Christmas / New Year Digest – January 05 2015

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Your daily free dose of Exchange Invest returns after a Festive hiatus – with 2 editions today!

This is Part One: a digest of what happened during the Festive fortnight.
Part Two will cover the news from the past weekend.

“Highlights” you may have missed include that mindboggling ESMA MIFID II paper, while Orc bought TBricks and the Festive rumour mill was overwrought with thoughts NYSE may soon be sold, plus so much more… Happy New Year!

Public Markets

NYP Says NYSE Will Be Sold, CNBC Report Says Not So Fast
Mark Melin – Value Walk

PLY: NYSE and its owner ICE denied a New York Post report that said the iconic trading floor would be sold within a year…

Meanwhile, ICE found an ally in Credit Suisse before Christmas for its efforts to revamp the U.S. stock market and bring more trading back onto exchanges.

Long-Term Questions As Euronext’s Momentum Gathers Pace (subscription)
Philip Stafford – Financial Times

PLY: FT adds to my Q4 theme that Euronext has a whole new business focus, reflected in the share price which reached circa €25 apiece, “having languished for several months below June’s €20 listing price.”

Philip Stafford raises the long term questions and ponders a CCP expansion via acquisition, perhaps BME? Interesting thought, I suppose if you can make the dysfunctional Euronext work then turning the reactionary BME into a proper competitive business from its current state of denial would be feasible.

ESMA Provides Implementing Rules For MiFID II
MondoVisione
ESMA Publishes Initial Cost-Benefit-Analysis On MiFID II Proposals
MondoVisione
The Financial News Guide To Mifid II (version 2.0) (subscription)
Tim Cave – Financial News
Key Takeaways From The Final Mifid II Consultation (subscription)
Tim Cave – Financial News

ESMA published its final technical advice (TA) and launched a consultation on its draft regulatory technical and implementing standards (RTS/ ITS) regarding the implementation of MiFID II and MiFIR as well as a preliminary cost-benefit-analysis (CBA).

Top 2014 Trends: Is This The Last Year Of Dark Pools?
Renee Caruthers – Traders Magazine

PLY: Not the demise of Institutional Liquidity Pools with economically beneficial block trades but the rather more nebulous deployment of systematic internalisation.

FTIL Updates On Sale Of Stake In MCX – SX
Business Standard

1. 2,71,65,000 equity shares of MCX-SX sold to Dr. Rakesh Jhunjhunwala;
2. the 38,48,00,000 warrants has been transferred in the name of investors and the investors have converted the said warrants into equity shares;
3. one investor, SKS Capital & Research have expressed its inability to purchase the warrants and accordingly both the parties agreed to terminate the Agreement;
4. one investor, Uday Shah has agreed to purchase additional 50,00,000 warrants;
5. the balance 17,26,60,000 warrants will be transferred to Escrow Agent in terms of WPA and the said warrants will be transferred to the investors from the Escrow Account as per terms & conditions of Escrow Agreement.

Who Did Buy Bourse Africa?
Sundaresha Subramanian – Business Standard

Continental Africa Holdings (CAHL), which apparently agreed (reported November 18th) to buy FTIL’s Mauritius-based Bourse Africa (BAL) exchange for $40 million (Rs 250 crore), does not seem to have the resources to pay, according to its corporate filings in Mauritius.

PLY: A curious state of affairs, especially as I just cannot see what can remotely justify the $40 million valuation, adding a big fat “why?” to the “who?” raised above.

FMC Says Kotak Bank Nominee On MCX Board Will Lead To Conflict Of Interest
Suresh P Iyengar – The Hindu Business Line

PLY: If Indian regulators had sway over the rest of the world’s exchanges, there would be perhaps three approved directors throughout the whole western world – a remarkable feat given that some exchanges in the US have a football squad sized board. I have long argued about board sell side groupthink but I think FMC lack perspective here.

