can be used to narrow the gap.
Are the exchanges driving FIX …
China’s financial sector is increasingly turning its attention to FIX as an efficient and standardized messaging protocol.
In 2006, the Shanghai Stock Exchange (SSE) announced plans to launch its Next Generation Trading System (NGTS). The SSE announced that, “with an extended capacity, the NGTS can support the trading of almost all products and various trading modes.” It added that the System would lay a “solid foundation for further development and innovations in the securities market” and that NGTS would improve the cross-border trading and support the internationalization of the members’ businesses.
Underlying the NGTS is a brand new protocol called STEP. STEP was developed after extensive consultation with a panel of FIX experts and is derived from FIX4.4. Some consider it a dialect of FIX. In June, the China Foreign Exchange Trading System has adopted the use of the iMIX protocol – also based on FIX – for the national interbank trading platform.
Together these developments show an important first move into the adoption of FIX as a common protocol in China.
Gearing up – Have no doubt, China is gearing up to be ahead of the game … and fast!
By Stephanie Lawton
FIXGlobal Face2Face forums were born of a desire to move away from salesfocused conferences, and towards real dialogue within the industry. The events are about education, experience sharing and critical assessment, of the development of electronic trading on a local, regional and global level. This month Face2Face hit Shanghai, and judging by the lively Q&A sessions that followed a full day of expert speaker sessions, China is more than holding its own in the electronic trading debate.
Another invitation to another conference pings into your inbox. The speakers have fabulous titles and an alphabet of letters after their name. The event promises to change the way you look at global markets, regional markets, and everything has a China angle. And yet, how many conferences end up feeling like sales pitches. And, in the spirit of honesty, how often, have we all witnessed a guest speaker’s presentation which has had a pretty solid chunk of sales-speak at the beginning, middle and end? Fast forward to Shanghai where, earlier this month, approx 180 people from the local and international financial community gathered together to debate the role of electronic trading in China at the FIXGlobal Face2Face. Almost two thirds of the vocal audience was from the buy and sell-side of the trading industry.
Don’t throw the protocol out with the vendor
Kicking off with an up-to-the-minute review on electronic trading trends and innovation were Citi’s Grace Lin and HSBC’s Gavin Williamson and Alan Dean. Of particular interest was the perspective of the speakers on the key drivers for asset manager, brokers and exchanges looking to develop or upgrade their electronic trading and FIX capabilities. A flurry of questions followed, with one brave individual suggesting the FIX messaging was too slow for the current high frequency – low latency environment. Alan Dean provided the most categorical answer… “Then you need to re-look at your vendor, as with FIX we are talking low micro-seconds.” Nothing like being put straight!
View from the Exchanges
Next up was an update on the development and implementation of FIX STEP/FAST at the Shanghai Stock Exchange (SSE). CTO of the SSE, Bai Shuo described the protocol as a variant of FIX, adapted for the local market. This streamlining – taking out aspects not relevant to the local market and adding in those the industry wanted – were essential to promote the protocol effectively to its users. A look at performance data of FIX STEP/FAST left other delegates in no doubt that Shanghai was poised to provide scalable capabilities that would attract a broad range of market participants.
Eric Yip, Head of Cash Markets for Hong Kong Exchanges and Clearing Limited, shared some updates on the global developments and regulatory issues concerning electronic trading and some of the lessons learned. Mr. Yip noted that changes in the Hong Kong marketplace would have to be driven by market demand and regulatory guidance. He also affirmed HKEx’s commitment to continuous improvement in market infrastructure. Along those lines, HKEx recently become a member of FPL and is assessing the pros and cons of adopting FIX Protocol for their cash market.
FIXing Russia – Despite some movement, the world’s largest country is far from being FIX-friendly
By Artem Kozyrev
While FIX is no longer a completely foreign language in Moscow, its adoption has been slow and patchy and interest remains low. Devexperts LLC, a leading financial software developer in Russia, argues that more needs to be done to promote the protocol to encourage foreign investors to access its markets.
In Russia, the major market players, including the largest brokers and the country’s two main exchanges, the Russian Trading System (RTS) and Moscow Interbank Currency Exchange (MICEX), have already integrated via their own APIs built on SQL and C technologies. As these institutions have already achieved a certain degree of success using these established integration models, many question the value of an upgrade to a full FIX infrastructure.
