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KAS Selections December 2010
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KAS SelectionsVolume 17, issue 4, December 2010
WorldPensionSummit offers insight on essential ‘crossroads’ in pensions
Stress test for pension funds
New developments in the pensions arena: performance & risk
‘Determining Share Prices’ Convention
The changing value chain and its impact on broker/dealers
CCP derivatives clearing
KAS BANK joins the afme Post-Trading Division
As 2010 nears its end, we can look back on a year that
was certainly “interesting”. This term is much used by
the British, and can often be open to interpretation.
And that, perhaps, is how best to describe 2010. The
markets have certainly been capricious, amid periods of
historically low volumes. We even faced an actual crash,
not in the traditional month of October, but in May.
And it only lasted 20 minutes: 2010, the year of the
flash crash.
This year also saw KAS BANK launch many ground-breaking initiatives, all
designed to increase our focus and attention on you, our clients. We will
continue this programme in 2011 and inform you of our progress through
your client teams.
On 15 December we hope to welcome you to our traditional year-end
reception, which promises to be very well-attended as usual. Prior to the
reception we will present our newly developed pension fund stress test, which
we anticipate the Dutch Central Bank will make compulsory next year.
Yet another innovation is an ‘app’ for our pension fund dashboard, allowing
you to view up-to-date pension fund reports on your iPad, wherever you are
and at any time. At the year-end reception we will demonstrate a prototype
version to those interested.
Another lesson of 2010 is that the financial markets change rapidly. One such
development is the implementation of a central counterparty for derivatives.
Broker/dealers must respond to these initiatives, which often have a direct
influence on their place in the value chain. Elsewhere, the impact of high
frequency trading on share prices is receiving much attention. And pension
fund trustees are under constant pressure to deliver on their most significant
promise to scheme members: the guaranteed payment of pension benefits.
KAS BANK specialists are regularly invited to speak on these subjects, both in
the Netherlands and abroad, and their reports can be found in this edition of
KAS Selections.
As you know, KAS BANK is an active member of several market steering groups
and trade associations. We have recently joined the Post-Trading Division of
the Association for Financial Markets in Europe (AFME). You can read more
about the Post-Trading Division’s plans for 2011 in an interview with Christian
Krohn, director at AFME.
We hope you find this final KAS Selections of 2010 to be interesting and
thought-provoking. For now I wish you happy holidays and a prosperous new
year on behalf of all KAS BANK staff.
Sikko van Katwijk
Chief Commercial Officer,
KAS BANK Managing Board
Editorial
Contents:KAS BANK joins the afme Post-Trading Division 3‘Determining Share Prices’ Convention 6Stress test for pension funds 9KAS Investment Servicing administers five new investment funds 9SIBOS Amsterdam well attended 10The changing value chain and its impact on broker/dealers 12WorldPensionSummit offers insight on essential ‘crossroads’ in pensions 15CCP derivatives clearing 16Client wins 17Global Custody Network News 18Client Service Review: the client speaking 20New developments in the pensions arena: performance & risk 21Personnel notes 22Laurens Vision 22
Comments on this issue, suggestions for future articles and mailing list requests should be addressed to:
Clearing & Banking ServicesAssociate director: [email protected]
Financial Institutions GermanyAssociate director:[email protected]
Fund & Investment ServicesAssociate director:Sicco [email protected]
Institutional ServicesAssociate director:Bob [email protected]
KAS Investment Servicing GmbHCEO & Managing director:[email protected]
Relationship Management UKManaging Director UK:[email protected]
Sub & Core custodyAssociate director:[email protected]
Translation:Interpret Tekst & Vertalingen
Text editor:Matthew Binnington
Editor:Carla BoogersKAS BANK N.V.Marketing & CommunicationP.O. Box 24001, 1000 DB AmsterdamThe Netherlands +31 20 557 [email protected]
Graphic Design:Ebbenhorst Design, De Meern
Print:KAS BANK,Document & Systems Services
KAS Selections is a quarterly newsletter from KAS BANK N.V.Although the information in this issue is drawn up with the utmost precision, no rights can be derived from it.
Volume 17, Issue 3, December 2010
KAS Selections
K A S S e l e c t i o n s • D e c e m b e r 2 0 1 0 3
KAS BANK joins the Post-Trading DivisionKAS BANK recently became a member of the AFME Post-
Trading Division, which represents the views and interests
of its members regarding developments in the European
post-trade environment. KAS BANK is already an active
member of numerous market steering groups and industry
associations, and AFME and KAS BANK share a common
focus on the European markets. As a clearing, settlement
and custody specialist KAS BANK is at the heart of
discussions over T2S, CCP messaging, EC legislation
concerning CCPs and CSDs, the implementation of market
standards for corporate actions, interoperability, and so on.
Membership of AFME will enhance KAS BANK’s ability to
influence these discussions and remain abreast of key
issues and market developments, gaining insight and
knowledge that we will then be able to pass onto our
clients.
We spoke to Christian Krohn, a Director at AFME, about the
association’s plans and some of the key issues in the post-
trade space.
What is on the AFME agenda for the next
12-18 months ?
“The AFME Post Trade division is about to commence the
process of determining priorities for 2011. The process is
as follows: each of the five-strong Post Trade Committee
(Clearing, Settlement, Custody, Tax and Legal) will over
the coming weeks develop their proposals for Committee
activities in 2011. The proposals for activity/work-stream
include: the overall objective of the activity; milestones;
timelines; success criteria; and resource allocation. The
proposals will then be submitted for approval by the AFME
Post-Trade Board resulting in a consolidated action plan
similar to that for 2010. In terms of content the Action
Plan 2011 for the Clearing Committee 2011 is likely to
include: CCP interoperability and input on the EC’s
proposed regulation on OTC derivatives, CCPs and trade
repositories (aka ‘EMIR’).”
Is AFME in favour of a regulatory approach
to improving market efficiency, or will
heightened competition be the best solution ?
“We take the view that the progress to date of the
industry on the harmonisation and standardisation of
operational processes, including settlement cycles and
market standards for corporate actions processing,
demonstrates unequivocally that market participants are
best placed to develop standards, analyse the gaps
between these and local practices and on this basis
execute national implementation plans. While certain
areas of such operational processing standardisation may
benefit from targeted regulatory support, we believe that
public sector action should be strictly targeted on the
areas of securities law, fiscal procedures and risk
regulation, supervision and oversight.”
The AMFE office at St. Michaels House, George Yard, London
K A S S e l e c t i o n s • D e c e m b e r 2 0 1 04
What is your view on the efforts to achieve
interoperability between EuroCCP, EMCF, LCH
Clearnet, and X-clear ?
