August 04 2015


Summertime continues with an unseasonal surfeit of news – ITG CEO out, UBS trader gets a swingeing 14 years for LIBOR offences, Puerto Rico defaults & CME swoops on a massive Index play in America… You simply cannot afford not to scroll through today’s Exchange Invest:

Incidentally, in parish news, Plato, which is in exclusive talks with Turquoise, launched its Market Structure Innovation Centre (MSIC), a research fund to sponsor research and analysis, aimed at helping participants to work together to improve the markets for tomorrow. The research scope is in 4 topics:

  1. Market model refinement
  2. Market structure and trading approaches
  3. Market profiling
  4. Future Plato initiatives

Feel free to cc me on the way through in confidence, you can reach Plato directly: HERE. Meanwhile, it looks as if Plato have stolen a march to disintermediate the consultant classes…

Public Markets

ITG Q2 2015 Results


vs Q2 2014: Revenues of $140.5 mln, up 1.4%, GAAP net loss of $10.2 mln, ($0.30 per diluted share vs GAAP net income of $12.9 mln, or $0.35 per diluted share). GAAP net loss for Q2 2015 includes a reserve for a probable settlement with SEC & related legal and other fees totaling $22.6 mln pre-tax and $21.6 mln after taxes, or $0.62 per diluted share.

PLY: Results announcement brought forward because:

ITG Chief Steps Down Amid SEC Trading Probe (subscription)

Joe Rennison & Philip Stafford – Financial Times

ITG Head Gasser Replaced

John Bakie – The Trade

Bob Gasser replaced by board member Jarrett Lilien.

PLY: Amidst last week’s news that ITG could be fined $20 million, the shareholder group led by Justin Hughes of Philadelphia Financial has succeeded in management change with their NED nominee Jarrett Lilien stepping up. More on this in our Premium service: “ITG, Dark Fines & a Coalition for Change.

LendingTree Swings To Profit In Q2

Charlotte Observer

vs Q2 2014: Earnings of $4.7 million vs a loss of $248,000, record revenue of $55.1 million, up 31%

Hong Kong Fines BNP Paribas For Breaking Dark-Pool Trading Rules

Eduard Gismatullin – Bloomberg

Hong Kong’s SFC Fines BNP Paribas Securities (Asia) $15 Million For Dark Liquidity Pool-Related Failures


Libor Dreams End In Prison Term As Tom Hayes Loses Last Gamble

Gavin Finch & Liam Vaughan – Bloomberg

Former City Trader Tom Hayes Jailed For 14 Years Over Libor Rate-Rigging


UK’s Serious Fraud Office: First LIBOR Defendant On Trial Found Guilty


The 35-year old is the first individual to face a jury trial for manipulating LIBOR, which is used as a benchmark for trillions of pounds of global borrowing and lending. Many banks have paid heavy financial penalties for tampering with the key benchmark. [PLY: BUT no senior executives are up for trial I believe…].

PLY: I am wary of such a lengthy sentence as it seems to suggest scapegoating the middle is better than rooting out criminality at the top. The justice system risks accusations of oligarchical bias if it does not apply the law without prejudice. Hopefully the British courts will build on this conviction and apply treason charges to the moronic spendthrifts led by Gordon Brown who nearly bankrupted Britain with their economic mismanagement. Realpolitik suggests we cannot even look forward to some bank bosses being jailed for their equally inadequate management. Nonetheless I have zero sympathy for Mr Hayes but he is just one stooge amidst a banking-political-regulatory nexus which failed capitalism and the people with its corporate socialist protectionist blob.

This is a huge wake-up call for those who endorse the “ahbut” school of regulation, as in: “‘ah, but, the regulators haven’t said anything so we must be okay.”

Pimco May Face SEC Lawsuit

CNN Money

PLY: Wells notice delivered in latest blow to the once seemingly unimpeachable PIMCO.

U.S. Brokers Face Big Rise In Exchange Fees Thanks To SEC Ruling

David Michaels & Sam Mamudi – Bloomberg

In a little-noticed letter issued last week, the SEC said brokers can’t rely on snapshots provided by a single exchange when quoting equity prices to clients. Instead, brokers have to scan the entire market for the best prices, which would require them to fork over millions more to exchanges that sell market data.

PLY: Reading this does really make you wonder how some people end up with positions of even minor influence at regulatory agencies. Clearly understanding the business they are regulating is an afterthought from this worrying example. This is a spectacularly short-sighted attempt to further destroy  smaller/local brokers in favour of those big guys who generally sound cheap until you realise they often just dump your order flow onto whoever pays them the most for it. Potentially quoting a penny off by looking at a single market or saying “thanks for your order we just flogged it to the first bloke who wandered by the back door…” – which is the worse offence? Well the regulators are clear. #Worrying.

