February 10 2015

elb2

Greetings from Frankfurt where as I ‘pithify’ today’s EI, I am in a hotel lounge listening to (aka unable to avoid hearing!) conference calls discussing stresses from a counterparty evidently with issues pertaining to their clearing and settlement. I’ll spare blushes but presumably somebody is being paid to undertake a conference call in public which is clearly audible? There was me thinking big global custodians were the epitome of privacy and confidentiality…

N.B. Exchange Invest is entirely discrete and never names sources relating to any off the record information but those broadcasting data in public are a cause for concern.

Anyway, it’s the Frankfurt e-Finance Lab Spring Conference today where I look forward to seeing many of our German readers this afternoon and chairing a panel on HFT and related issues.

In today’s Exchange Invest daily, Chinese equity options are go – and I bet most readers didn’t even feel the earth move. NY Bit Licence appears to make a lurch towards reality and not reaction, Bulgaria still wants to privatize its exchange to a major player prompting a likely surge in “fat chance’ futures. SEFs struggling with carpet bumps spread across 20+ platforms, while LME is struck between a warehouse and a hard Senate. Does the Delhi state election infer an acceleration of an NSEL resolution? Who fancies a BADeX baseball cap?

All this and more in today’s free daily Exchange Invest.

Meanwhile, in Premium Posts, there are several new Premium Briefs to remind you of various issues in the industry 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, Part 2 and Part 3
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

ICAP – Trading Statement
ICAP

Group revenue for Q3 to 31 December 2014 1% lower than the same period last year on a constant currency basis, 2% lower on a reported basis. ICAP focused on delivering its cost savings programme and is on track to reach the target of £43 million for the current year and at least £60 million on an annualised basis.

Bulgarian State Starts Selling The Stock Market
Focus News

The government is bracing for its third attempt at selling the Bulgarian SE (BSE-Sofia). The government intends to sell BSE-Sofia by the end of the year together with the Central Depository.

The purpose of the sale is to make BSE-Sofia part of a bigger foreign market. DB1 expressed interest in the deal last year. The Bulgarian Ministry of Finance owns 50.05% of the capital of BSE-Sofia and 43.7% of the capital of the Central Depository. However, BSE-Sofia has a 6.61% share in the Central Depository. Therefore, the future buyer will control more than 50% of the capital of both companies. Apart from DB1, Vienna SE, LSE, and even the Warsaw SE were rumoured as potential strategic investors. However Warsaw is state-owned and cannot buy BSE-Sofia for that reason.

PLY: DB1 may buy to protect their IT contract but that seems an expensive option. The fundamental problem remains that the Bulgarian government is convinced it must sell to an existing exchange group but it simply does not fit within any existing group and the listed companies will be loathe to embark on a new strategy of buying a small business by their standards which could provide more headaches than upside. This is a lovely morsel for a suitable PE or similar buyer but the Bulgarian government appear unwilling to speak to any strategic shareholder, even those who may grow the market considerably. This ‘become a bit of a big bourse’ strategy is a shame, as the Bulgarian economy, not to mention the exchange itself, are the losers here.

HKEx Weighs Expanding Eligible HK Stocks For Chinese Investors -CEO
Reuters
HKEx Discusses Positioning Of Hong Kong’s Financial Markets & Its Role
HKEx

HKEx is considering expanding the number of Hong Kong stocks Chinese investors will be able to buy as part of the Hong Kong-Shanghai stock connect programme, CEO Charles Li told reporters at a briefing on Tuesday.

Read our Premium Briefs: HKEx – SSE – Stock Connect Brief Part 1, Part 2 and Part 3.

LME’s Planned Warehouse Crackdown May Drive Metal Off Radar
Eric Onstad – Reuters

A new layer of tough rules proposed by LME for operating warehouses may boost costs and drive more metal out of the regulated system and into unregistered depots.

The plan would give LME sweeping regulatory powers to determine whether warehousing firms are behaving badly, even if they are not technically breaking the rules.

