December 19 2014

Okay, this is it for 2014 – final scheduled EI, as we go for our Christmas holidays – the news flow is drying up and I have laden pith in here to end the year!

In some ways, Exchange Invest and my satellite operations seem to make a fair bit of the news today but there are some useful ‘pithified’ stories below so scroll on…However as you read this daily newsletter for free, I hope you won’t mind a few messages from our world first!

Yesterday the good folks of Cinnober launched this video with yours truly, Patrick L Young, discussing the future of cryptocurrency. It’s the first in a series – so if you tire of repeats of “The Italian Job” or “Top Gear” across Christmas you can always try watching this again:

cinnober video 2014


In our Premium service, we are housekeeping and organising content into briefs to help meet reader demand to “bring me up to date about ongoing issue “X” in the industry.” At $120 for a year’s subscription to the Premium service it’s a lot cheaper than paying me to talk you through even one brief (although that I might say has some additional value add!). So, the basic way to get up to scratch on the burning issues is from our Briefs (more to follow in the forthcoming days):

Brief number one is NLX
Brief number two is The bidding war for GFI between BGC and CME/GFI

Subscription to our Premium service is a mere $120 dollars per user / year. Subscribe Here: It all helps fund this free Exchange Invest daily alongside our sponsors! (If you want to pay directly then email me, I’ll find a way to invoice you!).

Thirdly, it’s the final day of our first crowdfunding campaign for Audun Coffee. Great coffee, P&P included throughout Europe for the first roasts from a champion Nordic roaster – more details here, or I can expedite orders directly if you email me: HanzaTrade.

Indeed as we race to pixel this morning, the project just went through 100% – Hooray! Mission Accomplished! (but no aircraft carrier celebrations on our budget!). The one-off wholesale price offer continues until midnight CET tonight so you still have a few hours to secure some first roast world class coffee at a great price!

Now in the rest of the industry…here are today’s pith enhanced headlines. Two stand out: NYSE almost raised more in IPOs than the next three markets combined! Beside that, BATS look to play catch-up in the US exchange regulatory debate but frankly just saying no isn’t going to cut the mustard with a broadly cynical investing public. The leviathan Big Board suddenly looks more nimble than many upstarts. Exciting times, scroll for more pith on multiple topics:

Meanwhile, a Very Happy Hanukkah and a Very Happy Christmas and a Peaceful and Prosperous New Year to you all, thanks for Reading Exchange Invest!

Daily bulletins will suspend from now pending vast news stories emerging but I will likely add some Premium material for subscribers during the holidays.

Public Markets

NYSE Announces Fourth Consecutive Year Of IPO Leadership In Global Capital Raising; Technology IPO Leader

NYSE raised $182 billion in 545 transactions in 2014, listing eight of the 10 largest 2014 U.S. IPOs.

NYSE welcomed 129 IPOs, raising $70B in total proceeds – more than any other exchange.

NYSE is the leader in follow-on financing with $111B in proceeds raised, as of December 17, 2014.

PLY: The IPO ‘scores on the doors’ (provisionally) for 2014 (reported earlier this week via Barron’s) suggest:

1. NYSE $73.4 bln (N.B. given as ‘over $70 bln’ by ICE above);
2. HKEx $27.1 bln
3. NASDAQ $23.9 bln
4. LSE $22.6 bln

Note that even without the $25 bln Alibaba mega deal (about which I retain significant governance reservations) NYSE was still vastly ahead – almost at the same level as the next three exchanges combined (Alibaba alone would have made NYSE number two in IPO fundraising). HKEx has had a good year but both NASDAQ and LSE look very second tier compared to the powerhouse NYSE performance in 2014.

I would be especially worried if I was running an exchange as during 2015 the ICE management revolution will make NYSE a lot more effective, as they shape the US equity market around their constructive, progressive ideas…

BATS Opposes ICE’s Stock-Market Reform Plan (subscription)
Bradley Hope- Wall Street Journal

BATS is opposed to a draft proposal (reported yesterday) by ICE to reform the U.S. stock market.

PLY: ICE’s six recommendations may not be quite as epic as the moment where Martin Luther nailed his theses to the door of All Saints’ Church in Wittenberg in 1517 and launched the reformation but Luther’s ire at the “indulgence salesman” Dominican friar Johann Tetzel is something akin to what many of us feel about the dog’s dinner of the US equity market infrastructure.

