November 27 2013


It’s an official Exchange Invest farewell to old monuments day as CME confirm NYMEX building sale and Larry Leibowitz is leaving NYSE. Turquoise grow blocks, Aquis birth healthy, Bovespa no to MILA, Istanbul is talking talking talking, hot air as collateral breakthrough (no not in Istanbul, this is a separate story), Tradeweb’s elegant compression and much more, scroll on:

Public Markets

CME Announces Sale Of NYMEX Building To Brookfield Office Properties
CME Group

CME, today announced the sale of the NYMEX Building located at One North End Avenue.

Brookfield Office Properties will buy the 15-story, half million square-foot office building for $200 million. As part of the sale, CME will lease back the lower 222,000 square-feet of space in the building for a 15-year term, including the NYMEX Trading Floor as well as office and trading floor support space.

We originally reported the impending deal here in EI during September.

Executive Departures Send Ripples Through Exchange Industry (subscription)
Wall Street Journal

PLY: Let’s summarise this article: “Capital Market Revolution!” was published July 1st 1999 by which stage ECNs were already running rampant. Apparently it took US stock exchanges about another decade to “get the memo” and even then it seems as if they may have lost the final few pages. Now apparently Wall Street is shocked by the departure of some executives…

In the interests of space let’s focus on one: Larry Leibowitz, whose tenure as ‘chief of operations’ has been frankly disastrous for NYSE, overseeing the crazed empire building of NYSE Technologies, a business with much that is useful but nonetheless more fat than worth. Naturally, just as previously proven wanting management apparatchiks have often ended up in new (higher) positions (a Reuters speciality in times past), Mr Leibowitz will doubtless manage to waft higher in the executive tree. However, his imminent departure from NYSE can only be greeted with relief by those in search of better markets and shareholder value.

Margin Deposit Practices In Focus As Clearing Firms Gain Clout

Federal Reserve governor Jerome Powell said last week that “concentrating risk in a central counterparty could create a single point of failure for the entire system.”

To protect against this, international regulators are developing principles to mitigate the risks a clearinghouse or broader markets faces if a firm like MF fails. Some rules meant to reduce the risk of a clearinghouse failure are already surprising some market participants who claim the new rules are too rigid.

PLY: Article discusses what clients will know as my supermodel versus Moe’s thesis on clearing house concentration.

Europe’s OTF To Follow The US’s SEF?

It is still too early to derive meaningful conclusions from the impact of SEFs on trading behavior. However, European regulators and counterparties can learn from the US experience as they implement the European equivalent: Organized Trading Facilities (OTF).

Turquoise Triples Turnover With Revamped Dark Trading Service
banking technology

LSE’s European equity market Turquoise has reported a substantial increase in dark trading volumes following the relaunch of its ‘dark’ pool Uncross service.

“We asked customers what they liked about us, and a lot of them talked about Turquoise Uncross,” said Robert Barnes, Turquoise CEO since September. “It was a relatively unknown part of the Turquoise dark offering. But nearly a quarter of the value traded on that platform per month was traded in blocks of around 100,000 shares or more. That is a buy-side friendly platform. In September, we rebranded and relaunched it. Since then, daily trading turnover on Uncross has tripled from €30 million to €100 million.”

PLY: Good work by Robert Barnes in enhancing this service for buy side liquidity.

Pinto – No MILA Role For Bovespa Ahead

The disparity in trading volumes and regulations means BM&FBovespa is unlikely to join MILA, the integrated Latin American market, the CEO of Brazil’s SE, Edemir Pinto, said.

The MILA platform is an amalgamation of the Chilean, Colombian and Peruvian stock exchanges.

PLY: MILA is working well from modest beginnings with small exchanges, there is little reason for BM&F to join at this stage.

Philippine SE To Hike Capital Stock

“The Securities and Exchange Commission approved the increase in capital stock of PSE from 97.80 million to 120 million shares with a par value of P1.00 (USD 0.022).”

ECC To Allow EU Carbon Permits As Margin Collateral

European Commodity Clearing (ECC) will allow EU emission permits to be used as collateral for margin payments from December 2, it said, in a move that could boost liquidity on its partner exchange, EEX.

“Until the emission allowances are used as compliance instruments, our customers can make use of their stock of EU Allowances (EUAs) to reduce the capital commitment through other forms of collateral,” said Thomas Siegl, ECC’s chief risk officer, in an emailed statement on Monday.

