Australian equity markets have seen just two deterioration in market cleanliness over the past five years, according to a recent ASIC report, “continu[ing] to operate with a high level of integrity and remain[ing] consistently among the cleanest in the world”.
These incidents, namely increased trading and market volatility during the Covid-19 pandemic and increased corporate activity in late 2023, reduced market cleanliness temporarily before being stabilised by ASIC’s actions.
The commission used a range of regulatory interventions, employing real-time trade surveillance data, analytical tools and human expertise to carry out activities including chat room interventions, targeted reviews of leaked information and observing finfluencer activity, to address these issues.
The number of new insider trading investigations launched by ASIC in the past five years has almost doubled, the commission stated. A dedicated criminal justice investigation team is being established to more efficiently progress insider trading investigations and increase the number of briefs referred to the Commonwealth Director of Public Prosecutions, it added.
Commenting on the report’s findings, Joe Longo, chair of ASIC, said: “Clean financial markets are essential for the financial wellbeing of Australians and fundamental to an efficient economy. They enable businesses to raise capital and manage risk and give investors confidence to invest.
“Protecting and enhancing the integrity of Australia’s equity markets continues to be a priority focus for ASIC. We will continue to invest in data and technology to hunt and detect all forms of market misconduct. As our financial landscape evolves we will expand our market cleanliness work to capture private markets and products in the coming year.”
Marie-Anne Barbat-Layani, president, utorité des Marchés Financiers
Following confirmation from the European Commission that the principle of T+1 has been accepted, the Autorité des Marchés Financiers (AMF) and the Banque de France have called for a “well-coordinated and efficient transition” for securities transactions across the EU.
Both organisations have emphasised the importance of cross-border cooperation in the transition, highlighting Switzerland and the UK as key jurisdictions due to their interdependency with EU markets.
A two-phased approach to the transition is advised. First, all trades on securities in a T+2 environment should be confirmed and allocated by the end of the trade day – a process that will require operational and technical upgrades across the industry, the firms state. Then, T+1 can be adopted, “with a satisfactory level of trade confirmations on the trade date”.
The T+1 framework should not be limited to regulatory aspects, they added, advocating for regulatory and economic incentives to be included.
The organisations concluded: “This comprehensive strategy aims to ensure a smooth and effective transition to the T+1 settlement cycle, safeguarding the stability, efficiency and competitiveness of European financial markets.”
Commenting on the announcement, Susan Yavari, regulatory policy advisor for capital markets at EFAMA, told Global Trading: “It’s good to see the French authorities calling out their priorities at this point.
“[It is] critical that we maintain alignment with the UK. A joint migration is feasible, we need to avoid reinventing the wheel and leverage on existing work and even share resources. The UK is still on CSDR, albeit as onshored UK legislation – it is still fundamentally the same framework. Europe should not have a misaligned system vis-a-vis other jurisdicitons for any longer than it has to.
“Most fundamentally, the short AMF/BdF paper points to an intelligent use of resources and path forward, while still delivering a safe and well-controlled migration. We should seize that.”
Rob Kirby, head of sales and business development for EMEA, QuantHouse
Multi-asset trading technology provider Quod Financial has entered into a strategic partnership with QuantHouse, a division of Iress, to enhance its AI-driven trading algorithms.
Trading firms will be able to carry out real-time transaction cost analysis (TCA) at the point of execution thanks to these enhancements, Quod Financial said, with QuantHouse’s low-latency and historical market data used within backtesting and to achieve algorithm refinement.
Commenting on the partnership, Rob Kirby, head of EMEA sales and business development, said: “In today’s trading environment, financial institutions are actively exploring and adopting the latest advances in AI and machine learning (ML) to enhance trading outcomes. The key challenge with deploying these latest innovations into the trading environment is that AI-driven algorithms can only be as accurate as the data on which AI systems are trained.
“QuantHouse’s historical data is now being used to train QuodFinancial’s AI/ML models to adapt to, and even anticipate, market movements. Traders no longer need to adjust their TCA assumptions or trading strategies manually when unexpected market events happen. They can now analyse the cost associated with each trade, optimise trading strategies and ultimately improve trade executions right at the point where it is needed most: as part of the trade execution.”
Medan Gabbay, chief revenue officer at Quod Financial, added: “In financial services, the performance of your technology is defined by the quality and speed of the data that powers your systems. This has never been more true or more important than now, as we go through a transition of data automation and AI/ML. QuantHouse has proven to be an exceptional partner in this data journey.”
Lara Jacobs, vice president of equities electronic trading coverage, JP Morgan
JP Morgan has appointed Lara Jacobs as vice president of equities electronic trading coverage. She is based in London.
