February 16 2015


Rats can trade forex better than many humans (can they broke without repricing I wonder?) with no signs of rodents on the beefed up board of the FX Professionals Association. Elsewhere Barrons considers CBOE’s place as perma-prey in the US exchange environment. ICE Singapore is slightly delayed while Euronext and Johannesburg cooperate on global benchmark milling wheat and related ag co-operation. How many bond platforms will last a year? Reuters ponders (probably more than we think albeit many will be terminally ill). MCX finally gets a new CEO and a massive stock relief rally into the bargain. All this and much more, including Barclays’ failing to strike out that NY AG dark pool action…

Meanwhile, our Premium service, has 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 via Exchange Invest Premium.

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ICE – SMX Deal Brief
DFM – ADX Merger Brief
BATS – Direct Edge Merger Brief
HKEx – SZSE Stock Connect
HKEx – SSE – Stock Connect Brief Part 1, Part 2 and Part 3
IEX India Sale
Virtu Financial IPO

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Public Markets

CBOE Takeover Speculation Could Start Anew
Steven M. Sears – Barron’s

PLY: An interesting imputation here that ICE (trading 16x) would seek to acquire CBOE (trading 22x) for the exclusive ViX and various options products. However, the ability to clear vertically is relatively limited within CBOE as it must use OCC for many products. That has remained a deterrent to a rapid roll-up. True, there are clearly costs to be taken out of the rather flaccid CBOE structure (and floor). At the same time, with the cross-holding in the (marginal) OneChicago business, and the Chicago name in CBOE it had long been presumed that CME would eventually seek to create the Single Chicago Exchange.

SEC Gives Go-Ahead For Sale Of National Stock Exchange
Self-Regulatory Organizations – National Stock Exchange, Inc.: Order Granting Approval Of Proposed Rule Change In Connection With A Proposed Transaction In Which National Stock Exchange Holdings, Inc. Will Acquire Ownership Of The Exchange From The CBOE Stock Exchange, LLC

SEC has given the green light for the takeover of the shuttered National Stock Exchange by a group that plans to reopen the electronic stock trading venue. Deal terms were not disclosed.

NSX, which began as the Cincinnati Stock Exchange in 1885, is owned by the CBOE Stock Exchange, which in turn is majority owned by the top U.S. options exchange operator, CBOE Holdings. The exchange, based in Jersey City, New Jersey, closed at the end of May 2014 due to low volumes.

An entity called National Stock Exchange Holdings is buying the NSX, according to the filing, as discussed in October last year.

EBRD Said Looking To Buy Stake In BIST As Turkey Prepares IPO
Marcus Booth – 4Traders

PLY: Renewal of earlier speculation that EBRD plans to buy a minority stake (5%) in Borsa Istanbul (BIST) ahead of an IPO planned for later this year.

Earlier this year (here and here) BIST said it is in stake sale talks with Silver Lake and Warburg.

In November EBRD bought a 4.99% stake in Bucharest SE (BVB).

Read our Premium brief: BIST IPO Brief.

ICE Delays Opening Of Singapore Futures Exchange
Today Online

ICE has delayed the start of a new futures marketplace in Singapore, which was scheduled to open March 17, the Atlanta-based company said on Feb 12. ICE sees opening the market by the end of June.

Read our Premium brief: ICE – SMX Deal Brief.

Barclays Fails To Win Dismissal Of New York ‘Dark Pool’ Lawsuit
Jonathan Stempel – Reuters

Justice Shirley Werner Kornreich of the State Supreme Court in Manhattan said it was premature to dismiss state Attorney General Eric Schneiderman’s claim under the state’s Martin Act, a powerful anti-fraud law.

Barclays Fails To Get NY Attorney General’s Dark Pool Lawsuit Dismissed

Read our Premium brief: NY AG – Barclays Dark Pool Brief.

JPX CEO Eyes Takeovers In Certain Segments

JPX is considering takeovers in certain areas of its business but is not looking at large cross-border exchange mergers.

“I am not thinking about direct takeovers between Tokyo and Europe,” Atsushi Saito told Boersen-Zeitung in an interview published on Saturday.Borse Zeitung interview here (German version, subscription needed).

“But we are always looking for acquisition opportunities or partnerships in special segments of our business such as index operation or information services,” he added.

Last week JPX said it is interested in building a corporate information business in order to diversify its revenues.

Euronext Signs Partnership With JSE

License agreement enables the reciprocal use of settlement prices and brands for other’s commodities contract. Aim of agreement is to extend access to global benchmark milling wheat contract by broadening its international exposure to a wider audience

ENX press release here.