PLY: One might say that allowing hot air to be used as collateral makes even the worst excesses of OTC banking look credible but there is logic behind this. That said if it all goes wrong, expect the anti-market media to have a field day.

CME Alters Some Natgas, Oil Settlement Prices Due To Glitch

CME has changed the contract expiration price of 10 NYMEX energy products and related instruments settled between May and October due to a technical glitch.

“We observed that because of a technical issue, some of the previously reported settlement prices were calculated incorrectly. We have thoroughly updated and tested our settlement programs to validate pricing.” – CME spokesman.

Analysis: U.S. Exchanges Grapple For Solutions To Trading Glitches

What appeared to be a workable solution two months ago to create a back-up for the exchanges’ “securities information processors,” or SIPS, like the one that got clogged with reams of quotes in Nasdaq-listed stocks on August 22, now looks too complicated.

Making the SIPs more resilient highlights a problem for a market that generally operates exceptionally well, despite a number of high-profile technology failures since early 2012.

PLY: As usual the errors/finger pointing seem to lie with the exchanges although surely there has been a complete disinterest amongst the regulatory classes in actually building a workable highway, let alone making it function, despite multiple (often misguided) regulatory edicts?

Private Markets

Aquis Announces Successful Launch
Automated Trader

PLY: It all went live, it all worked and there were trades in all three of its markets: blue chip stocks in UK, France and the Netherlands, well done to the Aquis team on a successful birth.

Borsa Istanbul To Expand Partnerships

While Borsa Istanbul (BIST) is expecting to tie up loose ends in its strategic partnership deal with the U.S Nasdaq OMX soon, it is also currently in partnership talks with ten global institutions, BIST President İbrahim Turhan has said.

PLY: Istanbul has a huge opportunity. In the old days they spent so much time discussing partnerships that competing exchanges sprang up in the likes of Izmir and created derivatives liquidity Istanbul could not muster. So the government manipulated mergers into an enlarged Istanbul exchange. Now the exchange is hyper-busy with a seemingly endless stream of (useless) partnerships… I fear Istanbul is missing the whole point of its existence. Just as Vienna has gone nowhere trying to rebuild the Habsburg dynasty, Ibrahim Turhan needs to remember the Ottoman empire ruled by brute force, not MOUs.

Picking Global Data Centre Operator Equinix Pays Off For Chi-X
The Australian

“We needed to make sure that when we started we kept the costs impact to them (customers) very low so part of that was looking for where they had already made significant investment in data centres,” Chi-X Australia CTO Mike Aikins says.

PLY: A heartwarming tale of customer satisfaction and pragmatic IT management as has always been the hallmark of the highly capable Australian fintech visionary CTO Mike Aikins who currently helps power the Chi-X revolution against monopolist incumbent ASX.

Tradeweb TW SEF Completes First Swaps Compression Trade

Tradeweb Markets, has completed the first fully-electronic compression transaction of cleared derivatives trades on TW SEF LLC.

Investment manager Arcem Capital successfully executed a pool of IRS trades as one or a zero line-item transaction with Deutsche Bank that was cleared by LCH.Clearnet’s SwapClear.

Compression trade functionality on TW SEF creates significant operational efficiencies for market participants, allowing for compression packages of up to 200 trades into one or a zero line-item trade using the tool. An investor can quickly net or terminate trades and increase available credit at their derivatives clearing organization (DCO) by inputting lists of offsetting trade information using up to 85 standardized fields.

PLY: And thus the IRS business will grow…even faster, via SEFs. Well compressed Tradeweb!

Shanghai Starts Carbon Trading Today

The trading platform will be launched in the Shanghai Environment and Energy Exchange in Hongkou District and will be followed by the inauguration of a similar one in Beijing on Thursday.

Thai Alternative Bourse Will Classify Stocks Into 8 Industry Groups

The Market for Alternative Investment (mai), under The Stock Exchange of Thailand (SET), is planning to classify mai-listed stocks into eight industry groups, enabling investors to analyze information more efficiently. The bourse will announce the list of securities in each group from January 2014 before implementing in January 2015.

HKMEx Adds Private Equity Director

A private equity firm backed by the China Development Bank Corp. is studying HKMEx, a commodities market that suspended operations this year, for investment opportunities.

