February 05 2016

elb2ICE sails on at the top of the pyramid (admittedly only just, overnight) while MCX & DFM disappoint. ITG notes it is in review mode… CMC prices ahead of London IPO… Today’s Exchange Invest is a marathon but you cannot afford not to scroll on, so I’ll disintermediate myself from the opening blurb forthwith:

Public Markets

ICE Q4 2015 Results

ICE

ICE’s Earnings Top Expectations (subscription)

Lisa Beilfuss & Bradley Hope – Wall Street Journal

vs Q4 2014: total revenues $875m, up 9%, net income $373m, up 26.8%

vs 2014: total revenues $3.338 bln, up 7.9%, net income $1.295 bln, up 28.8%

PLY: ICE saw data services revenue jump as it carries on into the next stage of the Exchange operator’s development now it is easing into its position as world number one by market capitalisation (albeit yesterday’s share drop left it only 50 million above CME). The ICE saw data-service revenue jump while busier energy markets helped revenues too.

ICE Boss Sprecher Blasts Regulators Over Mifid II

Joe Parsons – The Trade

Sprecher claims reporting and best execution rules in Mifid II is “balkanising” Europe’s securities markets.

PLY: Measured criticism to this awful piece of legislation which cures little and causes an almost never ending stream of problems which have not been considered…

 

ITG Q4 2015 Results

ITG

vs Q4 2014: total revenues $224,1m, up 50%, net income $82.3m*, up 534%

vs 2014: total revenues $634.8m, up 13.4%, net income, up 80%

*GAAP net income for Q4 2015 includes (i) a gain from the sale of the energy research business of $91.3 million after taxes, or $2.66 per diluted share; and (ii) a tax charge of $6.5 million, or $0.19 per diluted share, to amend the capital structure of ITG’s operations outside North America.

ITG CEO Troise Promises Full Business Review by Q2

Annie Massa – Bloomberg

PLY: After the shareholder putsch of management led by Justin Hughes of Phullyfin, stockholders expect little else…

 

MCX Q3 Net Profit Falls 22% To Rs 17.95 Cr ($2.65m)

NDTV

MCX reported 22% drop in net profit at Rs 17.95 crore ($2.65m) for Q ending Dec, on higher operational expenses and transfer of some fund for investor protection; net profit of Rs 22.96 crore ($3.4m) in the same quarter last fiscal. Net income remained flat at Rs 56.96 crore ($8.42m) compared with Rs 57.09 crore a year ago.

 

DFM’s Q4 Profit Tumbles 89%

Reuters

Posted net profit 15.5m dirhams ($4.22 million) in the three months to Dec. 31, down from 138.2m dirhams in the year-ago period.

DFM’s 2015 annual profit 261m dirhams ($71m) versus 759.3 million dirhams in 2014.

 

CMC Prices Shares At 240p To Value Firm At £691m ($1B) For LSE IPO

Catherine Neilan – CITY A.M.

Lower than the £730m ($1.06B) originally expected with CMC releasing 90.6m shares – 31% of its share capital, equivalent to £218m ($316m). Some £15m ($22m) will be used as raised capital for the business.  There is a balance of a further £203m ($295m) secondary shares being sold by existing shareholders including Peter and Fiona Cruddas and Goldman Sachs Strategic Investments. There is also an over-allotment option of up to 13.6m shares. The husband and wife team will in aggregate hold 62.5% of the group’s ordinary shares, while Goldman Sachs Strategic Investments will hold 4.99%.  

PLY: Seems to be more market issues than the recent FCA suggestions of a crackdown on the leveraged retail sector…

 

NYSE Feud With IEX Heats Up With Sprecher’s `Un-American’ Jab

Brian Louis & Annie Massa – Bloomberg

The war of words between NYSE and upstart IEX, which is seeking approval to become an exchange, continued on Thursday as Jeffrey Sprecher, CEO of ICE, called IEX criticisms of its trading systems “absolutely false.”

