February 13 2014


TRs are go in Europe alongside all sorts of SEF news. Results from ASX, BGC and Reuters. EU looking at funding issues while being attacked over FTT and prop trading ban. ICE want to simplify equity pricing. LCH cost savings to boost LSE by $30 million more? Duncan Niederauer sells some ICE stock, agency business in SEFs gets going on Bloomberg and Eris (hooray!) as Trans Atlantic regulators agree ‘peace in our time’ for 3 years at least, although the domestic US prognosis remains confusing as multi-agency implementation talks continue.

Lots happening and today’s Exchange Invest arrives a bit earlier today, as I am heading to a Liquidnet Europe board meeting now – happy scrolling!

Public Markets

ASX 2014 Half-Year Results

Profit after tax for H1 2014 increased 10.8% to $189.6 mln from the prior comparable period (pcp). EBITDA increased 8.0% to $252.1 mln from $233.5mln in H1 2013.

PLY: ASX ekes out encouraging profit growth despite at best static volumes overall.

BGC Partners Q4 & Full Year 2013 Results
BGC Partners

Revenues for distributable earnings $432.9 mln in Q4 2013 decreased 0.8% and $1,768.2 mln FY 2013 increased 1%. Adjusted EBITDA $64.8 mln in Q4 2013 decreased 38.8% and $923 mln FY 2013 increased 190.9%.

Thomson Reuters Q4 & Full Year 2013 Results

Revenues grew 2% for the full year and 1% for Q4, before currency. Including a $260 million charge in Q4, adjusted EBITDA was down 7% for the full year and down 32% for Q4. Including a $275 million charge in Q4, underlying operating profit was down 15% for the full year and down 50% for Q4.

Full-year adjusted EPS was $1.54 vs. $1.89 in 2012 and Q4 adjusted EPS was $0.21 vs. $0.54 in the prior-year period. Excluding the Q4 charges, adjusted EPS was $1.83 for the full year and $0.49 for Q4.

EU Executive Sees Personal Savings Used To Plug Long-Term Financing Gap

The savings of the EU’s 500 million citizens could be used to fund long-term investments to boost the economy and help plug the gap left by banks since the financial crisis, an EU document says.

PLY: The EU’s anti-commercial nanny stating of retail investors has helped develop a risk averse investor bloc across 28 countries overly reliant on banks. Europe desperately needs to find a financing pathway forward, albeit the concern is that if savers don’t voluntarily fund enterprise then the EU may yet resort to confiscation as per recent IMF memos.

Regulators Reach Deal On OTC Derivatives Rules (subscription)
Financial Times
EU, US Iron Out Differences Over Derivatives Trading

European-approved platforms that trade derivatives will now be exempt from US trading rules until equivalent European rules come into force in around three years’ time. US banks trading on these venues will also be exempt.

PLY: Sanity prevails across the Atlantic, good to see this co-operation as opposed to the potential for double compliance chaos – at least for the next three years.

Nasdaq OMX Slams EC For Calls To Accelerate FTT (subscription)
FOW Intelligence

Nasdaq OMX is the latest trading firm to criticise European plans for a FTT following calls by a European Commissioner to speed-up the controversial levy.

PLY: Our industry must stand up and be counted against this toxic tax.

NYSE Owner Says Outlawing Exchange Rebates Would Simplify Market

Eliminating payment for order flow would help tackle an array of problems in the market including fragmentation, proliferation of order types and HFT, Jeffrey Sprecher, CEO of ICE, said at a Credit Suisse financial services forum.

“The pricing structure that has been created by exchanges, including my exchange, has really had a corrosive impact on cash trading in U.S. equities in particular,” Sprecher said.

PLY: I am minded to agree.

LSE Edges Higher On Talk Of Job Cuts (subscription)
Financial Times ‎

PLY: With LCH.Clearnet a focus for job cuts, LSE shares reached a six year high. A Morgan Stanley report has noted LCH has three times the costs and seven times the headcount of equivalent peers. Therefore MS is forecasting 40 million Pounds in cuts as opposed to the existing 20 million LSE guidance.

