NASDAQ OMX - Nordic Securities Markets Bjørn Sibbern
NASDAQ OMX - Nordic Securities Markets Bjørn Sibbern
NASDAQ OMX - Nordic Securities Markets Bjørn Sibbern
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© Copyright 2011, The <strong>NASDAQ</strong> <strong>OMX</strong> Group, Inc. All rights reserved.<br />
<strong>NASDAQ</strong> <strong>OMX</strong> - <strong>Nordic</strong> <strong>Securities</strong> <strong>Markets</strong><br />
Bjørn <strong>Sibbern</strong>
<strong>NASDAQ</strong> <strong>OMX</strong> NORDIC<br />
TRANSACTION SERVICES SUMMARY<br />
Sweden*<br />
GDP Growth 3.9%<br />
Public Debt 38.4%<br />
Operating 7 stock exchanges<br />
• 637 listed companies<br />
• Total Market Cap of $936 B<br />
• 185 unique members<br />
• Cash Equity turnover $3,2 B per day<br />
• Financial derivatives contracts 466,000 per day<br />
Operating <strong>NASDAQ</strong> <strong>OMX</strong> Commodities<br />
• The world’s largest power derivatives exchange<br />
• One of Europe’s largest carbon exchanges<br />
• N2EX – a marketplace for UK power contracts<br />
• 138 trading & clearing members<br />
Iceland<br />
N2EX<br />
UK Power<br />
Denmark*<br />
Norway*<br />
GDP Growth 1.6%<br />
Public Debt 29.0%<br />
GDP Growth 1.0%<br />
Public Debt 46.5%<br />
Dutch Power<br />
German Power<br />
Estonia<br />
Latvia<br />
Lithuania<br />
Finland*<br />
GDP Growth 2.9%<br />
Public Debt 48.6%<br />
EU27*<br />
GDP Growth 1.5%<br />
Public Debt 82.5%<br />
• <strong>Nordic</strong> Power: 1,723,330,962 MWh (total cleared 2011)<br />
• UK Power: 2,728,140 MWh (avg. monthly volume Q1 2012)<br />
2<br />
Exchange business in Iceland, Estonia,<br />
Lathvia, Lithuania<br />
Exchange & Power business in Sweden,<br />
Finland, Denmark and Norway<br />
Power offering in UK, Germany, Netherlands<br />
*<br />
Source: 2011 World Bank
<strong>NASDAQ</strong> <strong>OMX</strong> NORDIC<br />
<strong>NASDAQ</strong> <strong>OMX</strong> <strong>Nordic</strong> wants to be the primary market for trading and Clearing in all <strong>Nordic</strong><br />
Equities, Exchange Traded & Structured Products, Fixed Income, Derivatives & Commodities<br />
A Multiple Asset Classes venue for <strong>Nordic</strong> & European instruments<br />
EQUITIES DARIVATIVES FIXED INCOME COMMODITIES<br />
New <strong>Markets</strong> New Products New Clients<br />
Norwegian Share<br />
Trading<br />
UK Power<br />
UK Gas<br />
IRS Scandinavian<br />
currencies<br />
Clearing of OTC<br />
Products<br />
Seafood Derivatives<br />
European Customers<br />
Algorithmic trading<br />
in Derivatives<br />
Cross Selling<br />
Freight<br />
Weekly Options<br />
NOS ASA Clients<br />
Joint Venture<br />
NODE<br />
GCMs<br />
3
Changes in the <strong>Nordic</strong> & European Exchange landscape<br />
1998: Merger between OM<br />
& Stockholm Stock Exchange<br />
2004: Acquisition of<br />
Vilnius Stock Exchange<br />
2006: Merger of <strong>OMX</strong> and<br />
Iceland Stock Exchange<br />
2008: Merger of <strong>OMX</strong> and<br />
<strong>NASDAQ</strong><br />
2009: EDX<br />
Agreement<br />
terminted<br />
2012/13 EMIR: Mandatory clearing<br />
of eligible OTC derivatives<br />
1998 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014<br />
2003: Merger of <strong>OMX</strong> and<br />
HEX, including Tallinn &<br />
Riga exchanges<br />
2005: Merger of <strong>OMX</strong> and<br />
Copenhagen Stock Exchange<br />
2008: Acquisition of Nord Pool<br />
Creation of Commodities business<br />
