February 05 2015

elb2

Thursday dawns with Mickey Gooch under the thumbscrews. True he could cash out soon with a load of money but he won’t see it that way if he is banished from his empire by the man he presumably sees as Lutnick the Barbarian. Elsewhere, the Danish socialist commissioner has slapped ICAP with a fine for being a cartel which appears to demonstrate a lot of desire to politic but not a lot of credible legal or economic understanding. It’s pretty much the last post for the CME floor too it seems – not, before time one might add. All this and lots more. With added pith of course…

Meanwhile, in Premium Posts, there are several new Premium Briefs to remind you of various issues in the industry (and don’t forget others such as the BGC-CME-GFI deal file) are updated daily when news arises. All briefs can be found on our dedicated Briefs page on the Exchange Invest Premium website.

Latest briefs include:

AFET TFEX Merger Brief
NSEL-FTIL Merger
IEX India Sale
Virtu Financial IPO

Our Premium service is on a roll – can you afford not to be a subscriber? $120 per user/year and it helps keep EI Free. Subscribe here or email and I will invoice you forthwith.

Public Markets

Howard Lutnick’s BGC Extends Offer For GFI
NY Times
BGC Extends All-Cash Tender Offer To Acquire GFI Group For $6.10 Per Share To February 19
BGC Partners

Deadline for fully financed, all-cash tender offer to acquire all of the outstanding shares of GFI Group for $6.10 per share extended to February 19, 2015.

PLY: Scores on the doors, 43.3% of shareholders supported the BGC deal (despite of course M.Gooch and associated insiders holding 36%+ of the company). GFI are close to their 45% goal… Or as BGC note:

“As of 5:00 PM New York City time on February 3, 2015, approximately 37.9 million shares were tendered pursuant to the offer. The 37.9 million tendered shares, together with the 17.1 million shares of GFI common stock already owned by BGC, represent approximately 43.3% of GFI’s outstanding shares, or approximately 70% of shares not owned by GFI executives or directors.”

…Those sounds you can hear in the background is the feverish typing of lawyers preparing to sue GFI insiders for acting against the best interests of the company if they don’t capitulate. Whether they do or not, Howard Lutnick clearly holds the whip hand right now.

Read our daily updated Premium brief: BGC-CME-GFI.

Mexico Bourse CEO Open To Brazil Talks As MILA Focus Remains
Benjamin Bain & Cristiane Lucchesi – Bloomberg

“We’re not closed to any option,” according to CEO Jose-Oriol Bosch, who took the helm (appointment reported here) of Bolsa Mexicana de Valores SAB in January, said in an interview in Mexico City when asked about a potential tie-up with Brazil’s BM&FBovespa SA. The Sao Paulo-based operator of Latin America’s largest exchange said in November that it hired investment banks to help acquire as much as 15% each in exchanges in Mexico, Colombia, Chile, Peru and Argentina.

Bosch said the bolsa hadn’t been approached with any offer and there were no talks between the two parties for a deal. Mexico’s exchange operator has been focused on developing the Latin American Integrated Market, known as MILA, which allows investors to trade stocks from Mexico, Chile, Peru and Colombia over a single platform.

Icap To Appeal Against €14.9m Libor Rigging Fine
Jill Treanor – The Guardian
ICAP Fined $17 Million By EU For Aiding Yen Libor Cartels
Gaspard Sebag & Aoife White – Bloomberg
Antitrust: European Commission Fines Broker ICAP € 14.9 Million For Participation In Several Cartels In Yen Interest Rate Derivatives Sector
MondoVisione

Icap, the international money broker run by chairman Michael Spencer, has reacted angrily to a €14.9m (£11.3m) fine from the European commission for rigging Libor.

After a long-running dispute, the commission said it was fining Icap for facilitating several cartels involved in setting benchmark interest rates in the Japanese yen.

Commissioner Margrethe Vestager said the decision to fine Icap “sends a strong signal that assisting companies in their cartel activities has severe consequences”.

But Icap, which is the world’s biggest inter dealer broker and has already been fined by the City regulator and the US authorities, said the decision was wrong in fact and law.