PLY: A canny deal by Euronext with global benchmark milling wheat as the centrepiece.

PSE Eyes 2016 ASEAN Linkup
Business World Online

Philippine SE (PSE) is not yet ready to link up with Southeast Asian bourses this year, its CEO said, with participation possible in 2016.

FAO: The Asean Exchanges comprise seven stock markets from six countries: SET, Bursa Malaysia (BM), SGX, Hanoi SE (HNX), Ho Chi Minh SE (HOSE), Indonesia SE (IDX), and Philippine SE (PSE).

ASEAN Exchanges Meet With The Honourable Prime Minister Najib In Support Of The Integration Of Asean Capital Market

Which Corporate Bond Trading Platforms Are Lost Causes?
Laura Benitez & Alex Chambers – Reuters

Mark Benstead, senior portfolio manager for UK credit at L&G:.

“There are 30-odd platforms currently looking for a share of activity but there certainly won’t be 30 in a year’s time.”

PLY: Zinger stats here, on why every platform and his dog are trying to trade corporate bonds:

NY Fed reckons corporate bond inventories have decreased more than 75% since before the financial crisis from around US$250bn to US$57bn today…while SIFMA reckons the net total of corporate bonds outstanding has jumped from US$5.2trn in 2007 to US$7.7trn now.

Meanwhile 30+ platforms are chasing the lowest yields in corporate bond history and that means there will be a lot of disappointment when the market turns down and multiple platforms turn out to be exposed at the wrong end of the optimism index…

Read our Premium post: On Bonds & SEFs.

EU States Agree Position For Final Deal To Regulate Market Benchmarks
Benchmarks For Financial Instruments: European Council – Council Of The European Union – Agrees Stance On Tighter Controls

EU states agreed a common position on Friday to regulate market benchmarks, opening the door to negotiations on a final agreement with lawmakers on new rules to avoid more damaging market rigging scandals.

PLY: As always the concern is that the regulation will be overly prescriptive and thus drive benchmarks out of Europe.

Previous discussions on the topic earlier this month.

Canada Proposes New OTC Clearing Rules (subscription)
Cian Burke – FOW

The Canadian Securities Administrators published its proposed rules for the mandatory clearing of derivatives on Thursday, to bring Canada into line with reforms underway in the US and Europe.

Private Markets

This Top Tech Investor Believes Bitcoins Will Beat Apple Pay
Leo Sun – The Motley Fool

Marc Andreessen, the co-founder of Netscape and famed venture capitalist believes bitcoin will beat Apple Pay in the long run.

Andreessen’s venture capital firm, Andreessen Horowitz, had invested approximately $50 million in bitcoin-related companies at the time. Since then, Coinbase became the first licensed U.S. bitcoin exchange, and the Winklevoss twins are reportedly close to launching their own exchange as well.

PLY: Apple Pay is an interesting system but it has much less optionality than cryptocurrency per se – I agree with Andreessen, in the longer run Bitcoin/blockchain/cryptocurrency is the future in a bigger picture.

Special Section: FTI, NSEL, India at the Crossroads

PLY: A new permanent MD has helped boost MCX, up a whopping 10% while FTIL has also jumped 5%.

MCX, FTIL Donations To Charity Come Under The Tax Scanner
The Hindu Business Line

MCX is under investigation by the Income-Tax Department for making donations of a ‘non-genuine’ nature to a charitable trust. Interestingly, the exchange’s original promoter, FTIL, was also under the Department’s scanner for donations to the same organisation, the Navjeevan Charitable Trust.

PLY: A remarkable coincidence, presumably this is the sort of thing new CEO B Venkataramani intends to firmly eliminate so there is no hint of impropriety at MCX.


CME Futures Seen By Traders Maintaining Current Settlement Times
Naureen Malik & Joseph Deaux – Bloomberg

CME will probably maintain current settlement times for commodity futures even after pit trading is halted for those contracts in New York and Chicago later this year, traders said.

Earlier this month CME announced it will close most of its futures trading pits in Chicago and New York by July 2, 2015.

Career Paths

The Economic Times reports that MCX has roped (as rumoured last week) in BSE’s Chief Business Officer B Venkataramani to head the bourse as MD and CEO. MCX has been without an MD since May 2014, after Manoj Vaish left.

FOW reports that ICE is set to hire in the coming weeks Gordon Bennett, the former global head of energy at Marex Spectron.