PLY: It has to be said that for those of us still in the sunny Reaganite optimist camp, the entire legacy shambles of the US stock market / Reg NMS is a broadly UnAmerican activity in terms of delivering equality to end investors. That’s not the incumbents’ fault but they just historically tended to fall in behind the latest SEC approach. This is a healthy debate. However, I agree just giving one party a right to a speed bump would be wrong but I am not sure that is IEX’s intention, they have proposed their approach as a means to improve order execution and in the minefield of colocation, SIPs et al, I still think it appears as a distinctly feasible concept…

 

High-Frequency Trader Warns Of Potential Market ‘Catastrophe’ (subscription)

Robin Wigglesworth – Financial Times

Mark Gorton, founder & head of Tower Research Capital, has warned that there are several fault lines in the structure of increasingly electronic, automated financial markets that could lead to a “catastrophe” in the long run.

PLY: The pot kettle black-ometer hits new low latency highs on the back of this missive which seems to suggest risk management is broadly only an issue for exchanges …oh hold on, fair enough, the realpolitik is, I suppose, all too true! Only the Chinese regulators have dished out appropriate punishment for HFT screwups – wonder what happens next time Goldmans have a US problem? That will be a test of NYSE management demonstrating progress from the ancien regime. At the same time, the clear best approach for exchanges to cover themselves is pre-emptive risk management (again pioneered by China – h/t to Peter Jessup at NASDAQ for pointing that out during Young Markets – in the mid-1990’s). Hey, while they are at it, exchanges could even add a little speed bump to help make markets fairer too, perhaps?

 

Hounslow Trader ‘Sent Millions Of Trade Messages Before Flash Crash’ (subscription)

Bernard Goyder – Financial News

The Hounslow trader accused of helping trigger the Flash Crash of 2010 sent 7.4 million ‘trade modification’ messages – sometimes seen as a sign of abusive trading – on a single day…

QV Premium: Flash Crash & Hound of Hounslow – Brief and The Kennel – Premium discussion of the “Hound of Hounslow”.

PLY: However nobody at any exchange seems to have noticed, or at least done anything concrete about it. Given that those messages all required the rest of the users to contribute in fees to pay for the hardware and software of the exchange, not the finest hour for exchanges to show they have market supervision under control, despite the software being capable of doing such things for the past 20 years (and indeed improving enormously in the past decade to make it essentially effortless). I still sympathise that the hound has been hung out to dry as a show trial amidst wholesale institutional failures of governance. Speaking of which, here’s the cavalry a decade late:

UK’s FCA Confirm Accountability Rules For Wholesale Traders & Interim Rules On Regulatory References

MondoVisione

FCA Extends Accountability Regime To High-Frequency Traders (subscription)

Caroline Binham – Financial Times

Algo/HFT will be captured by an accountability regime as part of a push by the UK financial watchdog to extend rules across wholesale markets.

PLY: Catching up back to about 2001 when a big wave of pointy headed folks received poor briefings by old lags (digitisation strategy being a poor process in most incumbent financial entities), the general moral fibre of markets was stretched as folks were told just to make money and the old floor constraints/conventions of, er, quasi-self-regulation (usually being firmly berated in Europe, or, punched in  US markets –  $1K per thump as I recall on CBOT – arising from too many ‘messages’ in the pit)…fell apart.

The problem is not with the mathematicians but now we have a quandary as some firms even have managements which appear to have lost the ability to discern between common sense and an arrogant rite to do as they wish (lack of policing by regulators & exchanges not having helped). There is a lot of fit & proper analysis to be done here, FCA is right, if a decade behind the times.

 

Shanghai-HK Stock Trading Link Beats Singapore: Chart

Eduard Gismatullin – Bloomberg

The equity trading link between Hong Kong and Shanghai, also known as Stock Connect, has disappointed some analysts. But since its introduction in November 2014, the link has consistently surpassed SGX in volume of dollars traded per day. Last year Stock Connect accounted for 10% of trading on HKEx. QV Premium: HKEx – SSE – Stock Connect Brief Part 4.

PLY: I still don’t get the ‘glass half empty’ mentality of many analysts/journalists in Hong Kong. They were wrong at first and continue to be wrong in the fashion of a bar room boor who has lost perspective.

