December 09 2013


ECC gets green light, ICE sale of NYSE Technologies unlikely to another exchange, Indian fraud squad do well in seizing property to pay NSEL creditors. Swap future speculation, Volcker ‘rule’ makes “War & Peace” look like a pamphlet, Niederauer will not return to exchange industry, lots of Asia discussion, StartUp Stock Exchange interview and much more…

Incidentally, today marks another little milestone, our 150th edition of Exchange Invest. Thanks as always to the many readers throughout the world who take the time to praise our endeavour to provide exchange/market infrastructure news in one simple daily format. With a little more commercial input we are looking forward to adding additional subscription insights in the near future as well as maintaining this free daily newsletter. Thanks too to Florin for managing to organise production of today’s newsletter despite a dose of some lurgy – get well soon!

Public Markets

European Central Counterparty Gets Green Light For March Launch
banking technology
EU Equities Clearing Primed For 2014 Transformation (subscription)
Financial News

European equities clearing houses EMCF and EuroCCP have completed their merger transaction and chosen a new name for the merged company, following the final approval by Dutch central bank De Nederlandsche to the group’s shareholder organisations the DTCC and BATS Chi-X Europe.

The new entity, European Central Counterparty, will come into being on 6 January 2014, and promises to bring cost reductions in post-trade for European financial institutions. The group’s other owners include the Netherlands’ ABN Amro Clearing Bank, and Nasdaq OMX. Customers are expected to be moved across to the new company by the end of March.

PLY: Congratulations to Diana Chan and her team for stewarding this merger through. ECC has great opportunities and a proven track record, it will be interesting to watch its development.

Asia Beat: Swimming In The Derivative Seas (subscription)
Financial Times

Charles Li of HKEx was the swordfish, Elmer Funke Kupper of ASX the barramundi.

PLY: Fishy analogies from Singapore.

Deutsche Boerse Says India Is High Priority In Asia Strategy
The Economic Times

DB says India is a high priority in its Asian business development strategy and it is expanding alliances and education programmes with institutions there.

NYSE’s Niederauer Has No Plans To Lead Another Firm
Market Watch

The CEO of NYSE says he has no plans to head up another large company. If anything he will do something in the veterans or special-needs space.

LCH.Clearnet Ramps Up Australian Business (subscription)
Financial News

LCH.Clearnet, the international clearing house majority-owned by LSE, is ramping up its operations in Australia ahead of new rules that are set to boost clearing volumes in the country.

TSX To Clarify Reverse Takeover Rules
Financial Post

TSX has proposed amendments to the rules governing reverse takeovers or mergers, also known as backdoor listings.

Dubai’s Main Bourse Delayed Market Open Due To Technical Fault

Dubai Financial Market, delayed Sunday trading by several hours following a technical hitch.

Billions At Stake In Two Madoff Court Cases (subscription)
Wall Street Journal

Five years later, legal issues potentially affecting more than $7 billion in recoveries, underscore the challenges in unwinding the biggest financial fraud in history.

Private Markets

SIX Swiss Exchange Lures India To The Alps
Business Standard

SIX Swiss Exchange, Switzerland’s principal stock exchange, is encouraging Indian companies to raise capital through its platform.

The Zurich-based exchange, Europe’s third-biggest, wants to cash in on Switzerland’s near-zero interest rates, stable currency, friendly regulatory regime and large pool of investment capital.

Startups Need Their Own Stock Exchange. So I Built One

PLY: Ian Haet, who gave a fascinating presentation at Young Markets this year, discusses his Startup SE.

Bitcoin Fuelling Rise In Cyberattacks (subscription)
Financial Times

Ransomware attacks jump ten-fold, says McAfee

Special Section: FTI, NSEL, India at the Crossroads

PLY: Hopes are rising that the Mumbai EOW (fraud squad) will recover a significant amount of the money owed in the NSEL fiasco, although MCX shares are down 1.5% and FTIL essentially flat. To have some 500 million dollars in attached assets and seized bank accounts demonstrates good police work. Given the fear of massive hair cuts up to now, investors ought to be relieved that a settlement of most of their debts is now looking much more plausible given that barely 5% of the total owed has been collected directly by NSEL to date.

India Exchange Probe Widens As Police Seize $487 Million Assets

Investigators probing the biggest payment default in India’s commodity market seized assets and some 300 properties worth $487 million from exchange officials and defaulters that may be used to clear dues to investors.