JPX: Signing Of Joint Venture Agreement To Establish Yangon Stock Exchange
MondoVisione

PLY: …signing an agreement which was already hugely trailed…

LCH.Clearnet Plans Equity Clearing Fee Cuts (subscription)
Philip Stafford – Financial Times

Derivatives Exchanges Prove Resistant To Regulatory Change
David Henry – Reuters

Goldman Metal Warehouse Sale To Reuben Brothers (subscription)
Henry Sanderson & Neil Hume – Financial Times

David and Simon Reuben, who amassed a fortune from property, pubs and data centres as well as mining investments, will buy Metro International Trade Services, a warehouse company with nearly 30 Detroit warehouses, for an undisclosed sum. Goldman bought the business almost five years ago for around half a billion dollars.

Citi Buys Credit Suisse Commodities Trading Book
Reuters

PLY: Apparently Citigroup is the one bank expanding as others withdraw from the commodities business.

New Measures Set To Boost Stock Connect Scheme
Hu Weijia & Li Qiaoyi – Global Times

Hong Kong is considering new measures to promote the Shanghai-Hong Kong “through train,” including relaxing the stock market access threshold for mainland investors. Currently, mainland investors need to have a portfolio value of 500,000 yuan ($80,369) to participate in the stock connect scheme.

Santa Hears Laments From HKEx Chief
The Standard
Latest Charles Li Direct: HKEx CEO Charles Li Letter To Santa
MondoVisione

HKEx CEO wrote to Santa to mourn the loss of China’s biggest e-commerce business, Alibaba to the NYSE.

SGX Hopes For Greater Links With Shanghai
Reuters

CBOE Enlists Help of FINRA, Brokering New Regulatory Oversight
Jeff Patterson – Forex Magnates

CBOE will reportedly relinquish its regulatory duties, outsourcing to FINRA.

FINRA press release here. CBOE press release here.

Nasdaq Gains More Company Listings – Soundly Thrashed in Total Money Raised
MondoVisione

Nasdaq welcomed 313 new listings to The Nasdaq Stock Market in 2014, including 189 IPOs – representing a 50% increase from the 126 2013 NASDAQ IPOs.

PLY: EI December 19th reported that NYSE raised $182 billion in 545 transactions in 2014, with 129 IPOs, raising $70B in total proceeds.

The IPO ‘scores on the doors’ (provisionally) for 2014 (reported December 17th via Barron’s) suggest:

1. NYSE $73.4 bln (N.B. given as ‘over $70 bln’ by ICE above);
2. HKEx $27.1 bln
3. NASDAQ $23.9 bln
4. LSE $22.6 bln

N.B. This press release suggests “over $22 billion” raised by NASDAQ, whereas Barrons thought it was $23.9. Perhaps LSE ultimately squeezed past for the final IPO ‘podium’ position?

NASDAQ had a great year for number of IPOs which offers exciting portents but NYSE raised most money by a vast margin.

U.S. Retail Brokers Warn ‘Tick Size’ Plan To Boost Investor Costs
John McCrank – Reuters

A plan by SEC to widen the minimum trading increments of some small-cap stocks to test if that would spur more trading could end up harming mom-and-pop investors, retail brokerages said in letters to the regulator.

CFTC Staff Extends Time-Limited No-Action Relief To Japan Securities Clearing Corporation et al
MondoVisione
CFTC Staff Extends Time-Limited No-Action Relief To Eurex Clearing & U.S. Clearing Members
MondoVisione

OCC Approves New Capital Plan
GLOBE NEWSWIRE

OCC approved a newly formed capital plan designed to comply with proposed new standards for covered clearing agencies. Existing stockholders, CBOE, ISE, NASDAQ, LLC, NASDAQ, NYSE will contribute $150 million in equity capital, increasing OCC shareholders’ equity to approximately $247 million by Q1 2015. The existing stockholders will also commit to provide specified replenishment capital if needed…

TMX Reforms Need Reform
Financial Post

A letter from Joacim Wiklander, Chief Trading & Data Officer with Aequitas Neo Exchange Inc., in Toronto, was sent December 18th to Aequitas supporters.

Can The Once-Mighty TSX Venture Exchange Be Saved?
Peter Koven – Financial Post

Canada’s junior stock market is in crisis. Many companies can’t raise money, do anything productive to create shareholder value, or get anyone to trade their stocks. But the biggest problem may be that most people just don’t seem to care.

FMC’s Call Auction Move To Bring Spot Trading On Comexes
Business Standard

The call auction on commodity exchanges proposed by FMC to arrive at a final settlement price, will help bring spot trading of commodities on national exchanges.