Jacobs has more than five years of industry experience, and joins JP Morgan from Liquidnet. Most recently, she was head of international client trading for EMEA at the firm. Prior to this, she was an equity trader and market structure and strategy analyst.
An application by multi-asset market operator, CBOE, to define what is considered a ‘facility’ of the exchange, has triggered a row. The firm sought to rule that its order management system (OMS), Silex, acquired in 2017, would not be considered a facility of the exchange. Naysayers argue this could be used to escape regulatory oversight, potentially allowing the ‘fair and orderly market’ aspect of oversight to be bypassed.
On 13 February 2024, Cboe Exchange filed with the Securities and Exchange Commission (SEC), a proposal to adopt a new rule regarding order and execution management systems (OEMSs). The proposed rule change was published for comment in the Federal Register on 5 March 2024 and in April the SEC designated a longer period to consider the matter and, following a series of letters opposing the ruling, it decided to institute proceedings to determine whether to approve or disapprove the proposed rule changes.
The SEC has noted that “When the Exchange or an Exchange affiliate owns an OEMS platform, [SEC] staff has advised [CBOE] that affiliation with those entities caused the OEMSs to be considered “facilities” under the [Securities Exchange Act of 1934] and are thus subject to the rule filing requirements under Section 19(b) of the Act. The Exchange, however, believes that even if an OEMS is offered by an exchange affiliate, if it is operated as a separate business from the exchange and is operated on the same terms as OEMSs that are not offered by the exchange or an exchange affiliate, it is not a facility as defined by the Act. The Exchange seeks to codify this interpretation of the Act in its rulebook.”
While the SEC reported that CBOE states that an associated OEMS platform receives no advantage over other OEMS platforms as a result of its affiliation with CBOE, and orders from such an OEMS are handled by CBOE pursuant to its rules in the same manner as orders from any other OEMSs, CBOE also “notes it currently offers certain port fee waivers to users of the Silexx platform [affiliated with CBOE] and different pricing for certain functionality to trading permit holder (TPHs) and non-TPHs,” the Commission wrote.
The SEC observes that CBOE does not provide fee waivers to OEMS users not affiliated with Silexx.
Tyler Gellasch, CEO of the Healthy Markets Association, wrote a response in March 2024, “Cboe is not the first exchange to attempt to exclude product offerings from the definition of a ‘facility’ of an ‘exchange so as to avoid Commission oversight’.”
He cited a case involving NYSE in which it sought to offer wireless connections to the exchanges through an exchange affiliate (ICE Data Services), a case which involved the wireless service being offered over a shorter distance – leading to faster data exchange and trading – than rivals were able to offer.
“The Commission rightly rejected NYSE’s tortured interpretation of the “facility” of an “exchange” [after which] the NYSE family of exchanges and others challenged the Commission’s decision in the Court of Appeals for the DC Circuit … The Court of Appeals for the DC Circuit was not persuaded by the exchanges. It flatly rejected NYSE’s arguments that wireless communications were not part of a facility of the exchange, noting that the products were a “system of communication to or from the exchange . . . maintained by or with the consent of the exchange” that is offered “for the purpose of effecting and reporting transactions on the Exchange.”
Gregory Babyak, global head of regulatory affairs, Bloomberg.
Gregory Babyak, global head of regulatory affairs, Bloomberg added in his March 2024 letter, “The instant CBOE Proposal falls squarely within this history of the exchanges’ unrelenting efforts to limit the Commission’s authority to oversee core exchange functions. In the wireless case, NYSE asserted that the wireless connections were not a “facility” and hence didn’t need SEC approval. However, the DC Circuit Court and the Commission – supported by a multitude of market participants in each proceeding – found the wireless services were squarely within the definition of facility. It is sobering to note that – if NYSE had simply amended its rulebook to declare that “wireless connections” are not a facility of the exchange in the way that CBOE is proposing to amend its rulebook – this “filing out” would present substantial obstacles to enforcing the Exchange Act and would undermine future scrutiny by the Commission, market participants, and the courts”
Laura Dickman, CBOE
In April, Laura Dickman, associate general counsel at Cboe Global Markets, wrote in response to the letters written by other firms, “Given these commenters’ apparent lack of understanding of the rule filing process and the Commission’s authority over national securities exchanges, Cboe Options believes it would benefit these commenters for the Exchange to provide an overview of this process and authority.”
Having established its case that an exchange needs to file proposed rule changes with the SEC, Dickman noted that, “The proposal is nothing more than such a proposed rule change. … [T]he Act requires an exchange to submit to the Commission as a rule filing a change to the interpretation of a rule, so Cboe Options submitted the proposal to do just that. It is not unprecedented for an exchange to submit a filing to provide that products or services previously subject to rule filing requirements are no longer facilities of an exchange subject to those requirements. Like any other rule filing submitted to the Commission pursuant to Section 19(b) of the Act, Cboe Options expects the Commission to carefully review the proposal and approve the proposal if the Commission finds it consistent with the Act. Therefore, Cboe Options is not acting unilaterally or outside of the statute and is overtly doing the opposite.”
