April 20 2015

“Bloomie” suffers hangover from Friday fallover, Vienna pondering a sale of Slovenian exchange? Lots of discussion of CCPs, waterfalls and capitalisation, including at OCC and elsewhere as Norwegian SWF hints Plato may be “the one” block platform it wants? SEC market structure committee to start with ‘trade through’ discussion – hooray!

Indian blob frustration alongside Indian blob optimism at a merged FMC-SEBI while Jon Corzine is pondering a hedge fund (no, it’s April 20th, not the 1st under any calendar we can find) and there are some fascinating fundraisings and M&A in the crowdfunding sector. Lots to read, happy scrolling:

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.

cinnober video 6

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?

I added a Premium Post this morning: Bloomberg Down – Embarrassing But Hardly Scorched Earth?

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.

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A Taste Of HFT Scandal Brief – Part 1, Part 2, Part 3 NEW!
Vietnam Exchanges Merger Brief 
CVC Betfair Bid Brief 
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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 22

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Public Markets

Bloomberg Outage Hits Financial Markets
Jamie McGeever & John Geddie – Reuters

A two-hour outage at news and market data provider Bloomberg LP hit financial markets around the world on Friday, prompting debt sales to be postponed and exacerbating a spike in volatility in European stocks.

“We experienced a combination of hardware and software failures in the network, which caused an excessive volume of network traffic…This led to customer disconnections as a result of the machines being overwhelmed.”Bloomberg said in a statement.

PLY: See also my Premium Post: Bloomberg Down – Embarrassing But Hardly Scorched Earth?

G20 To Deal With Weaknesses At Clearing Houses
Reuters
EU Prepares Rules For Tackling Failed Financial Firms Outside Banking
Huw Jones – Reuters

G20 is set to back action by regulators to ensure that clearing houses for securities can withstand market shocks while the EU is looking at creating rules on how to deal with financial firms outside the banking industry that run into trouble, including clearing houses, insurers and asset managers, the EU’s financial services chief said on Friday – similar to the rules in place to wind down troubled banks without turning to taxpayers for cash.

PLY: Winding down provisions sound logical. On the weakness of CCPs, it will be interesting to see the prescription but clearly amongst other things, a sensible moratorium on Open Access would be a good idea until the core issues of the waterfall, the Supermodel buffet and other concentration conundra are sorted. The worry is clearly that having made one good move to enforce clearing, international bodies like the EU will merely cave in to the bank blob and not actually address the risks coherently at all. A lot needs to be discussed and the best solution for now may not be overly prescriptive up front but allow for the data of CCPs to tell us where the risks are building up and plan accordingly. None of that, however, will fit with an impatient blob who want to regulate first and ask questions later…

EU’s British Finance Chief Woos London Capital Market Leaders
Huw Jones & Alastair Macdonald – Reuters
The Capital Markets Union: Breaking Down The Barriers To Completing The Single Market – Commissioner Jonathan Hill, Reuters Newsmaker’s Event, London, 17 April 2015
MondoVisione

In his first speech to London’s financial community since his appointment to the European Commission last November, the former Conservative minister went out of his way to praise London for its ability to innovate and adapt to change.

PLY: In a further demonstration that there is life in the old dog yet, Reuters had a glorious Friday – their systems reigning supreme as Bloomberg collapsed and then the first speech by Commissioner Hill in London since his accession to Brussels.

QV on the bigger picture, our Premium EU CMU Brief.

China Not Trying To Chill Red-Hot Stock Market, Says Regulator (subscription)
Shen Hong – Wall Street Journal
China Raises Red Flag On Its Stock Markets (subscription)
Chao Deng – Wall Street Journal

The announcements late Friday by the China Securities Regulatory Commission, the Shanghai and Shenzhen stock exchanges and two industry associations raised fears of a selloff in China, where the main market index has doubled over 12 months and the riskiest index is up 70% this year.

The CSRC warned small investors, who have been big drivers of the rally, not to borrow money or sell property to buy stocks, ratcheting up its rhetoric about the market. Mainland investors opened stock-trading accounts at the fastest pace ever in the week ended April 10, and margin account balances reached a record 1.16 trillion yuan ($187 billion) as of Thursday, according to Shanghai SE.

China Drafts Rules For IPO Plans To Be Vetted by Stock Exchanges
Bloomberg

China’s government has drafted rules for companies’ applications for IPOs to be reviewed by the nation’s two stock exchanges, rather than regulators, the state-run Xinhua News Agency reported Monday.

PLY: Good.

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

Pimco Urges Basel To Fix Rules Before Swaps Market Disruption
Matthew Leising – Bloomberg

“Should these rules not change, in our view the cost of transacting in the markets will continue to increase and risks will become more concentrated in the hands of fewer market participants, creating a more interlinked and fragile market system that is more vulnerable to dislocations,” Pimco executives Libby Cantrill, William De Leon, Tracey Jordal and Courtney Walker wrote in a paper published last week. The firm manages $1.59 trillion.

