December 16 2013

elb2

Monday, edition 155: year end closing in but still lots to discuss, from KRX/EUREX to SIPs, NSE, SEBI, ILPs & the Dark, crowdfunding and general market opinions about regulation, new Sino-centric bourse approach while Ireland is rightly lauded for its marketplace.

All this and much more, happy scrolling:

Public Markets

KRX Joins Hands With Eurex In Developing Derivatives
Yonhap News Agency

PLY: Korea Exchange (KRX) deepened their partnership with EUREX by signing an MoU to develop new financial products linked to the energy sector.

U.S. Exchanges Near Deal For Infrastructure Upgrade (subscription)
Wall Street Journal

PLY: The SIP upgrade looms closer with a most enlightening article in the WSJ here addressing multiple issues. In one sense, I am impressed the NASDAQ SIP is running Window 2003, hey at least it’s not served by an XP-400 box, (the financial industry’s legacy dirty secret)…

Note interesting complaints about monopoly provision here from Sungard too…

What Are Regulators Getting Right And Wrong? And What Advice Would You Give Them? (subscription)
Financial News

PLY: A useful review with some rather pithy remarks from various players. The buy side win the ‘zing’ awards for the most apposite remarks in this review. Best of all is:

“Hendrik du Toit Chief executive Investec Asset Management Regulators have pounced on some costly abuses such as those related to the setting of Libor. My wish for 2014 is that regulators steer clear of becoming industry central planners. They, in conjunction with policymakers, must set the parameters and then let the market do its work. Price and product should be the responsibility of business.”

…although various others hit the spot too. Mark Hemsley rightly dismisses the toxic FTT while other exchange players are more emollient (if not downright boring) but it’s the buy side which wins the day attacking the mortgaging of the future for the status quo and indeed overall, behind the diplomatic tones, it would take a tin ear not to realise that the undertones suggest a negative feeling towards the regulatory juggernaut. Oh and that is just a warm-up for the crowdfunding criticism looming a few scrolls below…

Reminder: Changes At NASDAQ OMX Riga With Changeover To The Euro
Nasdaq OMX

PLY: Latvia will join the euro area January 1, 2014. Many voters remain frustrated the change was railroaded through without a popular vote although given that the LAT was long pegged to the Euro, it is perhaps not so surprising. Also, the LAT is fairly unique in entering the Eurozone with its currency “more” valuable than a single Euro. Now in inverse situations, there appears to have been a homogenising effect where prices crept up to a “Euro parity” of sorts. Could Latvia have deflation to get down to the same level on key goods?

Private Markets

Irish Stock Market Proves The Detractors Wrong
Irish Examiner

PLY: Irish broker Joe Gill rightly praises the ISE whose flexible management team have maintained life in a business those of a closed mind have long sought to dismiss, or as Mr Gill puts it:

“I’ve listened to dozy commentators and a few private companies express the view that the ISE was a poor platform for progressive companies seeking equity finance. The glittering lights of the London and New York exchanges are, through that prism, more attractive centres in which to raise risk finance because they apparently have deeper pools of capital.

This argument assumes stock exchanges operate in geographical silos that limit the flow of capital. Nothing is further from the truth. The existence of advanced communication and electronic trading systems ensure that investors can research, invest, and trade in equity instruments listed in Dublin faster and cheaper than is the case in centres such as London and New York. “

“So there is life in the old dog yet. After a long and extended period, during which the end of the Irish SE (ISE) was being heralded by some, a fresh wave of companies and equity issuance suggests something different is afoot.”

…Ireland emerges from bailout today which is like financial parole, it isn’t over by a long way and recidivism may yet follow. I’m recording a show on Voice of Russia radio about the topic this week with the excellent Marina Dzashi. It’s a step in the right direction and both Ireland’s government and issuers will be foolish if they do not advance in step together to fund the rejuvenation of the economy.

China – Small-Firm Exchange Fully Opened By Govt
globaltimes.cn

The State Council, China’s cabinet, announced over the weekend that the national OTC market, National Equities Exchange and Quotations system (also “The Third Board” alongside Shanghai and Shenzen SE’s), has opened up full access to qualified companies for equity or bond financing.

New Bourse Aims To Lure Chinese Firms
businessspectator.com.au

Asia Pacific Stock Exchange (APX), a small bourse that aims to attract Chinese companies to list in Australia, has received final clearance from ASIC to start operations and aims to launch its first initial public offerings in the first half of 2014.

PLY: Originally the Austock exempt (i.e. third tier / OTC-BB style market in essence, although really more an exchange than pure BB) then APX and now APSX (but er, still APX) is looking to list the Chinese companies China doesn’t list. On one hand a very logical approach. On the other, previous Chinese experience in, say, the USA, suggests this needs some strength of regulatory character to prevent what may be regarded as dubious practices in the west. Perhaps ace short-selling Sydney fund manager John Hempton of Bronte Capital can advise as he has a remarkable ability to spot dubious accounts on several continents?

