This article is adapted from the book being prepared to commemorate the WFE’s 50th anniversary. The book is based on a dozen essays, reflecting on transformations of various sorts – trading floor to screen, member cooperative to demutualized company, starting a regulated market from scratch, the value of regulation, the effects of deregulation, etc. The book’s purpose is to examine the various roles exchanges play in public life, and the ways in which they have contributed to the growth of capital markets over these decades.
Trade reporting and market transparency in the U.S. fixed income OTC market will expand substantially this year as trade reporting encompasses entire new classes of debt. Two initiatives by the Financial Industry Regulatory Authority (FINRA) would more than double the percentage of the U.S. debt market subject to FINRA data collection.
On 1 February, the London Stock Exchange launched its order book for retail bonds. Opened in response to increasing demand from private investors in the UK, the initiative aims to make trading in bonds as straightforward as trading in shares by offering continuous, transparent electronic access to a range of UK gilts and corporate bonds for the first time. The market is supported at launch by three dedicated market-makers, and initially offers trading in 60 of some of the most recognisable fixed-income securities currently listed in London.
Fixed-income markets across Europe have undergone significant evolution in the past twenty years. When Mercato dei Titoli di Stato (MTS) was founded in 1988, it represented the first step in a large scale transformation of the secondary market for European government debt. Desire from the Italian Treasury to make sure the debt it issued was quoted in a centralised, electronic and transparent (and thus easy-to-monitor) environment was the driving force behind its launch, and other European governments soon followed suit Since its privatisation in 1997, MTS Group’s European exchanges have grown to represent a continent-wide facility for the secondary market in the public debt of fifteen countries, and today over €2 trillion worth of trading activity takes place on the Group’s cash markets each year.
South Africa’s debt market when measured in terms of debt issued comprises but a fraction of the world’s debt markets combined, yet it constitutes the lion’s share of the African debt market. It boasts sophistication and efficiency that match those of many of the bigger debt markets in the developed world. It is thus both a David and a Goliath. In its former role, it is often a taker of global financial market developments that from time to time ripple out globally, while in its latter role it is a leader on the continent, and possibly even among emerging markets elsewhere.
The financial crisis brought over-the-counter (OTC) derivatives to the forefront of regulatory attention. The default of Lehman Brothers, the near collapse of Bear Stearns and the bailout of AIG highlighted to all involved the significant role played by OTC products. Since then, regulators on both sides of the Atlantic have begun to look at how the derivatives market, or “weapons of mass destruction” as they have fashionably come to be known, can made safer. Although derivatives have been around for centuries, from the most basic contracts for the transfer of risk, the innovation within the sector has been fast and finding a solution to producing effective regulation from a policy-making point of view has not been easy.
On 15 January 2010, I will be retiring from HKEx. For many people, retirement represents a point when they are able to pursue their passion or things they have missed during their career. In my case, I am very fortunate that I have found my passion in the securities market. I have enjoyed going into work everyday – and challenges I have faced in the past 40 years have made my career more interesting and meaningful. I have also had tremendous privilege and pleasure of working with my global exchange peers at the Federation Internationale des Bourses de Valeurs (FIBV) and the succeeding World Federation of Exchanges (WFE). I have learned so much by working alongside with many of the world’s most brilliant minds.
Global media attention was firmly focused on the Danish capital for two weeks in December last year as world leaders gathered in an attempt to come up with solutions to probably the greatest challenge yet faced by mankind: How to reverse the damage that we are doing to our planet as a result of our thirst for energy.
The capital markets in India have evolved over more than a century. The seeds of investor protection were sown way back in 1956 at the time of enactment of the Securities Contracts Regulations Act, 1956, wherein several investor protection measures found their place. Since then, investor protection has been evolving. Over the period, investor protection has been receiving increased attention and focus from the market regulator, the Securities Exchange Board of India (SEBI), as well as stock exchanges.
The legal principle of protecting the investor permeates virtually all current regulation governing the operation of stock markets. This has not always been the case. It was after the devastating effects of the 1929 stock market crash that much regulation began to be inspired by this principle. Nevertheless, it has taken many years to develop a legislative framework with detailed legal precepts and provisions that provide effective public oversight of the rights of investors in their relations with the markets. The current financial crisis has highlighted the fact that the investor enjoys little protection outside the area of regulated exchanges.