August 19 2013

elb2 Another (mid-summer) mega Monday as buyers emerge in MCX while NSEL creditors are on tenterhooks before the first payment tranche due tomorrow and the battle for Brent is intensifying. We lead with great news on Warsaw’s stake buy in Aquis while there are remarkable SEK clearing numbers from OMX and great results from NZX…amongst a multitude of interesting stories. Trust me, you can’t afford not to scroll down…

Public Markets

Warsaw Buys 30% of Aquis Exchange

Confirmed: GPW/WSE will buy a 30% equity stake in the Alasdair Haynes vehicle Aquis Exchange buying up to 384,025 ordinary shares at GBP 13.02 making a bargain of 5 million GBP. GPW can nominate two directors to the board.

PLY: Excellent news for the development of MTFs away from the Aldi/Walmart discount model to something rather more sophisticated. For Warsaw it’s a good chance to get into other markets for a low overall cost – which incidentally is well south of the rather extreme valuations being bandied around previously in the media (as we speculated at the time).

GPW has its strongest management team yet in Chairman Wieslaw Rozlucki and CEO Adam Maciejewski (the latter the core driver behind this deal). If the company can focus on building value in its brands as well as doing promising deals like this then Warsaw is worth investing in. Clearly a slight investment cloud hangs over the bourse until the merger speculation prompted by Vienna is cleared up and we can concentrate on the great core value propositions confronting GPW.

Barring a Viennese merger crisis, GPW is in a great position. The Aquis deal marks good progress placing Poland’s exchange on the international stage.

Read the GPW report here.

ICE Gains SEC Approval To Buy NYSE
Bloomberg

The SEC has approved ICE’s acquisition of NYSE Euronext

PLY: We are one step closer to ICE delivering cost cuts well above those already in their guidance, not to mention making a coherent business from the disparate NYX sprawl.

NZX Doubles Profit After Bumper Year
The Australian

New Zealand’s NZX, doubled H1 profit as it benefited from new listings, a surge in trading activity and fees for running market operations.

Profit rose to $NZ6.4 million (USD 5.2 mln) to end June, from $NZ 3.2 million (USD 2.6 mln) a year earlier while sales rose 14.3% to $NZ30.3mln (USD 24.63 mln).

PLY: A long long time ago I was wrong. Before I realised the value of niche franchises (something many still don’t in the frenzied hype of ever larger mega-merged entities) I defined NZX as “road kill” amongst the “Predators” and “Prey.” Rather, NZX continues to prove the benefit of small niche markets and this year they have benefitted from a perfect storm of upside including increased government support through privatization. Good results, well done.

Press release here.

NZX Suspended Trading Friday Because Of Earthquake
NZX Resumed Trade At 0345 GMT After Quake
Reuters

NZX suspended all trading on Friday after strong quake shook the capital Wellington and the centre of the country.

The magnitude 6.2 quake was felt over much of the centre of the country, and was centred at the top of the South Island at a depth of 8 km.

TOM Keeps Up Pressure On Liffe (subscription)
Financial News

The Order Machine, a Netherlands-based options trading venue part owned by Nasdaq OMX, has maintained its market share in Dutch index options, despite a legal challenge from NYSE Euronext.

PLY: The battle for options markets in Europe is heating up with TOM making a huge impact alongside the already battling entities of EUREX, LIFFE and OMX

CME Under Fire Over Cash For Trades In Brent (subscription)
Financial Times

The biggest US futures exchange’s campaign to break into North Sea oil has been marked by unusual trading patterns as computerised firms engineer ways to exploit a cash-for-volume scheme.

CME Group has promised a pot of as much as $1m a month to the biggest traders in its upstart Nymex Brent crude futures contract.

PLY: We have had lots to say of late as the CME-ICE battle for oil is effectively a proxy war as the exchanges expect to fight for dominance in interest rates when ICE’s NYSE deal finalises and integrates.

