April 01 2015


Prop ban to be ignored in EU? BM&F buys Chile stake, FTIL “without prejudice” proposal for NSEL resolution rejected out of hand by brokers and investors. Burgundy looks for a new purpose in life, as BIST elects new Chairman with candidate Ibrahim Turhan out on the hustings since leaving his offices. EBS Select near launch, Euronext to add dairy products while crowdfunding report shows massive growth, particularly in, respectively, Asia and debt.

Meanwhile, I have been pondering the latest market infrastructure bubble in my monthly column for Trading Places.

Open Access is all the rage today as ICAP, LSE, it’s sibling LCH.Clearnet and NASDAQ have published a joint letter…which alas raises more questions than it answers. It is a frank expression that these parties are desperate to see Open Access (albeit without quantifying the risks, the operational issues and other key factors which I continue to believe make the whole exercize impractical and ill-considered, alas). I have a lot to say about it as an immediate reaction but really the free daily is full enough already today and thus it is in the Premium section:

NEW! Premium post Sometimes You Need A Plumber – rather long but essential reading to consider the issue being raised by the 3.something parties.

NB I have had some emails from various folk in recent days saying they cannot access EI Premium – this tends to arise most frequently when you have not paid your subscription renewal. If for any reason you have not received a renewal invoice, apologies in advance: please email me and we will send one out asap! We also have a third payment gateway coming in this week although that, alas could involve a higher VAT rate but it may help those bamboozled by Paypal’s reticence to deliver credit card payments easily. Thanks so far to all those who have renewed their Subs and indeed our new subscribers too – you all help keep this daily afloat free of charge as well as benefitting from the extra insights.

Meanwhile, our Premium Briefs keeping you abreast of various industry issues are updated daily when news arises. All topics covered can be found on our dedicated Briefs page via Exchange Invest Premium. The latest include:

NSEL scandal – FTIL Group – Board and Management Changes Brief – Part 1 and Part 2
FXCM Sales Brief
BGC / GFI: Post Merger Disposals
NSEL Scandal Brief – Part 15 NEW!
Rise of Africa – Part 1Part 2Part 3Part 4Part 5
The Bond Platforms Rush – Part 1Part 2
ICE – NYSE Euronext Deal – Part 1Part 2Part 3

Our Premium service is a unique source of industry analysis – insight in a low latency environment if you like. Can you afford not to be a subscriber? $120 per user/year helps keep Exchange Invest daily Free. Subscribe here or reply to this email and I will invoice you forthwith.

Public Markets

BGC Partners Updates Its Outlook For Q1 2015
BGC Partners

GFI Provides Preliminary March, 2015 Results
With a 56% holding & ¾ of BoD, GFI’s Results will be Consolidated with Those of BGC
BGC’s 8.75% Convertible Senior Notes to be Converted Into Units and/or Common Shares
BGC’s Q1 2015 outlook, which was also without regard to the impact of GFI, was originally published in a press release dated February 11, 2015.

Conversion of BGC’s 8.75% Convertible Senior Notes: Cantor Fitzgerald, L.P. (“Cantor”) currently intends to exercise its right to convert BGC’s $150.0 million of 8.75% Convertible Senior Notes, due April 15, 2015, into approximately 24.0 million units and/or common shares by their due date. This will have no impact on BGC’s fully diluted share count for distributable earnings nor any impact on BGC’s liquidity or cash position. All else being equal, the conversion is anticipated to reduce the Company’s pre-tax interest expense by $13.1 million on an annualized basis and decrease the amount of debt on its balance sheet by $150.0 million.

For background, read our Premium BGC – CME – GFI Brief

Europe Urged To Safeguard Spirit Of Derivatives Regulation (subscription)
Philip Stafford – Financial Times
Mifid II Needs To Uphold Spirit Of Reform (subscription)
Michael Spencer, Xavier Rolet & Hans-Ole Jochumsen

Read the Open Letter to ESMA HERE.

“This is not an esoteric concern — getting this right is critical for the EU’s financial markets and for the EU’s economic growth,” they warned Steven Maijoor, head of Esma, the Paris-based regulator in a letter on Tuesday.

