LME chooses DTCC for trade reporting
The London Metal Exchange’s LME Clear, the exchange’s self-clearing platform, chose The Depository Trust & Clearing Corporation as its partner for LMEwire, a new reporting service that is scheduled to go live in early 2014 to meet trade reporting requirements under the European Market Infrastructure Regulation.
Under the MiFID trade reporting requirements, which are set to take effect on Feb. 12, all LME futures and options will have to be reported to a trade repository.
LMEwire will allow LME members and their clients to comply with these requirements. The trade data will be transmitted from LMEsmart, the exchange’s matching platform, directly to DTCC’s trade repository, eliminating the need for members to process the data themselves. Members also will be able to use LMEwire to file data for over-the-counter trades.
“The major benefit for members using LMEwire is that we will direct the relevant data straight to DTCC,” said Adrian Farnham, chief operating officer of LME Clear. “This will save members time and money and will be the most efficient way for them to meet their new regulatory obligations.”
ASX rolls out technology upgrades for futures markets and clearing
ASX in November began rolling out a series of technology upgrades to its futures market and clearing services expected to be completed by July 2014. The new upgrades include OTC client clearing, cross-margining simulation and other key upgrades.
The upgrades began in November with a new margin control upgrade. In January, ASX was set to introduce new margin simulation to simulate cross-margining benefits using existing cleared and “what-if portfolios.” In March, ASX will launch client level clearing for OTC interest rate swaps, with a planned business go-live date for April.
In May, ASX will launch its Genium Clearing upgrade, moving the ASX Clear Futures Platform from SECUR 17.2 to Genium Clearing. And finally, in July ASX clear will introduce new clearing account structures for futures participants and customers, allowing for segregation and portability.
HKEx goes live with new trading and clearing platform
Hong Kong Exchanges and Clearing in October went live with Nasdaq OMX’s trading and clearing exchange technology platform, Genium INET, for HKEx’s derivatives market, more than a month ahead of schedule.
“A key factor in making our launch successful was the ability to establish a true partnership with Nasdaq OMX,” said Bill Chow, chief technology officer, HKEx. “The new project methodology with early joint testing proved to be highly effective and an important element in the delivery approach, resulting in high quality and close collaboration between the delivery teams.”
The system upgrade multiplied the exchange’s clearing and trading capacity, equipped its trading system with ultra-low-latency trade processing capability, and improved derivatives clearing processing by shortening batch running times. Additionally, new central gateways for exchange and clearing participants were introduced to reduce the hardware footprint and network bandwidth requirements at a participant’s premises.
The new platform also offers new functionalities such as tailor-made combination orders and a new trading function for investors to execute option strategies with multiple legs at one net price.
Eurex to launch contracts based on Taiwan’s Taiex Index on May 15
Taiwan Futures Exchange and Eurex announced the launch date for a linkage between their two exchanges that will allow Eurex members to trade futures based on the Taiex futures and options, which rank among the most heavily traded equity index contracts in Asia.
The linkage, which has been under development since February 2013, will go live in May 2014. Eurex has developed a similar linkage with the Korea Exchange, under which the German exchange provides a way for traders to access the Kospi options market when the KRX market is closed.
“With this link, we further broaden our presence in Asia and complement our global product suite,” said Andreas Preuss, chief executive officer of Eurex. “Our members will benefit from direct Futures Industry | January 2014 51 access to one of the most successful index derivatives contracts in Asia, while Taiwanese market participants will be able to trade Taiwan’s most liquid index derivatives contracts during Taiwanese after hours.”
The link is expected to further increase the liquidity and efficiency of the Taiwanese derivatives market. In 2013, average daily volume of Taiex was roughly 95,000 futures contracts and 455,000 options contracts. The options are the fourth most heavily traded index derivatives contract in Asia-Pacific and are ranked sixth worldwide in the first ten months of 2013.
“We are excited about our tie-up with Eurex and the launch of the Eurex/Taifex Link, which enables global investors to trade Taiex futures and options after Taiwanese market hours,” Taifex Chairman Tony Fan said. “The ability to transfer open positions to Taifex will also enhance the efficiency and increase the liquidity and depth of Taiwan’s derivatives market. This cooperation is a win-win for our two marketplaces.”
TT to connect to Nasdaq OMX’s U.S. Treasury platform
Trading Technologies will introduce connectivity to Nasdaq OMX’s eSpeed platform in the first quarter of 2014, an important addition to the range of markets available through TT software. TT said the connection to eSpeed will provide traders with a consolidated point of access for the vast majority of fixed income markets and provide further support for trading strategies that involve the cash Treasuries and futures markets.
The eSpeed platform operates a widely used central limit order book for electronic trading in benchmark U.S. Treasuries. TT already has connectivity to BrokerTec, the other main venue for electronic trading of benchmark Treasuries.
TT customers will be able to access eSpeed using TT’s full suite of products, including the recently released X_Trader 7.17, the ADL visual programming platform for automated trading, and the TT API and FIX Adapter API solutions.
