December 12 2014


We’re heading inexorably towards Hanukkah-mas or however one wants to describe this year’s festivities which elide rather neatly for once. Nevertheless, still interesting news on all fronts from the exchange world and even a few surprises as the EU blinks and delays suicide move on CCP equivalence. Can common sense now reign in Trans-Atlantic regulatory relations or are they just digging in over Christmas for a more subtle run of bureaucratic Balkanisation in the New Year?

Meanwhile, how solid is SEF-world and whose bleed is really a mortal haemorrhage? The rumour mill has started and that is going to create a very challenging time for all post OTC platforms.

CFTC claims jurisdiction over Bitcoin while SEC can’t deliver a crowdfunding rulebook. IEX wants to shake up the exchange landscape in even more ways then before (hooray!) while BIST makes a late claim for most incongruous investment of the year by seeking to up their stake in the Sarajevo bourse.

All this and more in today’s Exchange Invest while I endeavour to get through my paperwork mountain having finally, it seems, finished travelling for the year…happy scrolling:

Public Markets

FTIL Continues To Hold 10,000 Shares Of NSE
Ashish Rukhaiyar – Livemint

Long after its subsequent banishment from all exchanges, FTIL continues to hold 10,000 shares of NSE.

PLY: Unravelling the labyrinth of FTIL’s exchange actions remains akin to nailing a jellyfish to a wall.

BM&FBovespa Extends Buyback, Boosts 2015 Investments

BM&FBovespa SA will extend for another year a plan (scheduled to expire at year end) to repurchase up to 60 million shares, or 3.3% of its shares outstanding, it said in a securities filing on Thursday.

Investments for 2015 were raised to between 200 million and 230 million reais ($75 mln and $86.8 mln) from a previous goal of 190 million to 220 million reais ($71 mln to $83 mln). In 2016, BM&F plans to invest 165 million to 195 million reais ($62 mln to $73 mln).

Europe Presents Olive Branch To U.S. In Derivatives Skirmish (subscription)
Andrew Ackerman – Wall Street Journal

European policy makers took steps Thursday to ease a cross-border dispute with the U.S. over derivative regulation delaying onerous capital charges that would have gone into effect for European banks that do business with U.S. clearinghouses like CME and ICE.

The European Commission formally delayed until June 2015 a requirement that European banks face significantly higher capital charges unless they move derivatives trades away from clearinghouses based in the U.S. and other countries that operate under rules that haven’t been deemed “equivalent” to those in Europe. The higher capital charges were set to go into effect next week without the delay.

PLY: Regulators finally see sense after pushing the system towards an impossible situation. Plaudits for seeing sense, null points to those who pushed the situation to near apocalypse.

LSE Adds EuroCCP As Third Clearing Option

LSE announced that it expects to add EuroCCP as a provider of CCP services to its SETS and SETSqx order books in March 2015 alongside LCH.Clearnet Ltd and SIX X-Clear.

PLY: A good move by LSE which will further encourage Diana Chan and the EuroCCP team.

ICAP To Close LME Base Metals Broking Business
ICAP Said To Be In Talks With ADM To Transfer LME Trading
Agnieszka de Sousa – Bloomberg

ICAP is exiting the base metals business it entered in January 2009 (category 2 LME membership – electronic & telephone access) as part of wider restructuring, perhaps through a sale to ADM Investor Services International Ltd.

JSE In Africa Gateway Play (subscription)
Andrew England – Financial Times

JSE has launched an initiative to attract companies listed in London, New York, Toronto and Sydney to dual list in South Africa as it seeks to reinforce its position as the continent’s top exchange. The “Fast-Track” initiative is designed to cut red tape and streamline the process, reducing the costs and time taken for a dual listing by enabling companies to leverage off the processes they went through with their primary listings.

PLY: An interesting play by JSE whose core infrastructure (currently being bolstered by some new Cinnober kit at the rear end) is strong and while South African government is somewhat woeful (then again hands up those who think they are reasonably governed in the modern age…), the state has cohered post apartheid and has by far the strongest claims to be the central market to sub Saharan Africa, if not the entire continent, albeit at a time when exchange development has hugely ramped up in commodities and equities.