Ownership<br />
consolidation<br />
Few platforms<br />
Consolidations<br />
•Between Regulated<br />
<strong>Markets</strong> and MTFs<br />
•Mergers between<br />
crossing networks<br />
and MTFs<br />
• Mergers of<br />
European CSDs<br />
Consolidation<br />
Fragmentation<br />
Consolidation<br />
2007: MiFID (I)<br />
Concentration rule abolished<br />
Entrance of new market participants MTFs<br />
Introduction of dark pools and Internalizers<br />
Competition in European equity business<br />
Fragmentation og liquidity and data<br />
2014 MiFID (II):<br />
• Potential creation of a new category<br />
of multilateral trading venue i.e. OTFs<br />
• More transparency<br />
• Trading of eligible OTC derivatives<br />
on organized venues
<strong>NASDAQ</strong> <strong>OMX</strong> NORDIC<br />
EQUITY MARKET – STRONG<br />
IN A HIGHLY COMPETITIVE<br />
ENVIRONMENT<br />
<strong>NASDAQ</strong> <strong>OMX</strong><br />
MARKET SHARE OF OWN LISTED SHARE TRADING %<br />
100%<br />
90%<br />
80%<br />
70%<br />
End of Year 2009<br />
End of Year 2010<br />
End of Year 2011<br />
Retains high market share compared to<br />
other European exchanges . Market share<br />
of own listed <strong>Nordic</strong> share trading was<br />
68,55 by Q1 2012<br />
Despite declining market share in <strong>Nordic</strong><br />
equities – <strong>NASDAQ</strong> <strong>OMX</strong> is gaining market<br />
share at total European turnover level<br />
60%<br />
50%<br />
40%<br />
Oslo SIX Swiss Nasdaq <strong>OMX</strong> Deutsche<br />
Boerse<br />
Euronext<br />
LSE<br />
Drivers for market share<br />
in European equity<br />
• Liquidity<br />
• High share of EBBO on a market<br />
• Market structure<br />
• Total cost of trading<br />
• Strong retail order flow in orderbooks<br />
5<br />
<strong>NASDAQ</strong> <strong>OMX</strong> LISTED COMPANIES’ SHARE OF EUROPEAN TURNOVER<br />
10%<br />
9%<br />
8,4%<br />
8%<br />
7,5% 7,6%<br />
6,7%<br />
7,0%<br />
7%<br />
6%<br />
5%<br />
4%<br />
3%<br />
2%<br />
1%<br />
0%<br />
2008 2009 2010 2011 2012-Q1
Building the <strong>Nordic</strong> trading and clearing infrastructure for the future<br />
<strong>OMX</strong> <strong>Nordic</strong>, Iceland &<br />
Baltic Exchanges<br />
2008: Merger of <strong>OMX</strong><br />
and <strong>NASDAQ</strong><br />
2008: Acquisition of<br />
Nord Pool Creation of<br />
Commodities business<br />
2008<br />
2009<br />
2010 2011<br />
2012<br />
<strong>NASDAQ</strong> <strong>OMX</strong> <strong>Nordic</strong> Technology Roadmap completed:<br />
Multi asset class trading and clearing on Genium INET platform<br />
Ensuring improved capacity, low latency and cost efficiency<br />
Infrastructure based on several systems:<br />
SAXESS (Cash Equities, Fixed Income),<br />
Click & Secure (Derivatives),<br />
Targien (Marketdata)<br />
Equities<br />
Fixed<br />
income<br />
Cash<br />
Derivatives<br />
Derivatives<br />
Cash<br />
CCP<br />
2009-10<br />
2010-10<br />
2010-10<br />
2011-06<br />
INET<br />
2010-02<br />
Genium INET<br />
Commodities<br />
Derivatives<br />
2011-11
<strong>NASDAQ</strong> <strong>OMX</strong> <strong>Nordic</strong> Continues to Develop the <strong>Nordic</strong> Market Places<br />
…to keep up with Market Trends and to Keep <strong>Markets</strong> Attractive<br />
Standardization<br />
of the <strong>Nordic</strong> markets<br />
CCP launched October 2009<br />
CCP-only membership<br />
New Cash equity Trading Platform - INET<br />
launched February 2010<br />