PLY: Apparently the total worth of attached properties has gone beyond Rs 3,109.67 crore (USD 508,2 mln). The frozen bank accounts have a balance of Rs 172.15 crore (USD 28.13 mln) with property of all 26 defaulters attached. That suggests very good progress in returning a significant chunk of money to creditors from the circa 860 million dollars owed.

Talks Between Investors, FT Likely To Resume Soon
Business Standard

FTIL is all set to restart settlement talks with investors and brokers of NSEL next week. Talks were derailed two weeks ago over settlement terms.

According to sources, Jignesh Shah, former director of NSEL, had made an offer of Rs 1,111 crore (USD 181.5 mln) to investors and brokers to settle all issues and withdrawing cases filed against the FT Group and board of directors of various group entities in various courts. The offer was agreed upon by the investors, but was rejected by brokers.

EOW To File First NSEL Chargesheet By Dec 31
Business Standard

The Economic Offences Wing (EOW) of Mumbai Police will file the first NSEL charge sheet by December 31.

Worth Of NSEL Attached Properties Crosses Rs 3,109 Crore (USD 508.2 Mln)
The Times of India

Jignesh Shah, chairman of FTIL and Joseph Messy, one of the accused in NSEL, on Saturday appeared before the city EOW and told a senior police officer that they were trying their level best to return the money of victims.

Six More Borrowers Approach NSEL To Settle Dues
The Hindu Business Line

With the Mohan India group taking steps to settle its Rs 771 crore (USD 126 mln) outstanding dues to NSEL, other borrowers too have approached the exchange for a settlement.

NSEL promoter Jignesh Shah told Business Line that six more borrowers have come forward for a financial agreement with the exchange.

On Friday, the EOW had allowed Mohan India to liquidate its sugar stock worth Rs 90 crore (USD 14.7 mln). The proceeds of the sale would be used for settling the dues of the investors.

Panel On NSEL To Review Actions Taken By Agencies
The Financial Express

A high-level panel set up to probe irregularities at NSEL will take stock of the actions taken by various investigating agencies in the matter on Monday.

This development comes after the Mumbai Police on Saturday completed attaching assets of all defaulters in the exchange.

MCX, Brokers Seek To Restore Faith In Futures Market
Business Standard

MCX’s oversight committee convened a meeting of leading brokers to deliberate upon restoring confidence in the commodity futures market, which was shaken by the payment crisis at NSEL.

Around 20 brokers attended the meeting on Saturday and discussed “how to come out of the several problems faced by the market”.


ICE Finds Challenges In Technology Unit Sale (subscription)
Financial News

Early efforts by ICE, the new owner of NYSE Euronext, to offload NYSE Technologies businesses have met a cool reception from potential industry purchasers, including HKEx, Nasdaq OMX, Markit and Deutsche Börse.

PLY: Unsurprising that there would be apathy in exchanges to buy a service oriented towards customers. However it is early days for this sale process and having knocked on the exchange doors, it’s time to look at other possible buyers including vendors and private equity looking to do a turnaround.

Budapest SE Migrates To Xetra
waters technology

Budapest SE (BSX) has completed the migration of its trading system to Xetra, meaning that all four exchanges in CEESEG are now running Deutsche Börse’s platform.

PLY: Just to correct a typo in this story, FESE VP Martin Reck is clearly head of cash markets at Deutsche Boerse, not Budapest SX.

ADX Begins Mock Session For New Trading Platform

Abu Dhabi Securities Exchange (ADX) has begun testing the new “X-stream” trading system with members.
A mock session was successful and ADX will conduct two more mock sessions in December 2013 and January 2014. ahead of an official launch at the end of January 2014.


Oslo Børs: Nibor On Millennium

Oslo Børs NIBOR will go-live Monday December 9 on the Millennium platform. Indicative deposit rates will be distributed via FIX-FAST and average of the indicative deposit rates and Nibor will be distributed through the FAST Indices gateway as of Monday.

Rival Models Of Swap Futures Evolve In Europe (subscription)
Financial News

As new European derivatives rules drive up costs, trading venues are following their US peers by exploring the creation of alternative, cheaper swap futures which are starting to gain traction in the US, with exchanges including CME Group, Eris Exchange and trueEx leading the charge.

LME To Consider Listing Powder Under Cobalt Contract (subscription)
Metal Bulletin

LME is considering listing cobalt powder under its cobalt contract.


FTSE Launches Innovative UK Digital Services Index Series

FTSE announced the launch of the UK Digital Services Index Series, which will act as a benchmark of UK companies operating in the digital sector.

Indices will be calculated based on the FTSE All-Share and the FTSE AIM benchmarks, as well as a composite index of both FTSE All-Share and FTSE AIM constituents for eligible companies, namely those which derives more than 50% of its revenues from either digital or online services, or which are considered to be engaged in providing services that are integral and critical for the functioning of digital services.

