Models for cooperation / integration of FEAS member countries
7th International SASE Conference
Mustafa Baltacı
Secretary General, FEAS
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Agenda Regional cooperation among exchanges The past and future of the exchange industry The case of small and medium sized exchanges Why cross-border trading and connectivity matters Models for capital markets linkages Examples on inter-market linkages Is FEAS standing any chance for regional connectivity?
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Regional cooperation among exchanges-Federations/Associations/Forums
Benefits to the exchanges:
Increased visibility Contribution to the promotion of the region Opportunity to learn from others’ experiences Tackling common problems together Following industry trends and developments closely Common projects Lobbying
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Regional cooperation among exchanges-Federations/Associations/Forums
Federation of Euro-Asian Stock Exchanges (FEAS) Federation of European Securities Exchanges (FESE) South Asian Federation of Exchanges (SAFE) African Securities Exchanges Association (ASEA) Organization of Islamic Cooperation (OIC)
Member States’ Stock Exchanges Forum Association of Southeast Asian Nations
(ASEAN) Exchanges
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Regional cooperation among exchanges- FEAS
Federation of Euro-Asian Stock Exchanges (FEAS)
established with its head quarters in Istanbul on 16 May 1995 with 12
founding members
it has grown to 34 members and 16 affiliate members in 28 countries
Membership in the Federation is open to exchanges in Europe and Asia
as affiliate membership is available for post trade institutions and dealer
associations
The mission of FEAS is to help create fair, efficient and transparent market
environments among FEAS members and in their operating regions
Minimize barriers to trade through the adoption of best practices for listing,
trading and settlement
Support promoting linkages among members for cross-border trading
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The past and future of the exchange industry
Regulation and deregulation:
1986 - “Big Bang” deregulation of UK Government
Late 1990s – Japan followed the UK reform model and the US passed
Regulation (Reg) ATS
Early 2000s – Reg NMS in the US and MiFID/MiFID II in Europe
Deregulation opened the floor to fragmentation - competition from
alternative trading platforms
Demutualization and IPOs of exchanges
Advances and investments in technology – importance of speed and access
to more markets (DMA, colocation, etc.)
Debate on HFT and algorithmic trading
Domination of the markets by large exchanges – the need to cooperate for
small and medium sized exchanges
Listing, no longer a primary function
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The case of small and medium sized exchanges
Mostly in emerging and developing
economies
Limited number of public companies
Hesitation of private companies to go public
Low liquidity
Exchange consolidation trend in the world
Fierce competition abroad and fragmentation
Need to cooperate with others to survive
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Why cross-border trading and connectivity matters…
A single access-point to different markets for investors
Extended opportunities for diversification
Ease of cross-border transactions
Improved investor base and liquidity for exchanges
Increased liquidity for listed companies
Wider range of products to offer their customers for brokers
Platform management simplification, easier support, wider
applicability of developments for technology firms
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Models for capital markets linkages
Integrationist: NYSE Euronext, NASDAQ OMX Nordic, CEESEG
Collaborative: ASEAN, MILA
Acquisitive: CME, ICE Futures
Source: Sungard
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Examples on inter-market linkages - I
ASEAN link by Sungard ASEAN Exchanges:
A collaboration of the seven
stock exchanges of ASEAN
Other ASEAN Exchanges:
The Philippine Stock Exchange (PSE), Indonesia Stock Exchange (IDX),
Hochiminh Stock Exchange (HOSE), Hanoi Stock Exchange (HNX)
To be added in October 2012
+ Connected on Sept. 18, 2012
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MILA (Mercado Integrado Latino Americano):
One equity market linking three stock markets Went live on May 31, 2011
Collaboration of stock markets from:
Colombia Chile Peru
Examples on inter-market linkages - II
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North-to-south order routing agreement between CME Group and the
Mexican Derivatives Exchange (MexDer)
The commercial agreement for South to North order routing between
CME Group and BM&FBOVESPA
Examples on inter-market linkages - III
MoU to cooperate on inter-market
linkage/connectivity between İMKB and Egyptian
Exchange (EGX)
Letter of intent between NYSE Euronext and Tokyo
Stock Exchange to identify options to give customers
of each exchange accessibility to the other’s markets
through a network linkage
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Is FEAS standing any chance for regional connectivity?-YES!
Great potential of emerging markets of FEAS
Improved visibility and accessibility through a network linking FEAS
exchanges
Advanced technology and safe environment
Operational efficiency and cost effectiveness
Increased liquidity
Linkage/connectivity models to be analyzed for the best solution for FEAS exchanges
volunteering exchanges investment in technology commitment support from regulators
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Based on a survey among FEAS members, members denoted that;
Their investors have interest for investing in other member states’ capital
markets.
A market access to other member states’ capital markets would attract their
investors.
They have intentions to establish capital market linkages and/or
correspondent relationships with the other member states’ capital market
institutions.
Increasing the trading volume, regulations and legal framework are the
important factors.
Expectation about cost feasibility and demand potential of discussed linkage is
generally positive. Cost feasibility is deemed more hopeful than demand
potential by the member states.
Some members stated that there are some barriers to establish a
link/relationship with the correspondent institutions operating in member states
Is FEAS standing any chance for regional connectivity? - FEAS Survey on market linkages
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Is FEAS standing any chance for regional connectivity? - Sungard Trading Link Solution for FEAS
Thank you…
Sarajevo, October 19, 2012
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