February 09 2015


It’s last call ladies and gentlemen, if you want to buy GFI, ring Mickey Gooch now! Nasty repricing leaves Saxo under fire once again while elsewhere Indian corporate governance is questioned over proposed forcible merger of NSEL into parent FTIL. Broad Street slimming for NYSE while John Romeo leaps to head of US for Oliver Wyman. Well done, John! All this and more in today’s free Exchange Invest Daily, brought to you via a train to Frankfurt ahead of tomorrow’s e-finance conference better known as “Gomberfest.”

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) updated daily when news arises. All briefs can be found on our dedicated Briefs page on the Exchange Invest Premium website.

Latest briefs include:

HKEx – SSE – Stock Connect Brief Part 1
HKEx – SSE – Stock Connect Brief Part 2
AFET TFEX Merger Brief
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

CBOE Q4 2014 Financial Results

Q4 2014 Financial Highlights

Operating Revenue Increased 17% to $166.5 Million; Diluted EPS Up 12% to $0.58; GAAP Operating Margin of 52.2%; Adjusted Operating Margin of 53.4%, Up 220 Basis Points

Full-Year 2014 Financial Highlights

Operating Revenue Increased 8% to $617.2 Million; Diluted EPS Up 11% to $2.21; GAAP Operating Margin of 50.8%; Adjusted Operating Margin of 51.6%, Up 80 Basis Points.

PLY: Encouraging numbers from CBOE.

Gooch Hustles For Other GFI Bids As Lutnick’s Takeover Looms
Zeke Faux & Matthew Monks – Bloomberg

Mickey Gooch isn’t ready to sell the interdealer brokerage he founded 28 years ago to his longtime rival, Howard Lutnick.

Lutnick is close to winning the support of 45% of shareholders, the amount he said his BGC Partners needs to complete a hostile offer for Gooch’s GFI Group. Now Gooch is reaching out to competitors ICAP and Tullett Prebon in an attempt to find an alternative.

PLY: Given that GFI was long looking for funding, it is a little challenging to believe that a better bid will somehow emerge in the short term. However perhaps Mickey Gooch can succeed…

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

Numis: Aberdeen May Make £900m Russell IM Bid
Dan Jones – Investment Week

Aberdeen Asset Management may be among the bidders for Russell Investment Management, the $260bn asset manager put on the block by LSE, according to “speculative” analysis from Numis.

PLY: LSE bought Frank Russell from insurer Northwestern Mutual last year for $2.7 billion…rem all my previous thoughts on whether a sale as a whole was the best approach for NorthWestern and now watch what may become a bidding frenzy break out…

Read our daily updated Premium brief: LSE – Frank Russell Deal Brief.

Saxo Bank Takes Hard Line On Clients’ Swiss Franc Losses (subscription)
Tommy Stubbington & Chiara Albanese – Wall Street Journal

When SNB suddenly let its country’s currency rocket on Jan. 15, Pawel Jaworski, a welding engineer from Elblag, Poland, was a loser.

Using an online account with Copenhagen-based Saxo Bank A/S, Mr. Jaworski had bet the Swiss franc would fall. He closed his trade with a loss of €1,000 ($1,148). “I thought, ‘I’m not the winner, but it could be worse,’” said Mr. Jaworski.

It was.

That evening, Mr. Jaworski, 38 years old, checked his account again. Saxo had changed the price at which his trade was executed. He was out an additional €2,000. “This is two or three months’ wages; this is money that I don’t have,” he said.

Saxo said any losses are its clients’ fault. It said its business terms explicitly grant it the right to revise prices after trades have been closed. “I think it was a fair way of dealing with it,” said Steen Blaafalk, Saxo’s chief financial and risk officer. “Clients that lost money can blame us, or they can blame themselves.” Saxo said it doesn’t comment on individual clients.

Saxo Bank was forced to admit last month that it was likely to suffer losses after SNB’s move.

Read Bronte Capital’s John Hempton remarks regarding Saxo Bank here and here.