PLY: PIMCO is upset because the latest Basel Committee suggestions want banks to hold collateral for customer derivatives but won’t allow an offset against margin paid to CCPs as a buffer. It strikes me there needs to be an allowance for pure agency clearing if we are not to have higher fees and greater propensity to concentration and chaos around the realm of ETD which after all has traditionally been very cheap and secure.

World’s Biggest Wealth Fund Targets Single Dark Pool to Cut Fees
Jonas O Bergman & Saleha Mohsin – Bloomberg

Norway’s $890 billion wealth fund is taking the rare step of publicly criticizing the proliferation of dark pools, arguing the world’s biggest investors only need one such platform.

PLY: While backing Plato: Does Oslo think this is the platform for the future of blocks? The stats on algo usage reduction are very interesting in the article, down from as high as 75% to 40% during the past 6 years.

SEC Announces Agenda For May 13 Meeting Of The Equity Market Structure Advisory Committee
SEC

SEC announced that its Equity Market Structure Advisory Committee will hold its first meeting on May 13. The meeting will focus on Rule 611 of SEC Regulation NMS, known as the “Order Protection Rule” or “Trade-through Rule.”

Rule 611 requires trading centers to have policies and procedures designed to prevent “trade throughs” – trades at prices that are inferior to displayed and immediately accessible quotations at other trading centers.

PLY: What a pertinent, cracking topic to begin their work – will the committee just ‘trade through’ or is it going to address a rule which forces anybody to connect with any venue no matter how dismal their market share? I am all for competition but this rule has ended up merely wrapping the market infrastructure in yet more cable, being directed to venues which are, alas, nebulous.

OCC Owners Want Dibs On Half The Pie
Lynne Marek – Crain’s Chicago Business

Options Clearing Corp. has acted as a low-fee industry utility in processing options trades for 42 years.

OCC Executive Chairman Craig Donohue won regulators’ initial approval (reported last month) of a deal that calls on the four exchange owners, including CBOE, to bolster the clearing company’s weak capital reserves with $150 million; in return, they’ll have dibs on half the company’s profit.

PLY: Even the hint that a rebate may be removed is usually enough to render any counterparty incandescent. So it is proving here, although noise appears in danger of crowding out the rational debate. Then again perhaps the whole idea of OCC’s ownership structure has become somewhat antiquated? I don’t mean their open clearing model which has made US equity options a great landscape of competition but perhaps there needs to be a window to allow those who want to have the benefits of ownership and the burden of meeting ongoing capital calls which may be hanging over the CCPs for many years to come as we get to grips with the brave new world and OCC fulfills its obligations as a SIFMU?

India – Sebi Allows 18 Months For Migration To National Bourses
Anirudh Laskar – Livemint

Sebi on Friday allowed 18 months to companies listed on exiting and de-recognized regional bourses to migrate to national stock exchanges such as the BSE or NSE.

‘FMC-SEBI Merger Will Bring More Participants To The Market’
Shishir Sinha – The Hindu Business Line

PLY: Here’s hoping.

NZX’s Disciplinary Arm To Review Penalties
New Zealand Herald

NZX is looking to beef up the penalties its disciplinary arm imposes for breaches of stock market rules, including the introduction of fines for directors of companies which break listing rules.

JPX: Opening Of Singapore Branch
MondoVisione

JPX announced that subsidiaries Tokyo SE and Osaka Exchange will open a branch office in Singapore on May 1, 2015 replacing the current representative office in the city.

Private Markets

CEESEG Mulls Sale Of Ljubljana Bourse
Djordje Daskalovi – SeeNews

CEESEG is considering selling the Ljubljana bourse, CEESEG spokesperson Julia Resch said on Friday.

“We have received interest from several parties in the Ljubljana SE” (Resch).

Resch added that CEESEG is currently looking into several options and will check the economically reasonable offers.

PLY: A fascinating development. With the right agile management the Slovenian bourse has great potential – it does not fit easily into a larger bureaucracy such as the Austro-Hungarian bourse empire model at its current size. A fascinating development, particularly if Vienna begins to sell assets, where might it end?

European Power Bourse Epex Spot To Swallow Anglo-Dutch APX
Reuters

European power bourse Epex Spot will absorb Anglo-Dutch rival APX group, which handles spot electricity trading in Britain, the Netherlands and Belgium. Amsterdam-based APX, currently owned by Belgian power transmission system operator (TSO) Elia and its Dutch counterpart TenneT, will become a fully-owned subsidiary of Paris-based Epex Spot, the companies said.

PLY: An interesting deal as the power business remains a very exciting element of the European landscape.

Press release here.

Saudi Regulator Confirms June Opening For Tadawul To Foreign Investors
CPI Financial
Saudi Arabia’s Capital Market Authority Announcement In Regard To The Rules For Qualified Foreign Financial Institutions’ Investment In Listed Shares
MondoVisione

Irish Stock Exchange: New Online Process For ISIN Applications Coming In June
MondoVisione

MtGox ‘Lost Coins’ Long Before Collapse (subscription)
Ben McLannahan – Financial Times

MtGox was in effect insolvent long before it collapsed, according to a report that claims thieves were routinely stealing the digital currency from its thinly protected vaults.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX is down 1.5%, FTIL is down 2%.

