March 10 2016

elb2PLY: NASDAQ swooping on ISE (which had been semi-shopped for some time) is not a huge surprise but at a keen price for Bob Greifeld, gives him super value & leverage in the single name US equity options business, a great additional stake and perhaps most exciting of all, his first truly coherent management thinkers in the international derivatives space. Good luck to all concerned, for DB1 it’s a case of opportunity lost. NASDAQ-ISE: A New Opportunity is in Premium now.

Britain’s Telegraph welcomes ‘the wedding crasher’ as DB1-LSE seem to have convinced the malleable minds of the mainstream financial papers but not necessarily mainstream media per se…

Public Markets

Nasdaq Agrees to Acquire International Securities Exchange For $1.1 Bln


Nasdaq intends to fund the purchase price through a mix of debt and cash on hand, no expectation of material impact on Nasdaq’s financial leverage or capital return strategy. The deal is currently expected to close in H2 2016 & expected to be accretive to Nasdaq earnings within 12 months of closing and deliver attractive returns on capital.

Following the close of the transaction, Nasdaq will operate PrecISE Trade, award-winning front-end OMS/EMS for trading options and stock-option combinations. PrecISE lets traders submit, monitor, alter, and cancel orders; display the NBBO and BBO of options on ISE exchanges; and route orders to all options exchanges via execution brokers.

NASDAQ OCC stake doubles to 40%. ISE also operates ETF Ventures, (index development, licensing, financing, and marketing of exchange-traded products); and Longitude, a technology that uses parimutuel principles to aggregate liquidity and produce fair and efficient prices for applications in a diverse range of industries.

DB1 press release.

Nasdaq Buys DB1 Options Market For $1.1 Billion

Annie Massa & Brian Louis – Bloomberg

ISE runs three options markets, and so does Nasdaq. Together, the six handled 38% of U.S. volume in February, compared to CBOE’s 27%. However, CBOE arguably retains the jewels of options trading: exclusive rights to contracts on the S&P’s 500 Index and the VIX.

PLY: Good deal for NASDAQ, sad to see DB1 finally just abandon ISE which they never truly exploited in any synergistic fashion… More in Premium: NASDAQ-ISE: A New Opportunity.

QV Premium: Exchange Deals Brief.


Univer Group Completes Purchase of 23% in Ukrainian Exchange from MOEX


Univer Capital investment group has completed the purchase of 23% in PJSC Ukrainian Exchange (Kyiv) from MOEX. The group was transferred property rights to 100% of the shares in PJSC Ukrainian Exchange Holding (Kyiv), which owns about 20% in Ukrainian Exchange and directly holds about 3% of the stock exchange.

QV Premium: Exchange Deals Brief 2.


LSE’s American Suitor Is A Wedding Crasher Who Should Be Welcomed

James Quinn – Daily Telegraph

ICE Said To Line Up Financing For LSE Bidding War

Michele Maatouk – DigitalLook

Despite the apparently cosy relationship that has emerged between the British and German bourses, that does not mean the proposed tie-up is necessarily the best for investors. In fact, and this will not be a popular stance, London’s future place in the global exchange landscape would be far better off by eloping with Atlanta-based ICE than continuing this sham marriage with DB1.

PLY: After concerted agitprop in the LSE and DB1 camp (admittedly not directly encountered in this parish so far), the Telegraph is thinking for itself…as ICE reportedly lines up financing for an LSE offer.

ASX’s EFK: Impact of LSE Merger Limited

James Chessell – AFR

PLY: As the former boss of the betting monopoly Tabcorp, EFK is clearly able to appreciate a gamble when he sees one but eager to point out that outmoded protectionism means the situation in Australia is not challenged by any form of free market shenanigans elsewhere.

QV Premium: DB1-LSE Merger Brief.


DFM 2015 Results


Dubai Financial Market (DFM) 2015 results vs 2014: net profit of AED 261m ($ 71m), a 66% decline, total revenues AED 451m ($ 123m), down 51%.


BME Looks to Grow LatAm Business with Colombia Branch, Local Alliances (subscription)

Waters Technology

After Infobolsa buyout last month, BME will leverage its subsidiary OpenFinance’s existing presence, and aims to ally with local exchanges.

PLY: A decade late but still the most feasible BME strategy methinks.


The Death & Rebirth Of The Stock Exchange (subscription)

John Gapper – Financial Times

PLY: Elegant column for the general reader who likes a bit of Hollywood. Not terribly accurate but this is the Brussels Bugle after all. Notes how important SwapClear is, misses how it isn’t actually controlled by LSE but by OTCDerivnet. To be fair, neither has most of the rest of the media to date…


Buyside Firms Face Mifid II Reporting Headache (subscription)

Tim Cave – Financial News

PLY: Fines, horror, woe…must be new regulation implementation time. Tim on the right pain point though as reporting is messy with MIFID II changes.

MiFID II/Best Execution Legal Opinion With Regard To Routing To Multiple Trading Venues


PLY: Interesting & overshadowed by NASDAQ buying ISE but an interesting and worthwhile opinion published via another excellent NASDAQ options investment, TOM.

Private Markets

Hungary Approves Plan Aimed At Boosting Stock Market

Gergely Szakacs & Marton Dunai – Reuters

Hungary Central Bank To Revamp Bourse After Purchase (subscription)

Margit Feher – Wall Street Journal

Having bought a majority stake in the Budapest SE last year, the Hungarian central bank plans to develop the bourse aggressively in the coming years to make it a more capable tool for raising corporate sector finance—instead of relying on bank lending—and thus boost growth. QV Premium: CEESEG Stakes Sales Brief.

