August 08 2014

elb2ICE leads results announcements as BM&F disappoint, BvB improves and TMX is within consensus. MCX-SX stake unsold leaving FTIL to explain to SEBi while there are various developments in crowdfunding. ICE buys technology patents from TT, Indonesian CEO encourages privatization…

A remarkably interesting day, welcome to Friday’s (almost precisely) mid-summer Exchange Invest!

Meanwhile, a friendly reminder: if you like the free stuff and want to support us building out the industry platform for markets, please join our top tier, it’s only $120 per annum and keeps this daily newsletter free (You can subscribe here). Recent stories include:

New: Has CME Europe Chosen the Right Man?

CME GFI & the New IDB Paradigm

NLX: Measuring Up the Coffin?

FTIL: The Divestment of MCX

The Democratisation of Swaps aka The Citadel Inverse Repo Breakthrough

Public Markets

ICE Q2 2014 Financial Results
ICE

Q2 2014 Results

Q2 2014 consolidated revenues, less transaction-based expenses, were $750 million (up 101% YoY). Included in this amount are net transaction and clearing revenues, less transaction-based expenses, of $460 million. Consolidated market data revenues for Q2 2014 were $96 million and listings revenues were $83 million. Consolidated other revenues were $111 million, which includes technology services, trading license fees, regulatory and listed company service fees, among others. Consolidated operating expenses were $423 million for Q2 2014, including $36 million in NYSE integration costs. Consolidated operating income for the quarter was $327 million and operating margin was 44%. The effective tax rate for Q2 was 29%.

H1 2014 Results

Consolidated revenues, less transaction-based expenses, in H1 2014 were $1.547 billion (up 113% YoY). Included in this amount are net transaction and clearing revenues, less transaction-based expenses, of $958 million.

Consolidated market data revenues for H1 2014 were $199 million and listings revenues were $165 million. Consolidated other revenues were $225 million.

Consolidated operating expenses were $829 million for H1 2014, including $59 million in SMX acquisition-related transaction expenses and NYSE integration costs. Consolidated operating income for H1 2014 was $718 million and operating margin was 46%. The effective tax rate for the first half was 28%.

Consolidated cash flows from operations were $836 million in H1 2014. Operational capital expenditures were $47 million and capitalized software development costs totaled $40 million.

Unrestricted cash and short-term investments were $2.1 billion as of June 30, 2014, of which $1.3 billion is reserved for the repayment of the 2015 Eurobonds, and the Company had $3.9 billion in outstanding debt as of June 30, 2014.

PLY: The achievement of the quarter remains divesting so much of the ill-conceived NYSE Technologies subsidiary and, of course, Euronext almost lock, stock and barrel… Remarkable results at a pace which simply defied the market’s expectations.

ICE Acquires Trading Technology Patents
ICE

ICE announced that it has acquired intellectual property rights that relate to computerized trading strategies. The acquired intellectual property rights include U.S. Patent Numbers 7,177,833; 7,251,629; 8,498,923; 8,478,687; 8,660,940; 8,732,048; 8,725,621 and various related pending U.S. Patent Applications. Terms of the transaction were not disclosed.

The acquired intellectual property rights include patent claims covering the use of an automated trading system to make price and trading decisions based on market price information. The intellectual property rights cover multiple asset classes traded electronically on exchanges, including futures, options and cash equities.

PLY: Developing and to be pondered…

TMX Q2 Financial Results
TMX

Q2 2014 Highlights

Revenue USD 182.3 mln, unchanged
EBITDA USD 71.3 mln, up 6%
Net loss USD 26.4 mln, down 204%
EPS USD 1.01 mln, up 13%

BM&FBOVESPA Q2 Results
Mondo Visione

Lower volumes drove revenue to a 22.8% decrease compared to the Q2 of 2013, while expenses were flat as a result of the company’s expense discipline.

PLY: Not good.

