“We confirm the EU Commission’s investigation and are fully cooperating. We do not comment on ongoing investigations,” said Deutsche Boerse when approached by The TRADE.

Specifically, the inspection relates to potential violations of EU antitrust rules linked to financial derivatives that prohibit restrictive business practices – Article 101 of the Treaty on the Functioning of the EU, and Article 53 of the EEA Agreement (both include reference to directly or indirectly fix purchase or selling prices or any trading conditions). 

The TRADE understands that the alleged actions which led to the raid include undercutting fees to out price competitors, and price dumping.

Unannounced investigations such as these are a preliminary investigatory step, confirmed the regulator, speaking about the process for inspecting suspected anticompetitive practices. 

“The fact that the Commission carries out such inspections does not mean that the companies are guilty of anticompetitive behaviour nor does it prejudge the outcome of the investigation itself,” asserted the European Commission. 

There is no legal deadline for completing inquiries into anticompetitive conduct, reminded the watchdog in an announcement today. The duration of the investigation depends on factors including case complexity and the extent to which companies in question cooperate with the EC.

“The Commission officials are accompanied by their counterparts from the relevant national competition authorities of the Member States where the inspections are conducted,” asserted the watchdog in an announcement.

The Commission is also carrying out unannounced antitrust inspections at the premises of other companies active in the financial services sector in two member states, The TRADE understands.

More to follow…

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The move comes as an increasing number of clients have begun to seek dark offerings from primary exchanges in order to avoid having to go elsewhere – which creates a time delay and subsequent reduction in the efficacy of a trade due to the potential for market impact. 

Deutsche Börse’s new service – known as ‘Xetra Midpoint’ – offers an integrated solution for German instruments.

When using the mid-point service, traders will be able to choose between midpoint orders to trade in the midpoint book only and a dark-lit sweep order.

This has a strong use case for price improvement in comparison with aggressive execution in the central limit orderbook, Deutsche Börse’s project manager for Xetra Midpoint, Maximilian Trossbach, asserts.

The intention is to build a midpoint trading facility in an order book that is hosted on the same machine as the reference market order book.

Read more: Deutsche Börse launches Xetra market close mechanism 

“We’re building it in a way that it has no disadvantage over the existing standard limit orders, and we also want to make the implementation for our clients as easy as possible,” says Trossbach. 

“[…] The Xetra lit book is the source for the midpoint that serves as the reference price in the midpoint order book. There is also an order type – the sweep order – where you can check for executions in both books starting in the midpoint and take out everything that’s immediately there. Any remaining quantity then goes into the lit book. That’s the way they are integrated, and we have also built prototypes for the matching algorithm and have tested that, primarily for speed.” 

Client led development 

As part of its client-led approach, Deutsche Börse tells The TRADE that applications for new MIC codes for the midpoint order books have been a key focus following client discussions which found them to be the preferred route for trade reporting and order routing logics. 

All trading will be under the operating MIC of Xetra (XETR) before the deployment of dedicated segment MIC codes for midpoint trading only. The new codes are reserved and set to be published soon following application to the International Organisation for Standardisation (ISO).

Read more: European Commission hurries through last minute revision to Mifir text to plug dark trading loophole 

This is a key example of where client demand led product development, Trossbach explains, suggesting there could have been a more simplistic, though admittedly less attractive, approach to pushing Xetra Midpoint live. 

“We could have simply introduced some flag in the trade notification that tells you ‘this is midpoint’ without using a separate MIC, but clients wanted it, so they get it,” he says.

An integrated approach

Deutsche Börse’s focus is on having a synchronous service across its dark and lit books in one queue so as to ensure no disadvantage when it comes to using dark-lit sweep for all aggressive flow. Specifically, this means achieving efficacy without sacrificing speed.

This however, as the industry is acutely aware, is a technological challenge, in particular as matching logic in midpoint book is more complex than in the lit. 

