April 11 2014

elb2Basel eases bank CCP buffers, EUREX gets EMIR CCP green light, China makes another fascinating liberalisation move. Wow, just read that first sentence again – big chunky news there alone! FT proposes FTT, Fidelity planning new trading venue, afternoon/evening session musings, swaps implementation worries, SEC considers moves to switch trading back to exchanges from MTFs.

It’s Friday, happy scrolling and look out for more new content next week in EI Premium. Meanwhile, the latest five posts on Premium are:

The Dark Pool Kiss of Death

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

The Ring Cycle

FTIL MCX Round-Up

Buying A Stake In MCX – A Guide For The Perplexed

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Public Markets

China Opens Big Window To Equity Market (subscription)
Josh Noble & Simon Rabinovitch – Financial Times
China To Allow Cross-Border Hong Kong, Shanghai Stock Investment
Reuters
Proposed Establishment Of Mutual Market Access And Resumption Of Trading
HKEx
HKEx Welcomes The Central Government’s Support On The Establishment Of Mutual Market Access Between Hong Kong And Shanghai
HKEx
Shanghai-Hong Kong Stock Connect List of Eligible Stocks for Southbound Trading (for reference only)
HKEx

Under a pilot scheme announced jointly by Hong Kong and Chinese regulators – and endorsed personally by China’s Premier Li Keqiang – global investors will soon have a new route into mainland equity markets. In return, domestic investors in China will get access to shares listed in Hong Kong, as part of the so-called Shanghai-Hong Kong Stock Connect scheme.

PLY: Very interesting development and a triumph for HKEx CEO Charles Li, to really help along HKEx as gateway to China narrative. Part of the ongoing China Liberalisation narrative I discussed in a Premium Post recently.

Eurex Gets EMIR Green Light (subscription)
Tim Cave – Financial News

Eurex Clearing received approval from German watchdog BaFin, following approval from a college of regulators in eight EU members states.

DB press release here.

PLY: Good news for EUREX and the market after the College of Regulators initially kicked the application into touch temporarily. EUREX is now the fourth EMIR CCP alongside NASDAQ OMX, KDPW and Euro CCP.

Eurex Clearing Publishes Study On Capital Efficiencies Of Central Clearing
Deutsche Borse
Eurex Takes Aim At SwapClear In Clearing Cost Study (subscription)
Cecile Sourbes – Risk

In a capital- and cost-efficiency study based on analysis by consulting firm Oliver Wyman, Eurex calls itself the “natural hub” for euro OTC and listed derivatives clearing as well as repo and securities lending, because of the netting efficiencies it is able to deliver between the three product groups.

PLY: Netting is clearly a handy way to sell settlement services especially given that LCH.Clearnet has little or no ETD business nowadays.

Basel Eases Bank Capital Rule For Derivatives Clearing
Huw Jones – Reuters

Banks will not have to hold as much capital as feared to cover trading losses, global regulators said on Thursday in their latest easing of rules to avoid crimping economic recovery. The Basel Committee of banking supervisors from nearly 30 countries published its finalized rule on how much capital banks must set aside to cover trading positions at clearing houses from 2017.

Let Flash Boys Fix The Lincoln Tunnel (subscription)
Gary Silverman – Financial Times

I would like to offer a modest proposal for reining in the fast-moving folks Mr Lewis claims are helping to rig the stock market. I suggest they pay tolls like anyone else who uses the Lincoln Tunnel.

PLY: FT endorses FTT in other words. Quite why anybody continues to believe this left wing big (super-) state newspaper is a beacon of free markets advocacy escapes me.

HFT Is ‘Legalised Scalping’
Bianca Hartge-Hazelman – Sydney Morning Herald

High profile Bell Potter trader Charlie Aitken has labelled high-frequency trading “legalised scalping” and warns that the national stock exchange is headed for trouble because it profits from allowing investors to gain faster access to the equity market to the disadvantage of other participants.

