February 10 2014

elb2CBOE results sparkle, lots of TR talk in all manner of areas, ESMA gets (insufficient) budget increase, multiple tech discussions on exchanges alongside some glitches. A Useful Jeff Sprecher profile alongside news of LIFFE fee reviews (welcome) and LSE investigating LCH.Clearnet IT (logical). CCPs up in arms about IOSCO intrusion and much more.

Happy Monday and welcome to the first Exchange Invest of the week, burgeoning with insights and information on the world of markets:

Public Markets

CBOE Q4 Results

Q4 2013 Financial Highlights

Operating Revenue Increased 9 Percent to $141.8 Million, GAAP Net Income Allocated to Common Stockholders Up 16 Percent to $45.6 Million; Diluted EPS Up 16 Percent to $0.52, GAAP Operating Margin of 51.2 Percent; Adjusted Operating Margin of 51.2 Percent, Up 130 Basis Points

Full-Year 2013 Financial Highlights

Operating Revenue Increased 12 Percent to $572.1 Million, GAAP Net Income Allocated to Common Stockholders Increased 12 Percent to $173.9 Million; Diluted EPS Up 12 Percent to $1.99, Adjusted Net Income Allocated to Common Stockholders Increased 20 Percent to $177.4 Million; Adjusted Diluted EPS Up 20 Percent to $2.03, GAAP Operating Margin of 50.0 Percent; Adjusted Operating Margin of 50.8 Percent, Up 210 Basis Points

PLY: Higher volume, with a slight fillip from a slightly lower tax rate helped CBOE record record Q4 numbers – well done all round to Ed Tilly & team.

Master Of The Markets (subscription)

PLY: A zinger of a Frank Lloyd Wright quotation which inspires Jeff Sprecher:

“Always design a thing by considering it in its next-larger context—a chair in a room, a room in a house, a house in an environment, an environment in a city plan.”

A well-considered resume of the stellar Sprecher career to the present, worth reading.

Clearing Houses Criticise Push For More Transparency (subscription)
Financial Times

PLY: In their haste for control (of everything) there is an industrial sized regulatory class which simply does not appreciate the delicacy of the ecosystems they are now trying to nail down. Whether through bloody mindedness or naivete, there are plans afoot to have all manner of disclosures which will in fact only add to the pressure on the CCP system by allowing big data crunchers to spend all their waking hours searching the least clad emperor in the clearing system, even when that may actually not endanger the system.

ICE Plans Changes To Liffe Trading Schemes (subscription)
FOW Intelligence

PLY: In the miasma of schemes available to traders on LIFFE, frankly a lot are at worst, fusty, many at least require fine tuning. ICE would be mad not to seek results that best benefit the business and not merely ‘incentivise’ some traders to do what they are doing already.

NYSE Liffe Latest To Suffer Technical Glitch (subscription)
FOW Intelligence

NYSE Liffe, became the second European exchange in as many days to suffer a system glitch after some clients were left unable to trade for 80 minutes Friday afternoon.

LSE Lures Second Chinese Member (subscription)
Financial News

LSE has bolstered its membership roster with a second China-based firm, GF Financial Markets (UK) Ltd, which is owned by Chinese securities broker GF Securities, joining its equity and derivatives markets, following in the footsteps of China International Capital Corporation, which joined in May 2011.

LSE IPO Rush Continues (subscription)
Wall Street Journal

After a quiet January, a growing parade of companies is queuing up to list on LSE.

LMEwire To Start Trade Reporting On February 12 (subscription)
Metal Bulletin

As the EMIR deadline approaches, LME members will probably opt to use DTCC, selected as the exchange’s strategic partner for its new reporting service, LMEwire: a new system that has been customised to the needs of the metals market, and is currently being tested by members before its launch.

Changes To Account Segregation Fuel Rising Cost, Credit Concerns (subscription)
Metal Bulletin

Rising costs, eroded margins, reduced or perhaps zero, credit for clients are concerns being voiced by ring dealers as the start date approaches for EMIR.

