February 07 2014

elb2

In many ways it’s a flabbergasting Friday whether it’s the lack of a Volcker rule assessment or perhaps the most remarkable exchange technology contract ever , a candid ‘live with a -37% volume commodity tax impact’ et al… There’s SIP news, tin talks, CCP developments, swaps plus bond data and more, all brought to you in one user-friendly scrollable environment. Perhaps the most fascinating story of the day is Oslo heading for CCP inter-operability. Read on:

Public Markets

Exchanges Spar Over Data System (subscription)
Wall Street Journal

U.S. exchanges are at loggerheads over the maintenance of a SIP.

PLY: I am not sufficiently briefed to take sides here but I see one major flaw straight off: Committee.

Cast your mind back. Did the Politburo Committee do a really spiffing job winning the cold war? Or indeed do various committee based organisations really run markets more efficiently than for profit entities? There are doubtless valid statements on all sides but the core is that the US market structure is endeavouring to centrally plan the structure and, just like the Politburo, it has failed. Spectacularly.

Cash Equities Clearing House EuroCCP Loses Market Share (subscription)
Financial Times

EuroCCP, Europe’s largest cash equities clearing house, has lost market share in the past year as competition and structural change continued to overhaul the market.

The enlarged group lost out in part to SIX Group’s x-clear, which along with EuroCCP and LCH.Clearnet, has emerged as one of the winners from a European initiative to reform the market.

PLY: Perhaps I missed something but this article seems to suggest EU stock volume was flat 2012 to 2013 at 9.8 million trades? Moreover, EuroCCP lost 4% market share but retained 45% of volume. Hmmm, okay growth is good, any decline is bad but does this really represent a huge decline when the other major players at LCH.Clearnet and x-clear are smaller? Not great news for EuroCCP post EMCF merger but hardly disaster. All to play for in EU equities CCP.

ICE Clear Europe – NYSE Liffe Post-Trade & Clearing Systems Migration
ICE

A document to describe the approach, plan and milestones that relate to the rationalisation of the post trade and clearing systems between the London markets of NYSE Liffe and ICE Clear Europe.

FMC To Allow Trading By Bourse Shareholders
Business Standard

FMC, is in the process of relaxing curbs to help brokers with a small shareholding in an exchange to start trading on it.

Chairman Ramesh Abhishek: “We feel brokers with up to two per cent or some such percentage can be allowed to trade as long, as they have no say in the management or on the board.”

In the case of MCX, at the time of its public issue, brokers with less than one per cent shares were allowed to trade on it but that was an exemption due to an IPO.

PLY: Progress from a base of extraordinary red tape which needs to be subject to wholesale amendment. At least it isn’t an Indian committee running the American SIP.

Regulators “Don’t Give A Damn” About Volcker Impact, Claim Republicans (subscription)
Risk

A bad-tempered congressional committee hearing sees US regulators quizzed over Volcker rule costs

US regulators did not conduct a formal cost-benefit analysis in considering the Volcker rule, the chairman of SEC admitted yesterday, arguing the proprietary trading ban was promulgated under a statute that did not require an analysis of its impact.

PLY: Oh hold on a second, I may be about to reverse my last statement, US regulators seem to be pushing their Indian counterparts at least to a draw. Then again which is worse – US with no impact assessment on Volcker Rule or the EU pushing an FTT when its own reports expressly note how damaging it will be?

India – FMC: Investors Will Have To Live With Commodity Transaction Tax
The Financial Express

The government isn’t planning to roll back a transaction tax on select commodity derivatives despite a 37% plunge in exchanges’ turnover until mid-January this fiscal from a year before.

PLY: So allowing brokers holding shares to trade in that exchange is a payoff for a swingeing transaction tax which is making India’s commodity markets utterly inefficient when there are often struggles to feed the nation. Very sad.

Madoff Ex-Aide ‘Corporate Psychopath’ Defense Challenged
Bloomberg

A former Bernard Madoff executive on trial for aiding his $17 billion Ponzi scheme should be barred from calling a witness on “corporate psychopaths” to claim he was relentlessly manipulated, prosecutors said.

Private Markets

FINRA To Provide Market Surveillance For BATS Global Exchange (subscription)
Wall Street Journal

FINRA has signed a deal to take over market surveillance of BATS Global Markets, giving the regulator the ability to track about 99% of all U.S. stock trading for market abuse and other trading problems.

Oslo To Offer Clearing Choice From Next Month (subscription)
Financial News

In a first move for interoperability. Oslo Børs, will offer members the ability to process trades through LCH.Clearnet, the international clearing house majority owned by LSE, in addition to its existing provider Oslo Clearing from next month.

PLY: Fascinating insofar as it works well for smaller entities such as Oslo but at a higher level of total inter-operability could be much more challenging in terms of managing total risk. This is an intriguing experiment demonstrating Oslo’s desire to innovate.