She also asserts that “Commenters’ dire warnings about the impact that approval of the proposal would have are grossly exaggerated. Contrary to Bloomberg’s views, the only the proposal, if approved, would have no impact on connectivity services such as co-location and ports or the offering of real-time Exchange market data, which services and data are facilities of the Exchange.”
“It is nonsensical to believe a single rule filing limited to whether one specific product is a facility of an exchange can “fundamentally alter . . . the Commission’s authority” with respect to exchange oversight,” she said.
The latest comments include on from the Securities Industry and Financial Markets Association (SIFMA), a trade association for broker-dealers, investment banks and asset managers in US capital markets responded to CBOE’s filing in a latter penned by Ellen Greene, managing director, Equities & Options Market Structure and Joe Corcoran, its associate general counsel.
Ellen Greene, SIFMA
“Allowing exchanges to craft rules to adopt overly narrow interpretations of what constitutes an exchange facility would enable exchanges to shift functionality that has traditionally been considered part of the exchange outside of the exchange and beyond the Commission’s oversight,” they wrote.
“SIFMA agrees with Commission staff that an OEMS owned by or under common control with a registered national securities exchange, where the affiliated OEMS enables its users to route orders for execution to that exchange or receive market data from that exchange, is a “facility” of the “exchange,” as those terms are defined in the Exchange Act and rules promulgated thereunder,” they continued.
In June, Babyak responded to Dickman’s letter, with a second missive to the SEC, “Should this be approved, there are unfair competitive advantages that could be realised by an Exchange-affiliated OEMS that could arise from that OEMS operating outside the Commission review process. But at a more basic level, the question before the Commission presently is whether the foundational definition of ‘exchange’ – that has consisted of a marketplace and facilities for 90 years – can be fundamentally altered in a manner that vastly reduces the Commission’s authority and the public’s rights by the expedient of simply amending an Exchange rulebook. We continue to believe the answer to that is an emphatic ‘no’.”
The SEC has 180 days or six month from initiating the period to determine its decision, to reach a conclusion, so the decision is likely to be expected in October 2024.
Commending the new Government’s “commitment to UK capital markets”, AFME has shared three key principles that it believes will create “deep, integrated and sustainable” markets that support both companies and investors.
The association calls on the Government to provide a clear roadmap on capital market reforms, including a structured timeline for the completion of work under the smarter regulatory framework.
Regulators should remain independent within their mandates and retain the ability to react to market developments in a timely manner when justified, AFME continued. This is particularly relevant given current concerns in the US that the Federal Reserve may lose its independence under a second Trump presidency.
High regulatory standards and a stable, independent regulatory regime are key for the UK’s reputation and success as a global financial centre, the association argued, and should be both tailored to the domestic market and have the ability to meet changing needs and international standards.
International competitiveness needs to remain a focus, it added, stating its support for the international competitiveness and economic growth objective outlined in the Financial Services Market Act. Regulators’ policy decisions need to prove their commitment to this objective, it said, adding that competitiveness is improved by having a well-functioning financial services ecosystem rather than a low-regulation environment.
Adam Farkas, CEO of AFME, stated: “On behalf of our members, I want to extend our sincerest congratulations to the ministers on their appointments. We look forward to working with them and their colleagues to secure the UK’s long-term economic prosperity and competitive advantage.
“We strongly believe that UK regulation should keep-pace with global changes in regulation, to ensure the UK does not diverge from other major overseas jurisdictions, or international standards and best practice. Changes to the regulatory landscape should be considered alongside the effect that they will have on the UK’s competitiveness compared to other jurisdictions. A consistent international level playing field and the prevention of both excessive regulation and the fragmentation of capital across different jurisdictions are vital to cross-border banks and their client base who benefit from open, liquid and transparent global financial markets.”
Euroclear has expanded its fund business into Spain through a planned complete acquisition of global investment technology solutions and outsourced financial services provider Inversis.
The company has initially acquired a strategic stake of 49%, with the intention of achieving full ownership by 2027.
Inversis, a wholly-owned subsidiary of Spanish bank Banca March, provides funds platform services, securities outsourcing and intermediation, amongst other offerings. Through the acquisition, Euroclear aims to accelerate the delivery of its funds strategy and increase its pan-European coverage, it said.
This continues the expansion of Euroclear’s end-to-end funds platform solution, FundsPlace, which operates across mutual and money market funds, alternative funds and ETFs.