The issue of incentives is always a tricky one for exchanges and here the CME plan seems to be creating some sort of wash. Whether true or not, the perception will hurt…

NASDAQ OMX Clearing Becomes Second Largest European IRS CCP

Total cleared volume of SEK denominated interest rate swaps (IRS) has reached SEK 100 billion, equal to €12 billion, making NASDAQ OMX Clearing the second largest IRS clearing house in Europe. Members began submitting SEK interbank trades on April 22, 2013.

PLY: First up this is a huge success in clearly garnering a vast amount of business in the Swedish Kroner. 10% penetration of CCP in SEK IRS is a very good number.

However, I do feel obliged to caution the NASDAQ press folks for what is surely another example of rather breathless hype as evidently EMIR will have entirely failed if SEK clearing can be as large/larger than GBP and indeed Euro clearing… This is a cute snapshot for the history books in overall terms but the market is entirely in transition so expect considerable volatility in the top clearers of IRS for some time…

Japan Exchange Group Set For Major Derivatives Push (subscription)
Financial News

The Japan Exchange Group – created by the January $1.7 billion merger of the Tokyo Stock Exchange and the Osaka Securities Exchange – is planning to boost its derivatives volumes by almost 50% within two years and revive trading in the local commodities market.

PLY: Osaka was long the derivatives powerhouse leaving Tokyo to believe merger was essential. In a derivatives world, seeking to bolster that market is a good move but then again remember that Japanese regulators essentially stunted the index market by trying to control the falls of the Nikkei leading to Singapore taking volume despite brutal protestations from Japanese officials…

Philippine SE: Delay To Finalize Acquisition Of PDS Shares
menafn.com

Philippine SE acquisition of bond market is delayed but still anticipated by the end of 2014

Private Markets

Malawi’s First Commodity Exchange
Digital Journal

AHL Commodities Exchange Ltd. (AHCX) has successfully started live operations in Malawi using exchange technology provided by InterContinental Syetems (ICS).

PLY: Good luck to commodity trading in Malawi and again to clarify, ICS is not related to ICE

Pakistan – SMEs Gain Enhanced Access To Capital Markets
tribune.com.pk

The Small and Medium Enterprises Development Authority (Smeda) and the Islamabad SE (ISE) have signed an MOU to improve SME financing via the stock market.

Technology

India – CTO Q&A
Moneycontrol.com

The NSE (India) system is state of the art: up time record of 99.99 percent and processes more then 450+ million messages every day with sub millisecond response time. The exchange has been continuously undertaking capacity enhancement measures, to effectively meet the requirements of increased users and associated transaction loads. Today, NSE has 200,000+ terminals spread across more than 2000+ towns/cities across the country.

PLY: Interesting Q&A with Umesh Jain, CTO.

Nigerian SE Adopts SWIFT
afriquejet.com

The NSE CSD subsidiary, Central Securities Clearing System (CSCS) Plc, has adopted a SWIFT messaging system.

PLY: Of all the fabulously aged pieces of architecture in the world of finance, surely nothing can match the utterly archaic bane of almost every bank client’s life, SWIFT?

Dividend News

NZX has declared a second quarter dividend of 1.25 cents. The dividend record date will be 2 September with a payment date of 13 September.

Special Section: FTI, NSEL, India at the Crossroads

PLY: By popular demand our special NSEL crisis special section enters another week.

MCX looks to have some buyers at last although now, ironically the reduced 5% limit may be impeding upside. Good analysis as always from the sub-continent’s finest financial writers. Meanwhile, check in tomorrow for news of the first tranche payment from NSEL, a critical juncture for the exchange.

In shareholder notes below we also have noted some significant MCX buyers while, as we close for press, FTI is up 1% and MCX is (finally!) 5% limit up.

MCX Surges 5% From 52-Week Low On ‘No Exposure’ To NSEL
The Economic Times

MCX shares surged 5% in early trade after management clarified that it has no exposure to crisis-hit NSEL.

…However given that the FMC has appointed a forensic auditor to review the NSEL accounts over serious questions concerning the books of the spot market, the euphoria in MCX may be short-lived…

NSEL Confident Of Settlement Ahead Of Schedule
Business Standard

NSEL is confident of settling the Rs 5,600-crore (USD 900 mln) dues to investors earlier than the 30-week schedule it had declared last week.

