February 18 2014


It’s a bad day for big vendors (as opposed to big data) today with disappointing profit slippage at Fidessa and Sungard producing perhaps the worst comment piece since Exchange Invest was born 9 months and several days ago. Read it and weep (or laugh). Don’t laugh at Germany and France though, as they seek to revive the FTT (while elsewhere Germany’s coalition is already riven with infighting and resignation). Time for the human curtain call in forex trading (and I don’t just mean because so many traders face jail time)? ASX leaps into RMB clearing, HKEx mulls circuit breakers as SGX adopts, Indian commodity pricing competition breaks out, all manner of TR/EMIR related stuff while EU Money Market fund rules are delayed alongside the benchmark mentioned yesterday…and there’s more (like recent pay packets of Romanian regulators)…

If you were out of the office enjoying President’s day, don’t forget to check yesterday’s bulletin in your inbox or on our web site.

Welcome to Tuesday’s Exchange Invest, happy scrolling:

Public Markets

Fidessa Posts Lower Full-Year Profit

Fidessa reported a 2% drop in f-y profit as further consolidation, restructuring & closures in the financial sector continues to restrain growth.

Adjusted pretax profit fell to 41.8 million pounds ($69.94 million) in the year ended Dec. 31 from 42.7 million pounds a year earlier. Revenue was broadly flat at 279 million pounds.

Fidessa results here.

PLY: Fidessa slips despite a healthy stock market, demonstrating the pressures vendors are under, particularly those of very large scale like Fidessa where dozens of smaller competitors are endeavouring to eat away at tasty morsels of the market. A cause for concern.

Fidessa Aims To Take Advantage Of US Swaps Trading Reform (subscription)
Financial Times

Fidessa is looking to exploit impending changes to US swaps trading as the UK trading technology company looks to its fast-growing derivatives business to underpin growth.

PLY: The core problem for Fidessa here remains the fact that it is still broadly (rightly or wrongly) perceived as a cash equity processing behemoth which happens to have some derivatives functionality.

Germany, France Seek To Revive Transaction Tax Plan

Germany and France will lead a face-saving bid this week to revive a flagging project to tax financial transactions in 11 euro zone countries and allay fears it could hamper economic recovery.

PLY: Here we go again – this time the proposal needs a stake straight through its heart to be finished off once and for all, leaving France and Italy with their own national problem areas. Note that Mrs Merkel’s failure to win her general election is a huge issue here as the SPD now wag the tail of the government (qv the Agriculture Minister resignation this past week) while those 2 most dangerous words when applied to tax “phased in” are being used. This needs to die…or I’ll see all my friends in the Euromarket in Moscow and Singapore in 2016.

Transaction Tax Would Cost UK Savers 3 Billion Pounds

A planned tax on financial transactions in 11 euro zone countries would cut the value of household savings in non-participating Britain by 4.4 billion euros (3 billion pounds), a report for the UK financial sector by London Economics has stated.

PLY: Good timing, clearly just what Europe does not need is another tax to preclude investment when unemployment is stuck at outrageously high levels.

Now Or Never For Europe’s Exchanges (subscription)
Financial Times

PLY: Sometimes it is really worrying just what passes for ‘thinking’ in the exchange industry. Then again clustering linear processors together helps make better linear processes but it doesn’t advance human knowledge beyond rendering more efficient what is already in the box. Dear Reader, this article is perhaps the most spectacular example of unedifying mediocrity of thought we have yet subjected you to, during the past 9 months. I know and like Philippe Carre, he is a very pleasant technology salesman, a good company man who came from GL Trade. However, the corporate behemoth of Sungard is sending out a message here and it reads clearly ‘we have either lost the plot or we never had it in the first place.’ Thats not good. Moreover, that the FT publishes this stuff only adds to the growing sense of concern that the pinko is also losing its way.

Apparently there is a great solution out there for Europe’s exchanges: they ought to create a big fluffy j.v. partnership and then this massive capital pool will be hugely successful. Gosh we could base it around Euronext – the most dysfunctional cross border exchange ever seen (and it was one entity – no sniggering at the back – i.e. not even a loose affiliation or j.v. and yet still Euronext is a ramshackle government manipulated, leadership-free disaster area of bourse ‘consolidation’).

