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September 03 2013

elb2 Welcome back North America after what was a slow but interesting day in Europe: Energy and Power shuffles, clearing harmonisation at Moscow Exchange, more African ‘demat’ and competition in Brazil are raised along with a new FIAB chairman and some final OTC clearing rules.

Elsewhere it’s time for NSEL to indulge in their weekly masochistic ritual of defaulting on their own payment schedule – once again it looks to be more default than payment too. The Feds are doubtless mustering and it won’t be surprising if jail time is looming for more than a few counterparties at all points on the spot/forward commodity curve.

Public Markets

Moscow: BCS Says T+2 Alone is Not Enough
Businessweek

The Moscow Exchange’s transition to a two-day stock settlement today won’t suffice to lure foreign investors to locally-traded stocks because of concerns over minority shareholder rights, according to BCS Financial Group.

PLY: London continues to garner the lion’s share of Russia trading but T+2 is a significant step in harmonising (backwards in this case) the west’s antiquated payments systems. Moscow is going places, as indeed exemplified by BCS, a remarkable business with clear global ambitions.

NZX Launches Natural Gas Market

The launch of NZX’s gas market has been dependent on successful completion of an Interconnection Agreement with Maui Development Limited, the owner and operator of the Maui Pipeline.

The market features monthly, weekly, daily and intraday products focused on a ‘virtual welded point’ on the Maui pipeline.

PLY: Years ago one of my mistakes in Capital Market Revolution! was to mark NZX as “road kill” amidst an ocean of predators and prey. Rather NZX has championed the dynamics of the smaller markets (hat tips also here to Ireland and Luxembourg to name but two) in morphing their business and maintaining an impetus for innovation which is relatively rare amongst legacy markets. Wonder if there is any chance of a Trans-Tasman reverse takeover? Certainly NZX is now the more dynamic exchange when compared to the leaden-footed ASX monopoly.

Borsa Istanbul Revitalises Turkish Capital Markets
banking technology

Created in April 2013, Turkey’s new Borsa Istanbul exchange is at the heart of an ambitious project to turn Istanbul into a major global trading centre. With the country’s economy ascendant, Turkey has a lot to offer, according to Ali Çöplü, chief information officer of Borsa İstanbul.

PLY: I have to admit to still not being a fan of the forcibly merged Borsa Istanbul. The dynamic parts such as the upstart Turkdex have been absorbed into an Ottoman empire style management structure which is labyrinthine. Turkey has huge potential as a financial centre and Borsa Istanbul massive opportunities as a market but it needs to have the dynamism of the bazaar and the vision of Attaturk to achieve its core aims…

Eurex Clearing Adds One More To Clearing Service
assetservicingtimes.com

Eurex Clearing has welcomed Deutsche Zentral-Genossenschaftsbank, Frankfurt/Main (DZ BANK) as a new member of EurexOTC Clear for Interest Rate Swaps bringing the number of clearing members to 15..

LSE Gunning For First Tech IPO On New Platform
City AM

As London gears up for the first floats on the new High Growth Segment, experts in fast-growing firms have said that a handful of extra analysts and investors could enable the platform to rival the Nasdaq for technology listings.

A growing number of tech companies are being courted by the HGS, which was launched by the London Stock Exchange (LSE) in March with the goal of enticing British firms into the market without the usual free-float rules.

First Anniversary Test For Icap’s ISDX (subscription)
Financial News

Icap Securities and Derivatives Exchange – best known as the listings venue for Arsenal Football Club and brewer Adnams, will celebrate the first anniversary of its launch next month.

PLY: It would be great to see Plus Markets finally succeed a it deserves to. AIM founder Simon Brickles made incredible progress with the market in its early days but the platform was somewhat becalmed before the frankly odd transaction which left it owned by ICAP.

Margin Requirements For Non-Centrally Cleared Derivatives

The Basel Committee on Banking Supervision and IOSCO released today the final framework for margin requirements for non-centrally cleared derivatives.

Under these globally agreed standards, all financial firms and systemically important non-financial entities that engage in non-centrally cleared derivatives will have to exchange initial and variation margin commensurate with the counterparty risks arising from such transactions.

Private Markets

ATG, RiskOffice Plan To Create Brazil Clearinghouse For Equities (subscription)
The Wall Street Journal

American Trading Group and Brazilian consulting and risk management company RiskOffice will pair up to create a new clearinghouse for equities in Brazil, a crucial element in the plan to launch a new Brazilian equities platform in partnership with NYX during H1 2014.

PLY: So far kudos to the Brazilian regulators and hopefully they will allow full competition in Brazilian markets to benefit the local economy and investors everywhere.