“The time schedule declared by us is based on the minimum amount committed by buyers. But many of them have said they will pay earlier.” noted Anjani Sinha, CEO of NSEL..

PLY: FMC has already expressed concern over the revised settlement timeline and NSEL seem keen to try to resolve the problem asap – presumably with full payment even though last week theer were claims of 50% haircuts from a prominent BJP politician Kirit Somaiya (see also below).

Jignesh Shah Assures To Repay, Investors Wary
moneycontrol.com

NSEL investors met Jignesh Shah and Joseph Massey on Sunday and Shah assured NSEL that he will repay all investors. But investors are far from believing him.

PLY: Painted into a corner, it’s difficult to see what else JS could say but the problem of credibility is now highly significant. Actions will clearly speak louder than words and tomorrow’s first payment from NSEL is critical…

Nine Brokers Account For Bulk Of NSEL Exposure
The Financial Express

Nearly half of NSEL’s total outstanding amount is accounted for by the combined exposures of 9 brokers, each with over Rs 100 crore (USD 16.04 mln) owed to NSEL making a combined outstanding circa Rs 2,500 crore (USD 401.15 mln). This is nearly 45% of the total outstanding of Rs 5,574 crore (USD 900. mln).

NSEL Investors To Wait Till Tuesday Before Seeking Legal Remedy
The Economic Times

Investors hit by the payment crisis at beleaguered NSEL are keenly awaiting the first payout by the exchange on Tuesday before deciding on taking any legal recourse.

Brokers Gave Loans To Clients To Play On NSEL
The Economic Times

Many among the 13,000 investors of the NSEL, who are now running from pillar to post to recover their money, were financed by brokerage groups that sold the product.

PLY: With 80:20 or 90:10 margins permitted, there must clearly be questions of how culpability here is balanced between the exchange and the brokers given that this story says the margin trading was financing 80-90% of NSEL exposure…

The Fall Guy Or A Bright Spot That Turned Black?
Business Standard

An interesting profile and discussion of the role of NSEL CEO Anjani Sinha.

Earlier this week, Sinha, managing director and chief executive of NSE, took full responsibility of the situation. “I and my management team at the National Spot Exchange Ltd have been solely and directly responsible for all operations, including screening of parties, warehouse management, risk management and other related company matters.”

FMC Okays NSEL Eettlement Plan; Doubts Account Books
The Indian Express

Commodity regulator FMC has for the time being approved the NSEL plan to settle Rs 5,600 crore (USD 900 mln) in dues.

The regulator has also ordered the appointment of a forensic auditor as it has “serious doubt” over the credibility of accounts and information given by the exchange.

Noting that NSEL’s plan does not inspire confidence, the FMC asked the exchange “to go ahead with your settlement plan for time being as the payouts are already seriously delayed, which is causing deep anxiety and resentment among the sellers.”

NSEL To Face Forensic Audit
The Economic Times

FMC has ordered a forensic audit of NSEL, raising serious questions about the credibility of books of account and record maintenance at the crisis-ridden bourse.

PLY: More detail on questions unanswered and the audit process itself.

Indian Council Of Investors Files PIL Against NSEL
indiatvnews.com

Indian Council of Investors, an investors’ representative body, yesterday filed a public interest litigation against NSEL in the Bombay High Court.

NSEL Payment Crisis To Be Discussed In Parliament This Week
ndtv.com

“A member has given a notice for moving the Calling Attention Motion on the NSEL issue in Parliament. The notice has been accepted and discussion will be held this week.”

NSEL Scam Of Rs 8000 Crore Backed By UPA
truthdive

Kirit Somaiya, President of Investors’ Grievance forum and national secretary of the BJP, said they would ask court to appoint auditors and take steps to sell NSEL promoter FT and MCX assets to repay the farmers and action on the brokers who lured investors by giving false claims of high returns. Somaiya says investors have lost faith in FMC.

PLY: Clearly there is political capital to be made in such problems but at the same time Somaiya is a voice for many smaller investors.