At the heart of their fears is the ruling that non-segregated account facilities must vanish, replaced by new segregation and collateral requirements. The changes will kick in when the LME’s clearing house, currently LCH.Clearnet and soon to be LMEClear, is re-authorised under EMIR which could happen as soon as April.

SGX Enhances Regulatory Tools
Singapore To Introduce New Trading Rules (subscription)
Financial Times

SGX is enhancing its regulatory tools in line with international standards, by refining its query process and adding new requirements.

Sweeping changes to equities markets are aimed at cleaning up trading practices in the wake of an embarrassing “penny stocks crash” last year.

Singapore Authorities Propose Collateral Requirements For Contra Trading
Shanghai Daily
SGX To Revise Fees For Securities Market

SGX is revising the fee structure for its securities market to make trading more cost-efficient and to facilitate market making and improve liquidity. The revisions to clearing and depository fees will be rolled out from 2 May 2014.

Treasury BondSpot Poland: An Electronic Market In Treasury Securities

Treasury BondSpot Poland has been reauthorized as the electronic market in Treasury securities for the next two competition periods from 1 October 2014 to 30 September 2016.

Industry Fears ESMA Budget Blues (subscription)
Financial News

ESMA will receive a 17% budget increase this year but some industry watchers warn it may not be enough for the regulator to fulfil its ever-increasing duties.

PLY: As discussed for weeks in Exchange Invest. Sadly the oversight system will not be able to cope with the burdens of ongoing regulation unless something gives way and that means big budget increases or fewer rules being applied.

CFTC Has ‘Turned The Corner’ On Swap Data Mess, Says O’Malia (subscription)

The data on OTC derivatives being collected by CFTC is in a sorry state and riddled with inconsistencies that make it difficult for the agency to fulfil its oversight mission, according to commissioner Scott O’Malia. But the commission has belatedly recognised the problem and is taking steps to fix it.

Private Markets

EU Exchanges Plan Intraday Power Market Coupling By End-2014: APX

Europe’s energy exchanges are targeting the end of this year to go live on coordinated cross-border coupling of intraday electricity markets, APX COO James Matthys-Donnadieu said in an energy conference in Brussels.

The goal is to move to the European intraday target model, which would mean having all the order and capacity information for continuous intraday trading going through one system, he said.

Power Exchanges APX, Belpex, EPEX SPOT, Nord Pool Spot & OMIE Agree On The European Cross-Border Intraday Solution

The Power Exchanges APX, Belpex, EPEX SPOT, Nord Pool Spot and OMIE are pleased to confirm the signing of a cooperation agreement for a common European cross border intraday solution. An early start agreement was signed with Deutsche Börse for the delivery of a technical system.

Investors In Indian Commodity Exchanges Flee As Trade Sinks

ICEX is set to fold due to plummeting trading volume as a result of the government’s failure to liberalise and investors retreat from futures markets after a major financial scandal at another exchange last year.

It will be the first to go, in what has become an overcrowded segment since India first allowed futures trading in commodities in 2003.

EI reported on September 12th about a proposal of Universal Commodity Exchange (UCX) to acquire ICEX.

ICEX net worth at the end of FY12 was Rs 36.6 crore (USD 6.78 mln), down from Rs 100 crore (USD 20.59 mln) when it came on stream in the latter half of 2009.

PLY: The rout in Indian commodity exchanges is not unexpected but the lack of vision for the sector remains a worry as Indian regulators have rushed to curtail risk (to their superannuation) as opposed to helping the sector credibly develop the risk transfer tools Indian farmers and producers so desperately require.

NSE Expects 8-10 Listings On Institutional Platform By March
Business Standard

National SE (NSE) said its newly launched institutional trading platform (ITP), which allows start-ups to list without an IPO, is expected to have eight to 10 listings by end March.

Russia Prepares Crackdown On Bitcoin (subscription)
Financial Times

Russian authorities are preparing to crack down on Bitcoin and have warned that those who use “cryptocurrencies” are breaking the law, as regulatory scrutiny of the virtual payment system intensifies around the world.

