August 19 2014

elb2The new iShares Euroclear ETF innovation is a fascinating moment of mid-month nerdiness you ought to follow on a day when many are thinking about their trip to Busan for the WEF congress, er, buying a stake in KRX, as the Cinnober powered BM&F Bovespa CCP opens for business. Interesting snippets from throughout the world with encouraging news in the world of P2P lending and Bitcoin once more…

Public Markets

Global Exchanges Line Up For KRX Stake (subscription)
Song Jung-a & Jeremy Grant – Financial Times

CME, DB1 and Standard & Poor’s have expressed interest in buying a stake in KRX.

PLY: EI reported yesterday that a 2.5% stake in KRX is being put up for sale as a result of the merging NH Investment & Securities / Woori Investment & Securities having a combined 7.5% stake which is above the permitted regulatory threshold of 5%. The stake is apparently worth more than Won90bn ($88 mln) according to the FT. Note that EUREX trades KOSPI futures on its platform for the European market while it also purchased a 5% stake in TAIFEX of Taiwan in January.

Of course a cynic might note that the upcoming Busan WEF annual meeting may make exchanges keen to show interest to their hosts… Alas I doubt I can make it this year to the event.

MCX To Ask SEBI To Waive 2% Cap On FTIL Stake Sale
Economic Times

The board of MCX has decided to ask market regulator SEBI to relax the 2% lock-in cap on its promoter FTIL to enable the latter to sell entire 5% MCX stake via a block deal and comply with various regulatory orders.

The largest commodity bourse has decided to move SEBI seeking a waiver of the 2% stake sale cap clamped on FTIL. According to the exchange, this cap prevents FTIL from exiting MCX completely.

BM&FBOVESPA Clearinghouse Starts Operating
Mondo Visione

BM&FBOVESPA Clearinghouse goes into operation using the new CORE integrated risk calculation system. First phase is the migration of the exchange-traded and OTC derivatives market.

EI reported on August 18th that BM&FBovespa is set to launch its new clearing house.

World’s Largest Clearing Project Goes Live In Brazil
Cinnober

Brazil’s BM&FBOVESPA has successfully launched phase one of its comprehensive post-trade integration project, which will see the migration of the exchange’s four existing clearinghouses onto a single platform. The derivatives market is now up and running on the platform provided by Cinnober Financial Technology. The second stage of BM&FBOVESPA’s project, for the equities market, is now underway, with a planned launch in 2015.

PLY: The good folks of Cinnober are clearly delighted at the successful implementation of this project and of course they recently won the JSE’s new project for a multi-asset clearing platform (reported on April 23rd) for South Africa.

NASDAQ OMX’s Bob Greifeld Talks R&D, Private Markets & what IR Wants
Tim Human & Neil Stewart – IR Magazine

Following a big acquisition last year, NASDAQ OMX is now the world’s largest IR service provider. CEO Bob Greifeld answers questions on its future plans for the IR industry

This June marked a year since NASDAQ OMX completed its massive acquisition of Thomson Reuters’ IR, PR and multimedia businesses. With that single all-cash $390 mln deal, the exchange operator more than tripled the size of its corporate solutions business, from less than $100 mln in annual revenue to an estimated $331 mln.

‘Relentless’ Consultation Shows Rules Still On Rise (subscription)
Mark Cobley & Joe McGrath – Financial News

With 47 consultation documents issued in the past 12 months, up from 41 in the previous 12 months and 35 before that, the pace is “relentless”, one lawyer said.

The figure indicates that six years after the crisis, regulation is accelerating rather than nearing completion. The invitations to industry to submit its thoughts before new regulations are formulated were sent out by FCA and Prudential Regulation Authority 41 times in the 12 months to the end of last August and 47 times since then.

PLY: Regulatory fervour is growing exponentially, this is a UK example. That said, many such rules are still based on outmoded principles – such as the overly prescriptive approach to crowdfunding where the UK FCA got the whole approach entirely wrong. We need deregulation urgently, otherwise the future of financial innovation will be in Asia, far away from the optimistic noises emanating from the UK’s expanding fintech movement.

Bursa Making It Easier To Open Trading Accounts
Star

The Malaysian stock exchange operator said on Monday it is moving to simplify the requirements to open a trading account.

CFTC Staff Issues No-Action Letter For CME
Mondo Visione

CFTC issued a no-action letter concerning clearing collateral and documentation.

Private Markets

BIST Forges New Links To Boost Turkey’s Financial Credentials
Out-Law

BIST plans to strengthen its derivatives market by creating links with other global institutions including diamond bourses and precious metals trading institutions are among near-term goals for Borsa Istanbul.

