August 21 2014

elb2ASX profits up as visionless cost control business model receives a fillip, new FTIL tech deal for MCX. Bitcoin is legal in Thailand – who would have thought a military junta would be more enlightened than many democracies? Jeff Singer leaving DIFC? Euronext launch options on…Euronext and yes, for all our cynical readers they have calls as well as puts (well I suppose at least you can sell premium if you wish!). Ought to be a product worth trading given the debate on the future of exchanges, especially in Europe with so much flux.

Thanks to all our top tier subscribers, including those who joined the group yesterday. So far the voices who support the NLX business are entirely mute. If you are not up with the NLX story which began in the public domain at Exchange Invest, you can access the whole story with a Premium subs at just $120 per annum for each user. It also helps keep this daily newsletter free (You can subscribe here). Recent stories on NLX alone include:

NEW: NLX: Plus Ca Change?

Must Read: NLX: The Butterfly (In)Effect,
NLX: Big Data: Easy to Find?,
NLX: Missed Opportunity,
NLX: Measuring Up the Coffin?

Public Markets

ASX Full-Year Financial Results
ASX

Highlights

Operating revenue $658.3 mln, up 6.6%.
Operating expenses $153.6 mln, up 5.1%
Net Profit $383.2 mln, up 10.0%
EPS 198.5 cents, up 1.5%
Full-year dividend per share 178.1 cents, up 4.6%

PLY: Clearly ASX will regard this as validation that the visionless cost control strategy works. At the same time, the rumblings remain that the ASX is not gaining traction in post OTC markets with LCH in pole position to hoover it up thanks to the inherently trans-Pacific globalised routes of the trading desks at ANZ, Westpac et al.

ASX Keeps Up Infrastructure Investment Run Rate
Simon Osborne – Trade

ASX announced in its annual results that its capital expenditure for 2014 was A$43.2 mln, maintaining the exchange’s investment in its market infrastructure since 2012. ASX expects capital expenditure in the next financial year to be between A$40 and A$45 mln.

PLY: They may pinch pennies in many places but there are ongoing projects to endeavour to capture the post trade and general post OTC business; my concerns on that are above. ASX total investment annually appears to be something like the sum NASDAQ OMX pours down the NLX drain.

Equity market share has been reduced to 91% from 95% in cash equities in the past year thanks to the impact of the strong Chi-X challenge.

FTIL & MCX Agree To Terms Of New Tech Deal
Business Standard

FTIL and MCX will soon sign an agreement to revise the terms of their technology supply contract. This would end a controversy which began with the special audit report of Price Waterhouse.

The report had said the contract unduly favoured FTIL, which was the anchor investor in MCX. Now, said a source, FTIL has agreed to reduce its annual maintenance charge by 40%, an exit route has been provided and MCX gets the flexibility to have another technology vendor.

FESE Warns On Shift From Exchanges To OTC Venues (subscription)
Joe Parsons – FOW

Exchange trade body called for OTC equity derivatives to be mandated for clearing. FESE has warned the European plan to exempt off-exchange equity derivatives from clearing will see liquidity shifting from exchanges to unregulated platforms.

PLY: Amusing perspective moment: 15 summers ago, my book “Capital Market Revolution!” was published (July 1st 1999) and suggested that it was only logical that CCP clearing would come to equity markets. At the time, the exchange fraternity almost, not not quite exclusively, reckoned this was an utterly daft idea. At least it’s good to see they are embracing it now.

ICAP Launches Singapore Coal Derivatives Trading (subscription)
Jeremy Grant – Financial Times

ICAP has opened a coal derivatives trading desk in Singapore in a move that highlights the growing importance of the Asian city-state as a commodities trading hub amid robust Chinese demand for coal.

See also our premium post ICAP Explores A New Galaxy and the excellent (open access) guest posts by Jake Pugh here and here.

