Published On: Tue, Oct 5th, 2010

Electronic Trading Industry in Asia Q3 Highlights

Electronic Trading Industry in Asia Q3 HighlightsDespite the summer begin generally an inactive time Q3 in Asia isn’t letting up.

By far the most active space is at Asia’s exchanges. New products, services and rules dominated the last 91 days. In particular the Singapore Exchange (SGX) rises to the challenge of local competition and regional financial center. They expanded co-operation with western exchanges, ramped up their OTC initiative, improved the Securities Borrowing and Lending (SBL) structure, are exploring bond trading, improving short sale transparency and are re-examining trading hours. A full plate indeed. Bursa Malaysia saw their crude palm oil contract move to Globex. The Korea Exchange (KRX) launched their T+1 KOSPI options at Eurex. Thailand launched gold futures and is embracing algorithmic trading as well.

We also saw the arrival of the Singapore Mercantile Exchange (SMX). The SMX having gone live only on August 31 has launched gold, Brent and WTI crude, a Euro/USD currency contract, Black Pepper and an Iron Ore future as well. Quite an achievement in only 30 days. On the topic of commodities The Tokyo Commodity Exchange changed its rubber contract specification, opened up off shore trading through local intermediaries and increased the evening trading session to 4am (except for rubber). When you include China and India in the mix commodities in Asia is the place to be.

Fragmentation and alternative trading venues heat up in Asia this quarter as well. On the display side SBI Japannext achieved 1% of Japanese turnover, Instinet’s JapanCrossing recorded its largest volume Since 2008 and Chi-X Japan began operations. CBX Asia dropped its PTS license and began offering dark order types. While non-display volume in Japan is more difficult to come by it is now believed to account for around 4% of daily trading. Exchange dark pools also began to operate in Australia (VolumeMatch) and in Korea (A-Blox). Deutsche Bank launched a darkpool in Hong Kong too. TORA’s Crosspoint has received quite a bit of attention in Asia as brokers try to find liquidity for the buy-side. They signed a reciprocal liquidity deal with Instinet and Bank of America Merrill Lynch connected to Tora as well. Fidessa’s Fragmentation Index expanded to include Asia and held an Asia Darkpool, PTS, ATS and MTF Webinar. You can listen to the recording HERE.

India’s “Golden Age” continues amongst deregulation, exchange competition and international partnerships. Smart Order Routing (SOR) was finally permitted with both the Bombay Stock Exchange (BSE) and Progress Apama offering this service to its customers. A pre-open session was approved (9am – 9:15am) and wireless trading allowed of which the BSE promptly launched services for. The BSE and Eurex partner to launch futures and options on the BSE SENSX Index, the National Stock Exchange of India (NSE) and LSE Group sign a Letter of Intent and the S&P CNX Nifty futures contract begins to trade on CME’s Globex. Mizuho establishes a local securities subsidiary in India, Nomura India appoints Head of Equity Capital Markets and Thomson Reuters launches Elektron in India too.

The brokerage space was active as well with Citi expanding aggressively by taking a seat on the Indonesia Stock Exchange (IDX) and offering equities trading in Indonesia. Citi became a trading and clearing member of Bursa Malaysia and announced the launch of a Singapore dark pool in 2011. They also appointed Endre Markos to Asia’s Head of Electronic Markets and Platforms and Hired Ian Smith to head electronic trading for APAC. Other notable activities in Asia’s brokerage industry this quarter were Credit Suisse launching AES Velocity in Singapore and Deutsche Bank closing its Japanese trading desk following a substantial trading error.

Asia’s regulators too were busy changing rules and handing out fines. Of particular note was in Australia were the Australian Securities and Investment Commission received supervision over the Australian Securities Exchange (ASX). This was the last hurdle for exchange competition in Australia but they are still figuring out the specific rules (called Market Integrity Rules – MIR). The ASX fines Deutsche Bank, Timber Hill, Kokomo Capital, Macquarie Bank, JP Morgan and MF Global for various infractions. The Monetary Authority of Singapore (MAS) takes Supervisory Action against DBS Bank and files a civil penalty on another for false trading. In Hong Kong the Securities and Futures Commission (SFC) fines a participant for illegal short selling and also reported that licensees reached a record high. The Japan FSA extends temporary measures on short selling, SEBI denies MCX SX an exchange license and the New Zealand Securities Commission authorizes the NZX Futures Exchange.

And let’s not forget the vendors either. Patsystems partners with Standard Bank, hires a new Managing Director in Tokyo and launches ‘XConnect’ as new ASP hubs open in Asia. Fidessa offers connectivity to Chi-X Japan and SBI Japannext. Orc Software launches a new spreader and provides access to the Singapore Mercantile Exchange. RTS Realtime Systems also began offering access to SMX and Calypso signs the HKMA to help with trading and treasury management. These were only a few of the vendor activities in Asia this quarter.

It remains to be seen if the last quarter of the year will top Q3 but judging by the activity I am seeing already it should be one heck of a year. It seems all eyes are now squarely on Asia and hopefully

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