Come for the Pizza, Stay for the Foreign-Exchange Derivatives
Here's something that'll get your head working early on a Monday ─ Chicago is less than two centuries old. It's only a 177-year-old city in fact, incorporated in 1837, with the town of Chicago having formed in 1833 with a population of around 200.
By contrast, New York, in its former life as New Amsterdam, was officially settled in 1624. Edo, which would later become Tokyo, was first fortified in the 12th Century by the 17-year-old Emperor Meiji. The first reference to Moscow dates back to 1147, while nobody really knows how old London is. Timbers have been found by the South Bank that date back to 4500 BC.
Given the relative youth of America's Windy City, it's quite remarkable that it's developed a leading spot in the world as a commodities hub in a fairly short space of time. The Chicago Mercantile Exchange (CME) Group, which has its origins in the Chicago Butter and Egg Board, was established in 1898, although through its acquisition of the Chicago Board of Trade in 2006, it's been a part of Chicago's financial landscape since 1848.
While the CME is a thoroughly Chicagoan entity, being nearly as old as the city itself, then, it still has extensive links to Europe. The CME's offices in London are at One New Change, in the very heart of London's oldest districts, and it's had a presence here for 30 years, one that's been strengthened with the announcement that the long-awaited CME Europe will be launching next month.
You can read more about the announcements from our coverage here and here, but suffice it to say, the fact that all three major US exchange operators ─ IntercontinentalExchange, Nasdaq OMX and now CME Group ─ all have regulated derivatives markets in Europe, operating from London, makes this an interesting time in the continent's venue environment.
While the CME is a thoroughly Chicagoan entity, being nearly as old as the city itself, then, it still has extensive links to Europe. The CME's offices in London are at One New Change, in the very heart of London's oldest districts, and it's had a presence here for 30 years.
Empirical Value
The other highlight from this week has been the release of the European Securities and Markets Authority's (Esma) semiannual report on risks, vulnerabilities and trends. The two items of most interest to Waters readers will be the sections on high-frequency trading (HFT) and central securities depositories (CSDs), both of which receive in-depth examinations from the regulator.
So much has been written about HFT in recent years that you can guess the findings of the report ─ it helps with price and order volume, but it's negatively related to volatility. More research is needed, etcetera etcetera. So far so predictable, but at least Esma actually tries to include a little empirical data with its polemical rhetoric ─ a study of 100 stocks traded in nine countries to analyze the impact of HFT yielded some interesting results, which you can read about here.
On CSDs, too, Esma broke ranks slightly by not only highlighting the fact that, by dint of their position in the market, CSDs are systemically vital institutions (with a subtextual suggestion that they should receive a level of supervision according to that status), but that the rescue of a CSD would be impractical. Primarily because it would rely on trans-border cooperation at an unprecedented degree to implement.
Luckily for the market, however, the delivery-versus-payment model means that there isn't likely to be a full-scale collapse from one incident, but the wider systemic risk environment has been generally heightened by an increasing tendency for CSDs to focus on ancillary services, even with (or possibly because of) CSD Reg and the Target2-Securities project.
As always, if you're come to this through the website, you can sign up for Sell-Side Technology's weekly newsletter, which aggregates all of the week's coverage across both SST and Waters as a whole, for free.
EDIT: It's been pointed out to me by my esteemed colleagues that Chicago's population is actually well below that of London, and that I was taking the metropolitan area figure as rote. The article has been updated to reflect that.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@waterstechnology.com or view our subscription options here: http://subscriptions.waterstechnology.com/subscribe
You are currently unable to print this content. Please contact info@waterstechnology.com to find out more.
You are currently unable to copy this content. Please contact info@waterstechnology.com to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@waterstechnology.com
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@waterstechnology.com
More on Trading Tech
Getting aggressive: Overbond uses AI to assess dealer axes
The fixed-income analytics specialist has developed a new tool to help buy-side firms decide if they’re getting a good price from their dealers.
TS Imagine integrates LTX’s pre-trade analytics tool
Users of the fixed-income EMS will now have access to LTX’s Liquidity Cloud tool, which provides a pre-trade score for the likelihood of trading success.
European exchanges turn to dark trading in battle for flow
The EU’s two biggest exchanges are launching dark pools this year. The apparent change in their stances on dark trading reflects a profound shift in equities markets.
After contentious Opra upgrades, vendors brace for a faster future
Upgrades to the datafeed widely used to gauge the current market price for options contracts went into effect in February after three separate delays, which market participants say were caused by persistent bandwidth issues at some important recipients.
The IMD Wrap: No more turf wars, or why CDOs should heed the Voice of the CTO
Max reviews how our recent Voice of the CTO series has implications for those beyond a firm’s technology function, and how communication and collaboration between tech, data, and leadership will deliver better results.
Dark horse: Deutsche Börse building dark pool
New functionality allowing exchange members to execute sweep trades comes hot on the heels of European rival Euronext launching its own dark pool.
Waters Wrap: The tough climb for startups
Anthony speaks with two seasoned technologists to better understand why startups have such a tough time getting banks and asset managers to sign on the dotted line.
European firms prime for lopsided settlement in North America and at home
With T+1 imminent in North America and increasingly likely to traverse the Atlantic, operations and trading professionals in Europe are fighting on two fronts.
Most read
- Women in Technology & Data Awards 2024: All the winners and why they won
- Witad Awards 2024: Above and beyond award (vendor)—Susan Bennett, Tradeweb
- Fighting FAIRR: Inside the bill aiming to keep AI and algos honest