December 17 2014


We’re Going Crowdfunding!

Apart from delivering this newsletter free of charge, I have a portfolio of entrepreneurial and advisory activities which has now expanded to include crowdfunding.

HanzaTrade has grown from our tech-oriented / coworking space Hanza Cafe and startup group Mission ToRun in Poland as a product crowdfunding platform.

The first project is closing in the next few days and just about to reach its target. If you like coffee, you will love this crowdfund: world class coffee roasted by a Nordic champion who has set up nearby our Polish base.

Why not kick start start the New Year with a really smooth caffeinated bang throughout the office? We have a 5kg pack (5 exquisite, different beans) at the wholesale price of 676 PLN (approx 130 GBP/ 160 Euros). EU P&P is included. Smaller offers on the HanzaTrade site start at under 15 Euros.

Beat the hipsters to get the first batch (it compares very favourably with anything I have tasted recently in London / Paris / Brussels / Dublin / Belfast / Berlin / Stockholm / Warsaw and many other cities).

SEPA and Polish payments are supported, credit cards not yet – if you want to order, you can even email me at the above address and we can manually process and enable bank transfers in the UK etc.

For the past week, Exchange Invest has been fuelled by the Colombian Buesaco amongst other roasts – if you want to emulate my pith, you know what you need to drink!

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Meanwhile, back in the bourse world: some readers were pondering the Schatz shuffle from last Friday I mentioned yesterday. Here is what the NLX price data shows:

nlx volumes


In total some 28,754 contracts traded in a wafer thin ‘half tick’ zone between 110.94 and 110.945.

Impact on Open Interest was apparently zero (OI total was a paltry 160 lots).

Readers may ponder just which meaningful buy side traders would be indulging in the act of apparently crossing very significant volumes of Schatz contracts without intending to hold the trades. This is all the more interesting as previously Schatz volume on NLX has been patchy overall.

Quite how we can justify this trade as being meaningfully economic remains a question which hangs in the air…

Note too how the settlement price is above the traded high for the day – a classic sign that the NLX market is not trading continuously. (Presumably the closing price was settled in line with the prevailing rate on the benchmark exchange – in this case EUREX).

Yesterday the Schatz traded 6961 contracts on NLX, Open Interest has declined since Friday to 110. Some folks might be inclined to regard that sort of ratio as tape painting with a very broad brush. I wonder how regulators view this?

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Today in your free Exchange Invest Daily: ICE urges caution on EU reforms, Middle East settlement cooperation, Turkish Lira compression by the inestimable TriOptima. NYSE reduces fees, multiple commodity stories and more, happy scrolling!

Public Markets

ICE Urges Caution On European Derivatives Reform (subscription)
Philip Stafford – Financial Times

ICE has urged Europe to give clearing houses leeway over what products they must accept, warning that lawmakers’ plans to open up the derivatives market would remove operators’ incentives for innovation.

ICE has again warned that trading could move away from Europe if the continent pursues new rules in the coming days to introduce more competition for derivatives.

PLY: EU “Open Access” (sic) as proposed, remains a testament to the ignorance of bankers and, alas, a clear inability on the part of some exchanges to appreciate the differences between cash and derivatives markets. I do not believe it will ‘work’ remotely as planned. Rather, it is just a question of how it won’t work and when. Sadly in a time of continent wide depression, the EU continues to pursue multiplicitous (suicidal) pogroms against enterprise as an apparent central goal nowadays (reform having been clearly abandoned). The latest victims of spiteful EU socialism is e-commerce. Sorry to be so blunt but few things suck more than the EU sucks in the world of the embattled European capitalist/entrepreneur right now.

Back to ICE’s warnings, time to keep building Singapore (DB1, ICE et al) and use that as a backstop while waiting for the increasingly inevitable implosion of the EU which sits a lot more precariously on the cusp of economic irrelevance than most anybody in Brussels seems to realise. Otherwise, we’ll all be pivoting elsewhere in the near future as Europe threatens to become a wilderness once again…and for now I will try to pause my criticism of this dismal dictatorial edifice but mark my words, dislocation and failure is looming…and ICE is right to warn about the dangers of reform motivated by banker politics not economic common sense.

NYSE To Eliminate Fees For Some Retail Stock Orders

NYSE will eliminate fees for certain retail stock orders in an effort to take back business from OTC trading platforms.

PLY: “Systematically Internalise that Gotham bankers!”

The process of reform engendered on each side of the Atlantic from the divorce of NYSE and Euronext increasingly looks much more exciting than the unhappy marriage. Here NYSE once again offers welcome new approaches to delivering customer focussed reform which seemingly the previous regime was too busy to manage.