Shanghai SE Promotes Regulatory Transformation To Activate Blue Chip Market
MondoVisione

PLY: Mostly platitudes as opposed to deliverable workflow. Exhortations to be open, transparent, well regulated, promote corporate governance, encourage blue chip investment etc…

Hard Times For A Bitcoin Evangelist (subscription)
Wall Street Journal

“2014 will be like the Industrial Revolution for bitcoin,” Mr. Shrem said in an interview Wednesday at his lawyer’s office in Manhattan, one of the few places to which he can travel while serving house arrest.

“Satoshi is like Columbus—he gave us the new world. Now we have to build the bridges, roads, tunnels, synagogues and churches,” he said.

Mr. Shrem also dismissed bitcoin’s complicated nature, saying people don’t have to understand all its intricacies to appreciate its ability to speed up commerce. “You don’t know how every nut and bolt work on a car, but you can still drive.”.

HFT Service Provider Accepts Bitcoin Payments (subscription)
Financial Times

Perseus Telecom, which develops HFT tools will accept the controversial digital currency for its services worldwide and process transactions with GoCoin, the payment platform.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX is flat, FTIL off 3% as the week closes out. Stake cut decisions loom large and broker Hawala transfers suggest AML or at least transfer charges may strike brokers soon.

MCX Board Meet On Friday To Take Call On FTIL’s Stake Cut
Moneylife

MCX has been given time till 10th February to submit a time-bound action plan to ensure its promoter FTIL cuts stake in the Exchange to 2% and its board will meet 7th february to decide on options.

EOW Finds Rs.100 Cr (USD 16.04 Mln) Hawala Deals
Livemint

EOW of Mumbai Police on Thursday said at least Rs.100 crore (USD 16.04 mln) had been transferred to Dubai through hawala transactions in connection with the payment crisis at NSEL.

The agency has informed the enforcement directorate, which investigates foreign exchange violations, about the money flow in the NSEL case.

PLY: Once again the EOW are on the trail, even though this money will be harder to retrieve.

Police Begin Forensic Audit Of NSEL Brokers
Business Standard

The economic offences wing of the city police, investigating the NSEL scam, has started forensic audits of the accounts of brokers which traded on the platform.

Heavy Cost For MCX-SX In FTIL Separation
Business Standard

MCX-SX has a problem on its hands in proceeding with the direction it has got to downgrade ties with FTIL, the promoter entity

A large part of the business link with FTIL is a licence to use technology software for trading on the exchange platform developed by the latter. There is a heavy cost for cancellation of the contract.

Insiders say FTIL’s contract with MCX-SX and the exchange’s clearing corporation is for 33 years and about five years are over. The amount payable to FTIL by both companies together is about Rs 27 crore (USD 4.33 mln) a year per company. The termination clause, says a source, specifies the exchange must pay double the amount for the remaining years of the contract to FTIL.

PLY: 33 years? Any director who signed this contract off is surely culpable of some form of mega-gross-uber-negligence. There needs to be some form of crackdown on their ‘fit & proper’ status on this basis alone (presumably FTIL board reps didn’t vote as they had a conflict of interest?). All that effort to regulate exchanges and the regulators presumably read the minutes and allowed this contract? This is not a contractual issue, it’s a farce.

Technology

New CEO Lane Promises Major Changes At Trading Technologies
waters technology

Rick Lane left his job as principal architect at Trading Technologies (TT) for Google in 2011. A little more than two years later, he was put in charge of the Chicago-based software vendor, which counts 19 of the world’s top 20 futures brokers among its customers.

PLY: Delivering major changes in a company where the major shareholder has just stepped up to being Chairman will be an interesting exercise for the company and especially Rick Lane and Harris Brumfield.

Nepse To Adopt Fully Automated Trade Platform
ekantipur

Nepal SE (Nepse) has a target of having an entirely online trading system by the next fiscal year and has called for expressions of interest (EoI) to hire a consultant. Interested firms have been given two weeks to apply, and the selection will be done through public procurement procedures. Nepse said that it would invite foreign companies to apply in case eligible domestic bidders were not found.

Nepse General Manager Sitaram Thapaliya said that they would decide whether to upgrade the existing system or install a new one after hiring a consultant.

PLY: Upgrading the current COMDAQ system would be the simplest solution to facilitate NEPSE’s ambitions. The upheaval cost alone of a new system is considerable as well as the time required.

Speed Traders Get An Edge (subscription)
Wall Street Journal

High-frequency traders have been paying Business Wire and MarketWired to get direct access to market-moving news releases, a practice that can give firms the ability to trade fractions of a second ahead of less fleet-footed investors.