Russian brokerage companies, in most cases, perform electronic trading via the QUIK trading platforms developed by ARQA Technologies. Apart from custom APIs, QUIK solutions also provide access to the main Russian, and a number of foreign, exchanges indirectly, via a FIX connection through QUIK network. This has tied Russian brokers to their software provider, and makes the whole industry unreceptive and reluctant to any interventions of new technologies into the market.
Changing mindsets
Still, in spite of these obstacles, the industry is slowly changing as the brokers and exchanges become aware of the business opportunities offered by FIX. Despite their own established APIs, it has been the exchanges that are leading the shift. This change of heart, it seems, is being driven by the growing level of interest in trading opportunities in Russia from international brokers outside the country. According to a recent Morgan Stanley report, the share of foreign traders on the domestic exchanges now exceeds 30 percent, and continues to rise.
As Roman Goryunov, president of the RTS recently acknowledged, “Today, international banks and brokerage firms are increasingly interested in our derivatives markets, so it is essential that Russia’s major brokers and RTS have the effective and powerful solutions capable to support international trade standards.”
Most believe that the level of participation in the Russian markets would have been even higher had the exchanges provided foreign investors with a standardised FIX access earlier. Instead, foreign investors have had to either open local offices and connect via the exchange’s’ custom-made APIs, or apply to a Russian broker for access via its QUIK trading platform. Neither models were conducive with encouraging greater international participation in the domestic markets.
According to local FIX specialists, the time and cost involved in upgrading to FIX is far shorter than trying to adapt to the local systems. “The difference between R&D expenses for integration via FIX or non-FIX protocols is substantial. Where it takes three to four days to build FIX integration, to adopt the route of trading via the custom APIs can take up to three months and be much more expensive,” explains Artem Kozyrev, Product Development Manager of Devexperts LLC.
It was these market realities that have driven RTS and MICEX to improve their FIX infrastructure and to build a direct connection to their services for foreign investors, using FIX.
Desktop Consolidation – Is it finally becoming a reality?
By Ron Quaranta
For years, the financial community has heard rumours of the impending consolidation of desktop capabilities. Yet despite the talk, the anticipated consolidation never seemed to get off the ground. But now, with the economic downturn, firms worldwide are facing shrinking budgets and strict mandates to find ways to do more with less. As a result, Thomson Reuters’ Ron Quaranta argues, consolidation of capabilities at the desktop level may become more than just talk.
A trading desk has a myriad of needs: news, pricing data, fundamental information, risk analysis, liquidity discovery, trading capability, and much more. For the most part, many of these capabilities are resident within different applications or systems provided by different vendors. As a result, intercommunication and integration of these can be challenging, resulting in sub-par efficiency which, so far, has been accepted by most as ‘a way of life’.
The idea behind consolidation is simple. Rather than having data terminals, multiple execution management systems (EMS), order management systems (OMS), risk management systems located at disparate trading desk terminals (or worse, bundled randomly onto a single PC), the idea of consolidation is that a single desktop seamlessly interacts with all of the functionality a user needs. News and information lead to global liquidity discovery, to transactions routing, execution analysis and position management. All effortlessly interacting when and as needed.
Why has it taken so long?
Sounds great in principal, right? But this idyllic working scenario comes with a series of challenges.
Firstly, it requires traders, trade managers, technology heads etc to reconsider and in some cases rework how their trading desks operate. All too often, traders and the internal organizations that support them are comfortable with their current methods of working, are averse to possibly learning new technology, and in fact may not have the time to engage in a new workflow routine.
Secondly, many buy side traders are just using the systems given to them by their brokers. For the types of trading that they are doing, the broker provided system is just fine, so why change?
Also, in many instances the ideal workflow solution simply hasn’t existed. A vendor might be providing price discovery, and now incorporates trade order routing. But what about post trade analysis or position management? Essentially, it hasn’t made sense to move away from the existing method of working to a solution that was still only partially ideal.
Technically, many of these workflow capabilities can’t in fact communicate with each other. This issue has multiple roots, not least of which is the proprietary nature of many of the applications and services. Over time this is becoming easier to handle as more capabilities can communicate using industry standard protocols, notably FIX. Technology vendors are also increasingly open to wider collaborative capabilities since that does lead to greater business all around.
