April 23 2014

elb2Cinnober scoops deal to provide clearing IT to Johannesburg. Canada sagely notes: The single market is in equities, not milk. Bidders gathering for Russell, CME Chairman wants to close out equity competition. Various Indian shuffles including power exchange closure, usual swap talk, CBOE unit teams up with Bitcoin exchange, SGX results arrive just as we go to pixel. Another cracking day’s issue – oh and if it’s your first day back after Easter, catch up with all the news you missed (and a lot of pith from yesterday) here.

Public Markets

SGX Posts Q3 Net Profit Of $76 Million

Revenue: $166 million, down 13% from a year earlier
Operating profit: $88 million, down 23%
Net profit: $76 million, down 22%
EPS: 7.1 cents, down 22%
Interim dividend per share: 4.0 cents

PLY: Uh oh. I signalled some time ago via Premium (A Year of Unprecedented Executive Change?) that Magnus Bocker is very exposed as SGX CEO. On first glance as we race to pixel, I can’t see anything about these numbers which will alleviate the tide of rumours that the personable Magnus may be out of office sooner than his full contract…

Kill Dark Pools: CME Chairman’s Fix For Broken Stock Market
Matthew Leising – Businessweek

CME Chairman Terrence Duffy, has a solution for those seeking to fix the U.S. stock market: kill dark pools: “Fix the fragmentation issue, and you’ll fix the problem,” Duffy said. “We need to have 100 percent of that liquidity on exchanges.”

Duffy’s position aligns him with his biggest rival: Jeffrey Sprecher, CEO of ICE. Sprecher’s company, which like Chicago-based CME Group has its roots in futures, recently bought NYSE.

PLY: I cannot agree. Apart from anything else that lazy catch-all definition of “dark pools” is tediously misrepresentative of the equity ecosystem where there are multiple value additive players. Competition has been good for markets – otherwise the NYSE would be an even more flaccid organisation than it is today. Market structure needs reform but in the discussion, a sense of proportion would be welcome. Simply saying “close it all down” is as lazy a theorem as “the market is rigged” – can we produce a more adult debate at exchange C-suite level, please?*

*To be fair, at least Terry Duffy is part of the debate unlike the New York Stock Exchange which has abrogated its market leadership with its CEO displaying an increasingly incredible silence in recent days.

CME’s Duffy: Market Absolutely Not ‘Rigged’

CME Chairman Terry Duffy doesn’t believe the market is “rigged” and looks at the wealth and opportunities it creates for investors and companies.

PLY: Yip, Yip and thrice Yip, cannot agree more with Terry Duffy here.

Clearstream & Citco Announce Citco Global Securities Services Transaction

Clearstream and Citco have signed an agreement for the sale of Citco’s Cork based Financial Institution Hedge Fund custody processing business to Clearstream for a sum in the mid double digit million euro range. The deal allows Clearstream to significantly expand its hedge fund services for financial institutions whilst enabling Citco to strategically focus on its core fund investor client base – namely Fund of Hedge Funds, Family Offices, Insurance Companies and Pension and Endowment Schemes – via its Citco Alternative Investor Services (CAIS) division.

PLY: At first glance in the rush to pixel, another useful additive deal to the Clearstream powerhouse.

A Stock Market More Transparent Than A Pint of Milk
Kevan Cowan – The Globe and Mail

The last time you purchased or sold shares on the stock market, did you think of the price of milk? Probably not, unless you were buying shares in a dairy company.

PLY: Kevan Cowan of TMX offers an simple article which ought to remind multiple parties, especially those endlessly dismissing exchanges as ‘fixed.’ A very constructive contribution to a heated debate.

LSE Switches Auditing To EY (subscription)
Harriet Agnew – Financial Times

LSE has replaced its auditor for the first time since it became a listed company in 2001, the latest FTSE 100 mandate to change hands as the European audit market undergoes wide-ranging reform. The UK exchange said it would drop PwC and replace it with EY after completion of the audit for the year ending March 2014.

PLY: Unsurprising, a standard rotation following new EU rules to the same effect.

No Extra Taxes On HK-Shanghai Stock Link
ChinaDaily Asia

To help allay investors’ concern about double taxation on trading shares as part of the proposed Hong Kong/Shanghai stock exchange link, a spokesman for the Chinese securities watchdog, Deng Ge, stressed the guiding principle that no extra taxes or fees will be levied administered under the Qualified Foreign Institutional Investors (QFII) until the Ministry of Finance and State Administration of Taxation adopt further administrative policies.

Slow Start To Swaps Trading Revolution (subscription)
Gregory Meyer & Michael Mackenzie – Financial Times

PLY: I always expected a slow start while a consulting/media cabal expected huge upheaval (Y2K plus ca change and all that). This article has those trying to justify their erroneous previous outlook driven by narrow linear groupthink as well as those with a much greater capacity for insight such as the excellent Lee Olesky of Tradeweb.

MCX – Submission Of Special Audit Report By PwC

PwC have submitted their final report on the Special Audit. The said report shall be placed before the MCX Audit Committee at its Meeting to be held on April 23, 2014 and at the Meeting of the BoD to be held on April 26, 2014, for deliberating and deciding the further course of action to be taken.

