April 14 2015

elb2Welcome back post-Passover and Easter holidays one and all. KRX seeks to re-energise derivatives after re-privatisation. Hong Kong in exchange pole position thanks to “through train” leverage. Interesting developments from Ancoa, Aquis, Cinnober, Cinnober (again) and more…

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:

CVC Betfair Bid Brief NEW!
India – NSE Sales Brief
EU CMU Brief
EU FTT Brief Part 1Part 2 
NSEL Scandal Brief – Main File
NSEL scandal – FTIL Group – Board and Management Changes Brief – Part 1 and Part 2
FXCM Sales Brief
BGC / GFI: Post Merger Disposals
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

New Records At HKEx
MondoVisione
Hong Kong Becomes World’s Largest Exchanges Operator (subscription)
Josh Noble & Philip Stafford – Financial Times

The market capitalisation of Hong Kong-listed shares set a new record (Monday) once again, and passed the $30 trillion mark for the first time to close at $30.55 trillion.

PLY: HKEx is garnering the ultimate premium from the ‘gateway to China’ trade – which I seem to recall was precisely why I loved the whole notion of ‘through train’ from the very start. Yip, I am ramming the point home but most sources of analysis were utterly incapable of seeing the potential of this linkage and we have always said it was a transformative moment for HKEx…so pardon me while I blow our trumpet where many analysts failed.

China Investors: Stock Market Fever (subscription)
Gabriel Wildau & Josh Noble – Financial Times
Why China’s Sharemarket Surge Is Too Powerful To Ignore
Jonathan Shapiro – Sydney Morning Herald

Retail money is pouring into tech shares and other ‘concepts’ — and the buoyant mood is spreading.

PLY: But I don’t see P/Es particularly stratospheric unless I missed something…

China Allows Mainland Investors To Open Multiple A-Share Accounts
Reuters

China will allow investors in the country’s A-share stock markets to open multiple accounts (started on Monday), the country’s clearing house said on Sunday.

The move will help support development and innovation in the capital markets, China Securities Depository and Clearing Co Ltd (CSDC) said in a brief statement.

See also our Premium briefs: HKEx – SSE – Stock Connect Part 1,Part 2,Part 3.

Virtu IPO Aims To Present Friendly Side Of HFT (subscription)
Philip Stafford – Financial Times

At a publicity event in London last week author Michael Lewis professed “no great antipathy to the high-frequency traders exploiting the problem” of the US equity market.

Now this week Virtu is due to list, aiming to show exactly how it navigates a world where some 13 exchanges compete for business with alternative trading venues and bank-owned platforms.

Read our Premium Virtu Financial IPO Brief.

Aim Market ‘Has Injected £14.7bn Into UK Economy’
Ashley Armstrong – Daily Telegraph

LSE has fought back against mounting criticism about corporate governance issues in its Aim market by commissioning a report that shows the junior market has made a £14.7bn contribution to the UK economy.

More than 3,580 companies have listed on the Aim market in the past 20 years, raising £39.5bn from 1995 to the end of 2014, according to the report by accountancy firm Grant Thornton.

PLY: It may not be the biggest profit factor in the business but AIM remains the benchmark in successful small cap stock markets. Where many majors abandoned theirs (e.g. DB1) and others scoffed at the market, the truth is that AIM has been a huge success overall and we ought to applaud everybody from its founder Simon Brickles through to current management for making a lasting impact on the small cap equity arena – through thick and thin.

Scary Numbers At CBOE
Lynne Marek – Crain’s Chicago Business

The VIX “fear gauge” has scared up plenty of growth for the company that invented it in 1993—Chicago Board Options Exchange parent CBOE Holdings—but lately it’s been spooking investors.

Trading volume at the options exchange, the biggest in the U.S., dropped 15% in Q1, including a dramatic 50% plunge in VIX options trading in February and March, from a year earlier.

PLY: Perhaps ViX is not just tracking the right risks qv the bond market, the Eurozone etc etc…

MCX To Be A Deemed Stock Exchange, Says Joint MD PK Singhal
Mahesh Nayak – Business Today

Business Today caught up with PK Singhal, Joint MD of MCX…

See also our Premium FTIL Stakes Sales Brief and Exchange Deals Brief.