PLY: Russia has leapfrogged China to become the second fastest growing Bitcoin territor. It is entirely unsurprising he Russians would crack down as they are preparing the Ruble to become free floating in 2015 and therefore will seek to concentrate Russian liquidity in the domestic currency.

Cyprus Central Bank Warns Over Bitcoin Risks
Financial Mirror

The Central Bank of Cyprus has issued its second warning in two months over risks related to virtual currencies, saying that the Bitcoin is not legal tender.

PLY: In other words, the Central Bank of Cyprus would far prefer holders of currency to have Euros deposited in banks so they can have them stolen at will by the EU…

Dividend News

As announced on February 5, 2014, CBOE declared a quarterly dividend of $0.18 per share, payable March 21, 2014 to stockholders of record on February 28, 2014.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX is up 1%, FTIL down nearly 2.5% as the MCX board caps the FTIL vote regardless of stake size and requests for FTIL to divest.

MCX Board Says FTIL Can’t Hold Over 2% Equity In MCX, Caps Voting Rights
The Economic Times

FTIL, 26% anchor investor of MCX, cannot hold more than 2% equity in MCX and its voting rights will be capped at 2% with immediate effect, the MCX board decided in a board meeting held Friday evening.

MCX Tells FTIL To Divest Holding In It

The board of MCX on Friday asked FTIL to divest its current holding of 26% in the exchange and bring it down to 2%, in keeping with an order passed by the commodity markets regulator FMC.

FTIL To Contest MCX Directive
The Hindu

FTIL, on Saturday, refuted the directives of MCX to reduce its stake in the commodity exchange from around 26 per cent to below 2 per cent as prescribed by FMC.

NSEL’s Settlement Talks On With Borrowers; Size Of ‘Haircut’ The Issue
Business Standard

Settlement talks between NSEL and its second largest defaulter, ARK Imports, are locked over the size of the “haircut”.

With a payment obligation of Rs 719 crore (USD 115.6 mln), ARK, a Ludhiana-based raw wool importer, sought a 21 per cent cut in the amount owed, saying it could pay Rs 570 crore (USD 91.7 mln); NSEL has refused. ARK is scheduled to meet NSEL officials again on Tuesday.


LSE Eyes LCH.Clearnet Tech Revamp (subscription)
Financial News

LSE and its MillenniumIT subsidiary are reviewing the technology that underpins LCH.Clearnet, the international clearing house in which it bought a majority stake last year.

Nasdaq Opts For Nordic Anonymity In Boost For HFTs (subscription)
Financial News

Nasdaq OMX is to depart from an old Nordic tradition next month by introducing the option of trading anonymously on its European exchanges.

The Scramble For Exchange Deals
Financial News

PLY: Financial News do a good job in mapping out the major technology deals that Nasdaq OMX and MillenniumIT have with exchanges and clearing houses across the world. We have additional database resources in this area if clients are interested.

At The Cutting Edge Of Exchange Technology (subscription)
Financial News

For modern stock exchange groups a strategic focus on technology is essential. Over the past decade, global financial markets have grown in complexity, with many firms now relying on speed to make money from trading.

A Fair Exchange Of Labour?
Futures & Options World

Common technology platforms enable efficient markets, but buying systems from potential competitors has raised concerns about conflicts of interest.

PLY: I see I am quoted in passing (slightly out of context) on a tranche of my remarks at the last MondoVisione Exchange Forum amidst this fairly inconclusive welter of ‘he says, she says’ remarks.

N2EX Introduces Free RSA SecurID Software Tokens For All N2EX Members

From March 1st, N2EX members will be able to switch from their current physical RSA Tokens to software based RSA authentication to access the CONDICO & SAPRI platforms.


CME To Launch Euro-Denominated Deliverable IRS Futures

CME announced it will launch Euro-Denominated Deliverable IRS Futures (Euro DSF) contracts on April 14, 2014, pending CFTC review.

CME Delays Launch Of Japanese Index Options (subscription)
FOW Intelligence

CME has delayed the launch of its Japanese index options products following a period of high activity in its dollar denominated Nikkei futures.