Private Markets

CIBC, Buyout Firms Circle Russell Investments – Sources
Greg Roumeliotis, Mike Stone & Euan Rocha – Reuters

Private equity firms CVC Capital Partners Ltd and Silver Lake have teamed up to pursue Russell Investments, as have Warburg Pincus LLC and TPG Capital LP while CIBC has also joined the bidding.

Northwestern Mutual Life Insurance Co, which owns Russell Investments, is hoping to find a buyer for both the investment management and indexes businesses of Russell for as much as $3 billion.

PLY: Selling Russell as one unit is the wrong approach. Much better value can be had and indeed the future of the business would be best as 2 separate units (asset management and indexes). However, that doesn’t fit with incumbent CEO Len Brennan’s desire to continue running the business as a whole.

Closing Bell For Madras SE?
Bharani Vaitheesvaran – The Hindu Business Line

Madras SE, the first to be set up in South India, may stop operations shortly. The 76-year-old exchange has failed to secure a formal tie-up with the National Securities Clearing Corporation Ltd (NSCCL), a subsidiary of the NSE, and achieve the net worth target, and hence may soon cease to be a trading interface for investors.

National Power Exchange Plan Shelved; CERC Withdraws Permission
Business Standard

After dilly-dallying for nearly five years, promoters of National Power Exchange have decided to wind up the company. National Power Exchange is jointly promoted by NTPC, PFC and NHPC and private sector Tata Consultancy Services. Following the promoters’ decision, electricity regulator CERC has withdrawn the permission granted to the exchange for starting power trading business.

PLY: Currently there are two power bourses in India, Indian Energy Exchange (IEX – promoted by FTIL and therefore with a large stake for sale – circa 28% undiluted) and Power Exchange India.

Erbil Market For Securities To Be Opened In August

Erbil market for securities board said that it has held a joint conference with the international financial institutions to mobilize financial and moral support to open the market next August.

Bitcoin Trading Platform Atlas Partners With National SE (subscription)
Michael J. Casey – Wall Street Journal

PLY: A good move. The CBOE owned NSE, a US equity market minnow, has all the prerequisite regulatory permissions and hence is in a good position to partner with New York-based Bitcoin exchange Atlas ATS and thus propel Atlas forward as a regulated market.

SSX To Allow Investing In Bitcoin

Caribbean-based investment marketplace the Startup SE (SSX) will allow investors or any size to back companies using their bitcoins. Launched in June last year, the SSX complies with the legal framework of regulations of the Dutch Caribbean Securities Exchange (DCSX), an international exchange for listing and trading securities. Bitcoin investment will be processed by the GoCoin payment exchange.

PLY: Good move by Ian Haet & team at the SSX.

At Mt. Gox Bitcoin Hub, ‘Geek’ CEO Sought Both Control And Escape
Sophie Knight – Reuters

In June 2011, when customers of now-bankrupt bitcoin exchange Mt. Gox agitated for proof that the Tokyo-based firm was still solvent after a hacking attack, CEO Mark Karpeles turned to the comedy science fiction novel “The Hitchhikers Guide to the Galaxy”…”Don’t come after me claiming we have no coins,” Karpeles said, according to a transcript of that online discussion. “42 is the answer.”

PLY: Arcane back story for lovers of Adamsian parallel universes.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX is off 1%, FTIL down 3% as clearly there remains nervousness about what/whether FTIL will sell in MCX.


JSE Chooses Integrated Clearing Technology From Cinnober

PLY: A brilliant breakthrough sale for Cinnober and a blow to LSE whose platform (pre-Millennium) powered much of the South African infrastructure in a deal created by current CEO Nicky Newton-King’s predecessor Russell Loubser.

Direct Edge Expands Attributed Quote Program (subscription)
Max Bowie – waters technology

BATS Global Markets’ Direct Edge Exchange is expanding its attributed trading program to allow participating firms to show their order flow as being comprised of retail orders, rather than revealing their identity.


HKEx Metals Contracts Aim To Pave Way For Future Mainland Tie-Ups (subscription)
Enoch Yiu – South China Morning Post

HKEx unveiled detail of contracts it is launching to spur commodity trading in the city as part of a bid to attract mainland investors and pave the way for future tie-ups with established mainland commodity exchanges in places like Shanghai, Zhengzhou and Dalian.

HKEx Announces Plans for its First Asia Commodities Contracts – press release here.

Presentation by HKEx CEO Charles Li and Head of Asia Commodities Rebecca Brosnan at a Media Briefing on Launch of HKEx Asia Commodities New Products – here.

LME Seeks To Lure Dinner Guests From Tables To Metal Trading

LME is attracting a growing crowd to its Asian gala dinner this year, with about 60 percent more attendees. The biggest metals bourse is finding it harder to replicate those gains in trading in the region. Asia accounted for 18% of electronic trading in the LME’s benchmark three-month futures at the end of 2013, an annual increase of just 2%. Yet China alone is estimated to be using at least 45% of the world’s copper and aluminum.