Private Markets

PDEx Buyout Seen By H1 2015
Doris Dumlao – Inquirer

Philippine Stock Exchange expects to complete by H1 2015 its acquisition of majority stake in Philippine Dealing Systems Holdings Corp. (PDS Group)—the first step towards unifying two distinct capital market systems in the country.

Read our EI Premium – PSE – PDEx Merger brief.

PLY: I still can’t risk holding my breath on this deal but presumably some day it will happen?

BSE Introduces New Functionality To Prevent Self Trades
India Today

NCDEX Proposes To Cover APMCs In Common Clearing Corporation
Rajesh Bhayani – Business Standard

NCDEX has proposed a clearing corporation across market segments.

Angola Stock Exchange Inaugurated In Luanda
Macau Hub

The Angolan Debt and Securities Exchange (BODIVA) was inaugurated on 19 December in Luanda, with the launch of the Wholesale Treasury Market and Treasury Securities Registration Market.

Bosnian Stocks Offered On BIST
World Bulletin

Sarajevo SE and BIST will come together next year in an “order-routing system” which will allow brokers from Turkey and Bosnia to trade through each other’s markets.

SEBI Allows Exit Of Cochin SE As Bourse
New Indian Express
Sebi Permits Bangalore SE To Exit From Stock Markets
Times of India
Sebi Allows Exit Of Ludhiana SE As Bourse
The Economic Times

Seven Regional Commexes’ Recognition Lapsed, Audit Pending: FMC
Business Standard

Of the total 16 regional commodity exchanges, recognition of seven bourses has lapsed, according to a report by sector regulator FMC.

Saudi Arabia Said To Plan Stock Market Opening In April
Matthew Martin, Sarmad Khan & Arif Sharif – Bloomberg

Saudi Arabia is apparently seeking to open its $509 billion stock exchange to foreign investors in April.

Serbia’s Balkan Power Exchange Launch Hits New Delay
Maja Zuvela – Reuters

Serbian delays in enacting a new energy law have postponed the start of a Belgrade-based regional spot power exchange to at least the third quarter of 2015.

Thai Bourse Signs Mou With Bank Of China
MondoVisione

Bitcoin Hit With Tax Blow In Australia
The Guardian

Australia’s tax authorities have ruled that bitcoin transactions are subject to the goods and services tax (GST), suggesting that the cryptocurrency is not likely to be classed as “money” in the near future.

Special Section: FTI, NSEL, India at the Crossroads

Bombay HC Extends Status Quo On FTIL-NSEL Draft Merger Order
Khushboo Narayan – Livemint

FTIL Promoter Group Entity Skips Holdings Disclosure
Business Standard

Sigma Financial Services, (which Jignesh Shah’s private firm La-Fin Financial Services owned 18% until March 2013), owned 7,000 shares of FTIL at Rs 45.2 a piece. However, Sigma’s shareholding did not figure in the shareholding pattern of FTIL filed with the exchanges in March 2013 or before.

PLY: Readers may be surprised at such a fundamental oversight by a company clearly within the Jignesh Shah circle of influence…

Investor Moves Court Against Motilal Oswal, PhillipCapital
Khushboo Narayan & Ami Shah – Livemint

PLY: First formal complaint in the court against the role played by brokers in the NSEL case demonstrating the clear split now between brokers and investors who appeared aligned in the earlier days of this fiasco.

Merger Proposal Represents ‘Personal Vendetta By A Senior Bureaucrat’
The Economic Times

PLY: Jignesh Shah claims proposed shotgun merger of NSEL-FTIL (which I still find a dubious adulteration to core precepts of corporate law), was promoted by K P Krishnan, just before he transferred from the Ministry of Finance to another department. The MCA had earlier filed an affidavit stating “NSEL is nothing but a colourable device floated by FTIL to take the shield of corporate veil to avoid liability under various provisions of the Companies Act and other statutes”. “Besides, the business activities of both the companies have been carried out from the same premises and the executive/employees of both petitioner (i.e, FT) and as well as third respondent (i.e. NSEL) are engaged on deputation/loan basis which would clearly establish that the minds of both the companies are one and the same.”

