December 08 2015


elb2Concerns grow about those eerie basis points differential in swaps cleared by candlelight and punch card at LCH alongside the offsetting offices of CME. (On a macro point, junk returns negative for the year… “I’ve got a bad feeling about this” seems the apt Han Solo line ahead of “The Force Awakens” being released.

It’s Christmas Pantomime season in the UK and other parts which share similar traditions. For those, say in the US who don’t understand the concept: a brief review of recent IEX submissions seems to be taking a similar tack. Broad perspective has gone missing amidst the minutiae as sceptics launch an “oh no they won’t!” onslaught from the serried ranks of the MMI (to avoid index confusion, think of this MMI as the “HartsSmarts”) & their cohorts. If you’re having a quiet day, I’ll leave it to you to consider which of the major protagonists may get to dress up as a woman to lead their chorus in the Pantomime tradition.  

SGX restructures, interestingly Ramu gets some more power having not made it to the top job this year. Indian exchange IPO agenda continues to be hotly pursued while DB1 renews with Scila for surveillance and Fidessa signs former LIFFEr, Paul Dex.

Public Markets

Citadel Makes Third Appeal To SEC Over IEX Application To Become Exchange

Francine McKenna – MarketWatch

Citadel, HRT Raise Heat On IEX’s Application To Be An Exchange


Citadel is taking no chances that the SEC will get its message about IEX Group’s application to become a national securities exchange. The privately-owned, Chicago-based high-speed-trading firm, institutional asset manager and market maker sent its third missive to the SEC on Monday, and it’s not the only interested firm signalling serious concerns via a flurry of activity that threatens to continue until IEX submits the revised application they all say is necessary

More about IEX here.

PLY: Isn’t saying the same thing over and over again expecting a different result, Einstein’s definition of insanity? It is interesting to see the same shrill voices getting ever louder. However, the argument doesn’t strike me as overly coherent in the dog’s dinner of the current Reg NMS debacle with the SIP’s at their data heart. It strikes me a few lamp posts are being ignored in some folks eyes, while a publicly transparent coil of wire is a bad thing when others have worked hard to deliver handicapping through other means.

In essence, this criticism strikes me as a magnificent failing of perspective, admittedly from folks who aren’t expected to have much in the first place – their focus is on the micro minutiae. Moreover, play this argument back to a lay observer and nothing is clearer in his mind than Wall Street is full of pointy headed but narrow minded folk who are out to profiteer at the expense of the average investor. Main Street wants a revolution in what they see as a flawed and corrupt system (it’s certainly one of those). Meanwhile an element of Wall Street is busy pondering whether it can push the revolting peasants into the more expensive spread trade on brioche to make up for a systematic baguette shortage…


Euronext To Appeal $5 mln Fine Set Out French Market Regulator


Euronext To Appeal Ruling By AMF Enforcement Committee


Euronext considers that the decision handed down today by the Enforcement Committee of the Autorité des Marchés Financiers (AMF), the French market regulator, and the five million euro fine is particularly open to dispute, totally disproportionate and completely anachronistic. Euronext contests the claim that it failed to meet its professional obligations and favoured one market member over others. In no event did it ever compromise the market’s integrity when, in 2009, it deployed pilot programmes linked to the new HFT practices then beginning to appear on European markets.

After reviewing the ruling of AMF’s Enforcement Committee, Euronext has resolved to appeal the committee’s decision.

PLY: Given that it took the AMF until recently to levy the fine, there are clearly issues about anachronism to be answered even before examining the case in greater detail.


SGX Changes Organisational Structure To Sharpen Focus On Operational & Business Priorities


The sales and product teams will be combined to form three vertical businesses: Equities & Fixed Income, Derivatives, Market Data & Connectivity (MDC). The new structure will consolidate SGX’s international offices (China, Hong Kong, India, Japan and UK) under a single unit – Membership & International Coverage (MIC).


Chinese Companies May List Yuan Stocks In Frankfurt In 2016

John Detrixhe & Will Hadfield – Bloomberg

The so-called D-shares would list on China Europe International Exchange (CEINEX). The platform has traded an average of 18.3 million yuan ($2.8 million) a day since it opened on Nov. 18.


Here’s An Even Weirder Thing Happening In Financial Markets

Tracy Alloway & Liz McCormick – Bloomberg

If you thought the widespread plunge below zero in U.S. IRS spreads was an oddity, the ballooning gap between a swap cleared at one exchange vs. another is even stranger and shows more unintended consequences of market structure changes.

PLY: The curious bumps in the yield curve as some folk prefer CME to LCH – the latter looks a tad exposed for various reasons.


CME’s Duffy: I Opposed Dodd-Frank, But It Benefited Me (Video)



Capital Controls On Athens SE To Be Lifted

Anastassios Adamopoulos – Greek Reporter

After four months of operating under restrictions, Athens SE will soon be functioning without limitations for Greek investors as Charalampos Gkotsis, President of the Hellenic Capital Market Commission (HCMC), announced that Greek Finance Minister Euclid Tsakalotos has signed off on the lifting of capital control restrictions in financial markets transactions and that the ministerial decision will be published soon.


