April 08 2014


Some relief as EUREX edge closer to EMIR sign-off amidst mercifully little HFT discussion. CME looking to lead on Euro swap and premium aluminum contracts while DGCX eyes agricultural products, banks will fight closed doors hearing against CDS opening… Hong Kong debating lower standards of probity and investor protection while ASX maintains predatory delusional protectionist monopoly approach to running what ultimately barely feels like a business, more a monopoly rentier bourse.

Not such a frantic day today but various nuggets to digest… If you want to read more, remember there is always EI Premium. A mere $120 buys any individual full access to the Exchange Invest inner circle & helps fund this daily free newsletter. You can Subscribe Here.

The latest five posts on Premium are:

New: The Dark Pool Kiss of Death

Homer Simpson & The Supermodel Buffet – A Guide To Clearing In The New Era

The Ring Cycle


Buying A Stake In MCX – A Guide For The Perplexed

Public Markets

Eurex Clearing Moves Closer To Resolving EMIR Issues (subscription)
Anish Puaar – Financial News

Deutsche Börse’s clearing house is close to resolving a key issue related to the protection of assets that has delayed its authorisation under EMIR. In mid-March, Germany-based Eurex Clearing told its members that its EMIR approval would be delayed after it failed to get the required sign off from other national regulators, sparking fears that national interests may be hampering the process.

Apparently the regulators’ decision not to approve Eurex Clearing was in part due to legal issues around how it ring-fences client assets. The clearing house was required to ensure the way it protects buyside assets is compatible with bankruptcy laws in each European member state and said it is now close to achieving this.

PLY: An interesting situation. There has been muttering for some time on how Germany protects assets in bankruptcy which has been a London lobby argument against the clearing house but nothing has ever really been argued in the open while EUREX keenly assert their model is robust.

Dubai Says Agreement In Principle On UAE Bourse Merger

A top Dubai economic policy maker said on Monday that an agreement to merge the two main stock markets in UAE, DFM and ADX, had been reached in principle but nothing had been finalised.

PLY: While DFM and ADX negotiate a merger for largely unexplained business reasons, DGCX is busy innovating, developing and building a tangible franchise…

CBOE Statement On Today’s Court Ruling In Favor Of CBOE In ISE Patent Litigation

“CBOE is pleased that the Court has concluded what we always knew to be true – CBOE does not infringe ISE’s asserted patent. Our unique Hybrid trading system, which combines the best features of electronic and open outcry trading, is just one of the many innovations that have made CBOE the leader in the options industry,” CBOE CEO Edward T. Tilly said about the 7 year lawsuit.

LME Considers High Court Appeal (subscription)
Metal Bulletin

“LME is taking legal advice to establish the quickest effective route by which action can be taken to reduce queue lengths at affected warehouses,” it said. “The rule may still be implemented (potentially with revised timing periods), either as the result of an appeal or a fresh market consultation.”

Fed Gives Banks Extra Time On Volcker Compliance (subscription)
Gina Chon – Financial Times

The Federal Reserve granted a fresh concession to banks that are subject to the Volcker rule on Monday, giving them two more years to offload their holdings in collateralised loan obligations to comply with the measure.

PLY: The banking industry failed to get the broad exemption for CLO ownership they had been seeking but will now avoid instant losses through forced sales.

HKEx CEO Charles Li: Latest Charles Li Direct

What are the core values of the Hong Kong market? Can we maintain Hong Kong’s long-term competitive advantage while insisting on those values? In his latest blog post, HKEx CEO Charles Li shares his thoughts on the core values of the Hong Kong market. In his view, it is investor protection, not simply “one share one vote”, that the Hong Kong market should uphold.

PLY: Clearly Charles Li is frustrated that Alibaba has gone towards a US listing and is keen to get the debate started on shareholdings and control for listed companies. He notes the case of HKEx itself where the government owns 5.8% but gets to appoint 6 non-execs of 12 and the Chairman. This is what I would call “two wrongs don’t make a right.” Overall simple shareholder democracy is important. I am not a fan of multiple share models or other manipulations to capital structure and I firmly believe that Hong Kong will be on a long, slippery slope to financial centre obscurity if it drops its decent standards where others are going for a lower common denominator which will surely only have practitioners claiming the market is rigged against investors. That is bad for the bourse, bad for investors and bad for the economy. It is sad that HKEx are wasting so much energy on this issue at a time when they have a lot of fires to fight and the LME situation is becoming challenging in the extreme.

