December 11 2014

elb2

PLY: It’s GMEX/EUREX versus ERIS/ICE in the battle to be the Brooks brothers suit of commoditised (‘futurised’) swaps while CIBC looks at Russell, NYSE is for Christmas but may not be for life, infers Sprecher while the NYT has a Xavier gush and the battle is on between Hong Kong and Singapore media to see which can berate their local markets the hardest (tough call right now). Euronext launches B Clear lookalike in logical expansion choosing Cinnober technology, and in a move back to 1996, EUREX is offering STIRs free of charge to break the currently unchallenged (in economic value volume terms) ICE stranglehold on EURIBOR.

Lending Club valued at $5.4 billion while the Swiss Exchange joins pretty much everybody else on the planet with a secondary bond platform looming…

All this and more in today’s free Exchange Invest, happy reading…

Public Markets

CIBC Said To Mull Offer For LSE’s Russell Asset-Management Unit
Matthew Monks, Doug Alexander & John Detrixhe – Bloomberg

CIBC is weighing a bid for Frank Russell’s asset-management arm, a business LSE is preparing to sell early next year.

PLY: CIBC boots Russell asset management in to play. A $1.3-1.5 billion valuation at this stage on the rumour mill suggests the sale price could be a lot higher too and every cent at or above these levels significantly de-leverages LSE.

ICE CEO Says No Immediate Plans To Sell NYSE
John McCrank – Reuters

PLY: “How long will I own the business? I’m not wedded to any business that we have. I’m wedded to providing earnings growth for our shareholders,” says Jeff Sprecher reminding us why he leads the bourse boss field by a country mile when it comes to, well, being a bourse boss.

We know various slide rules have been run over NYSE already and equally a number of former executive folks fancy their chances engineering a deal to run the business, so a sale could easily be on the cards, after ICE has turned what was once an apparent post Goldman Sachs sinecure masquerading as a trans-Atlantic exchange entity, into a proper business.

LSE’s Westward Expansion
Anita Raghavan – NY Times

PLY: Nowadays the trajectory of deals is regarded as a smooth process – clearly Xavier Rolet had the vision and has acted upon it but actually one of the various reasons I advanced the Exchange Invest publication was precisely because most talking heads and much of the media just didn’t get the brilliance of early Xavier deals such as buying the 50% of FTSE that the FT held (that group you will recall held on to their declining newspaper interests, in a move almost as short-sighted as Barclays keeping the bank and selling the ETF arm around the same time).

The Rolet trajectory has been amazing – likewise the long-term story of how Bob Greifeld has expanded NASDAQ from a nascent exchange one trick pony into a proper broad business (albeit with a few ill-defined and unsuccessful diversions along the way). Both deserve plaudits, although at the same time, I cannot really say I have much confidence in some of their plans.

Riding The Ghost Train
Asia Asset Management

PLY: Brutal defeatism reigns supreme in parts of Hong Kong as the ‘through train’ runs at the pace of European rail freight. True, I have tended towards cynicism on pure exchange linkages (and in the region, the likes of ASX-SGX demonstrated a noble, well executed project which alas just didn’t work out). However given that the access to China is, to put it mildly, patchy, through other channels, I still think this one will work when both the regulatory/accounting bottlenecks are clarified and indeed the Chinese economy whets buyer interest once again… (True, the bit in the middle may be a bit ugly).

Taiwan SE Will Start Cross Trading Links With SGX & JPX
Reuters

Taiwan SE will kick off cross-trading with SGX and JPX next year (previously announced here and here).

PLY: Unlike “through train” I do not see the point of this plan.

Lawsky Said To Probe Barclays, Deutsche Bank FX Algorithm
Greg Farrell – Bloomberg

New York regulators have found evidence that Barclays and Deutsche Bank may have used algorithms on their trading platforms to manipulate foreign-exchange rates.

PLY: Ugly. Having once been a deeply disillusioned Barclays Bank customer, I am left to ponder how they could manage such alleged sophistication in one arm of the entity and yet be unable to process basic transactions in the main bank franchise.

Dividend News

CME declared its annual variable dividend, amounting to $2.00 per share. The dividend is payable January 13, 2015, to shareholders of record on December 29, 2014.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX has a bounce today, up 4% while FTIL is up 1%.

Technology

Has SGX’s System Become Too Unwieldy?
Goh Eng Yeow – The Straits Times

Time was that it took a war to close a stock exchange. Not anymore. Now all it takes is a technical glitch – and there have been a few examples here recently.

