Equity Markets in Transition: The Value Chain, Price Discovery, Regulation, and Beyond

612 Pages·2017·15.915 MB·English

by  Reto Francioni, Robert A. Schwartz (eds.)

Reto Francioni · Robert A. Schwartz
Editors
Equity
Markets in
Transition
The Value Chain, Price Discovery,
Regulation, and Beyond
Equity Markets in Transition
Reto Francioni • Robert A. Schwartz
Editors
Equity Markets in Transition
The Value Chain, Price Discovery,
Regulation, and Beyond
with the assistance of John Byrne and Stephanie
Welkoborsky
Editors
Reto Francioni Robert A. Schwartz
Faculty of Economics and Business Zicklin School of Business
Administration Baruch College/CUNY
University of Basel New York, NY, USA
Basel, Switzerland
ISBN 978-3-319-45846-5 ISBN 978-3-319-45848-9 (eBook)
DOI 10.1007/978-3-319-45848-9
Library of Congress Control Number: 2017930221
© Springer International Publishing Switzerland 2017
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Contents
Part I The Value Chain of Exchange Organizations:
Systematic Overview
1 Exchange Organizations: Thoughts and Reflections ........................... 3
Reto Francioni
2 An Exchange and Its Value Chain ......................................................... 15
Reto Francioni
3 Primary Market: Bringing Products to the Market ........................... 71
Cord Gebhardt and Jan Strecker
4 Secondary Market: Trading, Price Discovery,
and Order Matching ............................................................................... 85
Reto Francioni, Martin Reck, and Robert A. Schwartz
5 Clearing .................................................................................................... 123
Thomas Laux
6 Securities Services: Settlement, Custody and Financing ..................... 153
Marc Robert-Nicoud
7 Information Technology ......................................................................... 189
Matthias Kluber
8 Contractual Relationships Across the Value Chain ............................. 215
Matthias Stötzel
9 Financial Market Regulation ................................................................. 239
Reto Francioni, James H. Freis Jr., and Alexandra Hachmeister
v
vi Contents
Part II Trading of Financial Instruments: Selected Topics
10 Security Market Microstructure: The Analysis of a
Non-frictionless Market .......................................................................... 289
Reto Francioni, Sonali Hazarika, Martin Reck,
and Robert A. Schwartz
11 Exchanges: Link to the Real Economy ................................................. 325
Michael Heise
12 The Role of High-Frequency Trading in Modern
Financial Markets ................................................................................... 337
Wolfgang Eholzer and Randolf Roth
13 High Frequency Trading: Market Structure Matters ......................... 363
Reto Francioni and Peter Gomber
14 Global Developments in Equity Trading .............................................. 391
Phupinder Gill
15 From the End of Bretton Woods to the Global Financial
Crisis: 40 Years of Turbulence ............................................................... 411
Hugo Bänziger
16 Risk and Representation: The Limits of Risk Management ............... 429
Heinz Zimmermann
17 T2S: Creating a New Post-trade Landscape ......................................... 445
Karla Amend and Matthias Papenfuß
18 IT in Transition ....................................................................................... 455
Philipe Enness and Andrew Graham
19 The Future of Finance: FinTech, Tech Disruption,
and Orchestrating Innovation ................................................................ 473
Oliver Bussmann
20 Equity Capital Market Expectations of Corporate Issuers:
The Fresenius Perspective ...................................................................... 487
Ulf Schneider
21 The Investment Process .......................................................................... 491
Asoka Wöhrmann
22 Institutional Investors and Exchange Organizations ........................... 499
Asoka Wöhrmann
23 Equity Market Fragmentation in the Swiss Market ............................ 519
Andreas Grünbichler, Alexander Kohler, and Rico von Wyss
24 Takeover Regulation as Part of a Functioning Equity Market ........... 533
Christian Zschocke
Contents vii
25 Implementing MiFID2: The View of a Cash Equities
Trading Venue ......................................................................................... 549
Miroslav Budimir
26 European Financial Integration: Monetary Union,
Banking Union, Capital Markets Union ............................................... 565
Andreas Dombret
Glossary ........................................................................................................... 575
Abbreviations
ABS Asset Backed Security
BaFin Bundesanstalt für Finanzdienstleistungsaufsicht (DE)
Basel III Third Basel Accord
BCBS Basel Committee for Banking Supervision
BIS Bank for International Settlement
CAP Client asset protection
CCP Central Counterparty
CDO Collateralized Debt Obligation
CFTC US Commodities Futures Trading Commission
CH Clearing House
CMU Capital Markets Union
CPMI (CPSS) Committee on Payments and Market Infrastructures (formerly
Committee on Payment and Settlement Systems)
CPU Central Processing Unit
CRD IV/CRR Capital Requirements Directive/Regulation
CSD Central Securities Depository
CSD-R Central Securities Depositories Regulation
DCO Derivatives clearing organization
DTCC Depository Trust and Clearing Corporation
DvP Delivery versus Payment
EBA European Banking Authority—Regulation (EU) 1093/2010
ECB European Central Bank
ESFS European System of Financial Supervision
EIOPA European Insurance and Occupational Pensions Authority—
Regulation (EU) 1094/2010
EMIR European Market Infrastructure Regulation—Regulation (EU) No
648/2012
EP European Parliament
ESAs European Supervisory Authorities
ESMA European Securities and Markets Authority—Regulation (EU) No
1095/2010
ix
x Abbreviations
ESRB European Systemic Risk Board
EU COM European Commission
FinFraG Finanzmarktinfrastrukturgesetz (CH)
FIX Financial Information eXchange
FMI Financial Market Infrastructure
FOP Free-of-payment
FPGA Field Programmable Gate Arrays
FSB (FSF) Financial Stability Board (formerly Financial Stability Forum)
G20 Group of 20
GAAP United States Generally Accepted Accounting Principles
GPS Global Positioning System
GUI Graphical User Interface
HFT High Frequency Trading
IAIS International Association of Insurance Supervisors
IASB International Accounting Standards Board
ICE International Commodity Exchange
ICSD International Central Securities Depository
IFRS International Financial Reporting Standards
IMF International Monetary Fund
IOSCO International Organization of Securities Commissions
IPO Initial Public Offering
IRS Interest rate swaps
ISA Individual segregated account
ISIN International Securities Identification Number
ISO International Organization for Standardization
IT Information Technology
JRE Java Runtime Environment
LSOC Legally separated, operationally comingled
MBS Mortgage Backed Security
MiFID/MiFIR Markets in Financial Instruments Directive/Regulation
MTF Multilateral Trading Facility
NCM Non-clearing member
NTP Network Time Protocol
OCC US Office of the Comptroller of the Currency
OECD Organisation for Economic Co-operation and Development
OSA Omnibus segregated account
OTC Over the Counter
OTF Organized Trading Facilities
PS Payment system
PTP Precision Time Protocol
RC Registered customer
RDMA Remote Direct Memory Access
Repo Repurchase agreement
RM Regulated Markets
RTGS Real-time gross settlement
Abbreviations xi
SEC Securities Exchanges Commission (US)
SEF Swap Execution Facilities
SGX Singapore Exchange
SI Systemic Internalizers
SSBs Standard-Setting Bodies
SSS Securities Settlement System
STP Straight through processing
SWIFT Society for Worldwide Interbank Financial Telecommunication
T2S TARGET2-Securities
TCP/IP Transmission Control Protocol/Internet Protocol
UDP User Datagram Protocol
VPN Virtual Private Network
WAN Wide Area Network
WB World Bank
WpHG Wertpapierhandelsgesetz
WTO World Trade Organization