Kotak Bank Does A U-turn, Seeks Board Seat In MCX
Suresh P Iyengar – The Hindu Business Line

Kotak Mahindra Bank has sought MCX board representation on the board of MCX with Paul Parambi, Head of Group Strategy being considered as a nominee on its board.

In July, while making an investment of ₹459 crore ($76.1 million) to acquire a 15% stake in MCX, the bank said it was only looking for an investment opportunity and was not looking at any special rights or board seat.

PLY: I never quite understood why Kotak Mahindra would buy 15% and not seek to at least best monitor / understand the business through evaluating activity independently from the board perspective.

Fears Subside Over French HFT Reporting (subscription)
Tim Cave – Financial News

Market practitioners have described new French reporting requirements imposed on high-speed traders and brokers in two weeks time as “benign” and “straightforward”, a relief to the industry that had feared they would be much more onerous.

PLY: “Benign” and “straightforward” French regulations – now this is arguably a first…

BVB Announces AeRO Launch
Asset Servicing Times

Bucharest SE (BVB) will launch AeRO, its ATS for SMEs, on 25 February 2015.

PLY: The previous RASDAQ initiative was closed after failing to emerge from a regulatory grey area. Now BvB is looking at AeRO to be a flagship ATS for SME listings.

JPX Eschews Smaller Tick Sizes For More Stocks
Yuko Takeo & Toshiro Hasegawa – Bloomberg

JPX decided against cutting trading increments for more listed companies, and reversed reductions for others having initially introduced smaller tick sizes for the Topix 100 Index in July, as the second step of a three-part plan to offer better liquidity and shorten waiting times to process orders. After analyzing the impact, JPX won’t broaden the reductions to smaller companies next year.

HKEx Ranks Second In IPOs Despite Losing Alibaba
Shuli Ren – Barron’s

HKEx famously lost Alibaba mega IPO to NYSE by holding onto the one share, one vote principle. But after a flurry of billion-dollar deals hit the market in December. In 2014, HKEx is expected to rank number two in the global IPO rankings.

So far this year, HKEx has raised $27.1 billion from listings, trailing NYSE’s $73.4 billion in IPOs, but ahead of Nasdaq‘s $23.9 billion and LSE‘s $22.6 billion.

PLY: Perhaps this is proof that sticking to your principles pays. It has been an amazing year for HKEx CEO Charles Li and despite many issues, he emerges from 2014 as a man who has achieved much more than anybody might reasonably have expected last January.

DFM & Bahrain Bourse Plan Swift Transfer Of Securities From H2 2015 – MoU Signed To Outline Guidelines Of Transfer Process

Dubai Financial Market (DFM) signed a MoU with Bahrain Bourse (BHB) to introduce an electronic system to improve share transfer between the two exchanges during H2 2015.

Private Markets

Brokers Back New Boost To Bond Liquidity (subscription)
Tracy Alloway – Financial Times

Former Salomon Brothers and Citibank trader Ronnie Mateo, known for his colourful bespoke suits and outgoing personality, has launched TruMid, a new electronic trading platform that he hopes will bring together “sellside” bankers and “buyside” investors to solve what is perceived to be a growing problem of illiquidity in the $7.5tn US corporate bond market.

FAO: Don’t forget the bigger picture with Tradeweb releasing its new offering in October, while Liquidnet bought Vega-Chi in March. Also DB1 backed Bondcube received European regulatory approval earlier this month, while ITG is planning to launch a fixed income platform…

PLY: Recently anthropologists on a very remote stretch of the Amazon reported first contact with a previously unknown tribe. The indigents opening comments were reported as: “Can anybody advise us on an electronic platform for our bond trading? We hear it is all the rage these days out there in ‘civilisation’.”

TriOptima Completes First USD/Turkish Lira Cross Currency Swap Compression

TriOptima, a leading provider of OTC derivative post trade risk management services, announces that 17 financial institutions eliminated $213 billion in the first USD/TRY (Turkish Lira) cross currency swap triReduce compression cycle.

PLY: Very interesting and as always great progress from the business whose reductions only help the financial markets grow and grow more safely too. This is an interesting development at a time when Turkish yields have been challenged by some element of contagion risk from the Rouble crisis…

Kuwait Working To Improve Stock Exchange Conditions

…Finance Minister Anas al-Saleh said on Sunday.

Australian Regulator: Bitcoin Is Not A Financial Product
Jon Southurst – CoinDesk

Digital currencies are not a financial product and operators do not need licenses to trade or hold them, ASIC has said. Additionally, an operator does not require a license to provide advice to others in relation to digital currencies, or to arrange for others to buy and sell them.

ASIC’s comments are contained within a 32-page submission (download the pdf here) to the ongoing Australian Senate inquiry into digital currency.