SGE Said To Plan FTZ Contract For Sept
Bloomberg

Shanghai Gold Exchange (SGE) plans to start bullion trading in the city’s FTZ on Sept. 26. Gu Wenshuo, a spokesman for the exchange, confirmed that the trading system is being tested, without giving further details.

EI reported on June 19th that SGE FTZ plan was approved by PBOC.

Previous discussions on the topic in Exchange Invest can be found on May 28th and March 17th. Also see our Premium post China Liberalises.

BSE Revises Equity Transaction Charges
NDTV

BSE has decided to revise equity trading fees from September with a uniform transaction fee of Rs. 275 (USD 4.53) per crore of the gross turnover for both active as well as passive orders.

China To Launch Market-Making System On Beijing OTC Market On August 25
Reuters

China’s “third board” OTC market in Beijing will implement a market-making system for trading shares from August 25, the regulator announced, resolving a long-standing liquidity bottleneck that has stifled the development of OTC markets.

Preparations Underway To Open Corabia Grain Exchange
ACT Media

The grain exchange in Corabia, Olt County, Romania will be commissioned in the next two weeks, with the last preparations for its opening being currently underway, according to spokesman for the Corabia Town Hall Dan Oltean. The shareholdings in the Corabia Grain Exchange Ltd. are Olt County Council, (25%), Corabia Local Council (25%) and the Romanian Commodity Exchange (BRM) with 50%.

EI previously reported about this project on June 3rd.

DGCX Moves To New Offices In The DMCC Free Zone
Mondo Visione

DGCX has moved to a new permanent office in the DMCC Free Zone, the global gateway for commodity trade and enterprise in Dubai and the region.

Santiago Bourse Seeking Regulatory Approval For New Venture Exchange
Juan Andres Abarca – BNAmericas

SASE plans to submit its proposal for the creation of a venture exchange to local securities regulator SVS in the coming weeks, according to BCS planning and development manager Nicolás Almazán. The Bolsa de Santiago, Venture, as the exchange is to be called, could receive regulatory approval in January 2015 and be launched in March, Almazán said recently at an exploration event held in Santiago.

EI previously reported the SASE dual listing agreement with TSX-V in March.

NSE Extends Deadline For Clients’ Email ID, Mobile Numbers
Business Today

Providing more time, NSE on Monday asked its trading members to provide mobile number and e-mail address of their clients by September 30 to facilitate dissemination of instant trade alerts.

EI reported on August 14th that the deadline for the process was August 19th.

Coinbase Acquires Blockr.Io To Enhance Its Blockchain API
Coinsetter

Coinbase has announced on its blog that it is acquiring the Slovenian startup Blockr.io.

Blockr.io is a block explorer service that competes in the space with some well known industry leaders like Blockchain. With this acquisition, Coinbase hopes to be able to become the API of choice for developers. Blockr.io is run by two Slovenian entrepreneurs Sašo Matojina and Samo Drole who will join the Coinbase team in San Franscisco.

Bitcoin Shakes Up Remittances As Poorer People Offered Digital Deals
Mark Anderson – Guardian

Social entrepreneurs in developing countries are using mobile phones and the controversial digital currency bitcoin to increase the speed, and slash the price, of international money transfers, raising the prospect of a revolution in the $600bn annual global remittance market.

PLY: Yip, it’s coming, cryptocurrency will help destroy the hideous rapacious blob of rubbish technology and dismal providers – this is the bullet with SWIFT and multiple payment processors’ names on it. Apart from wiping out this outmoded legacy tier, think of the multiplier effect for every dollar which actually goes to those who can spend the cash in emerging markets. Theferore, I am a huge fan of initiatives such as BitPesa amongst others.

Investigators Work To Close The Net In Mt Gox Probe (subscription)
Ben McLannahan – Financial Times

Six months on from the apparent theft at Mt Gox, once the world’s biggest Bitcoin exchange, the net could be beginning to close. Late last month police in Tokyo said they had launched a formal fraud investigation into the disappearance of as many as 650,000 bitcoins reported missing by the Shibuya-based exchange. In the meantime, a small local group of experts led by Jason Maurice of security consultancy Wiz Technologies, is pursuing an independent probe, convinced that the culprit – or culprits – can be traced.

