December 04 2013


Confirmation that NYSE have used my term “ILP” for SEC application. Asia concerned about EU extra-territoriality, Betfair results, various job moves, including a historic retirement, Swap futures discussions and much more…

Meanwhile, for those who haven’t seen enough of me on video of late, here is a recording of some remarks I made at the Markets Media Europe event in London a few weeks back: Patrick L Young Conversation

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Public Markets

Betfair H1 FY14 Results Announcement

Underlying EBITDA up 16% to £48.9m and underlying EBITDA margin up 5% to 26%
Underlying free cash flow up 52% to £23.5m
Interim Dividend up 50% to 6.0 pence per share
Expecting full year underlying EBITDA of between £82m and £87m in FY14, including combined start-up losses of between £5m and £10m in Italy and New Jersey.

PLY: The sportsbook centric policy seems to be working and also driving some business to the original core exchange…

NYSE Builds A Dark Pool
Traders Magazine

Call it ‘NYSE vs. the Internalizers, Round Two.’

NYSE is looking to replicate the functionality of a dark pool under a proposal filed with SEC in November.

The goal of the NYSE’s ‘Institutional Liquidity Program’ is to encourage trading in size by offering brokers and exchange market makers two new hidden order types that will allow them to transact in the dark. The proposed one-year pilot program would target a specific segment of the NYSE’s customer base much as the exchange’s 16-month old ‘Retail Liquidity Program’ does.

PLY: I am delighted to see my campaign to remove the “dark” label with its overtones has reached NYSE HQ and they have used the “Institutional Liquidity Program” tag which is in line with my suggestion resulting in the acronym “ILP.” The programme itself is interesting as it enables blocks for brokers and dealers – it’s a sort of hi-tech version of the old IDB concept in equities used in the LSE 2 decades ago.

Nasdaq’s NLX Grabs Market Share Amid Liffe Shift To ICE

Trading in short-term interest-rate futures on Nasdaq OMX’s NLX European exchange is increasing.

Euribor futures averaged more than 100,000 contracts each day last week, representing 20 percent of the trading that took place on the Liffe exchange for that contract, up from 4.9 percent the week before. A daily average of more than 40,000 short-sterling futures changed hands on NLX between Nov. 25 and Nov. 29, 13 percent of the trading on Liffe and a jump from 4.6 percent the previous week.

PLY: A fascinating development: meaningful volume on NLX. Is this a long-term shift away from a perceived monopolistic position held by ICE or merely short term posturing to try to ensure LIFFE fees are not materially amended in the near term? As always in such head to head competitions, the advantage invariably lies with the incumbent – as for example was made clear in the almost overnight disappearance of ADX in Sydney more than a decade ago.

Asia Regulators Attack EU Over Clearing House Standards (subscription)
Financial Times
Comment: EU Derivatives Measures Worry Asian Policy Makers (subscription)
Financial Times

PLY Asia is right to voice concerns as the regional myopia of both the USA and currently the EU is creating a huge potential butterfly effect which may cause market deterioration world-wide from the eagerness of the major western blocs to engage in unwarranted extra-territoriality.

HKEx and SGX To Cooperate On Yuan
Wall Street Journal

HKEx and SGX will promote the yuan’s internationalization by working together on areas including new technology, products and regulatory matters.

HKEx press release here.

JPX Seeks Derivatives Partners (subscription)
Financial News

JPX CEO Atsushi Saito, is looking for tie-ups in derivatives markets:

“As far as cash is concerned, it is very difficult to make a joint exchange. We have seen a lot of failure. Even the very rare story of Euronext will break up – and will come back to being a European stock exchange again. As far as derivatives are concerned, unlike cash, we might be able to collaborate with our foreign friends. There are a lot of chances.”

LME Considers Floor Trade Future: HKEx CEO

LME is considering the future of floor trading and may take a decision in 2014, said HKEx CEO Charles Li.
“We have not made up our mind yet,” Li said in an interview at the FIA conference in Singapore.

