December 03 2014

elb2

A bumper day of intriguing nuggets as LSE closes the Russell deal and CME equals the BGC bid for GFI. Multiple stories pertaining to clearing, commodities et al as LME CTO is reported to have stood down and various parties are upset at having to pay for LIBOR services.

Much to consider, happy scrolling:

Public Markets

LSE Completion Of Acquisition Of Frank Russell Company
LSE

PLY: Plaudits all round to LSE on a smooth completion as scheduled.

CME Group & GFI Group Announce Revised Offer For GFI Group Stockholders
PR Newswire

Bid increases from $4.55 per share in CME Group stock to $5.25 per share, payable in a mix of shares of CME Group Class A common stock & cash, a 5% premium above yesterday’s closing price of $5.00 per share of GFI Group common stock and a 69% premium above the closing price of $3.11 per share of GFI Group common stock on July 29, the last day of trading prior to the announcement of the transaction.

As part of the revised transaction, the purchase price to be paid by a private consortium of GFI Group management, led by current Executive Chairman Michael Gooch, CEO Colin Heffron and MD Nick Brown, for GFI Group’s wholesale brokerage business increased to $254 million, up from $165 million in cash offered in July, along with the assumption, at closing, of approximately $72 million of unvested deferred compensation and other liabilities. This $89 million increase represents $0.70 per share and is being passed along in its entirety by CME to GFI Group stockholders, increasing the total consideration payable to GFI Group stockholders from $4.55 per share to $5.25 per share.

Last month EI reported that BGC Partners extended the deadline for its hostile $5.25 per share cash tender offer to buy rival GFI Group.

PLY: CME equals but does not trump the BGC bid…

Citigroup To Shutter LavaFlow Stock Trading Venue
John McCrank – Reuters

Exchange Row Brews Over ICE’s Libor Fees (subscription)
Tim Cave – Financial News

LCH.Clearnet and Nasdaq are in dispute with ICE over its licensing fees for the trading and clearing of Libor-linked derivatives, marking a new front in the battle between the world’s largest exchange groups.

PLY: It strikes met this is a sticky wicket where that most overused u- word “utility” is wielded as some form of talisman to clinch the argument which is surely specious – I doubt ICE will be getting free FTSE or Russell index licences from the LSE Group, why should it be an issue for a benchmark to be charged for, especially when the service is being improved? That NLX is seeking to avoid the charge only adds further weight to the contention that this MTF is, alas, not a viable business.

Euronext Targets Non-Listed Securities With Expert Market MTF (subscription)
Marina Daras – Waters Technology

Euronext Expert Market is an electronic trading platform that aims to facilitate the sale of non-listed securities by organizing weekly auctions.

Euronext press release here.

‘Too Big To Fail’ Worries Reach Clearing Houses (subscription)
Philip Stafford – Financial Times

Clearing houses have become risk managers for global markets in the post 2007-crisis era. But they are having to defend their role in a growing debate over what would happen if one of them failed.

PLY: CCPs need to clearly bullet proof their markets but at the same time, banks are unjustly pushing a bracket creep agenda – seeking to add costs and to the clearing house which are really in the domain of the clearing member. CCPs are risk aggregators, it is the clearing members who have to set pertinent end user rates on top of the margin base, for instance…

Can MCX Ever Regain Its Past Glory?
Seasonal Magazine

India’s first and only listed exchange, MCX, is 263% up from its all-time lows…or 46.45% down from its all-time high.

Bursa Malaysia Derivatives Recognised As Approved Foreign Derivatives Exchange By Taiwan Regulator
MondoVisione

Private Markets

Thai Bourse Announces 2015 Plan, Gearing Towards To Digital Exchange With Sustainability
MondoVisione

Previous discussions on SET expanding collaboration with the GMS exchanges here and here.

CSE Launches New Generation Depository System
Anushika Kamburugamuwa – Lanka Business

Colombo SE (CSE) launched a new generation depository system with an investment of 150 million rupees (USD 1.14 mln) for its fully owned subsidiary, the Central Depository System (Pvt.) Ltd. and an upgrade to the ATS.

CSE’s Demutualization Next Year: Regulator
Anushika Kamburugamuwa – Lanka Business

A proposal to demutualize the Colombo SE (CSE) is ready and would be submitted to the government with the recommendation of SEC, a senior Sri Lankan regulator said.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX and FTIL up 2% as the High Court takes some action against the second largest NSEL defaulter:

Bombay HC Restrains Two NSEL Borrowers From Selling Their Assets
Khushboo Narayan – Livemint

…s until they submit a bank guarantee of Rs.690 crore (USD 111.5 mln) in the court within four weeks The two borrowers are Mohan India Pvt. Ltd and its group firm Tavishi Enterprises Pvt. Ltd. who jointly owe Rs.878.39 crore (USD 142 ml) to NSEL. In October 2013, Mohan India had agreed to deposit Rs.771 crore (USD 124.6 mln) over a period of one year towards its settlement obligations. After making an initial payment of Rs.11 crore (USD 1.77 mln), the company defaulted in its subsequent payments to NSEL.