BVB Triples Profit In Q2 On Electrica’s IPO, Romgaz Sale
Andrei Chirileasa – Romanica-Insider

Two large transactions, IPO of Romania’s electricity distributor Electrica and the sale of a 5% stake in Romgaz by Fondul Proprietatea, doubled the value of transactions on BVB in Q2, which led to 82% higher revenues for the market operator. BVB posted a turnover of EUR 1.9 million in the period April 1 to June 30, and increased its operational profit by 289%, to EUR 1.06 million. The net profit tripled to EUR 960,000, the company announced on August 7.

PLY: Not so much good numbers as a good example of what happens when the BvB actually functions vaguely like a stock market and not a weird Balkan backbiting machine. Ludwik Sobolewski is clearly banging heads together and one privatisation doesn’t make a summer but it does materially demonstrate what this business could look like if Romania can develop a coherent market.

GFT Group H1 2014 Financial Results
Mondo Visione

H1 2014 Highlights

Revenue Eur 156.74 mln, up 37%
EBITDA Eur 13.61 mln, up 123%
Net income Eur 7.32 mln, up 68%
EPS Eur 0.28, up 64%

PLY: Technology provision group is growing rapidly…

Jakarta Bourse Urges More IPOs From SOEs
Business Times

IDX chief Ito Warsito said that President-elect Joko Widodo should encourage more state-owned companies to sell shares to help achieve his goal of lifting the nation’s economic expansion to the quickest pace in a decade.

PLY: Hear! Hear!

Ice’s Sprecher Talks Equity Market Structure
Markets Media

ICE is one of the most influential market operators in the world, and CEO Jeff Sprecher is by extension one of the more influential individuals. ICE’s roots are in commodity futures, but the Atlanta-based company has had a seat at the table of U.S. equity market structure since its November 2013 acquisition of NYSE Euronext, owner of the NYSE.

“We continue to take a leadership role to advocate on behalf of our listed companies for the importance of an improved market structure,” Sprecher said Thursday on a conference call to discuss ICE’s second-quarter earnings.

An SEC Computer to Peer Into Wall Street’s Dark Pools
Matthew Philips & Silla Brush – Businessweek

Around 2:30 p.m. on May 6, 2010, the U.S. stock market began to crash. It fell 600 points in five minutes, erasing about $800 bln in value. The market largely rebounded by day’s end, but investors were spooked. It took the US SEC more than four months to piece together what had happened: A single trader’s order to unload $4 bln in futures contracts caused a price dip that set off a cascade of automated selling.

The Flash Crash, as it was dubbed, made obvious what had been true for years – the stock market is so fragmented that computers processing orders at lightning speed can trigger a selloff before anyone spots a problem. “The idea that the regulator of the largest-capital market in the world didn’t have a consolidated view across all the different trading venues … seemed to be a glaring issue that needed to be remedied,” says former SEC Chair Mary Schapiro.

Private Markets

SBI Ties-Up With NCDEX Spot Exchange
Deccan Chronicle

The SBI has entered into a tie-up with NCDEX and LTC Commercial Co, a collateral management service provider, for lending farmers against the security of warehouse receipts.

This tie-up would enable both SBI and its borrowers to access market through NSPOT’s electronic portal in real time for the best possible price discovery, creation of charge on pledged commodities and monitoring of loans, a statement said.

The Bitcoin Derivative Boom Can Be A Mark Of The Cryptocurrency’s Coming Of Age
Eric Mu – Forbes

The year 2008 will always be remembered for the global financial crisis, an event, fairly or not, often attributed to the proliferation of financial derivatives. Derivatives allow for phony accounting; they obscure the market and concentrate risk and allow megabanks to take on more debt! Such was the sentiment back in the day.

Dividend News

ICE announced a $0.65 per share dividend for Q3 2014. The dividend is payable on September 30, 2014 to shareholders of record as of September 16, 2014. The ex-dividend date will be September 12, 2014.

TMX declared a dividend of $0.40 on each common share outstanding, payable on September 5, 2014 to shareholders of record at the close of business on August 22, 2014.