“It is something that makes a lot of sense for a long time so there must be a great reason for it to be there. We will be looking at it, and will look at it with an open mind. There is no decision.”

PLY: I discussed the LME floor and its unique economics last week.

NYSE extends market share in November
The Trade

Leading US lit venue NYSE increased market share on its two order books, while soon-to-be combined entity comprising BATS Global Markets and Direct Edge markets experienced a mild dip last month:

US Equity Data from Thomson Reuters Market Share Reporter:

1) NYSE: US$1.01 trillion, market share: 25.26% November, (October 24.77%)
2) BATS-Edge (merging): US$874.4 billion traded: 21.78% (October 22.02%)
3) Nasdaq, US$693.03 billion traded: 17.26% (October 17.65%)

Korea Securities Depository (KSD) & Clearstream Agree Fund Cooperation
Deutsche Borse

Korea Securities Depository (KSD) and Clearstream – a Deutsche Börse subsidiary – signed a MOU in Seoul which creates a framework to support cross-border investment fund distribution by linking KSD’s FundNet and Clearstream’s global funds processing platform Vestima.

KSD and Clearstream agreed to implement the system linkage in 2014 and start offering extended services to support cross-border fund distribution (direct and indirect distribution).

WSE Mobilises Issuers To Eliminate Penny Stock Problem

From 2014, all stocks trading at a price lower than PLN 0.50 will be classified in the Alert List segment irrespective of price volatility. As of Q4 2014, the penny stock threshold will be set at PLN 1.0. Penny stock issuers will be required to adopt a corrective action plan

PLY: This is a silly US-driven rule which adds nothing to the exchange and only drives up cost. It had a sort of pertinence back in the days before US exchanges could cope with less than 1/8th dollar price moves but decimalised markets function from 0.01 up. Not sure why WSE are wasting their time here when there are so many things they could do. True, it isn’t as bad as a merger with Vienna but…

Regulators Set To Approve Toughened ‘Volcker Rule’ (subscription)
Wall Street Journal

Agencies plan votes next week after adding more restrictions on hedging by banks.

PLY: A fascinating plan: This may be the first time regulators effectively help swim with the tide of banks’ inevitable decline following their historic all-time peak in 2008…

Private Markets

Nigerian SE – A Brave New World of Governance Votes

PLY: I think this ought to be in the “too whacky to be believed” section. NSE plans to ban directors and controlling shareholders from voting in transactions such as takeovers to protect minority investors with the aim of strengthening corporate governance.

Yes, you read that right.

True, Nigeria has an oligarch problem but really, can stopping the largest shareholders and company directors, aka ‘corporate governors’ from voting actually improve corporate governance?

True, Nigeria ranks 139th out of 174 in Transparency International’s Corruption Perceptions Index, which suggests considerable room for improvement but this is hardly a way to solve the problem!

Bitcoin At A Crossroads

PLY: Bitcoin peaked at 1242 Friday on Mt Gox and this article eloquently backs up my own core theme: it’s not what ultimately happens with BTC which matters any more, a cryptocurrency has now blazed a trail and led to a shake-up in core infrastructure to accommodate it. Read it and weep if you’re a central banker. Cheer from the rafters if you’re a normal citizen subject to coin clipping fiat money shenanigans from the political classes.

Dividend News

Betfair – Interim Dividend up 50% to 6.0 pence per share

Special Section: FTI, NSEL, India at the Crossroads

PLY: Another 9 crore week means repayments were again only about 90% short for week 16 of the world’s least amusing pantomime, the NSEL repayment schedule. MCX and FTIL shares are down circa 2% today.

