April 30 2015

elb2SAVE THE DATE: My focussed event about the Future of Finance, Young Markets will take place in Warsaw, Poland, on September 17th. More details to follow…

Meanwhile, I am delighted to announce the arrival of a new sponsor for Exchange Invest, GMEX Group whose CEO Hirander Misra commented: “It is great to support the highly relevant industry content and thought leadership of Exchange Invest through GMEX Group sponsorship. We look forward to working with Patrick and the team on an ongoing basis in addition to reading the high quality subscription based premium content.“

It’s great to have GMEX onside as innovators in markets and IT. Hopefully the first of many seeking to exploit the post OTC IRS marketplace and more in this world of opportunity.

Our 500th Anniversary and 2nd anniversary are looming in the middle of May and I am subsidising your daily ‘must read’ newsletter on exchanges – I feel it is only fair for that to change. So, please Email me and let’s have a dialogue on the way you and your business can support Exchange Invest to give you more pith and insights going forward.

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:

HKMEx Fate Brief NEW!
Pakistan Exchanges Merger Brief 
Flash Crash & Hound of Hounslow – Brief 
Taiwan SE Cross Trading Links Brief
India – GIFT Exchanges Brief
A Taste Of HFT Scandal Brief – Part 1, Part 2, Part 3, Part 4, Part 5, Part 6
Vietnam Exchanges Merger Brief
CVC Betfair Bid Brief
India – NSE Sales Brief
EU CMU Brief
EU FTT Brief Part 1, Part 2
NSEL Scandal Brief – Main File

Our Premium service is a unique source of industry analysis – insight in a low latency environment if you like. Can you afford not to be a subscriber? $120 per user/year helps keep Exchange Invest daily Free. Subscribe here or reply to this email and I will invoice you forthwith.

Today, Exchange Invest is a results frenzy with BGC, BME, DB1, Thomson Reuters while jubilant mood prevails at HKEx AGM with plans to expand trading capacity as volume booms. Swap discussions, Trayport for sale, Zagreb to buy Ljubljana SE from Vienna? Interesting growth market thinking from DB1 & NASDAQ Baltics while ‘the hound of Hounslow’ stays in the doghouse. NASDAQ launches Bitcoin notes and Christian Katz has a new appointment. All this and more – happy scrolling!

Public Markets

DB1 Q1 2015 Financial Results


Total revenue €693.4 mln, up 14.8% YoY
Net revenue €600.1 mln, up 16% YoY
EBIT €312.3 mln, down 9% YoY
Net profit €235.5 mln, down 1%

PLY: Results beat expectations but at the same time, DB1 benefitted from a US dollar gain. DB1 continues to slip relative to peers and the new CEO clearly has an opportunity to galvanise a business which has fallen into a degree of rallentando under the outgoing Reto Francioni.

BME Q1 2015 Financial Results


Revenue €93 mln, up 8.2%
EBITDA €66.3 mln, up 8.9%
Net profit €47 mln, up 11.5%

PLY: Close to consensus but BME remains rather overpriced as RBC’s Peter Lenardos notes this morning.

BGC Partners & GFI Group Q1 2015 Financial Results
BGC Partners


Revenues for distributable earnings $563.9 mln, up 26.5%
Adjusted EBITDA $117.1 mln, up 56.9%

GFI Group’s results from March, 2015 onward are consolidated with those of BGC.

PLY: With a yield curve becalmed by QE, BGC produce encouraging results.

Thomson Reuters Q1 2015 Financial Results

Revenues $3,044 mln, down 3%
Operating profit $407 mln, up 13%
Diluted EPS $0.38, up 12%

PLY: Slipping revenue but good profit numbers.

BGC Plans To Sell Trayport Unit After Receiving Approaches (subscription)
Philip Stafford – Financial Times

BGC Partners is looking to sell Trayport after being approached by several parties in recent months, Howard Lutnick, its CEO, has said.

BGC Partners said it was willing to sell the unit it inherited with February’s takeover of rival GFI Group, and hoped to have a deal completed by the end of the year.

FAO: CME held talks with BGC about buying GFI’s trading-software units, Trayport and Fenics – valued at more than $600 million.

Read our Premium BGC / GFI: Post Merger Disposals Brief

PLY: Clearly CME must expect to be in pole position here but there may be other bidders interested in the Trayport IT, IP and perhaps most importantly, remarkable list of exchanges, particularly in power, deploying their services. An interesting trade awaits.