When it comes to flogging a horse that has already bolted, vendors do themselves a grave disservice with such material – at least I suppose one could argue this latest piece doesn’t argue blindly for more merger mania (but it does involve a form of tie-up where large vendors would likely profit).

If you want a good tasteless laugh at a piece of frontline thought laggardship (an interesting diversion in the expanding media field of 20:20 hindsight) have a perusal at this profoundly disappointing piece. I sincerely hope the FT were paid handsomely for placing it as there is no other merit to it seeing the light of day. In a world where the future is bottom up, nano replacing micro, sooner or later the big clunking top down will be rent asunder. On the basis of this article it is easy to see just how large vendors like Sungard, and indeed the FT are so badly exposed. Generating ‘big hot air’ is a long way from dealing with the challenges of ‘big data.’

NYSE’s New York City Footprint May Shrink (subscription)
Wall Street Journal

PLY: Totally unshocking news but confirmation always welcome nonetheless. Lots of bodies that aren’t actually needed in expensive downtown Manhattan office space will move to the elegant air conditioned towers of Atlanta. Clearly emptying out the 381,000 sq feet at 20 Broad Street (lease expiring 2016) would be a great move and of course we all know Chuck Schumer wants to see that iconic building retained at 11 Wall but it can be used as a heritage site and exhibition centre presumably in due course as well as a downtown management/marketing/services facility.

EMIR Reporting Date Sparks ‘Mad Rush’ In Energy Derivatives Market (subscription)

A requirement to report trades under EMIR kicked in on February 12, creating a rush to comply among energy derivatives market participants. Some firms have struggled with the rules, and say a lack of support from regulators hasn’t helped.

PLY: The ‘lack of regulatory support’ sits at the nexus of a Venn diagram with circles marked ‘we don’t have the time’ ‘we don’t have the budget’ and ‘you think you’ve got problems, we’re struggling to understand it all ourselves.’

Institutional Investors Back HKEx’s Circuit Breaker Plan (subscription)
South China Morning Post

Some institutional investors are supporting the HKEx’s decision to consider introducing circuit breakers to prevent computer-based HFT programs from causing market disruptions or distortions which has been strongly opposed by brokers. SGX plans to introduce circuit breakers next Monday.

ASX And Bank Of China To Deliver New RMB Settlement Service

ASX and the Bank of China have agreed to deliver Renminbi (RMB) settlement services to the Australian and Chinese financial markets by the middle of the year.

PLY: Interesting and progressive move by ASX on the back of their spending rights issue money to improve their clearing and settlement offering overall.

UK Serious Fraud Office: Further Charges In LIBOR Investigation

Criminal proceedings by the Serious Fraud Office (SFO) have commenced today against three former employees at Barclays Bank Plc, Peter Charles Johnson, Jonathan James Mathew and Stylianos Contogoulas, in connection with the manipulation of LIBOR between 1 June 2005 and 31 August 2007.

U.K. Likely To File Criminal Charges Vs Ex-ICAP Brokers (subscription)
Wall Street Journal

The SFO is likely to file criminal charges against three former ICAP brokers for their alleged roles in the manipulation of benchmark interest rates: Colin Goodman, Darrell Read and Daniel Wilkinson.

Private Markets

Lusaka Bourse May Buy Stake In Commodities Market After Tie-Up

Lusaka SE said it will consider buying a stake in Zamace Ltd., Zambia’s sole agricultural commodities bourse.

Bangladesh – Commodity Exchange A New Priority To BSEC
Financial Express Bangladesh

The securities regulator is giving first priority to the introduction of commodity exchange and clearing corporation by relevant formulating rules and conducting a feasibility study.

PLY: Maybe I am just too entrepreneurial here but when it comes to feasibility studies, is the emerging exchange opportunity not in danger of being blighted by bureaucracy? Some feasibility is good but the mountains of reports being generated nowadays for many venues is only creating a problem, often multiplied by standards for vendors and so forth. Exchanges ought to be available as cheap run of the mill ventures for starting out and if you become a great behemoth then by all means anticipate the sort of systems derived for the world’s largest bourses. However I continue to see all too many viable small exchanges drowning in paperwork as they endeavour to have a report to cover every eventuality that may otherwise result in their having to make a decision of their own volition. Perish the thought!

