December 05 2013

elb2

Volcker rule gets ever tighter as CFTC gets sued over extra-territorial ambitions. EC fines banks with gusto, sprinkles press release with typical political hypocrisy, US ponders penny pricing, BXTR leads, Jignesh speaks (it was all ‘their’ fault apparently…cue blunt analysis…), FOX shocked that Duncan Niederauer gets $30 million management failure bonus for selling NYSE, repository & OTC clearing news et al…

Public Markets

Wall Street Groups Contest CFTC Cross-Border Guidelines
Reuters

Three Wall Street trade groups sued CFTC on Wednesday in hopes of beating back tough overseas trading guidelines which could hurt markets.

They also said the lawsuit aims to stop the CFTC from what they described as an “unceasing effort” to seize authority over the global swaps market by publishing hasty, unpredictable advisory documents instead of issuing formal rules.

PLY: In the end the regulatory process begun since the Lehmans debacle is being pursued with unseemly haste (and inadequate management) as terms are up and the legislators have failed to produce coherent bills, instead giving lawyers another feeding frenzy. There may have been good intentions once and clearly pushing bilateral OTC financial markets is a good idea (but difficult to safely engineer). However, in the end we have two major power blocs in the USA and EU who are exercising a cynical (or just plain ignorant) approach to extra-territoriality which will in the end hurt them…particularly when China’s financial sector really gets going and enjoys the protection of its government while the west is left with a creeping idiocy of big state advocates who run every western nation.

Survey Of CCP Progress Since The US Clearing Mandate Kicked In
theotcspace.com

PLY: An interesting analysis of how CCP is building out for previously OTC financial products.

Penny Pricing For U.S. Stocks Said To Get Scrutinized
Businessweek

Securities executives are trying to determine if the 12-year-old decision to narrow the price increments for American stock trading has harmed investors.

PLY: In a digital world, if the infrastructure cannot cope with decimal pricing then that infrastructure must be replaced or the US markets can face a diminishing role in world markets, despite the overwhelming success of the US economy during the past century and more.

Betfair Sees Growth Prospects In Italy, United States
Reuters

Online gambling company Betfair is looking to grow its business in Italy and the US.

PLY: Seeking secure returns is key in an environment where many governments are more keen to protect monopoly legacy providers of Dickensian products than encourage enterprise, innovative and a potential Schumpeterian upside. It’s a pity for Betfair whose prospects looked good under, EU Commissioner McCreevy but Europe’s free markets are atrophying while the US is reforming more slowly than the original Obama electioneering suggested. Betfair is wise to stick to markets which look safer from a regulatory perspective.

Private Markets

BATS: European Trade Reporting Service Becomes Market Leader; 1Q14 Close Projected For Direct Edge Merger
BATS Global Markets

BATS’ pan-European trade reporting service, BXTR, became the industry leader in its first month of operation while BATS Chi-X Europe remained Europe’s largest stock market in November.

BATS also continues progress towards approval and closing of the merger with Direct Edge Holdings, with completion of the transaction now expected in the first quarter of 2014. The company received clearance from the U.S. Department of Justice in late October and its primary focus now is on receiving approval from SEC.

PLY: BXTR has eaten Markit’s Boat alive in a matter of weeks while the BATS-Edge merger looks on course and of course that ‘stealth’ listing franchise has begun in Europe with the addition of ETFs. Very intelligent stuff indeed from an exchange group with strategy and coherence of thought.

Calcutta SE Meets SEBI Chief U K Sinha To Resolve Crisis
The Financial Express

CSE officials met the SEBI chief to resolve the crisis which kept trading in C-star suspended since April.

Tehran & Muscat Stock Exchanges Signs MoU
Tehran SE

TSE and Muscat Securities Market signed an MoU following FEAS 2013 general assembly, which was held in Oman on 4 December 2013.

Two other Exchanges from Iran, Iran Farabourse (SMEs Exchange) and Iran Mercantile Exchange (IME) were admitted as new members of FEAS.

PLY: Iranian commerce on the rise at the FEAS meeting.

Prospects And Challenges Of W’African Stock Exchange
thisdaylive.com
African Bourses From Nairobi To Abidjan Luring IPOs After Rally
Businessweek

African bourses from Ivory Coast to Kenya are forecasting an increase in share sales in 2014 as a rally in stock markets helps end a drought of initial public offerings.

