We’re marking our 9 month anniversary today – pedants may note it’s officially tomorrow but we’ll spare you a celebratory Saturday bulletin! Thanks for reading so attentively and of course profuse thanks to our sponsors for helping me cover the bills. On behalf of myself, Florin and the team, thanks for all your support to date – watch this space for more exciting developments in the coming weeks at Exchange Invest!
Today there are results from BM&F Bovespa and MCX along with TR updates, Tradeweb joining the client swaps trend, CME board slate announced as it shrinks to, ‘just’ 24 people! All this and much more in today’s Exchange Invest – now reaching the end of its gestation phase! Happy scrolling:
BM&F BOVESPA Q4 2013 Results
Revenues not related to volumes traded grew 5.3% in Q4 2013 over Q4 2012, partially offsetting a
performance decline in Bovespa and BM&F segments.
Adjusted expenses reached R$575.8 mln (USD 241 mln) in 2013, up 2.2% compared to 2012, significantly
below official inflation. Adjusted net income reached R$341.9 mln (USD 143.05 mln) in Q4 2013, 9.9% decrease from Q4 2012 (adjusted EPS of R$0.180 – USD 0.075 – in Q4 2013, 8.6% decrease from Q4 2012). R$145.7 mln (USD 61 mln) in dividends, totaling 80% of Q4 2013 GAAP net income.
2013 Financial Statements here.
PLY: No clear signs here how well prepared BM&F Bovespa are ahead of competitors arriving in their territory.
MCX posted 71% decline in its net profit at Rs 21.84 cr (USD 3.5 mln) for the quarter ended December 31, 2013 compared to Rs 75.87 cr (USD 12.18 mln) in the corresponding quarter of the last financial year.
MCX release here.
PLY: A perfect storm threatens to overtake MCX: Commodity taxes alongside the NSEL fiasco, gold import curbs et al have fuelled a general apathy towards trading. The biggest worry now is that the management pivot towards a remarkably civil servant heavy board after the FTIL exodus adds to the concern. MCX needs to demonstrate business management to renew itself now and this may prove tricky given its structure post NSEL.
On the first day of trade reporting, ICE Trade Vault Europe, ICE’s European TR, processed around 4.5 million trades across energy, agricultural commodities, metals, credit, interest rates and equity derivatives. Trades and positions relating to over 300 market participants were successfully reported either directly or via delegated reporting.
The committee that oversees the NASDAQ run SIP has agreed to implement fixes demanded by the exchange.
PLY: Interesting that after recent remarks which inferred at best, recalcitrance, in the end the committee seem to have agreed NASDAQ’s proposals wholesale. Maybe it was the sunny influences of meeting venue Bonita Springs, Florida.
Exchange Data Revenues Run Gambit Of Gains And Losses (subscription)
PLY: I remain of the opinion that my “Capital Market Revolution!” prognosis of 1999 remains valid – even if it has not (still!) yet come to pass. Data without value add of some kind is difficult to sell at any premium price in competitive (fragmenting) times and exchanges are deluding themselves in seeking large plain vanilla data revenue…
LCH.Clearnet Taps CFTC For New Clearing Brief (subscription)
LCH.Clearnet has asked the US futures regulator to update its clearing license to cover the full range of derivatives in a bid to expand its US business.
LME Clear has successfully launched its new trade-reporting service, LMEwire, in time to meet the 12 February reporting deadline set out EMIR. The service, offered in partnership with DTCC TR, began reporting on schedule with uptake from 30% of the LME clearing membership.
A change of ownership and an evolving regulatory landscape have thrown up big challenges for LME in its quest to clear its own trades. Trevor Spanner, CEO LME Clear, speaks to Mark Pengelly about the project.
TOM, The Order Machine Sees More Growth Ahead
TOM, The Order Machine, a Dutch-based exchange, has been growing briskly since it was formed in 2009 and now handles some 30% of trading in the Dutch options market.
PLY: Given the success of TOM, it seems only a matter of time before Nasdaq OMX exercises its option to raise its 25% stake (acquired in December 2012) to 50.1%.
German HFT Ban May Hit Liquidity – Nasdaq OMX NLX (subscription)
Nasdaq OMX NLX has joined industry experts in raising concerns over German curbs on HFT, arguing that uncertainty created by the rules may push traders elsewhere in the search of liquidity.