NSEL Investors Sue Govt Agencies, Allege Shoddy Investigation
Business Standard

The NSEL Investors’ Action Group said the probe should be conducted by a joint investigation team of the Economic Offences Wing, Central Bureau of Investigation and Enforcement Directorate, the three respondents in the suit.

PLY: ..and that investigation needs to be faster. Amen to this article.

The Tangled Web Of NSEL
Aarati Krishnan – The Hindu Business Line

The problem with most financial fraud investigations in India is that they get caught up pursuing red herrings and debating tangential issues, to such an extent that the actual victims are finally left in the lurch. The NSEL scam, which broke in July 2013, seems to be taking a similar course. Though multiple agencies, three investor action groups and the Centre have all been frenetically pursuing the case, sometimes at cross-purposes to each other, there is no material move towards its resolution.

So given all the claims and counter-claims, who is responsible for the scam? More importantly, what’s the way forward for investors?

PLY: Pertinent questions as a clearly dysfunctional bureaucracy fails on every count to resolve the situation, despite there being considerable assets which have been encumbered for many months.

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

Technology

Oslo Børs Release 8.6 North Sea – GO!
MondoVisione

Oslo Børs confirmed the decision to Go Live with Millennium Exchange Release 8.6 North Sea for the Equities- and Fixed income markets on Oslo Børs, Oslo Axess, Nordic ABM and the Burgundy markets as of start of trading Monday 20 April 2015.

Regulators Face Tech Dilemma In Age Of Electronic Trading (subscription)
Peter Guy – South China Morning Post

PLY: This article notes “Regulators can’t distinguish between good or bad innovations as technology challenges the concept of ethics and trading.” Of course this isn’t news but it remains newsworthy, precisely because:

Regulators never could (discern in terms of innovation);
When folk like me tried to get them and the market generally to think about it from the mid 1990’s onwards, there were always “other priorities.” Now we have a mess. A great deal of coherent thought and analysis needs to be effected laterally to work out the ongoing mess and find ways to better understand the market failures / pain points and how/where regulators are able to help through better rules and/or indeed stepping aside and letting the innovations make markets better…

Read our Premium A Taste Of HFT Scandal Brief – Part 1, Part 2, Part 3

Products

Mexico Unveils New Swaps Rules To Boost Transparency
Reuters

Mexico’s central bank on Friday unveiled new rules aimed at limiting risk in the swaps market, despite concerns the measures could push trades into the US where such instruments are subject to less oversight.

The Mexican rules are in line with regulation being hammered out by US regulators seeking to boost transparency in the $690 trillion global derivatives market.

Career Paths

Amman SE‘s Board of Directors has elected in its meeting held on Monday, April 13, 2015 Mr. Marwan Al-Bataineh as Chairman of the Board, Mr. Azzam Ya’eesh as Vice Chairman of the Board and Mr. Mohammad Shneiwer as Secretary of the Board.

FOW reports that Markit has parted ways with Nick Dyne, its MD and co-head of fx.

NY Times reports that David Makol, known for pursuit of insider trading cases while at FBI, joined SEC.

Financial Calendar

Bahrain Bourse (BHB) will host the Arab Federation of Exchanges (AFE) Annual Conference 2015 in partnership with Thomson Reuters
SGX Q3 Results for Financial Year 2015 (FY2015)
Nasdaq Q1 2015 Financial Results

New announcement

SEC announced that its Equity Market Structure Advisory Committee will hold its first meeting on May 13 – see agenda here.

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

Crowdfunding

Crowdfunding Platform RocketHub Acquired For $15 Million
Catherine Clifford – Entrepreneur

RocketHub, has been bought by entrepreneurship resource center EFactor in a deal worth $15 million. New York City-based RocketHub, which operates in over 190 different countries and regions, will continue to exist as its own brand under the EFactor umbrella.

For RocketHub, which launched in January 2010 and has not raised more than $400,000 in capital in its history, the deal is a significant financial win. With the money, RocketHub will grow and add on to its existing suite of products, says co-founder Alon Hillel-Tuch.

Assetz Capital Raises Over £3 Million Through Seedrs
MondoVisione

Round consolidates Seedrs’s role as the crowdfunding platform of choice by other crowdfunders. Seedrs has now raised more than £4.5 million for crowdfunding and P2P lending platforms including Assetz Capital, Trillion Fund, Landbay, CrowdLords, CrowdCanDo and PledgeSports.

PLY: Fascinating deals in crowdfunding – if you want to support a mobile game, our modest crowdfunding platform Hanza Trade is nearly there with our second project – Skyter.

Other stories

Jon Corzine Considers Launching Hedge Fund (subscription)
Julie Steinberg & Rob Copeland – Wall Street Journal

Jon S. Corzine, the embattled former MF Global CEO & ex-Chairman of Goldman Sachs, has discussed plans to start his own hedge fund in recent months starting with cash from Mr. Corzine’s personal wealth and a handful of outside investors and projected around $150 million in assets under management.

PLY: Interesting development, do you get a discount on management fees if you back both Duncan Niederauer’s proposed fund and Governor Corzine’s?

March 2015 FESE Monthly Statistics Now Available!
FESE

Latest monthly statistics here.

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