August 04 2016

elb2In many ways the issue of cold storage at BitFinex may not appear material but the worry is it opens a can of worms in just how well all regulators are monitoring and dealing with data. Given that the Democrats can’t keep their data safe at home or in the campaign office it seems, we know hackers are after meaty chunks. How soon before they decide to download all the world’s algos in one easy repositary?

Results mania is led by The ICE (who else?) who banged out another great set of numbers and a handy spot of deleveraging. They also just elegantly pointed out that they could see Brexit while others were hastily polishing shotguns and planning a wedding party….

In events, there’s a great line up to discuss the CEE markets, CMU and the EBRD sponsored SEE Link September 15th in Warsaw ahead of the 2nd CEE Capital Markets awards. The excellent Vienna Bourse CFO Petr Koblic is the latest addition to a great lineup of panellists including Zagreb CEO Ivana Gazic and Sofia CEO Ivan Takev. Keynote Speakers include Florence Bindelle of European Issuers and Hannes Takacs of EBRD. If you are interested in CEE capital markets and indeed CMU or SEE Link, this is the must attend event for issuers, intermediaries, exchanges and CSDs. I look forward to chairing the CEE CMU summit. Rates are very attractive: from €295 for the summit, to €595 for the Gala & Summit together. Email me or follow this link HERE to sign up.

Public Markets

ICE Q2 2016 Results

ICE

vs Q2 2015: total revenues, less transaction-based expenses, $1.12bln, up 41.6%, operating income $551m, up 28.1%, net income $357m, up 26.1%.

PLY: 7 consecutive quarters of double digit growth as ICE is leading the pack for operational excellence in the right growth areas. A share split is in the offing too which may add some dynamism to the recently range locked shares.

ICE Pulled Out Of LSE Bid Because It Expected Brexit Vote

William Turvill – CITY A.M.

PLY: F-o-r-e-s-i-g-h-t. A word barely ever seen in the 20th century history of the LSE while one which clearly DB1 have forgotten from their management’s otherwise excellent command of English. Good to see Lord Hague (in public pro-Remain) was clearly more sanguine in his directorial duties amongst the NEDs. By comparison, the DB1 and LSE boards look entirely leaden footed – or perhaps executive management just refused to listen to counsel…

QV Premium: DB1-LSE Merger Brief & Brexit – Main File.

 

LSE H1 2016 Results

LSE

Revenue £721.9m (USD 960m), up 9%, total income £785.8m (USD 1.04b), up 11%, adjusted operating profit £333.3m (USD 443m), up 9%, profit after tax of £114.5m (USD 152m).

PLY: Numbers look good on the surface, as prepared by that guru of financial wizardry, CFO David Warren.

LSE Says Brexit May Erode Trading Volume

John Detrixhe – Bloomberg

PLY: Alas Brexit won’t upgrade the LCH’s technology but it might impact volumes – albeit LSE has clearly been blindsided by their proximity to the government’s hubris over the referendum which ended in a resounding defeat for the blob. That leaves LSE in a tricky position whether or not they can consummate that mispriced marriage which is about 188 days from entering the antitrust zone.

 

TMX Q2 2016 Results

TMX

vs  Q2 2015: revenue $194.6m, up 9%, net income $58.3m, up 111%.

PLY: Good results for TMX, although the threats continue to swirl around the group and that will impede upside on the shares given the NASDAQ incursion via Chi-X Canada, the Aequitas threat, and likely market data reviews etc. as Geoffrey Kwan of RBC commented in a note published this morning.

TMX Announces Business Integration Initiative

TMX

The first phase of TMX’s integration initiative addresses the technology and operations of its cash and derivatives clearing businesses, The Canadian Depository for Securities Limited (CDS) and the Canadian Derivatives Clearing Corporation (CDCC), subject to regulatory approval where required.

Bringing together CDS and CDCC under one leader will harmonize the companies’ integration efforts across risk, operations, systems and business development. Both CDS and CDCC will continue to maintain the strong and focused approach to risk management for which they are known.

PLY: Good to see Glenn Goucher recognised here for his considerable input into the MX and later TMX structure, he ought to be in the running to replace Lou Eccleston whenever the group CEO stands down along with Jean Desgagne from amongst the TMX insiders.

 

MOEX Q2 2016 Results

MondoVisione

vs Q2 2015: operating income RUB 10.81 bln (USD 163m), up 6.2%, EBITDA RUB 8.47 bln (USD 127m), up 6.6%, net profit RUB 6.41 bln (USD 96m).

PLY: MOEX remains a good business despite the geopolitical atmosphere impacting it.

 

Craig Donohue Talks Markets, HFT, Blockchain, & His New Role

Jonathan Garber – Business Insider

PLY: Interesting interview with Craig, Executive Chairman of The OCC.

 

Exchanges Supercharge Rules to Fight Cheaters Based Outside U.S.

