December 03 2013

elb2

PLY: T+2 for UK & Ireland while Markit further bloats exchange-sized board ahead of possible IPO? Herein everything from Schrodinger’s warehouse to new exchanges, merger updates, NZX hiring, new boss at OANDA et al…

Meanwhile, not quite on the topic of market platforms but highly pertinent to the world of financial infrastructure, I have noted in an Op-Edge for RT today the rather staggering deficit in top tier credit ratings for sovereign nations. Given that the ‘recovery’ is probably more advanced in the west cyclically than the statistics might suggest (i.e. another recession may be very close at hand), it is a tad worrying to see that there are now just 10 nations with AAA status…

Public Markets

Euroclear UK & Ireland To Lead Local T+2 Settlement Initiative
Euroclear

Euroclear UK & Ireland (EUI), in cooperation with LSE, BATS Chi-X Europe, the Irish SE and Turquoise, will shorten the standard securities settlement cycle for the Irish and UK capital markets to T+2 in October next year ahead of the anticipated deadline of 1 January 2015 in the proposed EU Central Securities Depositories Regulation (CSDR), which aims to harmonise EU securities settlement cycles.

PLY: Being horribly keen to wash away all the old rubbish in the system like SWIFT, naturally real time settlement would always be best but alas, the banking system can’t handle modernity.

KRX To Launch Gold Exchange In March 2014
onhapnews.co.kr

Korea Exchange plans to launch an easily accessible gold exchange market on March 24 to improve transparency in trading and generate new financial opportunities with a scheduled launch.

PSE-PDEx Merger Eyed For Next Year
bworldonline.com

PLY: The PSE-PDEX merger saga will drag into 2014 after the Nov 30 deadline passed without completion.

The PSE is set to acquire the shares of SGX and the Bankers’ Association of the Philippines (BAP) in Philippine Dealing System Holding Corp. (PDS Group), which is the holding firm of the Philippine Dealing and Exchange Corp. (PDEx) — the country’s fixed-income trading platform.

The BAP, SGX and the PSE hold 25%, 20% and 20%, respectively, of the PDS Group. The rest is owned by minority shareholders.

CBOE Eyes European And Asian Markets With BT Deal (subscription)
Futures and Options Intelligence

CBOE has allied with BT to offer European clients local access to CBOE’s Volatility Index (Vix) futures contracts and hopes to extend the partnership into the Asian markets.

LME IT Chief Warms To HKEx Task
The Banker

CTO Robin Paine is insourcing the LME’s IT function to fit its future as part of HKEx…

PLY: We can’t actually read this article so cannot comment on its quality but it is timely. The LME is currently replete with consultants including ex-Pipeline Europe CEO Marcus Hooper as HKEx maps out a strategy and look at how to maximize value from LME. Clearly IT will be key.

HKEx & China Futures Association Sign MOU
HKEx

HKEx and the China Futures Association (CFA) signed a MOU Monday on cooperation and the exchange of information.

Private Markets

Markit Eyes Independent Board Ahead Of Potential IPO (subscription)
Financial News

Markit Group, the 10-year-old financial information provider now worth an estimated $5 billion, is this week expected to appoint a majority-independent board for the first time in the latest sign it may pursue a public listing next year.

PLY: Markit is a great business but their colossal board would embarrass a few legacy exchanges! They are apparently about to add 3 or 4 directors to an existing 17 member board! The board includes Markit’s founder and CEO Lance Uggla, William Ford of General Atlantic, (11% stake) and Zar Amrolia of Deutsche Bank. “Deutsche is one of around 12 investment banks that collectively hold 51% of Markit’s stock.” Another key shareholder is the Singapore Sovereign Wealth Fund (GSIC).

EGX Ratifies New Strategy
dailynewsegypt.com

The board the Egyptian SE (EGX) ratified its management strategy for the next four years in a Sunday meeting.

According to a press statement from EGX, the outlines of the strategy include dealing with the bourse’s current obstacles and moving the Egyptian market from the circle of traditional markets and transforming it to a modern one.

PLY: We wish EGX every success given that Egypt’s own underpinnings are a tad uneven currently. Be brave…

Nepse Raises Stockbrokers’ Trading Limit
thehimalayantimes.com

Stockbrokers can now undertake transactions worth 50 times their security deposits (from 20 times) lodged with Nepal SE (Nepse) provided they are also clearing members at the central depository.