 

Central Bankers In Europe Put Clearinghouses To The Test (subscription)

Katy Burne – Wall Street Journal

European central bankers this week began testing how a bank default would pressure certain trade-plumbing firms.

PLY: QV The Exchange Invest Premium Classic on Homer Simpson.

 

EU To Propose Rules On Failing Clearing Houses By Year End

Reuters

EC plans to propose new EU rules for dealing with failing clearing houses for securities markets before the end of the year.

PLY: Wonder when we’ll get rules on how to deal with the EU’s collapse?

 

Buy-Side Should Be Allowed To Provide Liquidity To CCPs

Markets Media

The European Association of CCP Clearing Houses has asked EC to consider allowing highly creditworthy buy-side firms to act as potential investment counterparties to central clearers.

PLY: Good idea.

 

Turquoise Block Discovery Firm Up Rates: Integrity Matters

Robert Barnes, CEO Turquoise – Best Execution

At a time of global passive indexation and an electronic order book environment that naturally leads to small average trade sizes, investors that wish to outperform benchmarks are calling for innovation in electronic block trading.

PLY: The work of Robert Barnes and his team enhancing and deepening the Turquoise platform remains thoroughly excellent all round and to be applauded. A block product which was somewhat sneered at by some competitors has found a rich niche – well done!

 

ESMA To Focus On Governance, Strategy, Data & Fees In 2016 Supervision

MondoVisione

ESMA published its 2016 supervisory priorities for CRAs and trade repositories (TRs), as well as its annual report summarising the key supervisory work and actions undertaken during 2015.

 

U.S. Watchdog Finds CFTC Violated Accounting Law

Reuters

The Government Accountability Office has determined that CFTC violated a government accounting law by understating its leasing liabilities, a year-long investigation found. When the CFTC signed “multiple-year leases, it failed to record an obligation equal to the government’s total liability,” the non-partisan GAO said in its report.

PLY: Mega D’oh! moment given one would have thought the derivatives dervishes of CFTC would get the liability picture? #Embarrassing.

 

SEBI: Commexes Must Comply With Securities Mkt Standards

The Economic Times

Stating that regulating commodities derivatives market has several challenges, Sebi said commodity exchanges and its stakeholders will have to match the standards set for securities market at faster pace.

PLY: Worrying insofar as many of the standards SEBI sets for exchanges are rather pointlessly high.

 

Citic Securities: 7 Executives Involved in Probes Have Returned (subscription)

James T. Areddy – Wall Street Journal

Chinese brokerage firm Citic Securities said that it has re-established contact with seven senior executives who had been under suspicion of insider trading and other offenses following China’s mid-2015 stock-market meltdown, though the group didn’t include the firm’s former president.

PLY: Reminds me of that scene in Close Encounters of the Third Kind where various lost souls return on an alien craft….

Dividend News

ICE announced Q1 dividend $0.85, up 13% from $0.75 in Q4 2015. Dividend payable on March 31, 2016, record date March 16, 2016. The ex-dividend date is March 14, 2016.

DFM proposed a 5% cash dividend for 2015.

The Board of BSE in its meeting held on Wednesday, February 3, 2016, inter-alia,  reviewed the performance of the company for the nine months period ended 31st December 2015 and declared an interim dividend of Rs 3.50 per share.

Special Section: FTI, NSEL, India at the Crossroads

PLY: Flattish day, MCX slightly off, FTIL slightly up.

Technology

Virtu Is Letting Outsiders Use Its High-Powered Systems

John Detrixhe & Annie Massa – Bloomberg

Virtu Financial will offer to trade on behalf of a handful of investors in Q2, giving the asset managers access to the HFT firm’s powerful trading computers. The company has already tested its service with T. Rowe Price, according to Virtu CEO Doug Cifu. Virtu will not act as a counterparty for the transactions. Instead, it will seek to execute the trades on an agency basis.

PLY: Interesting move, intriguing first client too…

Products

Thomson Reuters, CME To Develop Silver Benchmark

Reuters

The benchmark’s oversight committee has held two extraordinary meetings since last Thursday.