JPX Targets Return Of Foreign Listings (subscription)
Ben McLannahan – Financial Times

Hong Kong may have turned up its nose at Alibaba’s IPO, but Tokyo – stripped of foreign issuers by years of deflation – would have welcomed an application to offer shares but a green light for the Chinese e-commerce group would not have been guaranteed…

ASX Cooks Up A Sweet Foreign Ownership Plan To Lick The Competition
Michael West – Sydney Morning Herald

ASX is at it again: having its cake, eating it and asking government to enact legislation that ensures nobody else gets a slice.

In its submission to the finance sector inquiry, the grand old markets monopoly has called for foreign ownership restrictions to be lifted, or to keep the location of market infrastructure onshore in Australia.

If SGX, therefore, were to return with a takeover offer, the crew from ASX could ride into the sunset with saddlebags full of cash (subject to approval by the Foreign Investment Review Board). If not, they could maintain their monopoly over clearing and settlement.

PLY: The blatant disingenuity of ASX is a growing blight on Australia’s financial centre. Well done to Chi-X Australia incidentally, moving in to profit last month despite being a genuine David against the monolithic ASX Goliath.

Thirteen Banks To Fight EU Derivatives Charges At May Hearing
Foo Yun Chee – Reuters

Thirteen investment banks, including Citigroup, Goldman Sachs and Deutsche Bank, will fight EU charges of blocking exchanges’ access to the credit derivatives market at a hearing next month. The closed-door hearing comes nine months after the European Commission accused the banks of preventing Deutsche Boerse and CME from entering the lucrative credit default swaps (CDS) business between 2006 and 2009.

PLY: Thus a hearing about attempts by DB1 to inject transparency and openness into CDS markets will be settled by an opaque tribunal behind closed doors next month… I think there may be a maxim in there for the EU?

AIM Market Back To Pre-Crisis Levels (subscription)
Philip Georgiadis – Financial News

London Stock Exchange’s Alternative Investment Market listed 76 companies in the year to the end of March, raising £2.2 billion — the biggest volume on the AIM index since the 2007/2008 financial year.
This is almost triple the amount seen the previous year, while last month was the biggest for volumes since July 2007 — with £671 million raised through ten IPOs.

PLY: Great numbers, good to see smaller listed companies returning to AIM.

Private Markets

Intrade’s New Gamble Is Sports Betting
Joshua Brustein – Businessweek

PLY: Intrade is back thanks to the dogged determination of former CEO Ron Bernstein to relaunch the market despite its various travails. I admire Ron for stepping up to the plate and his new approach is interesting. Having been an original founder of this business and I wish Intrade / Tradesports a prosperous future. We’ll keep a close eye on progress as it develops.

ESX Launch This Year, As Economy Surges Ahead

Erbil Stock Exchange (ESX) plans to launch by the end of the year, making it the autonomous Iraqi Kurdistan Region’s first private joint-stock market.

Mt Gox’s Karpeles Is Beyond U.S. Court Reach
Andrew Harris – Bloomberg

Mt. Gox Co. principal Mark Karpeles is beyond the reach of a U.S. court where he and the bankrupt Bitcoin exchange are being sued for consumer fraud by two American depositors, his attorney told a federal judge.

Karpeles and Tibanne KK, another of his companies named in the lawsuit filed in Chicago federal court in February, will submit papers asking U.S. District Judge Gary Feinerman to rule he has no jurisdiction over them, defense lawyer Eric Macey said in court

Special Section: FTI, NSEL, India at the Crossroads

PLY: FTIL falls 3% as worries continue about its exchange exit strategy while MCX is up almost 1.5%. No new news but all the usual stories are festering away in the background…


SIX Swiss Exchange Upgrades Trading Platform

The successful SWXess Maintenance Release 5 (SMR5) introduces a new STI FIX Infrastructure, new Order Book functionality as well as enhancements to Trade Reporting and Post-Trade Processing. With SMR5, SIX Swiss Exchange responds to the needs of its clients and further improves the trading conditions for all participants.

BSE Launches Equity Trading On Bolt Plus Platform
Business Standard

Premier stock exchange BSE launched its equity trading on the Bolt Plus platform and is hopeful that the traders who left the exchange in 1994 in search of faster trading platform will return.

G. H. Financials Selects Orc’s Electronic Execution Solution To Expand Clearing Business

G. H. Financials, a leading clearing and settlement services provider, run by the dynamic former LIFFE Co-CEO Mark Ibbotson, has chosen Orc’s Electronic Execution solution to support its expansion into the options clearing business globally. Delivered as a managed service, it enables G. H. Financials to provide their clients with low latency, ESMA compliant market access together with advanced pre-trade risk management.

