August 01 2013

elb2 TMX results are in, CME earnings are imminent. State Street joins the SEF business with Bloomberg ‘confirmed.’ Ex-CEO CME in running for OCC Chair scoops Bloomberg while LSE’s IT arm has a new client. And there’s more…

Yesterday I checked into the Warsaw SE results call and it was quite entertaining to listen to the verbal dexterity of the CFO as he neatly tried not to commit to anything concerning the Vienna Exchange negotiations. In essence, I would translate his remarks as being what we have heard: that Warsaw management are not keen on the utterly flawed concept of a Vienna merger while some within the government are more keen as they see it as a way to gain political capital. Minority investors here need to speak up. True WSE stock is somewhat broadly held beyond the government’s voting majority but a few voices stating objections to the most dismal merger of equals proposal ever, could help tip the balance against a deal which will send Warsaw staggering backwards and materially harm the capital markets of Poland and the New Europe.

Finally, in a move not widely publicised, Betfair are raising fees – a minimum of 7% of profits apparently which is a rather rich take imho: the original 5% basic rate was significant enough! I fear the management are losing the plot.

Public Markets

TMX Q2 Results for the Second Quarter 2013

Revenue of $182.3 million in Q2/13, up 6% compared with Q1/13
Diluted earnings per share of 47 cents in Q2/13
Adjusted diluted earnings per share of 89 cents in Q2/13, up 14% compared with Q1/13
Adjusted diluted earnings per share of 89 cents excludes:
22 cents per share charge related to the sale of PC-Bond and related income tax expense;
5 cents per share charge related to an increase in deferred income tax liabilities resulting from the change in B.C. corporate income tax rate; and
15 cents per share of amortization of intangible assets related to acquisitions

PLY: Results just in, sending without comment as it’s publication time!

CME Earnings Preview

Expect CME results before the bell today with analyst consensus expecting $0.89 EPS on $803 million in revenues, for flat EPS growth and 1% revenue growth.

CME’s stock is up about 50% year-to-date which is quite a surprise given the lack of earnings and revenue acceleration..

PLY: I don’t see the surprise at all. There has been a clear increase in STIR interest as the taper effect has come closer and investors reevaluate the de facto home of US interest rate trading which will (sooner or later) tick up…and that’s even before any knock-on from Dodd-EMIR-Frank.

StateStreet’s SwapEx Files CFTC SEF Application

PLY State Street have produced new research showing State Street to be the ideal home for the buy side who are not yet prepared for Dodd-EMIR-Frank. Meanwhile they are SEF filing number 6 with their multi-asset SwapExSM.

FCA Considers Investigation Of Metals Warehousing
Reuters

PLY: In this case not so much the horse stable door bolt equation as the warehouse door is wide open long after the metals, er, stayed inside and showed no sign of bolting whatsoever even when cajoled by the owners of the metal in the first place. Inelegant metaphors aside, this is a big regulatory shift and presents many more questions than it answers, especially given how overstretched the FCA is already, dealing with its existing extensive mandates…

SGX Introduces New Rules On Votes & GM In Singapore
4-traders

PLY: SGX is enacting some fairly simple but logical reforms for AGMs clearly aimed at enhancing transparency.

Tel Aviv SE On Verge Of Serious Problems – Regulator
Reuters

TASE could face huge problems unless major regulatory changes are made to address a fall in trading volume.

Israel Securities Authority Chairman Shmuel Hauser said the body was working on a plan to alter the regulatory landscape, including measures to remove barriers, lower costs to companies and ease disclosure requirements, but did not elaborate.

PLY: Somewhat ironically, Israel was upgraded to developed from emerging status last year and promptly lost a wodge of investor funds it seems. Stock volume slid to an average of about 1.1 billion shekels ($309 million) this year and last, from 1.7 billion in 2011 and 2 billion in 2010. Having effectively ousted the Chairman and CEO, it will be interesting to see how the regulatory moves forward with what has been a somewhat unprecedented regulatory putsch – or at least so it seems from the outside…

SGX Launches Long Dated Securities Orders

SGX has launched long dated order types, allowing investors to retain buy or sell orders for up to 30 days.

PLY: FIFO execution has just added a hefty degree of duration on SGX.

Dividend News

TMX declared a dividend of $0.40 payable August 30, 2013 to shareholders of record at the close of business on August 16, 2013.

Private Markets

Bloomberg SEF Approved

PLY: Temporarily from October 2nd…at least it demonstrates the CFTC are trying to process applications rapidly (Bloomies filed first June 4th). The multi-asset facility will open when Dodd-Frank takes effect.

Mt. Gox Still Grappling With Slowdown (subscription)
The Wall Street Journal

Mt. Gox, the largest bitcoin exchange, is still experiencing slowdowns with processing customer withdrawals, but is not having any liquidity problems following legal and regulatory blows in recent months.

PLY: Not as slow as a metals warehouse but Mt Gox has clearly suffered a huge reputational blow and is struggling.