In endorsing the broad brush of the plan, NASDAQ are wise and on what is already it seems being perceived as the progressive side of the debate. It is all the more remarkable that BATS, once deemed the progressive newcomer, seems to be endorsing the tired and dysfunctional legacy system. This strikes me as a worrying indicator – has the upstart discounter finally reached a high water mark in its ability to develop?

Perhaps Joe Ratterman delivered a cohesive alternative thesis and was not quoted by the WSJ but there is no sign of any such suggestion on the BATS social media stream this am.

We need constructive moves and in a development which demonstrates bravery emanating from a couple of things the rest of the market apparently lacks, Jeff Sprecher and the ICE team are leading the debate, leaving the other markets trailing in their wake…and endorsing massive broad-based reductions in cost too.

Cohesive comments will be welcomed from the practitioners, please. Saying no might be a means to contraception but it isn’t any way to tackle the ongoing urgency of dysfunctional and needlessly complex US equity markets.

BGC Partners Updates Its Outlook For Q4 2014

BGC Partners currently expects its quarterly revenues for distributable earnings to be around the high end of the range of its previously stated guidance and for quarterly pre-tax distributable earnings to be around the mid-point.

PLY: BGC, a business which has had a remarkable year, deserves plaudits for its achievements during 2014.

Highest U.K. Court Denies Rusal Right To Appeal Against LME (subscription)
Ese Erheriene – Wall Street Journal

Rusal, the world’s largest aluminum producer by volume, had challenged changes to LME rules on how metal is loaded into and out of warehouses. It had won a ruling in its favor in March, but lost on appeal in October.

The Supreme Court (Rusal’s last avenue of appeal) said Rusal did “not raise an arguable point of law.”

FMC Nod To Kotak’s Nominee For MCX Board Seat Soon
Sharleen D’Souza & Abhijeet Lele – Business Standard

FMC, which is considering Paul Parambi, head of strategy at Kotak Mahindra Bank, for a board position at MCX, is likely to give its approval for the appointment soon. This followed Kotak Mahindra Bank acquiring 15% stake in MCX for Rs 459 crore ($76.1 million) in July, although initially the bank had said they would not seek a board position.

RBC To Pay $35 Mln To Settle U.S. Lawsuit On Trading Scheme
Nate Raymond – Reuters

RBC has agreed to pay $35 million to resolve a lawsuit by CFTC that accused it of running an illegal trading scheme to gain lucrative Canadian tax benefits.

The settlement, disclosed in papers filed on Thursday in Manhattan federal court, would resolve claims that a group of RBC employees improperly coordinated to allow bank subsidiaries to buy and sell stock futures without taking a position in the market.

CFTC press release here.

PLY: How interesting to see a swingeing fine applied to a wash trade judgement in the US. True it took a couple of years and clearly here there was an issue of counterparties being arms of the same business. However, it strikes me part of the judgement clearly infers that just throwing block trades back and forth is a breach of the rules. Will the CFTC be taking an interest in wash-like behaviour by US market subsidiaries that has been repeatedly questioned in some western markets? Moreover, given the delay between judgement and the event occurring, added to the glacial pace of some regulators’ actions, might it prove sleep will be tricky for some folks (perhaps up to 720 nights forward) from the Christmas holidays on?

…In the depths of mid-winter butterfly wings rarely glisten.

Barclays Asks Judge To Throw Out New York Dark Pool Suit
Chris Dolmetsch – Bloomberg

NYAG Eric Schneiderman’s lawsuit accusing Barclays Plc of bilking customers to expand its dark pool was scrutinized by a judge for not naming specific victims of the alleged fraud.

The judge said she found the state’s suit hard to follow, adding that the complaint cited trade journals and newspapers as evidence of the bank’s misleading statements and not alleged victims.

“It’s hard for me to believe that a very sophisticated investor would base his choice of investment platform on a newspaper article,” Kornreich said.

EI reported earlier this week that the Barclays dark-pool suit is to be handled by NY judge.

PLY: I get the judge’s gist but at the same time there are more than a few “sophisticated” investors I have encountered who appear somewhat oxymoronic when compared to conventional dictionary definitions.

