February 05 2014


NASDAQ, TMX and Sungard results, ICAP update, DFM outage, JPX seeks new derivatives system, AlphaPoint to power a fascinating new Bitcoin exchange for the Caribbean, possible new Indian exchange holdings problem? A new P2P lending platform, ATG to create own clearing house in Brazil, Warehouse Worries, Data Centres discussed, all this and much more in today’s Exchange Invest:

Public Markets

NASDAQ OMX Q4 2013 Results

Q4 2013 net revenues were a record $520 million, up 23% from the prior year quarter. On an organic basis, assuming constant currency and excluding acquisitions, net revenues increased 5% YoY.

Achieved record Q4 non-GAAP diluted EPS of $0.69, which was 8% higher YoY. Q4 2013 GAAP diluted EPS was $0.81.

Achieved organic revenue growth YoY in all three non-trading business segments, Information Services, Technology Solutions, and Listing Services.

Non-transaction based revenues were 73% of total Q4 2013 net revenues, and increased 27% from the prior year quarter.

Both recent acquisitions of eSpeed and the IR, PR, and Multimedia businesses of Thomson Reuters are contributing earnings accretion and progress continues on delivering the synergy potential of both transactions.

The company paid down $98 million in debt in the period, and the deleveraging plan is on schedule to return NASDAQ OMX to its long-term leverage target by the end of the Q2 of 2014.

PLY: eSpeed and the various TMR acquisitions are all working well (as I thought they would) and NASDAQ reports some encouraging numbers just as we close for press.

TMX Q4 2013 Results

Revenue of $180.7 million, essentially unchanged from Q4/12

Diluted EPS of 77 cents in Q4/13, up 26% from Q4/12

Adjusted diluted EPS of 96 cents in Q4/13, up from 95 cents per share
in Q4/12

Adjusted diluted EPS of 96 cents excludes:

15 cents per share of amortization of intangibles related to acquisitions
3 cents per share charge related to Maple transaction and integration costs
1 cent per share related to an adjustment to the gain on the sale of PC-Bond

PLY: Again, not much time to comment as we close for press. Clearly flat numbers are not wondrous although Canada tends to remain somewhat beholden to resource prices.

SunGard Q4 2013 Results

Revenue $1.1 billion, flat YoY.
Operating income $179 million, down 7% YoY.
Operating margin 16.1% in the quarter, down 1.1 points.
Adjusted EBITDA $372 million, down 6% YoY
Adjusted EBITDA margin 33.4%, down 2.1 points YoY.

PLY: Stasis at Sungard

ICAP Interim Management Statement

ICAP Interim Management Statement for the period from 1 October 2013 to 4 February 2014 notes average daily volume has grown from $549 million in November to $2 billion in January while Q3 group revenue to 31 December 2013 was 6% lower than the same period last year, 5% lower on a constant currency basis.

PLY: ICAP all depends on volume and the January numbers suggest the Dodd-EMIR-Frank drought is coming to an end as everybody battles for SEF share.

Trading On DFM Suspended
Straits Times

Trading on Dubai’s main stock exchange, Dubai Financial Market (DFM) was suspended on Tuesday February 4th, because of a system malfunction.

DFM announcements here and here.

PLY: DFM installed NASDAQ OMX software in 2009.

ATG To File For Brazil Clearing House In March (subscription)
Financial News

Americas Trading Group (ATG) expects to file its application to operate a Brazilian clearing house by March, marking a major step in bringing competition to the country’s trading landscape.

ATS Brasil filed to become an exchange with the Brazilian securities regulator Comissão de Valores Mobiliários (CVM) in June and expects to receive approval in May 2014, according to Alan Gandelman, chief executive of ATS Brasil.

PLY: Yesterday we noted that CETIP was not open to creating an equity clearing house now the 80:20 ATG/NYSE ATS Brazil is clearly making its own CCP plans.

N2EX Successfully Coupled With North-Western Europe

As part of the North-Western Europe price coupling project, N2EX has coupled with the wider North-Western European electricity markets (N2EX has been instrumental in enabling the GB market to couple with Europe).

FCA To Keep Close Eye On Commodity Warehouse Reforms

FCA said it plans to keep a close watch on commodities warehousing to ensure that reforms in storage policies by LME and NYSE Liffe are carried out effectively.