“Given that the process of establishing interoperability
commenced over 18 months ago (under the EU Code of
Conduct on clearing and settlement), we have been
disappointed by the pace of progress. We understand (and
indeed fully support, given that it is ultimately clearing
member capital at risk) the need for the regulatory
authorities of the Netherlands, Switzerland and the UK to
have assurance that the additional risks of interoperability
are properly identified, monitored and mitigated. We
understand that a joint announcement approving the
proposed interoperability arrangements is expected in the
coming weeks.”
Do you think a pan-European securities law
is likely to be achieved in the future ?
“The EC has published a second public consultation on a
new legal framework for intermediated securities. The
consultation paper is the next step in the legislative
process for harmonising the legal framework for securities
holding and transactions in the EU and arrived
considerably later than originally expected (March/April
2010). The EC hopes to produce legislative proposals on
the issue (Securities Law Directive, or SLD) before summer
2011 aimed at increasing legal certainty for investors in
cross-border situations and improving the efficiency of
securities holding and improving the protection of
investors’ rights. The consultation covers the full scope of
the possible legislative approach but excludes some issues
raised in the first consultation which will be dealt with
separately (e.g. CSDs). We shall be responding to this via
the AFME Post Trade Legal Committee. It remains to be
seen whether the potential for the SLD to reduce systemic
legal risk will eventually trump remaining member state
preferences to retain national legal specificities.”
What impact will MiFID II have on the post-
trade environment ?
“At this time (in advance of the EC MiFID Review
consultation paper) it is difficult to predict the impact of
MiFID II on post-trade processing. However, the general
political/regulatory push for a greater degree of
centralised trading of all asset classes may lead to more
centralised post trade processing (i.e. clearing)
especially by trading platforms that own/control
clearing providers.”
What role do regulators play in discussions
surrounding pre-trade risk management ?
“Regulatory change dictating new practices related to
sponsored access appears inevitable with naked sponsored
access coming under greater regulatory scrutiny and lead
to a greater degree of standardisation of sponsored access
Christian Krohn works for the Association for
Financial Markets in Europe focusing on European
regulatory and market issues. Mr Krohn is a LLM and
MBA graduate with 16 years’ experience working in
the financial services industry. Prior to his current
position he worked in the FSA Market Policy
Department focusing on the UK implementation of the
Transparency Directive and the development and
implementation of FSA policy relating to the clearing
and settlement of securities transactions. From 2000-
2002 Mr Krohn was legal consultant to the Association
of National Numbering Agencies (ANNA - international
entity standardising securities data and disseminating
financial information), and from 1995-2000 he was
in-house legal advisor to the Danish Securities Centre
(an electronic securities depository and clearing
house).
“CCPs should only clear products for which they are capable of managing related risk”
K A S S e l e c t i o n s • D e c e m b e r 2 0 1 0 5
arrangements. While uniformity and standardsation in
requisite pre- and post-trade risk checks may go a long
way in paving the way for fair competition, all market
participants must continue with their due diligence and
scheduled audits to ensure that sponsored access
arrangements remain a beneficial force in market structure
evolution.”
Does AFME support the view that all
products should be cleared through
a central counterparty ?
“No, CCPs should only clear products for which they are
capable of managing related risk. In addition, in our July
response to the EC consultation paper on EMIR we gave
examples of contracts that should be excluded from a
mandatory clearing regime, including contracts required to
manage risk within groups; contracts required to manage
risk from non-clearable exposures; overly-directional
positions of CCP members, etc.”
The Association for Financial Markets in Europe (AFME)The Association for Financial Markets in Europe (AFME) was formed in response to the increasing globalisation of the
financial markets. A joint venture between LIBA (the London Investment Banking Association) and the European
operations of SIFMA (the Securities Industry and Financial Markets Association), AFME represents a broad array of
global and European participants in the wholesale financial markets.
The chief objective of AFME is to promote safe, sound, and efficient wholesale financial markets. They accomplish this
through their members, which include pan-EU and global banks as well as key regional banks, brokers, law firms,
investors, and other participants in the European financial markets. AFME offers its members the opportunity to engage
directly with policymakers to work towards open European and global markets that benefit from well-crafted, globally
consistent regulations; to participate in the formulation of market-led solutions, standards and practices; to
communicate authoritative industry expertise and views to public officials, private individuals, and the media; and to
participate in networking and educational events such as conferences, seminars, and workshops.
KAS BANK will be represented in the AFME Post-
Trading Division by Laurens Vis, Managing Director of
KAS BANK UK. Laurens brings a wealth of experience
to this pivotal role, having been an influential
member of several industry steering groups and
committees over numerous years.
Laurens Vis:
“KAS BANK has been at the heart of the securities
industry for many decades, and we take our
responsibilities to the post-trade community very
seriously. We are therefore delighted to be teaming
up with AFME. We bring considerable experience to
the Post-Trading Division, and hope to take a leading
role in shaping debate, developments and trends to
the benefit of the industry and, most importantly, our
clients.”
K A S S e l e c t i o n s • D e c e m b e r 2 0 1 06
How do HFTs affect share prices?
‘Determining Share Prices’ ConventionOn Wednesday 10 November 2010, KAS BANK organised its
“Determining Share Prices” convention. Focal points were
the impact of high-frequency trading on liquidity,
determining prices of securities and the role of regulated
markets and MTFs.
The participants were welcomed by Sikko van Katwijk
(Chief Commercial Officer, KAS BANK Managing Board,
after which he gave the floor to Laurens Vis, the first of
the four speakers.
Laurens Vis, Managing Director of
KAS BANK UK, explained that the
emergence of MTFs and new clearing
organisations, such as EMCF, has
done more to fragment the securities
landscape than to harmonise it. Nor
is real pre- and post-trade transparency in place. Vis went
on to say that this is partly due to the fact that today’s
regulated markets owe approximately 30 percent of their
turnover to making their market and pricing data
commercially available, which is not exactly beneficial to
transparency and interoperability. Vis concluded his
argument by sharing his greatest wish: uniform European
securities legislation.
The next speaker was Mark
Spanbroek, Director of Strategic
Development and Market Structure at
Getco Europe, Ltd., who delivered an
enlightening talk about this global
market maker’s operating procedures
and the (alleged) influence of high-frequency traders on
liquidity and prices in the market. Speed and market
knowledge are timeless, said Spanbroek. Only now we are
talking about microseconds and algorithms, instead of a
‘feel’ for the market.
According to Spanbroek, HFTs make a positive contribution
to increasing liquidity and reducing market volatility.
Furthermore, he also emphasised that most market players
are themselves asking for far-reaching pre- and post-trade
transparency, through the European consultation on MIFID
II among other channels.
After the break, Cees Vermaas, CEO
and Chairman of NYSE Euronext
Amsterdam and member of the NYSE
Euronext Management Committee,
discussed the changing role of the
regulated markets with regards to the
new alternative trading platforms, the MTFs. Vermaas
acknowledged that, for now, only the regulated markets
play a role in determining share prices. Vermaas also sees
a role for NYSE Euronext as a network provider and a
supplier of trading technology. Furthermore, he sees a
clear role for markets as suppliers of capital, particularly to
smaller companies and small- and medium-sized
businesses. He believes that political support for this role
is essential.
