August 20 2015

elb2 The funeral of Paul-Andre Jacot is taking place as we rush to pixel. There has been an outflowing of grief from all those who used to go to Burgenstock back in the day from across the world. RIP to the man who everybody has referred to as “Mr Burgenstock.” An era has definitively ended.

Looking to the future, I am delighted to see that alongside his generous tribute to Paul-Andre and times past, John Lothian of eponymous futures newsletter fame, has confirmed his attendance at the Burgenstock meeting to honour the legacy of Paul-Andre.

Wonderful news which I hope inspires many others in Chicago to follow John’s initiative and join the SFOA’s independent international forum for derivatives markets. SFOA is rebuilding, having been steered adroitly from its nadir by first Chairman Otto Naegeli, and now Dan Day-Robinson.

As always the venue is spectacular, & nowadays, practical too. The magnificent President Wilson hotel is under 5 miles from the international airport, close to the historic heart of Geneva while affording spectacular views across Lac Leman.

Moreover, the fantastic news is that my Crossfire panel will include Chitra Ramkrishna, CEO of NSE India and the most powerful woman in the world of exchanges. She will join a terrific opening line up with Magnus Billing of NASDAQ, Phupinder Gill of CME, former FESE President Christian Katz and David Peniket of ICE. You may toast those sadly no longer with us & Welcome the new era of an historic association: Register Here.

In today’s Bulletin

DGCX picks the perfect candidate, confirming the permanent elevation of acting boss Gaurang Desai as CEO – a dynamic executive for a dynamic business. Bucharest faces liquidity crunch? ASX loves holding its monopolies, Playtech shareholders unanimously lust for Plus 500…and much more, happy scrolling:

Public Markets

ASX Full-Year 2015 Results

vs FY14: Revenues $700.7m, up 6.4%, EBITDA  $540.6m, up 7.1%, Underlying profit after tax $403.2m, up 5.2%

Analyst Presentation here.

PLY: Profit growth plods along as the cost conscious monopoly continues to move without a clear vision beyond Dickensian protectionism.


ASX CEO Upbeat On Final Regulatory Hurdle To Keeping Share-Clearing Monopoly
Shaun Drummond – SMH

PLY: The fact that the media even report ASX as a plodding monopoly story at all times demonstrates the stasis in Australian market infrastructure which the Liberal government must unleash to empower, well, free markets.

Read our Premium ASX Monopoly – Brief – Part 3.


ASX Plans Hong Kong Link To Tap Into China Growth
Eduard Gismatullin & Adam Haigh – Bloomberg

The bourse will link its ASX Net Global to HK within the next 12 months. ASX’s network is already connected to Singapore, London and Chicago, allowing traders to hook up to Australia’s derivatives markets cheaply and speedily.

PLY: Readers may recall how the historic ASX-SGX link in the late 1990’s sank without a trace – hopefully this will be more successful.


Playtech Shareholders Unanimously Approve Plus500 Deal
Maria Nikolova – LeapRate

The completion of the deal between Playtech and Plus500 is one step closer, after Playtech shareholders approved unanimously the proposed £459.6 million acquisition.

Read our Premium Plus500 Turmoil & Deal – Brief – Part 1, Part 2.


Lou Eccleston Seeks To Inject New Life Into Peer-Lagging TMX
Barbara Shecter – Financial Post

TMX CEO Lou Eccleston Unveils His Strategy (subscription)
The Globe and Mail

PLY: Lou Eccleston is certainly talking a good book. Clearly, proof, pudding eating and all that but TMX is finally being shaken up in Toronto and the Maple consortium making progress.


Overseas Listings Threaten BvB Liquidity (Romanian Version)
Adina Ardeleanu – Bursa

Romania’s OMV Petrom Considers Secondary Listing In London, Fondul Proprietatea May Sell
Romania Insider

Romanian Fondul Proprietatea’s Liquidity Increases After LSE Listing
Romania Insider – Irina Popescu

PLY: BvB is suffering an existential crisis. The cross listing of Fondul Proprietatea has been such a success on LSE, that now the other liquid issues may be heading in the same direction, essentially decapitating the BvB. A worrying predicament for Ludwik Sobolewski who has done much with the feudal Romanian capital market structure so far but the risks of larger predators like LSE picking up the largest morsels was always evident with perspective.


Sebi Talks FMC Merger With Bourses
Jayshree P Upadhyay – Business Standard

No Equity Segment On MCX, NCDEX Bourses Immediately
Ram Sahgal – The Economic Times

It’s official. National commodity exchanges will become stock exchanges by September 28 but, initially, bourses like MCX and NCDEX will not be allowed to offer an equity segment just as stock bourses NSE and BSE will not be able to offer a commodity segment.

Read our Premium SEBI-FMC Merger Brief.