Bitcoin’s Crisis Is Turning Point For Currency (subscription)
Wall Street Journal

After weeks marked by technological breakdowns, regulatory issues and general questions over its viability, bitcoin is in the midst of the worst crisis since it was proposed in a white paper in 2008.

PLY: Or its greatest growing pains since birth as it struggles to leave diapers behind. Behind the usual quasi-reactionary headline, Francesco Guerrera demonstrates his ability to think beyond the limited confines of many in financial markets (media) and provides a comprehensible explanation that this indeed could be a turning point to greater things for BTC and cryptocurrency as a whole.

Mt. Gox Shows Bitcoin’s Growing Pains (subscription)
Wall Street Journal

Just six months ago, Mark Karpelès was sitting on top of the world. Mt. Gox, his Tokyo-based platform that had started as an exchange for Magic trading cards, had in a short time become the world’s dominant platform for exchanging the new big thing—bitcoins.

Cut to a snowy February morning in Tokyo, and you find Mr. Karpelès trying to walk past a bitcoin trader holding a sign outside Mt. Gox’s offices in the hip Shibuya neighborhood, asking: “MT. GOX—WHERE IS OUR MONEY?”

Dividend News

Fidessa final dividend, if approved by shareholders, will be 24.5 pence, to be paid on June 13th 2014 to shareholders on the register on May 16th 2014. In addition, a special dividend of 45.0 pence is proposed &, if approved by shareholders, will be paid at the same time as the final dividend.

Special Section: FTI, NSEL, India at the Crossroads

MCX is slightly firmer, FTIL up 5% as the activist PIL brought by activist/journalist Ketan Tirodkar mentioned here yesterday has made some progress.

HC Allows Amendment In PIL To Make NSEL Respondent
Business Standard

The Bombay High Court ordered that NSEL be made a respondent in a PIL seeking transfer of a probe by Mumbai police to CBI.

A bench headed by Justice P V Hardas asked the petitioner to make NSEL a respondent and asked the latter to file a reply. The matter has been posted after two weeks.

The PIL filed by activist Ketan Tirodkar argued that since the scam has national and international ramifications, only CBI has the necessary jurisdiction to probe this matter.


LME To Expand Data Access To Spur Computer-Driven Trading

LME will expand direct access to data feeds from its electronic trading system, aiming to boost computer-driven trading.

LME press release here.

PLY: Note to HFTs: Remember to close out your positions by day’s end as LME doesn’t trade conventional futures…

Holding Slovenske Elektrarne (HSE) Selects Trayport’s GlobalVision

Trayport today announced that Holding Slovenske Elektrarne d.o.o. (HSE) are now using GlobalVision Trading Gateway for power trading in CEE.

PLY: Trayport maintain a remarkable grasp on power trading, particularly across Europe, well done Paul Constantinou et al.

ICBC (London) Plc. Selects AxiomSL To Deliver ESMA EMIR Transaction Reporting

ICBC London will leverage AxiomSL’s ControllerView to deliver all ESMA EMIR Transaction reporting on a single integrated platform.

Collateral Optimization Still Not Widespread, But Growing (subscription)
waters technology

A survey by InteDelta and SunGard conducted last summer revealed a dismally low adoption rate of collateral-optimization systems. Only three percent of respondents called their optimization processes advanced or fully automated.

PLY: Clearly vendors must be salivating as collateral optimisation is hugely important to the OTC-CCP brave new world.

BVB Launches Mobile Application By End-Month (subscription)

Bucharest SE (BVB) unveiled a project for the implementation of a mobile application for investors.


Nasdaq OMX Files With SEC To Permit Listing & Trading Of Non-Transparent ETFs
ETF Strategy

Nasdaq OMX has filed with SEC for a proposed rule change to permit the listing and trading of exchange-traded managed funds (ETMFs).

