April 30 2014


GFI and Warsaw results flat, BME on a post depression bounce, SIBEX a shambles. ICE scoops ISDA fixing, swaps, swaps, swaps, “market not rigged” SEC Chairman agrees with me, while Deutsche Bank cannot sell its Gold/Silver Fixing panel position. MCX publishes PwC report for bidders and there’s more on warehousing, HK-Shanghai links and rating agency confusion. ISE may resume suing CBOE too.

Lots to read, happy scrolling!

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

New: HFT1: The Market is Not Rigged
– first in a series about HFT and the issues arising…

Gordon Bennett! Low Latency Data At The New York Yacht Club?
– a follow up to HFT: The Early Years

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

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

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Public Markets

BME Q1 Financial Results

Best quarterly result since 2010 and the best Q1 of the last 6 years
Q1 Revenue €86 million, up 17.8% YoY, EBITDA +27.2% to €60.9 million, efficiency ratio is 29.2%, more than 21 points above sector average, Return on Equity (ROE) 41.1%, over 27 points above the sector average.

Q1 BME net profit 2014 totalled €42.2 million, an increase of 27.9% Y/Y, 11.1% higher than the previous quarter. Third consecu­tive quarter of improved results, best quarterly results since 2010 and the strongest first quarter results since 2008.

PLY: The numbers remind me of the Philander Chase Johnson maxim: “Cheer up, the worst is yet to come.” Google Translate reckons my comment can be liberally translated thus in the Castillian vernacular: “Incluso los gatos muertos españoles pueden rebotar.”

WSE Q1 2014 Financial Results

Revenue Eur 20,6 mln in Q1 2014, up 8.2%
EBITDA Eur 12,6 mln in Q1 2014, up 2.5%

WSE Quarterly Report for Q1 2014 here.

PLY: Not very exciting numbers for a not very exciting quarter. Polish stocks are pretty flat and the Polish stock exchange retains great potential but needs dynamism, surgery and to forget about the value destructive CEESEG merger plan. There is much to be done, or competitors will eventually break into the picture.

GFI Group Q1 2014 Financial Results

Total revenues $240.7 mln in Q1 2014, down 1.5%
Net revenues $202.4 mln in Q1 2014, up 0.4%

PLY: GFI is stuck in the same interim position as all IDBs in transition. The future is the only thing which matters. If you haven’t already, see my Premium Post: ICAP Explores A New Galaxy and our excellent guest posts by Jake Pugh: here and here.

Sibex – Annual Report 2013

Loss Lei 3.33 mln (USD 1.03 mln) in 2013, compared to Lei 2.97 mln in 2012 (USD 885k).

Balance sheet here.

PLY: The usual travesty from SIBEX where there is no coherent management, less of a plan and yet a stunning potential remains. Of all the results, this is the most disappointing, there is no excuse for these increasing losses.

MCX Reveals Audit Report On FTIL Ties
Anirudh Laskar – Livemint

On Tuesday MCX gave in to demands by potential investors and released the findings of a special audit conducted by PwC that raised questions around so-called related party transactions and questioned whether dealings between the exchange and its parent FTIL had been conducted at “arm’s length”.

The move came shortly after FTIL, which holds a 26% stake in MCX, said it had not seen the report, sought to distance itself from it, and threatened legal action against MCX and PwC.

PLY: Against the background of Jignesh Shah’s ongoing mantra to create open fair, free markets for all in commodities and elsewhere, it is somewhat ironic that the PwC report complains about a lack of price transparency when it comes to related party transactions between the likes of MCX and FTIL. The bald numbers are fairly impressive, no wonder they are reluctant sellers given how much MCX was paying them:

MCX Paid Rs. 709 Crore (USD 117.5 Mln) To FTIL, Group Firms: PwC Report

MCX entered into agreements with related trading parties and paid about Rs. 709 crore (USD 117.5 mln) to erstwhile promoter FTIL and group firms without following proper documentation process.

Known Parties Manipulated Trades On MCX, Says PwC Audit
The Economic Times

A few related parties of MCX and its promoter FTIL conducted trades on the bourse without the intent to take a genuine market position. Such “wash trades” were part of the transactions these related parties conducted on MCX over the years in violation of regulatory norms, an executive summary of the PwC audit posted by MCX on BSE’s website states.