NSEL Defaulters Among Banned Sebi Entities
Sneha Padiyath – Business Standard

Senior officials of companies declared defaulters in the NSEL payment crisis are among 260 entities barred by the capital markets regulator in another securities market scam.

Sebi on December 19 barred 260 entities for stock market manipulation and suspected money laundering. Data from an exchange-sponsored registry of regulatory orders, watchoutinvestors.com, shows, for instance, that the names of Mohit Aggarwal and Shilpa Aggarwal also figured in the NSEL payment crises.

Technology

Tbricks Merges With Orc Group
IT Business Net

Orc Group press release here.

PLY: An interesting move adding more heft to Orc in front end trading capability in particular as its parent Cidron Delfi Intressenter Holding AB acquires 100% of Tbricks.

ICE Bans ‘Disruptive Trading’ Strategies (subscription)
Gregory Meyer – Financial Times

…takes effect January 14, about four months after exchanges owned by rival CME adopted similar rules.

Should We Pity The Poor Beleaguered HFT Firms?
John Bates – Traders Magazine

SGX’s Next-Generation Derivatives Trading & Clearing Platform To Use Nasdaq Technology
MondoVisione

Osaka Signs System Contract With TOCOM (subscription)
Alice Attwood – FOW

Following the basic agreement signed in September 2014, Tokyo Commodity Exchange (TOCOM) has signed a deal to use the Osaka SE derivatives trading system.

JPX press release here.

PLY: Strikes me as a likely prelude to a merger.

SGX Names Independent Experts To Investigate Trading Disruption
Channel NewsAsia

…including tech giant IBM, which will look at operational management issues; and a firm called Environmental Systems Design to explore technical issues.

SGX press release here.

NSE To Invest More In Technology: CEO Chitra Ramakrishna
The Hindu Business Line

ESMA Publishes Draft Implementing Technical Standards Under The Capital Requirements Regulation
MondoVisione

Products

CME Europe Targets Q1 Cocoa Futures Launch (subscription)
Alice Attwood – FOW

ISE Gemini Introduces Flat Pricing For Price Improvement Auctions
MondoVisione

DGCX Launches Three New Emerging Market Currency Futures
MondoVisione

Russian Ruble, Korean Won and South African Rand..

MCX Gets FMC Nod To Launch Crude Oil Mini Futures For Next Year
The Economic Times

Central Bank Gives Green Light To PFTS Stock Exchange’s Trade In Forex Futures
Interfax

UICE Launches Trading In Forex Futures
Interfax

Ukrainian Interbank Currency Exchange (UICE) December 26 stock exchange launched electronic trading in non-deliverable futures for Ukrainian hryvnia against US Dollar, Euro and Russian Ruble.

HK-Shanghai Stock Link Hurdles Spark Derivatives Boom
Michelle Price – Reuters

Hong Kong’s off-exchange derivatives market is thriving as foreign funds prevented from using “through train” look for a back door to gain exposure to China’s record-breaking stocks rally.

PLY: Sooner or later these issues will be ironed out no doubt.

Indexes

UK FCA To Regulate Seven Additional Financial Benchmarks
MondoVisione

PLY: Extending the remit from LIBOR. Given that LIBOR was all about market abuse, clearly we can expect the FCA to crack down on any errant MTFs imminently?

DB1 Announces Compliance Of DAX Index Family With IOSCO Principles For Financial Benchmarks
MondoVisione

Bursa Malaysia Announces Launch Of Environmental, Social & Governance Index
MondoVisione

Career Paths

HKEx has appointed Angelina Kwan as Head of Regulatory Compliance in its Listing and Regulatory Affairs Division.

Euronext N.V. announced that, following its EGM that took place Friday, December 19th, all the resolutions on the agenda were approved. Dominique Aubernon, Koenraad Dom and Godelieve Mostreyas were appointed members of the Supervisory Board.

MCX’s shareholder director, B V Chaubal, has resigned from its board.

Hong Kong Securities and Futures Commission (SFC) welcomes the re-appointment by the Financial Secretary of Professor Leonard Cheng Kwok-hon as a NED for a term of two years effective from 1 January 2015.

Stock Exchange of Thailand (SET) has appointed Santi Kiranand as EVP and Head of Markets, overseeing overall marketing, product and business developments, customer and channel, as well as technology products, effective from January 1, 2015.