Govt Drafts Rules To Give More Powers To Commodity Futures Market Regulator
Remya Nair & Ashish Rukhaiyar – Livemint

The finance ministry has put out draft rules to give FMC, the commodity market regulator, more powers over intermediaries in the commodity derivatives market. The rules propose giving wider powers to the regulator to check violations by market intermediaries. They empower the regulator to inspect the books of accounts and electronic records of the intermediary for effective regulation.

PLY: Overall these appear to be logical incremental inspection issues which make sense.

Financial Stability Board: Public Comments To The July 2014 Foreign Exchange Benchmarks Consultative Report
Mondo Visione

FSB published its Foreign Exchange Benchmarks Consultative Report. Interested parties were invited to provide written comments by 12 August 2014. These comments are available below.

EI report and discussions on the topic on July 18th.

Private Markets

BitBeat: Chinese Bitcoin Exchanges Weigh In on BitLicense in Lawsky Letter (subscription)
Paul Vigna & Michael J. Casey – Wall Street Journal

The three biggest bitcoin exchanges in China have weighed in on a critical regulatory proposal on the other side of the planet, submitting comments on the New York Department of Financial Services’ “BitLicense” proposal, in a gesture that shows just how far Benjamin Lawsky‘s regulatory arm could reach.

Last month NY DFS released the proposed BitLicense regulatory framework for virtual currency firm.

PLY: Good. These rules worry me as they are written for a two dimensional world which entrepreneurs and investors don’t inhabit but which apparently serves as a viable model for many regulators.

Bitcoin Start-Up Chain Raises $9.5 Mln Led By Khosla Ventures
Sydney Ember – DealBook

Another virtual currency start-up has attracted real dollars from prominent investors.

Chain, which aims to make it easier for developers to build Bitcoin applications, announced on Wednesday that it had closed a $9.5 mln investment round led by Khosla Ventures, bringing its total funding to $13.7 mln. RRE Ventures, Thrive Capital, SV Angel, Pantera Capital and the Bitcoin investor Barry Silbert were also among the backers.

PLY: Bitcoin is real, cryptocurrency is the future – and those who don’t see it are…well probably the same folk who didn’t get the internet until around the turn of the millennium or thereafter…

Chain itself looks very interesting too.

Bitcoin Ban Fear Fades In Thailand With Exchange Launch
Pete Rizzo – CoinDesk

Coins has launched its second bitcoin startup in Southeast Asia with the formal opening of Coins.co.th in Thailand. Led by CEO Ron Hose, Coins launched its Philippines-based bitcoin exchange and merchant processing service Coins.ph in March, at the time enrolling two larger merchants – MetroDeal and CashCashPinoy – in its services.

PLY: Very interesting news as last year the democratic Thai government moved to ban Bitcoin outright. Now it is being permitted as a commodity – who would think that a military junta installed by a coup would be more liberal in its approach to financial innovation than many western, er, democracies, let alone that supposed democratic supranational European Union behemoth?

Dividend News

ASX‘s BoD announced its dividend for the year ended June 30, 2014 of 89.9 cents per share, the holders are eligible to receive the dividend on September 05, 2014 and the payment date is September 24, 2014.

Special Section: FTI, NSEL, India at the Crossroads

PLY: FTIL has rallied 3% after several days of torpor, partially alleviated by relief that it will for the time being retain the vendor contract with MCX. MCX is similarly up nearly 3%, presumably on relief that it is no longer the bonded IT slave of FTIL’s quite remarkable contract (incidentally anybody seen a copy of this? we would love one to frame on the office wall).

Legal Hurdles Seen To FMC-Proposed NSEL-FTIL Merger
Moneycontrol

In what would be an unprecedented move, FMC has suggested the government merge the privately-owned NSEL, with its parent FTIL.

PLY: Article summarises what I said all along: “the proposed move…could also open up a quagmire over the legal sanctity of such a decision.” The forced merger line lets Jignesh fight the martyrdom defence…and what’s more he would have garner some sympathy, as it is an egregious over-use of regulatory privilege.