PLY: Ouch. Criticism of SGX is at fever pitch in Singapore while HKEx has its own local detractors. At the same time, the issue of exchange outages is not new – it was and has been always thus. Nobody used to pay attention during open outcry times when some feed or another became discombobulated. As to the suggestion of an independent committee to investigate recent SGX issues – well let’s hope it is genuinely international experts and not a hotch potch of dignitaries who have experience in other fields, as that process would be a lot worse than the existing investigation methinks.

The one bit which I would have thought the Singapore media might have been more active in discussing is the clearing side of SGX where LSE/Millennium are, from what I can see, effectively building a predominantly new system to service the clearing and settlement of SGX? Doubtless somebody will be eager to correct any misinterpretation here but even without customising, this is a big buildout and surprisingly the local media have not yet discussed it in the recent glitch context.

CFTC Head Says To Probe Cyber Security Efforts At Exchanges, Clearinghouses
Sarah N. Lynch – Reuters

The top U.S. derivatives regulator said on Wednesday that his agency plans to step up scrutiny of how exchanges and clearinghouses protect themselves from cyber attacks.

Products

Euronext Expands Derivatives Services Using Cinnober Technology
Cinnober

Euronext will run a trade validation and confirmation solution using proven TRADExpress technology adapted to Euronext’s specific requirements.

Euronext Expands Derivatives Services
Euronext

Euronext announced a new service which will significantly expand and enhance its derivatives offering for clients. Initially launching with equity derivatives in the spring of 2015, the service will enable bilaterally agreed trades in derivative products with certain flexible parameters to be reported to Euronext and cleared by LCH.Clearnet, Euronext’s CCP. The service will run on the TRADExpress platform, delivered by Cinnober.

PLY: Essentially Euronext launches its own variant of the LIFFE BClear. Sensible, and given the nature of the divorce, hardly a shock that somebody would remember how to do this amongst the national equity market folks once within Euronext then within LIFFE and finally back in Euronext again… Besides, Euronext needs to do this as they ought to have realised that options competition will soon be fiercer when their erstwhile owner rejoins the continental frey. Good move and the technology is first rate.

Meanwhile students of vendor history will recall that the original LIFFE BClear product used a solution delivered by Cinnober and Cscreen a decade ago.

Eurex Waives Fees For EURIBOR Futures
Deutsche Borse

The new initiative includes a 4-month fee holiday for EURIBOR futures. The zero fees period on trading and clearing of EURIBOR futures will be available from 10 December 2014 until 31 March 2015.

In addition, a range of new functionalities have been introduced with the latest update of the T7 trading system. The new release, introduced this week, provides market participants with the full range of functionalities required for money market derivatives trading, including packs, bundles and strips.

PLY: Gosh it’s back to 1996 all over again! Apparently the ‘dapper Dan,’ Mr Hodson was on the stump representing his NED role at NLX the other day in London while EUREX are waiving fees as they gear up for the short end answer to the Battle of the Bund…which took place so long ago I wrote all about it via Netscape browser online and in a book published in paper…ah the nostalgia of it all!

Eurex & GMEX Cooperate In Swap Futures Trading & Clearing – GMEX Granted UK FCA Approval – Interest Rate Swap Future With Innovative Product Design
MondoVisione

GMEX and Eurex announced the signing of a license agreement. Eurex will license GMEX’s Euro-denominated Constant Maturity Future (CMF) for trading via Eurex’s Multilateral Trade Registration (MTR) service and clearing on Eurex Clearing.

PLY: After last week’s Eris deal with ICE, now EUREX lines up their backstop play via GMEX where they already hold a stake.

Swiss Exchange Readies Bond Trading Platform (subscription)
Anna Irrera – Financial News

SIX Swiss Exchange is readying the launch of a new secondary bond trading platform next year as the bandwagon gains momentum:

FAO: The competition is increasing in the bond sector with Tradeweb releasing its new offering in October. Also, Liquidnet bought Vega-Chi in March, DB1 backed Bondcube received European regulatory approval earlier this month, while ITG are also planning to launch a fixed income platform…

PLY: …and indeed thus plans ‘Uncle Tom Cobbly Exchange’ and a billion other bourses. My worry: bond markets are in a mega-incredible-outrageous-QE-indicted-megabubble. When it all bursts, how many of the million or so bond platforms out there actually have a plan to deal with what will eventually be a mega slump (even if it only lasts a year)? My confidence factor in the breathlessly optimistic having indulged in such planning declines precipitously before I have even counted all fingers on one hand…

NCDEX To Launch Forward Trading In 17 New Commodities
The Economic Times

As planned earlier this year, NCDEX will soon launch forward trading in 17 additional commodities comprising major cash crops that form bulk of the physical agri trade in the country.