In addition, customers using TT’s Autospreader tool will be able to execute Treasury basis trades through TT’s Strategy Engine execution servers, which minimize execution latency via proximity based computing and co-location. The SE line includes highly scalable, high-performance products for algorithmic, synthetic and spread trading.
Firms can access eSpeed through internally hosted gateways or TT’s TTNET global hosting solution. eSpeed access also will be available to qualified customers through TT’s MultiBroker offering.
Credit Suisse integrates Onyx algos into Bloomberg platform
Credit Suisse in October connected Onyx, its algorithmic trading solution for fixed income securities and derivatives, to a trading platform operated by Bloomberg. The bank said clients will be able to access its algorithmic trading tools for U.S. Treasuries and other fixed income products through Bloomberg’s TSOX system, which is used by thousands of market participants globally for fixed income trading.
“Our most advanced clients are asking for smarter and more automated ways to trade with us and we are delighted to be partnering with Bloomberg to provide this,” said Ryan Sheftel, the bank’s head of fixed income derivatives eCommerce. “With all the structural changes in the rates market we see this as a continuation of our commitment to innovation in electronic trading with much more to come.”
Credit Suisse launched Onyx in 2010 to provide clients with algorithmic trading tools designed for fixed income futures and U.S. Treasuries. The algorithms can be used for trading pairs, basis trades, butterflies and various other strategies.
Nasdaq OMX launches algo testing facility
Nasdaq OMX plans to launch during the first quarter an algorithm test facility powered by Thesys Technologies, the infrastructure affiliate of Tradeworx. The facility will provide customers with a safe environment to examine algorithmic strategies by replaying and interacting with real historical market data.
The facility will allow market participants to simulate their automated trading strategies against real-world scenarios, transactions, and competitors to manage their risk exposure and their capital expenditure. Unlike ordinary back-testing systems, the facility is designed to allow traders to test all aspects of their strategy from the quality of their quote processing all the way down to order handling and the interaction of the trading algorithm with the market microstructure.
The algo test facility will be accessible through the Nasdaq OMX data center, enabling customers to use their existing trading infrastructure, including risk systems, OMS and feed handlers. Each simulation will recreate market microstructure and provide an accurate view of adverse selection, time priority, fills versus misses, latency and bursting.
The first phase of the algo test facility will include simulations for the Nasdaq Stock Market. Over time the facility plans to support all major U.S. equities exchanges along with their order types and protocols so user activity may interact with the historical orders of other market participants.
WEX introduces automated options hedging tool
Wolverine Execution Services in November launched Hedge Agent, a trading applet that allows traders to automatically hedge their executed options positions. Only available on the WEX Trading Platform, Hedge Agent saves traders time and resources by calculating hedge quantities based upon the current delta and immediately sends out the corresponding hedge order after an option is executed in WTP.
“As a leading provider of options trading technology, the addition of an automated hedging tool was a logical and valuable extension to the managed order suite in WTP,” said Kevin Kernan, director of WEX product development. “Traders hedging single options, spreads, or legging into spreads through the WTP Spread Agent can streamline their hedging process in addition to saving time and money with Hedge Agent.”
Hedge Agent benefits include: delta hedging with specific option products throughout an entire portfolio; hedging with the underlier or other products with a specified hedge ratio; setting specific safeguards, including defined risk limits, stop loss, and notifications if a hedge stalls; and confirmation of short sales with a locate identification.
ICAP and Interactive Data collaborate on OTC data distribution
ICAP and Interactive Data Corp. in November entered into an agreement to collaborate on distributing over-the-counter swaps data. The agreement provides Interactive Data clients the capability to access ICAP data via multiple Interactive Data desktop platforms and data feed offerings, all of which will be covered under a direct license between the client and ICAP.
Interactive Data clients can access a broad spectrum of ICAP data via the consolidated feed, including ICAP’s interest rate, credit, fixed income, money markets, foreign exchange, and energy market data. “Sourcing content from the leading broker of interest rate derivatives, fixed income and foreign exchange helps ensure that we can deliver high quality data for those markets to our clients,” commented Emmanuel Doe, president, trading solutions group for Interactive Data. “A significant benefit of our collaboration for clients is the ability to enhance pre-trade transparency through real-time price discovery across a range of global asset classes.”
Deutsche Bank algos target buy-side options traders
In October Deutsche Bank unveiled a new suite of algorithms aimed at buy-side options trading as part of its Autobahn electronic trading business. The service covers equity options trading on major U.S. electronic options exchanges including the Chicago Board Options Exchange, International Securities Exchange, Boston Options Exchange, BATS Options, NYSE Amex and NYSE Arca.
Deutsche Bank said customers now have a full suite of investment solutions for electronic options trading, including single-leg and complex multi-leg strategies. as part of a suite of algorithms, direct market access and smart order routing.