Bloomberg Begins Sponsored Access For SEFs (subscription)
Financial Times
Bloomberg SEF Completes First Sponsored Access Trade
Automated Trader

Asset manager NISA Investment Advisors (NISA), supported by its fcm Credit Suisse Securities (USA), executed the first-ever sponsored access trade with Goldman Sachs on Bloomberg’s SEF.

PLY: Such sponsored access will add transparency, liquidity and therefore volume to the SEF marketplace and will accelerate the pivot away from pure play OTC. This is manna from heaven for investors and good news for markets, backed up by Eris’ story below…

LEI Issuance Well Below Targets As EMIR Reporting Begins (subscription)

Only one of the nine European services issuing preliminary LEIs – a unique code required by all market participants – has met its anticipated targets. The other services have handled anything from 12% to 50% of their forecast demand, implying tens of thousands of firms are currently unable to report new trades or backload old ones.

For six issuers that shared their estimated targets with Risk, the total number of pre-LEIs handed out stands at 75,206, while their estimates range from 105,000 to 165,000.

PLY: Not vastly encouraging, although the LEI ‘industry’ has been keen to trumpet its successes without drawing much attention to the need to see greater deployment…

Challenger ATS Brasil Prepares To Take On BM&F Bovespa “Super Monopoly”
banking technology

“Fees are too high in Brazil,” Alan Gandelman, CEO at ATS Brasil, told Banking Technology . “Most of the liquidity on the BM&F Bovespa exchange is in just 10 stocks, and spreads can average as high as 70 basis points. It’s no wonder ADR trading is so high. The low number of listed companies puts Brazil on par with Vietnam or Mongolia. In retail investors, we’re in danger of falling behind African countries like Zambia, Ghana and Kenya. That doesn’t represent the economy of Brazil. The only one who benefits from all this is the monopolistic exchange.”

ATS Brasil was created by Americas Trading Group, a Brazilian company founded in 2010 by several of Gandelman’s former colleagues from Brazilian broker Ágora, including former CEO Arthur Pinheiro Machado. Gandelman joined the company to head up ATS Brasil in December 2012. The company’s ideal is to challenge the incumbent exchange by offering a cheaper, faster trading platform using NYSE Technologies’ UTP, which it claims is five times faster than the Puma platform recently installed by BM&F Bovespa.

PLY: Let battle commence and indeed kudos to Mr Gandleman for not holding back on his criticism of the incumbent BM&F Bovespa! Given the size of the opportunity, competition can grow the market and hence boost profits in both businesses.

JSCC To Be First Asian CCP To Clear Single-Name CDSs (subscription)

Japan Securities Clearing Corporation (JSCC) plans to start clearing single-name credit CDSs on Japanese names as early as May.

Banks Left Guessing On Volcker Rule (subscription)
Financial Times

The world’s largest banks could be left scrambling to meet a key reporting date for the Volcker rule because US regulators disagree on what the requirements are.

PLY: Any mix with five government agencies brought together will create problems as turf battles are a natural inclination of the regulatory beast, as opposed to actually serving the market, let alone taxpayers (and the best solution for commerce is an afterthought).

Frequent Panel Meets A Drain On MCX Funds
The Financial Express

Almost 25 committee meetings in the last three months have proved to be a big liquidity drain on MCX, which is also in the midst of a forensic audit ordered by FMC.

According to persons privy to the development, the 14-member board of the commodity futures exchange has created around 15 committees to oversee various functions of the bourse with some of them meeting on a weekly basis till recently.

PLY: This sounds like a variation on what I have heard previously described as a particularly Chicago disease for certain hyper-active committees.

Private Markets

Eris Exchange Announces UBS Execution & Clearing for Buy-Side Clients Ahead Of The SEF Trading Mandate
Eris Exchange

Eris Exchange announced the first execution of Eris Standard Swap Futures by UBS acting for a buy-side client.

