December 09 2014

ei 400th

 

 

 

 

 

 

 

 

 

 

PLY: Like any cost conscious organisation, we’ve gone to very finite lengths (q.v. the special cheesy banner) to celebrate a little landmark today: 400 editions of Exchange Invest. Good to get it in before Christmas so we will hit the magic 500 marker in Q2 2015. During those 100 days, I would ask all readers to reflect: not on what Exchange Invest can do for you but indeed what you can do in return, for your free, daily, Exchange Invest?

While eager to improve the context and quality of discussion about the Exchange and market infrastructure universe, nobody has been more surprised than me at the speed with which we have achieved industry benchmark status…and once again thank you to everybody for their feedback, both positive and indeed negative too – the quality of debate has been high and inspiring.

I am delighted Exchange Invest has a core of sponsors and supporters – you know who you are and I thank each and every one of you for reducing my cost of delivering this publication! In particular, I want to thank Cinnober and Volta who have been our most public supporters, as well as those major markets which have bought group-wide subscriptions to our Premium range. At the same time…

…the vast majority of the industry reads this newsletter and enjoys a free ride. Contribution, particularly from some who deem themselves industry leaders would be greatly appreciated… – remarkably some billion dollar businesses plead poverty nowadays.

N.B. No single sponsor contributes enough to influence our thought, so, while a commercial venture, I will always ensure Exchange Invest remains independent in its thinking. Besides, new revenue enables more and better coverage which I believe the industry badly needs to get core messages across.

Anyway, 400 issues in and so much has happened already – some things I championed like the abandonment of the Vienna-Warsaw merger, have come to fruition while it remains disappointing to see apparent market abuses permitted by regulators despite our bringing them into sharp focus.

Some stories just run and run – like Jignesh inc (even today) and so forth…but more of that later in Exchange Invest Premium, where I will be adding more pith on a variety of topics (apologies for the hiatus there, but I needed to ensure some income in for the family Young coffers and they were projects far too juicy to ignore! – for the record I have to date received nothing personally from Exchange Invest, rather I have spent rather a lot on the project: there was several years of planning before even a beta appeared).

Anyway, welcome to one and all for a pith-laden free daily Exchange Invest to mark the 400 issue mini-milestone, thanks again to all our supporters, happy scrolling dear reader:

Public Markets

ICE Sells Remaining Euronext Stake, Profiting From 23% Rally
John Detrixhe – Bloomberg

ICE sold the last of its shares in Euronext NV (ENX), completing its exit from a business that has rallied 23% since its IPO in June (from 20 Euros to 24.66). ICE raised 96.8 million euros ($119 million) by offloading 4.2 million shares, or about 6% of the European company. Euronext gained its independence from ICE through an 845 million euro IPO in June.

ICE press releases here and here.

PLY: Several good things have already emerged from the ICE acquisition of the materially deficient NYSE Euronext. An Injection of management at NYSE is speeding new thinking and reform which may yet make the big board the credible business it looked like becoming under John Thain before it lost its way. The Tech division has been (rightly) torn asunder and the exchange arm already looks very different.

Euronext never found its feet under NYSE ownership and was shunted out of ICE to avoid regulatory issues but also because it was the less loved duckling of the dysfunctional siamese twins which NYSE Euronext had become.

With this private placement Jeff Sprecher cements his right to sit at the top of the adult table of exchange managers looking over at…well not many others, alas.

Perhaps the most remarkable transformation has been at Euronext. Even staff were lukewarm about buying discounted stock at IPO. Yet the business is rebuilding. Whereas before it was in a race to the bottom with BME, the Spanish market is now more exposed than ever as Euronext has begun the tough journey back to respectability with the cost cuts the New Yorkers failed to deliver and a renewed emphasis on clients. Radical stuff for the former trans-Atlantic empire of dysfunction, good news for Europe’s markets (albeit with the caveat that Euronext’s home markets mostly have governments in the ‘mad, bad and dangerous to capitalism” division).

Conclusion: Camels/eyes of needles and so forth…If Euronext can turn Itself around then this Is no fad diet – hopefully more washed up bourses can join the plan and cut costs while improving their business. The industry needs you and it is good to welcome Euronext back to the fold as a viable entity. Yes of course circumstances are challenging but weren’t they forever thus? (Everywhere).

FTIL Sells 165k MCX-SX Shares To Jhunjhunwala
Moneycontrol

FTIL said it has sold an additional 165k shares to ace investor Rakesh Jhunjhunwala for Rs 247k (USD 4k) in stock exchange MCX-SX, thereby completely exiting the bourse.