PLY: Phil reports three although the version of the letter we have seen also has the CEO of LCH.Clearnet Suneel Bakhshi. Xavier Rolet, CEO of LSE; Michael Spencer, CEO of ICAP; and Hans-Ole Jochumsen, President of Nasdaq, have called on authorities to “safeguard the guiding spirit and vision of Mifid II”, the region’s flagship markets legislation currently in the final stages of a review in Brussels.

The issue arising for me is that it seems the signatories have correctly identified how getting clearing right “is not an esoteric concern.” I could not agree more. The difficulty is that this letter strikes me as the epitome of a misguided understanding of what can be done and what needs to be done to ensure safer markets…

Anyway, my low latency rapid analysis can be found here in Premium: NEW! Premium post Sometimes You Need A Plumber – I think this is a must read.

In perspective, it is worth also reading several other key Premium posts including:

The Homer Simpson Buffet Risk
The LCH.Clearnet Paradismal Shift

to name but two topics which are alone worth the $120 annual subscription.

BM&FBovespa Buys 2% Stake In Chilean Rival

BM&FBovespa SA, Brazil’s sole financial exchange, bought a 2% stake in Bolsa de Comercio de Santiago SA for about 10.3 million reais ($3.2 million) on Tuesday, through an auction at the Santiago bourse, according to a securities filing. In February, Edemir Pinto, CEO of BM&FBovespa, voiced the company’s intention to buy stakes in the main bourse companies in Mexico, Argentina, Peru, Colombia and Chile.

Read our Premium: Exchange Deals Brief and MILA Exchanges Brief.

From March 2015 Trading Places: This Year’s Platform Bubble – Our Columnist Patrick L Young Ponders The Latest Platform Bubble To Hit Markets…
Patrick L Young – MondoVisione

PLY: (for it is my column): Platform bubbles represent a new vestige of competitive digital markets. A couple of years back if you weren’t working on an SEF, lots of people inclined to believe you were somehow blindly incapable of spotting the future. Of course, those blindly incapable of foretelling the next year or three were mostly those fixated with the idea that SEFs were a guaranteed winning proposition despite the fact that in addition to the quasi-incumbent IDBs, a veritable cornucopia of folks equivalent to the population of a small French city were all assiduously beavering away building some form of post OTC swap-centric business.

Read also our Premium post On Bonds & SEFs

EU Presidency Wants To Ditch Ban On Proprietary Trading At Banks
Huw Jones – Reuters

Latvia, current holder of the EU presidency, in its first full proposal to revise the draft law, wants to ditch the EC’s proposed prop trading ban in the latest sign of how policymakers’ attention is switching from regulation to reviving growth.

“The changes reflect the fact that there is a mandatory separation of proprietary trading rather than a ban,” the document seen by Reuters said.

PLY: Readers may be surprised to find I am not averse to this, it is the right move. Yes, banks need to be brought under a semblance of control and true, their high water mark has passed with their long decline ongoing but reasonable prop trading (without leveraging the bank out of business) is permissible presuming a decent sense of proportion.*

*Admittedly a bank with a responsible sense of proportion may sound oxymoronic.

JPX: Establishment Of Yangon SE Business Setup Unit

JPX established a Yangon SE Business Setup Unit.

Oslo Børs To Discontinue Trading In Swedish, Danish & Finnish Securities As Of May 1 2015
Oslo Bors

Oslo Børs has decided to close down the trading in Swedish, Danish and Finnish securities via the Burgundy market. The background for the decision is a desire for more focus on the primary market and securities listed on Oslo Børs. Oslo Børs is also considering other opportunities for trading simultaneously, making use of the MTF license currently in use for Burgundy.

PLY: There are an infinity of possibilities for Burgundy – if Oslo need some input, we’re ready to provide commercial input on the cornucopia of ways they can deploy this MTF licence…

ICAP Shipping & Howe Robinson Launch New Venture “Howe Robinson Partners”

ICAP Shipping, and leading ship broker Howe Robinson Group have formed a new venture, ‘Howe Robinson Partners’. The new group of companies are now fully operational and have commenced trading with ICAP holding a 35% stake in the new venture.