Lawsuit Against Exchanges Over HFT ‘Unfair Advantage’ Dismissed (subscription)
Bradley Hope – Wall Street Journal

A federal judge dismissed three class-action lawsuits alleging stock exchanges gave high-frequency traders an unfair advantage, according to court documents.

The suits were inspired by allegations made in author Michael Lewis’ book “Flash Boys,” which last year argued the stock market was rigged in favor of exchanges, big banks and high-frequency traders.

On Tuesday, Judge Katherine Forest of the U.S. District Court for the Southern District of New York dismissed the claims, ruling that SEC approved of the way the exchanges distributed data.

The suit was filed against all of the U.S. stock exchanges, including those operated by BATS, Nasdaq and ICE.

Read our Premium: A Taste Of HFT Scandal Brief – Part 1, Part 2, Part 3, Part 4, Part 5, Part 6

SEC Proposes Cross-Border Security-Based Swap Rules Regarding Activity In the U.S.

DB1 Presents Plans For European Growth Funding

Programme launch set for June 2015. Initiative aims to bring growth companies and investors together. Concept to bridge funding gaps. First growth companies already on board.

PLY: Disintermediated funding platform, you don’t need an investment bank to join and seek funding. Interesting idea somewhere between crowdfunding and the traditional heavily intermediated exchange model.

HKEx:Poll Results Of The 2015 AGM

HKEx To Expand Trading Capacity Amid Boom (subscription)
Enoch Yiu – South China Morning Post

HKEx will expand its trading capacity to handle the increasing daily market turnover, said chairman Chow Chung-kong, who gained shareholder approval for a 40% pay rise.

“The current market rally that started from April 8 has shown that the average daily market turnover now stands at about HK$200 billion, which is three times the turnover of a normal day previously,” Chow said.

“HKEx is looking at how to expand our trading capacity and system to ensure they are ready to cope with even higher trading volume,” he said.

“Although the current trading volume represents less than one-third of our trading capacity, we always need to prepare and enlarge our system for when trading volume goes up.”

However, he did not give details on the costs or scale of this expansion.

Stock Connect Has Led To ‘New Normal’ In Market: HKEx Chief
EJ Insight

Read our Premium HKEx – SSE – Stock Connect Part 1,Part 2,Part 3

‘Flash Crash’ Trader Navinder Sarao Ordered To Remain In Custody After Failing To Pay Bail (subscription)
Chiara Albanese – Wall Street Journal

The “hound of Hounslow” has been remanded in custody after failing to pay £5 million ($7.7 million) in bail.

Read our Premium Flash Crash & Hound of Hounslow – Brief 

Nasdaq Baltic Publishes IPO Task Force Action Plan & Proposals

PLY: Sound basic plans. The Baltic states, like much of the “New Europe” suffers due to government apathy about markets – privatisation in the Polish model would be a good start in encouraging a stockholder culture as well as other items mentioned in the paper to encourage more listings and a better flow of capital.

Nasdaq Prepares To Remove “Pillar” Of Nordic Power Market

Nasdaq Commodities told traders its clearing house would stop accepting non-backed bank guarantees as collateral next year to meet EU rules, removing “a pillar” of the Nordic power market that could affect 60% of its participants.

The EU’s EMIR directive requires non-financial exchange members to use fully-backed guarantees to trade power and gas derivatives from March 2016, a measure aimed at reducing market risk following the global financial crisis of 2008-09.

LSE Says To Benefit From Ongoing EMIR Regulatory Changes

EMIR brings opportunities for group, and particularly LCH.Clearnet, with mandated clearing of OTC derivatives in Europe.

SEC Proposes Rules To Require Companies To Disclose The Relationship Between Executive Pay & A Company’s Financial Performance

ESMA Recognises Third-Country CCPs

ESMA has recognised ten third-country CCPs established in Australia, Hong Kong, Japan & Singapore.

Private Markets

Zagreb SE Wants To Take Over Ljubljana SE

Zagreb SE (ZSE) intends to take over Ljubljana SE (LJSE). CEESEG – the owner of LJSE – and ZSE have been negotiating a classical takeover for quite a while.

As announced last week by CEESEG’s spokesperson and confirmed by the group’s CEO, Vienna plans on selling LJSE that was bought in 2008 for EUR 47 million.

PLY: An interesting development, especially as this report suggests Xetra is of interest…when Zagreb currently uses NASDAQ… Not sure that makes sense, they could licence it after all. By the by, Ljubljana still has some perfectly usable tech of its own. If this results in a more dynamic market, great. My worry has been that for all the good work of Ivana Gazic and her team, the Croatian problem lies with a government machine which has not yet appreciated the merits of markets.