Annie Massa – Bloomberg

Foreign day traders were breaking rules and dodging regulators when Chris Concannon left Nasdaq in 2009. When he returned to the exchange industry five years later, he was dismayed to find it was still happening.

Now Concannon, back in the industry as CEO of Bats, is leading the charge against brokers that enable manipulators. Bats got regulators’ approval to move quickly against market participants whose clients engage in illegal practices like spoofing, barring them in weeks rather than the months or years it used to take. The company also introduced a neighborhood-watch style program to encourage more brokers to speak up when their peers abet manipulation.

PLY: Clearly Chris Concannon’s views are his own but there is evidence that some other venues (I don’t have the same data about NASDAQ) have not been as coherent in cracking down as might be the case. Meanwhile, elsewhere on the fringes of the parish, lots of crackdowns are ongoing in leveraged forex and the less transparent end of the retail binary business…

Private Markets

NSE April-June Quarter Profit Drops 44%

Indian Express

vs April-June 2015-2016: net profit 186.93 cr (USD 28m), down 44%, total income from operations 390.5 cr (USD 58m), up 12.5%.

PLY: A drop in net profit mainly due to transfer of money towards core Settlement Guarantee Fund (SGF) which will doubtless stir up a lot of analysis as the BSE and NSE approach possible IPOs.

 

Tokyo Commodity Exchange Consolidated Financial Statements For The Year Ended March 31, 2015

MondoVisione

vs 2014: total revenues Yen 2.72B (USD 22.7m), down 4.3%, total comprehensive income Yen 42m (USD 345k), compared to a loss of Yen 913m.

 

BSE Looks To Divest Up To 30% In CDSL Through IPO

Swaraj Singh Dhanjal & Shrija Agrawal – Livemint

BSE is preparing to divest a stake of up to 30% in depository firm Central Depository Services (CDSL) through an IPO that could fetch the exchange up to Rs.500 cr (USD 75m).

At an issue size of about Rs.500 cr (USD 75m), the company will be valued at up to Rs.1,500 cr (USD 225m).

PLY: A very interesting move which presumably will help BSE separately capitalise the CDSL in future, thus at least slightly insulating BSE from further regulatory fiat.

 

Why Florida’s Bitcoin Ruling Could Lead to Legislative Action

Andrew Hinkes – CoinDesk

Last month a Miami judge concluded that BTC doesn’t qualify as money.

Dividend News

ICE announced its Q3 dividend of $0.85, payable September 30, 2016, record date September 16, ex-dividend date of September 14.

CME declared a Q3 dividend of $0.60, payable September 26, 2016, record date September 9, 2016.

LSE interim dividend increased 11.1% to 12.0 pence

TMX declared a dividend of $0.40, payable on September 2, 2016, record date August 19, 2016.

Special Section: FTI, NSEL, India at the Crossroads

PLY: FTIL slightly firmer, MCX flat.

ED Files Fresh Application Against 11 NSEL Defaulters, Jignesh Shah

Business Standard

Last month, ED had issued summons against all 68 accused including Shah in the NSEL case. Later Shah was arrested on July 13 and sent to judicial custody after keeping in ED custody for five days. Shah continues to remain under judicial custody.

ED Summons Top Brokers In NSEL Money-Laundering Case

Shrimi Choudhary – Business Standard

The Enforcement Directorate (ED) has summoned nine brokers for questioning in connection with the NSEL money-laundering case.

The brokers have been asked to appear before the ED on Monday.

FTIL Founder Jignesh Shah Seeks Bail

Swati Deshpande – Times of India

FTIL founder Jignesh Shah pleaded for bail on Wednesday, claiming his current arrest in the NSEL scam is illegal. The Enforcement Directorate differentiated the capacity in which the arrests were made and said it was not illegal. A special sessions judge posted the matter on Thursday for further hearing. NSEL investors have sought to intervene to oppose Shah’s bail plea.

Shah has been kept in Kalyan jail in a special single cell.

PLY: At least with a cell of his own, it may not be the lap of luxury but it is a remarkable level of comfort not normally accorded to many in Indian prisons.

Technology

FlexTrade Opens Office In Frankfurt

MondoVisione

Products

ICE Plans to Aggressively Target Bond ETFs Business

Brian Louis – Bloomberg

On the results call Jeff Sprecher noted: “We’re aggressive and we’re interested in this space and so we’re able to move quickly. It’s going to be a growth area for us.”

PLY: A brilliant symbiosis, the core data is in IDC (owned by ICE), the world’s most famous listing venue is NYSE (owned by the ICE), the most agile minds in the business of pricing derivatives in exchanges are working for places like SuperDerivatives (hey, you get the gist…). In essence, the ICE has a compelling case for being a vertical in this space and it is in a position which will be hard for, say, BATS to compete with as it too pushes in the ETF space. Of course BATS is still attractive for equity ETFs but doubtless there are boffins from Atlanta to New York working on defeating the Kansas-NYX axis.