The NSEL tally of shame remains:

(N.B. Anticipated weekly repayment is Rs 174.72 crore, roughly USD 28,000,000)

Week 1: Rs 92.73 crore (USD 14.37 mln) paid
Week 2: Rs 12.05 crore (USD 1.79 mln) paid
Week 3:Rs 15.37 crore (USD 2.29 mln) paid
Week 4: Rs 7.77 crore (USD 1.21 mln) paid
Week 5: Rs 8.57 crore (USD 1.35 mln) paid
Week 6: Rs 11.45 crore (USD 1.82 mln) paid
Week 7: no payout – bank accounts frozen
Week 8: Rs. 2.85 crore (USD 457.9 k) paid
Week 9: Rs. 28.34 crore (USD 4.58 mln) paid
Week 10: Rs. 30 lakh (USD 49k) paid
Week 11: Rs. 29.05 crore (USD 4.72 mln) paid
Week 12: Rs. 11 crore (USD 1.77 mln) paid
Week 13: no payout
Week 14: Rs. 6.1 crore (USD 976.7k) paid
Week 15: Rs. 9 crore (USD 1.44 mln) paid
Week 16: Rs. 9 crore (USD 1.44 mln) paid

NSEL Defaults For Sixteenth Time; Pays Rs. 9 Crore (USD 1.44 Mln) Against Rs. 174 Crore (USD 27.9 Mln)

NSEL on Tuesday paid around Rs. 9 crore (USD 1.44 mln) against a scheduled payment of Rs. 174.72 crore (USD 27.9 mln), defaulting for the sixteenth straight time.

With this payout, NSEL has so far settled about Rs. 244 crore (USD 39.13 mln) against dues worth Rs. 5,600 crore (USD 900 mln) to 13,000 investors.

PLY: Not even a week and a half of the schedule has been effectively paid after almost 4 months…

Police Attach Assets Of Jignesh Shah, NSEL Directors

The Mumbai police’s economic offences wing (EOW) on Tuesday seized the assets of Jignesh Shah, and other directors on the board of FTIL-controlled NSEL in connection with the payment crisis at the commodity spot exchange.

The move is yet another indication that the investigation is getting closer to Shah, who has tried to distance himself from events at the exchange, which is 99.99% owned by FTIL.

PLY: Can Jignesh really believe he will escape this? Or has he some form of overseas escape plan? Presumably he has held assets overseas for some time. Even so having all Indian assets frozen must be quite a body blow.

EOW Asked To Submit NSEL Board Meeting Minutes
Business Standard

The Mumbai High Court has asked the Mumbai EOW (fraud squad) to file the minutes of all NSEL board meetings held since the inception of the exchange.

Lotus’s Rs 250cr Oil Stock Doesn’t Exist
Times Of India

Lotus Refineries, a defaulter owing about Rs 250 crore (USD 40 mln) to NSEL investors, has disclosed to the exchange as well as sector regulator FMC that it has 44,586 tonnes of palmolein oil worth nearly Rs 250 crore (USD 40 mln) stored at a facility.

However, said facility has a storage capacity of only 400 tonnes of oil – that is, a hundredth of what Lotus Refineries is claiming to have stored there.

Facility owner, Sarda Agro Oils, has filed a police complaint and has also taken Lotus Refineries to court for forgery and cheating, a top official of the company said.

PLY: Yesterday I was discussing my theory of Schrodinger’s Warehouse. This seems a textbook example. At the same time, the NSEL’s capacity for elementary DD/inventory checking does seem to have been a tad remiss, didn’t they know the size of the facility they had licensed as a warehouse?


SunGard Acquires Softputer Technologies ’Financial Reporting And N-SAR Filing Solutions

SunGard has acquired Softputer Technologies’ FundBridge and NSARFiler solutions for financial and regulatory reporting. The acquisition, the terms of which were not disclosed, is not expected to have a material impact on SunGard’s 2013 financial results.

MTS Launches RFQ Trading For ETFs

Predominantly fixed income platform MTS will launch RFQ trading for ETFs via its multi-dealer-to-client MTS BondVision platform. The new service will offer liquidity providers access to a diverse community of global institutional investors.

The platform will support ETF products of all kinds (i.e. including equity and money markets etc as well as bonds) listed on Borsa Italiana and LSE.

MTS BondVision is a fully independent, broker-neutral platform that lets investors request quotes on ETFs from up to five dealers, enabling them to meet best execution requirements, reduce risk and enhance efficiency throughout the trade lifecycle. ETF issuers available via BondVision include Amundi, Db X-trackers, ETF Securities, iShares, Lyxor, Ossiam, PowerShares, RBS, Source, SPDR and UBS.