Lastly, in the period prior to the economic downturn, money was not as much of a concern; at least not insofar as technology spending was related. Some traders wanted one type of news and data terminal. Fine, sign it up. Others wanted a different terminal. Sure no problem. It was the needs of the trader, as defined by the trader, that were in focus and accommodated, without question to a great extent. Enough money was being made to justify the costs of multiple disparate systems.
The rate of change – Emerging markets are increasingly turning electronic, but progress is patchy.
By Vincent Ong
Electronic trading is gradually gaining traction in emerging markets across Asia and few dispute that the onward push towards universal electronic trading is unstoppable. From his base in Singapore, Bloomberg’s Vincent Ong argues that, while exchanges, regulators and international investors will be the key drivers for change, domestic investors are slowly changing their ways.
Up until about two years ago, mention “electronic trading” in emerging markets across Asia, and the most common reaction, especially from domestic institutional investors, was a mix of bemusement and disinterest, or possibly both. The prevailing mindset was that this form of trading was unlikely to impact them personally in the near future. Well – it appears that the future is closer than many had envisaged.
Fear of the unknown?
As always, adoption of electronic trading in emerging markets has been driven by a combination of fear of the unknown, on one hand, and gradual acceptance of the upside, on the other.
The key concern we hear most frequently here at Bloomberg, from both exchanges and the broker community, is the ability of electronic trading to manage risk and volatility. Ensuring that robust and proper systems are in place to help navigate any shocks and wild swings in the market is an important precursor to persuading potential adherents of the upside of electronic trading.
Uncertainty over the impact of electronic trading on the relationship between investors and brokers has also caused some resistance. Some were unwilling to dilute strong relationships with counterparty brokers, often cultivated over time, and over the phone. Others point to the exchange as not being ready, while some say brokers are not keen on receiving orders via electronic means (even if just routing to the desk). And there are those who claim the market is simply not liquid or developed enough to support electronic trading.
Another reason standing in the way of change is simply that the phone is hard to put down. Deeply ingrained habits are tough to change. The perception was and, sometimes still is, that calling the broker to place an order is a faster and clearer means of communicating instructions. Also, some argue, during those small personal moments over the phone, it is possible to gain some valuable market color. We have clients who tell us they like and want to place orders into the market themselves. For them, picking up the phone is almost second nature. Electronic trading represents a significant mindset shift for many domestic investors.
Acceptance of the upside
Despite these business challenges, we see markets evolving and participants – both brokers and investors – committing to change from traditional phone trading to electronic trading. Increased industry media coverage, events and conferences have also helped promote the benefits of electronic trading.
This, in turn, has led to greater buzz and awareness amongst key players. Exchanges – such as the Bursa Malaysia – are taking steps in the direction of electronic trading. They have shown a commitment to change by implementing trading via direct market access (DMA), which is slated to go ‘live’ later this year. Some, like India, Thailand and Indonesia have already gone ‘live’ with DMA. Exchanges and regulators play a key role in engaging the market to open up and eventually allowing investors to trade via DMA. In emerging markets, this is no small event.
One of the main reasons the exchanges want to go electronic is because they have seen that developed markets featuring electronic trading attract more foreign institutional investor asset flows. This trend of foreign institutional investors driving the move into electronic trading is not an uncommon phenomenon worldwide. These institutions already trade electronically in other more developed markets and are looking for the same capabilities in emerging markets.
In addition, traders at these institutions are frequently measured and paid by beating certain transaction cost benchmarks. The only way to objectively capture and measure the data is to trade electronically. Also, as part of their workflow, their execution management system (EMS) and/or direct FIX connections are frequently integrated into an order management system. This streamlines their workflow and is compliant with internal processes as it minimizes manual input and, thus, human errors.
This increased volume from electronic trading improves market liquidity, efficiency and transparency and ultimately may lead to reduced transaction costs for investors.
Our experience at Bloomberg with domestic institutional investors has also changed over the past two years. The more traditional approach toward electronic trading is gradually changing and there is increasing receptiveness to change. Understandably, there were good reasons for their previous mindset. Most, if not all, of their investments are in the domestic market, which had not heard about or asked for electronic trading. There were concerns about system integrity and impacts on the market of big orders being placed into the market directly. Electronic trading was perceived as riskier versus phone trading.
