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Models for cooperation / integration of FEAS member countries

Models for cooperation / integration of FEAS member countries. 7 th International SASE Conference Mustafa Baltacı Secretary General , FEAS. Agenda. Regional cooperation among exchanges The past and future of the exchange industry The case of small and medium sized exchanges

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Models for cooperation / integration of FEAS member countries

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  1. Models for cooperation / integration of FEAS member countries 7th International SASE Conference Mustafa Baltacı Secretary General, FEAS

  2. 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?

  3. 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

  4. 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

  5. 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

  6. 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

  7. 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

  8. 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

  9. Models for capital markets linkages • Integrationist: NYSE Euronext, NASDAQ OMX Nordic, CEESEG • Collaborative: ASEAN, MILA • Acquisitive: CME, ICE Futures Source: Sungard

  10. Examples on inter-market linkages - I +  Connected on Sept. 18, 2012  To be added in October 2012 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)

  11. Examples on inter-market linkages - II • Collaboration of stock markets from: • Colombia • Chile • Peru MILA (Mercado Integrado Latino Americano): One equity market linking three stock markets • Went live on May 31, 2011

  12. Examples on inter-market linkages - III • 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 • 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

  13. Is FEAS standing any chance for regional connectivity?-YES! Linkage/connectivity models to be analyzed for the best solution for FEAS exchanges • volunteering exchanges • investment in technology • commitment • support from regulators • 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

  14. Is FEAS standing any chance for regional connectivity? - FEAS Survey on market linkages • 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

  15. Is FEAS standing any chance for regional connectivity? - Sungard Trading Link Solution for FEAS

  16. Thank you… Sarajevo, October 19, 2012

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