Carbon Trade Exchange & Minneapolis Grain Exchange Partnership
Agri Marketing

Carbon Trade Exchange (CTX) and Minneapolis Grain Exchange (MGEX) have announced the establishment of a new business relationship.

This exciting new partnership will facilitate the launch of CTX in the California Cap-and- Trade Program, with MGEX providing support and services for a spot market exchange trading Allowances and Offsets in the state-based program. The California Cap-and-Trade Program is designed to limit greenhouse gas emissions by establishing an annual cap on carbon emissions.

Kuwait Stock Regulator Plans Changes To Align Market With Global Norms

Kuwait’s Capital Markets Authority will separate the settlement of trades from its CSD and make the time allowed for the transfer of securities the same for all investors, to bring its practices in line with international norms, its vice chairman told Reuters.

The exchange, one of the oldest in the Gulf Arab region, has struggled in recent years because of a sluggish economy and a stagnant regulatory environment. Consequently, it has lost ground in the eyes of foreign investors to markets in the UAE, Qatar, and Saudi Arabia.

The World’s First proper Bitcoin Exchange Will Be Live In A Month
Kieren McCarthy – The Register

Bitcoin will officially enter the mainstream financial world next month when New York State’s Department of Financial Services (NYDFS) publishes a regulatory framework for the virtual currency, allowing virtual currency exchange itBit to become the first-ever legitimate Bitcoin bank. The NYDFS will publish its final “BitLicense Regulatory Framework for Virtual Currency Firms” in the next few weeks.

Previous comment and mentions re. BitLicense here, here, here and here.

PLY: Frankly I think “first proper Bitcoin exchange” is a ludicrous piece of hyperbole but then the story does emanate from New York…

Dividend News

CBOE declared a quarterly cash dividend of $0.21 per share of common stock payable on June 19, 2015, to the unrestricted common stockholders of record on May 29, 2015.

BGC Partners declared a quarterly cash dividend of $0.14 per share payable on May 29, 2015 to Class A and Class B common stockholders of record as of May 15, 2015. The ex-dividend date will be May 13, 2015.

Thomson Reuters – a quarterly dividend of $0.335 per share is payable on June 15, 2015 to common shareholders of record as of May 21, 2015.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX is flat, FTIL up 4.5% as clearly somebody thinks they have an inside track on corporate news of some sort…


Sweden’s Nasdaq Exchange Approves Bitcoin-Based ETN
Yessi Bello Perez – CoinDesk

Sweden’s Nasdaq exchange has approved a bitcoin-based ETN, opening up investment in the digital currency to those who do not want to directly purchase and hold bitcoins.

The Bitcoin Tracker One, launched by Stockholm-based XBT Provider AB, which is owned by the KnC Group and is expected to launch on 18th May.

Career Paths

Christian Katz, Division CEO at SIX Swiss Exchange, who decided last week to leave the Swiss group has been appointed Vice Chairman of the Board at Saxo Bank Switzerland.

Bilbao SE, a BME subsidiary, has appointed Manuel Ardanza as the new Executive Chairman of the Bilbao SE, replacing the deceased José Luis Marcaida.

Euronext – With reference to the AGM convening notice published on 25 March 2015, Euronext NV would like to state for completeness sake that under Agenda point 4, both Ramon Fernandez and Jim Gollan, who are proposed for appointment to the Supervisory Board, meet the best practice provision II.2.2 of the Dutch Corporate governance Code and should be considered as independent.

HKEx – Following the Government’s appointment of Anita Fung and Rafael Gil-Tienda and re-appointment of John Harrison and Margaret Leung, and shareholders’ election of T C Chan, Fred Hu and John Williamson as Directors of HKEx, HKEx’s Board considered the composition of its committees and consultative panels and appointed new members to certain committees and consultative panels with immediate effect as follows. The composition of the Risk Management Committee (statutory) and Clearing Consultative Panel remains unchanged.

HKEx’s Board Committeeshere.