New LIFFE Warehouse Rule Seen By Sopex Favoring Large Traders

NYSE Liffe’s new rules governing delivery times of robusta coffee and cocoa from warehouses will favor larger traders because they will be able to negotiate better rent deals, according to Group Sopex SA.

EI reported on January 29th that NYSE Liffe is planning warehouse delivery time limits.

PLY: Hmmm, is this not merely economy of scale? Larger exchange users pay less than smaller ones, is it all that surprising larger warehouse users will pay commensurately lower rates too? Surely the key is a level playing field for access overall?

JSE Would Explore Contract Licensing Tie-Ups With LME
Metal Bulletin

JSE is open to licensing tie-ups with LME in the future, according to Chris Sturgess, director of commodity derivatives at the JSE building on existing contracts licensed on CME in the USA.

TD Securities To Consider LME Membership In Metals Expansion

TD Securities, a unit of Toronto Dominion Bank, will consider applying for LME membership as it expands in industrial metals.

U.S. Judge Approves JPMorgan’s $543 Million Deal To Settle Madoff Claims

A federal bankruptcy judge on Tuesday approved a JPMorgan $543 million settlement first made public January 7th to end two private lawsuits stemming from its relationship with convicted Ponzi schemer Bernie Madoff.

SIBEX – HELEX Collaboration

PLY: SIBEX, as previously suggested are transitioning away from the Trayport system to Hellenic Exchanges’ platform (based on an old OM code) as well as linking to the Greek CCP. Full signing releases presumably to take place in due course. SIBEX shares remain depressed below 20 US cents.

Private Markets

IL&FS Asks MCX-SX To Drop Rights Issue
Business Standard

MCX-SX has been asked by one of its shareholders, IL&FS Financial Services (holding 5%) along with a threat of legal action, to withdraw its proposed issue of rights shares at Rs 10 each.

PLY: This could be another can of Indian worms opening. Essentially IL&FS are claiming side letters and other promises by FTIL etc to provide a specific return on their shares (15% IRR). Clearly a dilution would impact this and hence their threats. However, does that mean there are many other such assurances out there from FTIL? If so it could materially affect the valuation of FTIL itself and may lead to a new bout of duress for Indian exchanges as the shareholding picture could remain murky for some time to come.

AlphaPoint & bi.tt Bring First Bitcoin Digital Currency Exchange To Caribbean

AlphaPoint Financial Services Inc.(alphapoint.com), the leader in digital currency exchange software, today announced that bi.tt (www.bi.tt) will deliver the first digital currency exchange for the Caribbean Community (CARICOM) powered by the AlphaPoint Exchange platform.

PLY: I first chatted with the dynamic team of financial professionals at AlphaPoint a few months back and was very impressed by the workflow and methodology which resulted in their system. This is a great reference site deal to showcase their product and I look forward to more exciting news from both AlphaPoint and the bi.tt exchange.

Son Of Big Board Father Is No Friend To NYSE

PLY: Interview with William O’€™Brien CEO of Direct Edge on the BATS merger.

NSE Directs Brokers To Implement Risk Reduction Mode

India’’s leading bourse NSE has asked trading members to ‘compulsorily’ implement a risk reduction mode when 95 per cent of their capital is utilised towards currency derivatives margins and is effective from February 10.

Bitcoin Trading Heats Up A Block Away From NYSE

PLY: Meanwhile in New York, as happens in London, Berlin, and all manner of other cities world-wide, the Bitcoin market often involves, well what might one call them, ‘pop-up floors’ set up for a day or evening to run BTC trades…

Think Bitcoin Is Expensive? Try 42 Coin, The £100,000 Cryptocurrency
International Business Times

Just 42 coins will ever be mined and so far just 1.21 coins exist, with users each owning a tiny fraction.

Any immediate hopes of a cryptocurrency hugely more valuable than bitcoin being more stable were dashed as 42 Coin’s value tumbled from over $800,000 at its launch on 14 January, to $185,500 at the time of publication.

PLY: The most interesting factor here is not the price but the mining algorithm which makes 42 harder to mine when a lot of sophisticated capacity is on the network. Another intriguing cryptocurrency twist. Meanwhile, quite how you can realistically value a coin with only one whole in circulation is truly absurd.

Dividend News

NASDAQ OMX declared a regular quarterly dividend of $0.13 per share on the company’s outstanding common stock. The dividend is payable on March 28, 2014, to shareowners of record at the close of business on March 14, 2014.

