April 23 2015

Wondrous milestones are ahead for Exchange Invest – with our 500th Anniversary and 2nd anniversary all falling into the same week in the middle of next month. Before then, may I just ask those of you not currently in a commercial relationship with our offices to consider support by Sponsorship or Premium Subscription?

Email me and let’s have a dialogue on the way you and your business can support the industry daily read on market infrastructure and give you more pith and insights going forward.

Meanwhile, we’re seeking interesting FinTech ideas to take to Startupbootcamp in London. My StartUp club in Poland Mission ToRun is co-organising the FastTrack pitch day in Warsaw, May 19th and we welcome participants from anywhere to apply…more details by clicking on the link below:

Warsaw 19 Poster Final

 

Today in Exchange Invest Daily: “Flash Crash” Flapping as Cerutti surprises by departing Euronext as CEO. ISDA AGM sounds like reality tv show as regulators trade barbs while KRX-Stoxx ink deal for cooperation. Xavier suggests a mega deal within 24 months…and much more…

New Premium posts:

Nope-n Access – The Incumbents Strike Back
NLX On Life Support
After NLX The Ramifications
Bloomberg Down – Embarrassing But Hardly Scorched Earth?

Happy Reading and Thanks to all our subscribers for their support You can Subscribe here.

And on top of that today we even have another new video today!

Here is the latest in my series of Cinnober Videos, discussing the new risk and clearing culture – here.

cinnober 7

 

Previous Cinnober videos

LME Clear’s impact on the clearing industry

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, Part 3, Part 4, Part 5, Part 6 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

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Public Markets

Nasdaq Q1 2015 Financial Results
Nasdaq

Net revenues were $507 mln, down 4% YoY
Total operating expenses $480 mln, up 39% YoY
Operating income $27 mln, down 85%
Diluted EPS $0.05, compared to $0.59

PLY: This just in as we raced to pixel…

SGX Q3 Results For Financial Year 2015 (FY2015)
SGX

Revenue $199 million, up 20% from year earlier
Operating profit: $103 million, up 17%
Net profit: $88 million, up 16%
Earnings per shares: 8.2 cents, up 16%

PLY: Outgoing CEO Magnus Bocker approaches the end of his tenure on a high note…

Bursa Malaysia Q1 2015 Financial Results
Bursa Malaysia

Revenue MYR 127 mln (USD 35 mln), up 3.1%
Profit MYR 47 mln (USD 13 mln), up 4.2%

PLY: While up north of the City state, markets have been slower, clearly.

Hellenic Exchanges Proposes Cash Return Of 0.11 Euros/Share
Reuters

Proposes:
cash return to shareholders of 0.11 euros per share
to increase share capital by 43.8 million euros ($46.98 million) by capitalising reserves
to decrease the share capital by 7.2 million euros to fund the cash return.

Says capital increase, decrease and cash return to be discussed on AGM of May 20, 2015.

See AGM agenda here.

LSE Chief Says Exchange Could Do Deal With Rival Within Two Years (subscription)
David Wighton – Wall Street Journal

LSE is likely to do a deal with one of the other big four Western exchange companies within two years, said LSE CEO Xavier Rolet.

“Market infrastructure is still a bit of a cottage industry. It is ripe for change. When there is an industry with competitive tension, consolidation tends to be not too far behind,” Rolet said in an interview.

PLY: Hmmm. An interesting approach to saying “we’re back for sale but you better expect to pay up.”

Odey Asset Management Ups Its Stake In Plus500 To 13%
Andrew Saks-McLeod – LeapRate

Plus500 continues to attract investment from astute wealth management firms as Odey Asset Management increases its stake in the company to 12.69%, with CF Odey Absolute Return Fund holding 9.71%, whereas all other funds hold less than 3% collectively.

PLY: Fascinating given what I see of Plus500 I find discouraging.

