April 28 2014


PLY: Welcome to Monday’s Exchange Invest, where CME Europe has launched at last, JPX reports amazing numbers, ING or KBC may buy into Euronext while disclosure issues are slowing any FTIL stake sales in MCX. MOEX volumes boosted by Ukrainian issues, NLX add heavy hitters to board including Anthony Belchambers, usual swaps blah blah, EU energy regulation criticised, LME to add commitment of traders reports, Hong Kong road testing algos, Boerse Stuttgart Feline Good About Cats Acquisition, IEX plans to visit Europe, Judith Hardt talks Mifid II, West Bengal introduces transaction tax…& lots more, scroll on:

It’s great to see CME launching their European venture at last, I wish it every success and that they will soon have the CEO they deserve for this venue!

Also on the CME topic, Ray Cahnman, who I still regard as perhaps one of the wisest heads to grace exchange floors and subsequently become an electronic markets pioneer, has sent out a communique concerning the B-share directorship vote ahead of the CME EGM. I have taken the liberty of placing the story here on the Exchange Invest web site. (we will happily add as Guest Posts any similar discussions pertaining to exchange governance / elections at CME or any other entity).

Meanwhile, the latest five posts on Premium (more coming later) are:

New: OSOV No Argument
– democracy is an essential antidote to plutocracy –

New: The ZA Pivot
– Cinnober grabs the clearing advantage in South Africa –

ICAP Explores A New Galaxy

HFT: The Early Years

The Dark Pool Kiss of Death

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Public Markets

JPX Consolidated Financial Results For The Year Ended March 31, 2014, Unaudited

Click here to download JPX’s consolidated financial results for the year ended March 31, 2014, unaudited.

Net income 29,835 mln yen up 172.7%
Net income per share 108.68 yen compared to 64.59 year ended March 31, 2013

PLY: A vast jump in net income. Clearly JPX management are enjoying the fruits of Abenomics as well as their own merger synergies between Tokyo and Osaka.

JPX Update Of Medium-Term Management Plan For FY2013 To FY2015

Click here to download an update to JPX’s medium term management plan.

JPX Brings Tech Innovation To The Market, ‘Oligopoly’ Concerns Remain (subscription)
Anthony Malakian – waters technology

It took a while, but last summer Tokyo SE (TSE) and Osaka Securities Exchange (OSE) officially merged, forming Japan Exchange Group (JPX), which is now the third largest exchange in the world.

Futures Giant Begins Trading At Its New London Exchange
Jamie Dunkley – Irish Independent

PLY: Welcome to the CME Europe exchange launched at last with some 30 foreign currency pairs with a European flavoured core and biodiesel for a spot of diversity. We wish the project every success and look forward to the appointment of the new CEO in the near future.

ING Is Considering Buying A Stake In Euronext, CEO Says
Maud van Gaal – Bloomberg

ING Groep NV, the biggest Dutch financial-services company, is considering buying a stake in Euronext NV as ICE prepares to spin off the European stock-exchange operator.

PLY: A sort of ‘unstory,’ perhaps planted to put a spot of pressure on ING to do their bit for the Netherlands? If they really want to support Holland Financial Centre surely they ought to launch a buyout for the Dutch market alone, or look at an alternative platform given the federal failings of Euronext? Sensibly the Dutch government isn’t looking at wasting taxpayer money on this French regulator controlled white elephant. This story includes KBC as a new name in the list of possible investors alongside ING incidentally.

Citi Sells Cats Trading Platform To Börse Stuttgart (subscription)
Michael Marray – Risk

The move by Börse Stuttgart to acquire the Cats trading platform will alter the landscape of structured products trading in the German market and create a platform for European expansion. The deal is expected to close in May or June leaving Citi with a minority stake.

PLY: Another good development as the market I teasingly refer to as “the biggest European market English speakers have never heard of” continues to power forward. The addition of the Cats platform adds functionality on top of the existing EUWAX which remains a powerhouse of structured products in the German speaking world. EUREX is increasingly a direct competitor but Stuttgart remains nimble.

FTIL Completes Sale Of NBHC Stake To IVF For Rs 241.74 Crore (USD 39.8 Mln)
Business Standard

FTIL, which has been looking to raise funds by selling non-core assets, said it completed the sale of its entire stake in subsidiary National Bulk Handling Corporation (NBHC) to IVF Trustee Company for Rs 241.74 crore (USD 39.8 mln). NBHC, a warehousing and collateral management company, has a pan-India presence and operates 569 storage facilities with a capacity of over 1.47 million tonnes.