PLY: LME faces a catch 22. The users don’t much like regulation but the political classes, particularly those with a propensity to cluster in Washington D.C. will pursue the exchange mercilessly. As an analogy, tap dancing in a minefield, springs to mind.

SEFs Face Reckoning With Unintended Consequences Warns Report
Elliott Holley – Banking Technology

Like opening Pandora’s box, the emergence of SEFs in US derivatives markets has brought unexpected consequences and problems as well as benefits. In some cases, asset managers are actively looking to avoid trading on the new platforms and even turning to other asset classes, according to a new report by OpenLink.

PLY: The strap line for Dodd Frank could easily be ‘how to feed the hounds in several thousand pages and more.’

Read our Premium post: On Bonds & SEFs

Time Of Upheaval For Forex Markets (subscription)
Joel Clark – Financial News

Just a few months ago, foreign exchange traders were bemoaning an almost total absence of volatility from major currencies.

PLY: A classic “Be careful what you wish for” NDF has turned forex from dull but apparently a wondrous market to being rightly ridiculed as a farce which needs comprehensive reform to turn it into, well, a market.

Private Markets

Sebi Allows BhSE To Exit Bourse Business
The Economic Times

Sebi allowed Bhubaneswar SE (BhSE) to exit from the stock exchange business, after it settled its liabilities and complied with the necessary conditions.

BADeX Seeks Partners
Nkole Mulambia – Daily Mail Zambia

Bonds and Derivatives Exchange Zambia (BADeX) is seeking a local and foreign strategic financial partner to invest in long-term finance in the exchange.

Newly-appointed BADeX CEO Peter Sitamulaho said the partner is key, as the investment will be used to expand the activities of the exchange.

PLY: Dear BADeX, Exchange Invest and DV Advisors seek to partner on your clothing franchise and will happily also undertake our usual suite of market development operations for you too…

Investors Fear HK$3b (USD 387 Mln) Losses In Closure Of Bitcoin Trading Company (subscription)
Samuel Chan – South China Morning Post

The sudden closure of a Hong Kong-based bitcoin trading company may have left as many as 3,000 local investors with combined losses of HK$3 billion (USD 387 mln).

Lawmaker Leung Yiu-chung was approached by about 30 concerned clients of MyCoin, who will file reports to the police on Wednesday on the grounds that deception was involved in a pyramid-style Ponzi scheme packaged as bitcoin trading.

The HK$3 billion figure is based on an earlier statement by the company that it had 3,000 clients in Hong Kong, each investing an average HK$1 million (USD 129k).

New York State Department Of Financial Services: Revised BitLicense Regulatory Framework
MondoVisione

PLY: A new 30 day consultation window is open but there is welcome clarification, miners, merchants using Bitcoin and software developers are not to be regulated while the focus is on money transfer agents and similar… Counterparty data is no longer obligatory, user client data is – that’s a big step forward.

One other interesting snippet – virtual currency can now be used to contribute to the capital requirements for having the Bit Licence…

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX and FTIL are flat. Incidentally the election results from the Delhi state elections where a new anti-corruption party Aam Aadmi are poised to wipe the floor with all comers, winning perhaps 66 of 70 seats. The government could win 3 while the old Congress Party is staring at oblivion.

Technology

Nasdaq To Relocate Trading Data Center In Sweden
Yevgeniy Sverdlik – Data Center Knowledge

NASDAQ will move its primary trading data center serving the Nordic and Baltic regions from Lunda to Upplands Väsby. Both towns are within 20 miles (north) of Stockholm.

MOEX Offers Connectivity Via TMX Atrium Infrastructure
Finextra

Deutsche Börse Market Data + Services To Serve As Exclusive Licensor Of PEGAS Real-Time Market Data
Deutsche Börse

APX Rolls Out Trading Platform At Equinix Sydney
Hamish Barwick – Computerworld

Asia Pacific SE (APX) has launched a trading platform at Equinix’s Sydney data centre, SY1, so that its overseas customers can do business in the Australian market, offering mainland Chinese customers an alternative listing venue to the Shanghai and Shenzhen stock exchanges.