Commenting on the announcement, Valérie Urbain, CEO, stated: “Inversis’ diversified and resilient business model driven by continued growth perfectly complements Euroclear’s business. As a European leader with a global presence committed to supporting the Capital Markets Union, Euroclear will improve its coverage in Spain, a market offering significant growth opportunities in the fund distribution space.”
Alberto del Cid, CEO of Inversis, added: “By combining with Euroclear, Inversis will reinforce its large clients’ business. Likewise, Inversis’ existing clients will benefit from a stronger value proposition across all the firm’s business areas, including its fund distribution platform, which will be supported by Euroclear’s FundsPlace solution.”
The news comes alongside rearrangements in Euroclear’s executive committee. Chaired by Urbain, the eight-strong committee ensures the representation of all the group’s constituents in strategic decisions.
Sébastien Danloy has been appointed chief business officer. Pete Sneyers has been named as CEO of Euroclear Bank, while Bernard Frenay has taken on the newly-created role of CEO of European Markets.
Daniel Miseur will serve as chief people and communications officer, with Guillaume Eliet stepping up as chief risk officer.
Executives at ASEAN exchanges have agreed on four proof-of-concepts to follow over the next three years, continuing their sustainability initiatives.
The objectives, determined at the 37th ASEAN Exchanges CEOs Meeting, hosted by Bursa Malaysia, include the establishment of a harmonised ASEAN data infrastructure, creating a standardised ASEAN ESG curriculum to support listed issuers, driving transition financing for corporates’ suppliers through incentivised quality reporting, and the inauguration of ASEAN ESG awards.
Sustainability has already improved in the region over 2024, the exchanges stated. The ASEAN-Interconnected Sustainability Ecosystem (ASEAN-ISE), formalised through a memorandum of understanding earlier this year, has already expanded from three to five member exchanges, signifying the area’s commitment to improvements in the ESG space, they commented.
In addition, the exchanges agreed that they would collaborate to offer depository receipts in their respective exchanges to more easily facilitate cross-border investments in the region.
CEOs and presidents from Bursa Malaysia, the Indonesia Stock Exchange (IDX), the Philippine Stock Exchange (PSE), the Singapore Exchange Group (SGX) and the Stock Exchange of Thailand (SET), the deputy CEO of the Vietnam Exchange, and representatives from the Cambodia Stock Exchange and Lao Securities Exchange attended the meeting.
Datuk Muhamad Umar Swift, CEO of Bursa Malaysia, said: “The agreed-upon proof-of-concepts focus our collective energy and resources on exploring and deploying workable models in targeted strategic areas. These areas aim to elevate competitiveness by developing common data infrastructure, enhancing capacity building capabilities through economies of scale, and building an inter-connected marketplace to facilitate transition financing and capital deployment into businesses with superior ESG practices. We envisage a three-year glide-path and are open to exploring commercially viable business models or fit-for-purpose partnerships to accelerate this journey.”
Ramon Monzon, PSE CEO, added: “Sustainability is a collective endeavour and we believe ASEAN-ISE provides us an opportunity to contribute to the development and implementation of ESG initiatives in the region. We are excited to collaborate with our peer exchanges in creating programs that will elevate the level of sustainability in ASEAN markets.”
Gilles Ohana, head of international listing, Euronext
Euronext has appointed Gilles Ohana as head of international listing. He is based in London.
Ohana has more than 25 years of industry experience and joins Euronext from PrimaryBid, where he was managing director of global capital markets.
Prior to this, Ohana was a senior advisor at ARIE Capital and head of equity capital markets and corporate finance at Sunrise Brokers. He currently serves as managing partner at investment company PCG UK, and has been a board member at firms including Veltyco Group and ARIE Capital.
Commenting on his appointment via LinkedIn, Ohana said: “I am excited to join a fast-growing Company and help the Group consolidate its leading position in listing securities for our issuer clients.”
Following a review of risk management practices earlier this year, the Futures Industry Association (FIA) has published a paper detailing best practices for automated trading risk controls and system safeguards.
Covering pre-trade controls, exchange-provided volatility control mechanisms (VCMs) and post-trade analysis, along with other tools and controls including market data responsibility and exchange message programmes, the report considers how practices can be applied both to existing and evolving technologies.
On the new report, Walt Lukken, President and CEO of the FIA, commented: “As we reviewed our previous work in connection with the production of this paper, we were pleased to find that, as trading technologies have evolved over time, the risk mitigation tools used by market participants and exchanges continue to keep our markets operating effectively.
“Although the paper builds on more than a decade of work in this area, the practices it outlines are well suited to both existing technologies and evolving ones, such as artificial intelligence.”
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