Delving into this, Trossbach says: “Minimum acceptable quantity (MAQ) is an additional aspect that you need to consider in the matching. Imagine there is a resting sell order in the midpoint book with an MAQ of 100 shares and a resting buy order with a total quantity of 60, then another buy order comes in with a quantity of 40. We aggregate the two buy orders to be executed against the resting sell order. 

“This is done by a matching algorithm that seeks the combination of executable orders which maximises the overall executable volume at the given midpoint price and under consideration of individual MAQs.”

Currently, Deutsche Börse sees a lot of high frequency trading in its lit book, which becomes tricky to replicate in a dark book environment.

“The midpoint book could offer opportunities for slower moving clients who sometimes aren’t able to be first in the queue in our lit book to place a passive order with highest priority when executed against a dark-lit sweep,” explains Trossbach. 

The potential benefit of Deutsche Börse’s so-called integrated approach is closely linked to the latency arbitrage which exists when it comes to third party venues. Other exchanges, such as Euronext, mirror Deutsche Börse in terms of their set up, where information travels from Bergamo and London, and Frankfurt and London respectively. 

Recently, Euronext confirmed the launch of its ‘Dark Mid Point Match’ service after relocating its servers to a data centre in Bergamo, in a similar attempt to bridge the latency gap. 

From his side, Trossbach explains: “There could be private connections that are simply faster. So, if you are not on the fast side of things in the London venue then you might get picked off systematically at prices that are not advantageous for you because your counterparty already knows what the next price will be.

“Therefore, we hope that the fact that that we have it as an integrated trading mechanism (literally on the same machine in the same location) will be a key argument for clients to potentially choose our venue.”

The post Shedding light on Deutsche Börse’s approach to the dark appeared first on The TRADE.

Known as ‘Xetra Midpoint’, the functionality is a customer-driven project according to Deutsche Börse and will be integrated into the Xetra market.

Speaking about the development, Maximilian Trossbach, project manager for Xetra Midpoint, said: “[…] Large member firms asked us to deliver a midpoint service as an integrated solution in the heart of price discovery for German instruments. We can offer full synchronicity of midpoint prices for these instruments, as the midpoint orderbook and the Xetra Central Limit Orderbook will be hosted in the same location.”

Read more: Deutsche Börse launches Xetra market close mechanism

According to Deutsche Börse, traders will be able to choose between midpoint orders to trade in the midpoint book only. In addition, they will be able to sweep orders which enter the midpoint book first – any remaining quantity is automatically entered into the Xetra Central Limit Orderbook.

“Sweep orders offer a chance for a price improvement against the BBO in the CLOB, and will have no latency disadvantage compared to orders that go directly into the CLOB,” said Trossbach.

Dark trading is continuing to grow across Europe, with a swathe of venues making moves in the space in recent times as both regulators and market participants across asset-classes increasingly bank on the strategy.

Read more: Trading in dark pools and periodic auctions lowers execution costs, FCA paper concludes 

More to follow…

The post Deutsche Börse targets November launch for dark trading capability appeared first on The TRADE.

DBDX claims to provide a fully regulated, secure ecosystem for trading, settlement and custody of crypto assets, leveraging existing connectivity to market participants.

The platform will also offer a suite of secure financial solutions for digital assets from a single point of access and across the value chain.

Initially, trading on the DBDX will take place on a request for quote (RFQ) basis, followed by multilateral trading.

Deutsche Börse operates the trading venue, while Crypto Finance (Deutschland) will provide settlement and custody services.

DBDX will help support development of a trusted digital asset ecosystem that meets institutional-grade standards.

Read more: Digital assets and traditional finance: Can two parallel lanes converge?

“Our new solution is a game changer for digital ecosystems. We aim to provide trusted market operations for crypto assets, ensuring transparency, security, and regulatory compliance for institutional clients in Europe. This enhances market integrity and security,” said Carlo Kölzer, head of FX and digital assets at Deutsche Börse.