‘Commodity Trade Needs Strong Regulator’
Suresh P Iyengar – The Hindu Business Line

The merger of FMC and SEBI should enable better business opportunities for commodity exchange and brighten the prospects of warehouses.

Aquis Exchange To Launch Closing Order Type (MaC) – Introduces An Alternative To The End-Of-Day Auction Monopoly – Has Buy-Side & Broker Support – Fully Transparent And MiFID II Compliant
MondoVisione
Bourses Face Closing Auction Challenge From Aquis (subscription)
Philip Stafford – Financial Times

PLY: I am not one for adding order types per se but here Aquis are clearly attempting to create something which adds to the auction marketplace and drives closing liquidity. Interesting and worthy of greater contemplation – an order type which guarantees the closing auction settlement price. In other words, a proper classical ‘fix’ – in all the correct connotations of that word.

HKEx Plans To Reintroduce Closing Auctions In 2016
Eduard Gismatullin – Bloomberg

The bourse is the only developed market exchange that doesn’t use the pricing mechanism to allow most orders to match before trading closes.

Boat To Support Industry With MiFID II Transparency Solution
Cinnober

Boat Services, independent OTC trade reporting service provider, has announced that it will apply for approved publication arrangement (APA) authorization under MiFID II.

PLY: Good move by Boat.

FXCM Clears The First Hurdle But Is There Any Value In The Company? (subscription)
Steve LeBlanc – Seeking Alpha

PLY: An excellent breakdown of a deal which clearly favoured Leucadia but then again the ‘beggars can’t be choosers’ index was at rock bottom values the day FXCM’s ‘risk management’ bubble was burst by the SNB. Whatever happens, it looks as if FXCM shareholders have significant issues gaining any form of value going forward…although readers will recall that the management changed their contracts last week to be better remunerated lest anybody may endeavour to oust them.

Read our Premium FX – CHF Crisis – Brief and FXCM Stakes Sales Brief.

Private Markets

BSE IFSC Exchange Within 18 Months
Deccan Chronicle

BSE, which was the first exchange to enter the just-launched International Financial Services Centre (IFSC) in Ahmedabad, has said it hopes to commission its exchange there within 12-18 months.

Both BSE and NSE plan to set up exchanges in India’s first International Financial Services Centre (IFSC), GIFT as reported here and here.

Read our Premium post: The GIFT Horse?

KRX All Out To Revive Derivatives Market
Korea Herald

Korea Exchange (KRX) is determined to give a boost to its long-stalled derivatives market by reaching out to potential investors overseas.

This is also part of the KRX’s long-term plan to expand its overseas business after it was reprivatized in February after six years of government control.

“We may no longer sit back and blame (the government’s excessive) regulations for holding back our derivatives market,” said Kang Ki-won, director of the KRX derivatives market division.

Read our Premium: KRX IPO Brief.

Special Section: FTI, NSEL, India at the Crossroads

PLY: Lots of stories as the crisis festers…

NSEL Scam: HC Panel Tightens Screws On Defaulters
Dilip Kumar Jha – Business Standard

A committee formed by the Bombay HC has ticked off the directors of Vimladevi Agrotech over non-cooperation.

NSEL Probe: Role Of NBFCs Owned By Brokers Under Lens
Suresh P Iyengar – The Hindu Business Line

Investigations into the NSEL scam has taken a new turn with an investor claiming that broking firms used their NBFC arm to route money into the exchange.

NSEL Scam: Investor-Broker Group Files Complaint Against Jignesh Shah
The Economic Times

An investor, who is also a witness in the NSEL scam case, has run a sting on a person purported to be MD of the exchange, sparking a demand for the re-arrest of Jignesh Shah, a prime accused in the case. An NSEL broker-investor group has also demanded action against Prakash Chaturvedi, the exchange’s MD, for allegedly trying to influence a witness.

NSEL Investors Urge Police To Investigate Rawal Group
The Hindu Business Line

NSEL Investors’ Action Group Alleges “Shoddy” Probe By Police
Business Standard

Corporate Affairs Ministry Finalises Share Swap Ratio For Proposed NSEL-FTIL Merger
Rajat Arora – The Economic Times

The corporate affairs ministry has finalised the share swap ratio for the proposed merger of crisis-hit NSEL with its holding company FTIL. The ministry has decided that three fully paid-up equity shares of Rs 2 each of FTIL will be issued in exchange of eight fully paid-up equity shares of Rs 10 each of NSEL. The order, made public on Friday, will be effective only after the government takes a final decision on merger.