“This is a regulatory matter that has already been settled. It is not a competition issue, and the EC has presented no evidence that Icap facilitated a competition law violation. Icap will be challenging this decision at appeal in the European Courts,” the company said.

PLY: Read the ICAP response to European Commission decision – here. Also bear in mind that Commissioner Vestager makes a ludicrous point about financial cartels which arguably incriminates her own department on this statement.

To wit, will she now investigate a cartel by banks and Mrs Angela Merkel of central Berlin who clearly acted in concert to impoverish the Irish people by advocating a bailout adopted by the EC which hugely benefitted German banks?

In terms of ridiculous undemocratic agitprop, Ms Vestager could have used some of the subjects from her economics degree to assess that her we see a brokerage which has had problems and been fined, being subjected to vindictive bureaucratic overreach. I sincerely hope that the (albeit heavily politicised) EU courts will finally see sense and over-turn this ghastly piece of totalitarian anti-markets behaviour.

Previous discussions here and here.

Ending An Era, CME To Shutter Most Futures Pits
Tom Polansek – Reuters
CME To Close Most Open Outcry Futures Trading In Chicago And New York By July; Most Options Markets To Remain Open
PRNewswire

As open outcry futures trading has fallen to just one percent of the company’s total futures volume, CME announced it will close most of its futures trading pits in Chicago and New York by July 2, 2015. The floor-based S&P 500 futures market, which continues to provide an important venue for trading the underlying futures contract for the open outcry S&P 500 options on futures contract, will remain open on CME’s Chicago trading floor.

Options on futures contracts, which continue to trade actively on both the floor and the screen, will remain open on both trading floors except for the DJIA ($10) and NASDAQ-100 open outcry equity index options markets which are designed to deliver into floor-based futures contracts.

With the exception of the S&P 500 futures and options on futures pits which will remain open, equity index futures pits and the DJIA($10) and NASDAQ-100 options pits will close following the expiration of the June 2015 contract on June 19, 2015. All other futures pits will close on July 2. In addition, in Chicago, all options pits will be located on a single floor in the company’s Financial Room by September.

To assist floor traders with the transition going forward, the company will make every attempt to make booth space available to those who want to trade electronically following the closure of the open outcry futures pits.

CME will hold members’ meetings in Chicago and New York to answer questions and discuss transition plans. Only current member owners will be admitted.

PLY: A sad day for history but an entirely understandable one for the future of efficient markets and CME as a business. Being proved correct having argued for pit closure for 20 years doesn’t make me immune to appreciating the upheaval involved amongst the trader community. Indeed a decade and more ago, CME already had a programme for making the floor to screen transition which it was my privilege to contribute to.

EU Watchdog Gives Forex Futures Breather From Clearing
Reuters
ESMA Issues Feedback Statement On The Central Clearing Of Non-Deliverable Forwards
MondoVisione

EU regulators have given the $127 billion daily currency futures market some breathing space by exempting it from mandatory clearing of transactions in the 28-country bloc.

ESMA is implementing new rules to make derivatives more transparent and safer, such as through clearing which uses a third party to guarantee the completion of a trade even if one side goes bust.

PLY: Let’s face it, ESMA has been strangled in budgetary terms by the perfect storm of vast new regulatory fiat allied to a marked reluctance on the part of the EU authorities to pay for the services they require. Hence NDFs will stay uncleared and our financial system will be less secure. Given the retail forex fiasco over the CHF peg the other week, it has never been clearer that forex markets need vast reform which includes proper CCP and not a waterfall of banks leading to CLS.

EU States In Preliminary Deal On Regulating Market Benchmarks
Reuters

PLY: Wider definition added as bracket creep wins the day… Originally critical benchmarks were defined as being linked to investment funds of at least 500 billion Euros ($572 billion). The member states have added two more definitions making it a 400 billion Euro threshold, which are widely used with few or no alternatives…

The amended text will be put to the bloc’s national ambassadors on Feb. 13 for formal approval and then negotiations will start with the European Parliament on a final deal.

India – Stock Exchanges, Brokers Ask Govt To Withdraw Or Cut STT
Ashish Rukhaiyar – Livemint

Stock exchanges and brokers have asked the government to withdraw—or at least reduce—the securities transaction tax (STT) that has been levied on equities since 2004.