Can Europe’s Digital Agenda Spur Capital Markets Public Cloud Adoption?
Wall Street & Technology

According to a recent survey conducted by OneMarketData, “Is Cloud Technology Gaining Momentum in Capital Markets?“, the benefits of lower technology costs, rapid scalability, and solution flexibility have been obscured by security, performance, and vendor flexibility concerns.

NASDAQ OMX Nordic Order Routing: New Strategy DCAP
NASDAQ OMX

DCAP enables posting of Limit priced Day and Good-till-Cancelled orders to Oslo Børs for continuous trading as well as participation in auctions on Oslo Børs in Norwegian shares admitted to trading at NASDAQ OMX Stockholm.

Direct Away Market Access Via NASDAQ OMX Exchange & Clearing Services AB’s Technical Service
NASDAQ OMX

The Direct Away Market Access enables

– the use of direct routing strategies
– the use of the on-behalf-of functionality

Changes To Post Trade Counterparty Visibility In NASDAQ OMX Nordic Blue Chip Shares, And Improved Transparency In Trading Statistics
NASDAQ OMX

NASDAQ OMX Nordic will introduce a new voluntary post trade counterparty visibility model for blue chip shares.

Products

CME Is ‘On Track’ With Aluminum Contract As Premium Trade Surges
Businessweek

CME is “on track” to start a physically settled aluminum futures contract and is considering introducing other metals products.

SKOFX Launches Corn Futures Contract
The International

South Korea Options and Futures Exchange (SKOFX) announced that they have signed an agreement to license benchmark corn futures settlement prices and to create a new SKOFX cash-settled corn futures contract.

Tin, A tale Of Two Exchanges
Reuters

This March the Indonesia Commodities and Derivatives Exchange (ICDX) will host a conference to drum up international interest in its recently launched tin contracts.

The official theme of the meeting will be “Guaranteed Supply and Guaranteed Quality”.

Seasoned watchers of the international tin market might be forgiven for raising an eyebrow at that title.

PLY: I could not have surmised it more neatly myself – a perfect mot juste.

Indexes

Eurex Rejects Calls To Void DAX Futures Trade After Halt
Reuters

Europe’s leading derivatives exchange rejected requests to void trades made during an abnormal plunge in German equity futures shortly after the ECB announced its latest rate decision.

Trade in the front-month March futures contract on the blue-chip DAX index was halted after it fell 2 percent in the space of a minute, a move that some in the market attributed to human error, known as a “fat finger”.

MarketAxess Starting Index To Measure European Bond Liquidity
Businessweek

The European Bid-Ask Spread Index will compile prices of investment-grade and high-yield company bonds in euros and pounds using pricing data from Xtrakter, which MarketAxess bought in March and last year monitored more than 69,000 bonds.

Career Paths

The new NASDAQ OMX Austin, Texas office will be overseen by Cris Farrell, VP and Head of Sales, U.S. West, Corporate Solutions, NASDAQ OMX.

Financial Calendar

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

Next week
ICE Q4 and full year 2013 results
BGC Partners Q4 2013 results
EMIR Deadline
Thomson Reuters Q4 2013 results
ASX 2014 half-year results
Record date MarketAxess $0.16 quarterly dividend
Financial Technologies Q3 results

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

Share Notes

Interactive Brokers Group CFO Paul Jonathan Brody sold 8,604 shares Tuesday, February 4th at an average price of $20.90 (bargain $179,823.60). Mr. Brody’s regular sales are chronicled on this specific page.

Charles Schwab major shareholder Charles R. Schwab sold 250,000 shares Wednesday, February 5th at an average price of $24.02 (bargain $6,005,000.00). He now owns 1,325,250 shares. Mr. Schwab’s regular sales are chronicled on this specific page.

GFI Group major shareholder Michael Gooch sold 100,000 shares Wednesday, February 5th at an average price of $3.66 (bargain $366,000.00). He now owns 193,024 shares. Mr Gooch’s regular sales are chronicled on this specific page.

Analyst Notes

JP Morgan Cazenove retains neutral on ICAP, target raised from 344p to 364p
CME “Neutral” Rating Reaffirmed by Zacks – $77.00 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.

Other stories

ISDA Launches SwapsInfo Website
MondoVisione

ISDA announced the launch of ISDA SwapsInfo (www.swapsinfo.org).

ISDA SwapsInfo aims to enhance transparency in the OTC derivatives markets by pulling together in one place a wealth of publicly available data on interest rate derivatives (IRD) and CDS.

CFTC’s Division Of Clearing And Risk Issues No-Action Letter For ASX Clear (Futures) Pty
MondoVisione

CFTC’s Division of Clearing and Risk (DCR) today issued a time-limited no-action letter stating that DCR will not recommend that the Commission take enforcement action against the Australian-based clearing organization, ASX Clear (Futures) Pty Limited (ASXCLF), for failing to register as a DCO under Section 5b(a) of the Commodity Exchange Act (CEA).

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