Vermaas also clarified that a single European market is a
distant concept, which he illustrated by mentioning that
Euronext already has to deal with five supervisory
institutions in five different countries.
Finally, capital market lawyer Joost
Schutte, a partner at De Brauw
Blackstone Westbroek, discussed the
legal differences in the European
regulatory systems for both regulated
and alternative markets (MTFs). One
area where this is relevant, for example, is the supervisory
regime applicable to a certain stock market. Despite MiFID,
regulation in Europe is still subject to differences in
interpretation between the supervisory institutions and
K A S S e l e c t i o n s • D e c e m b e r 2 0 1 0 7
governments. One of MiFID II’s tasks is to find a solution
for this, by paying particular attention to post-trade
reporting and the degree of transparency required. During
an interruption, Mark Spanbroek pointed out the fact that
the market players themselves insist on a ‘consolidated
ticker tape’ for all European markets to avoid any
appearance of insider trading or ‘free rides’.
Statements and discussionThe presentations were followed by a voting round during
which all participants could vote electronically on seven
statements. After each vote, the four speakers responded
to the result and to questions from the audience.
1. High-frequency traders provide liquidity, and therefore
stability.
(agreed: 71% / disagreed: 13% / no opinion: 16%)
Cees Vermaas pointed out that on the contrary, aggressive
trading can undermine market stability. The brokers
present expressed concerns about the potential for market
abuse since HFTs can slow or accelerate the market with
their enormous numbers of electronic orders. Spanbroek
disagreed, arguing that high-frequency trading is based on
algorithms and technology. The models used all work
independently, and sometimes even against each other.
For this reason, they ultimately have no impact on
determining prices as such. While he did admit that this
may lead to frustration among brokers’ end customers, he
added that this does not have an impact on market stability.
Laurens Vis wanted to broaden the statement. He said that
stability is more than just determining prices; it also
encompasses the operational and risk management systems
used by a platform.
2. Issuing institutions should be concerned about
disintegrating liquidity and the role played by high-
frequency trading.
(agreed: 38% / disagreed: 35% / no opinion: 27%)
Vermaas pointed out that issuing institutions are concerned
about the lack of clarity over who their shareholders are,
while the increase in OTC transactions makes trading in less
transparent general.
According to Schutte, listings on several platforms make
little sense for issuing institutions. Vermaas agreed with
this. This is even less relevant to lower-liquidity funds, as
MTFs do not offer the support that regulated markets are
capable of providing.
One of the participants argued that the solution is more
likely to be found in requiring a best price rather than best
execution, as the former already includes the trading fees
for the relevant platform.
3. Is one local supervisory institution capable of ensuring
fair and reasonable trading on all platforms (dark and
light)?
(Yes: 31% / No: 69% / no opinion: 0%)
“HFTs make a positive contribution to increasing liquidity”
“Issuing institutions are concerned about the lack of clarity over who their shareholders are”
K A S S e l e c t i o n s • D e c e m b e r 2 0 1 08
In this discussion the representative of the AFM spoke up
regularly, pleading for greater European supervision and
improved cooperation between the supervisory
institutions, among other things. He suggested that
maximum centralisation will automatically bring the
(interpretations of) regulations closer together. He also
announced the upcoming publication of an AFM research
report on high-frequency trading, which was published on
18 November 2010.
Issues surrounding supervision have implications for
sovereignty, said Schutte. The more countries that transfer
supervision to a central institution, the smaller the
possibility of ‘regulatory arbitration’, which currently still
provides the potential for competitive advantage. Vermaas
also pleaded for a uniform European supervisory
institution.
4. Computer trading has been around for years, but it is
the media that are suddenly turning it into a big issue
when actually no major changes have been made.
(agreed: 58% / disagreed: 33% / no opinion: 9%)
Laurens Vis again pointed out that the images formed in
the media are determined by the direction in which the
stock market is heading: up = popular, down = on the
chopping block. The AFM mainly looks to a fact-based
discussion for a solution, as the exchange of information
increases confidence in the market.
5. Harmonisation in Europe should take place through the
free market system instead of through increased
regulation.
(agreed: 46% / disagreed: 48% / no opinion: 6%)
Referencing his presentation, Laurens Vis argued that
further regulation is precarious. The situation already
leans more towards fragmentation than harmonisation.
The effect achieved is often different from the regulators’
intent. Therefore, the free market should be allowed to do
its job, but in a supervised manner. Vermaas agreed,
noting that the financial crisis has shown that allowing
the free market system to have complete influence on
financial structures is not desirable. He preferred that
Europe acts as a unified entity with regards to the
functioning of the market. When a member of the
audience referred back to the function of the stock
market, Vermaas said that the stock market does not equal
Europe. Enforcing the rules, for example where large
withdrawals are concerned, is better than more regulation,
which would only promote protectionist behaviour.
Schutte responded by stating that while MiFID is not ideal
in terms of its net impact, the situation in the US isn’t
either, in spite of the existence of a single CSD and
supervisory institution.
6. High-frequency traders’ computer programs are
sufficiently monitored and consequently the risk of
them causing a stock market crash is zero.
(agreed: 9% / disagreed: 58% / no opinion: 33%)
The AFM argued that direct monitoring of the manner in
which companies earn their money is undesirable due to
the risk of ‘moral hazard’. The focus of the monitoring
should be placed on the algorithms used, not on the basic
assumptions. In addition, proper emergency procedures
must be ready in case computers fail or ‘go crazy’.
Wrap-upIn his conclusion, Sikko van Katwijk
noted that there may be a positive
side to the fragmentation within
Europe. He argued that the
prevention of a rapid collapse of the
financial markets after Lehman and
the ‘flash crash’ last May could well have been due to the
existence of multiple CSDs, CCPs and supervisory
institutions instead of one central counterparty, as in the
United States.
“The prevention rapid collapse of the financial markets after the ‘flash crash’ could well have been due to the existence of multiple CSDs, CCPs and supervisory institutions”
K A S S e l e c t i o n s • D e c e m b e r 2 0 1 0 9
Stress test for
pension funds
KAS BANK has developed a stress test for pension funds that
will enable trustees to gain a better understanding of how
resilient their pension scheme would be in times of extreme
economic crisis.
The new service examines the likely impact of several
worst-case scenarios in terms of the funding level of their
scheme, and can be implemented on an annual, monthly
or quarterly basis. This stress test, which is also available
in the Netherlands and Germany, is in response to the
more stringent requirements in the UK market and around
the world following the global economic downturn.
