August 02 2013

elb2 CME results were excellent and show great potential. Well done to our clients who have been long in recent times. Meanwhile BGC has lots of cash while ITG and TMX appeared more mixed. Meanwhile Indian stock was highly volatile yesterday capping a poor run for FTI and MCX. CrowdCube claims to be the world leader in crowdfunding while banks/brokers are trying to attack exchanges just for a change.

Oh, finally, a curious aside, Thailand has outlawed Bitcoin! Interesting reading:

Public Markets

CME Group Profit Beats Wall St Estimate As Trading Climbs
Reuters

Press Release here

PLY: The terror of the taper helped show the potential for CME. Numbers overall good, excellent overseas growth for CEO Gill, which helps diversify CME from being a pure dollar silo. Huge upside remains. Is LCH now wrongly positioned with less offset to its IRS business than CME? CME’s IRS clearing revenues interesting.

The call was interesting too. So far IRS volumes are really doing well at CME – better than I had expected – but note how costs are tumbling already. $2.75 per million clearing in Q1 was $2.38 in Q2. A million dollar Eurodollar future even charged to the lowest caste of customer costs under a dollar by comparison, nickels and dimes for many. Not trying to rain on the parade, just preparing expectations of where pricing will go – CME have always proven highly capable of making good profits on microcharges. Meanwhile with massive SEF competition ready to emerge on “DEF1” day, the days of multi-dollar per million executions fees are likewise soon to be consigned to the history of the ‘old’ OTC world.

BGC Partners Q2 Results

PLY: The biggest issue in the BGC results was not the q/q performance per se but how Howard Lutnick will structure the business now he has a 750 million dollar chunk of cash from the NASDAQ eSpeed disposal…

ITG Q2 Results

PLY: ITG saw a big jump in European trading with a more mixed picture in the US.

TMX Group Profit Tops Estimates As Listing Fee Revenue Rises
TMX Shares Trailing Exchange Peers as Volume Slumps
Bloomberg

PLY: A tale of two stories from the same source: TMX topped analysts estimates for earnings by 6 cents (89 to 83) but the stock has lost 7.6% this year and certainly momentum appears drained. True commodities drive much of the Canadian marketplace but the prospects for Tom Kloet’s retention as CEO look to be slowly dwindling as the exchange would benefit from new blood to energise its activities.

ICE Clear Europe To Introduce Client Clearing For Index & Single Name CDS
4-traders

ICE Clear Europe, will introduce client clearing for European credit default swaps (CDS) after receiving regulatory approval in the UK and US, October 7 for 43 European index and 121 corporate single name CDS instruments. 12 clearing members will participate in the pre-launch testing. In the U.S., ICE Clear Credit commenced client clearing in 2009 and has cleared $1.82 trillion in gross notional value for 250 clients to date.

PLY: For all those who think ICE may be slowed by digesting NYX, think again, management at ICE Clear Europe exemplify the high standards of the ICE empire.

Financial Technologies & MCX Shares Plunge (subscription)
Wall Street Journal

Shares of Financial Technologies (India) Ltd. fell nearly 65% Thursday after a commodity exchange owned by it stopped trading in most contracts.

The National Spot Exchange, India’s largest for spot trading in commodities, late Wednesday cited a sharp fall in trading volume for indefinitely stopping trading.

The news also hurt the share price of Multi Commodity Exchange Ltd., which runs India’s largest commodity futures exchange and is 26%-owned by Financial Technologies. Shares of Financial Technologies ended at 191.75 rupees, while those of MCX fell 20% to close at a record low of 512.05 rupees.

In a regulatory filing, Financial Technologies said it has no financial liability from the decision of the National Spot Exchange. MCX Chief Executive Shreekant Javalgekar said National Spot Exchange’s step won’t have any impact on MCX’s operations and financials.

PLY: The NSEL incident has had a savage impact on FT and MCX shares, perhaps more as a result of fears that the regulators can inflict incredible damage on exchanges with their ongoing and rather misguided policies in many areas…

MCX Sees No Impact From NSEL Suspension Of Contracts
Reuters

MCX does not see any operational or financial impact from the suspension of forward contracts by commodities bourse operator National Spot Exchange Ltd (NSEL), which shares its promoter with MCX.

Sebi Begins Probe Into FTIL, MCX Stock Crash
Economic Times

Market regulator Sebi has begun a probe into a major crash in the share prices of MCX and FTIL.

Sources said Sebi began looking into the matter a few days ago as the stocks of two companies had been falling for quite some time with unusual volumes.

PLY: Clearly there may have been insider knowledge at work here but generally speaking regulators have been making public their complaints at NSEL for weeks (as reported in EI) and so it was hardly surprising savvy investors would be seeking an exit until the regulatory rhetoric subsided. FTIL has been crying foul for some time of rumours casting aspersions on the company.

Dividend News

BGC Partners will pay $0.12 per share on September 6, 2013 to Class A and Class B common stockholders of record as of August 23, 2013. Ex-dividend date will be August 21, 2013.

Hellenic Exchanges will reduce the share capital of the company by the amount of EUR1,961,056.89, which will take place through a reduction of the par value of the share from EUR0.79 to EUR0.76.

The payment date for the share capital return of 3 cents per share will be Thursday 3.10.2013.

Financial Calendar

CBOE will announce Q2 results before the market opens

Analyst Notes

NYSE Euronext Receives “Neutral” Rating from Zacks
Tullett Prebon Receives “Hold” Rating from Numis Securities Ltd – GBX 294 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.

Crowdfunding

Crowdfunding Comes Of Age As Crowdcube Passes £10m
Tech City News

PLY: A good infographic and we applaud Crowdcube’s success but er, this ‘first to raise 10 million Pounds line?” Ahem, crowdfunding apparently has raised north of 2 billion dollars. Can anybody rationalise this rather odd sounding statement that suggests Crowdcube is a world leader with a fraction of 1% of total volume? A provincial leader in England yes but surely breathless hype is supposed to be expunged from crowdfunding statements and platforms doing so only add fuel to the fire of regulators’ desire to impede the revolution?

Other stories

Wall Street Firms Back Removing Exchanges’ Legal Protections
Businessweek

The government should strip U.S. stock exchanges of the legal status that protects them from most lawsuits, a trade group for brokers said.

In a letter to the SEC, SIFMA said the self-regulatory model of organizations in the US is outdated. Though the SEC fined Nasdaq for mishandling Facebook Inc.’s initial public offering last year, the legal protections may shield the market operator from liabilities.

PLY: A dubious precedent is one where highly litigious banks and brokers can gain greater leverage over the financial system. I would need to be convinced of the merits of this letter, to put it mildly.

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