Numerous studies show that stock price is an important function of liquidity, a major component of market quality. Low-priced securities are generally associated with the risk of high volatility, making them more susceptible to excessive speculation and market manipulation, while higher-traded prices are associated with greater liquidity and market depth.

Recently, Singapore Exchange (SGX) conducted a review of the market quality of the SGX securities market in 2013. SGX’s study investigated if a higher level of market quality was observed at different levels of 2013 trading prices of  Mainboard and Catalist stocks, using bid-ask spreads and quoted best depth value to assess market quality. These two liquidity measures indicate the implicit trading costs faced by investors. A lower implicit trading cost ensures that investors will achieve a better quality of execution, which points to a higher quality market.

SGX would like to share with you the following key findings from the study:

  • Stocks priced above S$0.25 were quoted with narrower bid-ask spreads and higher quoted best-depth value. This shows that trades at S$0.25 or greater display higher levels of liquidity or market quality.
  • Stocks trading at less than S$0.05 and at S$0.25 or greater exhibit tighter bid-ask spreads, suggesting lower trading costs.
  • Conversely, those stocks that traded at prices between S$0.05 and S$0.25 were found to be largely illiquid. They typically traded at wider bid-ask spreads during the trading day and even had one-sided order books, making it difficult for investors to close out their open positions.
Wednesday, September 24, 2014

The next major shock to the global financial system will come as a result of a cyber-attack, according to Greg Medcraft, chairman of regulator the International Organization of Securities Commissions (IOSCO). Medcraft told the FT on Sunday that the financial markets were at risk because of the “uneven” response to online threats around the world. “The issue of cyber resilience is a bit of a sleeper issue, and one that we have to be proactive [about] in terms of making sure the risk management approach is robust,” he said in an interview with the paper. “Cybercrime has a huge potential impact on markets.”

Medcraft claimed that the best approach would be to build on the work being done in the US, which is apparently developing risk management standards which firms in the industry could better use to spot and block cyber-attacks. The SEC has already stated it plans to assess the ability to deflect threats of 50+ broker-dealers and investment advisors. The IOSCO published a report last July with the World Federation of Exchanges which warned that the number of high profile and critical “hits” is increasing.

Wednesday, September 24, 2014

BM&FBOVESPA begins operating the BM&FBOVESPA Clearinghouse, a new post-trade infrastructure which in a single platform will include exchange-traded and OTC derivatives; equities and corporate bonds; spot FX; and federal government bonds. Previously all of these markets used separate clearinghouses. As well as unifying the four existing clearinghouses, there is the major development of introducing of one of the world’s most modern and secure risk management systems: Closeout Risk Evaluation (CORE) (Details below). The BM&FBOVESPA Clearinghouse will bring greater robustness and competitiveness to Brazil’s financial and capital markets, representing a milestone in their evolution and history.

Wednesday, September 24, 2014

CBOE Futures ExchangeSM (CFE®) announced that it plans to launch futures trading on the CBOE/CBOT 10-year U.S. Treasury Note Volatility IndexSM (ticker symbol VXTYNSM) beginning on Thursday, November 13, pending regulatory review. CBOE CEO Edward Tilly made the announcement during his address to attendees at the CBOE Risk Management Conference Europe, currently taking place outside of Dublin.  

 The VXTYN Index, on which futures on VXTYN is based, is calculated by applying the CBOE Volatility Index® (VIX® Index) methodology to futures options data from CME Group's 10-year U.S. Treasury note contract -- one of CME Group's most active interest rate options products. In May 2013, CBOE began disseminating values on the VXTYN Index as part of an agreement between CBOE and CME Group.

Wednesday, September 24, 2014

Shenzhen Stock Exchange (SZSE) and Shenzhen Securities Information Co., Ltd. recently announced to launch SZSE Convertible Bond Index (Code: 399307, Abbreviation: SZSE Convertible Bond) and CNI Convertible Bond Index (Code: 399413, Abbreviation: CNI Convertible Bond) on August 27, 2014. The indices are designed to depict the overall operation feature of the convertible bond market, and fuel the development and innovation of indexing investment.