Special Section: FTI, NSEL, India at the Crossroads

PLY: The spectre of yesterday’s threats to make FTIL and MCX one and the same is hanging over the FTIL stock, down 5% while MCX is more chipper, up 3% as the ownership clouds gradually lift from around it and volumes rebound from a 5 year low:

Default Shadow Ebbs In India Commodity Trade Rebound
Swansy Afonso – Bloomberg

A year after a $920 million payment default at a spot commodities bourse cut trading from gold to soybeans futures, jolting India’s biggest brokerages, investors are returning as newer regulations buoy confidence.

NCDEX volumes have recovered from a 10-year low.

Technology

Exegy, TMX Datalinx & FIF Launch MarketDataPeaks Service In Canada
Mondo Visione

Exegy Inc., TMX Datalinx, the information services division, and FIF announced today the launch of the first Canadian website to track real-time market data messaging rates at no charge for the Canadian markets.

TMX press release here.

Interactive Brokers Plan To Launch Traders’ Marketplace For All FX Participants
Andrew Saks-McLeod – Leap Rate

Interactive Brokers is currently testing a new service called Traders’ Marketplace, a platform set to connect all sorts of participants in the Forex business. The platform, which is still in its beta version, promises to allow various service providers and their clients to communicate and do business.

PLY: A neat addition to the IB platform.

Data, Not Technology, Is Key To Improve Market Surveillance, Says CMCRC (subscription)
Marina Daras – WatersTechnology

According to the CMCRC’s latest research, advancements in technology are not enough to improve market surveillance, and the centre suggests firms should focus more on collecting good quality data than accumulating new technology systems.

PLY: CMCRC appositely note that Garbage In, Garbage Out remains a key issue…

CloudFX Announces The Launch Of CloudSelect-The Most Advanced Cloud Services Brokerage (CSB) Platform – CloudSelect Is An Advanced Anything As A Service Brokerage Platform, The Industry’s First Open Standards, Cloud Service Management (CSM) Platform
Mondo Visione

CloudFX has launched CloudSelect, the industry’s most advanced, innovative open standards-based Cloud Services Brokerage platform.

Products

EurexOTC Clear For Interest Rate Swaps: Introduction Of EurexOTC Clear Release 5.0
Eurex

With EurexOTC Clear Release 5.0, Eurex Clearing will extend its EurexOTC Clear service for IRS by additional functions and services, such as the introduction of a trade compression service and enabling also sensitivity-based margin calculation via the existing Eurex Clearing Margin Calculator.

PLY: EUREX enters the market for swap compression alongside ICAP TriOptima amongst others.

New Type Of ETF Promises To Shrink Spreads (subscription)
Yakob Peterseil – Risk

With the launch of their ‘international’ range of ETFs, iShares and Euroclear are creating a new type of ETF issuance inside an established structure. If their hopes pan out, all ETFs will look like this three to five years from now.

Squint at the factsheet for the iShares MSCI USA Dividend IQ Ucits ETF (QDIV), an ETF sold in Europe, and you will probably find nothing that strikes you as especially peculiar. But in one important respect, QDIV is not a typical ETF. The settlement process for ETFs has been the same for almost two decades, but QDIV ignores this and settles in a way that is different from any other ETF that has come before.

PLY: Today’s nerdy but necessary lesson. A fascinating incremental amendment by Euroclear and iShares where they borrow a commonly used model for Eurobonds and GDRs to create a new ETF issuance settling at an ICSD which effectively helps smooth the settlement process to endeavour to reduce friction, costs and spreads. Elegant, interesting and surely bound to help cross border ETFs especially in Europe and Asia methinks…

Traders: Spot Gold Exchange Requires Further Study
Nuntawun Polkuamdee – Bangkok Post

Stock Exchange of Thailand (SET) and seven gold futures dealers held a meeting on how to format a spot gold exchange market in accordance with their principles.

The seven dealers – Globlex Holding Management, Classic Gold Futures, GT Gold Bullion, YLG Group, Ausiris, MTS Gold and Hua Seng Heng Commoditas – control 90% of the country’s gold trading markets in terms of both physical gold and gold derivatives markets.

Previous discussions on the subject in EI on July 7th 2014.

NCDEX To Engage Multinationals In Forwards Segment
Dilip Kumar Jha – Business Standard

NCDEX is set to sign a trading pact with multinational grain trading companies and corporate houses for its ensuing forward contracts in agricultural commodities.

EI reported on August 11th new membership category by NCDEX for the soon-to-be launched forwards segment on its national level electronic platform.

PLY: Good progress. To date commodity markets have been too punter-centric as opposed to the broad gamut of risk transfer/arbitrage and speculation which can help transform all aspects of Indian agriculture, thus reducing the need for the splodgy blob of government intervention.