India – NSE Suggests Upfront Margin In Share Trading
Business Standard

PLY: NSE have asked SEBI to regulate that brokers have client cash in their accounts before they deal, as is the case with futures and options contracts.

Clearly brokers are concerned but this is another growing pain the Indian market needs to step through with likely short term pain for the marketplace but ultimately it’s a good way to avoid flash crashes such as the one which affected NSE via broker Emkay Global…

EEX To Conduct Emissions Auctions For Poland

The European Energy Exchange (EEX) will auction emission allowances for Poland for a transitional period.

Poland has chosen an auction procedure of its own (“opt-out”). Therefore, the Polish auctions will be held separately from the EU auctions, which EEX also carries out on behalf of the European Commission and of 24 Member States.

Kenya Bourse Tames Fraud With Electronic Share Certificates
Standard Digital

The Central Depository and Settlement Corporation (CDSC) has completed the dematerialisation of physical share certificates of the first batch of quoted companies.

Dividend News

HKEx: Scrip Dividend Scheme In Relation To The Interim Dividend For Y/E 31 December 2013

On 15 August 2013, the Board declared payment of the Interim Dividend in cash with a scrip alternative under which eligible Shareholders may elect to receive this Dividend wholly or partly in the form of New Shares instead of in cash

In addition, Shareholders have the right to choose to receive new Shares instead of cash for all future dividends to be paid by HKEx if a scrip alternative is available to them, until they revoke such election by notice in writing to the Share Registrar.

Special Section: FTI, NSEL, India at the Crossroads

PLY: Can this week market three (default) strikes and you’re out?

It’s Tuesday and that means we’re waiting to see how much money NSEL defaults by, er, can pay out to increasingly anxious creditors… (oh and dollar numbers are highly volatile as the Rupee has been in near freefall of late):

Each week the target payout has been 174.72 Crore Rupees (circa 26-27 million USD).

Week One: Rs 92.73 crore (USD 14.37 mln) paid
Week Two: Rs 12.05 crore (USD 1.79 mln) paid
week three: (provisionally) Rs 10.32 crore (USD 1.54 mln)

If you’re struggling overseas with Crore Rupees, let’s just say NSEL looks like being more than 60 million US dollars behind in its payment plan after 3 weeks from a total planned of around 80 million!

Warehouse receipts were a great move forward for commodity markets but the NSEL seems to have taken the concept of dematerialisation to extremes – it increasingly looks as if just about everything has not merely dematerialised but vanished outright: the commodities, the money and indeed even the counterparties…

FTI AGM Agenda Silent About NSEL
moneylife

While the FTI AGM notice does not even mention NSEL, it is interesting to note that Ravi K Sheth, director of FT for almost 20 years – going back to 1994 — a longstanding Jignesh Shah confidant has become the latest to resign from the company. Sheth is not seeking re-appointment and FT has decided not to fill the vacancy created by his resignation.

PLY: September 25th in Chennai will be a big day in India’s exchange history and given there are already 5 vacancies on the board and only 1.2 billion Indians, it may still prove tricky for FTI to fill the existing spaces without also replacing Mr Sheth. However recent boardroom attrition raises the question: how many directors will actually be left by the AGM in almost 2 months time?

NSEL Gets Rs 10.3 cr (USD 1.54 mln) Against Rs 174.7 (USD 26.17 mln) Cr Payable Today
The Economic Times

Crisis-hit NSEL has garnered Rs 10.32 crore (USD 1.54 mln) so far against Rs 174.72 crore (USD 26.17 mln) payable to investors today, raising the possibility of third straight default.

Mumbai Police SIT To Conduct Preliminary NSEL Probe
zeenews

Mumbai police has formed a Special Investigation Team (SIT) to conduct a preliminary inquiry into Rs 5,600 crore (USD 838.82 mln) NSEL payment default crisis after some investors lodged a complaint against the exchange and its office bearers.

Lotus Refineries To File Defamation Suit
Business Standard

Lotus Refineries Pvt Ltd, the only contesting member among the 24 borrowers of NSEL claim of pay-in obligation, has decided to file a defamation suit against the exchange for calling it a defaulter, which it says has caused “serious damage” to its reputation.

“We will file a defamation suit within two days as NSEL has not withdrawn our name from the defaulter’s list despite our legal notice,” said Viren Thakkar, spokesperson of Lotus Refineries.

Locked In A Financial Dispute? It Will Be A Long Haul
Business Standard

About 13,000 investors have Rs 5,500 crore (USD 838.82 mln) stuck in NSEL. The spot exchange has paid only Rs 100 crore (USD 14.97 mln), against its commitment of Rs 350 crore (USD 52.42 mln). Investors are concerned the funds might have been siphoned off.

