01.05.2012
By Terry Flanagan

Nasdaq Bolsters Clearing

As regulatory scrutiny continues to affect the markets, clearing, settlement and risk management have become more important than ever for market participants.

Nasdaq OMX has completed the acquisition of Lithuania’s Central Securities Depository, which boosts its presence in the region substantially. The deal, valued at €3.8 million ($4.9 million), was made through the Nasdaq Helsinki OY affiliate. The share was acquired from the Bank of Lithuania.

“Examples in Latvia and Estonia show that in smaller markets consolidation of ownership of stock exchanges and depositories creates valuable synergies also for the market participants,” said Arminta Saladziene, Head of NASDAQ OMX Baltic Market. “This is our goal in Lithuania.”

Nasdaq owns a stock exchange in Lithuania and exchanges and central depositories in Latvia and Estonia. Acquiring the remaining stake in the CSD of Lithuania allows it to integrate the trading and post-trading services, creating a so-called vertical silo model that has been proliferating in many regions.

With the collapse of broker-dealer MF Global and the scandal at Pipeline Financial Group putting a black eye on the trading community, market participants are taking the initiative when it comes to bolstering risk management.

TMX Group recently announced that they have come to an agreement to acquire Sydney, Australia’s Razor Risk Technologies, which provides credit risk software to clearing houses, stock exchanges, financial institutions and brokerages.

Market observers called for tougher regulation and more transparency when MF Global collapsed following a failed $6.3 bet on European sovereign debt. The brokerage did not properly separate its customer accounts and borrowed cash from those accounts to cover losses on its sovereign debt bet. The firm confirmed to regulators that over $700 million in customer funds had been misappropriated.

Following the scandal at Pipeline, the alternative trading system operator took steps to win back customer confidence, including replacing senior management and the divestiture of its Milstream Securities subsidiary, per the request of many clients. The unit was allegedly the counterparty on a majority of the trades matched by Pipeline, raising concerns that it was trading against its clients.

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