Spoofing Case Shows Fine Line Between Fair & Fraud

Peter J. Henning – NY Times

The financial markets have become much more fragmented in the last 20 years, which has led SEC to start trying to crack down on those who try to profit from the complexity.

But it can be difficult to separate out those who play the loopholes in the system to their advantage from someone engaging in fraud. Just ask any tax lawyer, who will tell you there sometimes is not all that much difference between good planning and improper avoidance.


”Just Water” Chief Slams NZX For ‘Price Gouging’

Fiona Rotherham – NBR

Tony Falkenstein, Chairman & CEO of NZAX-listed Just Water International, has again accused NZX of price gouging. He said NZX, which was required to review the five resolutions for the AGM, charged excessively for the privilege and he’ll be referring it to the Commerce Commission for “continuing its practice of abuse of its monopoly position as well as price gouging.” NZX invoiced Just Water a bill of $650 per hour for 9.5 hours for reviewing five resolutions and later reduced the rate, but not the hours, he said.

Private Markets

Dragon Capital Plans To Acquire 20% In Ukrainian Exchange


Dragon Capital Investment, which last month suspended its participation in the acquisition of shares in Ukrainian Exchange (Kyiv), has said that the group plans to acquire 19.99% (4,997 shares) in the exchange.

FAO: MOEX holds 43.08% in Ukrainian Exchange.


India – Listing Our Stock Exchanges

Sucheta Dalal – Moneylife

India – Listing Of Bourses: NSE ‘Delay’ Irks PE Investors

Abhineet Kumar & Jayshree Pyasi – Business Standard

After nearly 10 years of prevarication, misdirection, smoke-screens and false promises to institutional investors who were lured to invest in demutualised stock exchanges on the promise of listing, there seems to be serious pressure from the finance ministry to, finally, make it happen. The ministry, in turn, is under pressure from large institutional investors who are fuming at being trapped without an exit route. There are three reasons why things have come to a boil now.

PLY: A blunt assessment from Sucheta Dalal of Moneylife: “Market history shows that after touting professionally run bourses as the best thing to have happened in the Indian capital market space, we have allowed these to become ivory towers, where even their own shareholders complain about their functioning.”


India – MMTC Will Sell 10% In ICEX

Komal Amit Gera – Business Standard

The operations of ICEX were suspended last year. Now shareholders want to revive it. The board of directors at MMTC and the exchange have also approved the revival. It might take six months to resume operations.

MMTC will offload 10% of its stake and retain 16%. Buyers have been identified.


Official: Texas Not Competition To Wilmington SE

Xerxes Wilson & Karl Baker – Delaware Online

It turns out New Castle County and Wilmington officials haven’t been competing with Texas for a start-up stock exchange after all. John Wallace, chairman of the newly created Delaware Board of Trade Holdings Inc., said they approached officials in Austin, Texas, about creating an exchange this spring, but the plans never advanced. Talks then shifted to creating the venture in Delaware, where the company ended up incorporating in June.

Wallace said Delaware remains the only possible venue.

FAO: Delaware Board of Trade Holdings Inc. was incorporated in June and is headed by John F. Wallace, former Philadelphia SE CEO. Dick Grasso, former Chairman & CEO of NYSE, and Joseph J. Grano, former Chairman & CEO of UBS Capital Markets, are advisers for the company.

The New Castle County Council in July approved backing a $15 million revenue bond for the exchange.


Myanmar Bourse Launches Long Quest For Regional Stardom (subscription)

Michael Peel – Financial Times

Myanmar will finally ring the trading bell to launch its new stock exchange on Wednesday.

QV Premium: ASEAN Exchanges Project Brief.


Nepal – Demat Mandatory For All Listed Firms From January 15

Kathmandu Post

Securities Board of Nepal (Sebon) has said it will make electronic share transactions mandatory for all listed companies from January 15. Currently, only commercial banks’ shares ownership certificates have been dematerialised.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX and FTIL both off nearly 2%.


DB1 Re-Signs For Scila Surveillance Software

Banking Technology

DB1 has renewed its contract with Scila, signing a five-year agreement to continue using its software.

For the last four years, Scila Surveillance has been used Deutsche Börse’s two largest exchanges – the Frankfurt SE and the derivatives market Eurex – as well as the Eurex bond trading venue Eurex Bonds.

PLY: A good result for the Scila team and a sensible renewal for DB1.


Traiana Sees Possible $30 Million Savings For OTC Equity Markets


White paper highlights significant gains for the industry as a result of the netting benefits found during the automated central clearing of OTC equity trades, across pan European clearers on an interoperable basis.


SIX Swiss Exchange Celebrates 20 Years Of Fully Electronic Trading



NYSE Arca Expands Amounts Stock Prices Can Move When Reopening

Annie Massa – Bloomberg

Under the exchange’s new rule, securities valued at 1 cent to $25 a share can rise or fall 10% from their prior level. Securities between $25.01 and $50 can move 5%, and those valued at more than $50 can move 3%. Previously, those thresholds were 5%, 2% and 1%, respectively.