China Options Market Faces Margin & Settlement Challenges (subscription)
Justin Lee & Xiao Wang – Risk

Equity index options set for launch later this year, but China authorities expected to retain T+1 settlement which may inhibit options trading.

Margin calculation methodology and settlement rules preventing market-makers hedging underlying option exposures are the two main challenges that need to be overcome before the expected launch of equity index options in China at the end of this year, while the launch of single stock options has been suspended, say market insiders.

EI reported last week that China plans to launch ETF options this month.

PLY: There are veteran folks in Chicago who may regard these issues as mere namby pamby details – after all they began trading options at CBOE without even a tangible model like Black Scholes to price from. Of course that was back in the day when they still allowed runners to be flayed alive for getting your sandwich order wrong…

Indexes

Exchanges Sector In Midst Of Disruptive Forces & Innovation
Mondo Visione

With just three months until leaders from the global exchanges sector meet in London for the Mondo Visione Exchange Forum, the sector is in a period of unprecedented change in the global financial markets. However, this is not yet being seen in the FTSE Mondo Visione Exchanges Index, which has experienced six months of stagnation.

FAO: EI’s Publisher & PithMeister in Chief, Patrick L. Young, will be the Chairman of this year’s Mondo Visione Exchange Forum.

Deutsche Börse Launches US Dollar Hedged Version Of HDAX
Mondo Visione

Deutsche Börse today launched the HDAX Hedged USD Index, which measures the performance of the underlying HDAX while eliminating foreign currency fluctuations. The HDAX Index measures all 110 stocks listed in the DAX, MDAX and TecDAX indices, representing more than 95 percent of Germany’s free-float market capitalization.

PLY: At last moves towards different currency based futures for indices and other products are gaining momentum, something I have been a keen proponent of for a decade and more.

Solactive Launches First Buyback Index For Japan
Mondo Visione

Solactive AG has launched the Solactive Japanese Buyback Index (BUYJP Index), first of its kind in the market, which will be used as underlying by Société Générale Corporate & Investment Banking for swaps, options, warrants and certificates, following the similar deployment of a European Buyback index by SG CIB earlier this year.

SIFMA Announces Changes To The SIFMA Municipal Swap Index
Mondo Visione

SIFMA has made changes to the SIFMA Municipal Swap Index to enhance benchmark transparency, reliability and access for all users.

Financial Calendar

Today

LSE 20.7p final dividend payment

Thursday

Record date MarketAxess $0.16 quarterly cash dividend
Record date Thomson Reuters $0.33 quarterly dividend

Friday

Record date HKEx $1.83 interim dividend
Record date TMX $0.40 quarterly dividend
Record date BGC Partners $0.12 quarterly dividend
Record date Fidessa 13.1p interim dividend

Crowdfunding

P2P Lender LendInvest Passes £100m Lending Mark
Devraj Ray – MortgageStrategy

The platform allows individuals and institutions to invest in short-term buy-to-let bridging loans, offering an average annual yield of 8.15%.

LendInvest says it is currently seeing around £2m of new investments each week through its online platform, which is placed in short-term buy-to-let mortgage loans averaging six months in duration.

Federal Reserve: P2P Lending Poised To Grow
JD Alois – Crowdfund Insider

P2P lending is expected to grow and will be filling gaps left by the traditional lending industry.

The report was published by Senior Research Economist Yulia Demyanyk and Research Analyst Daniel Kolliner. The two note that P2P lending has been growing by an astonishing 84% per quarter.

PLY: With growth rates above 80% per quarter, I can see that my remarks some years ago at a Wilton Park conference are proving deliciously correct. Needless to add, my comments were dismissed out of hand by a typically arrogant academic non-executive central bank board member.

Upstart’s P2P Lending Platform Aims At Young Borrowers
Adam Ludwig – Forbes

For would-be borrowers with little credit history, getting a loan can be a nightmare. But one important group of applicants are young, well educated, and entrepreneurial—and would probably be favorable credit risks.

PLY: Love it. Incidentally, I enjoyed an interesting day last week at RanmakingLoft’s London facility at Mentor day for their Fintech accelerator programme. It’s great to see this part of the Capital Market Revolution! coming together at last!

Other stories

Rising British Tech Stars Urged To Float On Nasdaq
Gideon Spanier – Independent

Fast-growing European technology and biotech firms need to float in New York because investors on this side of the Atlantic are “not bullish enough to give them the right valuations”.

PLY: The redoubtable Adam Kostyal, head of European listings at Nasdaq OMX speaks a vestige of truth – the US is still providing the best valuations for businesses with heft and vast horizons in this world of opportunity…

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