Previously reported on March 17th.

FTIL Fails To Finalise Bidders To Sell 24 % Stake In MCX
MCX Board Not To Share Findings Of PwC Report
Business Standard

Crisis-hit FTIL was on Friday unable to finalise bidders for sale of its 24 per cent stake in MCX as the potential buyers sought more time to submit binding offers on grounds that the bourse is not providing key information to them. FTIL has called another board meeting on May 2 to review the stake sale in MCX.

PLY: Not sharing the PwC special audit report is clearly a huge stumbling block for any stake bidder.

Reliance Capital Slams MCX For Non-Cooperation In FTIL Stake Sale
The Economic Times

Reliance Capital, the top bidder for shares held by Jignesh Shah-led FTIL in MCX, has complained to the regulator about “lack of cooperation” and non-sharing of vital information by the bourse and the seller.

PLY: The difficulty is that good faith is hard to come by where FTIL is concerned and hence there is always the issue that if the sale drags then various parties may litigate on the basis that FTIL is slowing the sale process – and indeed regulatory patience is doubtless very finite. Could the general election change the picture for FTIL? I wonder…

MCX May Disclose Part Of Audit Details To Bidders Of FTIL Stake Holders
The Economic Times

MCX could disclose the non price sensitive portion of a forensic audit of the bourse to bidders of promoter FTIL’s stake in it.

NZX Resumes After 15 Minute Delay
Adam Haigh – Bloomberg

NZX, operator of the country’s stock exchange, halted equity trading at 10 a.m. local time and the halt lasted about 15 minutes.

LME Plans To Launch Commitment Of Traders Report In July

LME plans to launch its Commitment of Traders report in July, providing increased data on long and short positioning as part of a sweeping package of LME reforms, including new rules to cut backlogs at warehouses.

Panic Trading Of Russian Shares Is Great For MOEX
Jason Karaian – Quartz

PLY: Volumes have doubled of late at MOEX against the rocky background of east-west relationships and indeed as European balances in Clearstream and Euroclear have apparently plummeted.

Asia Clearing Mandates To Go Live Before European And US Regulators Approve CCPs (subscription)
Keith Noyes – Risk

Crunch time for clearing has finally arrived – China, India and South Korea will all implement mandatory clearing requirements in the near future, while US and European regulatory issues around third-country CCP recognition remain unresolved. (It should be noted that Japan and other Asian jurisdictions have not worked out standard procedures for recognition either.) As a result, global banks face critical decisions about CCP membership and which markets they will participate in.

PLY: The only advantage to the indecision in Asia is that they may yet be able to spot and thus sidestep some of the key foibles of implementation/regulation in Europe and America.

Shareholders Take JSE To Task Ahead Of AGM
Ann Crotty – BDLive

JSE has been caught on the wrong side of shareholder activism again and has had to change the agenda it will put to its shareholders at its upcoming AGM. At the AGM in 2012, the JSE suffered the embarrassment of having its share incentive scheme voted down when it failed to get the 75% support it needed for the special resolution. The resolutions causing all the trouble this time around deal with Sections 44 and 45 of the Companies Act – two sections that have attracted increasing scrutiny from shareholders who are concerned about some of the unintended implications of the loose writing in the act.

PLY: In a bit of a rush to pixel so not much time to consider this fully but investors are concerned that various insiders could gain access to funding for all manner of purposes due to rather unclear rules.

Swaps And Derivatives: Tougher Capital Rules Boost Traders’ Feelings Of Security (subscription)
Philip Stafford – Financial Times

Last month ISDA asked members and swaps users if markets were safer now than before the financial crisis.

The New World Of Mifid II
Financial Times

PLY: FESE Director-General Judith Hardt passes on some wisdom about Mifid II: “done but not dusted” as the FT blurb puts it succinctly.

Energy Firms Warn On EU Derivatives Regulations (subscription)
Tom Fairless – Wall Street Journal

A letter sent last week to the European Commission by three organizations representing Europe’s biggest electricity and gas producers argues that tougher requirements on the type of collateral that must be posted to trade energy derivatives will be prohibitively expensive for nonfinancial firms.

PLY: More problems for not merely “financial” regulation but also the huge festering oasis of common sense which is EU energy policy.

West Bengal Lands A Blow On Commodities Trading
Sunil B.S. – Livemint

Trading volume at commodities exchanges are likely to fall sharply after the West Bengal government raised stamp duty on contract notes, making it unviable for short-term traders and arbitragers based in Kolkata who survive on wafer-thin margins. On 11 March, West Bengal increased the stamp duty on contract notes for commodity trades and linked the duty to the volume of trade.