Eurex Response To The German HFT Act
The German law for the prevention of risks and abuses in high frequency trading, the High Frequency Trading Act, came into effect in May 2013. Of these requirements, three are particularly important for Eurex and its members:
license requirement for high frequency traders,
introduction of order-to-trade ratios and excessive system
usage fees, and flagging of algorithmically generated orders.
The law provided a period of time for the marketplace to transition to the new requirements. The OTR and ESU requirements went into effect in December 2013, for example, and the algo flagging requirement will take effect in April 2014.
In response, Eurex has taken several steps to enhance its trading platform so that the exchange and its customers can comply with the requirements. In particular, it has introduced new mechanisms to track order-to-trade ratios and system usage levels. Eurex also has developed new procedures to disclose this information to its members so that they can monitor and adjust their trading activity to avoid exceeding the thresholds and incurring the fees.
Differing trade reporting practices are distorting market share numbers for SEFs, and could give some platforms an unfair advantage, according to their rivals.
Two of the five big interdealer brokers are said to report and display all parts of some multi-legged trades as separate items. That results in a doubling or tripling of volumes when the data is aggregated in third-party reports, rivals complain – potentially making it easier for those platforms to attract users.
PLY: Trads and TNT in the firing line as SEFs endeavour to bed down new regulations and guidelines…
CFTC Leadership Change Eases Strains (subscription)
Softer approach shown in deal reached on OTC derivative rules.
ASX has raised listing fees twice in the past two years, and Morgan Stanley expects more fee hikes to come despite them already being high by global standards.
Morgan Stanley equity analysts Arvid Streimann, Andrei Stadnik, Richard Wiles, Daniel Toohey and Matthew Dunger today forecasted ASX revenues to continue to grow by about 7.5% a year in coming years, after it posted 8.0% revenue growth yesterday.
PLY: Another client finds flaws with the ASX’s passionate belief that Dickensian monopoly leads to better market structure.
Ontario Securities Commission has approved amendments to the TSX Company Manual, mandating TSX issuers to adopt majority voting for the adoption of each TSX-listed director, other than of a majority controlled issuer.
Thomson Reuters’ settlement with EU antitrust regulators faces a legal challenge from investment information company Morningstar concerning the settlement of the TMR case about securities identification codes.
On 7 February 2014 the Bank of Russia”s Financial Markets Service registered an amended version of Listing Rules for MOEX.
Bloxham Liquidator Loses Irish SE Case
The High Court has found “no reliable evidence” of any conspiracy behind the decision to terminate liquidated stockbroking firm Bloxham’s membership of ISE.
EI reported on January 23rd that Bloxham challenged the revocation from ISE.
PLY: ISE will sigh with relief after this expensive time consuming litigation where a liquidator sought, somewhat opportunistically to have assets restored when Bloxham’s liquidation caused its membership (and thus shareholding interest) to lapse immediately.
Investors Test New Swaps Trading Platforms (subscription)
Wall Street Journal
U.S. investors are testing new platforms for swaps ahead of a Monday deadline, whereby many IRS must be traded openly under CFTC rules stemming from the 2010 Dodd-Frank financial law. Certain credit swaps will fall under the same rules on Feb. 26.
Tradeweb Markets has completed the first swap trade by a FCM on behalf of a US-based asset manager on a SEF. Accessing Tradeweb’s TW SEF, Credit Suisse Securities successfully executed a five-year high yield credit default index swap on behalf of an asset manager, which cleared at ICE Clear Credit.
Silk Road 2 Hacked: Entire Bitcoin Wallet Drained, $2.7 Mln Stolen
International Business Times
Using the same transaction malleability bug in bitcoin’s protocol that led to bitcoin exchanges like Mt. Gox and BitStamp shutting down withdrawals, hackers cleaned out the bitcoin wallet belonging to Silk Road 2, an underground Internet black market that launched in October after the FBI shut down the original Silk Road. The hackers made off with 4474.27 bitcoins, roughly the equivalent of $2.7 million.
Silk Road 2’s administrator, known by the username Defcon, said that because transaction malleability is a problem with bitcoin itself, none of its anti-hacking measures could prevent the hack. The only currency accepted on Silk Road 2 is bitcoin.
PLY: Digital pickpockets hit the jackpot.
Mt. Gox Creator Jed McCaleb Dabbling In Mysterious Bitcoin Project
Venture Capital Post
The original creator of Mt. Gox Jed McCaleb is back in the Bitcoin business, working on a secretive secretbitcoinproject.com, the landing page of which bears only a brief note about his need for alpha testers.
