August 08 2013

elb2 The crisis in India is pausing and the battle to regulate the heart out of all markets may be on. The first has descended into a shambles, the second won’t improve things. Meanwhile, it’s been lovely to hear from so many people in Australia: still only damning indictments of ASX’s rather medieval concept of its position in markets and society.

Today, LME CEO runners and riders, is CME oversold? Investor news, listing switches and much more:

Public Markets

LME Said To Consider Three People For CEO
Bloomberg

The London Metal Exchange, the largest industrial-metals futures bourse, is considering three people for the role of chief executive officer, according to two people familiar with the process.

They include LME COO Diarmuid O’Hegarty, and Garry Jones, former NYSE Liffe CEO. while the third name could not be verified.

PLY: Not surprising that Garry Jones would be in the frame given his pedigree while I have a great deal of time for Diarmuid Hegarty who would make an excellent LME CEO.

Hong Kong, China Futures Are Step To Convergence: HKEx
Bloomberg

Futures linked to the CES China 120 Index which will begin trading in HK August 12 are a step toward the convergence of stock markets in Hong Kong and China, Calvin Tai of HKEx has stated.

“Eventually the three markets will converge. Not necessarily the exchanges, but the markets.”

Dutch Telecom Ditches NYSE For Nasdaq
The Wall Street Journal

PLY: Somebody going the opposite direction to Oracle, in listings terms at least. Heartening for NASDAQ as so far NYX have been winning this battle.

Private Markets

BATS’ Largest U.S. Exchange Hit By Technical Outage
Chicago Tribune

Stock exchange operator BATS Global Markets had an outage on its BZX exchange that lasted nearly an hour Tuesday due to an internal network problem. So far this month, the exchange had a 7.63 percent market share of U.S. equities trading.

Exchange operator Direct Edge also had a problem on Tuesday that briefly forced it to stop accepting orders on its EDGX exchange for stocks with symbols ranging from SPYV to TNC.

Direct Edge sent an alert about the issue at 3:00 p.m. ET, saying all open orders had been cancelled. It sent another alert eight minutes later saying its systems were operating normally again.

PLY: Naturally software glitch and BATS causes rushes of cold sweat all the way to Kansas City after their IPO had to be abandoned on March 23rd 2012..

Bob Diamond Reported To Be In Talks Over Investment In Aquis

Bob Diamond, the Former Barclays chief executive, is reported to have held talks over investment in Aquis Exchange.

PLY: Hot on the heels of Warsaw being in negotiation for 30% comes news that former Barclays CEO Bob Diamond is looking at the exchange too. Certainly good news for Alasdair Haynes, especially as the multiples look frankly frothy – there are much much better value start-ups out there to invest in, often in much less cluttered fields of competition. That said having ‘run’ Barclays for some years Mr Diamond could benefit from an exchange-related investment as he might garner some better idea of what an efficient financial services organisation looks like, compared to the morass of incompetence which was always my (painful) experience of dealing with Barclays.

NB Aquis is not a bad idea, just an expensive one if the figures being mentioned are correct that it’s raising on a valuation of up to 66 million dollars!

Kenya Mulls Minerals Exchange
Africa Review

The Kenyan government is considering setting up a futures market for minerals.

Mining secretary Najib Balala has lined up establishment of minerals and metals commodity exchange among the ministry’s priorities for the next five years as it seeks to make Kenya a mining hub, noting:
“We can’t have all the minerals and metals but we can lead the region in trade.”

PLY: Kenya gets the message: free trade wins the day, so encouraging to hear.

Robert Mugabe Plans New Zimbabwe Bourse For “Indigenous” Commerce
The Guardian

Post victory in last weekend’s elections, President Robert Mugabe, intends to set up a second stock exchange for black-owned business as part of an economic empowerment drive.

Saviour Kasukuwere, the country’s indigenisation and empowerment minister, disclosed the plan for a secondary stock exchange but did not give details of how it would work or whether foreigners, black or white, would be allowed to invest. “All those details will be given by the new minister of finance,” he told journalists.

PLY: It has to be said this is not a concept where I am instantly salivating at the prospect of performing due diligence on its investment prospects. Then again one can argue that the Zimbabwean central bank inspired hyperinflation of recent times did somewhat presage QE so maybe this is a world leading idea…

Mongolian Stand-off Flags Frontier Market Issues (subscription)
Asian Investor

The current stalemate between Mongolia Stock Exchange (MSE) and its members – which has seen half the local broking community suspended – has highlighted the problems faced by those trading frontier markets.

PLY: A very good article from a buy side perspective discussing not just Mongolia but multiple frontier markets issues for investors such as counterparty risk and frontrunning to name but two.

Special Section: FTI, NSEL, India at the Crossroads

PLY: Not so much happening on the surface today, as we enter an iceberg period of eerie calm punctuated only by the panicked cries of those wondering if they will get paid by NSEL…

Markets are still volatile and FTI is still rallying (about 5% up at the time of writing) while MCX has new +/-5% price limits and is actually up slightly (+1%) as we close for press.

