April 17 2014

elb2

Sprecher in Singapore outlines the vision for SMX, NYSE buys a company to revamp its tech (?) while management stay silent on HFT, Bursa Malaysia profits up 18%, HFT fightback begins from forex, Zambia exchange goes live, India tries to get more growers in commodity markets, LME loses first appeal claim on RusAl warehouse ruling while the world awaits (nervously) the MIFID documentation…

Welcome to Thursday’s Exchange Invest. Tomorrow is Good Friday, Passover is in full swing – whatever you are celebrating (or not) in our world of opportunity, we’re taking a couple of days off Friday and Monday to refresh batteries and partake of a spot of choco/bunny egg-mania & ponder resurrection et al. Have a good weekend, we’re giving ours the T+2 settlement treatment.

(N.B. Clients: I am around for calls Friday/Monday pondering MIFID II, HFT, NYSE Tech sales et al).

Meanwhile, the latest five posts on Premium are:

New: HFT: The Early Years
(a primer for those who mistakenly think HFT came from the digital world…).

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

(To join the Exchange Invest Inner Circle and glean more detail than we can fit into this free daily Exchange Invest then please Subscribe Here, it’s only $120 per user/annum – it also helps keeps the wheels turning for this free daily newsletter! – we promise we will invest this weekend’s new subs on the service and not spend it on egg-related confectionary).

Public Markets

Bursa Malaysia Posts 18% Jump In Its Profit After Tax & Minority Interest (Patami) Of Rm 45.1 Mln (USD 13.9 Mln) In Q1 2014
MondoVisione

PATAMI at RM 45.1 million (USD 13.9 mln), up 18%
ROE at 23%, improved by 5 percentage points
EPS at 8.5 sen, up 18%
Operating revenue at RM 115.1 million (USD 35.5 mln), up 13%

HKEx – Poll Results Of The 2014 AGM
HKEx

At the AGM of HKEx held on 16 April 2014, a poll was demanded by the Chairman for voting on all proposed resolutions as set out in the Notice of AGM dated 17 March 2014.

ICE In Asia: Jeff Sprecher In His Own Words (subscription)
Jeremy Grant – Financial Times

Plans by ICE for a new Singapore-based business are focusing attention on the Asian city-state’s growing role as a hub for market infrastructure. In an interview in Singapore Jeff Sprecher, ICE CEO, explains to Jeremy Grant why the company picked Singapore for its push into Asia.

PLY: Jeff notes the toxic anti-market attitude of Europe’s big government approach to delivering economic poverty may not work and hence he’s regulatory arbitraging his way to prosperity in the City state which if it managed Brussels, the EU would buy the world. Logical, commonsense statements.

NYSE Owner Said To Buy Algo Technologies To Overhaul Market
Matthew Leising & Sam Mamudi – Bloomberg

The New York Stock Exchange is due for a tune-up…the diagnosis after its new owner, ICE, examined the software. To modernize trading on the 222-year-old market, ICE bought Algo Technologies Ltd., a firm created in 2010 that claims to have the industry’s fastest matching engine.

PLY: Nope. What NYSE needs isn’t a tune-up, it’s a bare metal respray with all new mechanicals. Interesting to see ICE buying NYSE tech companies just when we’re awaiting news of all the other NYSE technology companies ICE are selling. Incidentally, another day, another apparent silence from the NYSE ‘management’ about HFT – maybe they’re just not allowed to speak any more under ICE ownership? Either way it exemplifies the NYSE’s situation: good building architecture, failed business architecture.

One line I can clearly agree with: “ICE considers the current NYSE technology outdated and slow.” Actually no need for the word “technology” in that sentence. True, some might contend that NYSE management have had a particular low latency tendency to get paid (with copious bonuses and equity) whether they succeed / fail / sell the business…or just turn up at the office. However, in the spirit of Easter, let’s pray the NYSE can be resurrected.

EU Agrees Rules On Cross-Border Settlement Risks (subscription)
Anish Puaar – Financial News

The European Parliament has signed off on new rules for the region’s settlement systems as part of a slew of reforms voted through by MEPs ahead of EU elections in May.