Private Markets

Exclusive: Why BATS Global Markets Got Into FX By Acquiring KCG Hotspot
Victor Golovtchenko – Forex Magnates

Forex Magnates reporters spoke with the President of BATS Global Markets, Chris Concannon, to discuss the challenges which the current foreign exchange market structure presents for new entrants like BATS.

Read our daily updated Premium brief: Exchange Deals Brief.

PLY: A good deal as Hotspot gives BATS a chance to expand beyond its core equity market.

CFTC Extends Period For Public Comment On Related Applications Submitted By LedgerX, LLC For Registration As A DCO and SEF
CFTC

Derivatives Exchanges Look To Add Liquidity To The Bitcoin Market
Robert Stowe England – Institutional Investor

Dividend News

CME declared a Q1 2015 dividend of $0.50 per share, a 6% increase from the prior rate of $0.47 per share. The dividend is payable March 25, 2015, to shareholders of record as of March 10, 2015.

CBOE declared a quarterly cash dividend of $0.21 per share of common stock payable on March 20, 2015, to the unrestricted common stockholders of record on February 27, 2015.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX up 2%, FTIL +1.5%.

Draft Order On FTIL-NSEL Merger: HC Vacates Status Quo
Khushboo Narayan – Livemint

A division bench comprising justices V.M. Kanade and Revati Mohite Dere on Wednesday directed the government to proceed with a final order under section 396 of the Companies Act, 1956, adding that it will look into the case after the order is passed.

EOW Wants A Special Court For Speedy NSEL Scam Trial
The Financial Express

The Economic Offences Wing (EOW) of the Mumbai Police Crime Branch has requested the home department to designate a special court for the trial of the NSEL scam. The EOW has so far arrested 17 accused in the alleged scam, in which over 13,000 investors lost their money. Apart from the Indian Penal Code (IPC), the EOW has also invoked the Maharashtra Protection of Interests of Depositors (MPID) Act in the case, which empowers it to attach properties of the accused and liquidate them.

According to EOW sources, the request was made in order to ensure a quick and speedy trial, as scope of the case is huge and it involves deposition of hundreds of witnesses and submission of loads of paperwork as evidence.

PLY: The EOW have generally appeared the most pro active in the NSEL race for resolution…where admittedly many other departments appear to have entered tortoises to the Mumbai Fraud Squad’s hare.

Read our daily updated Premium brief: NSEL-FTIL Merger.

Products

HKEx: Stamp Duty Waiver For All ETFs To Take Effect On 13 February 2015
MondoVisione

HKEx announced Wednesday that a stamp duty waiver for all ETFs listed in Hong Kong will take effect on 13 February 2015 following the passage of the Stamp Duty (Amendment) Bill 2014 today in the Legislative Council.

ACE Commodity Exchange Suspends Launch Of New Contracts
Suresh P Iyengar – The Hindu Business Line

Ace Derivatives and Commodities Exchange, promoted by Kotak Group, has suspended launch of new contracts for February even as turnover on the exchange has been dropping in the last few months.

The decision to suspend the launch of new contracts follows a similar announcement for this month.

The exchange has deferred launch of new contracts in crude oil, cotton, chana, castorseed, refined soya oil, crude palm oil, refined palmolein and soyabean meal.

Of the eight commodities listed for trade on ACE Commodity Exchange, only two contracts of Cotton-118 expiring in February and March are active.

PLY: ACE looks to be running out of road, alas.

Career Paths

MOEX AGM will be held in late April 2015. The AGM agenda will include election of a new Supervisory Board comprising 15 directors. The Supervisory Board will set the date and the full agenda of the AGM at a meeting in the beginning of March. From 1 January to 1 March 2015, shareholders owning at least 2% of Moscow Exchange shares are eligible to nominate candidates for the new Supervisory Board.