Products

China Launches Equity Options Trading
Zhang Shidong – Livemint
Shanghai Stock Exchange: Launching Ceremony Of Stock Option Held
MondoVisione

China started trading of equity-linked options for the first time, giving investors a new tool to manage risk in the world’s most volatile major stock market. Contracts on the China 50 ETF, an ETF tracking some of the country’s biggest companies, began changing hands on the Shanghai SE as part of a trial that Haitong Futures Co. predicts will eventually expand to options on equity indexes and single stocks. It’s the first new equity derivative allowed by Chinese regulators since the 2010 introduction of index futures, a market that has grown about 10-fold in the past four years.

PLY: A small call/put for China, a massive injection of delta for mankind…

The launch of China’s ETF options was previously announced and discussed here and here.

China Clearing House Considers Launching ‘Bond Connect’ Scheme (subscription)
Jeanny Yu – South China Morning Post

The mainland’s bond clearing house is studying the possibility of launching a scheme linking the onshore and offshore bond markets – similar to the Shanghai-Hong Kong stocks through train – which would give foreign investors broader and freer access to the world’s third-largest debt market.

Read our Premium Briefs: HKEx – SSE – Stock Connect Brief Part 1, Part 2 and Part 3.

BGC Becomes The First Interdealer Broker To Launch An Electronic Platform For The Yen IRS Market
BGC Partners

The Fault Lines In India’s Currency Derivatives Market
Mobis Philipose – Livemint

With India’s exchange-traded currency derivatives market, what you see is not what you get. Reported volumes and open interest have risen 73% and 115%, respectively, since mid-2014, after regulators relaxed some of the draconian measures they had taken in 2013.

PLY: Another sad drip drip drip of the Indian suicide pact against modernity. Hedging limits having been slashed, the forex futures market was largely abandoned by corporates. Another insightful piece from Mobis Philipose.

NCDEX Launches Forward Contracts In 7 New Agri-Commodities
The Economic Times

NCDEX launched forward contracts in seven additional commodities, including urad, tur and yellow peas. The total number of commodities available for forward trading on the NCDEX platform has increased to 26.

NCX Boss Canvasses Proper Legislation For Commodity Trading
Goddy Egene – This Day Live

The Acting MD of Nigerian Commodity Exchange (NCX), Hajia Zaheera Baba-Ami, has called for proper legislation to regulate commodity trading in Nigeria. NCX is the former Abuja Securities and Commodity Exchange (ASCE) which has transformed into a commodity trading outfit.

Career Paths

CME announced its slate of candidates for its BoD for election at the company’s annual meeting to be held Wednesday, May 20, 2015.

The BoD recommends the Class A and Class B shareholders voting together elect the following nineteen individuals to the board:

Terrence A. Duffy, 56, Executive Chairman and President, CME
Phupinder S. Gill, 54, CEO, CME
Timothy S. Bitsberger, 55, MD, Official Institutions FIG Coverage Group of BNP PNA
Charles P. Carey, 61, Former Vice Chairman, CME; Principal of Henning & Carey Trading Company and Henning-Carey Proprietary Trading LLC
Dennis H. Chookaszian, 71, Former Chairman, Financial Accounting Standards Advisory Council; Former Chairman and CEO, CNA Insurance Companies
Ana Dutra, 50, President and CEO, The Executives’ Club of Chicago
Martin J. Gepsman, 62, Independent Broker and Trader
Larry G. Gerdes, 66, CEO, SoloHealth; General Partner of Sand Hill Financial Company and Gerdes Huff Investments
Daniel R. Glickman, 70, Executive Director, Aspen Institute’s Congressional Program; Senior Fellow, Bipartisan Policy Center, U.S. Secretary of Agriculture (1995-2001); Member of Congress, Kansas (1977-1995)
J. Dennis Hastert, 73, Former Speaker of the House of Representatives
Leo Melamed, 82, Chairman Emeritus, CME; Chairman and CEO, Melamed and Associates, Inc.
William P. Miller II, 59, CFA, Head of Asset Allocation, Sanabil, Riyadh, Saudi Arabia
James E. Oliff, 66, President, FILO Corp.
Edemir Pinto, 61, CEO, BM&FBOVESPA
Alex J. Pollock, 72, Resident Fellow, American Enterprise Institute; former President and CEO of Federal Home Loan Bank of Chicago
John F. Sandner, 73, Retired Chairman of the Board, CME; former Chairman, E*Trade Futures, LLC
Terry L. Savage, 70, Financial Journalist and Author, President, Terry Savage Productions, Ltd.
William R. Shepard, 68, President and Founder, Shepard International, Inc.
Dennis A. Suskind, 72, Retired Partner, Goldman Sachs & Co.