The Abidjan-based Bourse Regionale des Valeurs Mobilieres, which trades securities from eight West African nations, is set for its first new listings since 2010 with two Senegalese companies. Meanwhile, the Stock of Exchange of Mauritius may see 15 offerings in 2014, while the Nairobi SE is predicting five.

Bitcoin Transactions Unlikely To Be Banned: BTC China CEO
wantchinatimes.com

The virtual currency bitcoin has not been acknowledged by the Chinese government, but Li Qiyuan, CEO of one of China’s largest bitcoin transaction platforms, BTC China, said the government is unlikely to ban transactions of the open source peer-to-peer virtual currency because of its innovative nature.

PLY: Interesting…

Special Section: FTI, NSEL, India at the Crossroads

MCX is flat, FTIL slightly down as Jignesh goes on the media trail to protest his innocence while the Mumbai fraud squad are keen to sell seized assets asap to return customer funds from the NSEL scam…

India’s ‘Exchange King’ Says Managers Misled Him (subscription)
Wall Street Journal
One-on-One With Jignesh Shah
Wall Street Journal

PLY: WARNING! The next sentence may make you nauseous and / or induce a hysterical reaction:

“‘I’m the biggest victim” says Jignesh Shah.

Frankly I just want to vomit at such pathetically self-indulgent twaddle.

In a world of pinko-psychotic neurosis, everybody has their ‘disability’ (perceived or otherwise) to wear as a badge of honour and everyone is a victim. Even against the background of this self-indulgent socialist ‘society’ this statement must surely win a Palme D’or (apart of course from places where using gold is somehow of itself a discriminatory action).

Way back when America still trusted their politicians, President Truman had “The Buck Stops Here” on his desk.

I have not indulged in the global financial markets parlour game of “Shahdenfreude,” conspicuously enjoying the downfall of Mr Shah but frankly this interview is a pathetic indictment of somebody who is either a crook, an incompetent or simply delusional. Applying any form of logic, no matter how fuzzy, it is a challenge to see how this CEO/Chairman/Board Director can be perceived as ‘fit and proper.’ Presumably he once was but as of now Mr Shah has, in my humble opinion, lost the plot (albeit not surprising given the clear strain he must be under). It is a sad demise, as no matter how many people he may have dealt badly with, it was an incredible rise from nothing to great success. What a tragedy he was unable to cope.

The “King of Exchanges” has de facto abdicated.

Over 30 Brokers Under Regulatory Scanner
Moneycontrol

As the NSEL crisis deepens, role of at least 32 brokerage firms has come under the scanner for allegedly charging high transaction charges and providing portfolio management and margin funding services to their clients in violation of regulations.

These brokers were apparently working as Carrying and Forward (C&F) agents as well for NSEL without checking the veracity of commodities lying in the warehouses, and kept investors in the dark about non-availability of commodities on which their clients were taking positions.

PLY: Whether through a lack of due diligence or plain ‘crookery,’ it is difficult not to perceive this as a criminal act, either of fraud or negligence…

Police To Arrest More In NSEL Case
Business Standard
Police Promise Speedy Liquidation Of Attached Assets
Business Standard
NSEL Investors Call For Fast-Track Probe
The Hindu

The Mumbai police Economic Offences Wing (EOW) probing NSEL case is set to arrest more and seize more assets.

The fraud squad is considering liquidating the assets and disbursing the money on a pro rata basis even before the charge sheet is filed.

PLY: After a lot of (rather justified) criticism of different authorities, in recent weeks the Mumbai EOW appear to have really been working hard to resolve the NSEL crisis speedily. They deserve plaudits for their work.

FTIL May Not Get Another Chance To Quiz Audit Firm
The Hindu Business Line

FTIL, which missed an opportunity to cross examine Grant Thornton on Tuesday, may not get another chance to do so.

Ramesh Abhishek, Chairman, FMC, said FTIL had already been informed that the time for cross examination would not be extended beyond December 3.

PLY: In other words, FTIL looks to have blinked. As I noted yesterday the cross examination strategy could have been fraught with risks for FTIL and its management.

Over 100 Apply For Post Of MCX CEO
Business Standard

About 100 are said to have applied for the post of MCX’s CEO, a diverse range from exchange CEOs to FII management and even civil servants.

The MCX-SX board is said to be negotiating with a candidate at a stock exchange.