CFTC Staff Issues No-Action Relief For Swap Dealers From Compliance With Certain Commission Regulations Applicable To Swaps With Legacy Special Purpose Vehicles

Private Markets

BIST Elects U.S.-Educated Finance Professor As Next Chairman

BIST on Tuesday elected a U.S.-educated economist and finance professor as its next chairman, as it gears up for a 2016 IPO.

Talat Ulussever was elected as Chairman of BIST at its AGM.

Saudi Bourse’s Rules For Opening To Foreigners Expected By End-April

Saudi Arabia’s market regulator will publish the final rules governing the opening of the kingdom’s stock exchange to direct foreign investors by the end of April, corresponding to a report in pan-Arab newspaper Asharq al-Awsat on Tuesday which quoted unnamed informed sources in the kingdom as saying the regulations will be published in April and the market will officially open to overseas institutions 60 days later.

The opening of the Saudi market, the largest in the Gulf with a capitalisation of around $510 billion, is one of the most eagerly awaited economic reforms in the region in recent times.

PLY: Previous comments here on this exciting and long awaited development.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX up 1%, FTIL down 1% as investors reject an FTIL settlement plan:

FTIL Offers Rs 1000 Crore (USD 160 Mln) Settlement Plan; Investors Reject Proposal
The Economic Times
Brokers, Investors Reject FTIL Settlement Plan
Ashish Rukhaiyar – Livemint

FTIL has proposed a settlement plan “without prejudice” to meet payment obligations arising out of the Rs.5,574.34 crore (USD 900 mln) fraud at NSEL, in which the former holds a 99.99% stake. It got an initial thumbs down from brokers and investors.

Broadly, the plan unveiled on Tuesday involves FTIL and brokers bringing in Rs.500 crore (USD 80 mln) each to clear the dues, either partly or fully, of a majority of investors. The remaining dues, as per the proposal, can be paid after the attached assets of the defaulting entities are auctioned by agencies such as the Enforcement Directorate and the Economic Offences Wing of Mumbai Police that are investigating the fraud. FTIL estimates that the auction of such assets would bring at least Rs.2,679.50 crore (USD 430 mln).

Economic Offences Wing May Soon Begin Assets Valuation In The NSEL Scam
Ram Sahgal – The Economic Times

The Economic Offences Wing (EOW) of Mumbai police, probing the NSEL scam, has requested the Maharashtra home department to appoint expert valuation and auction houses for auctioning the Rs 6,000-crore (USD 962) mln worth of assets it has secured from 24 defaulters and directors of the scam-hit bourse, a senior police official told ET.

Read our Premium NSEL Scandal Brief – Part 15


NYSE Arca Exchange Glitch Hampers Trading In Popular ETFs
John McCrank & Ashley Lau – Reuters

On Tuesday, trading was affected for around 160 Arca-listed ETPs, which were unavailable for trade on any exchange for a period ranging from just over 9 minutes to an hour, depending on the security, with problems beginning at 10:05 a.m. EDT with a downed Arca server that generates electronic trading prices for ETPs with ticker symbols from UTG to ZSML.

NYSE said at 12:19 p.m. EDT that the issues were resolved.


Euronext To Launch Dairy Derivatives On April 13

Euronext will launch its new dairy derivatives on April 13 and will offer a full waiver for its trading fees until June 30.

PLY: Euronext grasps the nettle on a big growth opportunity for Europe as the long derided milk quota system has finally been abandoned by the EU.

ICAP’s EBS Prepares To Launch EBS Select, Further Diversifying Its FX Trading Offering

EBS is preparing to launch a new global liquidity platform, EBS Select, to complement the company’s existing multi-product offering.

LCH First To Get Approval For Inflation Swaps (subscription)
Cian Burke – FOW

LCH. Clearnet has become the first European clearing house to be granted regulatory approval to offer inflation swap clearing.

