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December
Pension funds were about to celebrate their exemption from the costly clearing of OTC derivatives trades, when the banks pointed out the increasing costs of non-cleared trades that were heading their way finds Dan Barnes.
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In the depths of the coldest European winter for 300 years, the announcement in February of the proposed merger between Deutsche Börse and NYSE Euronext sparked a storm of debate and set the scene for a deal jamboree across global exchanges. However the merger mania was soon met with the cold wind of reality as deals collapsed in the wake of protectionism and competition concerns.
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The demise of MF Global hit the futures industry like a mack-truck. Allegations that the firm used customer money to cover its own financial shortfall in its last days, has left the industry and investors without knowing who can be trusted, finds Elise Coroneos.
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2011 was intended to be the year that reforms to the derivatives industry took shape. However, it will be remembered as a year of delays and confusion as regulators struggled to get on top of complex issues within the industry, write David Wigan and William Mitting.
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The fungibility that regulations will deliver in derivatives markets could trigger an arms race in algorithmic trading. However, algo traders will have to reassess their strategies for the new market writes Dan Barnes.
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November
In September, Kweku Adoboli, a trader at UBS, was arrested over an alleged fraud that led to a $2 loss. Following the arrest, there was justifiable shock across the industry. But, as David Wigan discovers, the accusations of fraud exacerbate existing concerns over the growth of the once pedestrian and innocuous asset class that is exchange-traded funds.
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The buy-side say there is a case for exempting them from the obligation to centrally clear OTC derivatives trades. Now the dealers are backing them finds Dan Barnes.
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Equity index trading in East Asia is booming. Following in the footsteps of the Kospi 200 Index, the most active exchange traded derivatives contract in the world by volume, exchanges across the region are harnessing the growth of the local retail market and opening up to foreign investors.
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The natural gas and power sector experienced its own financial crisis with the collapse of Enron in 2001. Since then, it has pioneered OTC clearing and exchange traded derivatives. However, the implementation of the Dodd-Frank Act will bring further reforms to the sector, not all of which are welcome, finds Elise Coroneos.
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Research suggests that central counterparties do not have the capacity to deal with the increase in volume of OTC derivatives processing that Dodd-Frank and EMIR will bring. Dan Barnes looked at what they were doing to meet demand.
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October
Asset managers are assessing the best way to manage the increased collateral obligations for OTC derivatives trades that will be required by new post-trade regulations pending in the US and Europe. However, incomplete regulation is hampering their ability to assess the suitability of systems on offer, finds Dan Barnes.
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Europe’s emissions trading scheme, the EU ETS, is the largest of its kind in the world. The scheme has experienced numerous teething difficulties since its launch in 2005 and as it moves into its third phase, expectations are reduced but lessons have been learned and the trading model could become a blueprint for other markets.
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Ancient Egyptians considered gold to be divine and indestructible. Emanating from the sun it was the flesh of the gods, and the store of wealth on which the Pharaohs built their kingdoms. Three thousand years later demand for gold has reached fever pitch, but as prices soar some investors are beginning to have second thoughts finds David Wigan.
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Real time is seen by many as the holy grail of risk management. Mythical perhaps but sought after by all for its indescribable value. With regulators putting increasing demands on banks to provide real time data and with the cost of collateral rising, the pressure is on to understand risk in a more timely manner. But what does real time mean and what are the barriers to achieving it? William Mitting found out.
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High frequency trading (HFT) firms, trading a large volume of contracts on a small margin, can find one small price movement potentially bank-breaking. That makes the choice of technology, which turns a firm’s orders into fills, crucial. But in a crowded marketplace, how do you decide what is right for you? Dan Barnes, looks at the options.
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September
How might risk systems at UBS have failed?
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What are the implications for European market structure of LSE's bid for LCH.Clearnet.
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Global food prices in July hit the highest levels ever recorded, with staples such as wheat and sugar a third more expensive than a year ago. In the face of the global economic slowdown, the commodity price spiral shows no signs of abating, and as policy makers seek an explanation, the derivatives market is again in the spotlight. David Wigan looks in to whether accusations that speculation pushes up prices are justified.
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Equity options in the United States are booming. In the first half of the year, over 2bn contracts were traded, with 376m contracts changing hands in June, at 21% increase on 2010. Daily equity options volume had an average of 16,039,382 contracts per day in July, a 31% increase on July 2010. As the US equity options markets rocket to their eighth consecutive record year, there are some clear lessons that can be learned from their success.