The Year Dark Trading Surged (And Regulators Hit Back) (subscription)
Financial News

It was the year that dark trading became the victim of its own success. While activity in off-exchange venues reached record levels in both the US and Europe, regulators across the globe have rounded on the phenomenon.

PLY: The year was good for most equity venues as prices were in an uptrend and hence volume grew. Moreover, the relative stability of price trends (i.e. without huge volatility spikes). Equally Institutional Liquidity Platforms traded many blocks too… Regulatory increments in Australia and Canada have been pragmatic, essentially preserving the concept that big trades which offer price improvement are good which is so logical as to be, well logical. The EU’s much more complex and prescriptive approach demonstrates the core difficulty in dealing with a totalitarian socialist behemoth with inherent anti-capitalist inclinations.

The Bitcoin Ideology
New York Times

IF you’ve only recently tuned in to the seemingly endless conversation about bitcoin, you could be forgiven for thinking that the digital currency is little more than the latest Wall Street fetish or a juiced-up version of PayPal.

PLY: A splendid review of the politics of Bitcoin, the currency of the libertarian futurists…

Special Section: FTI, NSEL, India at the Crossroads

PLY: FTIL is flat while MCX is down 2.5% today as publication is awaited of the fit and proper order from the FMC concerning the MCX promoters…

FMC To Issue Order On MCX Promoters’ Status This Week
Moneycontrol

After Monday, the commodity market regulator is likely to release the order or announce the specific day of next week for releasing.

PLY: A binary outcome awaits, it will be a happy Christmas for some but will it be Jignesh Shah, Joseph Massey and Srikant Javalgekar…or their opponents?

PwC To Conduct Special Audit Of MCX
The Hindu Business Line

FMC has appointed Price Waterhouse Coopers (PwC) as the auditor to conduct a special audit of MCX and examine if there was trade by related parties on the bourse.

Brokers With Large Exposure On NSEL To Meet Mumbai Police
The Economic Times

Some brokers who were among members with large exposure on the now defunct bourse NSEL will meet officials of the Mumbai police, which is investigating the case, to apprise them on why they sold the product to investors.

The police have now shifted some of their focus on brokers’ role in the NSEL crisis, having sent notices to 148 of them asking for details on client money and funding of clients and who operated as clearing and forwarding agents.

Given that virtually no goods existed in NSEL warehouses, police are keen to know whether any of the brokers who operated as C&F agents collected commission from clients. C&F agents facilitated sales tax and VAT payments by clients on goods deposited in warehouses across the country.

PLY: The EOW (Fraud Squad) once again appear to have the NSEL affair by the scruff of the neck and are not leaving any angles uninvestigated. Good for them…and more below:

EOW Quizzes Former Chairman, To Summon Brokers
Livemint

The economic offences wing (EOW) of the Mumbai police on Friday said it was interrogating Shankarlal Guru, former chairman of NSEL:

“We have sent a team of officers to Ahmedabad to question Guru at his residence,” said Balsing Rajput, deputy commissioner of the EOW.

According to Rajput, another team of EOW officials on Thursday attached the properties of Spincot Textiles Pvt Ltd in Andhra Pradesh.

The EOW said it would also summon a few brokers in connection with the payment crisis at the NSEL before filing its chargesheet in the case.

More Properties Of Mohan India Attached
Business Standard

The enforcement directorate (ED) has attached more properties of Mohan India worth about Rs 100 crore (USD 16.1 mln), under the Prevention of Money Laundering Act (PMLA), as part of the probe into NSEL.

Earlier, the ED had attached properties worth Rs 75 crore (USD 12.07 mln) of the group. Mohan India and its group companies, Tavishi Enterprises and Brinda Commodity, are among the biggest defaulters in the NSEL scam, with dues to investors of Rs 922 crore (USD 150 mln).

Govt Monitoring Follow Up Action In NSEL Case: Minister
The Hindu

Government is monitoring the progress of follow-up action in the case regarding NSEL payment crisis on the basis of report submitted by a special team, Parliament was informed on Friday.

“Recommendations of Special Team on which action needs to be taken was sent to seven offices /departments/ministry concerned for action thereon. The progress of the follow up action is being monitored through their Action Taken Notes and meeting at higher level,” Minister of State for Finance Namo Narain Meena said in a written reply to the Lok Sabha.

Products

Eurex Among Exchanges Watching US Dividend Futures (subscription)
Futures and Options Intelligence

Eurex has set its sights on the potentially lucrative US dividend futures market, should regulators approve the products for launch in the near future.

PLY: Interesting segment and clearly attracting interest from all major markets.

Equity Trading Lifts Off As Big Players Return (subscription)
Financial News

Trading volumes in European equities are set to have risen by nearly a fifth this year, with record levels of activity taking place in off-exchange venues called dark pools as institutional investors rediscovered an appetite for European stocks.

CME Announces Solution To Delivery Gap In US Treasury Bond Futures
CME

CME announced a solution to address a gap in the delivery basket of the U.S. Treasury Bond futures.

The gap results from the U.S. Treasury’s suspension of 30-year Treasury bond issuance between early 2001 and early 2006.