Career Paths

The electoral committee of Eurex Deutschland has today announced the result of the Exchange Council election. The following candidates were elected as the individual representatives:

Credit institutions:

Lars Hille, Member of the Board, DZ Bank AG Deutsche Zentral-Genossenschaftsbank
Rainer Krick, Member of the Board, Landesbank Hessen-Thüringen Girozentrale
Nico Baader, Member of the Board of Managing Directors, Baader Bank AG
Dr Carsten Esbach, Permanent Representative of the German Branch, BNP Paribas S.A.
Michael Klaus, Personally Liable Partner, B. Metzler seel. Sohn & Co. KGaA
Dr Stephan Leithner, Member of the Management Board, Deutsche Bank AG
Michael Reuther, Member of the Board of Managing Directors, Commerzbank AG
Carola Gräfin von Schmettow, Member of the Management Board, HSBC Trinkaus & Burkhardt AG

Financial services institutions:

Richard Falk, Member of the Executive Board, Kerdos Investment-AG TGV
Bronislav Kandrik, Member of the Board of Directors, RSJ a.s.
Helene von Roeder, Managing Director, Morgan Stanley Wertpapiere GmbH
Johannes Nicolaas Martinus Pieterse, Managing Director, Optiver V.O.F.
Charles Tall, Managing Director, Archelon Deutschland GmbH
Christian Trenkle, Managing Director, Panthera Investment GmbH

The Exchange Council will convene for its inaugural meeting at the end of January and elect Chairman, Deputy Chairman and investor representatives.

Financial Calendar


Record date CME Q4 $0.45 dividend

This week

Interactive Brokers $0.10 Q3 dividend payment
NZX 1.5 cents Q3 dividend payment
Record Date Nasdaq OMX Q3 $0.13 dividend

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, the sale of 8,365 shares Tuesday, December 3rd at an average price of $24.56 (bargain $205,444.40) reported December 5th 2013 Interactive Brokers CFO Paul Jonathan Brody sold another 7,952 shares on the open market on Thursday, December 5th at an average price of $24.56, (bargain $195,301.12).

Following his sale of 11,867 shares Friday, November 22nd at an average price of $24.21 (bargain $287,300.07) reported on November 27th and the sale of 12,117 shares Tuesday, November 26th at an average price of $24.28 (bargain $294,200.76) reported November 28th Interactive Brokers Chairman Earl Nemser sold another 14,303 shares Thursday, December 5th at an average price of $24.56 (bargain $351,281.68).


Miami-Based EarlyShares Goes Live With Equity & Rewards-Based Crowdfunding Deals
Crowdfund Insider

EarlyShares is a crowdfunding platform based in Miami, Florida.

Other stories

Levine On Wall Street: Volcker Countdown Continues

Next week regulators will finalize the Volcker rule, which will prevent banks from engaging in proprietary trading. Today’s leak is that a “senior Treasury official” told the Financial Times that no one should worry that the rule will cut off legitimate market making because “the rule itself would be quite short, leaving room for regulators’ discretion.”

The over/under on the length of the rule seems to be 950 pages.

PLY: A “rule” at 950 pages is not discrete, it is a damning indictment of dismal legislators.

Volcker-Rule Critic Raskin Seen As A Voice For Consumers

When Federal Reserve governors voted in 2011 on the Volcker rule ban on banks’ proprietary trading, Sarah Bloom Raskin was alone in opposition. For her, it wasn’t tough enough.

Raskin will be among the regulators voting next week on the final version of the rule, which is likely to be stricter than the original proposal. Later this month, the Senate may decide whether to confirm her as the Treasury Department’s No. 2 official and its highest-ranking woman ever.

India – FMC Gives Bourses Extra Time To Register Warehouses With WDRA

Commodity markets regulator FMC has given the six national commodity bourses three months more time till March 2014 to register their warehouses with WDRA to ensure quality and quantity of the produce lying with them.

For better regulation of warehouses, FMC had asked the national commodities bourses — MCX, NCDEX, NMCE, ICEX, ACE and UCX — to register their warehouses with the Warehousing Development & Regulatory Authority (WDRA) and obtain the accreditation certification before December 31.

New Research Finds HFT Improves Market Fairness – CMCRC

New research from the Capital Markets Cooperative Research Centre (CMCRC) has found that the presence of high-frequency traders improves market fairness by reducing end-of-day price dislocation.

PLY: a little splash of controversy to end today’s EI!

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