FMX | Connect – www.fmxconnect.com - (Reported 7/12/2010)
This week:
The sector was up 300 bps, underperforming global equities by 200 bps. Interdealer brokers were up 500 bps. YTD the sector is underperforming global equities by 450 bps.
Yesterday, CBOE announced that a circuit court in Illinois ruled in its favor regarding its dispute with ISE on exclusive rights to trade index options. The court dismissed ISE argument that products traded on based on indexes should be open to competition because indexes lie in the public domain. ISE will now appeal the decision. The ruling also forbids OCC from clearing SPX and DJX options unless they are traded pursuant to CBOE's exclusive license. (Page 7)
FESE members committed to provide separate access to pre- and post-trade data at a “reasonable cost” by year end, but announced it does not support the idea of a European Mandatory Consolidated Tape put forward by the buy-side, MTFs and CESR. A consolidated tapes will imply regulation of exchange’s market data fees as well as sharing of trade reporting revenues. “A MCT means that registered markets are not able to compete on the basis of quality because their prices [which perform a relevant price discovery function] are treated as equal value components of the proposed CT.” FESE said that “the underlying problem with data in Europe is the lack of availability of pre-trade OTC data, and the lack of consistency, granularity and poor quality of post-trade OTC data. These gaps can be addressed with a combination of MiFID amendments, better mechanisms for monitoring the data reporting” and letting competition work. (See pages 8, 9 and 10)
In Australia, the Financial Services Minister, Chris Bowen announced that ASIC will assume supervision of domestic licensed markets on August 1st. The domestic market was previously regulated by ASX.
Incoming OTC Derivatives regulation may require swaps to be traded on regulated execution facilities. As the Senate bill reads:
SWAP EXECUTION FACILITY.— “(8) TRADE EXECUTION . . . With respect to transactions involving swaps subject to the clearing requirement of paragraph (1), counterparties shall— “(i) execute the transaction on a board of trade designated as a contract market under section 5; or “(ii) execute the transaction on a swap execution facility . . .”
MKTX, currently trading at 14.0x forward P/E, seems an attractive takeover target for exchanges, dealers or IDBs looking to setup / sponsor an Alternative Swap Execution Facility (ASEF). Something similar happened in the equity markets with ECNs after the Order handling Rules passed.
Next Week
Charles Schwab release its 2Q10 earnings report
LSE Group reports fiscal 1Q11 revenues
Source: ERDESK
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