“I’m going in as a director to simply get an understanding,” said Jianrui Xiong, a Hong Kong-based venture partner at Infinity Group, which manages 10 billion yuan ($1.6 billion) in assets. “I want to understand whether this company can solve its previous issues and whether it’ll be a clean company going forward. If it is clean, then we may have some investment opportunities.”

An investment by Infinity could help revive the exchange, which surrendered its trading license in May after failing to attract enough revenue to support operations. Barry Cheung, the largest shareholder and chairman, is seeking to raise funds to repay debts and unpaid wages.

PLY: Huge opportunities here, provided HKMEX is indeed ‘clean’ and second that costs can be scythed from what appeared to be giddy amounts previously.

Saudi SE (Tadawul) And The Bahrain Bourse (BHB) Sign Cooperation Agreement

Saudi SE (Tadawul) and Bahrain Bourse (BHB) have entered into an MoU.

Bitcoin Jumps To Record Of $947

The virtual currency bitcoin jumped to a record of $947 Tuesday on the trading exchange Mt. Gox. In recent trade, one bitcoin bought $939.99 on Mt. Gox, the second-biggest exchange by volume, and $879 on BitStamp, the third-biggest exchange. Bitcoin had briefly pushed above $900 on Mt. Gox last week in the wake of a Senate hearing on virtual currencies.

Special Section: FTI, NSEL, India at the Crossroads

PLY: It’s the halfway stage in the NSEL payment schedule and guess what? In a move even less surprising than Larry Leibowitz’s resignation, NSEL defaulted. In total NSEL has settled about 38 million out of 900 million… True there might be some payments to come late (see NK Proteins ongoing attempt to weasel out of paying in less than 4 years for instance) but NSEL investors must surely realise massive haircuts are all but inevitable given we have not even seen 5% repaid in 15 weeks out of a scheduled 30.

Nevertheless, FTIL shares are essentially flat while MCX is up circa 2%.

The NSEL tally of shame remains:

Week 1: Rs 92.73 crore (USD 14.37 mln) paid
Week 2: Rs 12.05 crore (USD 1.79 mln) paid
Week 3:Rs 15.37 crore (USD 2.29 mln) paid
Week 4: Rs 7.77 crore (USD 1.21 mln) paid
Week 5: Rs 8.57 crore (USD 1.35 mln) paid
Week 6: Rs 11.45 crore (USD 1.82 mln) paid
Week 7: no payout – bank accounts frozen
Week 8: Rs. 2.85 crore (USD 457.9 k) paid
Week 9: Rs. 28.34 crore (USD 4.58 mln) paid
Week 10: Rs. 30 lakh (USD 49k) paid
Week 11: Rs. 29.05 crore (USD 4.72 mln) paid
Week 12: Rs. 11 crore (USD 1.77 mln) paid
Week 13: no payout
Week 14: Rs. 6.1 crore (USD 976.7k) paid
Week 15: Rs. 9 crore (USD 1.44 mln) paid

NSEL Defaults For 15th Straight Time; Pays Rs 9 Cr

Crisis-ridden bourse NSEL on Tuesday paid around Rs 9 crore (USD 1.44 mln) against the scheduled payment amount of Rs 174.72 crore (USD 28 mln), defaulting for the 15th straight time.

With Tuesday’s pay-out, NSEL has so far settled about Rs 235 crore (USD 37.7 mln) against Rs 5,600 crore (USD 900 mln) dues to 13,000 investors.

NMCE Asks Members Dealing With NSEL Defaulters To Be Alert
Business Standard

NMCE, the country’s third largest commodity bourse, has directed its members to exercise due caution while dealing with NSEL defaulters.

NK Proteins Proposes To Pay Rs.275 Crore To The Exchange

NK Proteins Ltd, one of the biggest defaulters of the NSEL, on Tuesday proposed to pay Rs.275 crore (USD 44.1 mln) to the commodity spot exchange.

According to a settlement plan submitted by NK Proteins in a Mumbai court, it plans to pay Rs.25 crore (USD 4 mln) upfront and Rs.5 crore (USD 800k) every month to NSEL over the next four years. NK Proteins owes about Rs.964 crore (USD 155 mln) to NSEL. The disputed is over the amount of Rs.689 crore (USD 110 mln).

PLY: NK Proteins have revised their offer slightly from what was previously reported here. It’s still a pretty dismal effort.

