April 26th 2013

elb2After a relatively calm week, it proved a pretty frantic Thursday for market infrastructure investors. The poor folks of CBOE saw their 40th anniversary celebrations temporarily upset by a headline-grabbing glitch which left everybody rushing to hedge a volatility hole in the Vix only to find that…oops…’no Vix trading available, please try later.’
Elsewhere, for a glowing example of the sheer cluelessness of many when it comes to investing in exchanges, the Vienna – Warsaw story from Reuters is highly instructive. Value in small exchanges is huge (qv the Malta story below!) while the problem with the “New Europe” is the failure in most exchanges, led by Vienna, to capitalise on the market opportunity. Warsaw remains a great business and one with no reason to waste time on a merger with the misguided attempts to recreate Vienna’s 19th century empire. It is dismal analysis of the sort which emerges from the mouths of some in this story which helped me decide to create EI in the first place!
Elsewhere, interesting stories on the big forex brokers and much else to chew on – happy reading and have a great weekend. As always, we’re available to provide direct analysis on any stories included here and everything else happening in the wonderful world of financial market infrastructure.

Public Markets

CBOE dark for much of day due to software glitch

Reuters

A software glitch shut down the Chicago Board Options Exchange for half the day on Thursday, preventing trading in options on two of the U.S. stock market’s most closely watched indexes and delivering the latest blow to confidence in the way U.S. financial markets operate.

Analysis – Centuries-old Vienna bourse seeks lifeline in Warsaw

Reuters

The venerable Vienna Stock Exchange swallowed centuries of national pride this month to enter into talks that could lead to a merger with its upstart rival in Warsaw.
Vienna, the central capital market of the Habsburg Empire in the eighteenth century and later gateway to central and eastern Europe after the fall of the Iron Curtain, has been usurped by the Warsaw exchange GPW.WA, with its friendly regulation and privatisations, as the main arena for investing in the region.

Liffe’s battle with TOM has bigger implications

Futures & Options World

Yesterday, news broke that NYSE Liffe had become the latest exchange seeking to protect the IP on an index licence with a legal challenge to Dutch rival The Order Machine (TOM). At the centre of the challenge is the TOM MTF Option, which was launched in January.

From Liffe’s perspective, the case is clear cut. It owns the IP on the AEX Index, TOM is offering a contract that it claims purports to be the AEX Index and causes confusion among clients. It is a clear breach of intellectual property laws, Liffe says

Private Markets

EEX, Powernext to combine gas trading from May 29

Reuters

The European Energy Exchange (EEX) and France’s Powernext will combine their gas trading platforms on May 29, as they wait for regulators to approve a full merger of their gas activities, EEX said on Thursday.
Their status as separate exchanges will remain and they will not create a joint venture for gas trading until energy and competition regulators give the green light.

Gain Capital Rebuffs FXCM Takeover, Buys Global Futures & Forex

Businessweek

FXCM made an unsolicited stock offer of $195 million for Gain Capital on April 8. The proposed transaction would “significantly undervalue” Gain Capital, the Bedminster, New Jersey-based company said today in a statement.

Gain Capital will pay about $108 million in cash, stock and debt for Sydney-based Global Futures, a provider of retail foreign-exchange and derivatives trading. The acquisition is expected to be completed in the third quarter of 2013. It will yield $35 million to $45 million in “operating synergies” in the first year after closing, according to a release from Gain Capital.

MSE registers pre-tax profit of €1.9 million

Times of Malta

The Malta Stock Exchange registered a pre-tax profit of over €1.9 million for the year ending December 31, 2012, an increase of €130,000 over the surplus generated the previous year. It was the fourth consecutive year that the MSE increased profitability.

 

Products

CME, ICE rivalry enters biofuel arena

Chicago Tribune

The battle between CME Group Inc. and the IntercontinentalExchange moves to the market for biofuel credits next month. CME will launch contracts to trade renewable identification numbers (RINs) on May 13, two weeks after the ICE debuts its RIN contracts.

Other stories

Derivatives reform in America

The Economist

The value of one form of derivative traded in America, known as a “swaps contract”, in which counterparties agree to exchange cash flows from two financial products, exceeds $400 trillion. The value of forwards and futures, another set of derivatives …

Options industry targets tax proposal seen as undermining market

Reuters

LAS VEGAS (Reuters) – The options industry is making efforts to defeat a proposal that would tax most financial derivatives on a “mark-to-market” basis by valuing positions based on their fair value.

Crowdfunding

Crowdfunding no start-up golden ticket

Stuff.co.nz

Proposed law changes allowing businesses to raise equity via “crowdfunding” platforms will not be a “golden ticket” for start-up success, says a securities law specialist. Crowdfunding is when individuals register on a website, such as Kiwi-owned …

Crowdwatch: Could Crowdfunding Save The U.S. Economy?

Business 2 Community

In its purest form, crowdfunding creates options for companies and organizations looking for ways to raise capital — a significant variable in an economy with close to 8 percent unemployment and slow GDP growth. According to the Mass Solution …

Using Crowdfunding to Bring Businesses to Life – E-Commerce Times

E-Commerce Times

The crowdfunding phenomenon has helped out many a charitable cause or artistic project. There is also the potential to attract venture capital for new businesses, but entrepreneurs hoping to tap into the wisdom — and checkbooks — of the crowd have been put on hold while federal regulators finish looking into the issue. In the meantime, entrepreneurs can do a little legal homework to find out if crowdfunding is for them.

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