“Crypto Finance, with its digital native capabilities in trading, settlement, and custody for crypto assets, will be a key part of the value chain. It is a first step towards realising Deutsche Börse’s ambition in the Horizon 2026 strategy to play a leading role in the digitalisation of asset classes.”

Last year, Deutsche Börse Group reaffirmed plans to create a digital asset platform within its Horizon 2026 strategy. In February, German regulator BaFin granted Crypto Finance (Deutschland) four licences which include regulated digital asset trading, settlement, and custody services in Germany.

This was another precondition to start the platform, which had already received a multilateral trading facility (MTF) licence.

“As a well-established Swiss company with a strong commitment to regulatory compliance and delivering top-tier financial solutions, we have further strengthened our position with the introduction of crypto finance in Germany as the settlement agent and custodian,” said Stijn Vander Straeten, chief executive of Crypto Finance.

“This marks a pivotal moment in our mission to cultivate a resilient and trusted digital asset ecosystem together with Deutsche Börse, while also strengthening Crypto Finance’s well-established and regulated custody and settlement offering in Germany.”

The post Deutsche Börse launches regulated spot platform for crypto assets targeting institutional clients appeared first on The TRADE.

We think that the introduction of an anonymised, single-level pre- and post-trade consolidated tape will trigger innovations at trading venues. A key part of these innovations will be how retail orders are executed in Europe, as a consolidated tape becomes a benchmark for retail investors for best execution. We expect to see innovation in dark trading, which has not had a shake-up for a while, as AI is embedded into order matching algorithms, resulting in better execution outcomes.

If the current low-volume environment in Europe continues, tied to GDP and economic growth, we will see renewed effort from policy makers to address some of the structural problems in Europe. They will need to take the Capital Markets Union more seriously and remove the frictional cost of trading between countries. As the focus of regulation shifts from Brexit to competing and reducing fragmentation, we will see more constructive regulatory dialogue between the UK and EU, based on the recently signed Memorandum of Understanding (MoU) on cooperation in financial regulation.

Niels Brab, chief regulatory officer, Deutsche Börse Group

With a new EU legislative period on the horizon, a decisive year lies ahead that will be full of opportunities to advance on key challenges. In light of geopolitical realities, sluggish economic growth, and constraint public finances, it will be particularly critical for the EU to ensure a new vision in regard to the Capital Markets Union. Despite decades of efforts, the EU’s capital markets remain underdeveloped, and their size does not correspond to the magnitude of the EU’s economy.

A new vision should be paired with a profound reflection around the open strategic autonomy. We should learn from best practices and centrally embed them into our thinking. Establish an EU equity fund, revitalise our securitisation markets, boost our primary markets and IPO ecosystem, address fragmentation, tackle incentivisation elements like taxation – and ensure that citizens truly endorse our markets by guaranteeing a better participation.

Michael Robertson, head of UK consulting, Delta Capita 

In 2024, the global capital markets landscape looks set for further transformational change. Against the backdrop of an uncertain macro-economic climate, we expect market disruption through convergent regulatory scrutiny, technology advancement and an ongoing focus on sustainability. Markets will be shaped by the impacts of a shortened settlement cycle. Whilst initial focus will be on T+1 in the US, governing authorities must weigh up the cost-benefit of an accelerated cycle whilst maintaining a stable, efficient, and competitive European capital market.    

Technology advancement continues at a pace. Decentralised finance (DeFi) and tokenisation represent a paradigm shift in financial services and there is widespread expectation that AI will bring improved capital efficiency and risk management. Regulation must establish a framework that encourages innovation while protecting consumers and maintaining financial stability. Cyber security will remain a top priority to ensure the industry has defence mechanisms to safeguard sensitive data. ESG considerations will play an increasingly pivotal role. Institutions will integrate sustainability practices into their operations, reflecting a growing awareness of the environmental and social impact of investments.