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July
As traders diversify to realise greater opportunities for arbitrage and move into new markets, the demand for cross-asset class trading capabilities has never been greater. Roger Aitken looks at what solutions are out there and how traders are increasingly looking for platforms that can trade equities, derivatives, FX and commodities and how the search for low and ultra low latency is defining the evolution of the market.
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The Dodd Frank Act creates a new class of trading venue intended to bring greater transparency to the trading of OTC derivatives. With new fixed income trading venues already emerging in response to the US legislation, Sassan Danesh and Murray Reid of ETrading Software argue the time has come for the introduction of open industry connectivity standards, based on the FIX Protocol and FpML.
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Interest rate derivatives represent the fastest growing and largest asset class in the sector and, as moves to push trading onto exchanges gather pace, innovative new contracts and exchanges are launching to meet the anticipated demand.
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The biggest regulatory overhaul since the Great Depression has hit a snag. Or make that several snags. With fierce debate, lobbying and the threat of regulatory nationalism we asked Theo Casey to investigate what is happening across the OTC market.
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June
Turquoise chief executive Adrian Farnham is nothing if not ambitious. This month, Turquoise Derivatives will launch its FTSE 100 futures contract in direct competition with NYSE Liffe. At the same time, Farnham has set out his stall to radically alter the landscape of European derivatives promoting a pro-competition, fungible model of contract trading. But, asks William Mitting, is the market ready for change and can Farnham succeed where so many others have failed?
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High frequency trading has received more than its fair share of attention over the past 12 months. As regulators grapple to control the trading strategy its rise appears unstoppable. Elise Coroneos looks at the controversy behind the trading strategy, what tack regulators have taken and the key growth markets.
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Ever traded CFDs from a hammock in Puerto Rico? Pork bellies on a yacht in the Med? Welcome to the world of ‘on-the-go’ execution. Thanks to the power of technology and mobile apps, traders now have the flexibility of no longer needing to be physically at the office or even having a desk. More developments can certainly be expected, writes Roger Aitken.
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There may be some good news in store for you if you’re a professional trader looking to test out that e-mini S&P Futures trading strategy on a similar product at another exchange. Depending on whether you meet a number of prerequisites including your level of experience and the location in which you trade, you may be eligible to receive significantly reduced exchange fees as part of a so-called trader incentive programme. Stephanie Hammer explains.
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May
The carbon trading market has an image problem. Hated by some as a drag on industry and by others as too soft to do much good, it has also recently had to cope with fraud and theft. But as Wyn Jenkins discovers, market participants are not dismayed. Lessons are being learnt and there is a wealth of new initiatives and ideas to strengthen the market. One day, it may even go global.
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Nasdaq OMX and Intercontinental Exchange’s hostile bid has disrupted what was supposed to be a smooth and amicable deal to merge Deutsche Börse with NYSE Euronext. It has also raised questions over the long term viability of the vertical silo clearing model on both sides of the Atlantic. William Mitting examines the implications of the takeover battle and how the clearing issue has come to the fore.
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April
This spring may be the most exciting time for years in US interest rate derivatives. The first credible challenger is trying to win market share from CME Group. NYSE Liffe US has a powerful advantage, in one-pot clearing with Treasury bonds. Will it be enough to win business from the world’s most successful futures exchange? Elise Coroneos reports
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A US Commodity Futures Trading Commission committee has outlined a series of proposals to ensure high frequency trading does not harm market integrity.
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The Nordic region’s financial derivatives market has been beset by institutional realignments and mergers for years. Now the landscape seems settled, with Nasdaq OMX as the dominant exchange and a partnership between Oslo Børs and EDX London.
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In less than a decade the US derivative market has gone from being equal to Europe's to three times the size. We ask how Europe lost the initiative and whether it can regain market share.
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A study group convened by the US Securities and Exchange Commission and Commodity Futures Trading Commission has published a list of suggestions designed to prevent a repeat of the May 6 Flash Crash.
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February
For decades clearing houses have provided a stable, safe service to the futures and options market. Now, the contours of the market are about to change. Large tracts of the over the counter market may be opened up for clearing, leading to a land grab by existing players and new entrants. As competition intensifies, the big clearing houses face as many risks as opportunities. And, as David Wigan discovers, the next two years of upheaval and debate could bring the market closer to a transparent and accurate calculation of the costs and benefits of clearing.