The Foreign Exchange Professionals Association (FXPA) held elections on February 10 for its first permanent BoD and Officers. The new FXPA Executive Committee includes: Chair Eric Busay, Portfolio Manager, CalPERS; Vice Chair Adam Cooper, Senior MD and Chief Legal Officer of Citadel LLC; Treasurer Sean Tully, Senior MD, Financial and OTC Products, CME; and Secretary William K. Goodbody, Jr, MD, COO & Head of Sales of KCG Hotspot.

In addition to Chairman Busay and Vice Chairman Cooper, the 12-member BoD includes: Michael Curran, EVP, Head of Global FX, BNY Mellon; Kevin Cudahy, Bloomberg Tradebook FX; Mike Harris, President, Campbell & Company; Stephen Komon, Senior Portfolio Manager and Trader at Colorado PERA; Dmitri Galinov, CEO, FastMatch; David Goone, Chief Strategy Officer, ICE; David Holcombe, Head of FX Product, Nasdaq; Jill Sigelbaum, Global Head of FX & Alliances, Traiana; and John Shay, Partner, Transaction and Technology Services, Virtu Financial. The twelfth member will be announced at a later time.

FXPA now has 20 institutional members. In addition to those serving on the Board and in Officer roles, Founders’ Council members include Jamie Singleton, Chairman and CEO, Cürex; Mark Sandomeno, Manager, GFI Emerging Markets, GFI Group; Vikas Srivastava, MD, Business Development, Integral Development Corp; Gavin Wells, Global Head of CDSClear & ForexClear, LCH.Clearnet; Patrick Bartle, Global Head of FX Strategy, LMAX Exchange; and Michael Syn, EVP, Derivatives, SGX.

PLY: A beefy board for an organisation clearly endeavouring to make an impression just when forex needs somebody to help remove the many blotches on its reputation.

Interview: Xavier Rolet
Tom Robinson – Cherwell

Financial Calendar

This week

SEC Advisory Committee on Small and Emerging Companies – public meeting by conference telephone call
ESMA open hearing in Paris on the issues set out in its Consultation Paper on MiFID II/MiFIR published in December 2014
SEC roundtable to explore ways to improve the proxy voting process – see agenda here.
NZX 2014 full year financial results
Record date TMX $0.40 dividend

Bahrain Bourse To Host The Arab Federation of Exchanges (AFE) Conference In April 2015

Bahrain Bourse (BHB) will host the Arab Federation of Exchanges (AFE) Annual Conference 2015 in partnership with Thomson Reuters. The conference, entitled “AFE Equities Summit 2015”, is set to take place in the Kingdom of Bahrain on the 22nd and 23rd of April 2015.

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

Share Notes

CBOE Director Frank E. Jr. English sold 1,500 shares Wednesday, February 11th at an average price of $61.73 (bargain $92,595.00). He now owns 4,656 shares.


InvestX Brings Crowdfunding To Private Equity Deals (subscription)
Amy Or – Wall Street Journal

InvestX Capital Ltd., founded last year with offices in Dallas and Vancouver, has established a crowdfunding platform for so-called accredited investors to back venture and growth equity deals.

New Crowdfunding Bill Introduced In North Carolina
JD Alois – Crowdfund Insider

Investment crowdfunding nearly became legal in the state of North Carolina last year. Unfortunately internal politics sidelined the bill but now new legislation has been introduced that may allow an unlimited amount of capital to raised for private companies.

Other stories

MIFID II: Another Wave Of Regulations Set To Hit European Commodity Traders
James Brown – bobsguide

While derivatives markets are still getting to grips with the rollout of EMIR and REMIT, politics and regulatory regimes continue to evolve and extend their grasp. Energy market participants in particular are now facing a new set of MiFID rules, which reach beyond banking to impact commodity trading as well.

Rats Of Wall Street: Rodents Taught To Trade In FX Markets

Believe it or not, ‘Rattraders’ is an actual experiment that teaches lab rats to trade in the foreign exchange and commodity futures markets – and in some cases, the rodents outperform the world’s leading fund managers.

Marco Morovici – the CEO of Rattraders, who headed up the project – said that his motivation was to see what kind of highly paid jobs could be replaced by machines in the future. In the case of brokers, their job is almost entirely based on pattern recognition capabilities and the ability to avoid distractions. He says rats are capable of learning those same skills.

PLY: A move beyond monkeys throwing darts – clearly the longevity of the traders may be an issue from an investor perspective…

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