August 18 2015

elb2 Perhaps the biggest news today is the billion pound loan mark for Zopa alongside another healthy fundraising round for MarketInvoice, pushing the boundaries of new model finance further forward…  Meanwhile Plus 500 UK gains a compliance heavy CEO and Indians ponder warming up Madras while NASDAQ adds some surveillance customers…

Thanks to all those who sent in tributes to Paul-Andre Jacot yesterday (an obituary is here), most correspondents identified him as “Mr Burgenstock.”

Meanwhile, on the Rumour mill of macroeconomics I am hearing the New Greek bailout includes a Buzz Lightyear bond package aka Repayment is being calibrated “to infinity & beyond.”

Happy scrolling:

Public Markets

Sarao: Reclusive Trader Or Criminal Mastermind? (subscription)
Philip Stafford, Lindsay Fortado & Jane Croft – Financial Times
The Day Of The Flash Crash (subscription)
Philip Stafford, Lindsay Fortado & Jane Croft – Financial Times

Much of the US Department of Justice’s case relies on one day in the life of Navinder Singh Sarao: May 6 2010.

Navinder Singh Sarao was freed on bail, as reported yesterday.

Read our Premium The Kennel – Premium discussion of the “Hound of Hounslow”.

PLY: In the way he traded and given his profits, the Hound may have been a mastermind. In his demeanour, he certainly behaved in a fashion where it was criminal that he was allowed to get away with it by exchange surveillance and it would suggest he outright broke the law. However “criminal mastermind” is clearly an elision too far. Note he has been diagnosed with Aspergers Syndrome, a kind of autism. This was also the diagnosis provided to Gary McKinnon who avoided extradition to the US for computer hacking in 2012…


Chart Of The Day: Finra Data Shows ITG Losing Dark Pool Share
Financial News

The market share of ITG’s US dark pool fell by more than 1% in the week the agency broker revealed it was negotiating a record fine with SEC over a secret proprietary trading desk.

ITG Posit saw its share of US dark pool stock trading by volume fall by over 1% to 3.9% for the week commencing July 27, according to data released by FINRA on August 17, dropping from 8th to 10th.

The chart above shows the market share of the 10 largest dark pool operators in the US. As at Friday, July 31, they were: Credit Suisse, UBS, Deutsche Bank, IEX Group, Morgan Stanley, Bank of America Merrill Lynch, Goldman Sachs, JP Morgan, BIDS Trading and ITG.

More about ITG settlement with SEC here & Read our Premium post: “ITG, Dark Fines & A Coalition for Change.

PLY: Standard practice, many practitioners switch you off at the first sign of a fine. Indeed there are some who may never switch a dark pool connection on again (or even go on to found entities to compete with the Institutional Liquidity Polls such as Luminex). Internal discussions at ITG will now be of the “of course they have told us they are coming back” genre while various competitors will be eager to twist a knife in the back of ITG’s issues, often forgetful themselves of penalties they paid recently (and clients who may never have returned).


Banks Braced For Billions In Civil Claims Over Forex Rate Rigging (subscription)
Emma Dunkley & Lindsay Fortado – Financial Times

Barclays, Goldman Sachs, HSBC and RBS were among nine banks revealed last Friday to have agreed a $2bn settlement with thousands of investors affected by rate-rigging in a New York court case.

Private Markets

Everyone Has A Plan To Save Small-Caps, Though Skeptics Abound
Ryan Hoerger – Bloomberg

For instance the New Castle County Council’s recent $15 million pledge to back Delaware Board of Trade (reported here), which wants to run two new stock markets for tiny companies.

PLY: Even here we are discussing US small cap stocks which are mostly a great deal larger than the equivalent in other parts of the world and frankly at giddy levels up from the areas pertaining to SME funding where markets are currently struggling to succeed, albeit with crowdfunding and P2P lending working well to fill in from the ground up.


Bob Diamond Snaps Up Stake In New York Trading Outfit South Street
Julia Banks – City A.M.

Bob Diamond has snapped up a stake in New York-based repo-trading outfit South Street Secur­ities, diversifying his portfolio since his exit from Barclays three years ago.


Yangon SE Listing Criteria Lacking Protection For Investors
Clare Hammond – Myanmar Times

Yangon SE (YSX) is due to open later this year. It is owned by Japan’s Daiwa Institute of Research (owns 30.25%), JPX (owns 18.75%) and state-owned Myanmar Economic Bank, and will become the country’s first modern bourse.