PLY: Very interesting. Indeed remarkable that the many tentacled ASIC have avoided regulating cryptocurrency when it usually has tried to gunge anything within a standard deviation or three of its overall remit. A welcome development which may help Australian cryptocurrency trade to develop while clearly denying the ASX another opportunity to claim monopoly jurisdiction over something else.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX up 2% while FTIL is down 1.5%.


JPX Partner With New Vendors To Provide “arrownet-Global”

…for the provision of external connectivity services from the JPX Co-Location area.

LMAX Exchange Deploys Matching Engine In Tokyo Equinix TY3
Victor Golovtchenko – Forex Magnates

New matching engine designed to deliver lower latency after its launch in the Equinix IBX Data Centre in Tokyo securing to traders in the country high speed trading delivering less than 4ms latency.


U.K. Regulators Hit Hurdles On Fixing Benchmarks (subscription)
Chiara Albanese & Ese Erheriene – Wall Street Journal

Some market participants are worried that a new benchmark silver price isn’t precisely reflecting trades, while a proposed change to the principal currency benchmark has been pushed into next year.

CME & Thomson Reuters took control of the 117-year silver fix in July.

PLY: Hmmm, without delving too deeply, isn’t part of the problem fundamental fix theory? I mean a commodity fix reflects a certain type of auction and that may indeed not be the same as spot price at the fixing hour due to concentration of business in the fix process which is not in the spot market (and possibly vice versa). Meanwhile, LIBOR issues appear more due to teething troubles in a period when to be fair to banks (not that they are ever fair to exchanges one might add), they are under unprecedented regulatory compliance pressures propelled from both sides of the Atlantic.

U.S. Senator Levin Aims To Clamp Down On Physical Commodity Trading
Michael Flaherty – Reuters

U.S. Senator Carl Levin has introduced a bill seeking to crack down on trading on inside information in physical commodities, the first U.S. legislation limiting Wall Street banks’ ability to deal in physical markets from crude oil to aluminum.

The bill, sponsored by the Michigan Democrat and co-sponsored with Republican John McCain, is seen as Levin’s parting swipe at Wall Street before he retires in January. He has previously accused Goldman Sachs and other banks of manipulating physical commodity markets.

PLY: Presumably when Senator Levin retires and joins the lecture circuit, pundits will eagerly ensure he pays his fair share of US taxes on all fees? I share his overall frustration at the ways in which some folks manipulate commodity prices although given how porous insider trading laws are in equity markets, I am minded to wonder how well they can be applied to the much trickier world of commodity markets where a lot of what might constitute ‘insider knowledge’ could easily be regarded as a mere knowledge advantage through monitoring and research?

Apparently Jefferies are looking at selling their commodities arm incidentally.

Moscow Exchange: Changes In The Minimum Initial Margin In The Derivatives Market

PLY: Understandable increases, given the volatility in Russian markets and the large oscillations across asset classes. At the same time, check out the MOEX share price which remains a bedrock at present in a time of Rouble crisis (qv also my latest RT OpEdge column on the topic).

NCDEX Gets FMC Nod To Launch Mustard Seed Futures Contract
The Hindu Business Line


S&P Dow Jones Indices & Lima SE Launch S&P/BVL Peru Select Index

Continuing its strategic expansion throughout Latin America, S&P Dow Jones Indices signed an agreement in Peru with Bolsa de Valores de Lima (BVL) to license, distribute, and govern all of the BVL indices including a new version of their flagship index, IGBVL (Indice General de la Bolsa de Valores de Lima).

Career Paths

Metamako, supplier of ultra low-latency devices to exchanges and the trading community, announced that former Wombat (NYSE Technologies) COO, Ciaran Kennedy, has been hired to run the Metamako team at the company’s new Wall Street offices.

CFTC announced that Gary Barnett, Director of the Division of Swap Dealer and Intermediary Oversight (DSIO), will depart the agency in January to take a senior position at SEC. CFTC Chairman Tim Massad also announced that Tom Smith, currently Deputy Director for DSIO’s Capital, Margin and Segregation Branch (CMS Branch), will become Interim Director for DSIO upon Mr. Barnett’s departure.

PLY: A rare inter-agency shuffle from CFTC to the more 2 dimensional cash market world of SEC.

Financial Calendar


CBOE $0.21 quarterly dividend payment

New announcement

TMX Q4 Financial Results – Tuesday, February 3, 2015

TMX press release here.

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

Analyst Notes

ICE Received “A” Credit Rating From Morningstar

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.


Private Equity Crowdfunding Marketplace For Retail Investors InvestX Announces Beta Launch
Samantha Hurst – Crowdfund Insider

InvestX Capital announced on Tuesday (December 16th) the beta launch of its cross-border private equity crowdfunding marketplace for U.S. and Canadian investors, opening up an asset class previously only accessible through larger (USD $1 million or higher) investments.

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