August 28 2015

elb2 FIA streamlining regions into one big global entity as a breadth of united derivatives players attack Basel threats to CCP and much more…

Parish notices: Two events you cannot afford to miss in September:

My “Young Markets” Symposium on the future of finance for those who actually want to understand Blockchain issues, data factors and the exchange of the future and how it will keep its software organised will be September 17th – one day and well worth the trip to learn how markets will develop…

The following week, it’s the return of the SFOA Burgenstock. Spectacular Lac Leman views from the magnificent President Wilson Hotel in Geneva and kicking off the morning of 23rd September is my “Crossfire” with a AAA panel: Chitra Ramkrishna, Phupinder Gill, David Peniket, Magnus Billing and Chistian Katz. Register Here

Public Markets

Plus500 H1 2015 Results
Plus500

vs H1 2014: Revenues $127 mln, up 20%, EBITDA $55.5 mln, down 23%, net profit $40.6 mln, down 25%

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

NZX Purchase Of Apteryx Completed
MondoVisione

On 26 June 2015, NZX announced that it had entered into a non-binding heads of agreement to acquire 100% of Apteryx, a business that delivers rich online functionality to enable NZ investment advisers and providers to efficiently manage, trade and administer their clients’ portfolios.

Letter – Leverage Ratio Threat To The Cleared Derivatives Ecosystem (subscription)
Financial Times

“Sir, Regarding Thomas M Hoenig’s article “Weakening leverage ratio undermines banks’ accounting” (FT Trading Room, FT.com, August 12): while we respect Mr Hoenig’s views regarding the value of the Basel Committee’s leverage ratio, we believe there are flaws in its application to cleared derivatives. These flaws threaten to undermine the global efforts to bring more derivatives into central clearing, damage the health of the clearing ecosystem, and make it more difficult for investment managers, commodity producers and other customers to hedge their risks.

The leverage ratio is designed to require banks to hold capital against actual exposures to loss, yet the current construct fails to consider existing market regulations that mitigate such losses. Unlike making loans or taking deposits, guaranteeing client trades exposes the bank to losses only to the extent that the margin collected is insufficient to cover the clients’ clearing obligations. To make sure that margin is available to absorb losses, it is posted in the form of either cash or extremely safe and liquid securities such as US Treasuries. Furthermore, there are strictly enforced rules to ensure that client margin is available for the limited purpose of guaranteeing the customers’ trades and is therefore segregated away from the bank’s own money. Given these longstanding regulatory requirements, it stands to reason that the leverage ratio should recognise segregated client margin as reducing the bank’s actual economic exposure.”

Timothy W Cameron – Managing Director and Head, The Asset Management Group of SIFMA

Terry Duffy – Executive Chairman & President, CME

Gregg Doud – President, Commodity Markets Council

Andreas Preuss – CEO, Eurex

Walt Lukken – President & CEO, FIA Global

Scott A Hill – CFO, ICE

Scott O’Malia – CEO, ISDA

Suneel Bakhshi – CEO, LCH.Clearnet Group

Richard H Baker – President & CEO, Managed Funds Association

Nandini Sukumar – CEO, World Federation of Exchanges

PLY: Hear! Hear!

Nasdaq Executive Urges China Authorities To Use Circuit Breakers
Frances Schwartzkopff – Bloomberg

Nasdaq’s Hans-Ole Jochumsen, President of Global Trading And Market Services, says the collapse in Chinese share prices, the biggest in two decades, suggests the country needs to follow Europe and the U.S. and halt trading when prices plunge.

PLY: Given how the Chinese authorities have thrown everything including the kitchen sink at endeavouring to control the ebbing tides of their markets recently, it is surprising they have not adopted circuit breakers (even if I remain fairly cynical about them in an interconnected world, myself).

Stock Halts Added To Monday’s Market Chaos (subscription)
Bradley Hope & Dan Strumpf – Wall Street Journal

Monday’s mayhem in stocks appears to have been exacerbated by rules designed to ensure orderly trading, executives and traders said, the latest ripple from investors’ embrace of stock-linked funds.

The proliferation of ETFs has made trading in different securities more linked than ever before, a fact that analysts said contributed to Monday’s wild swings in ETF prices and cascading trading halts.

