The WFE board is comprised of 18 leaders from around the world, and both Chye Loh and Dijsselhof will serve two-year terms, the WFE has confirmed.

London-headquartered WFE represents more than 250 market infrastructure providers, including standalone CCPs. Its membership is 34% based in Asia-Pacific, 45% in EMEA and 21% in the Americas.

Alongside the incoming chair and vice chair, John McKenzie, chief exec of TMX Group, has been named working committee chair.

In addition, four directors have been appointed to the board: Greg Wojciechowski, president and CEO of Bermuda Stock Exchange and Fredric Tomczyk, CEO of Cboe Global Markets, as directors of the Americas region, and Hiromi Yamaji, CEO of the Japan Exchange Group and Byungdoo Sohn, chair and CEO of Korea Exchange, as directors of the Asia-Pacific region.

The post SGX and SIX chiefs elected chair and vice chair of the World Federation of Exchanges appeared first on The TRADE.

Compared with H2 of 2019 equity markets saw levels of value traded (49.7%) and volumes (47.1%) throughout the first half of 2020 as volatility stemming from the COVID-19 pandemic swept through the global markets.

Similarly, in the first half of this year, exchange traded derivatives volumes were up 23.4% in comparison with figures from H2 of 2019.

The equities and ETD volumes surged as market participants responded to the unprecedented market volatility that swept across the market during the global pandemic.

Exchange traded derivatives also reached a record of 21.72 billion contracts traded in H1 of 2020.

This pattern stretched across most contract types in all regions with futures contracts trading increasing significantly more than options trading.

In its report, the WFE praised the role of market infrastructures during the heights of the market volatility.

“Whatever the perspective, we see how market infrastructures played a critical role in sustaining local economies throughout the pandemic outbreak and afterwards, ensuring markets remained resilient, trusted, and efficient,” said the association. “Their role in the economic recovery will be fundamental.”

In June this year, the WFE published a set of guidelines aimed at improving processes for central clearing counterparties (CCPs) handling potential non-default losses (NDL).

The new procedures allow a more transparent and predictable process in how NDLs are allocated and handled in central clearing.

The post New statistics quantify record-high equities and derivatives volumes in H1 appeared first on The TRADE.

In a statement, the global industry association for exchanges and clearing houses said the new procedures will allow a more transparent and predictable process in how NDLs are allocated and handled in central clearing.

“Non-default losses may not be the main risk faced by CCPs, but it is still important to have a structured approach to dealing with them,” said Nandini Sukumar, CEO of WFE. “That way, CCPs can devote more time to their day job, ensuring that uncertainty over counterparty credit exposures does not threaten the integrity of the financial system.”

While exact policies for NDLs differ according to each CCP, WFE highlighted that CCPs should focus on avoiding and mitigating the risks and potential losses due to NDLs. Where they cannot be avoided, WFE laid out guidance on how CCPs should manage NDLs.

CCPs usually absorb certain NDLs from their own capital, although market participants are required to back the risks they take by posting margin and other resources. WFE added that clearing houses have continued to support markets throughout the COVID-19 pandemic, allowing participants to trade, position and hedge portfolios despite the volatility.  

The guidelines follow news at the end of March that Dutch bank ABN Amro would incur a $200 million loss after a single client failed to meet margin calls to keep trading. The bank said that its clearing arm, ABN Amro Clearing, was forced to close-out the client’s position to prevent further losses.

“While the impact of NDLs on a CCP’s operations and the allocation of such losses are clearly legitimate policy considerations, the focus should continue to be on the avoidance and mitigation of risks resulting in NDLs in the first place,” the report from WFE concluded.

The post WFE issues guidelines for CCPs on non-default losses appeared first on The TRADE.

The trading venue grew by a staggering 373.60% in US dollar terms, followed by the Saudi Exchange (Tadawul) with 260.10%. In 2019, the MERJ Exchange saw the value of its listings more than triple to over $1 billion.

MERJ is one of the few exchanges to embrace blockchain and tokenisation as key building blocks. Most recently, it inked a deal with CurioInvest which will see interest in collectable cars represented as security tokens.

Looking ahead, Bobby Brantley, CEO and co-founder, MERJ, sees tokenisation entering mainstream issuance. “We very much feel that all securities are eventually going to be issued on this type of platform,” he told The TRADE. “We can already support companies that are issuing pure equity or debt instruments, but we do actually have quite a few people approaching us to create special purpose vehicles in which the equity interest can be tokenised.”

One of MERJ’s imminent milestones will be a direct access model that will lower trading costs for qualified participants and their clients.

The exchange is currently an affiliate member of the World Federation of Exchanges. “One of the last criteria that we have yet to meet is for our own regulator to become a full member of IOSCO,” added Brantley. “We have submitted their full membership application. Once that’s approved, we’ll immediately be launching on our application for full membership.” In the meantime, he stresses, “We’re a fully-fledged regulated exchange, targeting both retail and institutional investors.”

