London Stock Exchange To Expand Footprint
David Schwimmer, chief executive of London Stock Exchange Group, said there is a huge opportunity for the UK bourse to do more in Asia and the Americas.
Schwimmer was interviewed at the FIA’s International Derivatives Expo in London yesterday.
— FIA (@FIAconnect) June 5, 2019
“There is a huge opportunity for the UK bourse to to do more in Asia and the Americas and substantially grow beyond our primarily European footprint,” said Schwimmer.
He added that the long awaited London-Shanghai stock connect will soon come to fruition. The scheme allows UK shares to trade on the Shanghai Stock Exchange as Chinese depository receipts while Chinese A-shares will be able to trade and raise capital in London through global depository receipts. This week Chinese broker Huatai Securities announced plans to raise more than $500m (€444m) on the LSE.
In addition FTSE Russell, the exchange group’s index business, has promoted China A shares to emerging markets status so they are included in FTSE’s global equity benchmarks this month. China has also been added to FTSE’s watch list for possible inclusion in its global bond indexes.
China A Shares will join the FTSE Global Equity Index Series (#FTSEGEIS) beginning June 24, 2019.
View the infographic to see the timeline and projected index impact: https://t.co/J6fuKYQBPS pic.twitter.com/Gykaksl5ZJ
— FTSE Russell (@FTSERussell) June 5, 2019
Schwimmer continued that another big focus is green finance.
“We have listed green bonds, helped define environmental, social and governance standards for issuers and FTSE Russell has been providing ESG data,” he added. “We are very actively engaged and the City of London is taking a leadership role.”
This week the exchange said it has acquired Beyond Ratings, which provides ESG data for fixed income.
LSEG announces the acquisition of Beyond Ratings, a provider of ESG data, as part of its continued investment in its Information Services business. The acquisition is highly complementary to FTSE Russell’s existing #ESG index, data and analytics offering: https://t.co/7tMFcw713g
— FTSE Russell (@FTSERussell) June 3, 2019
In February this year the exchange also led a $20m funding round in Nivaura, a fintech that automates the issuance and administration processes for financial instruments.
Schwimmer said: “M&A is a tool in our toolkit but it will be difficult to execute a large cross-border acquisition today. We have plenty of opportunities for organic growth.”
He highlighted CurveGlobal, the London Stock Exchange Group’s interest rate derivatives venture.
Schwimmer continued: “This is our attempt to break the monopoly in interest rate futures which has been tried many times before and failed. However, we have strong demand for clients who are looking for an alternative market structure and pricing.”
The chief executive said there was a substantial pick up in CurveGlobal volumes at the end of last year and this year.
“CurveGlobal has a 10% market share in some products and 40% in Sonia futures,” he added. “Technology such as smart order routers are being used in the futures market and we are hugely excited.”
@CurveGlobal dashboard: record Open Interest in Euribor 369,433, 3M Sterling 324,598, 3M SONIA 77,809, total 772,116 which equates to a 222% increase from the end value of 2018. CurveGlobal share of total Euribor OI is at 7.12% as of 31 May 2019. #futurestrading #openaccess pic.twitter.com/coQ4imdemf
— CurveGlobal (@CurveGlobal) June 4, 2019
Andy Ross, chief executive of CurveGlobal said in the venture’s May newsletter that there has been an “explosion” in growth in the block market as a result its adaptive pricing mechanism, a different way of trading futures.
The @CurveGlobal May 2019 newsletter is now available online. Read Andy's CEO note, our Adapative Pricing trade concept, and this month's team picks! #SONIA #openaccess https://t.co/LtJbBCRcsb pic.twitter.com/hjQxKv30c3
— CurveGlobal (@CurveGlobal) May 20, 2019
“I like to think of adaptive pricing as a voice-based, admittedly, RFQ-like mechanism for futures,” he wrote. “Trade between the bid and offer at a price you like, in the size you want. This is not to say a central limit order book isn’t important – it is vital. But providing the choice of how you trade in different circumstances – utilising an RFQ-like mechanism and an order book – does work.”
He continued that nearly every futures market in the world has been a closed shop while CurveGlobal believes that futures markets globally benefit from competition.
“We think the example in Europe playing out in real-time is proving this,” Ross said. “We see the benefits far outweighing any fragmentation of liquidity, and it seems that a growing number of buy-side and sell-side firms share our view.”
This week CurveGlobal said it is expanding its suite of Sonia interest rate futures on 29 July, which is designed to complement existing three month sonar futures.
— CurveGlobal (@CurveGlobal) May 15, 2019
Giancarlo said he intends to call three rulemakings for a vote before he leaves the CFTC.
In the last few years the upward trend in clearing has leveled off.
The US regulator will propose a rule next month on overseeing third-country CCPs.
UK is exploring using new technology for regulatory reporting.
Customers in OTC interest rate derivatives clearing increased by 50% in the last six months.