What will be the next move for the markets?
The past weeks have been filled with interesting developments as exchanges with the urge to merge face regulatory hurdles, and competing bids.
One question that was recently addressed both at the WFE’s annual futures and options conference, IOMA, and also at annual Options Industry Council meeting (OIC) is why is this new round of consolidation happening now.
In this edition, Nicky Newton-King, Siobhan Cleary and Stephen Malherbe update a chapter on exchange strategy that appeared in the WFE book “Regulated Exchanges,” published in October 2010. They offer a comprehensive view of the drivers that motivate exchange operators to search for scale in a number of different ways. The article points out the value proposition to market participants both for integrated processing of trades and risk management , and the alternative - outsourced services. It explains the reasons for re-mutualisation: why erstwhile owners of exchanges , banks and brokers, want to restore their control over exchange operators such as NYSE Amex or TMX Group.
Trans- Atlantic mergers of exchanges on the one hand, and the broker /dealer ownership of trade execution facilities on the other, are certainly not new phenomena. However, each deal and venue turns out to have unique concerns. Just when it seemed that exchanges had finally been classified as just another financial services supplier, it turns out that they are still considered by some policy makers as unique agents positioned to stimulate economic and financial growth.
Meanwhile, one of the aspects of fragmentation that was alluded to in a recent Focus edition is dealt with by Mr. Stephen Luparello from FINRA in the following pages. Market surveillance in a fragmented environment is an issue that is heart of policy concerns today. Market integrity relies on a vigilant oversight and understanding of the interconnected actions of participants when dealing across asset classes and national boundaries. The FINRA model shows just how important the self-regulatory organizations (SROs) remain in the fight to identify and eliminate the dark arts of trading.
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