August 26 2015

elb2 Public Markets

Paddy Power To Merge With Rival Betfair (subscription)
Arash Massoudi & Malcolm Moore – Financial Times

Paddy Power and Betfair are to combine in an all-stock merger to create the world’s largest online gambling company, in the latest round of consolidation to hit the sector.

The union of the gambling sector’s two best-performing companies will create a group worth in excess of £6.5bn and send a warning to rivals such as William Hill. The deal will see Paddy Power shareholders control 52% of the business, with the remainder held by Betfair investors.

Betfair’s market capitalisation was £2.4bn at the close of trading on Tuesday while Paddy Power’s was €3.4bn (£2.5bn).

Read our Premium Exchange Deals Brief Part 1, Part 2.

PLY: It looks almost like the death of the biggest prediction exchange as it merges with Paddy Power, thus further, presumably moving the business to being another quasi-integrated broker dealer.

Nairobi Securities Exchange H1 2015 Results

vs H1 2014: total income Kshs.401.1 mln (USD 3.86 mln), up 14%, profit after tax Kshs 178.6 mln (USD 1.72 mln), up 40%.

We’ll Close SunGard Acquisition By Q4: Gary Norcross
Namrata Acharya – Business Standard

Interview with Gary Norcross, President & CEO, Fidelity Information Service (FIS) which is buying SunGard for $9.1 bn.

More info in Premium SunGard IPO Preps & Final Deal Brief & Exchange Deals Brief.

MCX Signs MoU With Gift City For International Asset Class Exchange
Sutanuka Ghosal – The Economic Times

MCX seeks to develop an international exchange across multiple asset classes in GIFT SEZ-IFSC.

Read our Premium India – GIFT Exchanges Brief.

China To Restrict Stock Index Futures Trading To Curb Speculation

Higher margins and much more besides as the impotent flail of the Chinese authorities continues apace:

China Launches Probes Into Brokerages (subscription)
Josh Noble – Financial Times

Haitong Securities, GF Securities, Huatai Securities and Founder Securities all issued statements confirming that they are being probed by CSRC for “failure to review and verify the identity of clients in accordance with rules”.

Alcoa Will Meet CFTC To Challenge LME Warehouse Reform

Alcoa will challenge the chairman of the U.S. commodities regulator on its authority to interfere in LME’s warehousing reform at a meeting on Wednesday.

The meeting between CFTC chairman Timothy Massad and Alcoa EVP & CFO Bill Oplinger comes after Alcoa ramped up public criticism of the regulator’s intervention in LME’s warehousing reform plan.

Previous discussions on the topic earlier this month.

Stock-Market Tumult Exposes Flaws In Modern Markets (subscription)
Bradley Hope, Saumya Vaishampayan & Corrie Driebusch – Wall Street Journal

Monday’s mayhem exposed significant flaws in the new architecture of Wall Street, where stock-linked funds—as much as shares themselves—now trade en masse on U.S. markets.

Many traders reported difficulty buying and selling exchange-traded funds, a popular investment in which baskets of stocks and other assets are packaged to facilitate easy trading. Dozens of ETFs traded at sharp discounts to their net asset value—or their components’ worth—leading to outsize losses for investors who entered sell orders at the depth of the panic.

PLY: The ETF industry appears to have failed investors on this test which was hardly that big a day in percentage terms. It’s a pity as the ETF process is such a wondrously simple one but the banks appear to have dropped the ball here. Nobody wants to return to the dire days of 500 basis point mutual funds and a rather shoddy systematic internalisation of the redemption process… Note how circuit breakers appear to be exacerbating problems too. One for the arbitrageurs meanwhile to consider, it looks like there is gold in ETFs on volatile days!

Slow Dark Pools Cost Investors, Study Says (subscription)
Bradley Hope – Wall Street Journal

Dark pools’ creaky infrastructure and slow computer systems are more of a threat to investors than HFTs…

PLY: #IsAnybodySurprised? Gosh, how could it be that banks would shirk on investment and end up not providing a seamlessly excellent service for their internalisation?  Oh, other than copying their pre-existing retail customer approach I suppose. An interesting study which raises a lot of questions.

REGIS-TR Approved As Registered Reporting Mechanism For REMIT

Private Markets

SIX H1 2015 Results

vs H1 2014: operating income CHF 887.5 mln (USD 940 mln), up 0.7% (adjusted for currency effects, growth reaches 6.3%), EBIT CHF 157.7 mln (USD 167 mln), up 4.4%, group net profit CHF 127.5 mln (USD 135 mln), down 2.4%.