Navigating this complex web of factors will require collaboration amongst industry practitioners, technologists and policymakers to understand, shape and design innovative solutions to common business problems.

Stephanie Eckermann, chief executive, Clearstream Banking AG

Securities services especially have been largely untouched by disruption in the last few years – partially due to protection of the industry by regulation. But we are seeing changes. We see the entire post-trade space becoming more and more of a platform business. The new digital securities world, and the new digital customer experience afforded by modern technology are driving this trend.

As we move into a world with digitisation, open API and the glue provided by hyperscalers, I envisage an interoperable platform of key market players, delivering a truly seamless global experience to investors. This experience will utilise advanced data tools to offer greater insight and enable better investment choices. To be the winners, platforms will need both the scale to fund the investments needed for change and the right culture to collaborate. Those that continue to operate behind their own protectionist garden walls will ultimately wither.

The post The TRADE predictions series 2024: Market Structure – industry unification appeared first on The TRADE.

Michael Peters

At a recent roundtable, Deutsche Börse Group derivatives exchange, Eurex, shared its plan to harmonise onto one risk management infrastructure over the next two years.

Speaking to the priorities for the business generally, Michael Peters, chief executive of Eurex Frankfurt AG, asserted that “risk management is top of the agenda for both the trading side and the clearing side.”

Almost a decade ago, back in 2014, Eurex clearing was a leading innovator when it came to real-time risk management. Today, the attention for the next two years is on harmonising onto one risk management infrastructure. Peters specifically highlighted putting Eurex’s MTF and trading pools onto one joint offering which would also likely include European Energy Exchange (EEX) and European Commodity Clearing (ECC) on the commodity side, as well as the repo business.

Matthias Graulich, chief strategy officer at Eurex and global head of fixed income, funding and financing strategy and development at Deutsche Börse Group, expanded on this, explaining: “The intention is to offer all financial products denominated in euro within the same legal, operational and risk management framework.

“In terms of what belongs in this ecosystem are long-term European government bond futures and options (Eurex is in the advanced stages of launching an EU bond future potentially in 2024), euro denominated interest rate swaps, futures and options on short-term Euro interest rates Euribor and €STR, as well as the repo business.”

Currently, Eurex’s offering allows clients to trade repos with more than 160 registered participants and allows participants to raise or place cash against over 13,000 securities, both domestic and international. 

Earlier this year, Eurex confirmed that it had seen a significant increase in trading activities and reached record volumes in its cleared repo markets – doubling across all markets year on year as of August 2023.

Speaking at this most recent roundtable, Graulich expanded on the growth of the repo business: “What we have seen is that this business has gotten more and more attractive again because excess liquidity in the market is shrinking as central banks take a step back out of this market.”

The execs also discussed the growth of their pension fund client base amid the changes being seen, emphasising that pension funds are moving into the repo market as they bank on more reliable liquidity in times of market stress.

“We see that pension funds are very interested in cleared repo because they get better rates, it’s operationally quicker, and they have a much broader choice of execution counterparties and ultimately face the CCP, which is also from a credit perspective preferable, said Graulich.

Speaking to this shift in more detail, he added: “The main reason why pension funds were for so long exempted from swaps clearing was the risk that if there was a large interest rate move that they wouldn’t have access to sufficient liquid resources to fund variation margin on the swap side.

“Now one driver for these pension funds to go into the cleared repo market is that this liquidity pool is much more reliable in market stress situations relative to the bilateral repo market. In particular when it comes to market stress liquidity in the cleared market increased whereas it dried up usually in the bilateral market.”

Read more: Eurex lures euro clearing volumes to Europe post-Brexit with new buy-side incentive scheme

Elsewhere, Graulich highlighted that credit index futures are also seeing more appetite from the market and are continuing to progress.