Read our Premium: FX – CHF Crisis – Brief

‘Flash Crash’ Arrest Puts Heat On Futures Market (subscription)
Nicole Bullock, Gina Chon, Philip Stafford & Michael Mackenzie – Financial Times
Flash-Crash Trader Sarao Fights Extradition In London Court
Suzi Ring – Bloomberg
‘Flash Crash’ Charges Spark Alarm Over US Regulation
Financial Times

When it comes to trading US equities, the solitary trader sitting at home has never been a match for a market dominated by powerhouse institutional investors and sophisticated computer systems. Such a popular perception has been turned on its head by US authorities alleging (reported yesterday) that an independent trader living on the outskirts of London contributed to one of the most embarrassing episodes for the equity industry and regulators, the “flash crash” of 2010.

Court grants Hounslow trader £5m bail as he fights extradition.

PLY: The supposed financial media are having a field day pooling their relative ignorance now Mr Sarao has been accused. The questions arising are clearly why it took the US authorities so long to find Mr Sarao, when clearly a lot of data was not that tough to ascertain…well, presuming you had the right systems of course…which presumably is the problem given how little granularity the world’s regulators’ have in data for such practices. Alas the media are frequently regurgitating warmed over insights akin to those about portfolio insurance from post October 19th, 1987, and presumably expecting people to pay for the privilege to be so poorly informed.

Flash Crash Hunt Homes In On Hounslow (subscription)
James Mackintosh – Financial Times

Accused handled only a fraction of the futures contracts traded.

PLY: James Mackintosh demonstrates an increasingly rare outbreak of perspective at the daily pinko, noting that while Mr Sarao made good money for a man, his profits were hardly a major impact on mankind – or on flash crash day 0.007 per cent of the $7.8bn of futures contracts traded, noting: “US market structure needs fixing. But true investors should worry more about whether US stocks are overvalued than whether trading tricks are costing them a couple of ticks extra.”

Fingering one person as the root of all foibles in a hypercomplex markets strikes me as a remarkable outbreak of reductionism to a single common denominator. Seven sigma in action, one might say. Clearly Mr Sarao appears to have played fast and loose but to be painted as the sole agent of the “flash crash” is to demonstrate profound ignorance of modern market structure. Speaking of which the Brussels Bugle gets better here:

Hounslow Not Origin Of Havoc In New York
Financial Times

Blaming a solitary trader for the 2010 ‘flash crash’ is disingenuous.

CFTC Head: Market Complexity A Factor In Time Taken To Charge Trader
Reuters
CME Statement In Response To The Navinder Singh Sarao Case
CME

“Nothing is more important to CME than the integrity of our marketplace. Following the Flash Crash on May 6, 2010, together with other regulators, we did a thorough analysis of all activity in our markets during the Flash Crash, and concluded – along with regulators – that the Flash Crash was not caused by the futures market. If new information has come to light, we look forward to reviewing it with the Commission. We fully support the CFTC’s actions to prosecute those who attempt to engage in fraud or manipulation. We are prohibited by law from releasing information about any individual’s trading behavior, including Mr. Sarao’s, so we are unable to comment further at this time. “

U.S., E.U. Regulators Trade Barbs Over Swaps (subscription)
Katy Burne – Wall Street Journal

Attendees at ISDA AGM in Montreal on Wednesday got a front-row seat to a continuing spat between international regulators over cross-border rules for the $700 trillion global swaps market.

Regulators Urge Swift Equivalence Fix
IFR

Jurisdictions that signed up to the G20 agreement in Pittsburgh almost six years ago, could ease the path to cross-border harmonisation of swaps rules by adopting a default position of recognising each other’s regimes, as current methods being used to determine equivalence are not working.

ISDA Study Shows Continued Fragmentation Of Global Liquidity Pools
Business Wire

Global derivatives markets are continuing to fragment along geographic lines as a result of divergent regulations across jurisdictions, according to new research published today at ISDA’s 30th AGM in Montreal.