Maxim Group Rejoins Fidessa Client Base

Fidessa announced that US broker-dealer Maxim Group has rejoined its client base re-signing for Fidessa’s fully-managed US trading platform to power its sales, market-making, options and international desks.

PLY: Not clear just what happened here but evidently the interim vendor didn’t manage to cut it… It is not clear who that earlier vendor was.

Direct Edge Upgrades EdgeRisk Controls

Direct Edge is pleased to announce two new enhancements to EdgeRisk Controls for EDGA Exchange (EDGA) and EDGX Exchange (EDGX).

EdgeRisk Controls is a free tool that provides Members with pre- and post-trade protection by allowing them to configure real-time, intraday risk control parameters via an easy-to-use web interface.

Firms Racing To Trade At Light Speed

Ari Rubenstein heads Strike Technologies, a New York company that’s part of a budding cottage industry racing to build networks of ultrafast microwave radio transmitters linking the world’s financial hubs. Industry insiders say some firms are toying with lasers and high-altitude balloons.

Strike, whose ranks include academics as well as former U.S. and Israeli military engineers, hoisted a 6-foot white dish on a tower rising 280 feet above the Nasdaq Stock Market’s data center in Carteret, N.J., just outside New York City.

Through a series of microwave towers, the dish beams market data 734 miles to the Chicago Mercantile Exchange’s computer warehouse in Aurora, Ill., in 4.13 milliseconds, or about 95 percent of the theoretical speed of light, according to the company.

Fiber-optic cables, which are made up of long strands of glass, carry data at roughly 65 percent of light speed.

PLY: The ULL arms race continues…

DataArt Collaborates With Squawker On First High-Touch Negotiation Venue For Sell-Side

DataArt, a software consultancy that builds custom solutions for select industries, announced completion of a mission-critical development effort and the launch of the first sell-side negotiation platform for Squawker.

The Squawker negotiation platform addresses the problem of matching trades that are difficult to execute on the order books or in dark pools by acting as the middle party in a community of vetted buyers and sellers.

DataArt engineers worked with Squawker to create an electronic trading venue that is free from algorithms and high frequency trading, enabling the sell-side community to negotiate anonymously and directly.

OTC Clear Clears First OTC Derivatives Trade Using Calypso Technology

Calypso Technology the leading integrated financial markets platform provider, announced that OTC Clear, a subsidiary of HKEx, cleared its first OTC derivatives transaction using Calypso’s CCP OTC clearing solution when it commenced business on 25th November 2013.


HKEx Plans To List Monthly, Cash-Settled LME-Based Contracts

HKEx plans to list monthly, cash-settled products based on its suite of LME contracts in Hong Kong, amongst other new developments…

GMEX Swap Future Set For Q2 2014 (subscription)
Futures and Options Intelligence

GMEX is the first European market to fix a date for the launch of its interest rate swaps future.

PLY: Good luck to the GMEX team with their ongoing innovation in the field, as there is considerable competition ahead as the next interesting article discusses:

Europe Set For Swap Futures Shoot-Out (subscription)

Up to eight venues are gearing up to launch interest rate swap futures in Europe.

PSE Eyes More Products To Sustain Stock Market’s Growth Momentum

PLY: Philippine SE has introduced local MSCI Index futures in co-operation with SGX while a Shariah list is looming as well as other products.

Shenzhen Commodity Exchange Launches Futures Trading In Lead Mini

Enthused by the success of zinc mini futures launched, SZCOX today launched Shenzhen Commodity Exchange lead mini futures contract.

From Iron Ore To Eggs, Asia Builds Commodity Pricing Clout

From iron ore to eggs, Asia’s new commodity derivatives are drawing in global exchanges eager to profit from rising trade volumes and a likely shift of pricing benchmarks from the West.

Asia has long been the fastest growing demand region for the raw materials to power economic growth, but has mostly priced the purchases against benchmarks like Brent crude, LME copper or New York cotton.

