April 17 2015

cinnober video 6


Oh Bloomie – how could you?

Looks like Etsy got the better of Virtu in the future of markets IPO debut day… US govvies only as collateral for Repo clearing, Cyprus signs deal with GXG, paucity of support for flawed MIFID II at TradeTech while Enternext expands. BATS launching pro rata US equity options market to compliment FIFO offering and lots more…

And just when you think it can’t get more exciting here is the latest in my series of Cinnober Videos, discussing LME Clear’s impact on the clearing industry – link here.

Previous Cinnober videos

The most fascinating era for capital markets which we are lucky to be witnessing:

The future of money – where is cryptocurrency heading?

What will the launch of real-time clearing at BM&FBOVESPA mean for the industry?

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:

A Taste Of HFT Scandal Brief – Part 1, Part 2 NEW!
Vietnam Exchanges Merger Brief 
CVC Betfair Bid Brief 
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

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

Bloomberg Terminals Experience Outage
Deals Postponed After Bloomberg Terminals Go Down In Europe And Asia
Josie Cox – Wall Street Journal

Bloomberg’s trading terminal experienced an outage on Friday morning, with some users saying they were unable to perform their usual trading activity.

The company confirmed to CNBC that its terminal was unavailable worldwide, with traders from the U.K. and Singapore complaining on Twitter that they had been affected by the issue. The interruption began around 8.20 a.m. London time.

Bloomberg said it was looking into the causes of the outage. By 9:10 a.m. London time the company said that some customers had reported the terminal was back online.

The terminals cost around $1800/month per user, according to a client.

PLY: The icon has gone down, will that help the Eikon regrow Reuters market share?

Nasdaq Welcomes Virtu Financial (VIRT)
Virtu’s Shareholders Said To Include Industry Critic T. Rowe
Sam Mamudi & Leslie Picker – Bloomberg
How Virtu Financial Went From PR Pariah To IPO Idol
Dan Primack – Fortune

T. Rowe Price, one of the biggest critics of HFT, now finds itself in a seemingly surprising spot: It acquired shares of HFT firm Virtu Financial, a key player in reshaping how everything from stocks to currencies are bought and sold.

PLY: Some rather dull shortsighted media as per usual on the back of the Virtu IPO – yes, Flash Boys knocked the IPO off course but the Irish based company with directors including retired EU Commissioner Charlie McCreevy, was always going to achieve a healthy value given its underlying profitability. However, the interesting pointer for the future of markets is how the craft ‘exchange’ Etsy took the laurels on the day with the stock doubling…

Read our Premium Virtu Financial IPO Brief and A Taste Of HFT Scandal Brief – Part 1, Part 2

Local Retail Participation In HKEx’s Stock Market Remains High

Local retail participation in the Hong Kong stock market remained high in number terms and that retail investors in general had traded more in value terms, both per transaction and in aggregate for the year, in the Hong Kong stock market than they did in 2011.

Valuations Of HKEx Go Interstellar
Denny Thomas & Saikat Chatterjee – Reuters

For the first time analysts are more bullish about HKEx than fast-growing Chinese firms like Lenovo and Tencent.

The HKEx is now the world’s biggest bourse operator with a $43 billion market value, ahead of rival CME Group Inc. Its P/E ratio has jumped to 45 times, while CME trades at a P/E of 23. No company in the Hang Seng Index matches that.

PLY: Reuters catches up to the story of how “through train” has not merely been a success, it has changed the outlook for the HKEx entirely.

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

MiFID II Will Prevent Traders Doing Their Job, TradeTech Delegates Told
Elliott Holley – Banking Technology

MiFID II legislation is a poorly thought-out, arbitrary and unclear piece of rule-making that will prevent traders from being able to do their job. Worse still, a lack of clarity over the final details will inflict uncertainty and cost on market participants from now until 2017, according to delegates at TradeTech Paris this week.

“The double cap on dark trading in MiFID II seems to be a strange attempt at compromise between those who want less dark trading, and those who think it should be protected,” said Rob Boardman, CEO EMEA at ITG. “It may end up pleasing no-one and upsetting everyone.”

PLY: I was not at TradeTech but am delighted to see that there seems to be considerable support for my ongoing thesis that MIFID II is legislation without merit.