Commenting, Stephen Isgar, UK Business Development
Manager, said: “Since the collapse of Lehman Brothers and
the subsequent economic turmoil, there has been greater
demand for services that help prepare pension funds for
the worst possible outcome. The new stress test identifies
risks in a pension fund’s portfolio, enabling trustees to get
a full grasp of the dangers potentially facing the pension
scheme in the event of severe market movements. This fits
perfectly within the ongoing development of innovative
institutional risk management services at KAS BANK.”
KAS Investment Servicing administers five new investment funds
In cooperation with Postbank Financial Services,
KAS Investment Servicing GmbH has launched five
new funds for investors in the German market. All
funds meet the guidelines for special funds
(‘Sondervermögen’) for investors and have been
approved for public sale.
The new ‘fund family’ consists of a fund of funds
(‘Dachfonds’) and four sub-funds. Each fund has its
own investment strategy and will invest in various
financial instruments. These include equities, money
market instruments, mortgage bonds and corporate
bonds.
This structure allows the investor to create a portfolio
drawing on the various funds within the fund of
funds. The funds have been established in cooperation
with the experienced asset management team of
Deutsche Postbank Financial Services GmbH in
Frankfurt, who also act as fund manager.
KAS Investment Servicing GmbH acts as ‘Master-KAG’
for these funds, and KAS BANK German branch as
‘depotbank’ and custodian.
“These five new funds represent
a significant expansion of our
fund administration services in
the German market,” says
Jörg Sittmann, CEO of
KAS Investment Servicing GmbH.
“As an independent ‘insourcer’ of administrative
services we provide services for German financial
institutions and institutional investors that are no
longer in their core service area. We are also the only
independent provider of Depotbank services as well as
so called KAG services. We expect a further expansion
of our services in other German-speaking countries
such as Austria and Switzerland.”
K A S S e l e c t i o n s • D e c e m b e r 2 0 1 010
SIBOS AmsterdamMore than 8,700 participants visited this year’s SIBOS
conference and SWIFT fair in Amsterdam, the ultimate
networking event for the financial industry. KAS BANK was
also present at the Amsterdam RAI congress centre, with a
stand at the show. We can look back upon a very successful
event as the congress resulted in over 100 appointments.
KAS BANK was delighted to welcome so many delegates to
our home city of Amsterdam.
A large number of participants visited KAS BANK’s green-
liveried stand during the week where our team of
specialists informed them about KAS BANK’s products and
services.
This year the Sibos conference programme has been built around three big themes:1. Regulation
We will look at the industry’s collective response to
regulation following the financial crisis and examine
the operational impact of financial reform. We will also
consider whether we should – and if so, how we should
engage with regulators earlier and more
collaboratively.
2. Rebuilding trust
We will explore how the industry should go about
regaining the confidence of its customers, its
counterparts and the public at large. How do we tackle
Henk Brink presents
K A S S e l e c t i o n s • D e c e m b e r 2 0 1 0 11
the inevitable conflict between reducing risk and
reducing costs? We will consider, for example, whether
we should change the measure of success beyond
profits and share price. We also intend to showcase
some pragmatic, actionable CSR ideas for the financial
industry.
3. Recovery
There are differing opinions about when and how it
will come about but the one thing everyone agrees on
is that a recovery is coming. We will discuss what
financial services players can do to be ready to
capitalise on it. Can we “innovate our way out of this”
as Steve Jobs once said? How do we best leverage
technology? We will also examine the uncertainty that
prevails in the marketplace and discuss where to
compete and where to collaborate.
KAS BANK at SIBOSFurthermore, Henk Brink, Director of Network Management
& Global Custody, organised a much-appreciated workshop
on ‘EU harmonisation’. Brink focused on Target2Securities,
the European Central Bank’s new settlement system.
As at other events, the traditional KAS BANK shuffleboard
competition proved to be a great success. Some visitors
returned to our stand several times to improve their
personal scores. The daily prizes went to Juha Mokka
(Pohjola Bank plc, Helsinki), Ulf Rohloff (Nord/LB,
Germany), KB Larsen (Nordea, Denmark) and Mike Clayton
(Butterfield Bank, Guernsey).
The KAS BANK stand
Meeting at the KAS BANK stand
K A S S e l e c t i o n s • D e c e m b e r 2 0 1 012
The changing value chain and its impact on broker/dealersThe financial markets are changing rapidly. The main factors
behind these changes are the regulatory environment, the
‘Europeanisation’ of the financial markets and the
incredible pace with which new technologies are changing
the way that trading is conducted. This has also influenced
distribution models for financial (and trading) services and
the need for all market participants to focus on costs to stay
competitive. All these developments change the way the
different participants in the financial markets interact with
each other – and therefore change the value chain of a
trading order from the
moment it is generated
until the moment the
transaction is settled
and confirmed. How
this impacts broker/
dealers is explained by
Ryanne Cox, Managing
Director KAS BANK
Germany, at the third Annual bwf/ICMA Capital Markets
Conference in Frankfurt, Germany.
The different stages of the value chain
Order generation
One of the main developments we have seen in the
execution phase is that the sheer number of alternatives
for executing blue chip/equity products is baffling
nowadays – just looking at RMs and MTFs, for some stocks
25+ different trading platforms are available. If MTFs and
other (secondary) platforms continue to gain market share
from the primary exchanges, it can be expected that
sooner or later a definition of best execution as “always
execute the transaction on the primary market”, possible
even today, will no longer sustainable. Either regulation
(the MiFID review) or commercial pressure is likely to
enforce links to multiple platforms.
Order execution
The incredible pace of new technologies has changed the
heart of a broker/dealer’s business: it no longer involves
physical contact between traders, but can take place
entirely on the basis of computerised models. Increasingly
sophisticated algorithms analyse any movements stock
(and other parameters in the system) make and react
within nanoseconds. It has had a major impact on the
number and composition of transactions.
More sophisticated systems have also made trading access
to stock markets so much easier for institutional as well as
retail investors. But in order to facilitate this, you need a
system that can instantaneously compare different
markets; smart order routing systems. And while you have
such a system in place, the possibilities to make use of
arbitrage opportunities between these different platforms
are within reach. The forerunners to these technology are
liquidity providers/market makers on these platforms. They
have been the first to adopt new technologies and have
established multiple memberships. Their constant,
automated order flow ensures highly liquid markets where
any price differentials are minimised.
Post-trading services
Clearing providers have responded quickly to the
developments in the trading leg of the process. Parallel to
MTFs trading pan-European equities, pan-European
“Either regulation (the MiFID review) or commercial pressure is likely to enforce links to multiple platforms”
K A S S e l e c t i o n s • D e c e m b e r 2 0 1 0 13
clearing houses have emerged. It
is however not an option for a
trading platform to appoint just
one clearing house for their
transactions. Under pressure from
the European Code of Conduct for
Clearing and Settlement Services,
trading platforms need to be open
to multiple clearing houses. In
order for this to work effectively,
these clearing houses should be
interoperable: they need to enter
into cross-connectivity agreements
in which risk management and
margining is organised between
both clearing houses.