The new regime for CSDs including T+2 and disciplinary measures such as cash penalties for failed settlements. According to the European Commission, CSDs processed €920 trillion worth of transactions in 2010.

Rivalry Builds In Battle For A Share Of China’s Currency Trades (subscription)
Philip Stafford – Financial Times

EI reported on March 31st that DB1 and Bank of China are to sign a strategic partnership.
EI reported on March 27th that the Bank of England and Bank of China are to sign an agreement on RMB clearing and settlement.

PLY: FT looks back at issues we have already raised as London has led the move to create RMB settlement with China hedging its bets by having a German alternative. Interesting times.

LME Says Court Refuses Permission To Appeal Warehouse Ruling
Reuters

LME on Wednesday lost the first stage of an effort to appeal a court ruling halting a reform aimed at reducing warehouse logjams.

Last month, the High Court in London ruled in favour of Russian aluminium producer Rusal, which feared it would suffer from further falls in aluminium prices if LME changed rules to make warehouses deliver metal more quickly to customers.

Traders Watchful For Mifid II Detail
Luke Jeffs – FOW

The approval of the final text by the European Parliament means the draft will be published into the journal in May or no later than June and the rules will officially become law some 20 days after that.

ESMA could publish its discussion paper, which will almost certainly be larger than the original Mifid document itself, in June or perhaps July and this is the next big milestone.

PLY: Lots to read in June and July as we try to discover what they actually decided behind closed doors and just how toxic (or not) that open access rule will be.

High-Speed Traders Said To Be Subpoenaed In N.Y. Probe
Keri Geiger – Businessweek

New York Attorney General Eric Schneiderman sent subpoenas to six hft firms seeking information about special arrangements they have with exchanges and dark pools as well as their trading strategies.

Chopper Trading LLC, Jump Trading LLC and Tower Research Capital LLC are among the firms…

PLY: Big data subpoenas from the NY AG.

HFT: Analysis Of An Industry Game Changer
Victor Golovtchenko – Forex Magnates

As the Chinese curse-proverb would say, “may you live in interesting times” – those are precisely the times in which virtually all financial markets participants are living in right now.

Private Markets

Luxembourg SE – 2013 Financial Results
MondoVisione

Consolidated revenues amounted to 40.69 million euros.
Consolidated net profit for the year totalled 8.18 million euros, an increase of 16% compared to 2012.

New NSE Equity Derivative Rules May Reduce Volatility
Reuters

National SE’s (NSE) new rules on matching equity derivatives’ orders as per reference price and execution range, starting May 5, are seen reducing error based volatility in the market: “Orders shall be matched and trades shall take place only if the trade price is within the reference price and execution range,” NSE said in a circular.

Zambian Derivatives Market Is Up And Trading
BDlive

THE first live trade on Zambia’s new derivatives market took place on Tuesday, with BancABC, majority-owned by former Barclays boss Bob Diamond’s new Africa-focused investment fund Atlas Mara, a party to the deal.

Former JSE executive Allan Thomson is CEO of the new Bond and Derivatives Exchange of Zambia. It is only the second derivatives exchange on the continent (if Mauritius is excluded) after JSE’s Safex.

PLY: Congratulations to long-time JSE staffer Allan Thomson on getting the Zambian exchange up and running.

Nepal – CDSC Finally Begins Demat Share Transfer
Dikshya Singh – The Himalayan Times

The Nepali capital market reached a new milestone today following the first electronic transfer of dematerialised shares that finally took place after more than three years of preparations by the country’s only central depository.

Mt. Gox Set To Liquidate As Court Denies Rehabilitation
Ritsuko Ando – Reuters
MtGox: Announcement Of The Order For Provisional Administration, Etc.
MondoVisione

Mt. Gox, once the world’s biggest bitcoin exchange, is likely to be liquidated after a Tokyo court dismissed the company’s bid to resuscitate its business, the court-appointed administrator said on Wednesday. CEO Mark Karpeles is also likely to be investigated for liability in the collapse.

Bitcoin Creator ‘Satoshi Nakamoto’ Unmasked–Again?
Paul Vigna – Wall Street Journal

A month after a firestorm erupted over Newsweek’s claim that it “unmasked” the creator of bitcoin, a U.K. university has released a new study that points to a different candidate.