EnterNext Launches Initiative To Create Flexible Financing Solutions For The Dutch & Belgian Markets

EnterNext announced the launch of a commercial solution specifically designed to simplify Dutch small companies’ access to capital and provide a broader investor base for Belgian and Dutch family businesses and entrepreneurs. The initiative will draw the two financial marketplaces of The Netherlands and Belgium closer, joining stakeholders from both countries, ensuring increased liquidity and more cost efficiencies for Euronext clients.

PLY: Good move. The more venues for smaller capital raising the better for ground up economic growth.

Safest U.S. Debt Likely Only Collateral Covered In Repo Clearing
Liz McCormick – Bloomberg

Treasuries and U.S. government-related bonds are likely be the only collateral covered when financial institutions begin offering centralized trade clearing in the short-term market for borrowing and lending debt.

The securities account for about 85% of the almost $1.7 trillion financed daily in the repurchase-agreement market, where banks typically borrow cash for a short time from investors, such as money-market mutual funds, using securities as collateral.

PLY: Given the Bond bubble will ultimately burst this seems only feasible as even sovereign paper is likely to be highly volatile in price terms and thus the collateral shufflings may be somewhat unnerving when the Bond market finally rediscovers something approximating to a classical yield curve.

Read our Premium posts: Sometimes You Need A Plumber, Open Clearing: A Paradismal Shift By LCH and Homer Simpson & The Supermodel Buffet – aka a Guide to Clearing in the New Era

Private Markets

BATS To File For Second U.S. Options Exchange
Saqib Iqbal Ahmed – Reuters

Exchange operator BATS said on Thursday it plans to open a second options bourse (EDGX Option) in November as it tries to capture a larger share of the U.S. options market.

Unlike BATS Options, which operates in a price-time priority market, the new exchange will work on a pro-rata allocation model.

BATS press release here.

PLY: We have travelled a long way (with much to cover in digital markets) and yet at the heart of exchanges the debate over FIFO or pro rata rages on…

Saudi SE To Open Up To Foreign Investment
Paul Crompton & Shounaz Meky – Al Arabiya News

Saudi Arabia will open its stock market to direct foreign investment on June 15, allowing approved foreign investors to invest in the kingdom. With a value of around $532 billion – the bourse is the Arab world’s biggest stock market and one of its most diverse.

PLY: A useful first step, enabling approved corporates. Hopefully soon Saudi Arabia will allow all investors to participate.

NCDEX To Set Up Commodity Exchange In GIFT
Financial Express

Within a week of unveiling of regulatory norms for International Financial Services Centre in India, NCDEX on Thursday signed an MoU with GIFT SEZ for setting up an International Commodity and Derivatives Exchange at Gandhinagar.

BSE and NSE plan to set up exchanges in India’s first IFSC, GIFT as reported here and here.

Read our Premium post: The GIFT Horse?

Cyprus SE Gets Liquidity Boost From GXG
Financial Mirror

Cyprus SE (CSE) and GXG Markets (GXG) have struck a deal to promote dual and parallel listings on the GXG Main Quote Market and the ECM Market of the CSE, an agreement that is expected to boost liquidity for the cash-starved Cyprus bourse following the banking fallout in 2013 and the Troika bailout.

PLY: A good move for both parties. We haven’t heard a lot from GXG of late but this deal could be very useful for both markets. Well done Nondas Metaxas on signing this deal – he has been dealt a difficult hand on account of the bailout and has fought back with gusto.

Ethiopian Farmers Are Getting 60% More Of The Value
Nicholas Norbrook – The Africa Report

Having launched operations in 2008, ECX has moved out of its pilot phase and plans to ramp up technology to improve speed and traceability.

London Looks To Become Future Global Financial Hub For Bitcoin
Cryptocoins News

PLY: The tricky bit remains just how London interacts with Bitcoin and the banking system – as the lack of banking facilities has been strangling the industry. The leading business friendly thinkers in the Bitcoin space in the British Isles are clearly to be found amongst the Isle of Man government.

Special Section: FTI, NSEL, India at the Crossroads

PLY: A flattish day equity market wise but there is a bit of action on the legal / resolution front…

India Infoline Threatens To Sue NSEL
Business Standard

Broking firm India Infoline (IIFL) will shortly move the high court here with a defamation suit against scam-hit NSEL and its joint MD, Prakash Chaturvedi, for damages of Rs 500 crore (USD 80 mln).