SEF Trading In The Doldrums, ISDA Data Show
David Wigan – IFR Asia

The evolution of electronic derivative trading continued its stuttering progress in recent months, with SEF volumes barely growing, according to data from Isda. Some 51.2% of average daily interest rate derivative trading activity was executed on SEFs in Q2, compared with 50% in the same period in 2014. Trade sizes were 19.5% lower than a year earlier on average.

PLY: So many SEFs, such a flat yield curve, survival may be a route to profits in this industry alone.

Pakistan’s Stock Exchanges To Be Integrated

Kazim Alam – The Express Tribune

Representatives of the Karachi SE (KSE), Lahore SE (LSE) and Islamabad SE (ISE) will sign a MoU on Thursday, which will lead to the integration of the three stock exchanges into the Pakistan SE (PSE).

Read our Premium Pakistan Exchanges Merger Brief.

BTC Exchange Igot Halted Trading

PLY: Unfortunate news of what looks to have been either incompetence or an outright scam as various exchanges are under pressure in the BTC space as transactional volumes remain low…

Dividend News

Nairobi SE BoD do not recommend the payment of an interim dividend for H12015.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX down 1%, FTIL (Moon-thingie if you want to be all ultramodern) up 1% after recent falls.


Why Fintech Is Hard: Lessons From The CEO Of Bondcube
Huy Nguyen Trieu – Linkedin Pulse

FAO: Bondcube, a fixed income trading platform, was closed in July, while its CEO, Paul Reynolds, was reported earlier this month to have made a quick return with a new venture called Bondchain.

PLY: Honest insights… including noting that investment banking is not a great preparation for entrepreneurship and also noting for future entities, a blunt statement (which ought to have regulators worried that they have overstepped the mark for innovation: “I would structure a model that did not require regulation.”


Liquidnet & IEX Create Dark Strategy
John D’Antona  – Traders Magazine

A new algorithm that will help the buyside find liquidity – anonymously, cheaply and in large size.

SECP Approves Red Chilli Futures Contract For PMEX
Daily Times

Available from September 1.


Nigerian SE (NSE) Launches Premium Board – Introduces Premium Board Index

Career Paths

BondBuyer reports that Samantha DeZur, the Bond Dealers of America VP of federal policy & strategic communications, will take a new job as the manager of government relations for CME Sept. 14.

Finance Magnates reports that First Derivatives has elevated its VP of e-Trading and Risk Management Solutions Gregory Bottitta to a new senior sales and business development role in the firm’s FX trading platform Delta Flow.

TABB Group promoted Anthony J. Perrotta, Jr. and Andy Nybo to Partner, Global Co-Heads of Research and Consulting.

Capital Markets Malaysia appointed Azhar Zabidi as CEO.

Financial Calendar

28.08 – Record date LSEG interim dividend of 10.8 pence

28.08 – Record date for HKEx Interim dividend

Young Markets Future of Finance Symposium: Warsaw 17th September, email me for registration details.

New announcement – WFE General Assembly and Annual Meeting at the Kempinski Marsa Malaz hotel in Doha, Qatar, on October 19-21.

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

Share Notes

Charles Schwab Director John K. Adams, Jr. bought 3,500 shares Monday, August 24th at $29.67 (bargain $103,845.00).

In connection with a monthly share savings plan for employees of subsidiaries, Oslo Børs VPS Holding has sold a total of 1557 shares. New holding is 5792 shares. Employees paid a price of NOK 90,56, but were allowed a discount of 20% on purchases up to NOK 625. The primary insiders are listed in our Share Notes section in Premium.

Thomson Reuters To Purchase Up To 10M Shares Through Private Agreements As Part Of Existing Program

Analyst Notes

CBOE Upgraded By Zacks From “Hold” To “Buy” – $68.00 Target Price

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


When Unicorn Companies Want More Than Cash
Erin Griffith – Fortune

In recent years, even some of the most scorchingly hot startups have grown hesitant to brave the transition to public markets. They’ve been staying in the nest well past infancy, achieving a sort of sheltered adolescence, ­trading the traditional IPO for multiple helpings of private capital.

PLY: The rather mollycoddled (in various parts) world of startups has delivered a clutch of unicorns who often don’t make money. This issue may also keep them away from public markets methinks…

Wall Street Said To Limit Support For Online Lenders
Matt Scully – Bloomberg

Wall Street banks are scaling back their role in supporting debt sales that have helped online lending companies double their originations every year since 2010.

PLY: The American state by state blob causes a blip in the way the modern P2P securitisation process can proceed.


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