Last month, crisis-hit FTIL signed agreements to sell its entire 5% stake, comprising of 27 mln equity shares and 562,46 mln warrants, for Rs 88.41 crore (USD 14.3 mln). While equity shares were sold only to Jhunjhunwala, the warrants were divested to him and some other investors.

Rakesh Jhunjhunwala is rumoured to have bought 4% of Indian Energy Exchange (IEX).

PLY: Am I alone in wondering at the sheer convenience of FTIL finding a beneficent single buyer with sparse exchange investment experience so eager to acquire shares In Jignesh Shah’s beloved bourses?

UK’s FCA: New Strategic Approach To Ensure “Sharper Focus” To Regulatory Challenges Ahead
MondoVisione

PLY: From the FCA’s web site:

“We regulate the financial services industry in the UK. Our aim is to protect consumers, ensure our industry remains stable and promote healthy competition between financial services providers.”

…A sharper FCA focus will be welcome, especially in ensuring a balance between competition which potentially discredits the industry and the core issue of stability. Consumer protection is good but people must be free to choose.

Large Scandal On The Romanian Stock Market
Romania-Insider

PLY: 25 so far placed under investigation amongst 2 SIFs (post ‘voucher’ local fund managers) with allegations of fraud and all the other practices that far too many folk regard as permissible under the unwritten elements of Romanian corporate governance. Circa EUR 16 million currently reckoned to be the sum defrauded but I would suspect the police (provided they have the auspices to keep looking) can find much more…

FAO: As of 30 Sep 2014, the two organisations at the centre of current investigations (SIF Banat Crisana and SIF Muntenia) held exchange stock as follows:

SIF Banat Crisana owned 0.18% of BVB.

SIF Muntenia owned 4.32% of BVB & 4.95% of Sibex Sibiu SE.

EU Still At Odds On FTT, 2016 Start In Doubt
Robin Emmott & Francesco Guarascio – Reuters

FAO: Latest comments on the subject here and here.

PLY: Again beware: EU reactions are always most dangerous when they look to be down and out BUT the encouraging thing is the next EU Presidency is Latvia (from Jan 1) where (unlike the old socialist guard like Spain, Germany, France, current Presidency Italy, and other bankrupt big statists) they actually have a modest inclination towards free markets.

Time Is Short To Get Final Building Blocks In Place (subscription)
Chris Hall – Financial News

Next year may be when the chickens of Pittsburgh come home to roost. When the 2009 G20 summit in the city produced the outlines of a post-crisis settlement – shoring up bank balance sheets and reducing the I of OTC derivatives trades by pushing most of them through clearing houses – many feared there would not be enough collateral to get the job done.

PLY: The real problem is politicians / regulators rushed the job with a haste indecent even to somebody at the dodgy scale of the Turkish builder charts. Hence some foundations are in sand and many elements were built on the hoof, making for a completely incompetent whole, albeit with some sound work on the core concept of rendering the bilateral, multilateral and transparent. The final building blocks probably need to come with a little deregulation to make the system workable.

Exchange Council Calls For European-Wide Implementation Of Reverse Charge Mechanism – European Power Exchange To Focus On Intraday Trading Availability
MondoVisione

EPEX SPOT called for the European-wide implementation of the Reverse Charge Mechanism (RCM) in order to battle VAT fraud.

SEBI Considers Penalties To Prevent Self-Trades
Jayshree P Upadhyay – Business Standard

Market regulator has seen an increase in trades, creating artificial volumes and manipulating prices. Trades where the buyer and seller are the same and not resulting in a change of ownership are termed self-trades. Typically, these occur when multiple dealers from the same broking house carry out trades using the same client code.

Madoff’s Ex-Back Office Director Gets 10 Years In Prison
Nate Raymond & Joseph Ax – Reuters

Bernard Madoff’s former back office director, Daniel Bonventre was sentenced to 10 years in prison on Monday for helping the convicted fraudster conceal his massive Ponzi scheme for decades. He is the first to be sentenced among 5 former Madoff employees.

Private Markets

Sebi Allows Exit To Inter-Connected SE As Bourse
Business Standard

SEBI allowed Inter-connected SE (ISE) to exit stock bourse business.

PLY: Farewell to an ISE we barely got a chance to know…

SEC Sanctions Operator Of Bitcoin-Related Stock Exchange For Registration Violations
MondoVisione

SEC sanctioned a computer programmer for operating two online venues that traded securities using virtual currencies Bitcoin or Litecoin without registering the venues as broker-dealers or stock exchanges.