The message simply read, “Come see. When I sold Mt. Gox a few years ago, Bitcoin was trading at less than a dollar. Today Bitcoin exists in a new environment. Mt. Gox is struggling to keep up. Now, I am building something that will be better for Bitcoin and better for you. I’m looking for alpha testers. -Jed”
Digital currencies, also known as cryptocurrencies, are uncharted territory for the financial sector – and serious questions still remain about how they should be regulated. In January this year, the New York State Department of Financial Services (NYDFS) held a two-day public hearing on the regulation of virtual currencies with panel discussions on subjects such as the future of virtual currencies from the investor perspective and law enforcement.
BM&F BOVESPA approved R$145.7 mln (USD 61 mln) in dividends to be paid on June 27, 2014, based on shareholders’ position dated June 11, 2014, totaling 80% of GAAP net income in 2013
Special Section: FTI, NSEL, India at the Crossroads
PLY: FTIL bounces nearly 5% while MCX is up 1% on a day when news is sparse in the published media on the NSEL crisis (although see our related MCX story in the top section today).
Norwegian exchange Oslo Børs is rolling out an updated version of its Millennium trading platform designed to increase trading in less liquid stocks while enhancing trading capabilities for strategies such as iceberg orders.
Product manager Line Mauseth says the latest release of Millennium Exchange ─ which Oslo Børs has licensed from LSE’s trading technology subsidiary, MillenniumIT since 2011 ─ will introduce a five-minute intraday auction for less liquid instruments at scheduled times through the trading day.
PLY: Interesting stuff, I recall Rich Friesen advocating such incremental auctions after founding ePit during the original dotcom boom.
Exchanges Face Off In Global Tech Race (subscription)
PLY: Anna Ewing NASDAQ OMX EVP Global Technology Solutions and Mack Gill, CEO of MillenniumIT discuss the sale of exchange technology.
PLY: Cinnober’s trainee program cinCube, is adding two more trainees in its second wave of recruiting more brilliant minds to financial IT development.
TradeStation, a Monex Group company will officially launch its all-new online TradingApp Store at the annual New York Traders Expo.
A Bright Future For Swaps
While no one expects swaps futures to take over the OTC swaps market, a movement of 5 percent of the massive OTC swaps volumes into swaps futures would be a huge win for futures markets.
PLY: One of my key investment positions during the past years neatly surmised in the sentence above.
OneChicago Launches OCX.Weekly Futures
OneChicago (OCX), will launch OCX.Weekly futures as part of the OCX.NoDivRisk futures product suite.
CME announced its slate of candidates for its BoD for election at the company’s annual meeting to be held Wednesday, May 21, 2014.
The board of directors recommends the Class A and Class B shareholders voting together elect the following eighteen individuals to the board:
Terrence A. Duffy, 55, Executive Chairman and President, CME
Phupinder S. Gill, 53, CEO, CME
Timothy S. Bitsberger, 54, MD, Official Institutions FIG Coverage Group of BNP PNA
Charles P. Carey, 60, Former Vice Chairman, CME; Principal of Henning & Carey Trading Company and Henning-Carey Proprietary Trading LLC
Dennis H. Chookaszian, 70, Former Chairman, Financial Accounting Standards Advisory Council; Former Chairman and CEO, CNA Insurance Companies
Martin J. Gepsman, 61, Independent Broker and Trader
Larry G. Gerdes, 65, General Partner of Sand Hill Financial Company and Gerdes Huff Investments
Daniel R. Glickman, 69, 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, 72, Former Speaker of the House of Representatives
Leo Melamed, 81, Chairman Emeritus, CME; Chairman and CEO, Melamed and Associates, Inc.
William P. Miller II, 58, Head of Asset Allocation, Sanabil
James E. Oliff, 66, President, FILO Corp.
Edemir Pinto, 60, CEO, BM&FBOVESPA
Alex J. Pollock, 71, Resident Fellow, American Enterprise Institute; former President and CEO of Federal Home Loan Bank of Chicago
John F. Sandner, 72, Retired Chairman of the Board, CME; former Chairman, E*Trade Futures, LLC
Terry L. Savage, 69, Financial Journalist and Author, President, Terry Savage Productions, Ltd.
William R. Shepard, 67, President and Founder, Shepard International, Inc.
Dennis A. Suskind, 71, Retired Partner, Goldman Sachs & Co.
CME press release here.