Special Section: FTI, NSEL, India at the Crossroads

PLY: Stocks down today, as we raced to pixel, MCX off 2% and FTIL 3%.

FTIL Misses Deadline To Sell MCX-SX Stake
Anirudh Laskar & Ashish Rukhaiyar – Livemint

SEBI is set to appoint an adjudicating officer and serve a show-cause notice on Jignesh Shah’s FTIL, which failed to meet a Thursday deadline for selling its stake in MCX-SX.

PLY: As ever process process process from SEBI. MCX-SX remains in a precarious situation when it ought to be much safer but the business still lacks management with vision and execution skills to turn it around apparently.

Technology

Telstra Launches Low Latency Service To CME Data Center
FTSE Global Markets

Telstra launches new low latency connectivity to CME Group’s Aurora data center, providing Australian financial services organisations with connectivity into other major financial centres including ASX in Sydney, Australia.

Vendors Begin Testing GMEX Feeds, Driven by Buy-Side Demand
Faye Kilburn – WatersTechnology

Four vendors are currently testing GMEX’s feeds, and a further two have completed the process and are ready to go live, says chief executive Hirander Misra, though he declines to name participating vendors at this time, citing non-disclosure agreements. “At the moment, we have NDAs around the vendors, but one vendor is focused on order routing and market data, and the other covers market data and routing, but does data redistribution as well,” he says.

Products

Euronext To Discuss Aligning Wheat Contract Quality With Silos
Reuters

Euronext plans to consult market operators on changing its wheat futures contract to bring it into line with grain quality requirements announced on Thursday by delivery silos.

Previous discussions on the wheat topic on EI July 7th.

Career Paths

Tom Kloet, who was initially set to bow out later this month as CEO of TMX, is now likely to stay on until at least October as TMX hunts for a long-term replacement.

See also our Premium post: 2014 – A Year of Unprecedented Executive Change?

Financial Calendar

Next week

NZX H1 2014 Financial Results
MCX India Q1 Financial Results
FTIL Q1 Financial Results
Markit Q2 Financial Results
SIBEX H1 2014 Financial Results
MOEX RUB 2.38 dividend payment

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

Share Notes

Charles Schwab Corp EVP Jay L. Allen sold 8,132 shares Monday, August 4th at an average price of $27.44 (bargain $223,142.08)

Analyst Notes

TMX “Sector Perform” Rating Restated By National Bank Financial – C$63.00 Price Target on the stock, Up From C$60.00.

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

Angel Investors Can Now Join Late-Stage Rounds As Life360 Posts Series C To AngelList
Alex Konrad – Forbes

A small syndicated fundraising opportunity posted today on AngelList may have sweeping ramifications for venture investing in the long-term. Angel investors on the funding platform can now get a piece of a later-stage company for the first time, as Life360 has opened up part of its large Series C round to a syndicate on AngelList led by Expansion VC.

Other stories

How Many Exchanges Does The World Need?
Forbes

Among the many financial trading and IT conferences I have attended over the years – from TradeTech in Paris to Burgenstock in Montreux, Switzerland, and beyond – the question has always arisen as to how many stock and derivatives exchanges there would be in three, five or ten years time. Depending on who you canvassed the answer would always be different. Perhaps not that surprising I suppose. Some pundits suggested that in the end analysis there would be five or six global exchange groups.

PLY: The concept that there will be “only” a handful of mega global exchanges demonstrates the profound ignorance of the linear “pundits” who profess to understand the industry. The number of exchanges has grown, just as banks have failed to actually coalesce into future institutions… The answer: hundred and thousands of platforms can be viable from mega to micro to even nano bourses in the future, it depends where you sit on the food chain and what your product is. The only major hurdle is a lack of investor appetite at the lower end… Ultimately capitalism abhors a profitable vacuum and it will be filled – as African commodity exchange growth is currently showing, to take but one example before we even get to crowdfunding or cryptocurrency…

On which optimistic note for the industry, have a great weekend!

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