PLY: West Bengal mimics Sweden (now reformed), Italy, France and perhaps soon the EU in a policy rush to destroy markets and impoverish consumers and industry alike.

HFT Is ‘Bad Influence’ (subscription)
Steve Johnson – Financial Times

The majority of financial market participants regard both HFT and the proliferation of dark pools and other off-exchange trading venues as having a negative effect on market efficiency, according to a survey of 700 organisations.

Dark pools are seen to drain liquidity from public exchanges and distort price discovery by most pension plans, sovereign wealth funds, insurance companies, asset managers and fund distributors, although almost a fifth regard their impact as positive.

LSE Launches Elite Programme For High Growth Companies

PLY: LSE has brought the ELITE Italy nurturing programme (launched 2012) to London with 19 member companies in the first tranche being groomed and advised through support from over 40 corporate advisory and investment partners.

Private Markets

CMC Markets Continues To Strengthen As EBITDA Increases By 260%

CMC Markets announces a strong trading update for the twelve months ending 31st March 2014. The final audited results for the full year will be released by September 2014. 260% improvement in adjusted EBITDA to £51.5 million with EBITDA margin remaining at the same level as seen in the half-year results at over 40%. The balance sheet is strengthening even further. Own cash reached £115 million, with minimal debt and a capital adequacy ratio of 233%.

Shree Renuka May Cut Back Stake In NCDEX; Wilmar Could Be Behind Move
Ram Sahgal & Sneha Shah – The Economic Times

Shree Renuka Sugars is likely to divest much of its stake in NCDEX, in the wake of bringing in Singapore based agricultural business giant Wilmar as a strategic partner in the company in February. The company’s stake in NCDEX declined to 11.38% after it sold 1.12% of its holding in the exchange to existing shareholder, Indian Farmers Fertiliser Cooperative Limited (Iffco), in March at an undisclosed price. Iffco’s holding increased to 10% following the deal.

Renuka Sugars is scouting for an investor to purchase 1.38%and the company may then sell a larger portion to an existing investor such as the NSE, which is keen on having a strong presence across all asset classes – stocks, bonds, commodities and currencies.

NSE, which holds 10% in the exchange (voting rights capped to 5%), could consider purchasing 5% from Renuka since shareholding norms in commodity exchanges are being reviewed by the finance ministry.

Tech Edge May Help BSE Regain Market Share; IPO Likely By Year-End
Sounak Mitra – Business Standard

Asia’s oldest bourse Bombay SE (BSE), is banking on its new technology that has reduced response time of orders to gain market share, and is gearing up for an IPO by end of 2014.

“An IPO could not happen as regulatory clearances have been taking time. We need two approvals from regulators. We hope to dilute either 10 per cent or 25 per cent, depending on how many shareholders would like to exit. We hope to complete the IPO by end of 2014,” said Ashish kumar Chauhan, MD and CEO of BSE.

PLY: Note that Deutsche Borse announced last week that Javier Tordable will look after the open source software agreement etc for BSE from the DB1 side.

Thousands Of SMEs ‘Ripe To Come To The Market’
R Yegya Narayanan – The Hindu Business Line

Though the SME sector appears to be rather cautious about listing its shares on the SME platform of the National SE (NSE) , the exchange is bullish about the business volume this platform can generate over a period of time. Since September 2012, when NSE’s SME platform ‘Emerge’ was launched, only five companies have signed up.

SEBI Warns Ahmedabad SE; Bars Three Directors

Finding some irregularities, market regulator SEBI today warned Ahmedabad SE and asked it to be cautious while carrying out its functions, including financial dealings, and barred three of its shareholder directors from the board.

PLY: The Ahmedabad SE was run by Anjani Sinha worked before his position as CEO of NSEL during the scandal.

Bitcoin Slips Following News Of Fresh Restrictions In China
Alex Wilhelm – TechCrunch

PLY: BTC China has decided to stop accepting local-currency deposits from China Merchants Bank, a large financial institution in the country, pushing the cryptocurrency below $500.

More Regulation Offers Greater Security To Bitcoin Users (subscription)
Maija Palmer – Financial Times

PLY: A general catch up on the risks and issues pertaining to Bitcoin.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX and FTIL largely flat as the issue of information sharing and sale of stakes dominates the still festering crisis agenda.