Three directors will be elected by the holders of the Class B-1 shares. The Class B-1 Nominating Committee has selected the following nominees for these positions:

Jeffrey M. Bernacchi, 56, Independent Trader; President, JMB Trading Corp.; Managing Member, Celeritas Capital, LLC
William W. Hobert, 51, MD, WH Trading LLC
Bruce F. Johnson, 72, Independent Trader
Jeremy J. Perlow, 47, Independent Trader
Howard J. Siegel, 58, Independent Trader

Two directors will be elected by the holders of the Class B-2 shares. The Class B-2 Nominating Committee has selected the following nominees for these positions:

Patrick W. Maloney, 53, Independent Floor Broker
Ronald A. Pankau, 58, Independent Trader; Owner, J.H. Best and Sons Steel Fabricating Co.
David J. Wescott, 57, President, Dowd Wescott Group
James J. Zellinger, 69, Senior Vice President, Wedbush Securities Inc.

One director will be elected by the holders of the Class B-3 shares. The Class B-3 Nominating Committee has selected the following nominees for this position:

Elizabeth A. Cook, 54, Independent Floor Broker
Thomas J. Esposito, 54, Independent Floor Trader

Steven E. Wollack, our current Class B-3 director, plans to petition to be included as a nominee in accordance with CME’s bylaws.

Read our Premium post: CME Board: B Grade Reforms

PLY: Yes, I was thinking the same thing too: gosh is Leo Melamed _only_ 82? I mean that makes him nearly 8 years younger than Queen Elizabeth II.

FOW reports that Robin Paine, former CTO at LME, has resurfaced at technology consultancy Tori Global. He resigned from LME in December, as reported by EI.

Green Key Technologies announced the hiring of Steve Van Deusen as Director of Compliance Technology.

SIFMA announced the hiring of Jennifer (Mundy) Flitton as MD of federal government affairs. Ms. Flitton joins SIFMA’s public policy and advocacy team from the office of Congressman Patrick McHenry where she served as the deputy chief of staff for almost nine years.

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

NASDAQ CEO Robert Greifeld sold 100,000 shares Friday, February 6th at an average price of $48.61 (bargain $4,861,000.00). He now owns 738,631 shares.

Charles Schwab major shareholder Charles R. Schwab sold 400,000 shares Friday, February 6th at an average price of $28.72 (bargain $11,488,000.00). He now owns 115,132 shares. Mr. Schwab’s regular sales are chronicled on this specific page.

Analyst Notes

ICE “Neutral” Rating Restated By Zacks – $237.00 Price Target
CME “Neutral” Rating Reaffirmed By Zacks – $99.00 Price Target
Deutsche Bank Reiterates Its “Hold” On CBOE – Price Target Reduced To $64 From $69
CBOE “Hold” Rating Reiterated By JPMorgan Chase – $56.00 Target Price, Down From $57.00
Citigroup Reaffirmed Their “Underweight” Rating On CBOE
Liberum Capital Lowered Their Price Objective On ICAP From GBX 408 To GBX 405 – “Hold” 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.

Crowdfunding

Securities Commission Malaysia Releases New Guidelines To Facilitate Equity Crowdfunding
MondoVisione

PLY: At first glance, some reasonably pragmatic new rules.

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