Equity Markets in Transition: The Value Chain, Price Discovery, Regulation, and Beyond PDF
Preview Equity Markets in Transition: The Value Chain, Price Discovery, Regulation, and Beyond
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 This work is subject to copyright. All rights are reserved by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made. Printed on acid-free paper This Springer imprint is published by Springer Nature The registered company is Springer International Publishing AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland 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
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