Technology

SunGard MarketMap To Focus On “Unique Content” (subscription)
Faye Kilburn – WatersTechnology

SunGard MarketMap, the market data arm of technology giant SunGard, is embarking on a new initiative to build out unique and proprietary content sets which leverage other areas of SunGard’s business, in a bid to better differentiate its offering from competitors, officials say.

PLY: Use your big data advantage to build new products. Simple in theory, tricky in execution, brilliant for shareholders when deployed successfully.

CenturyLink Bows Private Cloud Service (subscription)
Faye Kilburn – WatersTechnology

Network and datacenter hosting provider CenturyLink Technology Solutions, the subsidiary of internet and telecoms service provider CenturyLink formerly known as Savvis, has launched a new private cloud service, dubbed CenturyLink Private Cloud, that will enable financial services firms to build hybrid cloud environments which leverage both public and private cloud.

PLY: It has to be said renaming Savvis after what sounds like a realtor sounds like moronic business practice to me. Having worked in various ways with data centres over the years, even I have trouble keeping up with all the brands…

Citi launches Execution To Custody (E2C) Solution In Latin America
Automated Trader

Citi has launched its E2C solution in the Latin American market: an electronic platform automating the trade execution, post trade services, clearance and settlement processes in markets and liquidity pools.

Further Quotation Rate Acceleration & Charging Fee Slash In Shenzhen Market, Service & Market Efficiency Improved – Total Charging Fee Reduced By 180 Million Yuan, Quotation Rate Doubled
Mondo Visione

Recently, SZSE and Shenzhen Securities Communication Co., Ltd. jointly announced intention to slash the communication charging standard in Shenzhen Market, and speed up the quotation rate…

Products

Euronext Launches Equities Options On Euronext N.V. – New Option Class In Spotlight Options Segment
Mondo Visione

Euronext announced that trading in equity options on Euronext N.V. shares will start on the Amsterdam derivatives market as of Thursday 28th August.

PLY: With Euronext shares at 19 Euros, they remain below the 20 Euro IPO price but have at least rallied in recent weeks from the low of 17.32 Euro on August 6th. Their reappearance as a traded equity option ought to be a boon to trading volumes on what was once the MONEP.

CFTC & Traders Clash On Cotton Verdict (subscription)
Gregory Meyer – Financial Times

A notorious episode of wild cotton price swings was “orderly”, a US regulator has said, a conclusion at odds with many traders’ views of the 2011 affair. The assessment by CFTC has been invoked by lawyers for Louis Dreyfus Commodities, parent of the world’s leading cotton merchant, as it fends off a price manipulation lawsuit brought by the former head of cotton at Glencore.

Indexes

Battle Commences To Become China Benchmark Index (subscription)
Xiao Wang – Risk

China is the world’s second-largest equity market, but so far there is no globally recognised stock market benchmark. As derivative and ETF providers increasingly focus on the sector, will one emerge?

Now, Call Goes Out For A Jain Stock Index
Sachin P Mampatta – Business Standard

Stock exchange officials have been receiving requests to start an index of stocks of companies complying with Jain religious strictures, on the lines of the Islamic Shariah index.

PLY: The largest problem with Shariah compliant structures remains that there is no single agreed standard of “Shariah” across the various nations and sects of Islam.

Career Paths

The National reported that Jeff Singer has resigned as CEO of the Dubai International Financial Centre Authority (DIFC).

PLY: If confirmed, I am sorry to see Jeff leaving as he has been a very useful presence in the Emirate, having helped the growth of the exchange industry too, having previously been CEO of NASDAQ Dubai following his career with NASDAQ itself.

MV reported that SEC’s CIO Thomas Bayer is planning to leave the agency in October.