China’s Response To Stock Rout Exposes Regulatory Disarray (subscription)

Lingling Wei – Wall Street Journal

As China’s summer stock slide deepened, threatening a key plank of Beijing’s plan to overhaul the world’s No. 2 economy, the country’s premier pounded the table and demanded that regulators get their act together.

China Stock Exchanges Step Up Crackdown On Short-Selling

Nathaniel Taplin & Saikat Chatterjee – Reuters

Listings In New Third Board In China Hits Record, But Investors Stay Away Due To Chaotic Rules (subscription)

Enoch Yiu – SCMP

The National Equities Exchange & Quotations, OTC market known as the third board, hit a milestone last week when its listed companies hit 3,000, surpassing the combined 2,800 companies listed in Shanghai & Shenzhen.

However turnover is thin and a lack of regulation means the third board is far from becoming a success. Opening shop about 10 years ago for firms delisted from Shanghai and Shenzhen, the platform was supposed to give startups and outfits with no business track record to speak of a venue to raise funds. Only selected brokers and individual investors with more than 5 million yuan can trade on the market.

Read our Premium China Capital Markets Transformation Brief – Main File.

ESMA Confirms 4 Week Renewal Of Greek HCMC Short Selling Ban – Market Making Is Exempted


Private Markets

Hotspot To Offer Free Trading On New London-Based Matching Engine


PLY: Typically aggressive pricing from BATS to gain a strong position in the institutional marketplace for forex executed via MTF which I believe will be a huge trend in the near future for all segments of the market.

India – Local Commexes Head Online, Start Demutualising

Vimukt Dave – Business Standard

PLY: Developing…

Bitcoin Users Are All Tech Enthusiasts Or Criminals, Study Concludes


PLY: It’s summer time, always an ideal time to launch a little contentious research into the media so that it can help oil the existing prejudices of the luddites.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX off 1.5%, FTIL off 1%.

FTIL Proposes To Loan Rs 50 Cr ($7.8 mln) To NSEL

Business Standard

The assistance can be in the nature of loan or equity infusion. FTIL said, “NSEL has requested for financial support for its ongoing activities like recovering money from defaulting members, defending various legal cases and for working capital.”

Read our Premium NSEL Scandal Brief – Part 16.

PLY: Interesting. Many will see this as a doubtless Machiavellian move on the part of FTIL/Jignesh Shah.


Trading on SGX Derivatives Market Opens As Normal On Tuesday, After Monday Glitch

Ann Williams – Straits Times

Derivatives trading opened as normal Tuesday after a 90 minute trading suspension Monday night, when trading was suspended at 7:56pm…

Why LSE’s Digital Infrastructure Needs A Backup – In Leeds

Adam Beaumont – City A.M.

PLY: Mr Beaumont’s company AQL is behind a 43 million Pound ($60 million+) data centre, in, er, Leeds.


U.S. Officials Eye Risks From HFT In Bonds

Richard Leong – Reuters

BSE Cuts Number Of Equity Options Strikes To Curb Tax Evasion

Times of India


CME & FTSE Russell To Offer Leading Index Derivatives


Licensing agreement establishing CME as a global partner for futures, options on futures and OTC cleared products on FTSE Russell.

PLY: A fascinating structural deal – lavish plaudits to the CME management team! Anticipating USD FTSE 100 in the USA is just one minor component as the Russell Index portfolio swings (back) to CME from its recent home at ICE. Xavier meanwhile laughs all the way to the bank. Audacious move by CME, not clear if they had to provide significantly better terms than the usual percentages but the Chicago exchange is now clearly streets ahead of all other exchanges in terms of being the world’s leading Index ETD marketplace from Dow through S&P to FTSE/Russell…and presumably infinity & beyond…

With a bit of luck, I will have more on this in Premium slightly later…

STOXX Launches iSTOXX MUTB Japan Quality 150 Index


Career Paths

LeapRate reports that Jon Robson, whose previous roles include CEO of NYSE Technologies and executive at Thomson Reuters, joined First Derivatives as a NED.

Financial Calendar

This week:

Aug 04 2015- Lending Club Q2 2015 Results

Aug 05 2015

ICE Q2 2015 Results

LSE Q2 2015 Results

TMX Q2 2015 Results

Aug 06 2015 – FXCM Q2 2015 Results

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

Analyst Notes

UBS Maintains CBOE To “Neutral” – Price Target $62.00

A full table of current analysis can be found on our Analyst Ratings page which is updated daily.

Other stories

FESE Publishes The European Exchange Report 2014



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