FTIL Rejects PwC Report On MCX, Warns Of Legal Action Against Auditor

FTIL on Tuesday rejected a special audit report by PwC on corporate governance at the commodity exchange and said it will take legal action against the bourse and PwC for painting a wrong picture in the report.

PLY: Plus ca change, FTIL arguably threatens to scoop a place in the Indian Bar Association Hall of Fame for ability to litigate first and ask questions after…so far as I understand they were threatening to sue even before the report had been published…

CME Earnings Projected To Increase

Wall Street is expecting higher profit for CME when it reports Q1 results on Thursday, May 1, 2014. Consensus estimate is a profit of 83 cents a share, a rise from 73 cents a year ago.

SEHK & HKSCC Issue Participants Circular On Shanghai-Hong Kong Stock Connect

The Stock Exchange of Hong Kong Limited (SEHK) and Hong Kong Securities Clearing Company Limited (HKSCC), wholly-owned subsidiaries of HKEx, published circulars and related materials to their respective participants to provide information on the key features of Shanghai-Hong Kong Stock Connect.

Presentation by HKEx CEO Charles Li at a Media Briefing on Shanghai-Hong Kong Stock Connect – View Webcast.

HKEx CEO: Hong Kong-Shanghai Link To Speed Yuan Internationalization
Gregor Stuart Hunter – Wall Street Journal

A pilot program linking the Hong Kong and Shanghai stock exchanges will form a key part of China’s plans to internationalize its currency, the CEO of HKEx said on Tuesday.

HKEx: Funds From Cross-Border Investments Cannot Be Re-Invested

HKEx said that funds related to cross-border stock investments between Shanghai and Hong Kong could not be used for additional investment purposes, in a bid to control risks. HKEx CEO Charles Li, speaking at a news conference on Tuesday, said settlements would be based on net amounts to minimise cross-border fund flows.

“Money never leaves the channel … only when there is a net position, we carry it to China,” Li said.

ICE Benchmark Administration To Become New Administrator Of ISDAFIX

ICE announced that following an extensive selection process managed by ISDA, ICE Benchmark Administration (IBA) has been appointed as the new administrator of ISDAFIX.

ISDAFIX is leading global benchmark for interest rate swaps. It represents the average mid-market swap rates for four major currencies: Euro (EUR), British pound (GBP), Swiss franc (CHF) and U.S. dollar (USD), at selected maturities on a daily basis. Market participants use ISDAFIX to price and settle their derivatives contracts and as a reference rate for floating rate bonds.

PLY: The bits of the business which ICE wants from NYSE Euronext are making progress. There is a great indexing / admin business building out here. Meanwhile the fate of the NYSE remains unclear with the company de facto leaderless it seems q.v. the abject failure to engage in the HFT debate.

ICAP Cuts Brokers In Move Toward Electronic Trading (subscription)
Jenny Strasburg & Scott Patterson – Wall Street Journal

London-based ICAP this week cut about half a dozen so-called voice brokers who specialize in IRS, products that fluctuate in value as interest rates move. The layoffs include some at a Jersey City, N.J., desk known internally as “Treasure Island” because of its history of profits.

PLY: There is a clear trajectory, as we discussed on April 9th.

Deutsche Bank Resigns From Gold Price-Setting Panel (subscription)
Francesca Freeman – Wall Street Journal

Deutsche Bank has failed to sell its seat on the London gold-fixing panel following a three-month search for potential buyers, raising fresh concerns about the credibility of the historic benchmark. The German lender is one of five banks that set the twice-daily gold “fix”—a snapshot of the market price—in a process that has operated more or less unchanged since 1919. The bank had been looking for someone to buy its seat after announcing in January it was exiting the fixing panel as part of a wider scaling back of its commodities business. On Tuesday, the bank said it has resigned its seat, as well as its place on the three-bank silver-fixing panel having failed to find a buyer…

PLY: A blow for the price setting panel that nobody wants to join it but in the frenzied atmosphere of possible EU regulatory attacks and even legal action for redress, it is not surprising that counterparties saw this as a risk-weighted issue as opposed to one which provided a window of opportunity to develop the market…

Gold and Silver may yet be headed for an ICE-fix solution.