About That Bonus: Why Wall Street Can’t Bank On Bond Trading (subscription)

John Carney – Wall Street Journal

Will the last capital-markets trader please turn out the lights?


Deutsche Bank Launches ‘Robo Adviser’ For Equities Investors



ECB Introduces Changes To Euro ForEx Reference Rates



Shanghai SE, Shenzhen SE, China Financial Futures Exchange Issue Rules For Circuit Breaker Mechanism For Index


Career Paths

Aligned with the new SGX organisational structure, the following personnel changes will be effective from 1 January 2016:

President, Muthukrishnan Ramaswami (Ramu), will take on increased responsibilities overseeing the Operations and Technology units, MDC and MIC.

Chew Sutat, currently Head of Sales & Clients, will become Head of Equities & Fixed Income and report to the CEO.

Head of Derivatives, Michael Syn will lead the expanded Derivatives unit and report to the CEO.

Glenn Seah, currently Head of Compliance, will become Head of Legal, Compliance & Company Secretary and report to the CEO.

Presently based in China, Lawrence Wong will devote full attention to his role as Head of China Business, relinquishing his role as Head of Listings.  

In conjunction with the realignment, Tim Utama has decided to leave SGX. However, he has agreed to stay on to oversee the transition, and to see through the implementation of the various SGX Board Committee of Inquiry (BCOI) recommendations.

Reuters reports that Ben Bernanke, who chaired the U.S. Federal Reserve from 2006 to 2014 and was named a senior Pimco adviser in April, will lead the Pimco Global Advisory Board.

The board also includes Jean-Claude Trichet, president of ECB from 2003 to 2011, and Gordon Brown, the U.K. prime minister from 2007 to 2010.

PLY: A great case of a board which is famous but if I was a PIMCO client I would withdraw all my money on reading this list. Gordon Brown alone is a weird choice – a spendthrift incompetent whose damage to the British economy is still apparent today.

Other members include Ng Kok Song, who was group chief investment officer of the Government of Singapore Investment Corp sovereign wealth fund from 2007 to 2013; and Anne-Marie Slaughter, president of the think tank New America and a former U.S. Department of State policy director.

Finance Magnates reports that Fidessa appointed Paul Dex as its newest Business Development Manager for its derivatives business in EMEA. Prior to Fidessa, Mr. Dex worked for over a decade at LIFFE, having run the exchange’s global education program. Additional roles at the exchange also included stints as head of front-office execution business for SEB Futures globally.

PLY: Delighted to see Paul Dex being appointed here as his pragmatism ought to help Fidessa. I heard a great rumour the other day that apparently some legacy vendors are still handing out tricorn hats, masks and black chargers to their staff as a ritual when they are allowed to price client deals. A touch of the Dick Turpin trappings puts them in the mood to add shareholder value somebody alleged.

Traders Magazine reports that:

Global Prime Partners appointed Sean Capstick as Head of Prime Brokerage. Capstick joins from equity asset manager RWC Partners, where he was both a member of the management committee and also Head of New Markets. Prior to this, Capstick was European Head of Prime Brokerage at BAML. He has also held senior positions at Deutsche Bank, Morgan Stanley and Goldman Sachs.

Aqua Securities hired Danielle Jarnot as VP of Institutional Sales and Trading. Prior to Aqua, Jarnot spent over 10 years in buy side asset management roles including analytics, equities and convertible bond trading with GIC Asset Management and MSD Capital.

S3 appointed Jeremy Vest as VP of Client Services.  Additionally, Rob Olkiewicz was appointed VP of Client Integration.

Financial Calendar

10.12. – Record date CME $0.50 Q4 2015 dividend

11.12. – ITG $0.07 quarterly dividend payment

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

Share Notes

Euronext Announces Share Repurchase


Euronext repurchased 133,084 shares as part of the second phase of its repurchase programme, which aims to cover the LTI plan for 2015. The programme has been implemented by an independent agent since it started on 9 November 2015. The 133,084 shares were repurchased at €45.126 ($49.2) for a total consideration of €6,005,517.37 ($6.54 mln).


Markit Announces $200 Million Accelerated Share Repurchase


Markit announced an aggregate $200 million accelerated share repurchase (ASR) with J.P. Morgan Securities LLC, as agent for JPMorgan Chase Bank, National Association, London Branch and Morgan Stanley & Co. LLC. The transaction completes the $500 million share repurchase program announced in June 2015, with an additional $50 million share repurchase approved by Markit’s board of directors in connection with the ASR.

Other stories

Statement Of CFTC Commissioner J. Christopher Giancarlo On Enactment Of The FAST Act


PLY: An emollient Commissioner Giancarlo applauds efforts to rectify earlier oversights (or actually, lack thereof):

“Yet, a major flaw in Dodd-Frank imposed indemnification obligations on overseas regulators in order to share this critical information, which has been preventing international data sharing for swaps transactions. As a result, seven years after the financial crisis, regulators still do not have full transparency into global counterparty credit exposure that Dodd-Frank was designed to provide.”



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