Oh, one slight faux pas on my part yesterday. Thanks to one of our avid Indian readers for pointing it out, as I inadvertently mixed up regulators. Clearly regulator SEBI (even though they have notably poor relations with Jignesh Shah) cannot close down MCX as it is regulated by the Forward Markets Commission. The equity bourse MCX-SE is, of course, regulated by SEBI but is entirely separate from the original MCX commodity market. However, do note that SEBI may in the short term at least take over regulation of spot commodity markets including NSEL according to current speculation…

BSE Lowers MCX Limit To 5 %
The Economic Times

Bombay today decided to halve the circuit limit for the shares of MCX, capping its maximum movement in a day at five per cent (from 10%), effective August 8th. MCX shares have more than halved in a week.

MCX Hits New Low Despite Clarification
Business Standard

MCX was locked limit down for the fifth day in a row, despite the company’s clarification that it has a strong debt-free balance sheet with a net worth in excess of Rs 1,200 crore (USD 196.07 mln) as on June 30, 2013.

MCX is 26% owned by Financial Technologies Ltd, which also owns 100% of NSEL.

NSEL Crisis: Make A Clean Sweep Of Commodities Markets
The Economic Times

PLY: India is at a crossroads and whichever journey it takes there will be significant ramifications. Merging all regulators to one body is a pragmatic response but the difficulty is how to merger given that none of these bodies really inspire confidence that they understand markets and where the world is going. The innate desire of Indian regulators to prevent what they cannot control is understandable human nature but completely unworkable from the perspective of ensuring a dynamic market infrastructure to aid the Indian economy’s growth.

What went wrong at NSEL is one issue, how to make a better system is another. The latter in particular needs to be one where direction is taken from financial markets experts from around the world, and not merely by looking at India’s dynamism through a local industrial prism.

Dividend News

CME declared a third-quarter dividend of $0.45 per share, payable September 25, 2013, to shareholders of record September 10, 2013.

Technology

NYSE Liffe has amended the short-term interest rate (STIR) algorithms on its matching engines, in a move that gives greater precedent to time of entry over order volume.

PLY: The broad media may not pick up much on this but a big step in the upcoming post-”DEF” regulatory battle will be over algorithms in all manner of money market products. FIFO? Volume-weighted? Proportional? and a million tweaks in between are going to be tested as platforms and exchanges try to find the best possible mix to attract the greatest liquidity…

LEIs (clarification): Yesterday we ran an interesting story about the LSE implementing LEIs. We weren’t sure we understood the story but as it came from “Inside Market Data,” we believed it was important. In a busy morning there just wasn’t time to check further. My profuse thanks to Editor Michael Shashoua of industry bible IMD for clarifying: “LEI is an identifier for securities & who owns them designed to track transactions in the event of a Lehman Brothers type unwinding.”

ConvergEx’s LiquidPoint Launches New Market Data Service

ConvergEx Group, a leading provider of global brokerage and trading‐related services,today announced that LiquidPoint, its options technology business, has launched a new market data service that makes Complex Order Book data from all seven applicable options exchanges available through a single LiquidPoint API.

Share Notes

Charles Schwab EVP John Clendening sold 60,000 shares of stock on Thursday, August 1st at an average price of $22.73 (total value $1,363,800.00). Following the transaction, the executive vice president now directly owns 275 shares in the company.

Norges Bank Investment Management with Euro 560 bln asset from the Norwegian sovereign fund spent 2.1 million Euros investing in Romania at the end of 2012, including a share of 1.4% in the Bucharest SE (BVB).

Analyst Notes

CBOE Holdings Price Target Cut from $43.00 to $42.00 by Analysts at Barclays Capital
UBS lifted its price target on “Buy”-rated ICE from $193 to $215
ICE’s “Neutral” Rating Reaffirmed at Zacks – $196.00 price target

NYX Updates Q4 Guidance
DailyPolitical

NYX has updated Q4 earnings guidance to $2.03-2.13 for the period, compared to Reuters consensus earnings per share estimate of $1.88

CME: Oversold?
Forbes

On Wednesday, CME shares entered oversold territory, hitting an RSI reading of 27.1, after changing hands as low as $70.85 per share. By comparison, the current RSI reading of the S&P 500 ETF (SPY) is 62.6.

PLY: A simple point albeit single RSI data points should be approached with caution by non-technical analysts!

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 – Why Angels, Venture Capitalists & Private Equity Investors All May Benefit
Forbes

How pundits outside of the industry think they view crowdfunding.

Kickstarter Crowdfunding Arrives For Canadian Ideas, Finally
Globe and Mail

Canadians with an idea for a new techy gadget, or maybe a script for an independent film they want to make, can now stay home and raise the money for their dreams on Kickstarter.

Canada is the second non-U.S. country to host Kickstarter projects, which arrived in the United Kingdom Oct. 31, 2012.

Other stories

Home Routing To The New Markets
FOW magazine

A multitude of new trading venues launching in the derivatives markets are challenging trading systems designed to deal with specific markets.

Competition between derivatives trading venues has historically been rare. Since Eurex stole the bund from Liffe in the late 90s there has not been a major liquidity shift from one market to another. This may change.

PLY: At the same time innate non-fungibility incumbency always helps the legacy player. Moreover, the Bund like other major contract moves have generally been on account of a major advantage for the predatory party (e.g. technology in the Bund case). Right now there are lots of nickel/dime price advantages but not much evidence of real competitive advantage that I can see in the direct futures/futures platform battles.

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