 Being as a hybrid security with debt- and equity-like features, a convertible bond holder may enjoy a return close to stock investment in a bull market and resist the crash when market collapses. Holding of a convertible bond not only keeps the long-term growth potential of stocks but also the security and income advantage of bonds, is a kind of investment which maximizes profit when risks are considered. In recent years, the convertible bond market witnesses steady growth with 31 convertible bonds listed on Shanghai and Shenzhen stock markets and valued about CNY 167 billion (as of the end of July, 2014). The convertible bond market has become an important component in the exchanges’ bond market.

Wednesday, September 24, 2014

Euronext announced that trading in equity options on Euronext N.V. shares will start on the Amsterdam derivatives market as of Thursday 28th August.

 The new options will be listed in the Spotlight Options section, Euronext’s special segment dedicated to the development of new option classes requested by market participants. Spotlight Options give visibility to underlying assets such as newly listed stocks, SME’s and/or assets with notable market events or activity. Through a unique combination of Liquidity Provider support and dedicated promotion by Sponsoring Brokers, underlying assets are  put in the spotlight with short-term maturities options of one, two and three months

Wednesday, September 24, 2014

NASDAQ OMX announced that First Trust listed a new exchange-traded fund (ETF) which began trading on Thursday, August 14, 2014. First Trust Strategic Income ETF (Nasdaq:FDIV), listed on The NASDAQ Stock Market® (NASDAQ®).

FDIV seeks a high level of risk-adjusted income and diversification through the use of multiple asset classes, targeted investment strategies and specialized management teams. By tactically blending multiple investment strategies, which includes both fixed-income investments and income-producing equity securities, the Fund may provide a lower risk, total return alternative to focusing solely on one strategy. This approach focuses on providing risk-adjusted income and capital appreciation potential by utilizing the expertise of multiple specialist asset managers in a single investment portfolio. FDIV offers a disciplined and transparent solution for investors seeking income.

Wednesday, September 24, 2014

The Stock Exchange of Thailand (SET), together with four stock exchanges in Greater Mekong Subregion (GMS) – Cambodia, Hanoi, Hochiminh and Laos –, participated in the second GMS exchanges CEOs meeting ‘GMS Focus’. This SET’s hosted meeting serves as a platform for closer collaboration among GMS exchanges.

 A collaboration of five stock exchanges in GMS has continued after successfully organizing the first GMS Focus last year by initiating the GMS exchange’s information centre on SET website, an integrated single-window view into the GMS capital market featuring market data that contains each market stock quotation together with regional brokers and exchanges’ information. It is the first key milestone for the cooperation of the GMS exchanges, bringing new investment opportunities to the region. Furthermore, the five exchanges also jointly agree to launch the GMS exchanges’ information centre from each exchange’s website. In addition, factsheet of listed companies in each market will be facilitated on the website, reinforcing the exchanges’ cooperative effort to promote investment opportunity in the region.

Wednesday, September 24, 2014

CME Group, the world's leading and most diverse derivatives marketplace, announced that it has promoted John Pietrowicz to Senior Managing Director and Chief Financial Officer as James E. Parisi, who has held that role since 2004, will retire from the company on December 31.  Pietrowicz, 50, who has been with the company since 2003 and has been serving most recently as Senior Managing Director, Corporate Development & Finance and Deputy CFO, will move into the CFO role effective upon Parisi's resignation.  He will report to CME Group Chief Executive Officer Phupinder Gill.  Parisi, 49, will remain with the organization in his current role through yearend to ensure a smooth transition.

Wednesday, September 24, 2014

The World Federation of Exchanges Ltd. published its Statistics Market Highlights Report on the first-half year 2014. The main trends for this first six months of the year were: 

·         The value of share trading rose 10% worldwide to 29.7 trillion USD from the second-­‐half of 2013 (+6.8% year on year).

·         The number of trades rose 10% from the second-­half of 2013 (+12% year on year); the average value of trades decreased.

·         A continuing strong performance of equity markets, Global Market Capitalization rose 6% to 68.7 trillion USD from the second-­‐half of 2013 (+21% year on year.)

·         Good performance of IPO markets and investment flows. The number of IPOs fell 11% compared to the second half of 2013 but increased 42% year on year. Total investment flows in USD increased 17% compared to the second-­‐half of 2013(+11% year on year.)

·         Exchange Traded Derivatives (ETD) volumes were stable. The total number of contracts traded decreased 0.2% from the second-­‐half of 2013 (-­‐13% year on year.)

Wednesday, September 24, 2014