Germany’s Startup Phobia Sparks Plan To Spur Investment
Birgit Jennen & Cornelius Rahn – Bloomberg

Gabriel wants to establish a new exchange segment for companies in the initial growth phase that would spur investment in innovation at a time when Germany’s economic growth outlook is weakening.

PLY: Having snubbed their significant Russian export market and with the current boom near its end, Germany is actually the future sick man of Europe – albeit this moniker is perhaps the most competitive economic activity in the entire EU currently.

On a startup note, if anybody or their siblings/friends/relatives/household pets are looking at a New Year project, the Mission ToRun startup club I cofounded will be running a clinic (with Google Hangout access for those outside Poland) leading to a new (distance) accelerator programme on January 10th. Ping me for more details if you are interested.

CFTC Staff Issues Extensions Of No-Action Relief To Four Foreign Clearing Organizations

CFTC’s Division of Clearing and Risk (DCR) issued extensions of no-action relief to four foreign clearing organizations: ASX Clear (Futures) Pty Limited, Clearing Corporation of India Ltd., Korea Exchange, Inc., and OTC Clearing Hong Kong Limited.

FAO: OTC Clearing Hong Kong Limited is the the OTC derivatives clearing service established by HKEx

CCIL has 6 core promoters, including State Bank of India. The promoters are mostly banks along with some primary dealers and other financial institutions. It was launched at the behest of rbi to clearing debt and forex instruments.
(N.B. Attempts to access Clearing Corporation of India Ltd.’s website led Uncle Google to worry about site certification…ahem not ideal for the trust of a digital clearing operation…).

Private Markets

Irish SE Announces #IPOready Initiative
Charlie Taylor – The Irish Times

Irish SE (ISE) has announced a new programme for companies planning to go public over the new few years.

The #IPOready initiative, which is supported by Enterprise Ireland and Invest Northern Ireland, provides firms that are on course for an IPO with a support programme to teach them about investor relations, raising capital and business management.

PLY: Brilliant cross border cooperation from the passionate about growth Irish SE under Deirdre Somers. An excellent initiative and I hope it adds considerably to the ISE’s offering as well as developing more publicly quoted firms from all 32 counties of the wondrous emerald isle.

Nairobi SE Receives Approval For The Establishment Of A Derivatives Exchange

Nairobi Securities Exchange has received a provisional license for the establishment and operation of a Derivatives Exchange from the Capital Markets Authority.

Botswana SE Commercialisation Gets Parly Nod

Parliament adopted the Botswana SE (BSE) transition bill, which allows the bourse to be registered under the Companies Act.

New York Is Ready With Revision Of Bitcoin Regulations
Tom Groenfeldt – Forbes
Benjamin M. Lawsky, Superintendent Of Financial Services, New York State, Remarks On Revised Bitlicense Framework For Virtual Currency Regulation And Trends In Payments Technology

New York regulators will issue a revised proposed draft of regulations for bitcoins, Benjamin M. Lawsky, Superintendent of Financial Services, told the Bipartisan Policy Center in Washington this morning. Lawsky, who had explained the department’s process for developing virtual currency regulation at Money 20/20 in early November, said the revised draft would be posted on the department’s Web site soon, opening the way for a new round of comments.

FAO: Benjamin Lawsky has been developing a BitLicense this year.

PLY: The draft amendments appear to be going in the right direction with Mr Lawsky implicitly accepting that the old fashioned clunking fist of regulatory approaches won’t do but I am not entirely convinced it will be enough to really place New York on the map of localities which are ‘regulatorily beneficial’ to engage with for cryptocurrency. Lawsky is correct in noting that regulation means accepting more restriction but the first proposal was Dickensian in its understanding of matters digital.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX up 1%, FTIL rockets 7% as clearly the rumour mill suggests another miracle – resurrection of Jignesh Shah after Christmas perhaps?


ICAP Selects First Derivatives’ Delta Stream To Provide Data Analytics For All EBS Platforms
Forex Magnates

The managed service will be hosted by First Derivatives. Expected to be live by Q2 2015 initially under a three year managed service contract.