PLY: Fascinating dichotomy. Amongst the rubbish spouted inaccurately by mainstream media is the “Poland now governed like Hungary” dictum. A week after Poland’s de facto new model Communists ended privatisation (another self administered wound in a long running act of economic suicide which began with the previous inactivist, kleptocratic government), Hungary is now looking to list more… – all former Soviet states are bloated with plenty of opportunities for slimming down. This marks a good test of the mettle of the new GPW CEO. Is she just a government puppet academic feathering her own nest before a return to tenure, or will she defend markets?


Lost In Translation: Aequitas Gets Its First Listing, But Any Real Market Changes In Canada Will Come From Outside

Theresa Tedesco – Financial Post

After a few polite rejections and almost a full year from its ceremonial first trade, Canada’s upstart stock exchange Aequitas NEO in January finally snagged its first listing. Now, only 44 more to go before it can truly begin to try to live up to its self-proclaimed billing as a viable challenger to Toronto SE.

PLY: Typical financial fodder where the largest lunch tab is longstanding leverage in the establishment and thus the upstarts take time to cohere in the minds of those who derive clarification alongside the Claret. Then again why should Toronto’s financial media be any better than the paucity of insight in London or Frankfurt? Those who don’t recognise that the TMX is right now just a big, flaccid, fixed target while snipers roam Bay Street are deluding themselves.


India Bankers: Ease Exit For Firms Listed On Regional SEs

Ashley Coutinho – Business Standard

More than 5,100 companies were listed on regional stock exchanges.

Dividend News

DFM shareholders also ratified the Board’s suggestion of a 5% cash dividend, equivalent to AED 400 million of the capital.

Special Section: FTI, NSEL, India at the Crossroads

PLY: FTIL flat to small off, MCX up 3%.


Equinix Opens New Data Center In Tokyo

Maria Nikolova – LeapRate


EU Regulators Publish Tougher Rules For Derivatives Trades

Huw Jones – Reuters

Banks and companies will have to set aside billions of euros to back derivatives trades from September under new EU rules designed to make the $550 trillion market safer.

PLY: So on one hand a ‘Merger of Equal Desperation’ makes sense as it reduces collateral, on the other hand the whole tale is one of making the market safer…So just going the whole Homer Simpson on risk and having a single buffet makes sense, right? (Now remind me, what happened to XavRol’s old shop?).


Citigroup Joining JPMorgan, Goldman in a Growing Swaps Business

Alastair Marsh & Sridhar Natarajan – Bloomberg

PLY: Total return Swaps, fascinating product, interesting possibilities…


China’s Bond Market Prepares To Go Global (subscription)

Jennifer Hughes – Financial Times

Fancy a virtually untapped bond market that is liquid, with government debt offering more than 2% and with a relatively stable currency?

In a world where more than two-thirds of government debt yield less than 2%, China’s interbank bond market sounds a dream — and it is about to open to foreigners. What they do with it will be a test of the struggle between bearish China views and the need for returns. QV Premium: China Capital Markets Transformation Brief – Main File.

PLY: That scenario writ large: “Bring us your pensioners with their savings & we’ll guarantee copious copy about the newly impoverished for the Sunday supplement ‘if this is how they deal with money why do we let them vote’ Personal Finance section…”


Bet Big In Futures, SEBI Allows More Currency Pairs

Saikat Das – The Economic Times

SEBI has permitted stock exchanges to include six currency pairs in the exchange traded futures and options market, a move that may add depth to the moribund segment strengthening RBI’s hand to curb the rupee’s intra-day volatility against the dollar.

PLY: Interesting.

Career Paths

Reuters reports that LSE’s Russell Investments appointed Fons Lute as client portfolio manager.

PLY: The biggest career news today is doubtless going to be what clarification we hear on the continuity of the ISE senior management team, particularly Gary Katz, within their new parent entity, NASDAQ. (NASDAQ have an IR call NY AM).

Financial Calendar

10.03 – Record date CME $0.60 Q1 2015 dividend

11.03 – TMX $0.40 dividend payment

Next week

14.03 – Record date Nasdaq $0.25 quarterly dividend

14.03 – Interactive Brokers $0.10 quarterly dividend payment

16.03 – Record date ICE $0.85 Q1 dividend

16.03 – Record date NZX 3.0 cents 2015 final dividend

16.03 – BGC Partners $0.14 quarterly dividend payment

18.03 – CBOE $0.23 quarterly cash dividend payment

18.03 – ITG $0.07 quarterly dividend payment

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

Analyst Notes

LSE “Outperform” Rating Reiterated By BNP Paribas – GBX 3,000 Target Price

LSE “Buy” Rating Restated By Citigroup

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

Other stories

Manipulation or Brilliant Trade? The Curious Case of Don Wilson

Matthew Leising – Bloomberg

A former pit trader who rose from the floor of CME to create the 700-person derivatives powerhouse DRW Holdings, Wilson is a respected industry executive. Early in his career, the University of Chicago graduate with a toothy smile built quantitative models in the off-hours to guide his trading. That same methodical approach led him to assemble a group six years ago to determine if a pricing mismatch worth tens of millions of dollars was staring them in the face.


CalPERS Settles Moody’s Negligent Ratings Case For Record $130 Million



Dangote ‘Owns’ Nearly Half Of Stocks Listed On Nigerian SE

Mayowa Tijani – The Cable

At 43%, Dangote Group, predominantly owned by its president Aliko Dangote, Africa’s richest man, owns about half of the stocks listed on the Nigerian Stock Exchange.

PLY: For all his conspicuous success, I doubt Bernie Sanders sees Mr Dangote as a role model, then again with 43% of the Nigerian stock market, I doubt Mr Dangote cares about Bernie Sanders.



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