Published On: Sat, Oct 1st, 2011

Asia Etrading 2011 Q3 Highlights

Q3 2011 Electronic Trading Asia HighlightsWe usually like to list the top 3 events of the quarter that stood out with respect to electronic trading in Asia but given that it was the summer and most people were away from the office or devising marketing strategies for the last quarter we were hard pressed to find any real significant event that stood out among the rest. Perhaps the Korea Financial Services Commission (FSC) announcement to overhaul its financial system would qualify as a stand out. Their plan is intended to develop its small financial firms into international investment banks and bring exchange competition into Korea. This country will very likely be the next hot spot for smart order routing, fragmentation and improving execution services.

We are impressed by Fidessa’s coup in Australia where they secured a deal with the ASX to provide workstations to the exchange with a Smart Order Routing (SOR) capability. ASX Best will allow members using the front end to route orders to the venue with the best price. While this kind of technology is nothing new the impressive part is that Fidessa had very little footprint in Australia and this deal trumps efforts by home grown leader IRESS and rival Charles River Development who have long operated in Australia. It’s heating up down under.

Also worth mentioning would be the Singapore Exchange (SGX). Despite the failed merger the bourse continues to push ahead with its “Strategic Plan”. The lunch break was eliminated last quarter for one. Secondly, the SGX Reach trading engine dubbed “the fastest exchange in the world” came online. This coupled with the reduction of tick size should boost volumes on the relatively small equities market through high frequency trading strategies. The only hurdle, however, is the stamp duty the Monetary Authority of Singapore (MAS) levies which discourages this kind of trading. Perhaps now the SGX with its world class trading infrastructure in place it might be a good time for the MAS to reconsider.

In the market structure space the Hong Kong securities regulator stopped HSBC from offering a Dark Pool service to retail investors. Seems counter to best execution for these types of clients no? Chi-X Japan and SBI Japannext (JNX) continue to capture market share from the Tokyo Stock Exchange (TSE). SBI Securities the largest retail broker in Japan is now routing orders to JNX. The ASEAN broker network continues to move ahead despite the fundamental problem with clearing. Korea’s regulator implemented a temporary ban on short-selling after the sell-off and subsequent volatility brought on by the US credit rating downgrade.

The Australian Securities Exchange (ASX) handed out fines to Westpac Securities ($50,000), Deutsche Bank ($30,000), BBY Limited ($65,000), ABN Amro ($40,000) and to Timber Hill ($250,000). Also, Bursa Malaysia reprimanded and fined Macquarie and two former heads of dealing. The HK Securities and Futures Commission (SFC) handed a HKD7.5Million fine to Oasis.

Brokers too were busy despite the slowness generally found in Q3. Citi invested 10% in Horizon Securities a Vietnam brokerage, PhillipCapital Group now offers a low latency Platform for the Osaka Securities Exchange (OSE) to Singapore traders and Okasan Securities licensed Fidessa’s Japanese Trading Platform. GH Financial continues to push in to Asia with the opening of a Beijing office earlier this year and the addition of memberships at the HK Merc and the Singapore Exchange. CIMB Securities also joined the SGX and both ANZ and HSBC were granted licenses to trade futures in China. Nomura continued expanding its franchise in Asia with hires in Indian and Australian equities businesses.

Western exchanges were active in Asia as well. Eurex’s night session Kospi option surpassed 1 million contracts in less than one year, NYSE Liffe began its JGB futures position transfer arrangement and NYSE Euronext bought Metabit in Japan.

As always there was much musical chairs across the various electronic trading industry firms in Asia particularly at the exchanges. After only 3 months on the job Andrew Yap left the CME and Julien Le Noble was named Head of its Asia office. Chi-X Australia saw David Trude join the board but Richard Leung left for the SEHK. Stephane Lannoy joined HKMEx, Sompol Kiatphaibool was reelected Chairman of the Stock Exchange of Thailand (SET) and Jane Diplock joined the SGX’s Board. Ashley Alder was named head and Dr Eddy Fong was reappointed at Hong Kong’s securities regulator. Elmer Funke Kupper replaced Robert Elstone at the ASX. The sell side saw Kim Man Li join Bank of America Merrill Lynch, Michael Mollemans joined Credit Suisse’s AES team in Japan from Daiwa and Phil Joslin returned to Newedge heading up clearing sales in India. Misys appointed Didier Giesen.

While nothing really was a standout event in Asia there was a dirth of activity as the electronic trading industry continues to evolve and improve upon its foundations. We look ahead to Q4 were we expect to see competition in Australia, further developments at the exchange level and perhaps the London Metal Exchange change owners.

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