Whereas this direct competition between clearing houses
has brought clearing costs down, it has introduced a new
level of operational complexity: in order to have full
flexibility, multiple clearing links need to be maintained,
each with their own margining and operational
procedures.
The introduction of CCP clearing for instruments until now
traded bilaterally, such as OTC derivatives, will lead to
exploding clearing volumes, placing further focus on the
margining systems, collateral management and risk
profiles of the clearing houses and their members alike.
Among the central securities depositories, competition is
also increasing, albeit from existing rather than newly
established players. As the European authorities stimulate
competition between CSDs they will need to compete for
clients and therefore will need to ensure they can
differentiate themselves from other CSDs: increase scale,
differentiate on client services, value added, etc.
Therefore, CSDs can be expected to move up the value
chain: become hybrids between infrastructures and agent
banks. This may make the option to link directly to a CSD
(instead of doing so via an agent bank) more realistic for
broker/dealers.
These developments in the CCP and CSD environment
increase transparency and reduce direct costs under
pressure of competition. While transaction processing
becomes more and more commoditised, the focus shifts to
risk management: managing collateral and financing the
trade flow. Is this realistic in the short term?
What will the new value chain look like ? In the new value chain the different order generators
(not just end-investors but also proprietary traders) can
themselves submit orders to various, multiple, fairly
standardised and efficient trading platforms; upon
execution the transactions are cleared and settled
potentially via the order generator’s own accounts at one
(or several) of the multiple clearing houses and CSDs of
the generator’s choice; who confirm the transaction of the
settlement and report these to the relevant authorities.
What does this all mean for the broker/dealer?Multi-platform trading is more complex to clear and settle
“While transaction processing becomes more and more commoditised, the focus shifts to risk management”
“The service broker moves between the order generator and the trading platforms”
K A S S e l e c t i o n s • D e c e m b e r 2 0 1 014
– broker/dealers typically need more new links and margin
must be adequately allocated. If the broker/dealer has
appointed a clearing and settlement agent to take care of
this, it needs to make sure this agent is ready for this
added complexity – not many are!
When trading across various platforms it is more important
than ever that an agent bank can efficiently manage
margin requirements across those markets/CCPs and ensure
that settlements are financed. Failing to do so will
constitute a risk and cost!
Finally, while execution services are increasingly
commoditised, a differentiator for a broker/dealer can be
the quality of settlement it can offer, also on alternative
trading platforms – whether this is done by the broker/
dealer itself or its agent bank.
How should broker/dealers react to these developments ?We see two main strategies:
- Broker/dealers differentiate on service. For instance by
focusing on specific types of clients and adapting their
service model and added-value services to this.
Margins are gained from added-value services (for
instance, personalised advice) rather than the
execution or trading services themselves, which are
mainly offered in a facilitating role.
- Broker/dealers become ‘order gatherers’, i.e.
concentrators of flow. Decreasing margins are made up
for by attracting greater flow. Typically, in this case
the broker/dealer makes effective use of technology
(or even teams up with a technology provider) – for
instance by facilitating excellent connectivity to
multiple platforms, trading systems for end-investors.
This means that the service broker moves between the
order generator and the trading platforms. Effectively
executing the order is not core business anymore for this
broker; the order gatherer focuses on the trading venues
and offers more than pure execution services, it also
provides technology.
What will the new value chain potentially look like ?The traditional broker/dealer that becomes a service
broker is effectively also an order generator in this value
chain. A new breed emerges however: the order gatherer,
providing efficient trading access across multiple venues.
This model allows broker/dealers to specialise in
something other than execution services. The execution
process – in particular exchange connectivity and smart
order routing technology – is the specialism of the order
gatherer, potentially in tandem with a technology
provider.
We expect that, similar to the order gatherer in the
trading phase, a ‘transaction gatherer’ emerges in the
post-trading phase. This transaction gatherer has the
systems and the processes in place to efficiently link to
the necessary clearing houses and CSDs and, perhaps most
importantly, organise the financing of trade flows and
collateral management in an efficient and cost-effective
way.
How does KAS BANK fit into this picture ?
KAS BANK has effectively been a transaction gatherer
since 1806. We are the independent specialist for
transaction and asset servicing as banker to broker/
dealers, other banks, asset managers and institutional
investors. We focus on European securities services via our
direct processing platform, linking into all major European
markets and interwoven with our back-office outsourcing
services for broker/dealers. In doing so we support the
effective service delivery of ‘service brokers’ as well as the
’order gatherers‘ since we facilitate seamless trading on
25+ platforms. Which means our place in the value chain
is right in the centre.
“The excecution process is the specialism of the order gatherer potentially in tandem with a technology provider”
K A S S e l e c t i o n s • D e c e m b e r 2 0 1 0 15
WorldPensionSummit offers insight on essential ‘crossroads’ in pensionsBetween Wednesday 17 November and Friday 19 November
the Westergasfabriek in Amsterdam hosted the
WorldPensionSummit. KAS BANK’s Sikko van Katwijk gave a
presentation on ‘Trustees under pressure’.
The WorldPensionSummit is a top level environment for
pension professionals and a platform for the exchange of
business insights on essential ‘crossroads’ in pensions.
WorldPensionSummit is a unique platform for international,
high-level networking.
Some 260 professionals listened to a great number of high-
level speakers from around the world. On Thursday Sikko van
Katwijk (member of the KAS BANK Managing Board)
illuminated the role of trustees in his presentation on
‘Trustees under pressure’. How can trustees manage
expectations regarding the pension fund’s most important
promise: delivering your pension entitlements? Answer: by
organising their investment and information processes as
efficiently as possible.
Sikko van Katwijk’s presentationTrustees deal with many and varied parties. All these groups
perform parts of the overall pension fund management
process. It is important that trustees are able to use a
single source providing independent data. By doing so,
pension fund trustees benefit from a solid basis for
decision- making and control. It is also critical that trustees
fulfil their fiduciary role supported by an interactive tool
and that compliance monitoring is actively taken up by an
independent party (KAS BANK for example).
Custodians such as KAS BANK do not only provide basic
information for the financial administration but also deliver
relevant management information that helps the pension
fund board to remain in control. They can also play an
explicit role in monitoring the execution of the investment
policy within the risk and policy framework determined by
the board. In this way, the board provides an effective
counterweight to commercial asset management providers.
Furthermore, on the basis of the reports provided they are
able to inform the fund’s participants and pensioners in a
transparent manner of the results and the fund’s risk
management.
Thanks to these stable checks and balances the pension
fund can focus on its core business and the board will be
continuously in control of the entire investment process.
