Docstoc

IDMC

Document Sample
IDMC Powered By Docstoc
					                                  Syn~

 Market Liquidity:
 Efficiency in Market
 Infrastructure

                                 Donal O’Brien
                                  November 2006


Atos Euronext Market Solutions
    Market Liquidity: Agenda


     Introduction

     Operating Model Efficiency
           •   Clearing Model
           •   Settlement Model
           •   Depository Management - Hybrid Model
           •   Registry Management
           •   Short-Selling Controls


     Infrastructure Efficiency
           •   Localisation
           •   Easy Deployment
           •   Integration with Exchanges and Banks
           •   Integration with Brokers and Custodians
           •   Whole Market Infrastructure



Atos Euronext Market Solutions                       2
    Market Liquidity: AEMS - Ownership


                                    Premier Global                       Leading Global
                                 IT Services Provider                      Exchange




                                          50:50 ownership Atos Origin and Euronext



Atos Euronext Market Solutions                                            3
    Market Liquidity: AEMS - What do we do?


            IT Services to Exchanges, Clearing houses, Banks and Brokers
                  •    Financial IT Solutions
                  •    Global Data Centre Operations
                  •    Dedicated Financial Network for Trading



            Our Product Range
                  •    Regulatory:                   ARAMIS
                  •    Exchange:                     NSC, CONNECT
                  •    Clearing & Settlement         Syn~Clear, CLEARING 21, SARA
                  •    Capital Markets               Syn~Broker, Investiciel, Apollo
                  •    Interbanking                  Crystal, Diamis




Atos Euronext Market Solutions                              4
    Market Liquidity: AEMS Global Service Provision

             Montréal   Casablanca BVM Tunis   Euronext.liffe Euronext   Warsaw           Beirut           Amman             Tehran
                                               ICE Futures               Stock Exchange   Stock Exchange   Stock Exchange    Stock Exchange
                                               LCH.Clearnet
  Toronto

  Winnipeg

  BOX
  BSX

  Minneapolis

  CME
  CBOT                                                                                                                                 TFX
  Kansas City
  Board of Trade                                                                                                                        DIFX


  BM&F
                                                                                                                       Muscat Securities Market
  Bovespa
                                                                                                                              Bursa Malaysia




                                                                NSC®           CONNECT®

Atos Euronext Market Solutions                                             5
    Market Liquidity: Agenda


     Introduction

     Operating Model Efficiency
            •   Clearing Model
            •   Settlement Model
            •   Depository Management - Hybrid Model
            •   Registry Management
            •   Short-Selling Controls



     Infrastructure Efficiency
            •   Localisation
            •   Easy Deployment
            •   Integration with Exchanges and Banks
            •   Integration with Brokers and Custodians
            •   Whole Market Infrastructure

Atos Euronext Market Solutions                       6
    Market Liquidity: Clearing Model


               Clearing House:
               Controls risk for open trades between Trade and Settlement Date




                Risks:
                      •    Buyer does not provide Cash
                      •    Seller does not provide Securities



                Trade Novation into Clearing House name
                      •    Anonymity of Settlement
                      •    Liquidity of Market
                      •    Allows efficient net settlement of securities and cash




Atos Euronext Market Solutions                                  7
    Market Liquidity: Clearing Model


    Margin Requirement                                                                                  Collateral Management
          • Initial Margin Calculation                                                                       • Member firm specific account structure
                 –    Risk of change in price going forward                                                         • Pledge of Securities or Cash
          • Variation Margin Calculation                                                                            • Intra-day Margin Calls
                 – Risk       of change in price since trade was done
          • Multi-asset offsets



                                                                           Clearing Member




                                            Trading Member 0
                                            (Same as Clearing                              Trading Member 1                  Trading Member 2
                                                Member)




                                      House                      Client          House                                                           Client
                     Fails Account                                                                        Client            House
                                     Accounts                   Accounts        Accounts                                                        Accounts
                                                                                                         Accounts          Accounts




Atos Euronext Market Solutions                                                                  8
    Market Liquidity: Settlement Models

              Free of Payment Settlement
                    •    High Risk
                    •    Inefficient
                    •    No Guarantee


              Three ‘Against Payment’ Models:
                    •    DVP1: Gross settlement of Securities and Cash
                    •    DVP2: Gross settlement of Securities, Net Settlement of Cash
                    •    DVP3: Net settlement of Securities and Cash

              CSD Provides:
                    •    Guaranteed Settlement
                    •    Efficiency
                    •    Lower Cost

              OTC Markets:              Typically DVP1 settlement
              Exchanges:                Move towards DVP2 or DVP3 Settlement




Atos Euronext Market Solutions                              9
    Market Liquidity: Settlement Efficiency

             Settlement Cycle
                   •    Net Settlement by Broker (Securities and Cash)
                   •    Instruction Generation
                   •    Settlement Cycles
                          –      Securities Blocked until Cash Settled via RTGS

                   •    Cash Delivery Management
                          –      ISO 15022 Cash Instructions sent to Central/Clearing Banks (RTGS)
                          –      Full response tracking
                          –      Unblocking and settlement of Securities



             Fails Management
                   •    Settlement Tracking
                   •    Lending Pools and Auto-Borrowing
                   •    Buy-In Process
                   •    Compensation




Atos Euronext Market Solutions                                      10
    Market Liquidity: Depository Management