PLY: That wording makes it sound more like panic than orderly development to me…

 

SGX Commodities Publishes White Paper “Creating An Asian Market For LNG”

MondoVisione

 

DB1 To Launch Reporting Pilot In March (subscription)

Alice Attwood – FOW

 

NSE To Launch Carbon Trading Platform

Carbon Pulse

Nairobi Securities Exchange (NSE) said it wants to help publically-listed Kenyan firms to sell their CERs.

 

CDS Activity Heats Up (subscription)

Philip Stafford & Joe Rennison – Financial Times

A record $15.7bn in gross notional outstanding positions of single name CDS was cleared by investors during January according to ICE, the largest credit derivative clearing house.

PLY: Clearly some folks are thinking a few steps beyond the “negative yield for corporates” groupthink on the mainstream financial news channels…

Indexes

Moscow Exchange Launches Small/Mid-Cap Indices

MondoVisione

 

Malta SE To Launch Islamic Equity Index, Eyes Sukuk

Bernardo Vizcaino – Reuters

Malta SE (MSE) will launch on Monday an Islamic equity index aiming to attract business from Middle East firms, a move it hopes will also prompt the government to issue Islamic bonds (sukuk).

PLY: Interesting move by Chairman Joe Portelli and his outgoing CEO Eileen Muscat.

 

STOXX Launches Comprehensive Family Of Low Carbon Indices

MondoVisione

Career Paths

Plaudits to FOW who break the news as we race to pixel that not only does Curve have a CEO (finally!) but it is not Sandy Broderick as previously rumoured and clearly not Bill Templer who previously resigned but Morgan Stanley’s European head of Swap Clearing Andrew Ross – good luck to him.

According to Financial News, Stephen McGoldrick has rejoined the board of Turquoise having previously headed the Plato initiative (which is now in some form of partnership for services with Turquoise).

PLY: I am delighted to see Marcus Zickwolff who recently left EUREX amongst the list of luminaries who are members & observers of the European Post-Trading Forum:

Associations, interest groups or other organisations:

Werner Frey, AFME

Stephen Lomas, Association of Global Custodians

Andrew Douglas, DTCC’s Derivatives Repository Ltd

Rafael Plata, EACH

Marcelo Topa, EBA

Soraya Belghazi, ECSDA

Rudolf Siebel, EFAMA

Markus Kaum, EuropeanIssuers

Rainer Riess, FESE

George Handjinicolaou, ISDA

Individuals appointed to represent a common interest: Joël Mérère, representing interests of the T2S community.

Independent experts: Dermot Turing, Klaus Löber, Marcus Zickwolff, Paul Bodart

Observers: Helmut Wacket, European System of Central Banks and Karole-Anne Sauvet-Frot, ESMA.

SEC announced Advisory Committee on Small and Emerging Companies Members

Stephen M. Graham of Fenwick & West & Sara Hanks, CEO of CrowdCheck, will serve as co-chairmen of the committee.  Voting members of the committee are:

Robert Aguilar, CFO & COO, Cabrera Capital Markets LLC,

Xavier Gutierrez, President & CIO, Meruelo Investment Partners,

Brian Hahn, CFO, GlycoMimetics Inc.,

Kyle Hauptman, Executive Director Main Street Growth Project,

Jenny Kassan, Jenny Kassan Consulting,

Catherine V. Mott, founder & CEO, BlueTree Capital Group,

Jonathan Nelson, founder & CEO, Hackers/Founders,

Patrick Reardon, The Reardon Firm,

Lisa Shimkat, State Director, America’s Small Business Development Center at Iowa State University,

Tisha R. Tallman, President & CEO, Georgia Hispanic Chamber of Commerce,

Annemarie Tierney, VP & Head of Strategy & New Markets, NASDAQ Private Market,

Gregory C. Yadley, Partner, Shumaker, Loop & Kendrick LLP,

Laura Yamanaka, President Co-Founder, teamCFO, Inc.

The committee also will include as non-voting members:

Michael Pieciak, Deputy Commissioner, Securities Division, State of Vermont Department of Financial Regulation, & Chairman of the Corporation Finance Section of the North American Securities Administrators Association

Mark Walsh, Associate Administrator, Office of Investment & Innovation, U.S. Small Business Administration

The appointments to the renewed committee are effective until Sept. 24, 2017.  