Technologies

How Financial-Trading Networks Can Handle 30 Billion Messages A Day — And Avoid ‘Flash Crashes’
venturebeat.com

Steve Hirsch, the chief data officer at ICE, was a fountain of statistics in a talk on financial data at VentureBeat’s DataBeat Data Science Summit today. Intercontinental handles a ton of data for the NYSE as well as 22 other real-time financial exchanges around the world.

PLY: Interesting…

GMEX Technologies Launches Trade Reporting Service For Derivatives In Partnership With WithCoDiese
MondoVisione

GMEX Technologies, a wholly owned subsidiary of GMEX Group has launched Global Reporting Company Ltd in partnership with Paris based regulatory and market infrastructure advisory firm CoDiese.

Aquis Exchange Joins TMX Atrium Community
MondoVisione

Aquis Exchange, the pan-European equities exchange, has joined the TMX Atrium network.

Automate Bitcoin Bot Trading With Industry Grade Bitcoin Trading Platform Cryptotrader.org
Wall Street Journal

Cryptotrader.org is the first algorithmic trading platform for Bitcoin and other cryptocurrencies in the world.

The service allows traders to backtest and automate their Bitcoin trading strategies on MtGox, BTC-e and BitStamp, via a flexible built-in scripting language based on CoffeeScript.

For the trader’s convenience these trading strategies can be fully automated by utilizing trading robots running on their scalable VPS cloud.

Users without programming skills can still use the platform to backtest Bitcoin trading strategies and implement these with Cryptotrader’s automated Bitcoin trading bot solutions.

PLY: Just another nugget amongst the fascinating new infrastructure being built out for trading BTC…

Products

TAIFEX And Eurex Announce Launch Date Of Joint Product Cooperation
Deutsche Borse

Taiwan Futures Exchange, TAIFEX, and Eurex announced their plan to launch the Eurex/TAIFEX Link on 15 May 2014.

With this link, Eurex will list TAIFEX futures and options as daily expiring futures on Eurex.

Derivatives on the TAIFEX index are one of the most heavily traded Asian equity index contracts.

The cooperation has also been approved by Taiwan’s regulator Financial Supervisory Commission. They stated that they encourage the development of mutually beneficial endeavors of this kind.

PLY: Just FYI, there are about 23 million people in Taiwan and as I recall TAIFEX has something like 2 million plus client accounts. This is a stunningly dynamic retail driven marketplace with more client accounts than, say, Poland (itself a conspicuous success story for capital markets) with nearly double the population – about 39 million). A good move for both EUREX and TAIFEX (with their KOSPI products, EUREX are doing a good job of tying in existing Asian liquidity that is otherwise tricky to reach from the west).

Indexes

BM&FBOVESPA Announces 1st Preview For Ibovespa & Other Indexes, Valid Jan-April 2014
MondoVisione

BM&FBOVESPA announces the first preview for the BOVESPA Index theoretical portfolio, which will be valid for the period of January 6 –May 2, 2014, based on the closing of the November 29, 2013 session.

FTSE China 25 Index Will Become The FTSE China 50 Index From 19 September
MondoVisione

The FTSE China 25 Index will be expanded to 50 stocks, and will be renamed the FTSE China 50 Index. The changes will take place after the close of trading on 19 September 2014, effective from the start of trading 22 September 2014.

New Indexes On WSE From The Beginning Of 2014
WSE

Warsaw SE will publish the WIG30short and WIG30lev as of 2 January 2014. As previously announced, WSE will also provide historical data of the indices WIG30 and WIG30TR for the period from 31 December 2007.

Bucharest SE (BVB) Adds Romgaz, Nuclearelectrica Shares In Main Market Indexes
romania-insider.com

The shares of two Romanian state – owned companies were recently included in the main indexes of the BVB, while other companies were excluded.

The shares of gas company Romgaz and energy producer Nuclearelectrica were included in the BET index, which is the main index of the BSE.

The shares of Biofarm and Banca Carpatica will be excluded from the BET index.

Career Paths

Fox Business’s Charlie Gasparino: NYSE CEO, Duncan Niederauer, to receive close to $30M in golden parachute (Video)

GFI Group announced the following key appointments to the Board of Directors of its affiliate GFI Group Mexico, S.A. de C.V.

Jonathan Davis Arzac, Director
Leonel Guarneros Trujillo, Director
Richard Leighton, Director and Chairman of the Board
Guillermo Prieto Treviño, Director
Manuel Robleda Gonzalez de Castilla, Director
Christopher D’Antuono, Director
Jaime Eduardo Ortiz Pallares, Secretary of the Board

Messrs. Davis Arzac, Guarneros Trujillo, Prieto Treviño and Robleda Gonzalez de Castilla will serve as Independent Directors.