Now China, and to a lesser extent Indonesia, are launching policies and products aimed at cutting Western dominance, forcing exchange operators from outside the region to either acquire a local player or set up their own Asia bourse.

PLY: A useful discussion on how Asian and particularly Chinese benchmarks are emerging to challenge the old western standards. This is a huge move – one might call it a paradigm shift if that phrase was not so over-used.


Tokyo SE: Error In Calculation Of JASDAQ – TOP 20

Rakuten, Inc. (4755) was erroneously excluded from the calculation of the JASDAQ-TOP20 index and incorrect information has been published.

Calculation and distribution of the index has since suspended and the correct closing price of the index will be published separately.

The correct closing price of the index for today (December 3, 2013) is 5763.57 points.

Rakuten, Inc. (4755) will be removed from the index in the next periodic review, which will be conducted on the last business day of October 2014. Regular calculation and publication will resume tomorrow.

Career Paths

CBOE appointed John F. Deters as Chief Strategy Officer and Head of Corporate Initiatives. reporting to Edward T. Tilly, CEO, CBOE Holdings. Deters succeeds Richard G. DuFour, CBOE Executive Vice President, Corporate Planning and Development, who is retiring at the end of the year.

Press release here.

PLY: A fond farewell at year’s end to a good man: Dick DuFour has had a long and valuable contribution to CBOE and the world of exchanges for many years – good luck in retirement and all the best to John Deters in filling your shoes!

US data management company McObject has appointed Ian Hillier-Brook, through his company Ian H-B Associates Limited, as their new representative in the UK and Europe.

Financial Calendar


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

ICE Q4 and full year 2013 financial results on Tuesday, February 11, 2014 – press release here.

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

Analyst Notes

  • LSE “Outperform” Rating Reiterated At RBC Capital

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.


Seedrs Closes Self-Crowdfunding Round With Equity Raise Record
Crowdfund Insider

Crowdfunding platform Seedrs has closed their self-crowdfunding round having raised a record amount of funds with 850 individual investors purchasing shares in the company amounting to £2,154,710.

While the round is closed to new money the amount may increase as in-process money may not be posted. Pre-money valuation placed Seedrs at £5,174,171.

The amount funded represents 29.4% equity in the fast growing equity crowdfunding platform.

The Seedrs campaign breaks existing records for most capital raised through an equity crowdfunding platform and for the number of investors in a single campaign.

The previous record raised was held by Hab Housing which raised £.1.9 Million this past September on competitor site Crowdcube.

Seedrs has stated funds raised will boost their pan European expansion plans which were announced simultaneously with their own funding.

The UK based startup had originally targeted a self-crowdfunding round of £500,000.

This was bumped higher to £750,000 as investor demand was exceptionally robust. At launch the goal was reached in a matter of hours.

Other stories

NYSE’s Jeffrey Sprecher Talks About Founding ICE (Video)

In his first public appearance since wrapping up the $11 billion acquisition of NYSE on Nov. 13, ICE founder and CEO Jeffrey Sprecher spoke to the Rotary Club of Atlanta on Dec. 2 about ICE’s founding.

In a self-deprecating and joke filled talk in front of a crowd of about 300 Atlanta business executives, Sprecher, a former California power company CEO, described how his idea in the late 1990s for creating an exchange to trade electricity led him from Los Angeles to Norway and Sweden and then ultimately to Atlanta, where he bought a struggling software company that in 2000 became ICE. The company was founded in Atlanta only because the software company’s employees all said they would quit before they moved to Los Angeles.

Rudolph Technologies To Transfer Stock Listing To NYSE

Rudolph Technologies, Inc., a leading provider of process characterization equipment, lithography equipment and software for wafer fabs and advanced packaging facilities, announced the pending transfer of the listing of its common stock from NASDAQ to NYSE.

PLY: Another transfer to NYSE which looks to have won the 2013 round of cross listing shuffles in the USA.

Hong Kong IPO Market Springs Back To Life (subscription)
Financial Times

After a nervous few months, deal flow has picked up.

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