China’s Largest Bitcoin Exchange Seeks Recognition For Currency
Businessweek

BTC China, the nation’s largest Bitcoin exchange, has had low-level discussions with regulators seeking recognition of the digital currency that would allow it to be used to buy goods and services in the country.

Special Section: FTI, NSEL, India at the Crossroads

MCX has slipped 3% today while FTIL is essentially flat. It’s Tuesday so a grand default awaits this afternoon. The big news is that despite the attempts by Grant Thornton to wriggle out of it, the MCX ‘formers’ will get to cross examine the GT report…

NSEL Crisis: Cross Examination Of Audit Firm
The Hindu Business Line

The three former directors of MCX and a director of FTIL will get to cross examine Grant Thornton, which conducted the forensic audit on the embattled NSEL, on Tuesday.

PLY: I happen to think this is fair. It is also a big risk for the former MCX directors who may incriminate themselves as they cross examine…

FMC Asks NSEL To Reconstitute Auction Panel With More Powers
The Economic Times

FMC today asked crisis-hit NSEL to reconstitute the committee set up (at FMC’s behest 2 months ago) to oversee auction-cum-bidding process and give more powers to the panel to monitor the entire cash flow.

Jignesh Shah Cannot Plead Ignorance Of NSEL Fraud: MMTC
Moneycontrol

State-owned MMTC which had loaned Rs 228 crore (USD 36.6 mln) on the scam-hit NSEL, has argued before the Bombay High Court that Jignesh Shah cannot plead ignorance.

MPID Court Okays Mohan India’s Settlement Plan For NSEL Episode
The Financial Express
MPID Court Approves Sale Of Mohan India Properties
Business Standard

The MPID (Maharashtra Protection of Interest of Depositors) court on Monday approved the settlement plan submitted by Delhi-based Mohan India, one of the biggest defaulters in the settlement crisis at NSEL.

The court permitted Mohan India and its two group companies, Tavishi Enterprises and Brinda Commodity, to fulfil an earlier settlement plan submitted by the company in consultation with the spot exchange.

Under that plan, Mohan India had proposed to pay R771 crore (USD 123.73 mln), including a down-payment of R11 crore (USD 1.76 mln). The rest of the amount is to be repaid in 13 tranches over the next one year. Mohan India owes NSEL close to R910 crore (USD 146 mln).

PLY: A one year window is long but hardly ghastly given that property sales cannot be rushed. This is certainly a lot more beneficial than the 4 year terms being proposed by others!

FTIL’s Books Under Scrutiny In NSEL Case
Livemint

The Economic Offences Wing (EOW) of Mumbai police is probing the accounts of FTIL, in connection with the payment crisis at NSEL.

The fraud squad has also obtained the mobile tower locations of the board of directors of NSEL since 2011 to prove that most directors had signed the minutes of NSEL board meetings despite having been absent from these meetings.

PLY: Interesting use of mobile telephony to prove / disprove who was at which meetings (note to directors: if you’re joining by phone make sure it is clear in the minutes).

Technology

Perseus Launches London Metro Microwave Data Network
waters technology

New York-based low-latency network provider Perseus Telecom has launched a new microwave data distribution service that allows customers to connect wirelessly to major London financial markets.

The service, which links the London-based markets of NYSE Euronext, BATS Chi-X, the LSE, the LME, Icap EBS and data vendor Thomson Reuters, also enables customers to connect with the wireless network to Frankfurt that Perseus created in 2012.

Bitcoin Mining Malware Could Be Hidden In App, Security Researchers Warn
The Guardian

Computer users are being warned about “scam” apps which stealthily use their PC’s resources to “mine” Bitcoins – by getting permission in a lengthy user agreement.

Malwarebytes has come across a program which silently used more than half of a user’s computer power to perform the complex calculations required to generate the virtual currency.

Products

Shenzhen Commodity Exchange Launches first Futures Trading In Almond
sbwire.com

Shenzhen CE has launched the world’s first “Almond” futures.

At the end of the first trading session, the contract had total volume of 513,500 kg with open interest as 64,000 kg.

The trading unit for the contract is 500 kg with price quote (exclusive of VAT, other taxes and levies) with compulsory delivery and initial margin of 5%.