Saradha Scam Versus NSEL Crisis: Why The Latter Is Likely To Have A Happier Ending
The Economic Times

A few months before the meltdown at the National Spot Exchange Ltd (NSEL) there was Saradha. It was different in the mechanics, the kinds of promises made, in the ways it marketed itself and, perhaps above all, the client base.

The NSEL problem, on the face of it, isn’t similar to the Saradha collapse. The spot exchange, for now at least, isn’t looking like an outright scam (just yet). And while it has changed its schedule (yet again) to pay investors in full, it could well be that the payments could ultimately materialise. In the Saradha scandal, there is very little chance that its investors will be paid anything close to the full amount they invested and it was a scheme which preyed upon some of the poorest in Indian society.

Financial Calendar

ASX will release its 2013 full-year results on Thursday, 22 August 2013.

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

Changes in investors/shareholders

BNP Paribas Arbitrage Buys 1.25% Stake In MCX India
moneycontrol.com

BNP Paribas Arbitrage bought 640 000 shares (1.25 percent stake) of MCX near the day’s low of Rs Friday on the NSE.

On August 8, HDFC Mutual Fund A/C HDFC Prudence Fund purchased 306 000 shares at Rs 293.25 and on July 24, Swiss Finance Corporation (Mauritius) bought 473 837 shares at Rs 718.12 apiece on the NSE.

Share Notes

NASDAQ OMX Group EVP Bruce Aust sold 7,500 shares Tuesday, August 13th at an average price of $31.86, (bargain: $238,950.00). He now owns 114,751 shares.

Analyst Notes

Nasdaq OMX Oversold
Forbes

On Friday, Nasdaq OMX shares entered oversold territory, hitting an RSI reading of 29.3, after changing hands as low as $30.75 per share. By comparison, the current RSI reading of the S&P 500 ETF (SPY) is 46.7.

CBOE Holdings: A Quality Stock That’s Worth Watching
investors.com

CBOE has solid fundamentals.

The stock’s Composite Rating is 97, which puts it in the top 3% of stocks in IBD’s database. The Composite Rating combines all five IBD ratings into a single number.

Earnings grew 22%, 35% and 23% in recent quarters as revenue stepped up 8%, 18% and 14%.

Pretax margin last year was 48%, the best in at least eight years. Return on equity was 63%, and the company debt-to-equity ratio is 0%.

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

Ubuntu Sets Crowdfund Pledge Record For Edge Smartphone
BBC News

A crowdfunding campaign for the Ubuntu Edge smartphone has set a record for raising more money in pledges than any other such venture.

The London-based developer, Canonical, has generated $10,288,472 (about £6.6m) in pledges, passing the record set by Pebble smart watches last year although with 6 days to go it is still far from reaching its funding goal of $32m.

Canonical would have to return all the money if it does not reach the target.

Crowdfunding Takes On Hunger, Health And Human Rights
Forbes

Kickstarter meets Kiva meets TOMS: That’s the idea behind a soon-to-be launched social enterprise and crowdfunding web site by the name of Reciprocity & Co.

PLY: Ahem. Is this really crowdfunding? Man sets up online store selling bags and accoutrements. A percentage of each sale goes to charity. To achieve publicity, he calls it crowdfunding and gullible media write fawning praise.

Crowdfunding is a great instrument for selling equity. Crowdfunding/Crowdsourcing is a way to fund new inventions with receipt of product. Reciprocity & Co is just a retail site…

Other stories

CME Amends Electronic Audit Trail Requirements
natlawreview.com

CME needs to see an audit trail created between front end systems and GLOBEX with responsibility falling on clearing members.

India – 33 brokers Seek Sebi Nod For Equity Derivatives Trade
The Economic Times

SEBI has at least 33 pending approvals for futures/options broker designation with 68 in different segments…

Indonesia SE To Offer New Lot Size To Attract Retail Investors
The Jakarta Post

The Indonesia Stock Exchange (IDX) plans to introduce the long awaited reduced shares lot size on Dec. 1 at the stock market.

The new lot, which will compose of 100 shares from the previous 500 shares each, aims to increase market liquidity and attract more retail investors.

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