With this, the fund will be prepared for 21st century
pension governance.
White PaperA KAS BANK white paper on this topic will be published on
our website shortly.
K A S S e l e c t i o n s • D e c e m b e r 2 0 1 016
CCP derivatives clearingThe financial crisis has brought over-the-counter (OTC)
derivatives to the forefront of regulatory attention. The
near-collapse of Bear Stearns in March 2008, the default of
Lehman Brothers on 15 September 2008 and the bail-out of
AIG the following day highlighted the shortcomings in the
functioning of the OTC derivatives market. Within that
market, regulators devoted particular attention to the role
that credit default swaps (CDS’s) played during the crisis
and obtained a commitment from the major dealers in the
market to start clearing European-referenced CDS
transactions through a central counterparty (CCP) by the
end of July 2009. In October 2009 the European Commission
set out the future policy actions intended to increase
transparency, reduce counterparty and operational risk,
enhance market integrity and oversight in derivatives
markets and also announced that it would come forward
with legislative proposals in 2010.
The European Commission has presented a proposal for the
regulation of the OTC derivatives market. The general
objective of this proposal is to reduce the systemic risk by
increasing the safety and efficiency of the OTC derivatives
market.
What are the preferred options presented in this draft ?1. To report all requested information on outstanding OTC
derivatives contracts to trade repositories. Or if that is
not possible, directly to supervisors
2. To publish aggregated data on OTC derivatives for the
benefit of the general public
3. To clear all contracts that meet pre-defined eligibility
criteria via a CCP
4. To improve collateral management procedures for all
OTC derivatives that are still cleared bilaterally
5. The adoption of more standard contracts and processes
by market participants.
There was a unanimous plea from non-financial
institutions to be excluded from any kind of future
legislation on OTC derivatives, among others by the
Federation of German Industries and umbrella
organisations for Dutch pension funds. Their main
argument, besides their exposure to a significant increase
in their costs, was that their dealings in OTC derivatives
do not represent a systemic risk. And the European
Commission has taken that into account.
The preferred solution is now to leave non-financial
institutions outside the scope of the proposals unless their
positions are substantial. In this case the non-financial
institutions represent an indirect risk if their failure could
cause the failure of an important market participant.
What are the advantages of clearing through a CCP ?A CCP environment reduces counterparty risk. A market
participant always knows its own exposure to its
counterparties. What it does not know, however, is what
the exposure of any of its counterparties is to other
market participants including, most importantly, its other
counterparties. In other words, a market participant knows
the direct, but not the indirect exposure that is created
when it enters into an OTC derivatives contract.
central counterparties (CCPs) mitigate their counterparty
credit risk exposure through four lines of defence, typically
including access restrictions, risk-management tools (such
as collateralisation), and loss mutualisation. These
mechanisms are jointly known as the ‘risk waterfall’ of the
CCP.
• Access restrictions (such as membership requirements)
are a CCP’s first line of defence. CCPs only deal with
parties that meet their standards for creditworthiness
and operational capability and may revoke access
K A S S e l e c t i o n s • D e c e m b e r 2 0 1 0 17
privileges for those who fail to maintain these
standards and meet other obligations to the CCPs. This
permits the CCPs to limit their risk exposure to those
parties they are able to monitor.
• The second line of defence is represented by the CCP’s
counterparty credit risk management techniques. A CCP
usually uses several of them. For example, positions
and payment requirements are multilaterally netted.
CCPs also typically impose collateral requirements (i.e.
initial margin) on market participants that have direct
access to the CCP. In addition, gains and losses due to
mark-to-market fluctuations in open positions are
posted to a clearing member’s margin account on a
regular (usually daily) basis and result in calls for
variation margin.
• If the initial margin posted is not sufficient to offset a
loss resulting from failure of a clearing member, the
third line of defence is activated. After exhausting the
failed clearing member’s initial margin, a CCP will use
the latter’s contribution to the default fund to cover
any residual losses. If this were to prove insufficient,
the CCP can then proceed to share any remaining loss
among all (or certain classes of) clearing members by
using their default fund contributions.
• The fourth, and final, line of a CCP’s defence is its own
capital.
One of the consequences of introducing a clearing
requirement is that those market participants that would
not meet the criteria to become clearing members of a CCP
would have to access it indirectly, through a general
clearing member (GCM).
As a specialist in CCP clearing KAS BANK will arrange
meetings with its clients to explain the implications of
this new settup.
Client winsAmstel Securities, Netherlands:
Clearing and Settlement
Charity Bank, UK:
Custody
Credo Banka, Croatië:
Custody and settlement
Launch of five new Fund to Funds, KAS BANK Germany
(see page 9):
Generali Group, Netherlands:
Global custody, investment and financial administration
Haywood Securities, UK:
Securities and back-office outsourcing services
Jefferies International, UK:
Treasury services
Method, UK:
European clearing and settlement services
Oikocredit, Netherlands:
Custody, securities lending
Orca Finance, Netherlands:
Global Fund Services
Pensioenfonds Medewerkers Apothekers, Netherlands:
Global custody, investment and financial administration
Portaal, Netherlands:
Global custody, settlement and order execution
K A S S e l e c t i o n s • D e c e m b e r 2 0 1 018
Global Custody Network NewsEurope
Netherlands – implementation of registration date
shares for general meeting of shareholders
With effect from 1 July 2010, a new act has become
effective in the Netherlands regarding the rights of
shareholders of listed organisations. With this, the
Netherlands has put into effect the EU guideline 2007/36/
EG. The aim of the new act is to increase shareholder
participation in the decision-making process during the
general meeting. According to the legislator, the new act
also provides shareholders with increased clarity about
whether their shares have been borrowed with the
objective of voting. Due to the amendment shareholders
no longer have to block their shares during a particular
period prior to the general meeting of shareholders.
Instead, the 28th day prior to a meeting will become
‘registration date’. All parties possessing shares on this
date have the right to cast a vote during the meeting.
This is unrelated to whether the shares are actually in
their possession on the day of the general meeting. As the
shares are no longer blocked, they can be traded
immediately after registration date. In the former
situation trade during the blocked term was impossible.
Furthermore, listed organisations are obliged to publish
the agenda at least 48 days prior to the announced
meeting date. This term is also applicable to extraordinary
general meetings.
Netherlands – new law to prevent misuse of tax reclaim
possibilities
The Netherlands has implemented a new law to prevent
misuse of tax reclaim possibilities. The new law will be
effective for any securities that have an ex date of
22 November 2010 onwards and applicable to ISIN codes
that come under the Dutch withholding tax legislation.
Under the new law tax reclaims may only be based on the
securities amount of the dividend statement. As this
securities amount is fixed at the record date, market
claims may not be included in the entitlement. Therefore,
market claims do not result in a dividend payment but in a
compensation payment which is 85 percent of the gross
dividend. Consequently, no tax reclaim can be submitted
with regard to this compensation.