PLY: On the same day as Bloomberg, another key moment in third party client trading through a SEF – good news for the market and especially Eris in this case.

US Dark Trading Could Stall Despite 2013 High
The Trade

Market share for dark pools trading US equities was higher in 2013 than any prior year, but a slowing of growth could lead to a contraction, research compiled by broker Rosenblatt Securities has found.

In 2013, US dark pools executed around 14.54% of consolidated US equity market volume, a mild uptick from 2012’s figure of 14.26%. But average daily volumes have tapered, according to Rosenblatt’s analysis of 2013 off-exchange trading.

Cyber Attack On Bitcoin A Big Warning To Currency’s Users

A massive cyber attack from unknown sources that has been spamming bitcoin exchanges is highlighting some of the dangers people can encounter when they exchange cash for digital currencies like the bitcoin, experts said on Wednesday.

PLY: Clearly it is an issue and highly reminiscent of the attempts to take down the fledgling sports/prediction markets exchange business a decade ago when the likes of Betfair and Intrade were under siege for weeks. A cause for concern but also a clear growing pain – hackers rarely target failures (qv the “Willie Sutton rule” of bank robbery).

None Of The 5 Biggest Bitcoin Exchanges Are In The US

Thanks to the uncertainty surrounding the future of Bitcoin regulation in the US, none of the largest and most influential exchanges in the world are within this nation’s borders.

PLY: In the nascent frontiers of cryptocurrency the greatest innovations have often stayed well away from the USA as ‘orange jumpsuit risk’ focuses the mind to avoid the jurisdiction…

New Jersey Slaps MIT Bitcoin Hackers With Subpoena — & They’re Fighting Back
Venture Beat

The MIT students behind Bitcoin mining program Tidbit won the “most innovative” award at a recent hackathon. But they will soon face a ruling from another kind of judge: one employed by the state of New Jersey.

PLY: …& this heavy-handed behaviour is precisely why innovators will avoid the USA in certain sectors! I have no idea whether Tidbit have transgressed laws or not but the pugilistic US prosecutorial system is a problem for innovators as it dissuades people moving forward in the USA when there are 190-some other UN members to locate your servers in.

Dividend News

ASX interim dividend for H12014 of 88.2 cents per share

• Ex-dividend date 3 March 2014 (date shares begin trading ex-dividend)
• Record date 7 March 2014 (holders of shares at this date are eligible to receive the dividend)
• Payment date 26 March 2014.

BGC Partners declared a quarterly cash dividend of $0.12 per share payable on March 13, 2014 to Class A and Class B common stockholders of record as of February 27, 2014. The ex-dividend date will be February 25, 2014.

Thomson Reuters approved a $0.02 per share annualized increase in the dividend to $1.32 per share. A quarterly dividend of $0.33 per share is payable on March 17, 2014 to common shareholders of record as of February 24, 2014.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX is down 1%, FTIL -0.5%

Squaring With A Favoured Few
Business Standard

The mystery of NSEL’s shrinking settlement fund could finally be unraveling. Documents unearthed by forensic auditors Chokshi & Chokshi show it paid a sum of Rs 148 crore (USD 23.8 mln) from the Settlement Guarantee Fund (SGF) five days after suspension of trading which some investors contend in court documents was paid in an arbitrary and non-proportionate matter to the entire marketplace.


LME Enlists Cinnober For New Trade Reporting Service, TRADExpess Platform
Forex Magnates

LMEwire, the derivatives reporting and OTC service powered by technology and solutions provider Cinnober has launched, centered on Cinnober’s TRADExpress platform, a trading engine suitable for all asset classes including derivatives, foreign exchange, ETFs, et al.

Furthermore, TRADExpress has already been integrated with BM&F BOVESPA, DGCX, DB, Markit, NYSE Liffe, SEB and Stock Exchange of Thailand.

Cinnober press release here.

PLY: Good to see LME profiting from their ongoing relationship with Cinnober who, as always, have developed an independent solution for TR alongside their suite of products developed under the wise gaze of Chairman Nils-Robert Persson and his team.