Financial Calendar

Tomorrow

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

CME Q4 2013 results – Tuesday, February 4, 2014 – press release here.

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

Share Notes

Following his sale of 8,365 shares Wednesday, November 20th at an average price of $23.77 (bargain $198,836.05) reported November 25th Interactive Brokers CFO Paul Jonathan Brody sold 8,365 shares Tuesday, December 3rd at an average price of $24.56 (bargain $205,444.40).

Interactive Brokers Group SVP Milan Galik sold another 2,000 shares Friday, November 29th at an average price of $24.23 (bargain $48,460.00). He now owns 743,604 shares. Mr Galik’s regular sales are chronicled on this specific page.

Charles Schwab EVP Jay Allen sold 219,960 shares Monday, December 2nd at an average price of $24.93 (bargain $5,483,602.80).

Crowdfunding

Osborne Set To Announce Tax Free Treatment For Peer-To-Peer Lending (subscription)
Financial Times

Peer-to-peer lending platforms are preparing to be included in individual savings accounts (Isas) in a move that is expected to act as a huge boost to the industry.

PLY: Short-term good, long-term bad. The UK Treasury has ended up with a horrible socialist model and really Britain is still headed towards long-run bankruptcy until it has a supply side revolution. True short-term it may look “AAA” but then again compared to the neighbours, what doesn’t? Wrapping investments in tax incentives has short-term upside but ultimately just skews risk orientation and deters a holistic approach to risk taking.

‘Crowdfunding’ Gets State-Level Test Run
Wall Street Journal

In 2011, Kansas became the first state to allow intrastate crowdfunding, after fundraising by a local dairy and efforts to build a new, small town movie theater inadvertently ran afoul of state securities laws barring the “general solicitation” of ordinary investors.

So far, eight companies have filed under the Invest Kansas Exemption, including two microbrewery restaurants, a cafe, a defense contractor and a dairy.

Indiegogo CEO Slava Rubin Talks Equity Crowdfunding (Video)
Crowdfund Insider

Slava Rubin, Indiegogo Co-Founder and CEO, talks crowdfunding.

Other stories

Reforms In Shanghai Trade Zone To Start In 3 Months (subscription)
scmp.com

The Central bank is expected to formally launch financial liberalisations in the new Shanghai free-trade zone in three months, with the hope of soon extending the reforms to other parts of the country if the trial run proves successful.

PLY: Hmmm, thank goodness for Communism, as opposed to Obama-land / EU, ahem, ‘capitalism.’ There was a zinger of a comment the other day btw as windmill Dave the British PM (sic) toured China. The Global Times remarked aptly that Britain was “just an old European country apt for travel and study”. Indeed. Without its financial centre, where would Britain be? Adrift on the western fringes of a decaying continent, itself apt for handbag shopping and monument visiting.

Antitrust: European Commission Fines Banks €1.71 Billion For Participating In Cartels In The Interest Rate Derivatives Industry
MondoVisione

The European Commission has fined 8 international financial institutions a total of € 1 712 468 000 for participating in illegal cartels in markets for financial derivatives covering the European Economic Area (EEA).

PLY: The DB-NYX deal nemesis anti-trust Commissioner Joaquin Almunia is on fine form with this quotation:

“What is shocking about the LIBOR and EURIBOR scandals is not only the manipulation of benchmarks…but also the collusion between banks…Today’s decision sends a clear message that the Commission is determined to fight and sanction these cartels in the financial sector. Healthy competition and transparency are crucial for financial markets to work properly, at the service of the real economy rather than the interests of a few.”

…Presumably then we can expect the EU to crack down imminently on the manipulation by shady political groups (over lavish taxpayer funded dinners) where they and ECB officials actively subvert European laws in order to allow for currency bailouts entirely contrary to existing legislation and lead to the real economy being perverted at the whim of political expediency which, like the single currency, is not grounded in any economic reality?

Volcker Rule Won’t Allow “Portfolio Hedging” (subscription)
Wall Street Journal

In a defeat for Wall Street, the “Volcker rule” won’t allow banks to enter trades designed to protect against losses held in a broad portfolio of assets.

PLY: Quite why we need the complexity of a Volcker Rule when clearly a simple re-enactment of Glass Steagal would go a long way to rectifying the current mess escapes me.

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