Bombay High Court Adjourns All NSEL Case Proceedings Till Dec 5
Business Standard

The Bombay High Court has adjourned all cases linked to NSEL until December 5. Proceedings of cases in other courts will continue as per schedule.

MCX-SX Now Controlled By FIs, Not Financial Tech: GK Pillai

Newly-appointed chairman of MCX-SX, GK Pillai, is on a mission to convince investors that his company has nothing to do with the tainted NSEL or MCX, all part of FTIL.


ISE Gemini Completes Fourth Successful Product Rollout:
Approx 1000 Products Listed On ISE

ISE Gemini announced today that it has completed the rollout of 302 additional products, representing the fourth successful product rollout since launch. ISE Gemini now lists 996 total products and has an equity options market share of 2.9 percent through the month of November, excluding dividend trades.

NCDEX Re-Launches Crude Palm Oil Futures Contract
The Economic Times

NCDEX (India) said it has re-launched its crude palm oil (CPO) futures contract.


CBOE To List Options On CBOE Russell 2000 Volatility Index Beginning December 3

CBOE announced that it will list options on the CBOE Russell 2000 Volatility Index beginning Tuesday, December 3.

The CBOE Russell 2000 Volatility Index (RVXIndex) is an up-to-the-minute market estimate of the expected 30-day volatility of the Russell 2000 Index (RUT), calculated using real-time bid/ask quotes of RUT options that are listed on CBOE, based on VIX methodology applied to RUT options.

Career Paths

Larry Leibowitz, chief operating officer at NYSE‘s parent company and the brother of comedian Jon Stewart, will step down at the end of the year from his position at NYSE Euronext.

(PLY: Interesting family. Apparently Jon Stewart is a comedian although the mission critical point about being amusing has passed me by watching his puerile tv shows. I have no idea whether Larry Leibowitz views himself as humorous but certainly most industry experts describe NYSE Technologies as a ‘complete joke.’

Sadly like any misguided billion dollar spend, that isn’t funny either).

ICAP announced that Kenneth Pigaga has been appointed Global COO reporting directly to CEO Michael Spencer.

Algomi, a provider of information-matching solutions to optimise fixed income liquidity, has hired Stephen J. Gallagher as head of its US operation. Stephen will bring nearly 30 years credit markets experience with him, and will be responsible for launching the rapidly growing firm into the US market based in Algomi’s New York office, which is due to open on 2 January 2014.

Financial Calendar

This week:

GFI Group $0.05 Q3 dividend payment
Record date CBOE Q4 $0.18 dividend
Record date Interactive Brokers $0.10 Q3 dividend
Financial Technologies Q2 results

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

Share Notes

Interactive Brokers Chairman Earl Nemser sold 11,867 shares Friday, November 22nd at an average price of $24.21 (bargain $287,300.07).

NASDAQ OMX EVP Anna Ewing sold 10,000 shares Monday, November 25th at an average price of $39.60 (bargain $396,000.00). She now owns 147,741 shares.

Analyst Notes

  • Argus Lifted Their Price Objective On ICE From $195.00 To $240.00 – “Buy” Rating
  • ICAP Target Price Boosted By Barclays From GBX 450 To GBX 455 – ”Overweight” Rating

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.


Crowdfunding: Soon You Can Make Profits (& Losses) Like The Big Boys

PLY: Another article eager to see the JOBS Act actually being implemented.

Other stories

P2P Lending – Game-Changer Or Business As Usual?

Will peer-to-peer lending change the personal loans market beyond recognition? Or will increasing regulation and overheads erode its differentiators?

So it is no surprise that the UK peer-to-peer lending market is growing exponentially, with £ 221m of loans in 2012, and an estimated £ 522m of loans in 2013.

PLY: This is a fascinating area.

Direct Edge Fee Schedule Changes For December

PLY: If you don’t believe my comments yesterday about pricing being complex at US exchanges, just read this memo from Direct Edge…

BATS Global Markets Expands At 17 State Street

Electronic exchange operator BATS Global Markets has signed a 14,901-square-foot expansion at RFR Realty‘s 17 State Street, taking the entire 31st floor.

The tenant, which has tripled its space at the Lower Manhattan tower from 7,234 square feet, will pay rent starting in the mid-$50s per square foot, according to data from CompStak. Asking rents at 17 State Street are $58 per square foot.

PLY: Kansas marketplace making a mark on the ‘big smoke.’

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