Read our Premium ASEAN Exchanges Project Brief.


Shareholders Lukewarm To Reinventing Madras Bourse
Sandhya Ravishankar – Times of India

Since the curtain came down on the 76-year-old Madras SE last year, members of the bourse have tried to revive it in many ways. While some in the business community have a sentimental attachment to it and argue that a local stock exchange would be a boost for local firms, others say in the age of internet and interconnected economies, local exchanges offer no real advantage. If not revival, a resuscitation would work just as well, feel many on the MSE board.

Read our Premium Indian Exchanges Shutdown – Brief.

PLY: QV Those issues with smallcap and microcap stocks, crowdfunding et al, noted above…

Special Section: FTI, NSEL, India at the Crossroads

PLY: FTIL up 1.5%, MCX  flat


Nasdaq Signs New Exchanges For Smarts Tech (subscription)
Alice Attwood – FOW

Bolsa Mexicana de Valores, BIST and JPX have signed up with Nasdaq for the market surveillance technology.

PLY: Given the pre-existing shareholding for tech deal with BIST, that here installation was fairly inevitable given that the Istanbul Exchange has placed itself effectively in the hands of NASDAQ’s tech team while all three installations are a healthy fillip.


CME Out To Tempt European Market-Makers in Forex Futures (subscription)
Financial News

Career Paths

LeapRate reports that Plus500 UK is replacing Yair Lavi as CEO with ex Alpari exec Mark Winton. Lavi remains as a director at the company. Winton, was most recently Head of Compliance at Alpari UK. Winton also worked previously at London Capital Group, Astaire Securities, Goodman UK, CB Richard Ellis and Brown Shipley, primarily in senior risk management and compliance roles.

PLY: Presumably an attempt to dissipate the cloud hanging over the head of Plus 500 since their various scandals… Plus500 Turmoil & Deal – Brief Part 1, Part 2.


MFX Broker To Recruit FX Prop Traders Via Retail Competition
Avi Mizrahi – Finance Magnates

Belize licensed MFX Broker is launching an international competition to find traders who will handle proprietary accounts with $100,000 under management, giving traders a chance to become a top manager, as head of the new team of prop traders.


From Intern To President: Charting Adena Friedman’s Rise At Nasdaq
Victoria Craig – FOX Business

Financial Calendar

This week

19.08 – NZX H1 2015 Financial Results
20.08 – ASX Full-Year 2015 Results
20.08 – Record date Thomson Reuters $0.335 quarterly dividend
21.08 – Record date TMX $0.40 dividend
21.08 – Record date BGC Partners’ BoD $0.12 dividend

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

Share Notes

Interactive Brokers President Milan Galik sold 13,025 shares Thursday, August 13th at $41.44 (bargain $539,756.00).

Interactive Brokers Vice Chairman Earl H. Nemser sold 2,605 shares Thursday, August 13th at $41.44, (bargain  $107,951.20).

Check our Share Notes page in Premium.

Analyst Notes

CME “Buy” Rating Reiterated By Deutsche Bank – $108.00 Price Target

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


MarketInvoice, The U.K. Invoice Finance Platform, Raises Further $10M
Steve O’Hear – TechCrunch

U.K.’s MarketInvoice, which plays in the P2P lending space by enabling businesses to raise money from institutional investors and high net worth individuals by ‘selling’ outstanding invoices, has raised a further £6 million (~$10m) from existing investors Northzone, and the family offices of Paul Forster adding to a £5 million round the company closed in December 2014.


Zopa Tops £1 Billion In Loans, A UK First For P2P Lending
JD Alois – Crowdfund Insider


Dubai Regulator Weighs Up Crowdfunding Oversight
Bloomberg Businessweek

Dubai Financial Services Authority has confirmed that it is formulating its policy position on crowdfunding, with the regulator identifying the need for sophisticated investors and questioning the possible impact of failures.

PLY: The difficulty with ‘sophisticated investors only’ rules is that it strangles the path to becoming one…

Other stories

Citigroup Affiliates To Pay $180 Million To Settle Hedge Fund Fraud Charges

Two Citigroup affiliates have agreed to pay nearly $180 million to settle charges that they defrauded investors in two hedge funds by claiming they were safe, low-risk, and suitable for traditional bond investors.  The funds later crumbled and eventually collapsed during the financial crisis.

Citigroup Global Markets Inc. (CGMI) and Citigroup Alternative Investments LLC (CAI) agreed to bear all costs of distributing the $180 million in settlement funds to harmed investors.

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