New Trading & Clearing platform for Equity<br />
and Fixed Income derivatives - Genium INET<br />
launched Oct 2010<br />
<strong>Nordic</strong> Co-location services in Stockholm<br />
Sponsored Access with PRM tools<br />
Dark pool - <strong>Nordic</strong>@Mid Nov 2010<br />
Norwegian Equity and Derivative offering<br />
<strong>Nordic</strong> Order Routing February 2011<br />
CCP Interoperability for competitive clearing<br />
Implications:<br />
• Reducing operation costs through new<br />
consolidated infrastructure will enable the<br />
possibility to be competitive on trading fees.<br />
• High Market share in own listed shares<br />
• Increasing share of European Total Turnover<br />
• Lower total cost of trading<br />
• Lower quoted Spreads<br />
• High Market Quality<br />
• Enabling ultra low latency and high<br />
throughput<br />
Expectations:<br />
• Significant increase in interest from<br />
algorithmic traders. Strong Pipeline for new<br />
members<br />
• Significant increase in the demand for Colocation<br />
and access services<br />
• Reduced cost for market participants =><br />
more volumes and higher velocity
Since MiFID a lot of adjustments have been made to adapt to the<br />
competition and changing market conditions<br />
2007: MiFID<br />
Concentration rule abolished<br />
Entrance of new market participants MTFs<br />
Introduction of dark pools and Internalizers<br />
Competition in European cash equity business<br />
Fragmentation og liquidity and data<br />
2014 MiFID II:<br />
• Creation of a OTF category of multilateral trading venue<br />
• More transparency<br />
• Trading of eligible OTC derivatives on organized venues<br />
2012/13 EMIR: Mandatory clearing<br />
of eligible OTC derivatives<br />
2007 2008 2009<br />
2010 2011 2012<br />
2013 2014<br />
<strong>NASDAQ</strong> <strong>OMX</strong> <strong>Nordic</strong> Market Model changes due to legislation, competition or market preasure for harmonisation<br />
Internal initiative:<br />
• Harmonizing market<br />
model<br />
• Lowering trading<br />
fees<br />
Internal initiative:<br />
• Introducing CCP in<br />
<strong>Nordic</strong> LargeCap<br />
Internal initiative:<br />
• Implementation of<br />
INET for Equities<br />
• Introducing Co-Lo<br />
•Introducing <strong>Nordic</strong>@<br />
Mid dark pool<br />
Internal initiative:<br />
• Implementation of<br />
Genium INET<br />
• Introducing a Orderto-Trade<br />
ratio fee<br />
• Lowering trading<br />
fees<br />
Changes in the future<br />
due to increasing market<br />
demand / pressure<br />
Ext. initiative/demand:<br />
• Implementing OTC/SI<br />
offering<br />
Ext. initiative/demand:<br />
• MTF’s introducing<br />
CCP clearing<br />
• MTF’s pressuring for<br />
harmonized Tick-sizes<br />
by dumping spreads<br />
Ext. initiative/demand:<br />
• Implementing FESE<br />
Tick-Size for LargeCap<br />
• Introducing<br />
Norwegian trading<br />
with CCP clearing and<br />
routing<br />
• Lowering trading<br />
fees<br />
Ext. initiative/demand:<br />
• <strong>Nordic</strong> Smart Order<br />
Routing - Feb 2011<br />
• CCP Interoperability<br />
• Pressure for further<br />
Standardization<br />
of the <strong>Nordic</strong> markets<br />
• Extending CCP scope?<br />
• European Tick-Size<br />
harmonization outside<br />
Blue-Chip shares?<br />
• PoTa for all instruments?<br />
• Extending and<br />
harmonizing opening/<br />
closing hours in Europe?<br />
• Consolidation of data?<br />
• ???