Meanwhile, as a member of both the African Stock Exchanges Association (ASEA) and the Committee of SADC Stock Exchanges (CoSSE), MERJ is also looking to Africa for future regional listings. “We are definitely trying to bring investment opportunities to people in Africa,” says Jim Needham, head of digital strategy, MERJ. “One of the great things about the use of distributed ledger technology is that it integrates brilliantly with the mobile phone. The mobile phone’s got pretty high levels of penetration in Africa. I think that is a big part of story too.”

MERJ has been live since August 2013.

The post Seychelles boasts fastest growing exchange in the world during Q1 appeared first on The TRADE.

Outlining what academic research says about the restrictions on short selling, the WFE said that the evidence ‘almost unanimously’ points towards the bans being disruptive for the orderly functioning of markets.

Short selling has been banned across various countries in Europe due to the increased market volatility seen amid the global pandemic. Earlier this month, authorities in Austria, Belgium, France, Greece and Spain all confirmed that bans implemented throughout April will be extended until 18 May, with the possibility for further renewal.

The WFE’s most recent report has warned that the short selling bans reduce liquidity, increase price inefficiency and hamper price discovery, seemingly exacerbating market volatility rather than containing it.

“Based on the existing evidence, the WFE recommends that financial regulators do not introduce short-selling bans, as the academic literature demonstrates not only their lack of effectiveness, but their negative impact on market quality,” said Nandini Sukumar, chief executive of the WFE. “We would urge jurisdictions that have imposed such bans to reconsider in the light of the evidence.”

The report added that according to academics, short sellers behave like any other trader and in fact contribute less to price declines than regular long-sellers. Furthermore, the restrictions on short selling are more harmful to markets characterised by a high amount of small stocks, low levels of fragmentation and less alternatives to short selling. Emerging markets should be particularly wary of the bans, the WFE warned.

WFE warned in a statement last month that the bans will fail to produce the intended results unlike other safeguards, such as circuit breakers. Regulatory authorities in Europe said at the time of imposing the restrictions that it was due to the serious threat to market confidence at the height of the COVID-19 crisis.

The post WFE academic research finds short selling ban is disruptive to markets appeared first on The TRADE.

Regulatory authorities in Austria, Belgium, France, Greece and Spain have all confirmed that the restrictions on short selling, which were implemented throughout last month as markets became increasingly volatile, will be extended until 18 May, with the possibility for further renewal.

The European Securities and Markets Authority (ESMA) welcomed the extension in a statement, adding that the measures can be lifted before the deadline if risks of a loss of market confidence are reduced.

“ESMA considers that the proposed measures are justified by current adverse events or developments which constitute a serious threat to market confidence and financial stability, and that they are appropriate and proportionate to address the existing threat to market confidence in those five markets,” the EU markets regulator said.

A blog post published prior to the extension from Bryan Corbett, the chief executive and president of the Managed Funds Association (MFA), which represents hedge funds, argued that authorities should let the ban expire.

“The initial results from bans imposed in recent weeks already point to problems: Bid-ask spreads for affected shares widened more than 15 percent compared to unrestricted shares since the imposition of the bans,” Corbett wrote.

“That means the gap between the price at which someone will sell and the price at which another will buy grew because of the restrictions. This spread widening is effectively a tax on all investors trading the affected securities and diminishes liquidity at a time when markets need it most desperately.”

Similar warnings have been echoed by exchange group’s and central counterparties, with the World Federation of Exchanges (WFE) warning soon after the bans were implemented that the move would produce unintended results.

“Banning short-selling interferes with price formation, thereby increasing uncertainty. That can only artificially amplify volatility and probability of default, the opposite effect to that claimed, and hampers the ability of markets to serve the real economy. It is not – and never has been – true that bans have any other, positive effect on market activity or price levels,” said Nandini Sukumar CEO of WFE.

The post Short selling ban extended across Europe appeared first on The TRADE.

In a damning statement, the World Federation of Exchanges (WFE) said the bans will fail to produce the intended results. Unlike other safeguards, such as circuit breakers, which give traders time to process market information, the widespread ban on short selling will lead to less accurate pricing.

“Banning short-selling interferes with price formation, thereby increasing uncertainty. That can only artificially amplify volatility and probability of default, the opposite effect to that claimed, and hampers the ability of markets to serve the real economy. It is not – and never has been – true that bans have any other, positive effect on market activity or price levels,” said Nandini Sukumar CEO of WFE.

Regulators across Europe opted to restrict short selling on certain stocks earlier this month following major market volatility due to the spread of the coronavirus globally. The UK, France, Italy, Spain and more have banned short selling due to the ‘serious threat to market confidence’.

WFE argued that the bans on short selling, which is a small part of the wider market, risks reinforcing the false notion that the revaluation of prices reflects a deficiency in the market, rather than a change in the value of the asset. The association also pointed to recent statements from global authorities, including IOSCO and the UK’s FCA, which state the difficult environment to price securities and derivatives means it is more important that markets remain open.