KDPW_CCP & GPW Open Risk Management Access Platform For Clearing Members

TSX Long Life Order Type Receives Regulatory Approval

Time To End Quarterly Reports, Law Firm Says (subscription)
David Benoit – Wall Street Journal

Wachtell on Tuesday called on SEC to consider allowing U.S. companies to do away with the obligatory updates, one of the most important rituals on Wall Street.

PLY: Good idea. Too many companies are managed q on q with little strategic thought, even in this parish. I see no benefit to quarterly reporting as a ritual, it just wastes company time. Investors would be better served with other means of analysis, and indeed longer investment horizons.

Private Markets

Wall Street’s Unlikely Rebel: Can Brad Katsuyama’s New Exchange Fix The U.S. Stock Market?
Steven Bertoni – Forbes

Ask Brad Katsuyama if the stock market is rigged and he jumps from his chair, grabs a black marker and sketches on a whiteboard with the intensity of a head coach whipping up a Hail Mary. He draws squares to represent stock exchange servers and scribbles lines to show how HFT firms are threading cables through miles of rock, building microwave towers atop mountains and raising armies of computer-science Ph.D.s to outrun the rest of the financial community.

“Basically, someone is trading with tomorrow’s newspaper,” he says from his new offices at 4 World Trade Center, 44 stories above Wall Street. “Not only do they get market data ten times faster, but because their computers are located inside the exchanges, they can trade hundreds of times before anyone else knows what’s happening.”

PLY: May Brad Katsuyama and IEX inspire a new generation to work on better markets for all.


ISE Launches Free Listed Funds Portal For Professional Investors, Plans UCITS Portal
Benedicte Gravrand – Opalesque

Irish SE (ISE) recently launched a new initiative called the ISE Fund Hub, which offers alternative investment managers the option to list their funds so they can be screened by registered investors.

MtGox CEO To Face New Criminal Allegations
The Malay Mail Online

France-born Mark Karpeles, 30, was taken into custody in Tokyo this month over claims he manipulated data to artificially create about US$1 million (RM4.107 million) worth of the digital money.

He has been held without formal charges for three weeks, as allowed under Japanese law, but the Yomiuri newspaper said police plan to issue a fresh arrest warrant accusing him of pocketing US$2.6 million worth of Bitcoin deposits.

Dividend News

ASX – Full-year dividends 187.4 cents fully franked, up 5.2%, final dividend 95.1 cents, up 5.8%.

Special Section: FTI, NSEL, India at the Crossroads

PLY: FTIL (we haven’t quite got to grips with the whacky new name yet but give us time) is off 3% as Jignesh Shah is questioned by police while MCX is slightly up.


Delhi Police Question Jignesh Shah
N Sundaresha Subramanian – Business Standard

Close to the first anniversary of his release on bail and on a day his company, FTIL, was embarking on a new journey by changing its name (reported yesterday), Jignesh Shah spent most of Wednesday afternoon in this city’s Mandir Marg police station.

Sleuths of the economic offences wing (EOW) of the Delhi Police questions him on the affairs of payments scam-hit NSEL. This is in a case filed by Delhi-based Classone Exports. A sugar merchandising entity, it had registered the case in August 2014.


HFT Blurs Bond Futures, Cash Markets-N.Y. Fed

The growing presence of HFT has essentially blurred the line between the U.S. Treasuries futures and cash markets, according to a New York Federal Reserve blog (read it here).

HFT enable billions of dollars worth of trades between cash trading of U.S. government debt on interdealer broker platforms and futures trading on CME in five milliseconds.

“Although futures usually lead cash, the reverse is also often true. Therefore, from a price discovery point of view, the two markets can effectively be seen as one,” New York Fed analysts Dobrislav Dobrev and Ernst Schaumburg wrote in a blog post.


JP Morgan, Goldman Sachs & Morgan Stanley To Form Data Company (subscription)
Financial News

Entity would consolidate efforts to clean and store reference data, helping banks save money.

PLY: Will they christien it ReMarkit?


CME To Cut Minimum Guaranty Contribution For Rate Swap Clearing
Tom Polansek – Reuters

CME plans to reduce by 70% the minimum contribution that clearing members in the IRS market must make to a guaranty fund because of increased trading. Starting on Aug. 31, the minimum contribution to CME’s IRS guaranty fund will drop to $15 million from $50 million.

PLY: Interesting – all that talk of waterfall protection just a few months back and now CME feel comfortable enough to reduce these contributions. Comparing apples and oranges in a way, I concur but nonetheless interesting. As CME hold the data ‘in their hot little hands servers’ they clearly know more than we do…


Global Tagging System Proposed For Derivatives Trades
Huw Jones – Reuters

Global regulators and central bankers have proposed a common tagging system for off-exchange derivatives transactions to spot more easily which banks could be at risk in a market crisis.


