Assigment
of
Derivatives
Topic- London Securities And Derivative Exchange
Product – Electronic Order Book For Retail Bonds
London Securities And Derivatives Exchange
An integrated exchange and clearing house for futures and options derivatives based mainly on the Swedish and Norwegian equity markets. Products include futures and options on the OMX Swedish equity index (the 30 most liquid shares traded on the StockholmStockExchange), the OBX Norwegian equity index (the 25 most traded stocks on the OsloStockExchange), Swedish equity futures and options and Norwegian equity futures and options.
About London Stock Exchange Group:
London Stock Exchange Group is Europe’sleading diversified exchange business, incorporating Borsa Italiana and London Stock Exchange.Which has over 500 member firms and more than 3,000 companies establishedacross its markets,the Group operates the largest and most liquid equity marketplace in Europe.
London Stock Exchange itself is the world’s most international exchange withover 600 overseas companies from more than 70 countriesquoted on its markets. These figures include international companies on AIM, the London Stock Exchange’s growth market, which has grown to become the world’s most successful market for small and medium sized enterprises with1,385 companies at the end of July 2009.
The Group offers trading in a wide range of instruments, holding the number one position in the tradingof exchange-traded products (ETFsand ETCs)and through its interest in MTS, is Europe’s leading platform for the trading of fixed income products.Through Borsa Italiana’s MOT market it offersa comprehensive range of European corporateand government bond trading services. Its Italian Derivatives Exchange Market (IDEM) sees over �2.5 billion worth of trading every day and through EDX London the Group provides a facility for the trading of Scandinavian and Russian equity derivatives.
London Stock Exchange Group also offers post-trade services such as netting, clearing and settlement on an efficient and competitive basis.These include services from Monte Titoli, theCentral Securities Depository for all Italian financial instruments, andCassa di Compensazione & Garanzia (CC&G), whichin July 2009 was granted Recognised Overseas Clearing House (ROCH) status by the FSA to operate in the UK.
Now with the recent acquisition of MillenniumIT, the Group also encompasses a leading developer of low cost high performance trading platforms and financial markets software serving both the industry and the Group’s own businesses.
London Stock Exchange’s new retail bond market goes live
The London Stock Exchange launched its new electronic Order book for Retail Bonds. Introduced because of strong private investor demand for greater access to fixed income, it offers continuous two-way pricing for trading in UK gilts and retail-size corporate bonds on-exchange for the first time.
Initially, 49 gilts and 10 corporate bonds are available for trading including securities issued by these companies like Tesco, BT, National Grid, GlaxoSmithKline, Morgan Stanley, GE Capital, Enterprise Inns and a bond issued specifically for this new service by Royal Bank of Scotland. Investors can see prices on-screen, and trade in increments as low as �1 for gilts and �1,000 for corporate bonds, in a process similar to share dealing.
The new market is supported by well experienced market makers. Evolution Securitieshas committed toa leading role andwill make marketsacross allof the gilts and corporatesecurities on the service. In addition, Share CapitalStockbrokers will make markets incorporate bonds and ABN Amro is committed to quoting in the new RBS bond.
The new initiative is modelled on Borsa Italiana’s highly successful MOT market which, with �230 billion worth of trading in 2009, is Europe’s largest retail fixed income market.
To mark the start of trading on the electronic Order book for Retail Bonds, the Exchange today welcomed key politicians and market participants to speak at its Paternoster Square headquarters.
Lord Myners CBE, Financial Services Secretary to the Treasury, said:
�Economic growth depends on individual businesses being able to raise the funds necessary to operate and flourish. I welcome the launch of the London Stock Exchange’s new bond market today, which will offer companies a new route to access capital that is vital for growth, benefiting the wider British economy.”
Philip Hammond MP, Shadow Chief Secretary to the Treasury, said:
�This is an important day for savers in the UK. For the first time ordinary individuals in this country have a dedicated platform which will allow them to invest modest amounts of money in individual company bonds. At a time when equity markets have been volatile, and interest rates have remained low, this represents a new way for private investors to save while supporting the capital raising needs of British companies.”
Xavier Rolet, Chief Executive of London Stock Exchange Group, said:
�We are very excited to be launching this new market today. We are determined to continue expanding and diversifying our product offering while responding to the needs and demands of our customers. There has already been considerable interest in this new platform from issuers, member firms and private investors, and we look forward to further facilitating that growing interest as the market establishes itself over the coming months.”
Andrew Umbers, Chief Executive Officer at Evolution Securities, said:
�We are enthusiastic about the London Stock Exchange’s new electronic order book for bonds,and are pleased to be playing a key part in its launch by operating as a market maker from today.The new initiative reaches out to retail and, working together, we look forward tobuilding continuous, transparent and liquid access togilts and corporate bonds.”
Paul Killik, Senior Partner at Killik and Co, said:
�There has been growing demand from our private investor customers to access the corporate bond market but until now a centralised, transparent order book for trading in individual retail-friendly sized bonds has not existed. We are delighted to be participating in this market from its launch and, working with the London Stock Exchange, we look forward to providing our customers with an entirely new type of access to fixed income markets.”
Andrea Sozzi Sabatini, Head of Sales EMEA & Latin Americaat Royal Bank of Scotland, said:
“RBSis one of the leading issuers of bonds for private investors on Borsa Italiana’s MOT platform andour’Royal Bonds’have become the backboneof many personal portfolios in Italy.The LSE’s development of a similar market in the UKis a great advance and enables RBS to providemore and more British investors with the same opportunities, with the same small denominations and the same tight spreads.”
The main characteristics of the new trading service are:
* An electronic order-driven model, with retail-friendly order sizes, and continuous two-way trading provided by market makers.
* Two new segments for electronically tradable gilt-edged securities (UK Gilts) and electronically tradable UK fixed interest securities (UKCorporates) will be introduced on London Stock Exchange Group’s TradElect trading system.
* The trading day will be made up of an initial opening auction phase followed by continuous trading until market close. There will be no closing auction.
* All order book trades in securities admitted to the new segments will settle in CREST. Routing of trade information to Euroclear UK & Ireland will be carried out by London Stock Exchange Group’s post-trade router, X-TRM.
* It offers an open and transparent market model for trading in retail-size dedicated market makers committed to quoting will provide continuous tradable two-way prices in a range of retail bonds throughout the trading dayall other registered member firms will also be able to enter orders into the bookthe new market model means private investors will be able to see prices on-screen and trade in bonds in a similar way as they currently do for shares
The new trading service is not expected to impact existing wholesale bond or gilt trading and trade reporting arrangements. It is not intended to change established practices in the institutional fixed income markets.