TMX declared a dividend of $0.40 on each common share outstanding, payable on March 7, 2014 to shareholders of record at the close of business on February 21, 2014.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX up 1%, FTIL up nearly 2% after another vast default but at least half a million dollars more was added to the kitty with the Mumbai Fraud Squad (EOW) holding most of the assets. Note too the intriguing story on India is the MCX-SX dilution issue with IL&FS above

The NSEL repayment tally of shame remains: (N.B. Anticipated weekly repayment is Rs 174.72 crore, roughly USD 28,000,000)

Week 1: Rs 92.73 crore (USD 14.37 mln) paid
Week 2: Rs 12.05 crore (USD 1.79 mln) paid
Week 3:Rs 15.37 crore (USD 2.29 mln) paid
Week 4: Rs 7.77 crore (USD 1.21 mln) paid
Week 5: Rs 8.57 crore (USD 1.35 mln) paid
Week 6: Rs 11.45 crore (USD 1.82 mln) paid
Week 7: no payout – bank accounts frozen
Week 8: Rs. 2.85 crore (USD 457.9 k) paid
Week 9: Rs. 28.34 crore (USD 4.58 mln) paid
Week 10: Rs. 30 lakh (USD 49k) paid
Week 11: Rs. 29.05 crore (USD 4.72 mln) paid
Week 12: Rs. 11 crore (USD 1.77 mln) paid
Week 13: no payout
Week 14: Rs. 6.1 crore (USD 976.7k) paid
Week 15: Rs. 9 crore (USD 1.44 mln) paid
Week 16: Rs. 9 crore (USD 1.44 mln) paid
Week 17: Rs. 9 crore (USD 1.46 mln) paid
Week 18: Rs. 11.5 crore (USD 1.85 mln) paid
Week 19: Rs 12.64 crore (USD 2.04 mln) paid
Week 20: Rs 21 crore (USD 3.37 mln) paid
Week 21: Rs 2.45 crore (USD 394k) paid
Week 22: Rs 3.24 crore ( USD 526k) paid
Week 23: Rs 4.5 crore ( USD 726 k) paid
Week 24: Rs 2 crore ( USD 322 k) paid
Week 25: Rs 8.62 crore (USD 1.38 mln) paid

NSEL pays Rs 8.62 cr against Rs 86.02 cr, defaults 25th time – see NSEL announcement here.

MCX Asks SEBI To Skip SX Stake Sale
Business Standard

MCX has approached SEBI, urging it be allowed not to reduce its stake in MCX-SX, an MCX arm as it could no longer be seen to be acting in concert with FTIL, following a regulatory ruling asking FTIL to reduce its stake in MCX.

PLY: MCX now has a valid point although clearly the large stake still held by FTIL may vex regulators until it is sold.


JPX Invites Bids For New Derivatives Trading System Contract

JPX is seeking a new derivatives trading system as merger integration continues between Tokyo and Osaka.

Cash equity markets have already been hooked up to TSE’s Fujitsu-based arrowhead platform, and the derivatives markets are scheduled to move onto OSE’s Nasdaq OMX-powered J-Gate in March.

JPX press release here.

PLY: Interesting as they have an open tender planned and not merely a renewal negotiation with incumbent NASDAQ OMX. A big contract which will clearly be hotly contested.

The Data Center Remains The Focal Point Of The Capital Markets Battleground
Datacenter Dynamics

In Europe LSE and BATS Chi-X are battling it out for the title of Europe’s largest exchange. LSE runs its own data center and matching engine in central London while BATs Chi-X operates a primary site in Equinix LD4 in Slough, a secondary site in LD3 at Park Royal and a PoP in Interxion.

The dedicated commercial data center players are not the only players in London or, indeed, Europe while ICE committed to retaining the data center facilities it inherited from NYSE Euronext.

Following the completion of the deal, ICE said it would keep both NYSE’s Basildon data center located 25 miles from London and its sister facility in Mahwah, New Jersey, which is around the same distance from Wall St.

PLY: A fascinating data centre battle is breaking out. One could argue that Equinix has a relative stranglehold for the time being on much of the equities flow but the derivatives business in particular is up for grabs – and that is a lot to grab in the Dodd-EMIR-Frank era of SEF and platform driven volume increase. Moreover, those NYSE Technologies data centres still feel like a vastly racked albatross around the neck of ICE so a rationalisation seems plausible there. As an aside, it is increasingly difficult to build downtown data centres in many parts which leaves some folk with a potential advantage here (if you can’t think of one in London for example, peek at the sidebar for a clue). There is all to play for in the data centre game and some potentially fascinating new venues to come onstream in due course, perhaps not even in established financial centres but they are at key telecoms junctions.