Post NSEL Scam, FTIL Faces Toughest Challenge With Government Moves

The management, investors and lenders of FTIL are waiting with bated breath as the Company Law Board, a quasi judicial body, is set to hear a petition filed by the ministry of corporate affairs (MCA) on May 15. The ministry had filed the petition asking CLB to allow the government to appoint its own nominees on the board of FTIL in order to “prevent further acts of fraud, misfeasance, breach of trust”.

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


EEX Expands Access To Power Derivatives Market With OptionsCity

As an Independent Software Vendor, OptionsCity’s electronic trading platform, Metro Now, is linked to EEX’s “T7” trading system, providing access for trading in EEX Phelix Futures and Phelix Options.


Thomson Reuters Price Challenge Tool Adds Accuracy & Transparency To Fixed Income Market – AskTRPS Enhancement Allows Users To Raise Evaluated Pricing Inquiries Via Customer Interface

PLY: This headline as dealers grapple with the Bloomberg terminal collapse…


Dow Jones-BSE Joint Venture Firm Unveils New Indices
The Hindu Business Line

The major addition to the list of new indices is the S&P BSE AllCap Index.

Career Paths

BATS hired a senior NYSE officer Laura Morrison who served 8 years as NYSE’s SVP for global index and ETPs to be a SVP & Global Head of ETPs.

LCH.Clearnet appointed Shona Milne and Stephen Compton to its Board. Shona has over 25 years’ experience in the financial services industry including senior management roles in her 17-year career at Deutsche Bank, latterly as CFO Deutsche Bank Netherlands. Currently Shona holds directorships at Regents University, London; Finance South East and, Treasurer & Trustee of UK charity Stonewall Equality. Stephen is currently Global Head of G10 Markets Treasury at Citigroup.

PLY: Two bankers added to the LCH.Clearnet board as the LSEG remains beholden to its sell side blood brothers.

FOW reports that Eddie Astanin, the Chairman of MOEX’s settlement arm, NSD, has been nominated to the board of SWIFT.

PLY: Presumably Mr Astanin’s role will include endeavouring not to laugh openly at the steam powered SWIFT system when his own settlement arm used to do real-time settlement but had to desist in order to offer greater market accessible to, er, the rich western nations… On the political front, an interesting move given the grandstanding by the basketballer in chief about cutting Russia out of international payments.

Global Capital reports that Robert Pickel, the former head of ISDA, has joined interdealer broker Tradition as NED to the board of TraditionSEF.

Automated Trader reports that Themis Trading, an agency brokerage serving institutional investors, hired Davor Beverin, an equity sales and trading veteran with more than 25 years of experience, as MD – Sales and Trading.

Martin Noréus has been appointed Acting Director General of the Swedish Financial Supervisory Authority. At the same time, the Government has decided to appoint Martin Andersson as Director General at the Swedish Government Offices until 15 October 2015.

Trading Heavyweights Approached For Plato CEO Post (subscription)
Tim Cave – Financial News

Former Goldman Sachs and Instinet executives have been approached about the CEO role at Europe’s newest equity trading venue.

PLY: A rumoured second coming for Richard Balarkas is in the City gossip mix amongst pretty much every other name who has ever run a venue and a few bankers besides.

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.

Analyst Notes

National Bank Financial Increased Their Price Target On TMX From C$52.00 To C$56.00 – “Sector Perform” Rating

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.


P2P Lending Platforms: Big Money Investors Looking For Piece Of The Pie
Anthony Zeoli – Crowdfund Insider

It is clear that P2P lending is here to stay but long gone are the days of actual “peers” lending to “peers.” Today Wall Street firms, hedge funds and other “big money investors”, make up the overwhelming bulk of the funds being lent through P2P lending platforms thus the migration to the label “marketplace lending”. This trend is only getting stronger as these big money investors are seemingly tripping over themselves just to throw money at the P2P platforms in hopes of grabbing a piece of (what some estimate will be) the $1 Trillion dollar P2P pie….

Other stories

Bank Of China, BOC International Holdings & SGX Expand Collaboration On Renminbi And Market Developments

FIA Releases SEF Tracker Report For February

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