Read our Premium brief: FX – CHF Crisis – Brief

PLY: I have some sympathy with Mr Jaworski but at the same time he risked money he could not afford to lose. However, I think Saxo have driven a coach and horses through the spirit, at the very least, of the regulations – this is a disgusting farago. The idea that forex was the world’s most perfect, liquid market was immolated on the day of the SNB’s remarkable ‘unpeg.’ Moreover, there remains an air of unease about Saxo in the current market. It was slow to acknowledge losses yet seems to have cracked down hard on creditors and repriced with gusto, looking at this case…that all suggests a business which may be under significant pressure in terms of capital. Of course they may be in rude health, well excepting already announced losses of $100 million or so, but Saxo do not appear to be convincing the market they are other than in a precarious position currently and that is clearly a cause for concern. (Oh and yes, I do wonder how many clients have encountered a favourable reprice, even in the years before the CHF crunch?).

Regulators need to be out and about right now ensuring that the first fill is the price at which deals are held – this nefarious repricing is a scandal and must be stopped. Meum dictum est meum pactum – even if it brings tears to the brokers’ eyes…

European Regulatory Uncertainty Proves Nice For ICE (subscription)
James Rundle & Tim Cave – Financial News

ICE has extended the opening hours of its US clearing house to cater for a surge in European demand, as regulatory delays force swap positions held by firms in the EU to migrate to the US for clearing.

NYSE Giving Up Broad Street Home In Cost-Cutting Move
Lois Weiss & Kevin Dugan – NY Post

ICE has given notice that the NYSE will vacate 381,000 square feet at 20 Broad St. when its lease expires in August 2016, brokers at CBRE said under condition of anonymity.

NYSE had the right to extend the term of the sublease until 2041.

ICE has been cutting costs since the $8.2 billion acquisition of NYSE Euronext in 2013.

PLY: ICE concentrates NYSE on 11 Wall Street but rids itself of extraneous CBD property costs – sensible.

Private Markets

BSE To Start Its Commodity Exchange By Next Fiscal Year
Business Standard

BSE’s CEO and MD Ashishkumar Chauhan said that SEBI has already permitted BSE’s foray into commodity trading through its own exchange. Since commodity trading in India is regulated by FMC, BSE is now awaiting the Commission’s nod.

Bitcoin Panel Seeks New Take On Regulation At New Jersey Hearing
Stan Higgins – CoinDesk

A group of nine business owners and legal experts pitched a panel of New Jersey legislators this week on why they should make the Garden State a hub for bitcoin development.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX is flat, FTIL down 2%.

Did FMC Bosses Go Out Of Their Way In Recommending Merger Of NSEL-FTIL?
Tarun Nangia – dna India

The draft order for merger of NSEL with FTIL, mooted by the Ministry of Corporate Affairs (MCA) on the sole recommendation of FMC sets a dangerous precedent. The government has never used Section 396 of the Companies Act to merge two companies and use to the assets of one company to pay of the liabilities of other. The merger also deals a serious blow to the corporate culture by shaking one of the rudimentary principles of limited liability, on which the entire corporate edifice rests.

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

PLY: Once again Yip, Yip and thrice Yip, this is a dangerous, confiscatory precedent borne out of the incapacity of the system to administer an existing welter of laws and regulations. Some say the system is corrupt, I can certainly see an absence of competence. Forced merger is a dismal solution which will haunt India in the future.

NSEL Scam: Accused Firms Traded Just On ‘Paper’, Says ED Report
Business Standard

Trading activity at the scam-hit NSEL was just being done on “paper” by accused firms as they allegedly laundered genuine investor funds to not only purchase costly properties but also for advertising expenses and settling personal loans, according to the ED.

PLY: So sue them, sell the property EOW holds and let’s get a resolution thing going…

Setback For FTIL As SC Rejects Plea Against FMC
Indu Bhan – Financial Express

In a setback to FTIL, the Supreme Court on Friday refused to entertain its petition seeking a stay on FMC that declared the firm unfit to run exchanges and asked it to divest its shareholding in MCX.