The study by students and researchers at Aston University in Birmingham claims a linguistics analysis of the writings by people most often listed as bitcoin’s potential creator leads them to believe that Nick Szabo, a well known name in cryptography circles, is the mysterious father of the digital currency.

Bitcoin Miner Taps Dad’s Power Plant In Virtual-Money Hunt
Jason Clenfield & Pavel Alpeyev – Businessweek

Alex Wilhelm is a bitcoin miner, with 30 remote-controlled servers mining virtual gold in an old brick building in the Austrian countryside. His father is donating the electricity, which comes from a water-driven turbine that survived a World War II bombing raid and once powered the entire village of Tattendorf, where Wilhelm grew up.

While the operation is modest as mining farms go — this year’s yield may total no more than $12,500 — it illustrates a basic point: the race to uncover cybercash has become so energy intensive that power bills now make it mostly unprofitable.

PLY: As mentioned the other day solar panels in Australia, streams in the Austrian hinterlands…note incidentally how nobody in the Bitcoin mining private sector uses wind power which governments are wasting billions on…

Dividend News

Luxembourg SE shareholders approved the accounts for 2013 and resolved to pay a gross dividend of 50 euros per share for the year, an amount that remains unchanged from the previous year.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX is down 2.4% on no news of stake sales while FTIL is down nearly 1% and NK Proteins opts to sell itself to pay its NSEL debts…

NK Proteins Puts Itself Up For Sale
Sharleen D’Souza & Dilip Kumar Jha – Business Standard

Gujarat-based NK Proteins, an edible oil crushing company and a defaulter in the NSEL payment crisis with promoters offering to sell the company to raise funds to pay NSEL investors. Apparently the promoters have written to the Mumbai police, investigating the NSEL fraud, requesting its assets be unfrozen so that it could proceed with the sale. It isn’t known whether the company has approached the Maharashtra Protection of Interest of Depositors (MPID) court for the sale.

The company was declared a defaulter on paying Rs 969 crore (USD 160.5 mln) to NSEL investors, which was borrowed on the NSEL platform. Nilesh K Patel, the company’s promoter, was arrested by the Economic Offences Wing of the Mumbai Police for being the largest borrower in the NSEL payment crisis and released on bail.

Technology

High-Frequency Fightback Starts In Foreign Exchange: Currencies
Lucy Meakin – Bloomberg

Forex dealers say they have the solution to the HFT eroding banks’ profits. A currency-dealing platform known as ParFX, established in 2011 by firms from Deutsche Bank AG to Citigroup Inc., was approached last month by banks asking if its technology could be applied to other asset classes, CEO Dan Marcus said this week. The system works by pausing trades at random to prevent dealers with high-powered computers from jumping in front of investors and gaining an advantage.

Products

HKEx Said To Plan Coal Futures As CEO Li Makes Commodities Push
Chanyaporn Chanjaroen – Bloomberg

HKEx CEO Charles Li is said to be picking RMB denominated thermal coal futures for his company’s first energy product a year after paying a record price for the world’s top metals bourse.

India – FMC Mulls Centre-Specific Commodity Forward Trades
Ram Sahgal – The Economic Times

FMC is considering permitting bourses to offer centre-specific, short-term forward trades in highly traded farm products as the regulator aims to increase delivery in a market dominated by speculation and hedging. Termed a “game changer” by Ramesh Abhishek, chairman, FMC, these contracts will allow traders to buy commodities like chana, rapeseed mustard, castorseed, etc, on commodity exchanges, where currently they can’t do so. This, Abhishek feels, could increase delivery by physical market traders on the six national bourses.

PLY: The acute point of failure in Indian commodity trading remains the fact that growers have not been more extensive users of the contemporary commodity exchange infrastructure, this needs to change. Hopefully Chairman Abhishek can indeed change the game.

Indexes

Banks To Top Brazil Stock Market Index Weightings Under Proposal
Reuters

Brazilian banks would become the top-weighted companies in the country’s benchmark stock index, outranking energy and mining companies, under a proposed modification by the country’s stock market operator.