WHERE IS THE NEW<br />
NORDIC FLOW<br />
COMING FROM<br />
Remote members’ trading<br />
activity have steadily<br />
increased on <strong>NASDAQ</strong><br />
<strong>OMX</strong> in recent years<br />
Market Share (Turnover)<br />
80,0 %<br />
70,0 %<br />
60,0 %<br />
50,0 %<br />
40,0 %<br />
30,0 %<br />
<strong>NASDAQ</strong> <strong>OMX</strong> <strong>Nordic</strong> Market Share in Listed Shares traded by Non-<strong>Nordic</strong> Remorte<br />
members (Turnover traded)<br />
Stockholm - Non-<strong>Nordic</strong> Remote members<br />
Helsinki - Non-<strong>Nordic</strong> Remote members<br />
Copenhagen - Non-<strong>Nordic</strong> Remote members<br />
20,0 %<br />
Traditional broker flow is<br />
increasingly substituted<br />
by algorithmic flow – i.e.<br />
Smart Order Routers and<br />
HFT<br />
Type of member and flow traded on <strong>NASDAQ</strong> <strong>OMX</strong> <strong>Nordic</strong> Equity markets (Turnover)<br />
Not displayed <strong>Nordic</strong> members - Routing (DMA & Reporting)<br />
<strong>Nordic</strong> members - Algo & Sponsored Access<br />
<strong>Nordic</strong> members - Personal (Brokers) Not displayed Remote members - Routing (DMA & Reporting)<br />
Remote members - Algo & Sponsored Access<br />
Remote members - Personal (Brokers)<br />
45,0 %<br />
40,0 %<br />
35,0 %<br />
30,0 %<br />
25,0 %<br />
20,0 %<br />
15,0 %<br />
10,0 %<br />
5,0 %<br />
0,0 %<br />
Share of trading (Turnover)
TRADING VELOCITY AND<br />
HIGH EBBO ARE KEY<br />
DRIVERS FOR FUTURE<br />
GROWTH<br />
<strong>Nordic</strong> Equities: Great potential in<br />
increasing trading velocity<br />
Driving up velocity<br />
• Competition<br />
• Lower exchange fees<br />
• Lower clearing fees through CCP<br />
and coming interoperability between<br />
multiple CCPs on <strong>NASDAQ</strong> <strong>OMX</strong>’s<br />
<strong>Nordic</strong> market<br />
• Latency, capacity & Co-Lo services<br />
• Many new members<br />
• Strong liquidity<br />
• Very strong European Best Bid and<br />
Offer<br />
10<br />
TURNOVER VELOCITY ON EQUITY TRADING FOR BENCHMARK EXCHANGE<br />
<strong>Nordic</strong> & European<br />
<strong>NASDAQ</strong> <strong>OMX</strong> (US)<br />
250%<br />
200%<br />
150%<br />
100%<br />
50%<br />
0%<br />
<strong>NASDAQ</strong> <strong>OMX</strong> <strong>Nordic</strong> Exchange<br />
Average of European Benchmark Exchanges<br />
<strong>NASDAQ</strong> <strong>OMX</strong> (US)<br />
1200%<br />
900%<br />
600%<br />
300%<br />
0%<br />
Note: Avg Europe includes LSE, DB, NYSE Euronext and <strong>NASDAQ</strong> <strong>OMX</strong> <strong>Nordic</strong> (WFE) Source http://www.world-exchanges.org<br />
<strong>NASDAQ</strong> <strong>OMX</strong> <strong>Nordic</strong> defines EBBO prices approx 85-90 pct of the time (March 26 – April 20, 2012)<br />
100%<br />
90%<br />
80%<br />
70%<br />
60%<br />
50%<br />
40%<br />
30%<br />
20%<br />
10%<br />
0%<br />