Press release here.

MOEX Revises Margin Requirements For Forex, Precious Metals Markets
Maria Nikolova – LeapRate

Career Paths

BIST on Tuesday elected Talat Ulussever as Chairman at its AGM.

ICAP announced that following the announcement on 31 March 2014 (reported here), John Nixon, Group Executive Director, Americas has retired from his role and has resigned from the board of ICAP.

JP Morgan Chase & Co has promoted Robin Wemyss, its European head of foreign exchange options, to replace global head of foreign exchange options James Ellery.

At the latest meeting of the Canadian Securities Administrators (CSA), held in Toronto on March 26 and 27, 2015, Louis Morisset, President & CEO, Autorité des marchés financiers, was appointed Chairman of the CSA for a two-year term, ending March 31, 2017. Morisset succeeds William S. Rice, Chairman & CEO of the Alberta Securities Commission, who served as Chairman of the CSA since January 2011.

CSA members appointed Don Murray, Chairman of the Manitoba Securities Commission, to a two-year term as Vice-Chairman of the CSA.

Securities and Futures Commission (SFC) announced new appointments and reappointments to the following committees with effect from 1 April 2015:

Academic and Accreditation Advisory Committee
Committee on Real Estate Investment Trusts
Investor Compensation Fund Committee
Public Shareholders Group
Securities Compensation Fund Committee
SFC (HKEC Listing) Committee
Share Registrars’ Disciplinary Committee
Takeovers and Mergers Panel
Takeovers Appeal Committee

Press release here.

Financial Calendar

This week

ICE $0.65 Q1 2015 dividend payment

New announcement

MOEX AGM – 28 April 2015

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

Analyst Notes

RBC Capital Reissued Their “Outperform” Rating On LSE – GBX 2,600 Price Objective

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 Market Grows 167% In 2014: Crowdfunding Platforms Raise $16.2 Billion, Finds Research Firm Massolution

Crowdfunding is accelerating at an unprecedented rate and impacting government policy, informing enterprise innovation, and changing the role of financial institutions around the world. Massolution, a research firm specializing in the crowdsourcing and crowdfunding industries, released its annual 2015CF – Crowdfunding Industry Report.

After collecting data on 1,250 active crowdfunding platforms (CFPs) worldwide and undertaking significant further research, the results reveal that CFPs raised $16.2 billion in 2014, a 167% increase over the $6.1 billion raised in 2013. North America still accounts for the largest market but 2014 saw Asia overtake Europe, by a small margin. With exponential growth in Asia, Massolution forecasts this lead will increase significantly in 2015 with the delta between Asia and Europe increasing to over $4 Billion. We predict that Europe’s 20.1% of market share in 2014 will decline slightly in 2015 when Europe will account for 18.8% of the worldwide market.

Growth Rates By Region in 2014

North America: crowdfunding volumes grew 145% to $9.46 billion
Asia: crowdfunding volumes grew 320% to $3.4 billion
Europe: crowdfunding volumes grew 141% to $3.26 billion
South America, Oceania and Africa grew 167%, 59% and 101%, respectively

Growth Rates By Models in 2014

Lending-based crowdfunding grew 223% to $11.08 billion
Equity-based crowdfunding grew 182% to $1.1 billion
Hybrid-based crowdfunding grew 290% to $487 million
Royalty-based crowdfunding grew 336% to $273 million
Donation- and Reward-based crowdfunding grew 45% and 84% respectively

PLY: If you skipped these numbers, take a step back and read them – it is wonderful to see the revolution so animated…

Colorado Votes Yes To Expand Crowdfunding
Midori Yoshimura – Crowdfund Insider

Colorado’s Senate approved a bill that would make the state at least the 15th to create more straightforward regulations for residents who want to invest in Colorado companies through online intermediaries.

Other stories

ESMA Publishes Updated EMIR Q&A – No 12

ESMA has issued the 12th update of its Q&A document on the implementation of EMIR. The Q&As provide answers and guidance related to questions received regarding the implementation of EMIR.

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