Bahamas International Securities Exchange (BISX) appointed of Mr. Andrew Strachan as the new Chairman of the Board of Directors for BISX. Mr. Strachan takes over as the Chairman of BISX after having served in the capacity of Deputy Chairman for the last year, and he replaces Mr. Ian D. Fair who has served as BISX’s Chairman for the past 15 years.

Indian commodity regulator FMC is set to have T V Somanathan as its chairman from January 9, according to sources in the know of the development.

Schwab’s Clendening Leaving With More Than $5.2 Mln Package
Reuters

John Clendening, the former co-head of Charles Schwab’s retail brokerage business, will collect a cash payment of $5.17 million as part of a separation agreement he signed on Dec. 10.

ESMA Vacancy notice – Seconded National Expert – IT Projects management
MondoVisione

Deadline: 25 January 2015. Please refer to our vacancy page for the details on this position (Ref. 2014/VAC30) and how to apply.

Share Notes

NASDAQ OMX EVP Edward S. Knight sold 18,934 shares Thursday, December 18th at an average price of $47.73 (bargain $903,719.82). He now owns 73,164 shares.

Interactive Brokers Chairman Earl H. Nemser sold 4,254 shares Friday, December 19th at an average price of $28.36 (bargain $120,643.44). Mr. Nemser’s regular sales are chronicled on this specific page.

Investment Technology Group insider Peter A. Goldstein sold 5,000 shares Monday, December 22nd at an average price of $20.37 (bargain $101,850.00).

Investment Technology Group CEO Robert C. Gasser sold 2,000 shares Monday, December 22nd at an average price of $20.58 (bargain $41,160.00). He now owns 279,560 shares.

CBOE CEO Edward T. Tilly sold 6,250 shares Monday, December 22nd at an average price of $64.25 (bargain $401,562.50). He now owns 116,828 shares.

Interactive Brokers CFO Paul Jonathan Brody sold 5,249 shares Tuesday, December 23rd at an average price of $29.44 (bargain $154,530.56). Mr. Brody’s regular sales are chronicled on this specific page.

Interactive Brokers CFO Paul Jonathan Brody sold 3,711 shares Friday, December 26th at an average price of $29.56 (bargain $109,697.16). Mr. Brody’s regular sales are chronicled on this specific page.

Interactive Brokers Chairman Earl H. Nemser sold 2,967 shares Friday, December 26th at an average price of $29.56 (bargain $87,704.52). Mr. Nemser’s regular sales are chronicled on this specific page.

Interactive Brokers Chairman Earl H. Nemser sold 4,365 shares Tuesday, December 30th at an average price of $29.40 (bargain $128,331.00). Mr. Nemser’s regular sales are chronicled on this specific page.

Crowdfunding

BlockTrust Launches Crowdfunding Platform For Blockchain-Based Projects
Diana Ngo – Coin Telegraph

P2P Lending Set To Change The UK Mortgage Industry
Property Wire

P2P set to revolutionise the UK mortgage industry, starting with secured lending to landlords, according to a new independent review of the buy to let mortgage industry.

Other stories

CFTC Staff Issues Extension Of Time-Limited No-Action Relief For FCMs From Requirement To Obtain An Acknowledgement Letter From Certain Depositories
MondoVisione

CME Fines Three Firms For Automated Trading Violations
Reuters

CME on Friday, Dec. 19th, fined 3 Chicago-based proprietary trading firms (303 Proprietary Trading, Allston Trading and Traditum Group) for violations stemming from problems with automated trading systems.

Autorité Des Marchés Financiers Adjusts Fees
MondoVisione

EU Retreats On Prop-Trading Ban; Nations Back Separation
Jim Brunsden – Bloomberg

DFM, Egyptian Clearing Company Agree To Promote Dual Listing & Share Knowledge
MondoVisione

U.A.E. Regulator Said To Plan New Rules For Startup IPOs
Matthew Martin & Sarmad Khan – Bloomberg

UAE’ stock market regulator is working on rules that would make it harder for startup companies to sell shares in an IPO.

Federal Court In New York Orders MF Global Holdings Ltd. To Pay $1.212 Billion In Restitution For Unlawful Use Of Customer Funds & Imposes A $100 Million Penalty
MondoVisione

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