SGX To Let In Big Market-Makers (subscription)
Jeremy Grant – Financial Times

Singapore is taking steps to boost trading volume on its stock exchange, but in a way that aims to deter the type of HFT that has sparked controversy in the US. SGX was overtaken last year by the Stock Exchange of Thailand, pushing it to second place in southeast Asia for the first time.

It has decided to boost liquidity by introducing measures to encourage off-exchange trading on to SGX’s platform and allowing big market-makers on to the exchange for the first time, but only under certain conditions.

PLY: SGX precludes the complex order types which the US regulators and marketplaces have permitted.

TSE Proposes Launching Late Afternoon Market
Hideo Kamata & Yomiuri Shimbun – Japan News

Tokyo SE has proposed a plan to create a late afternoon market from 3:30 p.m. to 5 p.m., as part of efforts to strengthen its global presence by extending its trading hours, according to sources.

PLY: An evening session wasn’t a popular move but late afternoon appears more palatable to intermediaries.

BM&FBovespa Planning New Rules To Bolster Transparency
Ney Hayashi – Bloomberg

BM&FBovespa is considering a requirement that stock trading be halted for 30 minutes after events such as announcements of acquisitions or share buyback plans, according to its press office in Sao Paulo. The proposed changes still need to be reviewed by the exchange’s management.

PLY: Hmmm.

Traders Warn On Deadline For New Swaps Rules (subscription)
Philip Stafford – Financial Times

Swaps dealers have warned a mid-May deadline forcing them to comply with new US rules for OTC trading remains tight, even after a US regulator clarified its positions on some key issues.

CFTC said late on Wednesday that venues trading US products, and customers in Europe will be required to report trades to US data repositories. They will also provide US officials with monthly reports on the activity of their US customers.

PLY: Swaps dealers once again feel as if their complaints have been parachuted into the middle of a large forest within which nobody can hear their screams.

SEC Eyes Test That May Lead To Shift Away From ‘Dark Pools’
Sarah N. Lynch & John McCrank – Reuters

U.S. securities regulators are having internal discussions concerning testing a proposed reform that could drive business to major stock exchanges and away from alternative trading venues.

European Regulators Defend Dark Pool Caps (subscription)
Anna Irrera – Financial News

PLY: Smug Eurocrats demonstrate contempt for European Savers.

Energy Traders Organisation Successfully Reporting To UnaVista Trade Repository
MondoVisione

EFETnet meeting reporting requirements under EMIR since 12 February 2014 with over 100 EFETnet customers able to report via UnaVista Trade Repository

Private Markets

Fidelity Studies New U.S. Stock Venue With Other Investors
Sam Mamudi – Businessweek

Fidelity Investments, the second-largest mutual fund company, is exploring the creation of a U.S. stock trading venue along with other investors to address perceived flaws in the $23 trillion U.S. equity market.

PLY: Fidelity floats a new venue with no detail apart from proclaiming a mantra of apple pie smothered in lashings of cream for all.

Tehran SE In Talks To Share Trading Data With Reuters (subscription)
Benoit Faucon – Wall Street Journal

Iran’s main bourse is in talks to share its trading data with Thomson Reuters once the main sanctions on the republic are lifted.

PLY: Interesting in particular given that TMR is now headquartered in New York of course.

Evening Trades Improve Co-Relation With Global Markets: NCDEX
The Economic Times

NCDEX proclaims success of evening trading.

Trio Found Guilty In HKMEx Scam
The Standard

The District Court yesterday convicted three mainland businessmen involved in using false financial documents with a face value of HK$90 billion (USD 11.61 bln) in dealing with the failed HKMEx.

Dai Linyi, 56, Li Shanrong, 49, and Lian Chunren, 50, were found guilty of possessing false documents.

PLY: A staple soap opera from a few months back (qv here, and here) ends with across the board convictions for the accused.