“So long as exchanges, as front-line quasi-regulatory or self-regulatory entities, determine their markets to be fair and orderly, these financial markets should operate as normal, which includes allowing short selling to continue as usual,” the WFE stated. “Investor protection does not imply protection from asset prices movements based on the consensus of the market in which those investors themselves are participants.”

The post Exchanges warn of damaging impact of short selling ban appeared first on The TRADE.

Volumes traded of interest rate derivatives contracts were up 13.1% compared to 2016, with the total number of contracts peaking at 3.9 billion in 2017. WFE said this was the largest number of contracts since it started examining the figures in 2005.

All regions saw increased interest rate derivatives volumes in 2017 compared to 2016. The Americas, where over 66% of the total volumes are traded, saw volumes increase by 11.7%, while in the Asia Pacific and EMEA regions volumes were up by 5.5% and 18% respectively.

Globally, derivatives volumes were down slightly in 2017 by 0.2% compared to the year prior, with a total of 25 billion contracts traded.  

The WFE report showed a 5.8% increase in volume traded in the Americas, which offset declines of 3.5% in Asia Pacific and 5.3% in EMEA.

“While the overall global derivatives market was broadly flat in 2017, it is interesting to note the growth in volumes in the Americas, helping to offset declines in both EMEA and Asia-Pacific,” said WFE’s chief executive officer, Nandini Sukumar.

“Indeed, the Americas posted a very strong year across the board, with upticks across most asset classes. It was also interesting to see – for the second consecutive year – volumes of equity derivatives hover below 50% of total volumes,” she added.

Equity derivatives remained the most actively traded exchange-traded derivative product at 48% of total volumes, although this accounted for less than 50% of the total derivatives volume traded.

Equity derivatives volumes traded in the Americas and Asia Pacific were up year-on-year, although the EMEA region saw a 10.9% decline in the number of contracts traded.

The post Global interest rate derivatives contracts reach largest number on record appeared first on The TRADE.

Metcalfe joins the global industry association following a consulting project with BNY Mellon, where he provided advice on the practical implementation of MiFID II and other regulatory changes related to the markets business of the bank.

He established his own consultancy firm to focus on the MiFID II regime and wholesale markets prior to joining the project at BNY Mellon.

Metcalfe has experience with several industry associations throughout his career, including as director of regulatory affairs at the Investment Association, where he spearheaded its international lobbying on markets, investor protection and systemic risk.

He also spent more than 14 years with the International Swaps & Derivatives Association (ISDA) in various roles, including global head of policy and a senior regulatory adviser.

“[Metcalfe’s] deep knowledge and expertise of global markets, coupled with a strong focus on CCPs and wider market structure issues, ensures he will evolve our regulatory affairs function and the work of our 10 subject-specific member working groups over the coming years,” CEO of the WFE, Nandini Sukumar commented.

Metcalfe replaces Gavin Hill, who was head of regulatory affairs at the WFE for more than two years. Hill will be joining the compliance team at the London Metal Exchange.

“This is a very exciting time to join the WFE as it expands its team and influence as the global voice for exchanges and CCPs,” Metcalfe added. “I’m thrilled to be part of such a dynamic and ambitious team, and look forward to being part of the WFE’s next phase of growth.”

The post BNY Mellon’s MiFID II advisor appointed regulatory affairs head at WFE appeared first on The TRADE.

The World Federation of Exchange (WFE) has stated central counterparty (CCP) recovery should be given every opportunity to succeed and resolution should only be invoked as a last resort.

A recent whitepaper authored by WFE explained that should CCP resolution occur, there is not a single resolution strategy that can effectively manage all potential scenarios.

As there is no single resolution strategy, flexibility and cross-border cooperation is vital to ensure sound and orderly markets.

Nandini Sukumar, chief executive officer at WFE, explained CCPs play a key role in strengthening the system post financial crisis.

“While acknowledging the need for clear resolution plans, there needs to be clarity as to when they should be invoked. There also needs to be flexibility as to how resolution plans are executed,” she said.

The WFE is looking for regional and national authorities to implement international standards and suggests the regulatory authority in the jurisdiction of the CCP should manage the resolution.

Gavin Hill, head of regulatory affairs at WFE, explained the debate is a result of the recent FSB consultative document and the European Commission’s CCP regulation proposal at the end of last year.

In November last year, the European Commission proposed a set of measures to prevent a failure and bailout of Europe’s 17 clearing houses.

The proposals set out a framework for the recovery and resolution of CCPs and when national authorities can intervene to prevent their failure.

Kay Swinburne, Conservative MEP said at the time: “The key purpose of this legislation should be to ensure every possible measure is in place to prevent tax payers from having to bail out CCPs – either through central bank money or direct public intervention.”

The TRADE recently confirmed Swinburne as a keynote speaker at our latest MiFID II pop-up event on systematic internalisers in London on 27 February.

To register to attend, please click here. 

The post CCP resolution must be last resort, says WFE appeared first on The TRADE.