BM&FBOVESPA Announces 2nd Preview For Ibovespa & Other Indices Valid For May-August 2014
MondoVisione

BM&FBOVESPA announces the second preview for the BOVESPA Index theoretical portfolio, which will be valid for the period of May 05-August 29, 2014, based on the closing of the April 15, 2014 session. The preview registers the entrance of MMXM3 (MMX MINER ON) onto the Ibovespa portfolio, which is now made up of 73 stocks from 68 companies.

Career Paths

BoD of HKEx resolved to re-appoint Mr Chow Chung Kong as the Chairman of the Board for a term to be coterminous with his directorship.

Dr Bill Kwok and Vincent Lee were re-elected as Directors, each for a term of approximately 3 years from 16 April 2014 until the conclusion of the annual general meeting to be held in 2017.

Following the conclusion of the HKEx AGM, Board comprises 12 Independent NED, namely:

Mr CHAN Tze Ching, Ignatius,
Mr CHOW Chung Kong,
Mr Timothy George FRESHWATER,
Mr John Barrie Harrison,
Mr HUI Chiu Chung, Stephen,
Dr KWOK Chi Piu, Bill,
Mr LEE Kwan Ho, Vincent Marshall,
Mr LEE Tze Hau, Michael,
Mrs LEUNG KO May Yee, Margaret,
Mr John Estmond STRICKLAND,
Mr John Mackay McCulloch WILLIAMSON,
Mr WONG Sai Hung, Oscar,

and one Executive Director, CEO LI Xiaojia, Charles.
HKEx Board also considered the composition of its committees and appointed new members to certain committees with immediate effect as follows. The composition of other Committees remains unchanged.
HKEx’s Board Committees

Environmental, social & governance committee

CHOW Chung Kong (Chairman)
HUI Chiu Chung, Stephen
LEE Tze Hau, Michael
LI Xiaojia, Charles
John Mackay McCulloch WILLIAMSON (newly appointed)

Investment advisory committee

John Estmond STRICKLAND (Chairman)
WONG Sai Hung, Oscar (Deputy Chairman)
Timothy George FRESHWATER (newly appointed)
HUI Chiu Chung, Stephen
LEE Tze Hau, Michael
LUI Yin Tat, David

The term of service of each Director on each committee shall be coterminous with the individual’s term of directorship with HKEx.

HKEx press releases here, here and here.

India – FMC To Hire 20 Experts On Contract Basis
NDTV

Facing a major staff crunch when the payment crisis at NSEL has deepened, FMC has decided to recruit 20 experts and professionals on contract basis to assist it in legal, investigation and other matters.

Commodity markets regulator FMC, under the Finance Ministry, is functioning with less than 100 officers and staff against a sanctioned strength of 135. Vacant posts have not been filled due to poor responses to job advertisements.

Financial Calendar

This month

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

MarketAxess Holdings Q1 2014 results on Wednesday, April 23, 2014

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

Other stories

China Futures Association & The Options Industry Council Sign MOU Regarding Options Education In China
MondoVisione

The China Futures Association (CFA) and The Options Industry Council (OIC) have signed a MOU to establish cooperation on options education, information sharing and training.

New U.S. Attorney Unit Targets Securities, Commodities Fraud
Lynne Marek – Crain’s Chicago Business

The U.S. attorney in Chicago has created a new section to focus on prosecuting securities and commodities fraud, creating such a focus here for the first time.

The new securities and commodities fraud section was formed last month in the criminal division and includes 12 prosecutors led by Assistant U.S. Attorney Jason Yonan. Zachary Fardon,who was appointed in October as U.S. attorney for the Northern District of Illinois:

“The idea in creating this section was in part to make it a little bit more specialized and to give a little more prominence to these types of cases,” said Randall Samborn, a spokesman for the U.S. attorney’s office.

Danske Bank Fined By Nasdaq OMX Over AstraZeneca Share Trading
Reuters

Nasdaq OMX stock exchange in Stockholm has fined Danske Bank 500,000 Swedish crowns ($76,100) for breaching trading rules in a placing of orders for shares in drugs company AstraZeneca.

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