Bitcoin Price Crashes As Chinese Exchanges Halt Deposits
Anthony Cuthbertson – IBT

The price of bitcoin has fallen by almost $50 in a 24-hour period following announcements from bitcoin exchanges BTCTrade and BTC100 in China that they will be suspending bank transfers from customers following government instruction.

Investor Group Seeks Court OK to Buy, Revive Bankrupt Bitcoin Exchange Mt. Gox (subscription)
Michael J. Casey & Takashi Mochizuki – Wall Street Journal

The investor group, which includes Brock Pierce, a former child actor-turned technology entrepreneur, is offering a token payment of one bitcoin, or about $400, to buy the exchange outright. The acquisition must be approved by a Japanese bankruptcy court.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX is flat, FTIL off about 1% on another day where there is little new news from the NSEL crisis.

NSEL Investors File Complaint To Freeze IBMA Assets
Commodity Online

A section of investors of NSEL have filed a complaint with Economic Offences wing of Mumbai police seeking to freeze all assets of Indian Bullion Market Association (IBMA), a subsidiary of NSEL, as audit firm Choksi & Choksi has found irregularities in the financial dealings between NSEL and IBMA.

Technology

NYSE Preps Standalone Amex, Arca Complex Order Book Options Feeds (subscription)
Max Bowie – waters technology

NYSE Euronext will break out complex order book data for its NYSE Amex Options and NYSE Arca Options markets into two standalone and separately-billable and -reportable datafeeds, NYSE Amex Options COB and NYSE Arca Options COB, from May 1.

Products

CME To Delay Start Of New North American Aluminum Contract To May 6
Sarah Baltic – Platts

CME has delayed the launch of its new North American physically delivered aluminum futures contract by one day: Monday, May 5 for trade date May 6, pending all regulatory approvals.

CME Tests Support For Cocoa Contract To Rival ICE
Marcy Nicholson & Chris Prentice – Reuters

CME has canvassed traders in recent months about opening a cocoa futures contract to challenge ICE’s grip on the niche $15 billion market.

Indexes

SZSE Dividend 50 & Dividend 100 Indices Issued
MondoVisione

Shenzhen SE (SZSE) and Shenzhen Securities Information Co., Ltd. recently announced to issue SZSE Dividend Weighted 50 Index (Code: 399672, Abbreviation: SZSE Dividend 50), CNI Dividend Weighted 100 Index (Code: 399411, Abbreviation: Dividend 100) on April 10, 2014. Both indices take December 31, 2008 as the base date and 1000 points as the base value.

Career Paths

ISDA announced the election of 12 directors at its 29th AGM in Munich.

Four new directors were elected. They are:

Jonathan Hall, Advisory Director, Goldman Sachs
Kieran Higgins, Head of EMEA Fixed Income Trading, The Royal Bank of Scotland plc
Ciaran O’Flynn, MD, Global Co-Head of Fixed Income Electronic Trading, Morgan Stanley
Koji Sakurai, SVP, Head of Business Planning Team, Derivative Products Division, Mizuho Bank, Ltd

Eight directors were re-elected:

Guillaume Amblard, Global Head of FX and Local Markets, BNP Paribas
Biswarup Chatterjee, MD, Global Head Electronic Trading, Credit Markets, Citigroup Global Markets
Elie El Hayek, MD, Global Head of Rates, Global Banking and Markets, HSBC Bank Plc
Diane Genova, MD & General Counsel, Global Markets, JP Morgan Chase & Co
Richard Prager, MD and Head of Global Trading, BlackRock
Will Roberts, Head of Global Rates, Structured Credit Trading and Counterparty Portfolio Management, Bank of America Merrill Lynch (elected January 2014)
Eraj Shirvani, MD, Head of Fixed Income for EMEA Region, Co-Head of Global Credit Products, Credit Suisse
Emmanuel Vercoustre, Deputy CEO & Head of Financial Services, AXA Bank Europe

