It wouldn’t be a week in the markets without an
exchange outage and another massive dump of regulation and
(guess what dear reader?) this week was no different.
It started with Nasdaq OMX’s NLX platform
suffering a glitch that meant its main data server was
unavailable for some 40 minutes, leaving clients having to
log-on to a back-up which proved problematic for some.
The outage was not huge in the grand scheme of things but it
was not good publicity for the exchange as it looks to win more
friends and build liquidity.
On a more positive note, the nascent exchange moved this
week to tackle a characteristic of trading on its markets,
namely the spikes that take place as some clients pile in to
collect their rebates.
The exchange has capped rebates, changed the bands and
reshuffled the pot of cash made available to clients in a bold
move that could see trading go one of two ways.
It is potentially a gamble by NLX and its management but the
exchange has been up and running for a year now and
it’s about time the market saw whether this is a
viable contender or the latest in a long line of failed Nasdaq
forays into Europe.
NLX is not getting much help from Europe regulators these
days, as the Mifid II act that plans to undermine the
monopolies of the largest European incumbents remains years
The new exchange could have taken some confidence this week
from a rather unexpected source however. Competition in
Europe’s liquid futures markets would seem to be a
cause celebre for the European Commission though the tardy
implementation of Mifid might suggest otherwise.
But Britain’s FCA piled into the debate this
week with its sprawling probe into competition in the financial
markets which covers many areas of investment banking, asset
management and exchanges, including the access to clearing and
index licenses made available by their operators.
It is unclear why the FCA felt it important to launch its
own effort to open up the futures markets – one cynic
said they need to justify their existence somehow –
but the FCA competition probe adds to banks’
already long to-do lists.
Perhaps more worryingly for the futures markets, the FCA is
also gearing up for a crackdown on the shady issue of payment
for order flow.
FOW reportedly exclusively this week the British regulator
will unveil before the end of the month a ruling on payment for
orders that will stamp out the practice when dealing with
certain clients, a position that could hit revenue for some
The industry, through the FIA among other bodies, has been
arguing vehemently against the ruling but it would seem the
regulators have lost sympathy with their pleas.
The FCA insisted the payment for order flow review reflected
the views of market participants but this is not true when it
comes to some of its largest participants, namely the banks and
The latest in a long line of new lows in industry-regulator
relations you might think?
No. That came in Paris at the Mifid hearings on Tuesday
when, after a long critical statement by a British lawyer which
culminated in him saying his clients were not happy with the
reforms, a commissioner said in not so many words: "What you
have to understand is they are not meant to be happy."