NLX upgrades technology to support new trading strategies and pre-trade risk controls
NLX, the London-based futures exchange owned by Nasdaq OMX, installed new technology in December that will support certain types of spread trading strategies as well as enhanced pretrade risk controls. Exchange officials say the platform upgrade will strengthen NLX’s efforts to win market share from Eurex and Liffe in the European interest rate futures market.
The new technology supports inter-product spreads, a common trading strategy in the interest rate futures markets. In this case, the spreads comprise positions in Euribor futures and Euro Schatz futures in a four-to-five ratio. The ability to execute a spread through a single trade reduces so-called “legging risk”, which is the risk that a delay in filling one side of the trade changes the pricing of the spread. NLX started by listing spreads in the “red” months and plans to add more in the “white” and “rose” months later this year.
The new technology also supports enhanced pre-trade risk controls that meet European regulatory guidelines for risk management. The risk controls allow firms to set limits at any level down to a single trading desk or even an individual trader, and include limits on price levels, risk levels, and the number of orders submitted per second.
The upgrade took place amid a gradual gain in the exchange’s share of the European interest rate futures market. The exchange’s volume surpassed 180,000 contracts for the first time in November and its share of the Euribor market has risen as high as 29%. Another key development came in December, with the addition of Trading Technologies to the list of execution software vendors connected to the exchange. Access to NLX is now available through 10 ISVs including most of the major firms serving futures traders.
Deltix integrates execution strategy software with Object Trading platform
Deltix integrated its quantitative execution strategy software with Object Trading’s global direct market access platform. The joint offering provides a solution to develop, test and implement quantitative trading strategies in real-time across the global equity, derivative and foreign exchange markets.
The joint offering enables Deltix users to develop, test and implement trading strategies across more than 55 global markets using FrontRunner, Object Trading’s global DMA platform. FrontRunner is trading screen and venue-agnostic, providing market data, trade execution and pre-trade risk constraints.
Through a single gateway, sell-side and buy-side firms can access equity, derivative and FX markets globally. The platform offers a quick time to market and low technical overhead to add additional markets with one integration, regardless of the trading systems the broker or buy-side client uses.
The Deltix product suite provides support for all phases of quantitative research and trading, including data collection and aggregation, model development, back-testing, simulation and deployment to production. The FrontRunner Suite provides normalized exchange connectivity, real-time market data, and order execution with in-line pre-trade riskconstraints, greatly reducing the complexities of exchange connectivity.
Colo in Japan: KVH to offer faster access to OSE derivatives
KVH is offering a co-location service for access to J-Gate, the derivatives trading system operated by Osaka Securities Exchange. This new service will allow KVH to provide local and foreign traders with faster access to the J-Gate trading system. KVH said the new service will lower the amount of time for order messages to travel from client to matching engine to 2.4 microseconds.
Launch of the KVH co-location service comes as Tokyo Stock Exchange’s derivatives market will be integrated with Osaka Stock Exchange in March 2014. Both sets of products will be traded on the J-Gate system.
“We are excited to be offering the JPX (OPEN) co-location service as it fully complements our portfolio of services specifically designed for the low latency trading community in Asia,” said Takao Hirai, senior vice president, enterprise market division of KVH. “By providing KVH’s high quality global IT infrastructure services to OSE market participants, we are confident that we will be able to support the derivatives trading market in Japanand improve OSE’s foothold in Asia.”
TrueEX offers automated tool for swap terminations and compactions
TrueEx, an electronic exchange hoping to break into the market for interest rate swaps, is working with buy-side firms and clearing firms to offer a service for terminating and compacting swaps that have been submitted to a clearinghouse. The goal is to help buy-side firms reduce the number of positions in a cleared swap portfolio by cancelling out offsetting positions. This will become increasingly important as more of the swap market moves to central clearing.
TrueEX announced its “portfolio terminations and compactions” service in April and in December the exchange said it had processed the first batch of actual trades. Two buy-side firms were involved— AllianceBernstein and MKP Capital—along with J.P. Morgan and Société Générale. The firms said the PTC service provided them with an efficient way to automate the process of “compacting” their cleared interest rate swap portfolios.
In futures, offsetting positions cancel each other out, but there is much less standardization with cleared swaps. Through termination and compaction, several near-matching swaps can be replaced by one swap for the net aggregate risk. This reduces the number of positions in a cleared swap portfolio and reduces the capital requirement and operational complexity.
“SG has been an early adopter of innovative technology solutions like TrueEX that help the IRS market create economies of scale for all market participants,” Alan Mittleman, global head of USD rate trading at Société Générale, said in a statement. “SG is committed to helping build liquidity and scale for new entrants to create a competitive marketplace.”
CQG routing network available in Eze Software’s RealTick EMS
Eze Software Group in November announced that CQG’s Continuum Order Routing Network is now available in Eze Software’s multi-broker, cross-asset electronic execution platform, the RealTick EMS.
This integration provides users of the RealTick EMS with direct global futures exchange connectivity to over 50 additional markets and access to more than 100 new futures commission merchants. Users can now enter an order in the RealTick EMS and route it through the CQG network directly to any broker or exchange to which CQG is connected.