Private Markets

BIST Seeks To Increase Stake In Bosnian Peer -SASE

Borsa Istanbul (BIST) is keen to increase its 5% stake in Bosnia’s Sarajevo SE (SASE) to more than 30% via an auction scheduled for Jan. 12, SASE said on Thursday. BIST owns 308 SASE shares and wants to acquire a further 1,536 shares when they go on sale next month, SASE said in a statement. The maximum price is set at 360 Bosnian marka ($228.1) per share.

PLY Apart from some form of Islamic solidarity play with the Bosnian state, I see absolutely profoundly no logic to this deal other than some element of desire to keep recreating the Ottoman empire via a bourse – and as we know that has already created the dysfunctional Austro-Hungarian bourse which needs vast surgery…

Javelin Secures SEF Lifeline As CFTC Targets Anonymity
Mike Kentz – IFR Asia

One of a handful of smaller fish in the newly created sSEF pond has secured a commitment for longer-term funding – just prior to a possible change to CFTC rules that could finally spark the movement of OTC swaps into an exchange-like format.

PLY: Rumours have begun to swirl in the post OTC world and will now likely jump from SEF to SEF as the shakeout of platforms is coming soon. Off the record, the news is no job losses, no closure, funding secure. At the same time this story says the SEF “restructured some of its employee pay provisions…to secure longer-term funding” which could cover a multitude of possibilities. Hopefully it is safe.

The rumours surrounding Javelin are just the first of an ongoing progress which will challenge the press offices of all such SEFs in the months to come, as clearly there are looming casualties ahead (given the press offices of most SEFs have been pretty average – at best – in building relationships to promote their entities, they start at a disadvantage). It’s before the dawn in NYC as we race to pixel but whatever the future of Javelin (and I hope it is a long and happy one), I fear the entire marketplace is going to be a challenging one as the independent venues are forced to prove they will survive the next six months. I am convinced many SEFs will not.

IEX Urges Reform Of Stock Exchange Governance
Herbert Lash – Reuters

IEX is urging reforms to U.S. exchange governance that would put it at odds with its soon-to-be brethren. In a letter to SEC, IEX said its recommendations would eliminate conflicts and boost transparency in the governance of data processors and data feeds, among other infrastructure aspects of the U.S. stock market.

PLY: The US stock exchange hierarchy remains a rather linear arena still in transition from the mutual era to what will hopefully one day be genuinely dynamic businesses where needless complexity is replaced by customer service. True, NYSE injecting new blood this year from new parent ICE has been beneficial but the status quo is simply not acceptable on many levels. To that end IEX won’t please the legacy incumbents (including many MTFs) but I admire their desire to make a better market. True, I fear that making minutes more openly accessibly will just fuel an army of folks to style such missives in a fashion any Politburo would be proud of but at least IEX want to show investors and issuers that the exchanges care about their business. One thing the Lewis book did (for all its often fictional hyperbole in parts) was to suggest a big fat coalition in Wall Street which doesn’t favour the end users… Given that Fred Schwed Jr wrote “Where Are All the Customers Yachts” 65 years ago, isn’t it time for Wall Street to really come clean and show how they work for end users and not just the sell side? It seems almost embarrassing that it takes a new entrant like IEX to shake up the outmoded infrastructure incumbency…

BSE Begins Work On New Model For Risk-Based Supervision Of Brokers
Business Today

Bombay SE (BSE) has initiated a process of putting in place a new risk-based model for supervision of market entities including brokers, taking forward a new model proposed by Sebi in this regard.

CFTC Claims Jurisdiction Over Bitcoin
Crypto Coins News

Timothy Massad gave a very long testimonial update to the Senate Committee on Agriculture, Nutrition & Forestry which covered everything from “interaffiliate transactions” to virtual currency to local utility companies and their rights in energy swap markets.

In regard to cryptocurrencies, the Chairman noted that since such currencies are traded as commodities and in the same fashion as other futures, the 1936 Commodity Exchange Act grants the agency regulatory authority over them the same as it does any other commodity which is traded.