             Position-Keeping Models:
                   •   Direct Holding –
                         –       Final Investor is directly known to the Issuer and the CSD (Current Model)
                   •   Indirect Holding
                         –       Final Investor known only to Broker (European and US Model)
                   •   Hybrid Model
                         –       Final Investor position with Broker known to the Issuer and the CSD



             Advantages of Hybrid Model:
                   •   Full disclosure of Final Investor known at CSD
                   •   Corporate Action processing well defined
                   •   Allows efficient Netting at Broker level for DVP3 settlement




Atos Euronext Market Solutions                                        11
    Market Liquidity: Registry Management


             Central Registry held at CSD

             Real-time Investor Positions
                   •   Tradeable
                   •   Blocked
                   •   Borrowed and Lent
                   •   Encumbered
                   •   Pledged
                   •   Held for Inheritance

             Support for Corporate Actions
                   •   Benefits, Re-orgs, Advices and IPOs
                   •   Calculation of Entitlements
                   •   Transformation of Pending Trades
                   •   Cash Distribution




Atos Euronext Market Solutions                               12
    Market Liquidity: Short-Selling Controls


         Short-Selling in US and Europe:
                •     Trade-date position allowed to be negative
                •     Automatic overnight borrow based upon projected Settlement-date position
                •     Trade allowed to Fail (as of Settlement Date)
                •     Claim process for fails

         Short-Selling Restrictions:
                •     Today – No Short-Selling (should be restricted within Exchange system)
                •     Tomorrow – Allow Sell of Security before Buy is Settled

         Uncleared Selling Levels
                1.    No Short Selling allowed
                2.    Short Sell allowed on Trade Date but checks for pending Buy
                3.    Full Short Selling Allowed (European Model)

          Control Systems: CSD Pledging Fee
                •     Fee calculated on Short Position between Trade and Settlement Date
                •     Configurable rate to control Market Liquidity



Atos Euronext Market Solutions                              13
    Market Liquidity: Agenda

     Introduction

     Operating Model Efficiency
           •   Clearing Model
           •   Settlement Model
           •   Depository Management - Hybrid Model
           •   Registry Management
           •   Short-Selling Controls


     Infrastructure Efficiency
           •   Localisation
           •   Easy Deployment
           •   Integration with Exchanges and Banks
           •   Integration with Brokers and Custodians
           •   Whole Market Infrastructure




Atos Euronext Market Solutions                       14
    Market Liquidity: Localisation


             Multiple Languages
                   •   Arabic, Farsi, English, French, Spanish …

             Multiple Calendars
                   •   Gregorian, Persian
                   •   Holidays
                   •   Settlement Date Intervals
                   •   Bond Accruals

             Ownership point
                   •   Trade date vs. Settlement Date
                   •   Corporate actions
                   •   Registry updates




Atos Euronext Market Solutions                             15
    Market Liquidity: Easy Deployment

          Core Processing Infrastructure
                 •   Grid Processing – Scale
                 •   Linux / Windows – Low-cost
                 •   Service Oriented Architectures – Flexibility
                       –   Lifecycle Models
                       –   Workflow
                       –   Messaging (XML, ISO15022, FIX)



          Web-based Front Ends
                 •   Zero Footprint
                 •   Scales


          Reporting and Queries
                 •   Denormalised relational model of all data (separate from the OLTP)
                 •   Standardised third-party Report Writer support




Atos Euronext Market Solutions                                16
    Market Liquidity: Integration with Exchanges and Banks

                                                               Trading Applications

                              RCE                     Control Module                SPI                     Aramis
                        [Data Repository]          [Investor Checking]     [Buy-In Order Creation]    [Market Surveillance]

                                                          NSC                       TCS
                                                  [On-Exchange Trades]          [OTC Trades]




                                            HUB
                                                                                      FTP Interface
                                                  MMTP Interface



                                                                                                                                    $

                                                                    Syn~Clear
             Internet
                                                                                                               SWIFT
                                                                                                               RTGS           Clearing Banks

Users
                         Web Server


Atos Euronext Market Solutions                                           17
    Market Liquidity: Integration with Brokers and Custodians



      Client
                      Orders     Broker System         Orders
       / End                     (Syn~Broker)        Executions
                                                                              PAM
     Investor
                                                                          Tehran Stock
                                                                                                  OTC Trading
                                                                           Exchange
                                                                                                    (TCS)
                                                                             (NCS)

                                     Transfers
                                       Cash      Se
                                                    ttle
                                                         m
                                                             en




                                                                                         Trades
                                                                  ts




                                                                Cash                   CSDR
                                 Clearing Bank                Transfers             (Syn~Clear)




Atos Euronext Market Solutions                                18
    Market Liquidity: Whole Market Infrastructure



             Entire Market Infrastructure
                   •   Exchange Systems
                   •   Clearing Systems
                   •   CSD Systems
                   •   On-line Client Portals
                   •   Brokerage Systems



             Central ASP Provision
                   •   Shared infrastructure - Low cost
                   •   Standardised Data Centre Management - Low risk
                   •   Large infrastructure – Inherent scale
                   •   Easily deployed Regulatory and Market Changes




Atos Euronext Market Solutions                           19
    Market Liquidity: Questions



                                 Questions




Atos Euronext Market Solutions         20

				
DOCUMENT INFO