Audit Committee

John Barrie HARRISON (Chairman)
CHAN Tze Ching, Ignatius
FUNG Yuen Mei, Anita (newly appointed)
KWOK Chi Piu, Bill
John Mackay McCulloch WILLIAMSON

Environmental, Social And Governance Committee

CHOW Chung Kong (Chairman)
Rafael GIL-TIENDA (newly appointed)
LEE Kwan Ho, Vincent Marshall (newly appointed)
LI Xiaojia, Charles
John Mackay McCulloch WILLIAMSON

Executive Committee

CHOW Chung Kong (Chairman)
KWOK Chi Piu, Bill
LEE Kwan Ho, Vincent Marshall
LEUNG KO May Yee, Margaret (newly appointed)
LI Xiaojia, Charles

Investment Advisory Committee

WONG Sai Hung, Oscar (Chairman)
Timothy George FRESHWATER
FUNG Yuen Mei, Anita (newly appointed)
HU Zuliu, Fred (newly appointed)

Nomination Committee

CHOW Chung Kong (Chairman)
CHAN Tze Ching, Ignatius
Timothy George FRESHWATER
HU Zuliu, Fred (newly appointed)
John Mackay McCulloch WILLIAMSON

Panel Member Nomination Committee

CHAN Tze Ching, Ignatius (Chairman)
FUNG Yuen Mei, Anita (newly appointed)
KWOK Chi Piu, Bill
LEE Kwan Ho, Vincent Marshall
WONG Sai Hung, Oscar

Remuneration Committee

CHOW Chung Kong (Chairman)
Timothy George FRESHWATER (newly appointed)
KWOK Chi Piu, Bill
LEE Kwan Ho, Vincent Marshall
John Mackay McCulloch WILLIAMSON

Risk Committee

CHOW Chung Kong (Chairman)
CHAN Tze Ching, Ignatius
Rafael GIL-TIENDA (newly appointed)
John Barrie HARRISON
LEUNG KO May Yee, Margaret

HKEx’s Board also appointed Bill Kwok to succeed Michael Lee to act as director and also the Chairman of OTC Clear for a term to be coterminous with his term of directorship with HKEx. In addition, HKEx’s Board also appointed Jeff Kwan, Treasurer of MTR Corporation Limited, to succeed Roger Hepper as a client representative director of OTC Clear for a term of three years. Both appointments take effect immediately.

Scoop reports that Patrick Strange has joined the board of NZX. Strange, who headed up Transpower, the national electricity grid operator, for six years, will join the NZX board as an independent director.

STOXX announced that Christian Kronseder will join the company as COO, as of May 1st, 2015.

Reuters reports that Ben Bernanke is joining bond giant Pimco as a senior adviser, as the firm seeks to bolster its star power following the departure of co-founder Bill Gross.

After Remaking CME, Donohue Is At It Again, At OCC
Joe Cahill – Crain’s Chicago Business

Previous comment yesterday and last week.

Financial Calendar


CME Q1 2015 Financial Results
ITG Q1 2015 Financial Results

New announcement

CFTC’s Global Markets Advisory Committee (GMAC) – public meeting – May 14, 2015 – press release here.

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

Analyst Notes

LSE “Outperform” Rating Reaffirmed By RBC Capital – GBX 2,600 Price Objective

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.


P2P Lender Funding Circle Now Offers Fractional Investment
Main Street

Other stories

Swiss Derivatives Review Issue 59

PLY: Good articles on commodities and other topics, worth reading.

Statement By SEC Chair Mary Jo White At Open Meeting On Cross-Border Security-Based Swap Rules Regarding Activity In The United States & Pay Versus Performance

Statement Regarding Proposed Amendments And A Re-Proposed Rule Regarding Application Of Certain Title VII Requirements To Security-Based Swap Transactions, SEC Commissioner Daniel M. Gallagher, April 29, 2015

Statement On Proposed Rules For U.S. Personnel And Certain Activities Of Non-U.S. Person’s Security-Based Swaps Dealing, SEC Commissioner Kara M. Stein, April 29, 2015

Statement At Open Meeting On Cross-Border Security-Based Swap Rules Regarding Activity In The United States, SEC Commissioner Michael S. Piwowar, April 29, 2015

Improving Transparency For Executive Pay Practices, SEC Commissioner Luis A. Aguilar, April 29, 2015

Dissenting Statement At An Open Meeting Proposing Mandated Pay Versus Performance Disclosures, SEC Commissioner Daniel M. Gallagher, April 29, 2015

Statement On Proposed Rule On Pay Versus Performance, SEC Commissioner Kara M. Stein, April 29, 2015

IOSCO: Emerging Market Regulators Aim For Deeper & More Resilient Capital Markets

Global emerging capital market regulators met in Cairo this week and reinforced their commitment to maintain market resilience while focusing on efforts to accelerate the sustainable growth and development of emerging capital markets.

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