The directors continuing on the Board are:

Bill De Leon, Managing Director, Global Head of Portfolio Risk Management, PIMCO
Nitin Gulabani, Global Head of FX, Rates and Credit Trading, Standard Chartered Bank
Harry Harrison, Co-Head of Securities, Barclays
Alan Haywood, President Downstream Gas, BP plc
Rich Herman, Co-Head of Global Fixed Income & Currencies (FIC), Deutsche Bank AG, London
Jonathan Hunter, Global Head of Fixed Income and Currencies, RBC Capital Markets
Sotaro Kato, Managing Director, Co-CAO, Global Markets Asia-Pacific, Nomura Securities Co, Ltd
TJ Lim, Global Head of Markets, UniCredit
Eric Litvack, Managing Director, Head of Regulatory Strategy, Société Générale Global Banking And Investor Solutions
Ted MacDonald, Managing Director, DE Shaw & Co, LP, Chief Risk Officer, DE Shaw Group
Christopher Murphy, Global Co-Head of FX, Rates & Credit, UBS Investment Bank

Additionally, Stephen O’Connor, Chairman, Robert Pickel, CEO, and George Handjinicolaou, Deputy CEO, will continue to serve on the BoD.

ISDA press release here.

PLY: I ran out of fingers pretty early in this piece trying to count the total size (it’s 26 our maths boffin Florin informs me). Good to see the sell side showing legacy exchanges how to produce a slim corporate governance model via this association.

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

ITG Q1 2014 financial results on Thursday, May 1, 2014

ITG press release here.

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

Analyst Notes

ICE “Neutral” Rating Reaffirmed By Citigroup – $218.00 Price Target
ICE “Buy” Rating Restated By Bank of America – $240.00 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

SEBI To Issue Guidelines Soon For CrowdFunding
The Hindu Business Line

To encourage young entrepreneurs to raise capital from the market, which has seen decline is such activity, regulator SEBI plans to shortly come out with the guidelines for crowdfunding.

PLY: Given the innate bureaucratic micromanagement prevalent within SEBI I cannot harbour a great deal of optimism about their crowdfunding rules but at least they are doing something…

Other stories

SEBI Wants Bourses To Provide A Level Playing Field For HFT Traders
Palak Shah – The Economic Times

Capital market regulator Sebi wants stock exchanges in India to provide a level playing field for traders who use HFT through co-location and those without the facility.

PLY: HFT is about 17.5% of NSE trading. Not quite sure how this regulation could work without making it pointless to co-locate…

SGX To Effect Revised Securities Market Fee Structure On 1 June
MondoVisione

SGX will introduce revised securities market fees, with changes to clearing, transfer and onward settlement fees, with effect from 1 June 2014. This initiative is part of SGX’s on-going efforts to strengthen and improve liquidity in Singapore’s securities market.

ISDA 2014 Margin Survey Results: 90% Of Non-Cleared Derivatives Trades Now Collateralized
MondoVisione

ISDA released results from its 2014 ISDA Margin Survey at its 29th Annual General Meeting in Munich.

Private Pension Funds In Romania To Invest EUR 500 Mln On The Capital Market In 2014-2015
Romania Insider

The private pension funds in Romania may invest EUR 500 million on the capital market between 2014 and 2015, in new public offerings, according to Raluca Tintoiu, CEO ING Pensii.

“Private pension funds ensures over 10 percent of the average liquidity of the Bucharest SE, with investments in around 60-70 Romanian companies,” added Tintoiu. The funds hold 9.6 percent of Romania’s government securities. According to estimates, private pensions funds should hold EUR 10 billion in assets in Romania by 2018, from the current level of EUR 3.5 billion. There are currently eight private pensions funds active on the mandatory private pensions segment, and the market segment has 6.1 million participants. On the optional private pensions segment, ten funds manage assets of EUR 190 million on behalf of 317,000 participants.

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