 

ICAP Gambles on Super Fast Currency Data With Strings Attached

John Detrixhe & Matthew Leising – Bloomberg

ICAP, which has seen its share of currency trading dwindle in recent years, is rolling out an unprecedented plan to revive liquidity in its electronic market.

The venue will feature a price feed called EBS Live Ultra that updates five times as often — every 20 milliseconds — as the old one. But it comes with a catch, according to documents obtained by Bloomberg: at least 40% of the time, customers of the $50,000-per-month service must passively provide bids and offers, generally viewed as a less aggressive form of buying and selling. That trading must amount to $200 million or more a day.

PLY: Fascinating – not a chicane, just a “we’re not telling you” bump in the carpet. Very interesting and if it improves resting order liquidity in the forex pool that has got to be a huge advantage to the forex market as a whole and EBS-ICAP in particular.

 

HFT Firm Virtu Partners With J.P. Morgan Chase (subscription)

Bradley Hope – Wall Street Journal

Virtu Financial announced on Wednesday it is joining with J.P. Morgan Chase to help the bank trade more efficiently in the U.S. Treasury market. The agreement, which will last at least three years, is the second time Virtu has signed up with a larger more traditional Wall Street firm to help it navigate the high-speed markets. Last year, Virtu started working with T. Rowe. Price to help the money manager lower its trading costs.

PLY: I hear the sound of “win win” which is not something many readily associate with HFT practice.

 

Did CFTC Regulations Prevent Bitfinex From Offering Cold Storage?

Joseph Young – newsBTC

Some notable experts claim that this regulatory framework presented by the CFTC may have prevented Bitfinex from using cold storage.

PLY: Perhaps, perhaps not, BUT the key massive problem here is the liability from technology issue which is a much much larger pointer and one where regulators tread on dangerous ground. QV the CFTC desire to have all HFT algos deposited with their offices. Will there be cold storage there? Moreover, back to an old chestnut of mine: how much data is too much and at which stage will regulators who have gorged on data they don’t have the time / budget to analyse be held responsible for missing things in the patterns of the code they hold? However the ‘cold storage’ and security issue is a huge area where so far no regulator has adequately considered the risks they are potentially running.

Indexes

China Said to Plan Index Futures Revival After Volumes Drop

Bloomberg

China’s futures exchange is planning to relax the restrictions on stock-index contracts that sparked a 99% plunge in trading and heightened concern over the government’s intervention in markets.

PLY: Time to recalibrate clearly…

Career Paths

Glenn Goucher, President & Chief Clearing Officer, Canadian Derivatives Clearing Corporation (CDCC), has also been named President of Canadian Depository for Securities (CDS).

Mr. Goucher joined Montréal Exchange in 2001. Prior to assuming his leadership role at CDCC, he was SVP, Financial Markets, Montréal Exchange.

 

FX Week reports that Icap-owned post-trade services provider Traiana has hired Basu Choudhury, former head of product for LCH’s ForexClear service, to boost its fx product capabilities for buy- and sell-side customers. Choudhury will be based in London. Prior to ForexClear, he spent four years at Standard Bank, working as a business/technical architect.

Financial Calendar

04.08 – Bats Q2 2016 Results

04.08 – WSE 2015 PLN 2.36 dividend payment

New! 12.10 – ICE special meeting of stockholders (to discuss stock split – see below)

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

Share Notes

ICE Plans 5-for-1 Stock Split; Authorizes $1 Billion in Share Repurchases

ICE

ICE BoD has approved pursuing an effective 5-for-1 stock split of ICE’s common stock that will be distributed in the form of a four share stock dividend per share. The proposal is subject to both SEC and stockholder approval.

Additionally, the ICE Board authorized $1 billion for future stock repurchases.

A special meeting of ICE stockholders is expected to be held on October 12, 2016 to obtain stockholder approval. Additional details regarding the special meeting and stock split will be provided when available. SEC approval of the amendment will also be required as a result of ICE’s operation of a national securities exchange. Following SEC and stockholder approval, the ICE Board intends to declare the stock split and set a record date and distribution date for the stock dividend in Q4.

 

Everbright Securities Said to Set $1.2 Billion Share Sale Terms

Regina Tan – Bloomberg

The Chinese brokerage plans to offer 680 million shares at HK$11.80 to HK$13.26 apiece. The price range represents a 32% to 40% discount to Everbright Securities’ Wednesday closing price in Shanghai.

PLY: Everbright appears to have stabilised since its chaotic upset in the  August 2013, stock index futures fiasco.  QV Premium: China’s Everbright Securities Trading Error – Brief.

Other stories

FINRA Fines Barclays Capital $1.3M For Extensive OATS Reporting Violations & Related Supervisory Failures

MondoVisione

PLY: Meanwhile the Fed also settled its claim against Goldman Sachs for circulating confidential data.

 

U.S. Department Of The Treasury: Report To The Secretary Of The Treasury From The Treasury Borrowing Advisory Committee Of SIFMA

MondoVisione

 

 

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