Enforcement Directorate Looks At Possible Fund Flow From NSEL Borrowers To SEs Abroad
The Economic Times

The Enforcement Directorate, one of the agencies investigating the money trail in the NSEL payment crisis, is looking into the possible flow of funds from borrowers on the exchange to overshore commodity exchanges.

ED Alleges NSEL Warehouse Receipts Are Bogus
moneycontrol

The noose is tightening around the debt-ridden NSEL with. Sources in the Enforcement Directorate, or ED, saying the exchange’s T+25 business model was illegal and warehouse receipts of the exchange were bogus.

Are Raw Wool Barons Pulling Wool Over NSEL Eyes?
Business Standard

‘658’ seem to be the Aggarwals’ lucky digits. Three of their cars – a Porsche Cayenne, a BMW sports utility vehicle and an Audi A6 – bear registration numbers ending with these digits. Also, 658 is about five more than the number of crores of rupees their company, Shakun Polyplasts, owes NSEL investors.

In the new list, Shakun Polyplasts, with dues of Rs 653.87 crore (USD 97.94 mln), was the largest among the five clients of ARK Imports, the NSEL member that dealt with raw wool. The others were Genex Industries (Rs 66.3 crore – USD 9.93 mln), Punjab Wool Traders (Rs 36.07 crore – USD 5.4 mln), Karan Sales Corp (Rs 35.35 crore – USD 5.29 mln)) and Gurudev Wools and Fibres (Rs 18.43 crore – USD 2.76 mln).

However, Business Standard’s on-the-spot checks and enquiries at the addresses given by these entities corroborated with filings with the Registrar of Companies revealed the father-son duo of Kailash Aggarwal and Anubhav Aggarwal controlled both ARK Imports, as well as its five so-called clients. It also appeared the new names and their obscure and incomplete addresses could be a red-herring for aggrieved investors and investigative agencies.

PLY: The paper trail in the NSEL affair will at turns intrigue and perplex for a long long time to come…

Technology

MillenniumIT Becomes Top Cisco Partner
lanka business online

LSE unit MillenniumIT, has become a ‘Silver Certified Partner’ of Cisco System, a network equipment maker.

ECC Launches Clearing Services For PXE

The European Commodity Clearing (ECC) successfully launched clearing and settlement services for all transactions concluded on the Prague- based Power Exchange Central Europe (PXE).

Euroclear Nl & Broadridge Launch Automated Meeting Notification Service
Finextra

Euroclear Nederland and Broadridge Financial Solutions, Inc. are launching an automated, ISO-compliant shareholder meeting notification service in line with the European Market Standards for General Meetings (MSGM), which belongs to a set of measures aimed at addressing the Giovannini Group’s barrier 3 on corporate actions.

Dutch and foreign institutional investors can now receive meeting notifications for equities listed on NYSE Euronext-Amsterdam and NYSE Alternext.

Products

Launch Of Iron Ore Futures Approaching
en.ce.cn

On August 7, Dalian Commodity Exchange signed strategic cooperation agreement with China Beijing International Mining Exchange. Both parties intend to cooperate extensively in spot and futures markets for Iron ore.

Career Paths

Colombian SE president Juan Pablo Cordoba will head the Federacion Iberoamericana de Bolsas, known as FIAB from 2013-2015.

Changes in investors/shareholders

Bank Of India Offloads Entire Stake In MCX
The Hindu Business Line

Bank of India on Monday sold its 1.03 per cent stake (525,000 shares) in MCX at an average price of Rs 392.6 (USD 5.88), valuing the transaction at Rs 20.61 crore (USD 3.08 mln), via the open market.

Financial Calendar

Today:

Charles Schwab 6.00% Non-Cumulative Perpetual Preferred Stock, Series B, $0.375 quarterly dividend payment

All forthcoming exchange / investment related events are now listed in our Events page.

Analyst Notes

Betfair Group “Buy” rating reiterated by Panmure Gordon – GBX 1,317 target price.

A full table of current analysis can be found on our Analyst Ratings page which is updated daily.

All Analysts, Banks and Brokers are welcome to contribute to this section.

Other stories

Poland: Energy Law Changes
lexology.com

Significant changes in energy law are due to come into force after new legislation was passed with an obligation to trade gas on the Polish Power Exchange, the right to terminate fixed-term power supply agreements and the requirement to include an obligation to provide a timetable into connection agreements that have already been signed but not performed.

PLY: Poland’s government is in difficulty currently due to its ongoing indecision, weak leadership and lack of appetite for reform which is urgently required. The extent of reliance on a single monopoly exchange may be an issue in this law although fortunately the government have recently shelved renewables laws which at least may save some fiscal pain and more blighting of the landscape by ugly, useless wind turbines.

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