Nasdaq Opens Test Centers Ahead Of March Datafeeds Migration

Nasdaq OMX has made test environments available in its Carteret, NJ and Ashburn, VA datacenters for clients to test live data in new versions of its market data feeds that the exchange will roll out next month.

SunGard Adds OMS To Loanet

SunGard’s Loanet, a suite of solutions for the U.S. and Canadian securities finance industry, has launched a new OMS.

30% Of Buy Side Institutions Consider Changing Their OMS/EMS Providers — Greenwich Study
Wall Street & Technology

The trend is driven by new regulations, market structure changes in derivatives and growth in compliance demands across asset classes.

“Eurex Mobile App” Offers Comprehensive Data And Information

Eurex is offering all members and interested parties its “Eurex Mobile App”, downloadable on its website and in the Apple and Google online stores.


Eurex FX Derivatives To Launch ‘By Summer’ (subscription)
FX Week

Eurex is hoping to launch foreign exchange futures and options during the first half of 2014.

PLY: The CME’s inability to get regulated due to the TransAtlantic tussle of central bank regulators is helping EUREX ease into the game, perhaps even with first mover advantage on a Euro denominated suite.

New Index Fixes The ‘Broken Link’ Between FTSE100 Director Performance Pay & Company

Independent research organisation Verum Financial Research has developed a new index to help HR reward professionals and company remuneration committees ensure that growth in FTSE 100 directors’ performance-related pay reflects actual company performance from an investor’s perspective.

Career Paths

Betfair appointed Leo Quinn as a NED. Leo will join the Board with effect from 5th March, 2014.

Financial Calendar

6.60p ICAP interim dividend payment
CBOE Q4 2013 results
Record date Charles Schwab $0.06 quarterly dividend

This month – new announcement
Financial Technologies Q3 results

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

Analyst Notes

ModernGraham Quarterly Valuation Of ICE (subscription)
Seeking Alpha

Only through comparing the company’s intrinsic value to the marketplace can an investor truly get a sense of whether the company is a good investment.

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.


Y Combinator Nonprofit Launches The First Global P2P Lending Platform
Sacramento Bee

Zidisha has launched its global direct microlending platform at the legendary tech startup incubator Y Combinator. Dubbed an “eBay for microlending”, Zidisha is the first online P2P lending platform to link individual lenders and borrowers directly across international borders.

Other stories

Cyber Criminals ‘Targeting Share Prices’ (subscription)
Financial Times

Prolexic Technologies, which specialises in combating this type of attack, said: “Since 2011, and growing in 2012 and 2013, DDoS attack campaigns have become a significant threat to financial firms.”

PLY: I would have said they were a significant threat at least a decade earlier in fact, when the first DDoS extortion attacks took place on Intrade – which was discussed at the time in the web’s original derivatives publication.

Analysis: Lawsuits Over Forex Market Face Uncertain Future

PLY: Plaintiffs may see some justice, lawyers will get a lot of fees and ultimately the banks have mostly only themselves to blame, albeit they may wonder why it was the regulators apparently failed to spot (or failed to enforce) the problems for so many years…

European Parliament: Financial Market Manipulators May Face At Least Four Years In Jail

Judges imposing their countries’ maximum penalties for serious offences such as manipulating the LIBOR benchmark interest rate would have to stipulate at least four years in jail under draft rules approved by Parliament on Tuesday.

These rules, which aim to restore confidence in the EU’s financial markets and improve investor protection, now have to be formally approved by EU member states.

PLY: I agree that punishment must be meted out for financial crime but the issue of proportionality appears notable here. If you want to go on a crime rampage on a European high street it takes a lot of crimes to manage to get anywhere near 4 years for a first conviction, even as part of a string of offences while wielding a knife and terrifying the public. I’m not saying 4 years is excessive for market manipulation but perhaps the EU in its infinite wisdom may wish to consider why thugs get off so easily in the justice system?

CFTC Acting Chairman Wetjen To Testify Before U.S. House Committee On Financial Services

Wednesday, February 5, 2014, 10 a.m. – Volcker Rule Impact.

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