Bolsa Mexicana de Valores Selects Nasdaq’s SMARTS For Market Surveillance Efforts

BSE To Be 10,000 Times Faster In Next 3 Years: CEO Ashish Chauhan
Avinash Nair – Financial Express

Emphasising that “speed and execution” were the essence of stock exchange business, Ashishkumar Chauhan, MD and CEO of Bombay SE (BSE) on Friday said BSE under him has become 10 times faster than it’s rival the National SE. In the next three years, BSE plans to become 10,000 times faster.


CBOE Set To Expand VIX And SPX Options Trading Hours In Early March

CBOE will expand trading hours for both CBOE Volatility Index options (from March 2) and S&P 500 Index options (from March 9th), adding more than six hours of additional trading five days a week.

The expanded trading hours for VIX and SPX options at CBOE will run Monday through Friday, beginning each day at 2:00 a.m. CT and ending at 8:15 a.m. CT. The 2:00 a.m. CT start in Chicago syncs with the 8:00 a.m. open of trading in London.

Nasdaq Nordic To Introduce CCP Clearing For Danish, Swedish Mid-Cap Shares (subscription)
John Brazier – Waters Technology

Nasdaq Nordic has responded to growing interest from international brokers in the Nordic markets by announcing the introduction of a CCP clearing house for mid-cap shares in Denmark and Sweden.

FINRA Requests Comment On Proposal To Require Alternative Trading Systems To Submit Quotation Information Relating To Fixed Income Securities To FINRA For Regulatory Purposes

Career Paths

ASX announced the appointment of Ms Yasmin Allen as a NED of the company.

FOW reports that SGX is to lose one of its top international salesmen as Jon Cantouris has quit.

Oliver Wyman is pleased to announce that John Romeo has been named Managing Partner for North America, effective January 1, 2015. He is based in New York.

PLY: Congratulations to John Romeo on his elevation.

Hong Kong’s Securities and Futures Commission (SFC) welcomed the appointment by the Financial Secretary of Ms Julia Leung as Executive Director of the Investment Products Division for a three-year term effective from 2 March 2015.

Three new Chairmen for the FCA’s independent Practitioner Panels have been appointed.

The appointments, which come into effect from 1st April 2015, are:

FCA Practitioner Panel – Alison Brittain, Group Director of Retail, Lloyds Banking Group
FCA Markets Practitioner Panel – Robert Mass, Head of International Compliance and global head of Securities Division Compliance, Goldman Sachs
FCA Smaller Business Practitioner Panel – Clinton Askew, Director, Citywide Financial Partners

Each appointment is for a term of two years.

Alison Brittain, Robert Mass and Clinton Askew will succeed Graham Beale, Paul Swann and Andrew Turberville Smith respectively.

ESMA Vacancy Notice – SNE – Markets Profile (Deadline: 22/02/2015)

Please see the vacancy page for further information.

Financial Calendar

This week

BGC Partners’ Q4 And Full Year 2014 Financial Results
Thomson Reuters Full-Year And Q4 2014 Earnings
Markit Q4 & Full Year 2014 Financial Results
Record Date MarketAxess $0.20 Quarterly Dividend

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

Share Notes

ITG insider Peter A. Goldstein sold 5,000 shares Thursday, February 5th at an average price of $22.07 (bargain $110,350.00).

Analyst Notes

ICE Price Objective Raised By Deutsche Bank From $235.00 To $247.00 – “Hold” Rating
ICE Price Objective Raised By Barclays From $253.00 To $256.00 – “Overweight” Rating
CME Price Target Upped By Citigroup From $94.00 To $100.00 – “Buy” Rating
RBC Capital Lowered Their Price Target On TMX From C$54.00 To C$48.00 – “Underperform” Rating

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

Address By CFTC Commissioner J. Christopher Giancarlo Before The ABA Business Law Section, Derivatives & Futures Law Committee Winter Meeting – A Pro-Reform Reconsideration Of The CFTC Swaps Trading Rules

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