IEX To Use Kx Software For Data Platform

Fidessa On ESMA HFT Report – ‘Slave To A Label?’
Dr. Christian Voigt – Fidessa

ESMA published a report on HFT activity (reported yesterday) on EU equity markets.

PLY: Dr Voigt elegantly notes that ESMA apparently failed to use either of its own definitions for HFT that it has proposed in the MIFID II consultation paper. In other words, this is another great example of the EU wasting other people’s money on gibberish. A clear fail from one body I thought was better than this, amidst the Euro-blob.

IIROC Publishes Academic Papers On Impact Of HFT

The Investment Industry Regulatory Organization of Canada (IIROC) published academic papers from 3 of the 4 academic teams chosen to assess the impact of HFT and related activity on Canadian equity markets, as part of the final phase of IIROC’s comprehensive HFT Study.


CME Announces The Launch Of A Suite Of European Natural Gas Contracts

Listed for first trade date on 19 January, 2015, authorised and approved by the UK FCA.

PLY: Interesting new contracts. Come to think of it, CME Europe will soon have its new CEO, Cees Vermaas in situ for the first time once he exits his Euronext gardening leave. Market rumours continue to suggest his salary is sub 200K GBP which I think means he needs state benefits to afford to live in London? Further proof clearly that CME is still in major austerity mode – although maybe value for money might be a better economic criteria than just pleading poverty while spending lavishly on ladies playing golf?. Either way, the likeable Cees is not, so far as I am aware, experienced in energy markets. Then again he has no previous clear experience in the OTC interest rate markets either and that was allegedly the core criteria for the job. However he has experience at the old NYSE Euronext so I suppose he will be equipped to play factional politics amongst the CME hierarchy.

Financial Calendar


CBOE $0.21 quarterly dividend payment

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

Share Notes

Interactive Brokers CFO Paul Jonathan Brody sold 5,414 shares Wednesday, December 17th at an average price of $27.40 (bargain $148,343.60). Mr. Brody’s regular sales are chronicled on this specific page.

ITG CEO Robert C. Gasser sold 5,000 shares Wednesday, December 17th at an average price of $19.93 (bargain $99,650.00). He now owns 281,560 shares.

Analyst Notes

CME “Neutral” Rating Reissued By Zacks – $94.00 Price Objective
LSE “Buy” Rating Restated By Espirito Santo Investment Bank – GBX 2,364 Target Price
RBC Capital Restated Their “Outperform” Rating On LSE – GBX 2,150 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.


Luke Lang: “Banks Will Continue To Fail SMEs”
JD Alois – Crowdfund Insider

Crowdcube CMO & co-founder Luke Lang has distributed a list of UK-centric predictions for 2015.

SEC Proposes Amendments To Implement JOBS Act Mandate For Exchange Act Registration Requirements

As mandated by the Jumpstart Our Business Startups Act (JOBS Act), the Securities and Exchange Commission has approved the issuance of proposed amendments to revise the rules related to the thresholds for registration, termination of registration, and suspension of reporting under Section 12(g) of the Exchange Act.

PLY: So many words, so little substance. Welcome to the regulatory blob where no sentence can be written without being over-complexified.

Is Sebi Taking Too Much Time To Frame Crowdfunding Rules?
Archana Shukla – Moneycontrol

Crowdfunding may be at a nascent stage in India, but market regulator Sebi is running out of time in putting together guidelines to regulate this activity. With crowdfunding catching on in India, Sebi will have to move before market forces create their own ecosystem.

PLY: To be fair, SEBI are moving at decent pace by their standards.. The problem is many may feel the SEBI gearbox only includes 2 speeds: “dead slow “and “stop.”

Other stories

CSDR: ESMA Consults On Implementing Measures For New Settlement Regime

ESMA has launched three consultations on proposed technical standards, technical advice and guidelines implementing the Central Securities Depositories Regulation (CSDR).

Fed Expands Scope Of Volcker Rule Delay Until 2017
SIFMA Statement On Fed’s Volcker Rule Conformance Period Extension

The Federal Reserve on Thursday gave banks more time to meet a provision in the Volcker rule that bans them from using their own funds in private equity and hedge funds.

…So that’s it for the 2014 schedule, please do consider joining our crowdfunding project today: believe me the coffee is fantastic, I have tried the beta test roasts!

Compliments of the season to one and all!

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