NO 249 – NOVEMBER 2013

WFE Focus
Peter Clifford
Chief Operating Officer,

The lead article this month focuses on SEFs – a relatively new acronym for a trading venue, the Swap Executions Facility, that resulted from the Dodd Frank rules to bring more transparency to over the counter derivatives. As David Easthope, Research Director at Celent points out, there are many familiar faces among the initial operators of SEFs. Thus SEF trading may seem more of an evolution than revolution, as many of the SEF operators had been in the process of a technological shift away from purely voice broking. However, it is too early to say who the winners and losers will be. Data on trading from SEFs is not entirely reliable at this point, and the extra-territoriality impact on trading firms as well as at venues can potentially fragment some markets such as foreign exchange. Easthope also rightly highlights the true novelty of SEF – the clearing component – and the impact that is may have on how the world hedges risk.

Didier Davydoff provides insight into who owns shares of European stocks and brings to light for the first time some long term trends that are now possible thanks to the database developed at by INSEAD, OEE Data Services (IODS) for the European Commission and the Financial Services User Group. The notion of foreign and domestic investors can be seen in two ways over this period either as a purely national count, (i.e. British investors owning British companies), or from a pan-European perspective compared to investors from outside of the region. Combing through this data will allow investors and policy makers to better understand how the Euro crisis impacts investors from outside the region, or the extent to which cross-border investment among Europeans has developed thanks to the Euro and pan-European cash market regulation.

From the developments in the US and Europe, Focus also features new WFE members and the dynamic markets they lead in HoChiMinh, Qatar, and Kazakhstan. With the re-admission of New Zealand Stock Exchange at the WFE General Assembly in October, and the induction of Dubai Financial Exchange the number of WFE members now stood at 62 as of the end of November. We thank Tran Dac Sinh, Rashid al Mansoori and Azamat Joldasbekov for introducing the exchanges they operate to the wider readership of Focus, and wish all new WFE members continued success in developing their capital markets.

During the WFE Annual Meeting, I had the chance to meet with several CEOs and Chairman of exchanges to discuss the challenges of developing markets for small and medium sized enterprises (SMEs). The need to fully understand the dynamics that allow a market to flourish is essential for policy makers and exchange operators in financial environments where the lack of access to capital restricts companies that generate jobs and growth. As Silvia Hirsh of the Vienna Stock Exchange and Grégoire Naacke establish liquidity for listed SMEs continued to suffer in 2011 – 2012; however, there are a number of notable exceptions including National Stock Exchange of India, Korea Exchange, Shanghai Stock Exchange and Shenzhen Stock Exchange.