Technology

Millennium Tech For Argentine CSD Caja De Valores S.A.

PLY: The usual tedious hype about being a business partner is added to a good tech deal. Am I alone in being bemused that the same company which so comprehensively messed up Taurus is touting itself as a CSD development partner? Well, as I said before LSE has moved a long way of late and do have more CSD skills than years gone by.

Bolsa & Mercados Argentinos exchange (B&MA) incidentally is a new standalone spin-off from Buenos Aires SE and appears to be a vehicle to try and reunite various cousins in Argentina’s diverse markets structure.

Jordan & Jordan Deploys Nasdaq OMX FinQloud
Finextra

Jordan & Jordan (J&J) today announced that their Execution Compliance & Surveillance (ECS) service for broker-dealer algo/execution analysis is now running on NASDAQ OMX FinQloud, a secure, cloud computing platform designed exclusively for the financial services sector powered by Amazon Web Services (AWS).

StarHub Launches Singapore’s Fastest Network To Support Financial Firms
zdnet.com

Telco StarHub has launched Singapore’s fastest network connection, up to four times faster than existing networks supporting financial firms and their latency-sensitive trading applications, the Ethernet Low Latency Network which offers a guaranteed low latency of under 1 millisecond round trip delay for SGX co-lo orders.

Products

EEX: Belgian And Dutch Power Futures To Be Launched In September

On 2 September 2013, the European Energy Exchange (EEX) will launch trading in Belgian and Dutch futures which are settled physically with the delivery of power.

Indexes

NYSE Euronext Launches AEX® Ext
4-traders

The AEX® Ext index tracks the Dutch benchmark AEX-Index®, but with extended calculation and distribution hours, from 8.00 am to 6.30 pm CET (9.00 am to 5.30 pm for AEX-Index®). The AEX® Ext index is calculated on the basis of the AEX-Index® future traded on NYSE Liffe (FTI), adjusted for dividends and interest payments. Paris launched the similar CAC 40® Ext last month.

Career Paths

OCC Said To Approach Former CME CEO Donohue For Chairman
Bloomberg

Options Clearing Corp. is in talks with former CME CEO Craig Donohue to become Chairman.

PLY: Craig has a good pedigree from his lengthy CME experience and would make a sound choice for OCC to develop from the lengthy tenure of its outgoing Chairman/CEO Wayne Luthringshausen…

Adel S. Al-Ghamdi Appointed CEO Of Saudi Stock Exchange (Tadawul)

Adel Saleh Al-Ghamdi began his work as Chief Executive Officer of the Saudi Stock Exchange (Tadawul) on Monday, 1 July 2013, succeeding Mr. Abdullah S. Alsuweilmy, who recently left his position.

Financial Calendar

CME will announce Q2 financial results today
BGC Partners will announce Q2 financial results today
Investment Technology Group will announce Q2 financial results today

Analyst Notes

NYSE Euronext “Neutral” rating reiterated by Zacks – $44.00 price target
Tullett Prebon rating lowered to “Neutral” at HSBC – GBP 375 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

Alarm Bells For Crowdfunding As Bubble Pops For Soap Start-up (subscription)
Financial Times

One of the first companies to raise money via crowdfunding in the UK has ceased trading, sounding alarm bells for investors in what has become one of the fastest growing investment areas in the country.

Bubble & Balm, a fair trade soap manufacturer, was the first start-up to raise money via equity crowdfunding platform Crowdcube, in 2011.

PLY: It’s always good to see the socialist media like the FT keen to jump on the sensationalist bandwagon. Clearly a shame for investors and interesting to see what else might have been done to avert collapse but the liberal peppering of this article with words like “bubble” and “alarm” really demonstrates the failures of modern media whose increasing desperation for readers results in sensationalism as opposed to sanguine analysis. Likewise, it helps entrenched and regressive regulations and of course infantilizes the private investor who can do as he wishes on Betfair but is hugely restricted from funding the real economy. Crowdfunding is a quantum shift in investment. We need to see the same from legacy media and regulators, speaking of which:

SEC Chairman: Crowdfunding Rules Coming In Fall
Crowdfund Insider

Chairman White says that finishing rulemaking for Dodd-Frank and the JOBS Act are top priorities for the Commission in the short term and was pressed by Senator Mark Warner (D-Va.) on the issue of crowdfunding, continuing his legacy of being bullish on the democratization of access to capital for small businesses. Ms. White was hesitant to provide a specific timeline: “I’ve been describing multiple front burners…The crowdfunding rulemaking is on one of those front burners. I define the front burner to be sometime into the fall.”

PLY: plaudits to Senator Warner for his support of Crowdfunding and good luck to Mrs White, we need sensible regulations asap!

Other stories

SEC Adopts Rules To Increase Protections For Investors With Assets Being Held By Broker-Dealers

New SEC rules (3-2 Commission vote), require broker-dealers to file new SEC reports with the Commission that should result in higher levels of compliance with the SEC’s financial responsibility rules.

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