PLY: So in other words, that wonderful world of highly correlated traders across asset classes still has not come to pass?

Brokers Defy BlackRock Over Average Pricing On Sefs (subscription)
Robert Mackenzie Smith – Risk Magazine

PLY: The header we can read (don’t subscribe to Risk, there are limits to what a free Exchange Invest can do) seems to be obsessed with stripey animals…knowing Risk there’s probably a bit of crunchy discussion behind the paywall.

‘Need To Restrict Clients For Physical Traders’
Suresh P Iyengar – The Hindu Business Line

Commodity exchanges expect a smooth transition to the regulatory regime of SEBI from FMC with the clear timeline given for meeting different norms. Parveen Kumar Singhal, Joint MD, MCX, said the new draft regulations announced by SEBI were on expected lines. However, he said, SEBI should consider restricted membership for physical market participants such as large corporates and bullion traders to trade only on their underlying commodity.

Read our Premium SEBI-FMC Merger Brief.

HKEx Intends To Rely On SEC Class No-action Relief Letter Covering Foreign Options Markets & Certain Options Traded On Them
HKEx

ESMA Consults On Review Of EMIR Standards Relating To CCP Client Accounts
MondoVisione

Private Markets

The Art Of Forecasting: Augur’s Decentralized Prediction Market
Inside Bitcoins

There are many tools available today that can support our curiosity when it comes to gaining insight into past, present, and future events. The discrepancy, however, lies with the perspective that one can take when sifting through the vast amount of information available to us through the many sources. It may help to have a diverse background or experience so that one can understand and interpret the information more clearly — though this is not usually the case. This is where Augur, a decentralized forecasting platform, has stepped in to introduce a new way for people to share opinions about future events with the use of the blockchain technology and incentives for guessing correctly. So, how does decentralized forecasting differ to existing models?

Last week Augur launched crowdsale for the platform.

PLY: As a pioneer in the ‘prediction markets’ space myself, I find Augur absolutely fascinating.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX down 2%, FTILOrbiter (or whatever it’s called) up 1%.

Technology

ITG Suspended Trading Operations On Thursday Due to Issue At Data Center
Nick Baker – Bloomberg

A breakdown in the air-conditioning system at a New Jersey data center prompted ITG to suspend trading operations, including its Posit dark pool, on Thursday.

“We shut down all trading operations so we can be sure,” said Jamie Selway, a MD at the brokerage.

BATS has a presence in the same data center in Weehawken, New Jersey, but said its customers are unaffected because its U.S. stock exchanges are based elsewhere. IEX’s dark pool also operates in Weehawken, but it told clients its “critical trading infrastructure” is located in another building in that town, according to spokesman Gerald Lam.

NYSE Suffers ‘Cosmetic Problem’ On Data Screens
Jacob Pramuk – CNBC

The issues did not seem to disrupt trading. Many screens, which typically show quotes and other information, displayed NYSE logos. Thomson Reuters, which provides the data for the displays, said it was affected by issues at a New Jersey data center, which “interrupted service to a small number of clients.” A chilled water pipe failed, affecting the cooling in a New Jersey facility owned by CenturyLink.

LSE & NYSE Experiencing Technical Problems
LeapRate

At the LSE, the exchange’s main website www.londonstockexchange.com has been down Thursday evening for at least an hour, returning a ‘Page Not Found‘ error page for any company search conducted on the site. It seems that the outage occurred after LSE closed for trading Thursday at 4:30pm local time.

PLY: LSE site is back up this AM…

ASX Technical Fault Causes Long Delays To Earning Results Briefings
Shaun Drummond – SMH

Companies had to delay their earnings briefings on Friday as ASX’s reporting platform was hit with a technical fault. But companies have been reporting delays before their results appear on the ASX website since August 21.

SunGard Apologizes For Fund Pricing Glitch At BNY Mellon
Tim McLaughlin – Reuters

As reported yesterday, the system buckled last weekend as SunGard upgraded software for an accounting platform used by BNY Mellon Corp. BNY Mellon uses the system to generate net asset values for its mutual fund and ETF clients.

SunGard said the issue appears to have been caused by an unforeseen complication resulting from an operating system change performed by SunGard on Saturday.

PLY: Two words for Sungard: Aesthetic Integration…and if you have never heard of them, then you need to be at Young Markets in Warsaw, September 17th (email me for details/registration).