Europe Coffee, Cocoa Warehouses Seek To Temper New Exchange Rules
Sarah McFarlane – Reuters

European coffee and cocoa warehouse companies want NYSE Liffe to temper strict new warehousing rules designed to prevent logjams, the industry association said on Tuesday.

In January NYSE Liffe announced changes to its cocoa and coffee grading and storage rules, which including a limit on how long warehouses can charge rent when delivery or transfer of stock is delayed.

ISE Hopes To Renew Litigation Against CBOE (subscription)
Joe Parsons – FOW Intelligence

International Securities Exchange (ISE) has filed a petition with the US Court of Appeals for the Federal Circuit (CFAC) to reopen its case against CBOE.

EI reported on April 8th CBOE’s statement on the court ruling in ISE patent litigation.

EU Watchdog To Clarify Sovereign Debt Ratings Rules
Huw Jones – Reuters

EU’s regulator for credit rating agencies will clarify new rules on publishing changes to sovereign debt ratings to help investors confused by firms’ differing approaches. The big three of Standard & Poor’s, Moody’s and Fitch have each responded differently to rules laid out by the ESMA, which authorizes and regulates credit rating agencies in the 28-country bloc.

PLY: More rules, more confusion, will the EU ever learn? Probably not, given that the ratings agency pogrom is a political attack against independent financial analysis that dares to demonstrate where government has no clothes. Hence confusion is a likely centrepiece of EU attempts to discredit any justifiable criticism over their spendthrift ways nationally and at Brussels level.

Fears Raised Over Hong Kong Dark Pool Rules (subscription)
Michelle Price – Financial News

The world’s largest asset management association has voiced concerns over the Hong Kong regulator’s move to rein in private share trading platforms, warning the new rules could increase the cost of trading for investors. London-headquartered ICI Global — which represents funds managing more than $1.4 trillion — has urged the Hong Kong Securities and Futures Commission to “proceed cautiously” with a proposal, published in February, to bar retail investors from accessing so-called dark pools.

Credit Suisse’s Jain Says Life Would Go On Without Dark Pools
Sam Mamudi – Bloomberg

Ridding the U.S. stock market of dark pools would be the wrong move, though it wouldn’t be disastrous, said Bob Jain, Credit Suisse’s global head of asset management.

The current controversy over the functioning of stock markets is overblown, said Jain, who ran the Zurich-based bank’s equities business for almost four years until late 2012. Until it stopped reporting data last year, Credit Suisse’s dark pool was ranked as the largest in the U.S.

“If dark pools went away it wouldn’t be the end of the world, but I don’t think that would be the right structure for the equity markets,” Jain said.

DB1 Sees No Risk From High-Frequency Trading, Taxes
Nandini Sukumar – Businessweek

DB1 dismissed concerns that greater regulatory scrutiny of HFT in Europe or a financial-transaction tax will hurt the company. “There will be further discussion on” HFT, Gregor Pottmeyer, the exchange’s CFO told analysts today on a call to discuss first-quarter earnings. “For our business, we don’t think we are negatively impacted.”

PLY: Headline looks a bit blithe that FTT won’t harm the business whereas I think Pottmeyer is saying he doubts an FTT will happen? Any actual FTT will be utterly material on DB1, if nothing else the damage done to Europe’s market infrastructure will be significant…

Growth Financing For Startup Companies – Package Deal Needed
Deutsche Borse

Deutsche Börse is currently looking into options for financing startup companies by offering and facilitating financing via capital markets, in line with its principles of integrity, transparency and investor protection. As part of these efforts DB today brought together young companies with professional investors in Frankfurt.

PR Newswire To Ask Companies To Delay Late Releases To Sidestep Rapid Traders (subscription)
Scott Patterson – Wall Street Journal

PR Newswire will recommend that its clients, including publicly traded companies, wait to issue late-trading news releases until at least one minute after markets close in order to sidestep high-frequency traders who are often able to trade on market-moving information ahead of the closing bell.

PLY: As per recent discussions on the topic which note the time lag required to be after the conclusion of the closing algo process.