The record date is also applicable to securities lending,
both the balances of lent and borrowed securities.
Nevertheless, reversed market claims (trades with a trade
date on or after the ex date that are settled between ex
date and record date or on the record date) may occur
incidentally. With a reversed market claim, the securities
balance is mentioned on the dividend statement issued to
the buyer, while the dividend itself is paid to the selling
party. The buying party could reclaim taxes with regard to
a securities balance of which he holds no rights.
To minimise reversed market claims, both parties should
adhere to the Dutch settlement cycle of T+3 where
possible. To prevent a buyer from reclaiming tax with
regard to dividends not received, both the buyer and seller
should adhere to the Dutch settlement cycle of S+3
(= T+3) where possible.
K A S S e l e c t i o n s • D e c e m b e r 2 0 1 0 19
Outside Europe
CHINA – retrospective dividend tax payment, B-shares
B-shares dividends paid to non-resident investors in 2009
out of profits generated in 2008 without tax being
withheld could be taxable retrospectively and subject to
penalties. It has become increasingly certain that such
retrospective payments are being viewed as a mandatory
requirement.
INDONESIA – government debt trades interest
calculation
The Indonesian Debt Management Office has issued an
official guideline that the accrued interest calculation for
Indonesian government bonds is to be based on the
‘Actual/Actual’ method. The accrued interest is calculated
in order to establish the total settlement amount of a
trade.
Although this interest calculation method (for all series of
government debt securities) is officially only applicable to
trades with the Debt Management Office, Ministry of
Finance, for the secondary market to avoid failed
settlements we highly recommend that traders agree with
counterparties to ensure that the same method of interest
calculation is used.
ISRAEL – corporate bonds settlement on T+1
The Tel Aviv Stock Exchange has announced that with
effect from 28 November 2010, corporate bonds are settled
on trade date +1 (T+1). Currently, settlement takes place
on T+0 for the securities and T+1 for the cash leg. Since
28 November, both legs will settle on T+1.
JAPAN – fail charge on government securities
With effect from 1 November 2010, all trades in Japanese
Government Securities (JGS) including cross-border
transactions will be subject to a charge on failed
settlements on and after the effective settlement date
with the following exceptions:
• Settlement fails caused by buyers (receivers)
• Free of payment transactions.
The fail charge is calculated as follows:
(3%-overnight call rate) x settlement amount x (number of
days failed / 365)
The amount of the fail charge may be netted between
parties during the month.
THAILAND – tax on government debt as per 13 October
The Thai cabinet has endorsed the Finance Ministry’s
proposal to impose a 15 percent withholding tax (WHT) on
interest income and capital gains tax (CGT) on government
bonds.
The new tax imposition on government bonds became
effective on record date 13 October 2010. Your holdings in
debentures until 12 October 2010 are exempt.
The re-imposition of the WHT tax scheme is in line with
other types of bonds and debentures. Non-resident
investors are presently subject to a standard rate of 15
percent WHT on capital gains plus a WHT of 15 percent on
interest income earned from bonds issued by corporates
and any other bonds. For non-resident investors, domiciled
in countries that signed the double tax treaties (DTT) with
Thailand, they are subject to tax rates as agreed in those
treaties.
The measure aims to curb the strong baht and restricts
inflows into the bond market. This is to revoke a long-
standing waiver on WHTs for foreign investors in the local
bond market which has been effective since 25 January
2005.
BRAZIL – IOF tax increased twice
In October 2010, the Brazilian government has raised the
Tax on Financial Operations (IOF Tax) twice by 2 percent
to reach the current rate of 6 percent. Please find below
the IOF tax details and the changes:
1. Different IOF tax rate for fixed and variable income
investments
2. Account structure (renamed)
3. Funds transfered between a variable income strategy
account and a fixed income strategy account
4. ADR conversions.
For additional information please refer to our Global
Custody Network News dated 16 October 2010 which can
be found, for our clients, on KAS-Web Documentation,
News Archive.
K A S S e l e c t i o n s • D e c e m b e r 2 0 1 020
Client Service Review: the client speaking
Clients are the central focus at KAS BANK. Therefore, we
attach great value to clients opinion about the quality of
our services and how we can further improve them. That is
why at least once a year the client receives our online
service survey, the Client Service Review.
Client Service ReviewThe Client Service Review (CSR) consists of a ‘customised’
questionnaire on the specific services that KAS BANK
provides to the client. A score from 1-7 can be awarded to
each part of our service. Furthermore, the client can also
add remarks per subject about our services, the clients
relationship with KAS BANK and the added value of our
services in realising the objectives of the clients
organisation.
After the results of the survey have been processed, the
client relationship manager will schedule a Service Review
meeting at the clients office. During this meeting, which
will be attended by other members of the client team and
the product managers, if required, he or she will discuss
the results and remarks from the CSR with the client. To
closely monitor the improvement process a list with
follow-up actions will be drawn up. The client will be
informed of the progress on a regular basis.
ResponsesWe would like to thank all clients for the participation in
the Client Service Review. Their responses are a valuable
instrument for further improving our services and products
as well as the relationship with KAS BANK. That is why the
Client Service Review is conducted annually. In 2010, over
400 surveys have been completed and returned. In general
our clients appear to be satisfied with their relationship
with our staff at all levels within the bank. Certain product
groups score highly, as well as the majority of the basic
services in the area of custody, clearing and settlement.
Issues such as flexibility, decision-making and time-to-
market have been awarded lower scores on average. We
will actively study the points for improvement clients have
shared.
Our goal is to achieve better more regular contact with our
clients.
“Customer Service is very good. Always someone to answer phone calls”
“Meet expected benchmark”
“Personal contact has considerably improved since last reform”
K A S S e l e c t i o n s • D e c e m b e r 2 0 1 0 21
New developments in the pensions arena: performance & riskNew developments happen in rapid succession in pensions as
a result of which pension funds are confronted with
fundamental questions about their investment portfolio, such
as the optimal asset mix, currency hedge ratio, overlay, etc.
Performance analysts therefore use state-of-the-art software
packages which enable them to efficiently execute
performance and risk calculations.
In general, fund managers calculate the return figure of your
investment portfolio on the basis of the time-weighted return
method. KAS BANK calculates the performance of your asset
managers not only on a money-weighted basis but also on a
time-weighted basis.
Money-weighted return (MWR)This method calculates the performance over the average
capital invested, which is particularly useful if influence can
be exercised on deposits and withdrawals. The average capital
invested is calculated by adding the sum of the weighted
deposits and withdrawals to the starting market value. This
implies that a deposit or withdrawal at the beginning of a
period has more weight than at the end of the period.
Time-weighted return (TWR)This method calculates the performance over the start-up
capital, which provides a true picture of the performance if
no influence can be exercised on deposits and withdrawals. In
the event that several deposits and withdrawals are made in
the reporting period, the market value of the entire portfolio
must be determined for each external cash flow.