OptionsCity To Provide Settlement Price Solution For NFX
OptionsCity

Welcome To A Wild World Of Robot Investing (subscription)
Gillian Tett – Financial Times

Automated computer programs have changed how markets function.

PLY: A fascinating subject rendered blandly glib by bland reporting which epitomises how the FT continues to struggle with modern markets from pretty much every angle.

Products

Euronext Introduces Weekly Options Classes On French & Belgian Single Stocks
Euronext

Available for trading as from today.

CFTC Approves NFA Rules Enhancing Protections For Retail Forex Customers
CFTC

Stiffer Capital Rules For Retail Currency Dealers Backed By CFTC
Silla Brush – Bloomberg

Statement Of CFTC Chairman Timothy Massad On Enhancing Protections For Retail Forex Customers
MondoVisione

CFTC on Thursday backed steps meant to improve transparency and bolster resources of currency dealers when they face risks from overseas transactions. Two commission members said they would consider taking additional steps to rein in the market.

“The losses that many customers and dealers incurred in connection with the unpegging of the Swiss franc last January were a stark reminder of the risks of these markets,” CFTC Chairman Timothy Massad said in a statement. “We will continue to monitor these markets as well as consider whether there are additional steps that would be appropriate to advance the goals of customer protection and market integrity.”

PLY: Music to the ears of all those seeking to clean up the often dubiously murky world of retail forex trading, amongst them the CME’s futures markets, NASDAQ’s new forex venue and many other platforms…

QV our Premium FX – CHF Crisis – Brief.

Has Corporate Bond Market Liquidity Fallen?
Yuliya Baranova, Louisa Chen & Nicholas Vause – Bank Underground

PLY: Interesting analysis. It happens that my concern about bond market liquidity has always been that the expensive, exclusive, bank centric marketplace was in and of itself a restraint of trade, delivering a relatively illiquid solution. Shooting the market in the foot is no good idea but remaining beholden to the medieval banking structure whose importance to markets has now peaked, is simply not relevant for the medium term and beyond…

Career Paths

Head Trader Leaves Fidelity In Europe After 20 Years (subscription)
MondoVisione

A number of veteran buyside traders – including those at BlackRock and Standard Life Investments – have left their roles this year.

Financial Calendar

Next week

01.09.2015 – Record date Interactive Brokers $0.10 quarterly dividend

02.09.2015 – Record date NZX 3.0 cents interim dividend

04.09.2015 – Record date CBOE $0.23 dividend

04.09.2015 – TMX $0.40 dividend payment

04.09.2015 – BGC Partners’ BoD $0.14 quarterly dividend payment

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

Share Notes

CME MD Chief Accounting Office Jack J Tobin sold 600 shares Aug 18, 2015 at $98.27 (bargain $58,962.00).

Other stories

SEBI Reconstitutes Takeover Panel
The Economic Times

SEBI has reconstituted its Takeover Panel, which looks into the applications seeking exemption from the mandatory open offer that an acquirer needs to make to minority shareholders.

FIA, FIA Europe & FIA Asia Announce Merger Plans
MondoVisione

The respective boards of FIA, FIA Europe and FIA Asia today announced that they have reached an agreement to formally merge the three associations in the first quarter of 2016.

PLY: Wow three boards merged into one – then again the FIA main board usually is about the same size as a bloated US exchange, so it probably means 2 day meetings at all times with one to decide the mixers and the second to get around to that tricky off balance sheet stuff.

Seriously, FIA is wise to rationalise what looked like a rather unwieldy structure and given their status as the body for FCMs now essentially representing large banks in ETD and beyond, the organisation needs to take steps to maintain relevance (as do all industry organisations it has to be said).

Enhancing The Commission’s Waiver Process, SEC Commissioner Luis A. Aguilar
MondoVisione

Japan Exchange Regulation: Establishment Of International Surveillance Office To Strengthen Market Monitoring Of Cross-border Transactions
MondoVisione

New Zealand’s Financial Markets Authority Releases Enforcement & Investigations Report 2015
MondoVisione

ASIC Welcomes Consultation On Industry Funding
MondoVisione

ASIC welcomes the release today of the Government’s consultation paper on a proposed industry funding model for the organisation.

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