SEC Chair To Congress: ‘The Markets Are Not Rigged’
Sarah N. Lynch – Reuters

SEC Chair Mary Jo White flatly rejected claims that retail investors are being fleeced by high-frequency traders who can use their speed to jump ahead with buy and sell orders that fetch better prices.

“The markets are not rigged,” White told a U.S. House of Representatives panel on Tuesday, in response to a blunt question from New Jersey Republican Congressman Scott Garrett.

“The U.S. markets are the strongest and most reliable in the world,” she added.

PLY: Interesting line, White defends the agency… That may yet demonstrate how little she understands about the market, although she is right HFT1: The Market is Not Rigged as my Premium comment relates (written before White testified).

MOU Of Strategic Partnership & Cooperation Between Arab Common Exchange Holding And NASDAQ OMX

NASDAQ OMX and Arab Common Exchange Holding (ACX Holding) have signed a MOU that will build on their collective achievements to enter into a long-term strategic partnership to establish a pan-Arab network of exchanges owned and run by the private sector to serve the entire Arab capital markets.

PLY: Sounds interesting.

Private Markets

Liquidnet Reports Strong First Quarter Performance – Record Principal Traded In Both Liquidnet APAC And EMEA

Liquidnet, the global institutional trading network, announced strong performance for the first quarter of 2014, including record quarters of principal traded in both Europe and Asia.

PLY: Institutional Liquidity Pools are serving the buy side effectively. Good results from Liquidnet especially in Asia and Europe (where I remain proud to be a non-executive director).

Stakeholders Approve Nairobi Securities Exchange Public Listing

Shareholders Friday gave their consent at the AGM to the planned public listing of the Nairobi Securities Exchange (NSE) as the sale of the bourse’s shares to the public nears.

NSE AGM press release here.

PLY: Looking forward to the Nairobi IPO.

CBI Set To Question Bhave Over MCX-SX

CBI will soon examine former SEBI chairman CB Bhave as it plans to conclude its inquiry against him and ex-member K M Abraham, Jignesh Shah-founded FTIL and MCX among others in connection with alleged irregularities in granting sanction for operating the new Stock Exchange MCX-SX.

Lima Stock Exchange To Reduce Mining Junior Listing Fees (subscription)
Alex Emery – BN Americas

Lima stock exchange will reduce listing fees for mining exploration companies in a bid to boost dwindling trading volume.

In May last year, Bolsa Mexicana de Valores purchased 1.21 million of the bourse’s Series A shares at 10.5 soles ($4) each, representing 2.16% of Bolsa de Valores de Lima’s A shares in circulation, to raise its total stake to 8.4%.

Bitcoin Entrepreneur Pleads Not Guilty To Money-Laundering (subscription)
Christopher M. Matthews – Wall Street Journal

Well-known bitcoin advocate Charlie Shrem and his alleged accomplice pleaded not guilty to running an alleged money-laundering scheme that funneled the digital currency to users of the online black-market site Silk Road. Mr. Shrem, 24 years old, was arrested in January along with another man, Robert Faiella, in what the Manhattan U.S. attorney’s office said was a conspiracy to help Silk Road customers anonymously purchase everything from narcotics to forged passports online.

Dividend News

CBOE declared a quarterly cash dividend of $0.18 per share of common stock payable on June 20, 2014 to the unrestricted common stockholders of record on May 30, 2014.

GFI has declared a quarterly cash dividend of $0.05 per share payable on May 30, 2014 to shareholders of record as of May 16, 2014.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX down 3% as yesterday’s excitement that they would be paying NSEL investors on the back of MCX stake sales while FTIL is down 4% as worries emerge from the PwC report being circulated.

FTIL Shares Hit Upper Circuit Yesterday On Rumours Of Paying NSEL Investors
Business Today

Shares of FTIL were locked at five per cent upper circuit yesterday, following rumours that NSEL was paying off investors.


NYSE Computer Error Prompts Cancellation Of Almost 20,000 Trades
Callie Bost, Sam Mamudi & Eric Lam – Bloomberg

A computer malfunction yesterday caused almost 20,000 erroneous trades that were later canceled. On the NYSE Amex Options market, 12,830 orders involving 462,468 contracts were busted, while the tally at NYSE Arca was 6,932 trades and 34,484 contracts, according to notices sent by the exchanges. Affected securities included Apple, Amazon, Facebook, MasterCard and the SPDR S&P 500 ETF Trust. The erroneous trades happened from 9:30 a.m. to 9:43 a.m. New York time yesterday.