NSEL Invites Bids To Sell Ferrochrome Stock Of Defaulter Firm
Business Standard

Crisis-hit NSEL has invited bids to sell off 14,200 tonnes of Ferrochrome stock belonging to a defaulter Metkore Alloys and Industries in order to recover the balance amount of Rs 95.08 crore (USD 15.6 mln). In total, Metkore Alloys, one among 24 members who defaulted, owes Rs 114.28 crore (USD 18.8 mln).


Volta Welcomes SSE Telecoms’ ‘LIGHTNOW’ Network At Its Central London Data Centre – SSE Telecoms’ LIGHTNOW High Capacity Networking Service Now Available At Volta, Adding Customer Choice And Service Mobility

Volta Data Centres, announced that SSE Telecoms, the UK’s leading provider of network infrastructure and data centre services and part of the SSE Group, has added Volta to its LIGHTNOW high-capacity, ultra-resilient optical networking service.

Making Algorithms Pass A Test Before Heading Out On The Road (subscription)
Dan Barnes – Financial News

Inexplicable crashes and freezes that disrupt markets and can cost millions of dollars in seconds mean that tighter policing of electronic trading is inevitable. While formal EU rules on the issue are not expected to come into force for another two years, Hong Kong has introduced a strict requirement that some market participants say could serve as a model for European regulation.

PLY Hong Kong’s SFC issues a form of road test for new algos. That purchase of lots of pointy headed maths expertise will doubtless not be good for regulatory budgets already stretched in the west.

Technology & Trading: Nasdaq’s Robert Greifeld (subscription)
Alexandra Wolfe – Wall Street Journal

Bob Greifeld profiled by WSJ

RTS To Offer CME Europe Connectivity From Day One

RTS Realtime Systems Group (RTS), provided access to CME Europe upon the exchange’s launch on Sunday.

MIAX Technical Alert: MIAX Options Exchange Will Be Conducting DR Testing On Saturday, June 7th

The MIAX Options Exchange will conduct a Disaster Recovery test on Saturday, June 7, 2014 from 9:00am to 12:00pm EST. All exchange members are strongly encouraged to participate.


FX A ‘Go’ On Eve Of CME Europe Launch (subscription)
Anish Puaar – Financial News

CME Europe gained final sign-off from the Bank of England to offer trading in FX futures Thursday, which will be a relief to the bourse operator after months of delays because of issues related to the settlement process for currency products.

The exchange had intended to launch last September but was forced to delay, citing a “technical issue around the delivery of physical currencies”.

Career Paths

NASDAQ OMX NLX announced the appointment of Anthony Belchambers, Rod Banus and Andrew Chart as NEDs of NLX.

NASDAQ OMX NLX press release here.

PLY: If nothing else NLX seems to be sending a message to the market that it will be in business for a while yet despite ongoing speculation that it has no future. A trio of useful additions particularly Anthony Belchambers in his first such outing post FOA while Rod Banus is another canny hire for board heft.

The Bank of England and FCA have announced the appointment of Antony Townsend as Complaints Commissioner.

Financial Calendar

DB Q1 2014 earnings results
Sibex – Sibiu SE AGM

This week

Thomson Reuters Q1 2014 earnings
GFI Group Q1 2014 financial results
WSE Q1 2014 financial results

New announcement

Bulgarian SE AGM June 03, 2014

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

Analyst Notes

RBC Capital Increased Price Objective On TMX From C$50.00 To C$55.00 – “Underperform” 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.


Growing P2P Lenders Confront “Profound” Risks (subscription)
Fiona Maxwell – Risk

At first glance, P2P lenders appear to have no credit risk. The platforms simply act as shop windows for companies requiring financing, allowing them to appeal directly to retail investors – 28,562 individuals have lent a total of £265.4 million to businesses via the largest UK platform, Funding Circle, for example. But, even if they have no capital at stake in each loan, the P2P firms do take responsibility for the quality of their would-be borrowers and will suffer if investors take heavier than expected losses – a risk profile that makes them roughly comparable to rating agencies.

PLY: Interesting thinking here. P2P as long predicted is taking off – with huge ramifications for old-fashioned capital inefficient organisations. Or banks as some people refer to them.

Other stories

Flash Boys Heroes To Tour Europe (subscription)
Tim Cave – Financial News

IEX Group, the six month-old US stock exchange led by the heroes of Michael Lewis’s controversial new book Flash Boys, is to visit Europe for the first time in June as it seeks to build relationships with trading firms in the region.

PLY: We look forward to seeing IEX in Europe!

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