Assocham Lobbies Against NSEL Merger With FTIL
The Economic Times

Opposing the proposed merger of crisis-hit NSEL with its parent FTIL, industry body Assocham has said that a company cannot be held liable for “any alleged liability” of a subsidiary.

Read our Premium NSEL-FTIL Merger Brief and NSEL Scandal Brief – Main File.

Technology

Euronext Returns To Normal After Trading Glitch (subscription)
Luke Jeffs – FOW

The Euronext trading gateway that was down for most of last week was back up and running again on Monday.

Horizon Software’s Trading And Volatility Management Platform Selected By Euronext
MondoVisione

Horizon Software has been selected by Euronext, the leading exchange in the Eurozone, for monitoring and pricing derivatives instruments in real-time and to calculate and disseminate settlement prices on an intra-day basis.

MOEX: Securities Markets Trading And Clearing System Upgrade
MondoVisione

MOEX announced that planned Securities market trading and clearing system update is scheduled on 1 June 2015.

Cinnober & Ancoa Agree Strategic Collaboration To Deliver Market Surveillance Capabilities To Banks
Cinnober

PLY: A useful deal for both parties.

Aquis CEO Haynes: Feeds Will Stay Free Until Europe Gets Data Shake-Up (subscription)
Joanne Faulkner – Waters Technology

Aquis Exchange will introduce fees for its market data – which it currently provides free of charge – once a consolidated tape of market data is rolled out across Europe and market data for the region becomes more affordable overall, but will continue to offer its data for free until that point, according to Aquis CEO Alasdair Haynes.

Opening Cross: Is Fee-Free Feasible? (subscription)
Max Bowie – Waters Technology

If anything in life is certain, it’s that data comes with inevitable fees, and that end-users will make a fuss about every additional fee, especially when under pressure from above to control costs.

Tech Start-Ups Seek To Alleviate Dark Pool Headaches (subscription)
Anna Irrera – Financial News

Several young financial technology companies are developing solutions to ensure that one of regulators’ key concerns is allayed, that dark pools operate in a fair way for all who trade in them.

PLY: Useful resume of some of the thinking around new ways to make markets better from the likes of Aesthetic Integration and Scila amongst others.

Products

Bondcube Fixed Income Trading Platform Goes Live
DB1

Bondcube, the Fixed Income trading platform, is pleased to announce that it has gone live in Europe & the US with full match, negotiation and trading functionality for all to all bond trading.

PLY: All the very best to Bondcube, arriving as they are into a crowded market at the top of a pricing bubble.

Read our Premium The Bond Platforms Rush Brief – Part 1, Part 2

BATS CHI-X Europe & ICAP Launch Exchange For Trading And Clearing Physical Transactions
Andrew Saks-McLeod – LeapRate

BATS Chi-X Europe and ICAP have announced new services which, when combined, will enable market participants to trade fully cleared equity index Exchange for Physical (EFP) transactions anonymously.

Press release here.

PLY: A very good initiative for both parties.

Shanghai Gold Exchange Says To Introduce New Pricing Products
Reuters

China’s state-run Shanghai Gold Exchange said on Sunday it was working on launching new price benchmark fixing products as a new service to market participants.

Regulators In Race To Strengthen Bond Market Before Rate Hikes
Huw Jones – Reuters

The European Commission will meet bond market players in the next few weeks to discuss how to avert potentially disorderly market “flash crashes” when interest rates start to rise, EU and industry sources said.

Although plans by the EU executive for a CMU to help companies access market funding include measures to ensure adequate liquidity, warnings that fixed income trading could be disrupted have added a sense of urgency, with some asset managers wanting quick action.

PLY: I suspect “flash crashes” will be the least of the bond markets upcoming problems when markets run out of liquidity, buyers go on strike, issuers are stuck with bonds they cannot sell and the market as a whole goes through a very uncomfortable repricing endeavour. Compared to that a spot of algo dizziness for an hour or so rather pales into insignificance.