An average 94.3% of regional European interdealer volume in euro IRS was traded between European dealers between July and October 2014. The share of the exclusive European dealer pool fell slightly to 84.5% in December 2014, reflecting a general decline in euro IRS trading activity between European institutions in Q4 of last year. In comparison, the exclusive European dealer pool for euro IRS averaged 73.4% in Q3 of 2013.

Market Data, SEF Confirmations & Error Trades In CFTC Sights Says Massad
FTSE GM
Remarks Of CFTC Chairman Timothy Massad Before The DerivOps North America 2015
MondoVisione

In a speech to DerivOps North America 2015, CFTC Chairman Timothy Massad highlighted market uncleared swaps – SEF confirmations and confirmation data reporting and error trades are now in CFTC sights.

NZX Questions Unlisted’s Rule Exemption Bid
Tina Morrison – NBR

NZX fears that exempting the unregulated Unlisted share-trading platform from new market rules risks undermining their aim to strengthen confidence in New Zealand’s financial markets.

As reported earlier this week, Unlisted is seeking an exemption from Commerce Minister Paul Goldsmith from the Financial Markets Conduct Act, which came into force in December and requires that it apply for a licence from the Financial Markets Authority, saying the costs would be too onerous for its market servicing smaller companies.

Private Markets

Nord Pool Spot To Operate Bulgaria’s Energy Exchange
European News

Nord Pool Spot, the energy exchange running Europe’s largest electricity market, signed Wednesday an agreement also to manage activity at IBEX, the Independent Bulgarian Energy Exchange.

As many as 380 companies from 20 states trade on the Nord Pool Spot. IBEX, on the other hand, was recently granted a 10-year license to organize the market in Bulgaria.

Deals In Dark Helped Bitcoin Take Off, Says Chief Scientist
Jemima Kelly – Reuters

Without dealings in the “grey areas” of the global economy, bitcoin might not have grown to be worth the $3 billion (1.99 billion pounds) it is today, according to Gavin Andresen, the closest thing the digital currency has to a CEO. Andresen, a self-confessed “all-around geek”, is chief scientist at the Bitcoin Foundation, a non-profit group he helped set up three years ago to support and promote the digital currency.

Dividend News

Nasdaq declared a regular quarterly dividend of $0.25 per share on the company’s outstanding common stock, an increase of 67% from the prior $0.15 per share quarterly dividend. The dividend is payable on June 26, 2015, to shareowners of record at the close of business on June 12, 2015. (press release here)

SGX – Interim dividend per share: 4.0 cents, unchanged

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX up 1%, FTI down 1%, of resolution we hear nothing. Alas once more.

Technology

GMEX Technologies & Avenir Partner With Agricultural Commodity Exchange For Africa – Providing A New Commodity Trading & Warehouse Receipts System For Developing Market Exchanges
MondoVisione

PLY: A good deal all round. Avenir will develop a new warehouse receipt system which will help ACE reach the next level. Good news for African commodity markets and indeed commodity markets as a whole in due course.

DB1 And SIBEX Sign MoU For Power Futures
MondoVisione

Deutsche Börse Market Data + Services and the Sibiu Stock Exchange (SIBEX), Romania, have signed a MoU. Under the MoU Deutsche Börse will provide trading technology to SIBEX to facilitate its plans to operate an exchange for trading electricity futures using M7.

PLY: Having wasted years, finally SIBEX makes a lurch forward towards an electricity market – a plan I posited before I left as CEO… Presumably slow is better than never and this will be a lifeline deal for management ahead of the AGM next week where shareholders are restive. However delivering a SaaS platform deal is a long way from creating a market. SIBEX is better at spending than building.

JPX Forecasts Bigger Historical Data Cloud (subscription)
Waters Technology

JPX) plans to expand its JPX Data Cloud historical data service to include full-depth quote data for its derivatives market, after initially launching the service in February.

OKCoin Superwallet Outlines New Blueprint For Bitcoin Industry
Pete Rizzo – Coindesk

OKCoin, the largest Chinese yuan (CNY) bitcoin exchange by volume, has a new product (in beta) dubbed the first ‘Superwallet’, the OKLink desktop wallet, currently in beta, promises to combine the best of both fiat mobile wallets and traditional bitcoin wallets. In effect, the Superwallet will allow users to spend BTC, CNY or US dollars at bitcoin-accepting merchants, converting fiat currency to bitcoin only at the point of sale as a means of transmitting the payment and settling the transaction.