Dalian Commodity Exchange: Fiberboard, Blockboard Futures Contracts To Be Listed December 6
MondoVisione

On November 29, Dalian Commodity Exchange (DCE) released the “Notice on Relevant Matters over Trading of Fiberboard and Blockboard Futures Contracts” and decided that the fiberboard and blockboard futures contracts will be listed for trading from December 6 (Friday), 2013.

Tainted Pepper: Police To Close Case Against NCDEX
The Hindu Business Line

After holding investigations for about two weeks, the Economic Offences Wing of the Mumbai Police has decided to close the case against NCDEX in the controversy over delivery of pepper from warehouses in Kerala.

PLY: A warehouse screw up clearly, a criminal conspiracy, apparently not. The pepper affair has been damaging to NCDEX but at least it is a case of incompetence and poorly applied standards as opposed to there not being any pepper in a warehouse that didn’t exist in the first place (the so-called “Schrodinger’s warehouse” puzzle of commodity storage – if you open the warehouse door will you find anything there…will you indeed even find a warehouse? …whether or not there is a cat behind the door is a whole separate area of study).

Indexes

Revised Lists Of The Moscow Exchange Indexes
MondoVisione

Moscow Exchange has revised lists for the constituent lists of the Moscow Exchange Indexes as well as free floats effective from December 17, 2013 through March 17, 2014.

Brazil Exchange Previews Changes To Bovespa Index
Reuters

BM&FBovespa announced its first preview of modifications to the benchmark Bovespa stock index for the first four months of 2014.

Career Paths

OANDA Corporation, the global pioneer in foreign exchange trading services, today announced the appointment of industry veteran Edmond Eger III as President and CEO.

PLY: A perfect opportunity to link to an excellent Globe & Mail story on the fascinating story of OANDA from the perspective of co-founder and former CEO Michael Stumm discussing the story behind the rise and rise of this fascinating business.

BCS Prime Brokerage has appointed Gareth Johnson Senior Trader in the London office, Tim Bevan has been promoted to Executive Director.

Yeo Lian Sim, currently Chief Regulatory and Risk Officer for SGX, will be retiring at the end of this year.

Effective Jan. 1, 2014, Agnes Siew-Koh will serve the role as Chief Risk Officer to lead the risk management function at the international exchange. Siew-Koh has been head of clearing risk since July 1, 2010.

New Zealand Bourse Hiring On Surge In Share Sales, Trading
Bloomberg

NZX plans to hire five people in Auckland next year, expanding amid record trading volume on New Zealand’s stock exchange and a surge in capital raising.

The operator of the nation’s equity market will have 20 staff in Auckland by the end of 2014 from 15 at present, CEO Tim Bennett said in an interview. The Wellington-based firm had one employee in Auckland 12 months ago. Aaron Jenkins, who begins his role in January as head of markets, is one of five executives hired in the past year to form a 10-member senior management team.

Financial Calendar

Today

Betfair results for the six months to the end of October
MCX Rs. 7 interim dividend payment

This week

Record date LSEG interim dividend of 10.1 pence
TMX $0.40 dividend payment

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

Crowdfunding

NexTrend Crowdfunding Website Officially Goes Live
sacbee.com

NexTrend Technologies, Inc. today announced the NexTrend crowdfunding website www.nextrend.com is officially live and open for crowdfunding project owners and funders.

PLY: Interesting model – essentially an add-on to their core investment banking business, NexTrend are reverse engineering their way down the value chain.

Other stories

India – Govt Allows Deduction Of CTT As Part Of Business Income
The Economic Times

In a relief to commodity exchanges, the government has allowed deduction of Commodity Transaction Tax (CTT) to traders as it forms part of their business income.

The move will benefit MCX, NCDEX, and Universal Commodity Exchange (UCX). The government may withdraw the recognition of these exchanges if found violating specified income tax norms.

PLY: So the CTT will no longer apply to traders – a good idea but why bother with commodity duties which merely impinge on trade and reduce growth like FTTs at all?

Overseas Investor Participation In HKEx’s Derivatives Market In Hong Kong Remains High
HKEx

Overseas investors’ participation in HKEx’s futures and options market in Hong Kong remained high and their contribution surpassed that of local investors for two consecutive years, according to HKEx Derivatives Market Transaction Survey 2012/13.

The survey found that Exchange Participants’ principal trading and investor trading continued to contribute equally to the turnover in HKEx’s derivatives market, which comprises predominantly financial futures and options, from July 2012 to June 2013.

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