New BT Netrix HiTouch Keeps Traders In Control – New Cloud-Integrated Device Helps Bring Together High-Definition Communications, Specialist Apps And Market Information With The Simple Swipe Of A Finger

The new BT cloud-integrated innovation for financial markets puts traders in control of increasingly complex trading strategies and demanding client relationships.


ICE Announces Successful First Week For Liffe Ultra Long Gilt Futures

The 30 Year Ultra Long LIFFE Gilt futures launched on March 31, 2014 with strong first week volumes of 9,214 contracts traded and open interest of 2,634 as at April 4, 2014. The Ultra Long Gilt future complements Liffe’s benchmark 10 Year Long Gilt futures contract and together, they provide opportunities to trade the basis across the UK sovereign yield curve.

JPX Re-Launches Long-Term Govt Bond Futures (subscription)
FOW Intelligence

JPX has gone live with its first new derivatives product by re-introducing 20-year Japanese Government Bond (JGB) futures into the market.

CME’s Euro Swap Futures A Week Away (subscription)
FOW Intelligence

CME will launch its euro-denominated interest rate swap future next Monday, giving the Merc the jump on rivals looking to tap demand for this new asset class.

PLY: Very interesting. It will be exciting to see if the product can gain early traction, although, as with all new products, it takes time to develop their market…

LME May Not Launch Aluminium Premium Contract Until 2015

LME may not launch its new aluminium premium contract until early next year, months after a competing product from U.S. rival CME is expected to go live. The distant date for the new LME contract will stir the debate over its ability to resolve the years-long issue of backlogs and inflated physical prices that U.S. end users say are costing the industry $6 billion each year.

PLY: An acute issue. HKEx may own LME but it increasingly appears to have lost control of the exchange’s agenda…

Dubai’s DGCX To Launch Agricultural Contracts In Q1 2015

DGCX is planning to launch agricultural commodities contracts in Q1 2015:

“That’s something we really want to do, as we want to be able to diversify the products that we list on the exchange,” CEO Gary Anderson said.

PLY: DGCX continues to be the most dynamic exchange in Dubai and its move into agricultural commodities is very exciting news.

SGX Launches Clearing Of Ringgit, Baht IRS
Channel NewsAsia

SGX has started clearing non-deliverable interest rate swaps (NDIRS) for the Malaysian ringgit and Thai baht, broadening the range of OTC financial contracts that can be settled on its platform.

SEBI Eases Margin On Currency Futures
The Hindu Business Line

Market regulator SEBI has lowered the margin requirement for currency futures traded on NSE, BSE, MCX-SX and USE. The cut in margins will come into effect from April 15.

TOM Offers Best Execution In ETFs

As of today TOM offers best execution in ETFs to add to its existing suite of equities and options. Offering best execution in these products is a unique approach in Europe. Clients can benefit from using a single TOM connection to trade a wide range of products while receiving best execution in all those financial instruments according to MiFID requirements.


TASE Implements R&D Committee Recommendations: Launches TA Tech-Elite Index

In its 3.4.2014 meeting, the Tel Aviv Stock Exchange (TASE) BoD approved the launch of the TA Tech-Elite index, which will comprise the shares of the leading Technology and Biomed companies. The new index includes companies with a free float of at least 25% and a market cap of at least NIS 400 million.

Financial Calendar

This month

Interactive Brokers Q1 Financial Results
SGX Q3 results for FY2014
NASDAQ OMX’s Q1 2014 Financial Results
Record date HKEx $1.72 final dividend
Launch of CME Europe
Sibex – Sibiu SE AGM
Thomson Reuters Q1 2014 earnings

New announcement

TMX Q1 2014 Financial Results On Friday, May 9, 2014

TMX press release here.

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

Other stories

Budget Hearing – Before The United States House Of Representatives Committee On Appropriations Subcommittee On Commerce, Justice, Science, And Related Agencies – U.S. Attorney General Eric Holder Annouces Justice Department Investigation Of High-Frequency Trading

U.S. Attorney General Eric Holder announced to the US Congress that the Justice Department is conducting an investigation of high-frequency trading.

CFTC Staff Issues An Extension Of Time-Limited No-Action Relief To Futures Commission Merchants (FCMs)

CFTC Division of Swap Dealer and Intermediary Oversight (DSIO) today issued an extension of time-limited no-action relief to FCMs. The extension of no-action relief will expire on June 30, 2014.

CFTC Seeks Public Comment On Request From ICE Clear Europe For Order Permitting Portfolio Margining Of Futures And Foreign Futures Contracts

CFTC is requesting public comment on a petition submitted by ICE Clear Europe Limited (ICE Clear Europe) for an order pursuant to Section 4d(a) of the Commodity Exchange Act (Act).

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