Dubai’s SHUUA Capital To Go Live With SunGard Arena Platform
Wall Street & Technology

SHUAA Capital, a financial firm headquartered in Dubai, plans to go live with the SunGard Front Arena integrated sales and trading platform.

MIAX Options FIX Order Interface Specification (FOI) Update

MIAX Options Exchange recently released an updated FIX Order Interface Specification (FOI).

High-Speed Traders Spur Business Wire To Study Delay Of Releases

Business Wire is considering whether to encourage corporations that distribute press releases through its service to delay sending announcements until a few minutes after 4 p.m. New York time, reducing the odds of altering their stock’s closing price.

PLY: Which will presumably provoke a jump in after hours trading following the closing bell…


ICE Launches Review Of Liffe Cocoa And Coffee Rules (subscription)

ICE has launched a consultation on additional guidelines as it reviews London-based soft commodity contracts, including cocoa and robusta coffee having already amended warehousing rules.

MOEX Reports Rise In Registered FX Traders
Forex Magnates

MOEX has just announced that in the last 11 days the number of registered FX traders jumped nearly 1.5 times from 65,000 as of January 31, 2014, to nearly 113,000 as of February 11, 2014.


MSCI Increases Latin American Presence

MSCI is expanding its presence in Latin America with the opening of a new office in Santiago, Chile and the upcoming launch of a new index designed to capture the investment opportunities in the Latin America Pacific Alliance countries of Chile, Colombia, Mexico and Peru.

The firm also announced that it has been chosen by the Santiago SE to produce a study on the feasibility of creating an ESG index for the Chilean Stock Market.

JPX – Format Change For Stock Indexes

Effective Monday, March 3, Kyodo World Service will delete the Nikkei 300 and instead add the JPX-Nikkei Index 400 — jointly developed by JPX and business news provider Nikkei Inc.

Career Paths

Betfair has appointed former BSkyB director of software engineering Paul Cutter as its new CTO.

Perseus Telecom, a leading provider of high-speed global connectivity, High Precision Time and Market-to-Market networks announced Karen Bertoli joining as CMO.

SEC announced that Paul A. Leder has been named director of its Office of International Affairs, while David Fredrickson has been named associate director and chief counsel in the agency’s Division of Corporation Finance.

SEC also announced that Rick A. Fleming has been named as the first head of the agency’s Office of the Investor Advocate.

Financial Calendar

MCX Q3 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

ICE’s NYSE Euronext CEO Duncan L. Niederauer sold 20,000 shares Wednesday, February 12th at an average price of $214.70 (bargain $4,294,000.00). He now owns 174,667 shares.

NASDAQ OMX EVP Bradley Peterson sold 14,181 shares Friday, February 7th at an average price of $37.99 (bargain $538,736.19). He now owns 45,977 shares.

Interactive Brokers Group Chairman Earl Nemser sold 9,440 shares Monday, February 10th at an average price of $21.77 (bargain $205,508.80). Mr. Nemser’s regular sales are chronicled on this specific page.

Interactive Brokers Group CFO Paul Jonathan Brody sold 5,248 shares Monday, February 10th at an average price of $21.77 (bargain $114,248.96). Mr. Brody’s regular sales are chronicled on this specific page.

Analyst Notes

ICE “Neutral” Rating Restated By Zacks – $227.00 Target Price
UBS AG Raised Price Objective On ICE From $235.00 To $251.00 in – “Buy” Rating
BMO Capital Markets Lifted Price Target On ICE To $230.00 “Outperform” Rating
CME Upgraded At TheStreet From “Hold” To “Buy”

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

SocGen Chief Sees EU Move To Ban Prop Trades Foundering

European Commission moves to ban top EU banks from market bets with their own money will run out of momentum once this year’s health check on the sector shows it is in sound shape, the head of France’s Societe Generale said.

PLY: I hope so – splitting retail from investment banking is a sound idea but just banning trading will only help bureaucrats, not aid commerce or help seal the holes in the EU funding gap.

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