PLY: Being under the CFTC remit could yet be a challenge on some fronts but at the same time, the agency has generally shown a greater flexibility than most and given that the SEC is still struggling to write crowdfunding rules… Besides, I agree with Chairman Massad’s reading of the CEA, where he rules the roost for forex products, so too he is in situ to deal with Bitcoin and cryptocurrency – I wish the CFTC a benign and interesting period making the rules work cohesively to permit cryptocurrency to flourish.

Special Section: FTI, NSEL, India at the Crossroads

PLY: Flat day all round. The Indian justice system remains becalmed.


PSE To Launch New Trading System On Schedule
Daphne J. Magturo – Business World

Philippine SE (PSE) expects to launch its new trading system NASDAQ powered PSEtrade XTS on schedule in May next year, replacing the previous PSETrade NSC system which was developed by NYSE Euronext Technology SAS.

Markit & Thunderhead Partner To Launch Electronic Derivatives Agreement Service

Markit and, a trade and relationship documentation service, announced a partnership to establish an online service for creating and negotiating master confirmation agreements (MCAs).


CEO Of CME Hints Of More Products To Come With Hybrid Qualities
Renee Caruthers – Fierce Finance

“Dodd Frank did something very significant on the OTC side, it brought in a class of clients to us that up to that point we had not seen,” said CME CEO Phupinder Gill, speaking at the Goldman Sachs U.S. Financial Services Conference in New York this week. “That class is in conversation with us about ideas they have for product innovation very much along the lines of the deliverable swap futures contracts that we rolled out about a year ago.”

PLY: Unsurprising but welcome confirmation from the good offices of Mr Gill that CME are working on exciting new frontiers in post-OTC product (as indeed is everybody else). A golden age of IR product development beckons, provided the regulatory environment does not choke things.

Mexico Eyes Gas Futures Amid Energy Reforms (subscription)
Jude Webber – Financial Times

Mexico is developing gas futures contracts to exploit demand for hedging tools as the country opens up the hydrocarbons sector it has closed for nearly 80 years. The country’s main derivatives exchange, MexDer, will work on the development in the coming year with CME, according to Jorge Alegría, CEO of MexDer.

PLY A perfect hydrocarbon storm. The excellent MexDer under Jorge Allegria is well placed to exploit what amounts to a gradual opening of Mexico to capitalism and energy reform ought to help power his market forward.

Career Paths

Bolsa Mexicana de Valores reports that its BoD has appointed José Oriol Bosch Par (a non-executive board member since 2008) as CEO of the Company, effective January 1, 2015. Mr Bosch is a 22 year veteran of JP Morgan Mexico and replaces Luiz Tellez at the top of the BMV. Mr Tellez’s role as President of the Bourse has been given to Jaime Ruiz Sacristán, an experienced figure in Mexico’s financial markets.

Christian Grabbe will join Solactive AG as COO, with effect from 1st January 2015.

Financial Calendar


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

Next week

Record date ICE $0.65 Q4 dividend
Thomson Reuters $0.33 quarterly dividend payment
CBOE $0.21 quarterly dividend payment

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

Share Notes

Interactive Brokers Chairman Earl H. Nemser sold 4,255 shares Tuesday, December 9th at an average price of $28.03 (bargain $119,267.65). Mr. Nemser’s regular sales are chronicled on this specific page.


SEC: No ‘Drop-Dead Date’ For Equity Crowdfunding Rules
Dan Primack – Fortune

Securities and Exchange Commission is in no rush to finalize equity crowdfunding rules, despite having already missed its Congressionally-mandated deadline by around two years.

Following her speech this morning at the Dealbook Conference, SEC chair Mary Jo White told Fortune that her agency does not believe it has any “drop dead date” to complete its rule-making.

PLY: The inadequacy of the SEC when it comes to creating rules for crowdfunding is simply unacceptable and reflects very badly on the management skills of the current incumbents. This only adds grist to the claims of some incumbents that SEC is keener on aggressive litigation for misdemeanours than actually regulating for better markets.

Other stories

FESE European Equity Market Report – November 2014 Figures

The European Equity Market Report is a piece of analysis that allows for an accurate comparison of trading statistics across European trading venues.

PLY: …If you think you’re missing something at this stage, actually we had no stories concerning the Sino-HK ‘through train’ whatsoever today – how incredible!

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