The exchange has recently received the approval from FMC for trading in 17 commodities including 29 MM cotton, barley, castor seed, chilli, coriander, crude palm oil, chana, guar gum, guar seed, jeera, mustard seed, refined soya oil, shankar kapas, soybean, turmeric, cotton seed oil cake and wheat.

SET Mulls Next Step For Gold
Bangkok Post

Talks with major gold dealers over management of a proposed physical gold exchange have failed so far, and the Stock Exchange of Thailand (SET) is set to decide its next move early next year.

CFFEX To Launch Euro & Aussie Cross-Currency Futures (subscription)
Risk

Indexes

CBOE To Offer Options On MSCI Indexes
Saqib Iqbal Ahmed – Reuters

CBOE said on Wednesday it has entered an exclusive licensing deal with stock market indexes provider MSCI which would allow the CBOE to offer options on six MSCI indexes.

CBOE press release here.

PLY: That could be an intriguing breakthrough for CBOE which is a sort of VIX-fuelled also ran in the exchange industry. CBOE looks like a sort of one trick pony currently. Moreover while it has these exclusive deals, there is a broad pan-US licence for the iShares MSCI EM ETF (EEM.P) and iShares MSCI EAFE fund (EFA.P) options. A possible incremental advantage but US equity options trading remains such a bear pit that CBOE remains in danger of being irrelevant if it does not pick up its game, Vix or no Vix.

Dalian Commodity Exchange, Orient Futures Launch Agricultural Products Index
MondoVisione

On November 28, the “SOF-DCE agricultural products index” jointly developed by DCE subsidiary Dalian Futures Information Technology, and Shanghai Orient Futures was officially launched in Shanghai, and in the future, the index will be positioned as an underlying index for domestic commodity futures ETF products.

Comment: The Benchmark Of Success (subscription)
Will Rhode – Financial Times

PLY: A brief history of benchmarks and a clear sign of interest that the consulting classes hope for more business here.

Career Paths

CFTC Chief Pledges To Address Employee Unrest Plaguing Regulator
Robert Schmidt & Silla Brush – Bloomberg

The head of the U.S. derivatives regulator is promising employees he will try to address low morale that has caused the agency to be labeled one of the worst places to work in government.

CFTC Chairman Timothy Massad sent an agency-wide e-mail last week pledging changes after a recent federal survey found that just 40% of the staff are satisfied with their jobs and pay. Complaints that the CFTC pays less than other financial regulators prompted employees to unionize earlier this year.

SEC announced that Karol L.K. Pollock has been named the new leader of the examination program in the Los Angeles Regional Office.

FINRA has named Joseph M. Mecane as the Floor Member Governor on FINRA’s Board of Governors. Mr. Mecane is currently a MD of Electronic Equities and Credit Products at Barclays.

Financial Calendar

Friday

Record date NASDAQ OMX $0.15 quarterly dividend
Interactive Brokers Q3 $0.10 dividend payment

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

Share Notes

CME insider Hilda Harris Piell sold 5,825 shares Monday, December 8th at an average price of $89.00 (bargain $518,425.00). She now owns 20,136 shares.

Interactive Brokers CFO Paul Jonathan Brody sold 5,322 shares Tuesday, December 9th at an average price of $28.03 (bargain $149,175.66). Mr. Brody’s regular sales are chronicled on this specific page.

Analyst Notes

CME Had Its Price Objective Hosited By Argus From $92.00 To $95.00 – “Buy” Rating

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

Lending Club Valued At $5.4bn In IPO (subscription)
Tracy Alloway, Eric Platt & Arash Massoudi – Financial Times

Lending Club has priced its IPO at $15 a share to give the eight-year-old company a valuation of $5.4bn.

The pricing unveiled late on Wednesday was greater than the $12 to $14 a share range set out earlier this week by the San Francisco-based company, which began life with the goal of using new technology to disintermediate big banks and Wall Street.

That range was increased from the $10 to $12 a share set out at the beginning of this month, when Lending Club began marketing stock for its IPO.

Other stories

Testimony Of CFTC Chairman Timothy Massad Before The U.S. Senate Committee On Agriculture, Nutrition & Forestry
MondoVisione

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