HC Grants Injunction On Properties Of NSEL Defaulter
Sharleen D’Souza – Business Standard

…Also, HC directed Primezone Developers, a firm having links with the defaulter, to disclose details of its movable and immovable properties within a month. The order has come as a big relief to NSEL and its investors, said an investor.

With a payment obligation of Rs 922 crore (USD 149 mln), Mohan India, along with its subsidiaries, is the second largest defaulter to NSEL.

Technology

SGX Delays Trading Start Following Software Glitch (subscription)
Gaurav Raghuvanshi & Jake Maxwell Watts – Wall Street Journal

SGX Wednesday delayed the start of trading in its securities market by over three hours to give brokerages a chance to correct any errors on behalf of clients caused by a software glitch two days earlier.

SGX Update: All Securities Post Trade Online Systems Available To Members At 0600 Hrs
MondoVisione
SGX Securities Market Commenced Trading At 1230Hrs
MondoVisione
SGX Head Bocker Says Sorry As Regulator Slams Second Disruption
Adam Haigh & Joyce Koh – Bloomberg

SGX Picks TradingScreen To Build OTC Asian Bonds Trading Platform
Forex Magnates

As SGX is aiming to ramp up its corporate bonds trading unit, the exchange has announced the selection of TradingScreen to deliver a platform solution to the growing segment.

FinLeap Aims To Create Hit Factory For Fintech Startups
Finextra

The financial technology world is to get its first ‘startup factory’ with the launch by incubation platform HitFox Group of FinLeap in Berlin and San Francisco.

Unlike a typical accelerator programme – which aims to provide the fuel for fledgeling businesses to grow – the startup factory instead generates its own ideas for new companies and provides the funding, resources and mentorship to nurture the venture until it can stand on its own two feet.

Products

ICE Announced First Five Contracts For ICE Futures Singapore And ICE Clear Singapore
ICE

ICE announced the first five futures contracts to be listed for trading and clearing at ICE Futures Singapore and ICE Clear Singapore on March 17, 2015, subject to regulatory approval from the Monetary Authority of Singapore (MAS).

The first tranche of products include the following regional futures contracts:

Mini ICE Brent Crude futures
One-kilo Gold futures
Chinese Cotton No.1 futures
Chinese White Sugar futures
Chinese Renminbi futures

All contracts, excluding the One-Kilo Gold futures contract, will be cash settled. The One-Kilo Gold futures contract will be physically settled, with delivery in Singapore.

PLY: An interesting line up and the fact that a Brent contract is on the launchpad ought to be of acute concern for those proposing open access – Singapore may yet be the perfect haven to pivot away from Europe.

EU Power Sector Wants Intraday Trading Details Confirmed By March
Platts

EU transmission system operators and power exchanges should finalize details for an EU-wide cross-border intraday electricity trading platform by end-February, according to the conclusions to last week’s Florence electricity regulatory forum available on the European Commission’s website Tuesday.

LME Considers Monthly Futures For Base Metals In Parallel With Date-Structured Contracts (subscription)
Metal Bulletin

“We want to develop a third-Wednesday outright price that is liquid onscreen. Monthly outright prices are attractive to proprietary traders that are already active in the market, and to other financial players,” the LME’s new head of sales, Paul MacGregor, said at a presentation hosted by Bloomberg last week.

The third Wednesday of every month is a crucial date in the LME’s prompt date structure. Its flagship copper and aluminium contracts, for example, are deliverable daily from the cash date to three months; on every Wednesday from three months to six months, and thereafter every third Wednesday of the month out to 123 months. The carries between individual dates are used by the physical market to match hedging programmes exactly to purchases and sales.

Career Paths

Reuters reports that IEX Group has beefed up its sales team to expand its customer base as it seeks to become a full-fledged exchange. The hires include Peter Gallo, a former head of electronic trading at Cantor Fitzgerald & Co who also once worked for Citigroup and Bear Stearns. Rob Leff joined from Quad Capital, after previous jobs at SAC Capital and Millennium Partners, and Julie Huhn came from Bloomberg after working at Deutsche Bank before that.

We hear that Robin Paine has stood down as CTO of LME (he joined in June 2013 ). His position will, for now at least, apparently being taken by a committee of C-suite executives….

Financial Calendar

Friday

TMX $0.40 Q4 dividend payment
Record date LSEG 9.7 pence interim dividend

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

Analyst Notes

Barclays Hoisted Their Price Objective On CBOE From $48.00 To $52.00 – “Equal Weight” Rating

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

Chief Financial Regulator Calls For Adopting Crowdfunding
Yonhap

South Korea’s top financial regulator said Tuesday that a new type of fund-raising practice via social network services is necessary to help ventures turn their creative ideas into actual businesses as part of the South Korean government’s efforts to support start-ups.

“We should adopt crowdfunding in order to help creative companies raise capital and commercialize their ideas,” Financial Services Commission (FSC) Chairman Shin Je-yoon said in a meeting with start-ups and venture companies. “I will do my best to have the revised financial market law pass the parliament as soon as possible.”

PLY: Very encouraging.

Other stories

ASIFMA And Thomson Reuters Launch White Paper On Stock Connect Titled “The Through Train: Stock Connect’s Impact And Future”
MondoVisione

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