“While these volumes and activities are still small, we see a lot of interest. Clearing brokers are getting ready to support the product and liquidity providers are already engaging in the topic. Additionally, end clients in particular are showing interest also in the credit future side because it’s such an efficient tool to manage risks and take a perspective on credit.”

The post Eurex focused on harmonising onto one risk management framework appeared first on The TRADE.

Read more – Union Investment’s trading head Hock steps away from role to pursue digital asset aspirations

Speaking to the decision to trade through 360T, Rico Milde, head of FX trading at Union Investment, said: “Given that we are a long-term user of Eurex FX futures and have many trading relationships to manage, 360T – which offers us a range of specialist execution management capabilities – was a natural choice to partner with.

“We are confident that using the 360T EMS to manage all of our off-exchange futures relationship-trading activity in a fully integrated setup will deliver significant benefits to our trading desk.”

Deutsche Bank was the inaugural foreign exchange futures liquidity provider for Union Investment, with the bank set to reap the benefits of central clearing as well as continuing to take advantage of the customisation of over-the-counter (OTC) FX execution models, according to Hilko Kalberlah, head of DACH FX sales for institutional clients at Deutsche Bank. 

360T provides web-based trading technology for OTC instruments, as well as integration solutions and related services.

Read more: Deutsche Börse rolls out real-time FX pricing data from 360T platform

Speaking in an announcement, 360T explained that the potentially increasing costs when it comes to trading FX forwards across OTC channels, as a result of regulatory changes, will likely make its offering more and more attractive to market participants.

Sebastian Hofmann-Werther, head of EMEA at 360T, highlighted how this move fits into the business’ strategy: “The seamless integration between 360T and Eurex is part of a strategic investment we have made into supporting Listed FX trading alongside our world class OTC offering and we are now able to provide access to a range of different FX futures products to meet the various needs of our diverse, global client base.

“Meanwhile, we continue to see strong adoption of our best-in-class EMS by market-leading firms like Union Investment as they look for ways to continue expanding and enhancing their FX execution capabilities.”

Earlier this month, 360T made streaming mid liquidity via APIs available on its Swaps User Network (SUN), with Deutsche Bank and ING executing the initial trade. According to the business, this was the first time two banks had been able to trade FX swaps via API and match at the market midpoint.

Speaking to The TRADE, Hock said: “When we’re looking at futures transactions we have a higher participation rate compared to most of our peers […] so we’ve been fairly early adopter of this product.

“What’s important for us when executing – not just in FX but all asset classes – is to get the very best outcome for our investors. Not just best execution, also the regulatory requirements. Our goal is to be connected to the very best platforms and have the best breadth of broker firms on this platform, enabling us to play the white keys, the black keys and the pedals of the piano.”

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EuroCTP is a project which arose in response to the European Commission’s previously published proposal for an equities tape and aims to tender as the CT provider in the EU’s future selection process.

In the initial announcement declaring the exchanges’ intention to collaborate on a CT back in February, EuroCTP asserted that “the participants are recognised specialists in supplying reliable and high-quality market data and are well-positioned to deliver a CT quickly, efficiently, and to the highest operational standards”.

A CT, across the various asset classes, has been the subject of much debate in the market for some time, with regulators currently welcoming feedback from participants on what shape the final framework should take, both in the EU and the UK.

Speaking to The TRADE, Natan Tiefenbrun, president of Cboe Europe (not a shareholder in EuroCTP), highlighted some key points of consideration: “Our focus remains on ensuring the legislation – still under negotiation – will mandate a consolidated tape that meets the needs of consumers, including essential information from intraday and closing auction phases, is priced to succeed, and fairly rewards all data contributors.”

He added: “Only a tape with these characteristics will lower barriers to participation and support competition and growth in European equity markets. We continue to see members of the exchange consortium pushing in the opposite direction.”

Read more: Battle lines are drawn over European consolidated tape project

In April, five major buy- and sell-side institutions (Barclays, BlackRock, Crédit Agricole CIB, Société Générale and UniCredit) announced their intention to jointly explore the establishment of a consolidated tape for equities and ETFs. In the same statement, the institutions confirmed that they supported the current proposals to include pre-trade data.