CFTC Issues Proposed Amendments to Swap Data Recordkeeping and Reporting Requirements for Cleared Swaps

Statement Of CFTC Chairman Timothy Massad, Notice Of Proposed Rulemaking On Amendments To Swap Data Recordkeeping And Reporting Requirements For Cleared Swaps

Statement Of CFTC Commissioner Bowen Regarding Part 45 Cleared Swap Reporting NPRM

Statement Of CFTC Commissioner J. Christopher Giancarlo, Notice Of Proposed Rulemaking On Amendments To Swap Data Recordkeeping And Reporting Requirements For Cleared Swaps

Thomson Reuters Confirms Final FXall Operational Procedures
Avi Mizrahi – Finance Magnates

The procedures include the codified Provisory Liquidity protocol announced meant to enable liquidity consumers and providers to make informed trading decisions based on transparent and measurable criteria. A similar protocol was introduced at the same time by Hotspot, the institutional FX market owned and operated by BATS Global Markets.


CFTC/SEC Jurisdictional Battle Heats Up Over Dividend Indices

CFTC recently approved a futures contract on a dividend index as a non-security based index futures contract over the SEC’s objection that the dividend index contract could be a security future; the CFTC’s actions may have implications for market participants in this and other dividend index futures contracts and swaps.


Cool Derivatives & Bank Consultants
Matt Levine – Bloomberg View

I used to sell equity derivatives, and the way you sell equity derivatives is by telling scary stories about the future. Are you worried that the crisis in Ruritania will wreak havoc on your tungsten-miner stocks? We can build a product for you that will give you peace of mind. There are only so many products in the world, honestly, so the one we’ve built for you more or less reduces to a put option (deeply, it reduces to selling some deltas of your tungsten-miner stocks). But we don’t use terms like that, which are alienating to non-experts and which send experts scurrying to their Black-Scholes calculators to see how much we’re overcharging them. We just talk in terms of the story. What if a bad thing happened? What if we could save you from the bad thing? There, there.


CME To Launch New Pork Cutout Index

CME effective Aug. 24 will begin publishing a new pork cutout index. Issued each day it will consist of a five-day moving weighted average price using the daily negotiated trade FOB plant prices reported by the U.S. Department of Agriculture’s report PK602.

Career Paths

DGCX appointed of Gaurang Desai as CEO.

PLY: Gaurang Desai has done a terrific job as acting CEO, taking over in the tragic circumstances of the premature demise of Gary Anderson. He has maintained focus and staff morale and I am excited to see how he steers the dynamic DGCX forward in these exciting times. This is great news and I wish Gaurang every success in his well deserved post.

ASX announced the retirement of Ms Jillian Segal, effective 1 September 2015. Ms Segal has served for 12 years on the ASX Board, and was Chair of the Remuneration Committee, a member of the Audit and Risk, and Nomination Committees, and a director of ASX Compliance.

ASX’s Board renewal program is ongoing. In the last 12 months, Mr Damian Roche (August 2014) and Ms Yasmin Allen (February 2015) have been appointed to the Board. Ms Allen will be standing for election at the 2015 AGM.

SEC named Shelly Luisi as an Associate Director in the Division of Corporation Finance.

NY Business Journal reports that digital storage provider Box will open its first full-scale office in Manhattan, and hired Adam Ross, the former VP of Nasdaq’s global corporate solutions to help run the newly launched Box for Financial Services.

FN reports that Rothschild’s nine-strong fixed income team, led by MD Andrew Elman, was shut down in July.

Financial Calendar

This week

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

New announcement – ASX AGM – Wednesday 30 September 2015

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


With Funding, Lender Social Finance Has Nation’s Biggest Banks in Its Sights (subscription)
Peter Rudegeair, Telis Demos & Rolfe Winkler – Wall Street Journal

Fast-growing online lender Social Finance Inc. has raised about $1 billion more from investors, giving the startup a roughly $4 billion valuation that would place it in the top-30 U.S. banks by market capitalization.


The Next Moody’s? Orchard Platform Is A Guide To The Exploding Peer-To-Peer Lending Industry
Robb Mandelbaum – Forbes

Twice a day, at 8 a.m. and 4 p.m. Pacific time, Prosper Marketplace , an online service that connects small borrowers and lenders, posts a list of prospective loans for funding. That list is eagerly awaited by hedge funds and other institutions interested in making unsecured consumer loans at rates up to 32%. All the loans are snapped up within seconds.

That doesn’t leave much time for investors to look carefully for the ones that meet their risk and yield criteria. Which is where New York startup Orchard Platform comes in. Orchard builds software that buys loans and crunches all the data available from Prosper and other online loan marketplaces to analyze the performance of those loans over time. Today the company bids on loans for clients on three of the roughly two dozen U.S. online loan marketplaces and captures data from another seven.

Other stories

Nasdaq Private Market & Morgan Stanley Wealth Management to Launch Wealth Management Education & Services Initiative

Harmonisation Of The Unique Transaction Identifier (UTI), Consultative Report Issued By CPMI-IOSCO

SIFMA Publishes Quarterly Research Report For 2Q 2015


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