Read our Premium EU CMU Brief

Euronext Bets On Post-Quota Market With New Dairy Futures
Gus Trompiz – Reuters

Euronext launched revamped dairy derivatives on Monday, betting an end of EU milk quotas will stir price hedging interest, but a lack of opening day trade illustrated the uphill task it faces in a sector that has so far shunned futures.

PLY: Previous discussions here. Like all movements away from blob socialist centralisation this will take time, particularly given how so many European farmers have become used to subsidy and immune to free markets. Euronext are right to be in the vanguard even if it may mean some low volume times while they educate the market.

Financial Firms Move Closer To Central Clearing In Repo Market
Liz McCormick – Bloomberg

Financial institutions in the almost $2 trillion a day market for borrowing and lending debt are close to unveiling centralized trade clearing systems to minimize risk in the essential wholesale funding mechanism.

PLY: Hooray.

Equity Derivatives Traders Warm To OTC
Mike Kentz – Reuters

Equity derivatives traders have begun to warm once again to trading OTC – rather than through the regulated exchanges that many flocked to following the chaos of the financial crisis.

Volumes across listed US futures, options and securities lending transactions declined by 6% in March over the previous year, following a 13% decrease in February and a 5% drop in January over 2014 levels, according to data from OCC.

Indexes

Pricing A Bond Index Is A Vexed Process (subscription)
Sophia Grene – Financial Times

Passive investment in both bonds and equities is on the rise. But a process that seems like simplicity itself in the world of stock markets has hidden complexities when it comes to fixed income.

Career Paths

LCH.Clearnet announced that Steve Briscoe has been appointed as the new Group Head of Technology and Operations.

Cantor Fitzgerald has announced it was expanding its asset management business and has appointed Michael Gardner as a senior MD and its global head of portfolio solutions.

Traders Magazine reports that Kevin Rideout, the head of wholesale execution services for Asia at Citigroup, will join HKEx next week. Rideout will take charge of business development at the city’s bourse. He joined Citigroup in London in 2006 and led the bank’s execution services from Hong Kong from 2011. He worked for Thomson Reuters for a decade before joining Citigroup.

Global Capital reports that HKEx has expanded its Chinese business development by opening a mainland division, which has a representative office in Beijing and related offices in Shanghai and Guangzhou, is based in Hong Kong. It will be co-headed by Mao Zhirong and Li Gang, both of whom were at HKEx already.Press release here.

Daily Telegraph reports that ICAP has poached the CFO of Hiscox, who will leave his role at the insurer after 16 years to join the inter-dealer broking group. Stuart Bridges will depart from Hiscox at the end of August to join ICAP’s London offices, reporting directly to CEO Michael Spencer.

BCS Financial Group (BCS) has hired Vyacheslav Smolyaninov as its chief strategist and deputy head of equity research. Smolyaninov comes from URALSIB Capital where he worked as chief strategist and deputy head of research since 2009.

After two and a half years at Tradenext, Larry Da Souza has resigned from his position as Director of Sales & Trading.

WSJ reports that Mehra “Cactus” Raazi recently resigned from Tradeweb. The date of his last day couldn’t be determined. The former Goldman Sachs salesman joined Tradeweb in late 2013 and was head of credit for North America.

Ontario Securities Commission Requests New Members For Investment Funds Product Advisory Committee
MondoVisione

The Ontario Securities Commission (OSC) is inviting applications for membership on its Investment Funds Product Advisory Committee (IFPAC).

Financial Calendar

New announcements

Nasdaq Q1 2015 Financial Results – April 23, 2015 – press release here.
BGC Partners’ & GFI Group’s Q1 2015 Financial Results – April 29, 2015 – press release here.
TMX Q1 Financial Results – Monday, May 11, 2015 – press release here.
Lending Club Q1 Financial Results – Tuesday, May 5, 2015.

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

Other stories

Revitalised Auctions An Alternative Answer To Search Of Equity Liquidity – White Paper From Neonet And LiquidMetrix
MondoVisione

CFTC and Australian Prudential Regulation Authority Sign MoU to Enhance Supervision of Cross-Border Regulated Firms
CFTC

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