CME Overhauls Daily Grain Price Limits
Tom Polansek – Reuters

CME said on Tuesday it will implement a new system for setting daily price limits for U.S. grain and oilseed futures next month, applying limits to markets including corn, soybeans and wheat that will reset twice a year based on underlying price levels as well as removing price limits for all grain and oilseed options.

India – NSE Ready To Extend Currency Trading Hours; SEBI Nod Awaited

National SE (NSE) on Tuesday said it is ready to extend trading hours for currency traders and is awaiting a nod from market regulator SEBI. “We are geared up to change currency trading timings as and when SEBI allows us to do,” NSE MD and CEO Chitra Ramkrishna told reporters on the sidelines of the bourse-organised Futures Tech Summit.


FTSE TMX Global Debt Capital Markets Signs Agreement With PiP For Latin America Fixed Income Indices

FTSE TMX Global Debt Capital Markets has signed a cooperation agreement with Proveedor Integral de Precios (“PiP”), a leading multi-national price vendor in Latin America, to provide a range of fixed income indices. PiP currently manages over 100 of the most widely used government and corporate bond indices in Mexico, Colombia, Costa Rica and Peru. Going forward these indices will be rebranded as FTSE PiP.

Career Paths

Deutsche Börse has hired senior exchange executive Javier Tordable to lead its cooperation with the Bombay SE as it continues efforts to expand in Asia.

Liquidnet announced that Bob Garrett has joined the company as Head of Technology and a member of the leadership team.

Stock Exchange of Thailand (SET) announced that today members’ AGM elected 3 new members of its board of governors to replace those whose terms will end on May 27, 2014.

Suthep Peetakanont, Chairman of the Board and Chairman of the Executive Directors of Capital Nomura Securities pcl, Pichet Sithi-Amnuai, President of Bualuang Securities pcl, and Professor Kitipong Urapeepatanapong, Chairman of Baker & McKenzie Limited, were elected to serve two-year terms from May 28, 2014 – May 27, 2016. Governors whose term will end on May 27, 2014 are Suthep Peetakanont, Chaipatr Srivisarvacha and Rapee Sucharitakul, while Suthep Peetakanont was re-elected for a second term.

Kesara Manchusree was elected SET’s twelfth president, with a four-year term running from June 1, 2014 to May 31, 2018.

David Saunders and Gunner Burkhart have been appointed as senior advisers at FCA. Saunders is a former CEO of the British Competition Commission (anti-trust body) which was replaced this month by a new body, the Competition and Markets Authority while Burkhart is a former managing director at Nomura International who will advise on wholesale and market issues.

P2P lender, Prosper Marketplace, has announced it has named former eBay Australia CFO Macy Lee as CFO. As CFO, Lee will work closely with CEO Aaron Vermut, Executive Chairman Stephan Vermut, and President Ron Suber to manage the company’s rapid growth and expansion as more people turn to peer-to-peer lending to borrow money to refinance high-interest debt, fund large purchases, as well as invest money in a new asset class that delivers consistent returns. Prosper recently announced it had surpassed $1 billion in loans.

Data Vet Richards Starts New Advisory Firm (subscription)
Michael Shashoua – waters technology

Data industry veteran Dale Richards has founded Island 20 Ventures, a Toronto-based advisory firm specializing in financial markets technology, including information products, Big Data, analytics and data management.Richards was most recently a strategist at Northern Ireland-based data management software vendor First Derivatives, where he served until January, having previously served as president of US operations and head of data management and corporate development at the vendor between July 2010 and October 2013.

Financial Calendar


MarketAxess Holdings Q1 2014 results

BoD of Dubai Financial Market PJSC will hold a meeting at 2:00 PM at Borse Dubai to discuss the financial performance of the company and approve the Review report and condensed consolidated interim financial information for the quarter ended 31 March 2014.

This month

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
GFI Group Q1 2014 financial results

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

Analyst Notes

Credit Suisse Upgraded The Rating On NASDAQ OMX From Neutral To Outperform – Price Target Raised From $40.00 To $42.00
ICE “Overweight” Rating Restated By JPMorgan – $253.50 Price Target

Why NASDAQ OMX Will Fly Above $40
Brian Pacampara – The Motley Fool

PLY: The Fool gets bullish on NASDAQ stock.

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.


New Crowdfunding Rules: Implications For Small Businesses
Jonathan Thornton & Guy Wilmot – The Guardian

SMEs are increasingly looking at crowdfunding as a way of raising finance without dealing with bureaucratic banks and fickle investors. However, new rules by FCA, which came into force recently, regulate certain types of crowdfunding.

PLY: A brief review by some professional advisors sitting on the fence concerning what are horribly flawed crowdfunding rules which have left the likes of France a more open market…

Yip, you read that right.

Other stories

HKEx CEO Charles Li: Charles Li Direct

HKEx CEO Charles Li’s latest blog discusses LME Week Asia & HKEx’s four new commodities contracts in Hong Kong.

Monetary Authority Of Singapore And Autoriti Monetari Brunei Darussalam Sign MOU On Bilateral Cooperation

The Monetary Authority of Singapore (MAS) and Autoriti Monetari Brunei Darussalam (AMBD) have signed a MOU on bilateral cooperation.

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