MarkitSERV Helps Industry Begin Clearing OTC Equity Derivatives At OCC

Markit announced that MarkitSERV is providing trade affirmation, connectivity and trade status messaging services to support clearing of OTC equity derivatives by OCC, the first clearinghouse in the US to clear these types of transactions.

TMX Atrium Deploys Accedian Performance Assurance Solutions Worldwide
Business Wire

TMX Atrium has deployed Accedian performance assurance solutions worldwide. A tailored combination of network performance assurance platforms, elements and modules are now integrated into TMX Atrium’s network, providing a global QoS monitoring system to assure ultra-low latency connections for financial services connectivity.

Markit Plans Re-Launch Of Corporate Actions Service (subscription)
Michael Shashoua – waters technology

Data services provider Markit plans to launch a new web-based platform for its Markit Corporate Actions service, in about two months, near the one-year anniversary of its acquisition of the business.

Markit acquired the business, previously called the Global Corporate Actions Validation Service, from DTCC in June.

Leveraging Big Data In Market Surveillance – A White Paper By Scila Discusses How To Leverage Big Data Techniques When Analyzing The Vast Amount Of Information Gathered As A Result Of New Market Regulation

Modern market surveillance applications process billions of transactions in real-time every business day. The current trend is that new regulatory and compliance requirements result in market data sets getting larger and an increasing need to process data from longer time periods.


CME Mulls Price Fluctuation Limits For Gold, Silver Futures
Frank Tang – Reuters

CME is considering the introduction of daily limits on price moves in gold and silver futures in a bid to rein in wild volatility that has spooked investors in recent years. CME at present has price fluctuation limits for futures contracts in some energy, agricultural commodities and financial products, but none for its precious and base metals products.

Derivatives Trading In Europe Remains Two-Horse Race

DB1’s Eurex and U.S. rival ICE will withstand challenges from rival bourses and be the dominant forces in on-exchange derivatives trading in Europe, a Eurex official said on Tuesday.

Speaking at the Reuters Financial Regulation Summit in London, Brendan Bradley, Eurex’s chief innovation officer, said derivatives remains a difficult market to crack.

JPX Eyes New Products, Commodities And Clearing (subscription)
Jonathan Watkins – FOW Intelligence

JPX is showing no signs of slowing its aggressive derivatives expansion, announcing plans for new futures, commodities and swap clearing.


GMEX Index Unit Strikes IRS Data Deal With Tullett Prebon Info
Faye Kilburn – waters technology

Global Derivatives Indices (GDI), the wholly owned index development and production subsidiary of derivatives exchange operator and consultancy GMEX has struck a deal with Tullett Prebon Information (TPI), the data arm of interdealer broker Tullett Prebon, to use the broker’s OTC IRS data in the calculation of its benchmark indexes.

Career Paths

Santiago stock exchange is under new leadership, with Juan Andrés Camus taking over as president and Eduardo Muñoz as vice president.

Pimco Equity Chief Plans Hires As Expansion Picks Up
Simon Jessop & Alexander Smith – Reuters

Pimco’s new global equity chief plans a first batch of new hires that could see her investment team grow by half as the U.S. bond powerhouse boosts its stock offering – and one of those running money will be her.

That equity expansion strategy has been honed in the three months since French-born Virginie Maisonneuve was hired by then-Chief Executive Mohamed El-Erian – before a high-profile bust-up with Chief Investment Officer Bill Gross led to El-Erian’s departure.

Financial Calendar


Thomson Reuters Q1 2014 earnings


CME Q1 results
BGC’s Q1 2014 financial results
ITG Q1 2014 financial results

New announcements

TMX Annual and Special Meeting for shareholders on Friday, May 23, 2014
Bulgarian SE AGM June 03, 2014
SunGard to Announce First Quarter 2014 Results on May 8, 2014

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

Analyst Notes

ITG Upgraded By TheStreet Ratings From Hold To Buy

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.

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