Slideshow 12 Predictions for 2012

  • January 03 2012, 10:52am EST
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12 Predictions for 2012<br><br>

You never know what to expect. But events of 2011 gave plenty of clues for what lies ahead in 2012, as trading firms and exchanges speed up and beef up.

1. Liffe Gets Spun Out<br><br>

To placate European regulators, Deutsche Boerse and NYSE Euronext agree to sell off the Liffe derivatives business in order to get their merger approved. Deadline for spinout of London International Financial Futures and Options Exchange is two years hence.

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2. Deutsche Boerse and NYSE Complete Merger<br><br>

With European approval in hand, DB-NYSE become combined company on April 1.

3. Bakeoff Begins on Audit Trail<br><br>

SEC starts formal process of creating a real-time system for tracking stock market activity. Directs self-regulatory organizations to conduct review of best available options for creating (and funding) the system. Choice to be made by year’s end.

4. 'Infinite Loop' Shuts Down Exchange<br><br>

Major national exchange stops trading when algorithm of one of its members goes into an 'infinite loop' and overloads operations with excess orders.

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5. Cancels Get Canceled<br><br>

SEC and self-regulatory organizations put ceiling on number of cancellations a single trading entity can place in a single second. Aim is to reduce market volatility and increase liquidity.

6. One-Second Delay<br><br>

SEC begins examination of system that delays orders up to one second each, to insure that adequate pre-trade risk controls are executed, reduce competition on microsecond advantages in speed and increase reliance on best prices to win orders.

7. Nasdaq, London Exchange Announce Plan to Merge<br><br>

To keep pace with Deutsche Boerse, NYSE Euronext and BATS Chi-X Europe, Nasdaq OMX Group and London Stock Exchange Group announce plan to merge. Both sides say market conditions have changed radically since 2005, when LSE rejected merger with Nasdaq.

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8. Basildon Data Center Shuts Down<br><br>

Deutsche Boerse NYSE Group carries out plan to consolidate data centers. Left out in cold is NYSE’s data center in Basildon, England, erected two years ago for $250 million. Still operating is mirror facility in Mahwah, N.J., which houses operations of all NYSE exchanges.

9. Xetra Wins Out<br><br>

Deutsche Boerse NYSE Group says it will use the trading system that underlies the Xetra cash market in German for operations of all its exchanges. The changes are to be phased in over five years.

Aim is to create a single global trading technology that operates over the Secure Financial Transaction Infrastructure network established by NYSE Technologies.

10. Five-Microsecond Max<br><br>

Technology suppliers provide pretrade risk controls, order and execution management systems that carry out all phases of analysis and instruction in five millionths of a second.

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11. Wireless Replaces Wired<br><br>

Wireless communications infractructure, such as microwave and millimeter wave technology, begin to replace cables on long-haul networks. Trading instructions carried in straight line, without delays, at speed of light. No burrowing through mountains required.

12. Dodd-Frank Reform Incomplete<br><br>

CFTC and SEC push off implementation of final rules for implementing provisions of Dodd-Frank Wall Street Reform Act until first quarter 2013. At issue: Defining what is a swap that must be traded in a swap execution facility.