CME will exclude the 5-3/8% February 2031 U.S. Treasury bond from contract grade eligibility for the June 2015, September 2015, and December 2015 delivery months only.

PLY: What a lovely reminder of recent history: when government suspended 30 year bonds and the media was awash with stories of the US perhaps even paying off debt! Naturally, the narrative changed…and not for the better.

BSE To Launch Interest Rate, Equity Derivatives By January
The Economic Times

BSE is planning to launch interest rate derivatives and equity derivatives by January.

PLY: India’s markets badly need more liquidity in STIR and bond products.

Career Paths

SGX has hired a former senior JP Morgan executive, Jonathan Cantouris, as a director into its London office, as it pushes ahead with plans to expand its European and US membership base.

The Egyptian Cabinet issued a decree to appoint Dr. Wagih Mostafa Amin El Tazi as Vice-Chairman for the Egyptian Exchange (EGX).

Financial Calendar

Today

Record date ICE aggregate $75 million dividend
Thomson Reuters for $0.325 Q3 dividend payment

This week

CBOE Q4 $0.18 dividend payment

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

Share Notes

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, the sale of 12,117 shares Tuesday, November 26th at an average price of $24.28 (bargain $294,200.76) reported November 28th and the sale of 14,303 shares Thursday, December 5th at an average price of $24.56 (bargain $351,281.68) reported December 9th Interactive Brokers Chairman Earl Nemser sold another 15,237 shares Wednesday, December 11th at an average price of $24.16 (bargain $368,125.92).

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, the sale of 7,952 shares Thursday, December 5th at an average price of $24.56, (bargain $195,301.12) reported December 9th and the sale of 8,054 shares Monday, December 9th at an average price of $24.54 (bargain $197,645.16) reported December 12th Interactive Brokers CFO Paul Jonathan Brody sold another 8,472 shares Wednesday, December 11th at an average price of $24.16 (bargain $204,683.52).

Crowdfunding

Equity Crowdfunding Is Legal In Saskatchewan
Crowdfund Insider

As of last week, equity crowdfunding is legal in the Canadian province of Saskatchewan.

The Financial and Consumer Affairs Authority (FCAA) is now allowing small businesses and startups to offer equity to residents via the Saskatchewan Equity Crowdfunding Exemption (SECE).

PLY: Hooray and plaudits to the enlightened regulators of Saskatchewan!

‘Democratic’ Crowdfunding Under Threat
The Independent

Leading MPs and the UK’s crowdfunding industry are calling on FCA to halt the current consultation over regulation, because they claim the process is deeply flawed and may strangle the industry at birth.

Another perspicacious Pagano commentary here noting how the FCA are in a rut over consumers / investors and protecting them from any danger while permitting them to freely gamble to their heart’s content in thousands of betting shops across the country while creating an investor apartheid against building a better Britain. The FCA need a comprehensive rethink to make crowdfunding open and democratic as their current approach is too prescriptive.

SoMoLend Startup Could Shut Down Within Weeks
wcpo.com

A once shining star in Cincinnati’s startup universe might be out of business before a January hearing that is supposed to determine its fate.

SoMoLend Holdings and its founder, Candace Klein, are scheduled to face state regulators at a hearing starting Jan. 23. The goal is to determine whether Ohio’s Division of Securities can issue a cease and desist order that accuses the online lending platform of selling unregistered securities, committing securities fraud by overstating the company’s early success and making fraudulent financial projections, among other misdeeds.

But two SoMoLend investors told WCPO they expect the company will be out of business before the hearing starts.

Other stories

Shanghai Court To Hear Lawsuit Against Everbright Securities
globaltimes.cn

A Shanghai court will hear a lawsuit against Everbright Securities after the broker was criticized for insider trading and fined 523 million yuan (USD 84.75 million).

The plaintiff, surnamed Guo, said she was an investor of commodity and stock index futures. Guo told the court she had lost 45,000 yuan (USD 7500) after multiple tradings on Aug. 16, the day when Everbright Securities rocked the market.

Guo sued Shanghai SE and China Financial Futures Exchange in the same lawsuit, according to the court.

Govt May Promulgate SEBI Ordinance For Third Time: Chidambaram
ndtv.com

Finance Minister P Chidambaram has said the government may promulgate the ordinance giving greater powers to market regulator SEBI for the third time if the Standing Committee scrutinising the Bill to replace it does not submit its report in the current Session of Parliament.

The ordinance provides powers for SEBI Chairman to authorise Investigating Authority or any other officer of the regulator to conduct search and seizure under the SEBI Act.

India – Chidambaram Calls For High-Level Probity Into Capital Markets
businesstoday.intoday.in

Pitching for high level of probity, Finance Minister P Chidambaram on Saturday said Indian capital markets are facing many concerns including low level of retail participations, which needed to be addressed urgently.

PLY: The Finance Minister is absolutely correct.Indian markets need a next phase of revolution begun by the NSE 20 years ago. Then again that also means reducing a lot of the regulatory whim which shrouds markets and business in red tape!

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