PLY: An interesting case where Ethan Burnside ran the BTC Virtual Stock Exchange and the LTC-Global Virtual Stock Exchange allowing BTC or Litecoin investment in cryptocurrency denominated equities…

Special Section: FTI, NSEL, India at the Crossroads

PLY: FTIL takes a tumble, down 6%, perhaps as a result of whatever last week’s upswing rumour was, not coming to fruition. MCX is down 1%. After covering this story for the better part of 300 issues sadly we are no closer to resolution. That hangs heavily against India’s reputation as a credible capital markets nation.

Products

DCE & DGCX Seek To Deepen Product Development Ties
MondoVisione

DGCX and Dalian Commodity Exchange (DCE) are taking steps to further deepen product development cooperation to enhance the derivatives marketplace in the Middle East and Asia.

Yesterday DGCX signed a MoU with CFFEX.

Indexes

PSE – Shariah Subindex Launch Pushed Back To Mid-2015
Business World

A Philippine SE (PSE) launch of a new subindex for Shariah-compliant listed companies planned for this quarter will be delayed until mid-2015.

Career Paths

Supervision Chief To Leave In Shake-Up Of FCA
Huw Jones – Reuters

Supervision director Clive Adamson will leave, along with media head Zitah McMillan and Victoria Raffe, an executive committee member.

FCA will bring together the current Authorisations and Supervision Divisions, with the specialist supervision functions such as financial crime and client assets. Two Divisions will be created from April 2015 allowing for a clearer distinction between our approach to the regulation of large and smaller firms. Tracey McDermott (current head of enforcement) will take responsibility for managing this transition and will subsequently lead one of the new Divisions.

The supervisory board of Eurex Clearing AG comprises two new members: Roselyne Renel and Clifford Lewis. The new board members replace those members – Richard Berliand, Reto Francioni and Bill Templer, who stepped down earlier this year due to regulatory requirements or at their request.

Furthermore, the supervisory board has appointed Clifford Lewis member of the Compensation Review and Nomination Committee of the supervisory board.

Metal Bulletin reports that LME’s Singapore-based senior VP Asia commodities William Chin has resigned and is now on gardening leave.

FN reports that Jeremy Bruce, the head of European sales for Convergex‘s execution business has left the US agency broker’s London unit after two and a half years in the role.

MV reports that Adedamola Adetola and Yogita Mehta have been appointed Commercial Directors by Ancoa, responsible for different client segments and reporting into Kurt Vandebroek, CEO. Both executives bring extensive experience as commercial directors having previously worked for Bloomberg Tradebook and Barclays Capital and, Tbricks and DTCC respectively.

Also reporting into Kurt is Stefan Hoefnagels who extends the growing team and joins from Societe Generale and Rabobank.

Dipen Thaker also joins Ancoa as Product Manager from Thomson Reuters where he was part of the Innovative Industry Solutions team specialising in Benchmark surveillance solutions. Dipen has over 20 years Investment Banking experience, delivering Risks solutions for organisations such as RBS and Citi.

Joining Ancoa’s board is Johan Buyle who has over twenty years of experience in various aspects of the financial services industry. Johan has been involved in numerous transactional operations for Acquisition Finance at Fortis Bank, and spent several years as an investment manager at AlpInvest and at Fortis Private Equity. Johan joins existing board members Stefan Hendrickx, Andrew Louth, Hans Cobben and Stefan Dierckx.

Financial Calendar

This week

Record date CME $0.47 Q4 dividend
BGC Partners $0.12 quarterly dividend payment
Record date NASDAQ OMX $0.15 quarterly dividend
Interactive Brokers Q3 $0.10 dividend payment

New announcement

CME Q4 2014 Financial Results – Tuesday, February 3, 2015

CME press release here.

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

Share Notes

Interactive Brokers CFO Paul Jonathan Brody sold 5,497 shares Friday, December 5th at an average price of $27.70 (bargain $152,266.90). Mr. Brody’s regular sales are chronicled on this specific page.

Analyst Notes

Keefe Bruyette & Woods Upgraded NASDAQ OMX From “Market Perform” To “Outperform” – Price Target Raised From $45 To $55
CME Downgraded By Keefe, Bruyette & Woods From “outperform” To “Market Perform” – $92.00 Price Target

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

A Renaissance In Finance (subscription)
Philippe Morel & Will Rhode – Financial News

Online P2P and crowdfunding portals are springing up as alternatives to the traditional lending, foreign exchange and equity capital markets. New electronic trading venues are introducing all-to-all networks and competition to fixed income trading.

Other stories

Light-Speed Treasury Trading Governed By Rules Dating To 1998
Matthew Leising – Bloomberg

The last time regulators took a hard look at how Wall Street trades Treasuries, a little company called Google Inc. was just starting out.

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