The EuroCTP JV is made up of participants across 26 of the EU’s member states and includes: BME, Deutsche Boerse Group, Euronext exchanges (Borsa Italiana, Amsterdam, Brussels, Dublin, Lison, Paris, Oslo Børs), Luxembourg Stock Exchange, and Nasdaq exchanges (Stockholm, Copenhagen, Helsinki, Iceland, Riga, Tallinn, and Vilnius), among others.

The shareholders of EuroCTP are operators of regulated markets and have confirmed their intention to ensure the long-term success of both market participants and retail investors, aiming to maintain and strengthen the European capital market ecosystem. 

The company is set to appoint a board of directors, as well as ensuring that a representative of all the participating exchanges are included in a supervisory board. Jorge Yzaguirre Scharfhausen has been elected chair of that supervisory board, with the chief executive of the business to be announced soon.

Speaking in an announcement, Yzaguirre Scharfhausen said: “The initiative that has led to the creation of EuroCTP is a true representation of European capital markets and shows a broader range of interests than any other consolidated tape proposal, its aim is to strengthen the EU Capital Market Union.

“We are proud to be the first European consolidated tape initiative for equities and ETFs to have established a company. We are now working on the best solution for the provision of a consolidated tape in the European Union.”

EuroCTP explained that the development of the new company has been in the works for more than a year with shareholders having already made ‘significant investments’ and confirming their commitment to fully financing both the development and implementation of the CT.

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The offer period for the acquisition expires on 19 September, with the transaction expected to be completed by 29 September at the latest. 

Deutsche Börse entered into a binding agreement to acquire SimCorp in an all-cash public takeover back in April. At the time the acquisition was expected to complete in Q3 2023. 

Read more – SimCorp expands Dimension platform with Qontigo partnership

The acquisition has a minimum acceptance level of 50% plus one share of all SimCorp shares, with SimCorp’s board of directors having unanimously recommended to shareholders that they accept the offer.

Once completed, Deutsche Börse has confirmed it will combine its existing data and analytics subsidiaries Qontigo and ISS. These are set to be grouped under a newly created investment management solutions segment.

The post Deutsche Börse, SimCorp acquisition receives final approval from regulators appeared first on The TRADE.

Deutsche Börse

Deutsche Börse and Clearstream have co-developed a new data service, offering analytics and insights into the fixed income marketplace.  

Called Bond Liquidity Data, the new platform will pull aggregated data of settlement instructions for international securities from Clearstream’s ICSD. Investors will be able to evaluate fixed income asset and portfolios, measure liquidity and systemic risk of bond issuers and estimate execution prices for secondary trades.  

Alireza Dorfard, head of market data and services at Deutsche Börse, noted the fragmented and non-transparent nature of the European fixed income market, with relevant data stored with different market participants. “Our customers have, therefore, a strong demand for high-quality data on fixed-income instrument prices and volumes. With this new offering, we further support them in making an informed assessment and decision,” he said.  

Guido Wille, head of eurobonds business at Clearstream, added: “Clearstream processes close to 800,000 new issuances of international securities annually… Being at the beginning and the end of the fixed income value chain, we are uniquely positioned to provide comprehensive post-trade data, making the international bond market more transparent and thus more efficient.” 

The two organisations evidently recognise data as growth point for their businesses. In March this year, Deutsche Börse acquired data specialist Kneip with a view to forming a fund data hub based in Luxembourg – expanding its range of services, including data and post-trade services provided by Clearstream.  

Speaking at the time, Philippe Seyll, head of investment fund services at Deutsche Börse Group, said the move represented a chance to create “a leading European fund data champion” based in Luxembourg. 

The post Deutsche Börse and Clearstream partner on fixed income data platform appeared first on The TRADE.