Stock Exchange of Thailand (SET) announced executives’ appointments and promotions

Effective February 1, Rinjai Chakornpipat is promoted to Senior EVP & Head of Markets Division; Amnouy Jiramahapoka is promoted to EVP & Head of Issuer Marketing Group 1; Paythai Petcharat is promoted to EVP & Head of IT Operations Group; Rungtip Charoenvisuthiwong is appointed as EVP & Head of Issuer Marketing Group 2.

Rinjai Chakornpipat, Senior EVP, will oversee Markets Division, covering Product & Index Development, Customer & Channel and Technology Products Groups.

Amnouy Jiramahapoka, EVP, will be in charge of Issuer Marketing Group 1, under Issuer Marketing Division.

Paythai Petcharat, EVP, will head IT Operations Group after her 11-year experience in SET’s information technology projects.

Rungtip Charoenvisuthiwong, EVP, will oversee of Issuer Marketing Group 2, under Issuer Marketing Division.

Furthermore, there are some executives being assigned and rotated to take new key roles, as follows:

Santi Kiranand, Senior EVP, Issuer Marketing Division

Thirapun Sanpakit, EVP, Information Technology Division

Pataravasee Suvarnsorn, EVP, Market Operations Division

Pannavadee Ladavalya Na Ayudhya, EVP, Corporate Services Division.

Paveena Sriphothong, EVP, Market Supervision Division.

Kirati Kosicharoen, EVP, Customer & Channel & Technology Product Groups, Markets Division

Noppakao Sucharitakul, EVP, the Social Development Group, Sustainable Development Division; and Corporate Communications Department

Since December 17, 2015, Pataravasee Suvarnsorn has been appointed as MD, The Thailand Clearing House Co. Ltd. (TCH); Yupawan Srichainarumitr has been appointed as MD, Thailand Securities Depository Co., Ltd. (TSD).

The British Columbia Securities Commission (BCSC) appointed Peter Brady as Director of Enforcement, & Mark Wang as Director of Capital Markets Regulation.

Walt Bettinger of Charles Schwab: You’ve Got To Open Up To Move Up

Adam Bryant – NY Times

Interview with Walt Bettinger, C.E.O. of the Charles Schwab Corporation.

PLY: Oh, and give your clients a better deal than selling their order flow, some might argue…

Financial Calendar

05.02 – CME Q4 2015 Results

Next week

10.02 – BGC Partners Q4 2015 Results

11.02 – TMX Q4 2015 Results

11.02 – ASX H1 Results for FY16

New! 16.02 – ISE Mercury Launch

New! 11.02 – ASX H1 Results for FY16

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

Share Notes

NASDAQ OMX President Hans-Ole Jochumsen sold 35,000 shares Monday, February 1st at $61.44 (bargain $2,150,400.00).

Other stories

Aquis Exchange Limited – Important Changes To Terms Of Membership

MondoVisione

 

ESMA Publishes Responses To The EMIR Consultation On MPOR Client Accounts

MondoVisione

 

ESMA Updates Its EMIR Q&A

MondoVisione

 

CFTC Commissioner J. Christopher Giancarlo Releases Podcast About 6 Mega-Trends Facing 21st Century Financial Markets

MondoVisione

PLY: Readers may be interested to compare and contrast with my own original “Megatrends of Finance” white paper co authored with Steve Mitchell of Detica ahead of their sponsorship of the SFOA (now ICDA) Burgenstock meeting.

 

Independence, Confidence & Fairness – Speech By Tracey McDermott, Acting CEO FCA @Bloomberg London

MondoVisione

PLY: Wags may be tempted to consider that title in relation to the slightly odd position of Mrs McDermott’s sudden withdrawal from seeking the leadership of FCA before Andrew Bailey was appointed last week. Of course David Cameron delivered a benchmark speech about the reforms he would seek from the EU at the same Bloomberg venue a year or so back, wonder how that’s working out?

 

Do I Need To Worry About Benchmark Regulation? Speech By Edwin Schooling Latter, Head Of Markets Policy, FCA, @ CISI European Regulation Forum

MondoVisione

 

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