NSE To Launch Futures Contracts On India VIX
Business Standard

National SE (NSE) has decided to launch futures contracts on India VIX – a volatility index based on the index options prices of CNX Nifty.

Trading in India VIX futures will begin from 26 February 2014.

MOEX Updates Methodologies For Its Equity Indices

On 4 February 2014 MOEX approved changes to the methodology used to calculate the Broad Market, Second-Tier, Blue-Chip, MICEX Innovation and Sectoral Indices.

Career Paths

Peter Nessler Jr. quit as president and CEO of FCStone LLC, the company’s FCM subsidiary, according to a regulatory filing. Nessler, who joined the company in 1982, also left his job as EVP of commodities for NY based INTL FCStone effective Feb. 1.

Financial Conduct Authority (FCA) appointed James Kelly as an adviser in the wholesale banking and investment management division within Supervision.

Financial Calendar

This 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
MCX Q3 results
Financial Technologies Q3 results

Next month – new announcement

Dubai Financial Market – Ordinary Annual General Assembly Meeting Monday 3rd March 2014

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

Share Notes

Charles Schwab major shareholder Charles R. Schwab sold 150,000 shares Thursday, February 6th at an average price of $24.25 (bargain $3,637,500.00). He now owns 1,325,250 shares Mr. Schwab’s regular sales are chronicled on this specific page.

Analyst Notes

TMX Price Objective Hosited By RBC Capital From C$46.00 To C$50.00 – Underperform Rating
ICAP “Hold” Rating Restated At Societe Generale – GBX 375 Target Price

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.


Lendico Launches P2P Lending In Spain
Wise Clerk

German p2p lending service Lendico will launch tomorrow in the Spanish market. Maximum possible loan amount is 25,000 EUR, offered at between 6.29% and 25% APR.

Other stories

NASDAQ OMX’s GlobeNewswire And OTC Markets Group Announce Enhanced News Distribution for OTCQX, OTCQB & OTC Pink Companies
Nasdaq OMX

NASDAQ OMX’s GlobeNewswire & OTC Markets announced a strategic agreement that integrates GlobeNewswire’s press release service with OTC Markets’ OTC Disclosure & News Service, providing seamless connectivity & expanded news distribution options for OTCQX, OTCQB & OTC Pink companies.

The Regulatory Pressure Cooker: Compliance Moves Into The Boardroom
Wall Street & Technology

The task of complying with regulations in financial services is getting harder. Compliance is threatening companies’ ability to grow.

Commodities Traders Take Aim At Rule To Limit Speculation (subscription)
Financial Times

Some of the world’s biggest commodities traders will take a strong line against a new plan to limit market speculation, arguing it would derail the everyday business of buying and delivering shipments of grain, oil and metals.

A lobby group representing companies including Archer Daniels Midland, BP, Cargill and Louis Dreyfus Commodities intends to file a sweeping critique of the “position limits” rule proposed by CFTC in formal comments due on Monday, according to a draft letter seen by the FT.

PLY: First round in the USA before the same battle moves to Europe where, once again, political populism encroached into a serious legislative process q.v. Mifid II.

CPSS-IOSCO Post Responses To Consultation On Quantitative Disclosure By CCPs

IOSCO published today the comment letters to the CPSS- IOSCO consultative document on the Public quantitative disclosure standards for central counterparties, which was published on 15 October 2013. Eighteen comment letters were posted to the IOSCO website.

PLY: See news story above concerning the absolutely accurate concerns of CCPs concerning the garnering of yet more data that regulators won’t be able to cope with and which hedge funds will comb to find any form of weakness, real or perceived. I remain to be convinced this is anything other than a very foolish piece of regulatory intermediation.

Feasibility Study On Approaches To Aggregate OTC Derivatives Trade Repository Data

G20 Leaders agreed, as part of their commitments regarding OTC derivatives reforms, that all OTC derivatives contracts should be reported to TRs. A good deal of progress has been made in establishing the market infrastructure to support these commitments.

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