The conversion will come at no additional cost to the user, who will pay a bid/ask spread on the purchase as they would when initiating a purchase with BTC.

PLY: Very interesting.

Products

Clearstream To Offer Settlement & Custody For Municipal Bonds In Romania
Automated Trader

A recent change in regulation now enables Clearstream to offer settlement and custody for municipal bonds in Romania. Clearstream is the first international ICSD to offer this service in the country through an indirect link to the Depozitarul Central (Romanian CSD), via its custodian Bancpost. The indirect link complements Clearstream’s direct link to the National Bank of Romania.

First accepted RON-denominated municipal bond will be issued by the city of Bucharest and have a value of up to EUR 500 million. Raiffeisen Bank Romania is the Lead Manager and Bookrunner, while BT Securities is the Manager. Bancpost is the local custodian.

PLY: Good for Clearstream.

ISDA: Over 50% Of IRD & 70% Of CDS Indices Traded On SEFs During Q1 2015
MondoVisione

Indexes

STOXX Limited & KRX Enter Into MOU
MondoVisione

PLY: Given the successful relationship pioneered by KRX and EUREX for cross listing ETD, this is a logical expansion of relations with DB1 at group level.

Career Paths

Euronext announced that Dominique Cerutti, CEO of Euronext N.V. and Chairman of the Managing Board, will leave the company on 15 July 2015. Mr. Cerutti, who joined NYSE Euronext in 2009 as President and Deputy CEO, has decided to take a new position as Chairman & CEO at Altran.

ENX press release here.

Stock Exchange of Thailand (SET) announced that two members were elected to its board of governors to replace those whose terms will end on May 27, 2015, at a general meeting of member companies today.

Charnchai Kongthongluck, President, Trinity Securities, was re-elected for a second term, while Chaipatr Srivisarvacha, CEO of KT ZMICO Securities, was chosen to take seat of Pattera Dilokrungthirapop. (Completed two terms).

Their terms will run from May 28, 2015 – May 27, 2017. Governors serve for two-year terms, and may serve no more than two consecutive terms.

Thomson Reuters announced the appointment of David Akellian as MD of Wealth Management. Akellian will be based in New York and will report to Abel Clark, MD, Financial sector.

Financial Calendar

This week

Arab Federation of Exchanges 2015 Bahrain Bourse (BHB) in partnership with Thomson Reuters
ISDA AGM in Montreal

New announcement

Oslo Børs AGM – May 18 2015
Philippine SE (PSE) AGM – May 2, 2015

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

Share Notes

Charles Schwab CEO Walter W. Bettinger sold 100,000 shares Tuesday, April 21st at an average price of $30.28 (bargain $3,028,000.00). He now owns 611,119 shares.

Analyst Notes

Macquarie Cut LSE To “Neutral” – GBX 2,466 Price Target
ICAP “Neutral” Rating Restated By Macquarie – GBX 488 Price Target
ICAP “Sell” Rating Reissued By Liberum Capital – GBX 405 Price Target

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.

Crowdfunding

P2P Lending Site Funding Circle Raises $150M Led By DST At A $1B+ Valuation
Ingrid Lunden – Tech Crunch

Time to make way for another startup juggernaut out of the financial world. Funding Circle announced that it has raised $150 million in venture funding, in a round that we have confirmed values the startup at over $1 billion.

While partial news of the financing leaked out earlier this month, now we have the full details. This latest round was led by DST Global, with participation also from Baillie Gifford, a fund managed by BlackRock, Sands Capital Ventures and Singapore’s Temasek.

Other stories

CFTC Staff Issue No Action Letters Providing Relief In Connection with Erroneous Swap Trades and Swap Trade Confirmations
CFTC

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