ESMA Vacancy Notice – Two Vacancies In CRA Supervision Team
Mondo Visione

Deadline for both vacancies: 21 September 2014. Please refer to our vacancy page for the details on this positions (Ref. 2014/VAC11/AD6 and Ref.2014/VAC20/FGIV) and how to apply.

Financial Calendar

Today

ASX 2014 Full-Year Results
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

Share Notes

CBOE CEO Edward T. Tilly sold 6,250 shares Monday, August 18th at an average price of $52.00 (bargain $325,000.00). He now owns 129,328 shares.

Analyst Notes

SGX “Buy” Rating Initiated By Jefferies – S$8.00 Price Target, Up From S$7.27.

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

Innovestor Is Finland’s Newest Equity Crowdfunding Platform
JD Alois – Crowdfund Insider

Finland welcomed a new equity crowdfunding platform. Innovestor, a company formed in May 2014, was launched by CEO Tommi Äijälä and Antti Parviainen to help cultivate and fund startups.

Venture Capitalists Now Search Crowdfunding Sites For Opportunities
Annie Pilon – Small Business Trends

When crowdfunding sites like Kickstarter and Indiegogo began taking off, some thought they would make venture capitalists obsolete. That has not been the case so far. And crowdfunding sites have actually served as an opportunity for professional investors to easily find new startups to fund. A report released last week by research firm CB Insights found that about 9% of the 443 hardware projects that have reached the $100,000 threshold on crowdfunding platforms have also raised venture capital.

PLY: The great thing about knee jerk linear prognostications from the average market analyst is that they always view threats as opposed to opportunities – the VC business now has more competition via crowdfunding but it also has added optionality, this makes for a better ecosystem…which is also why regulators need to liberate their narrow-minded investor protection paranoia and focus on education and investor freedom.

Securities Commission Malaysia Invites Comments On Proposed Regulatory Framework For Equity Crowdfunding
Mondo Visione

SC today published a consultation paper seeking public feedback on the proposed regulatory framework for equity crowdfunding (ECF).

PLY: Dear Securities Commission of Malaysia, Make it lean, light, empower the great talent of the many ethnicities of this remarkable country and let growth rip amongst small business. Yours, a member of the Malaysia & Singapore Vintage Car Register.

China P2P Lending Market Booms In H1
Hu Xiaocen – ShanghaiDaily

China’s p2p lending continued to thrive in the first half despite a number of collapses of online platforms last year.

There were 1,184 registered p2p lending platforms by the end of June on China’s mainland, which had a total transaction amount of 81.8 bln yuan (US$13.3 bln), according to nonobank.com, a Shanghai-based p2p lending company.

Other stories

Hong Kong SFC Q1 Report
Mondo Visione

SFC published its Quarterly Report summarising key developments from April to June 2014. Among the highlights during the quarter, the Securities and Futures (Amendment) Ordinance 2014, gazetted in April, established a framework for the regulation of the over-the-counter derivatives market, and an SFC circular set out guidance on robust internal product approval and design processes for investment products. To encourage more meaningful disclosure, the SFC also requested listed companies to provide specific numbers in their profit alerts and warnings wherever possible.

ASIC Publishes Eighth Market Supervision Report
Mondo Visione

ASIC today published its eighth report on the supervision and surveillance of Australian financial markets and market participants.

Whistle-Blower Rule Denied To Foreigners: Business Of Law
Ellen Rosen – Bloomberg

Foreign whistle-blowers who work for overseas companies can’t be protected from retaliatory firings for disclosing conduct that happens abroad, a federal appeals court held.

The U.S. Court of Appeals in Manhattan found in a case involving Siemens AG that an employee who worked in Taiwan and reported alleged bribery to others in the company couldn’t take advantage of the anti-retaliation provisions of the 2010 Dodd-Frank Act.

PLY: Bumps in the Carpet rule instant analysis: presumably American businesses will as a result work assiduously to encourage the hiring of foreigners?

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