In example 1 it becomes clear how these different methods
influence the return figure. A deposit of 50 euros (20 + 30
euros) amounts to 5 percent of the start value and results in
a small return gap, namely 0.02 percent.
In the event that a deposit in a portfolio amounts to more
than 10 percent of the starting value, the return figures will
deviate significantly, which is clearly exposed in example 2.
The difference in return now amounts to over 0.20 percent.
This is a considerable difference and may become the
difference between outperformance and underperformance.
Time-weighted methodFund managers want to be assessed on the basis of decisions
that they are responsible for. They do not have any influence
on cash flows, however. For example, in the event that in the
course of a month cash is added to their current account on
an unfavourable day, this will have a negative effect on the
total return if the MWR method is applied. That is one of the
reasons why fund managers apply performance measurement
on a daily basis. Furthermore, the Global Investment
Performance Standards (GIPS) have prescribed this
performance measurement method since 1 January 2010.
However, with regards to the entire portfolio the figure in
conformity with MWR does correctly represent the result over
the average capital invested, as the MWR performance
calculation considers the result in euros compared to what has
been invested on average and therefore provides a correct
representation of the result in euros.
KAS BANK provides the following solutions:• Fund manager performance figures are calculated on a
daily basis so that the result of their actions is not
influenced by external cash flows, the time-weighted
return method.
• On an aggregated level the return figures for your fund
are based on the average capital invested (MWR).
• Dependent on the structure of your portfolio these
different methods can be applied to your performance
report.
K A S S e l e c t i o n s • D e c e m b e r 2 0 1 022
Laurens Vision
The Association of UK Investment Companies has recently
counted 420 investment trusts with over £95 billion of
assets. When an investment trust is formed, shares are
offered to investors in order to raise the required funds for
investment. After the initial launch period, the number of
shares is fixed and quoted on an exchange. The trust has
commenced its ‘closed-ended’ investment life, and its share
price is now free to move with the flow of supply and
demand, with a temporary discount or premium to the net
asset value a possible consequence.
Winterflood Securities has analysed the returns of
investment trusts compared to ‘open-ended’ vehicles (such
as unit trusts, OEICS and ETFs). In most popular
investment categories, they comfortably outperformed
them. The investment trusts, having their investment pot
closed upon introduction, seem to allow their managers to
take a more long-term view than ‘open-ended’ colleagues,
who must worry about inflows and outflows of cash in
good and bad times, and often end up buying and selling
to manage their cash flows rather than delivering
investment performance.
That having been said, open-ended exchange traded funds
(ETFs) have become very popular in the US. Introduced as
index funds in 1993, they are structurally a mixture of unit
trusts and investment trusts. And as of 2008, the
Securities and Exchange Commission has also allowed the
creation of actively managed ETFs. These are fully
transparent and publish their underlying securities
portfolios daily. This very fact has put these ETFs at risk
from arbitrage activities by market participants who are
driven by momentum rather than long(er) term investment
strategies.
In May this year, ETFs underwent a severe test in this
regard during the so called ‘flash crash’. The regulatory
review of the flash crash in the US stock markets showed
that almost 90 percent of all broken trades had limit
prices, and were not market orders in search of the best
available liquidity regardless of price. On that day, price
Personnel notesGermanyFrank Vogel will become Managing Director, Sales of
Germany with effect from 1 January 2011. He will be
responsible for all sales activities in Germany, Austria and
Switzerland. His appointment emphasises KAS BANK’s
ambitious growth strategy in the German market.
Client Management NetherlandsJan-Albert Koopman and Jan-Willem Bakker are
appointed as Specialist Relationship Manager Institutional
Services, as well as Veronica Cherekhovitch per 1 January
2011.
Product ManagersPol de Jaeger, Maarten Aarts and René Hoogeland have
been appointed as the new product managers at
Investment Management Services, Global Fund Services
and Broker Services.
The role of Product manager is a new position at
KAS BANK. Based on their product, market and client
knowledge they will seek new opportunities to further
improve our products. Furthermore, they will analyse our
products in collaboration with you and will also advise
during the intake of new clients.
For operational issues your Client Team remains your
single point of contact.
SalesFloris Jan Zwijnen is appointed on 1 December 2010 as
Product Sales Manager
United KingdomSarah Aziz started on 1 September 2010 as Assistent to
the Sales Department.
K A S S e l e c t i o n s • D e c e m b e r 2 0 1 0 23
limits for stock orders were resubmitted over (and over)
again in a free-falling market until many executed as
‘penny’ stocks. Overall, nearly 20 billion shares were traded
and even the low turnover ETFs became exposed to hectic
price swings, with only one market maker who, having
abandoned ship, took the remaining liquidity with him.
And, as such, they became a major factor in the crash as
they became literally decoupled from their underlying
baskets of stock, while the prices of some specific stock
simultaneously swung wildly.
Fortunate were those who did not panic and only heard
about the crash after the equally sudden recovery after
fewer than 15 long ‘crash’ minutes. Where the investment
trust is best run by a patient manager, the ETF needs a
patient investor. An investor who refrains from making
(loss) stopping orders, which, in volatile markets, are a
certain recipe for financial damage.
And yet, patience is on the back foot where the financial
markets are concerned. Even in times of orderly markets,
the average duration of equity holdings fell from five years
in the 1970s, to two years in the 1980s, to one year at the
turn of the century and to just six months as I write.
Corporate secretaries of some quoted companies have
already waved goodbye to shareholders before the first
quarterly financial report hits their doormats.
But there is no doubt that the Formula 1 class of investors
in this day and age are the high-frequency traders. They
who trade in milliseconds, who consider holding a stock
for 20 seconds to be ‘long’ and who now dominate the
equity markets with a market share of around 70 percent
in the US and 40 percent in Europe. Having said this, their
market share of 10 percent in the Asian markets is dwarfed
by the 80-90 percent for day trading activity by small
retail investors on the Shanghai Stock Exchange.
What unites these Chinese day traders with the high-
frequency traders in the US and Europe? All positions are
closed before the markets do, and the global markets
could soon begin to haunt them. Because in volatile
markets correlation is high, between unrelated stocks,
sectors and markets.
But towards the end of the year the financial markets
themselves slow down and come to a halt over the
Christmas period, a time of reflection where even the
quick quick become slow. Which makes my mind drift to
the lyrics of that famous Quickstep tune:
“Give me the quick quick slow,
Get there before you go,
Give me the quick quick slow,
Lay it down far below,
Let’s get on with the show,
Give me the quick quick slow.”
But for now, we at KAS BANK wish you and your loved
ones a well-deserved and peaceful cross-over into the New
Year.
Laurens Vis, Managing Director, KAS BANK UK