In line with best practice in corporate governance, the Nomination and Remuneration Commission of the Moscow Exchange Supervisory Board considered the mix of experience and skills, as well as the reputation and independence criteria of potential candidates, and has recommended that shareholders nominate and elect the following candidates to the Board:

Nicola Jane Beattie, Senior Executive Director, NBXC, independent director;
Mikhail Bratanov, Head of Societe Generale Securities Services for Russia and CIS, Head of Depository Department at Rosbank, independent director;
Wang Yuan, independent director;
Sean Glodek, Director, Russian Direct Investment Fund, NED;
Andrey Golikov, Board of Directors Co-Chairman, National Securities Market Association, NED;
Valery Goreglyad, Chief Auditor, Bank of Russia, NED;
Yury Denisov, Deputy Chairman of the Supervisory Board, National Clearing Center, NED;
Bella Zlatkis, Deputy Chairman of the Management Board, Sberbank, NED;
Anatoly Karachinsky, President, IBS Group, independent director;
Alexey Kudrin, Chairman of the Supervisory Board, MOEX, NED;
Sergei Lykov, Executive Board Deputy Chairman, Vnesheconombank (VEB), NED;
Rainer Riess, independent director;
Andrey Sharonov, Dean of the Moscow School of Management Skolkovo, independent director;
Kirill Shershun, Executive Board First Deputy Chairman, CentroCredit, NED;
Alexander Afanasiev, CEO, Executive Board Chairman, MOEX.

Euronext Paris announced the launch of its new User Committee, reaching out to its user community to ensure that it meets genuine needs in providing finance for the real economy.

The Euronext Paris User Committee is an advisory body set up to advise on initiatives, new products, services and competitive positioning, at a time when capital markets are actively encouraged to finance the real economy. It will be consulted on key issues for Euronext users and will meet quarterly starting in the first quarter of 2015.

Euronext Paris User Committee will be chaired by Inès de Dinechin, an independent Board Member at Euronext London Limited and ex-Chairman of Lyxor AM. Other members include:
Marie Cheval, CEO, Boursorama
Thibaut Delahaye, Global Head of Equity & Commodity Trading, BNP Paribas
Luc François, Head of Capital Markets, Natixis
Pierre-Olivier Goineau, President, France Biotech & co-founder of Erytech Pharma
Jean-Pierre Grimaud, CEO, Swisslife Asset Management
Olivier Guélaud, Treasurer, Pernod Ricard
Benoit Jauvert, CEO, Financière de l’Oxer
Christophe Kieffer, Managing Director Trading Business Line, Amundi, and CEO, Amundi Intermediation
Eric Le Boulch, Chairman and CEO, CM-CIC
Jean-François Lepy, CEO, Soufflet Négoce
Eric Litvack, Head of Public Affairs, Société Générale CIB
Joseph Pinto, Global Chief Operating Officer, AXA Investment Managers
Alain Pochet, Head of Clearing and Custody, BNP Paribas Securities Services
Vincent Remay, Advisor to the CEO, Viel & Cie
Gregory Sanson, CFO, Bonduelle
Philippe Santi, Deputy CEO, Interparfums
Sophie Stabile, CFO, Accor
Banque de France, AMF, Agence France Tresor, Euroclear France and LCH Clearnet SA have been granted observer status.

UK Traders Should Pass Exam, Bank Lobby Group Says
Steve Slater & Matt Scuffham – Reuters

Thousands of bond, currency and commodities traders in London should have to pass an exam and obtain a new qualification to trade as part of attempts to raise standards, Britain’s bank lobby group said on Wednesday.

The British Bankers’ Association (BBA) said a “licence to trade” qualification and tougher codes of conduct should be introduced to strengthen trust in financial markets after a series of damaging scandals.

PLY: Presumably another piece of paper in addition to the existing requirement to pass the FCA exam will mean a lot more rote learning and little of benefit apart from to the coffers of, say, the BBA who probably want to run such an exam? Perhaps the BBA could concentrate on actually raising the standards so British retail banks function competently first before worrying their heads about other matters?

Financial Calendar

Today

ICE Q4 2014 Financial Results
CME Q4 2014 Financial Results

Friday

CBOE Q4 2014 Financial Results
ICAP 6.6p interim dividend payment

New announcement

ASX half-year results for FY15 – Thursday 12 February 2015

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

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