CME To Cut Board, But It’ll Still Be The Biggest (subscription)
Crain’s Chicago Business
CME, which has the biggest board of directors among large publicly traded companies, will cut its director group by 17 percent this year. Nonetheless, it will remain No. 1 in terms of board size reducing to 24 from 29. The average board size among companies in the Standard & Poor’s 500 Index is 11 directors.
EnterNext’s BoD coopted Anthony Attia and CGPME, represented by Bernard Cohen-Hadad, as Directors. They replace Roland Bellegarde and Jean-François Roubaud. These appointments will be submitted to shareholders at the company’s next general meeting for their approval.
PLY: Confirmation that Roland Bellegarde is clearly leaving Euronext.
Obituary: Hideki Takahashi, TOCOM Director, Senior Executive Managing Officer And COO
TOCOM announces that Hideki Takahashi, Director, Senior Executive Managing Officer and COO of the Exchange died last night at the age of 58.
Mr. Takahashi joined the Exchange in June, 2012 after leading the Japan Commodity Clearing House (JCCH) as CEO for three years. Prior to his career in the commodity derivatives industry, he served in a various positions in the Ministry of Economy, Trade and Industry from 1979 to 2009.
The BBoD of TOCOM, as well as the Board of Executive Officers, express their deepest sympathy to the Takahashi family for their loss.
A wake for Mr. Takahashi is to be held on February 16 from 18:00 JST, to be followed by a funeral on February 17 from 10:30 JST at Ekoda Saijo, Nerima-ku, Tokyo.
Tokyo Commodity Exchange (TOCOM) announced that the BoDs appointed new members to fill the vacancies in the Audit Committee, Compensation Committee and Self-regulatory Committee.
The complete list of members of the four Committees is as follows:
Chairman: Toshihiko Fukui
Chairman: Fumio Arai (New)
Katsuaki Futaya (New)
Chairman: Toshihiki Fukui
Kazuhito Ikeo (New)
Chairman: Fumio Arai
Toshitsugu Shimizu (New)
Chi-X Japan has announced the appointment of Makoto Nagahori as President and COO of Chi-X Japan.
Financial Technologies Q3 results
All forthcoming exchange / investment related events are now listed in our Events page.
Interactive Brokers Group Chairman Earl Nemser sold 14,063 shares Wednesday, February 12th at an average price of $21.68 (bargain $304,885.84). Mr. Nemser’s regular sales are chronicled on this specific page.
ICE Downgraded By TheStreet From “Buy” To “Hold”
BMO Capital Markets Lowered Their Price Target On Charles Schwab To $29.00- “Outperform” 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.
SoMoLend Settles With State Of Ohio
Somolend, a high profile social lending crowdfunding startup, has settled with the State of Ohio over allegations by the State the company had transgressed state securities laws. The company was previously led by Candace Klein, who had become one of the leading champions for the fast growing crowdfunding industry.
As the U.S. Federal Reserve considers new ways of reining in banks’ trading in what it sees as risky physical commodity markets, Wall Street’s two oldest and biggest players may ultimately gain in stature.
Thanks to a longstanding legal exemption that Fed officials say limits their regulatory capacity, Morgan Stanley and Goldman Sachs may yet emerge from the regulatory upheaval that is upending banks’ commodities trading better-off than their peers, who face potentially tougher new rules.
PLY: Interesting discussion of the changing commodity trading landscape and the position of banks within the new world order.
India – Commodities, Securities Norms To Converge
With the commodities derivatives regulator, FMC, now under the finance ministry, rules governing the commodities markets are being converged with the securities derivatives’, wherever there are similarities.
One is to disallow commodity exchanges from having different transaction charges for different brokers. In securities, irrespective of volumes, the charges are similar for all brokers. However, the FMC has allowed exchanges to have different transaction charges for deliverable commodities.
CTFC: Armed And Dangerous
National Law Review
As a result of new regulations and a more aggressive prosecutorial attitude, 2014 looks to be the year in which the CFTC comes out of its role as the sleepy kid-brother to SEC and makes some big cases of its own.
A simple model highlights how AMA capital requirements can change dramatically.
Opponents of the Volcker rule, are exploring whether regulators violated two obscure laws that require them to study the costs to business, a move that could lead to a possible legal challenge.
The U.S. Chamber of Commerce says bank regulators appear to have failed to meet their obligation to fully study the Volcker rule’s cost to the financial industry and the economy.
FESE European Equity Market Report – January 2014
The European Equity Market Report is a piece of analysis that allows for an accurate comparison of trading statistics across European trading venues.
HKEx CEO Charles Li – Charles Li Direct
Clearing the air on circuit breakers.