<strong>NASDAQ</strong> <strong>OMX</strong> S30 <strong>NASDAQ</strong> <strong>OMX</strong> C20 <strong>NASDAQ</strong> <strong>OMX</strong> H25<br />
100%<br />
100%<br />
90%<br />
90%<br />
Nasdaq<strong>OMX</strong><br />
80%<br />
80%<br />
70%<br />
70%<br />
ChiX<br />
60%<br />
60%<br />
50%<br />
50%<br />
Bats<br />
40%<br />
40%<br />
30%<br />
30%<br />
Turq<br />
20%<br />
20%<br />
10%<br />
10%<br />
Burg<br />
0%<br />
0%
<strong>NASDAQ</strong> <strong>OMX</strong> NORDIC WANTS TO<br />
SERVE ALL STAKEHOLDERS AND BE<br />
THE MAIN MARKET IN THE NORDICS<br />
What is our<br />
overall goal<br />
One<br />
infrastructure<br />
serving multiple<br />
<strong>Nordic</strong> markets &<br />
asset classes<br />
• To be the main (Primary)<br />
market for raising capital in the<br />
<strong>Nordic</strong><br />
• To be the main (Secondary)<br />
market for trading <strong>Nordic</strong><br />
securities<br />
• The most competitive venue<br />
for <strong>Nordic</strong> securities based on<br />
liquidity, price formation and<br />
total transaction cost<br />
• Genium INET build to be the<br />
fastest system and serving<br />
multiple asset classes<br />
• Cash Equity, Fixed Income<br />
and ETP’s, Derivatives and<br />
commodity products and<br />
continuesly adding new<br />
products (e.g. Binary-<br />
Options, ETF Options etc.)<br />
Vendors and<br />
media<br />
Technology<br />
providers<br />
Marketdata,<br />
Index &<br />
classification<br />
The main venue for listing of <strong>Nordic</strong> instruments<br />
Multiple asset classes<br />
Companies<br />
(from Large to<br />
Small)<br />
<strong>NASDAQ</strong> <strong>OMX</strong><br />
NORDIC<br />
Local as well<br />
as global<br />
Exchange<br />
Other Issuers<br />
(ETP’s, ETF’s,<br />
Investment<br />
Funds,<br />
derivatives,<br />
commodities)<br />
Competing<br />
marketplaces<br />
(Regulated<br />
Exchanges &<br />
MTF’s)<br />
Member Firms<br />
(Local and<br />
Remote both<br />
small and large)<br />
How do we want<br />
to position our<br />
selves<br />
• Ensure that the <strong>Nordic</strong> market<br />
is growing relatively compared<br />
to Europe<br />
• Focus on increasing turnover<br />
velocity<br />
• Ensure a high market share in<br />
<strong>Nordic</strong> instruments<br />
• Focus on high EBBO<br />
• Low spreads<br />
• Primary market for trading<br />
<strong>Nordic</strong><br />
11<br />
Local and<br />
<strong>Nordic</strong> SDA’s,<br />
FSA’s<br />
Investors<br />
(Shareholders &<br />
Buy-side)<br />
Algotrading<br />
(Traditional<br />
brokers and<br />
HFT)<br />
A local Exchange<br />
Covering the whole <strong>Nordic</strong> region<br />
Build on a Global competitive infrastructure
<strong>NASDAQ</strong> <strong>OMX</strong> <strong>Nordic</strong><br />
…the leading venue for trading<br />
<strong>Nordic</strong> listed securities<br />
12
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