Nasdaq OMX filing complements the previously announced application for exemptive relief to permit the offering of ETMFs as filed by Eaton Vance, creator of the ETMF structure, on March 27, 2013 and most recently amended on January 23, 2014.

PLY: The NASDAQ move follows a similar NYSE proposal reported by EI on January 24th.

India – Commexes To Cut Transaction Fee On Non-Deliverables
Business Standard

The flexibility to fix transaction charges has sparked a fight among the commodities futures exchanges to grab market share, a majority held by MCX.

The exchanges have started working on reducing the charges on non-agricultural commodities contracts like metals and energy that are cash settled and non-deliverable. Most important, these are 86 per cent of the accumulative turnover of all exchanges. MCX accounts for 90 per cent of the turnover in this segment. FMC on February 13 allowed different transaction fees on metals and energy’s contracts. FMC is understood to have asked exchanges to implement reduced charges for incremental volumes.

PLY: Good for competition, good for the exchanges although with a huge focus on the non-deliverables I do worry that the core user base, particularly in agricultural products is getting a raw deal right now from exchange markets – and given the ongoing food security issues in India these markets also need clear encouragement.


Methodology Of MOEX Indices Calculation Has Been Registered

The updated methodology includes a new procedure for using official closing prices in the index calculation process. Price filtering principles used to calculate the indices as well as eligibility factors were also changed. The Exchange’s trading modes used for the index calculation process were detailed. In addition, the free float calculation provisions were moved to a separate methodology.

The effective date of the Methodology of the Moscow Exchange Indices Calculation will be announced later.

Career Paths

Bethan Wilde, assistant VP of Asia Commodities at HKEx, will transfer to LME Clear, the exchange has confirmed.

Japan’s Financial Services AgencyThe Panel for Vitalizing Financial and Capital Markets welcomed a new member, Dr. Akio Mimura.

Local Media Reveal High Salaries For Romania’s FSA Management
Romania Insider

The first vice-president of Romania’s Finance Surveillance Authority (ASF) had in the last two months of 2013 a total gross income of over EUR 68,000, reports local daily Hotnews.ro.

In November 2013, Daniel Daianu, ASF’s first VP, had a gross income of some EUR 17,000, while in December, his gross income amounted to almost EUR 51,000.

“My gross income in December 2013 includes the gross salary, an annual holiday bonus (equivalent to a salary) given to ASF workers and that I picked up that month, and a bonus for the end of the year. Hence the large discrepancy from November and the other months,” Daianu told Hotnews.ro.

The president of ASF, Dan Radu Rusanu had the highest salary in the institution, earning in the last two months of 2013 a total gross income of over EUR 72,000.

The first vice-president got the second-highest gross income of over EUR 68,000 in November and December.

PLY: These numbers strike me as remarkably high by any standards and for Romania they appear incredible! To put it in perspective during November/December 2013 the ASF President earned the equivalent of nearly 1 euro per investor from all the registered accounts at the stock exchange!

Note too that the VP Mr Daniel Daianu lost money investing with Cristian Sima (story in Romanian) whose term as SIBEX Chairman was curtailed by a money management melt-down when he was not supposed to be active in the market due to his exchange position…

Financial Calendar


WSE 2013 financial results
Charles Schwab $0.06 quarterly dividend payment
Financial Technologies (India) Ltd 25th AGM
NZX preliminary 2013 full year financial results
Record date TMX $0.4 dividend

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

Analyst Notes

GFI Group Downgraded By Zacks From “Neutral” To “Underperform” – $3.70 Price Target

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.


Peer-to-Peer Lenders In The UK
Crowdfund Insider

The Guardian has compiled a very practical list of all the major P2P lenders in the UK.

Other stories

EU Lawmakers Delay Money Market, Benchmark Rules

EU lawmakers have delayed new rules to regulate money market funds used by big companies to park billions of euros after they clashed over how tough the changes should be.

The funds are also used by banks for short-term funding and the most contested element is a requirement for one type of fund, known as constant net asset value (CNAV), to hold a cash buffer equivalent to 3 percent of assets.

The draft rules, and a separate draft law on regulating benchmarks such as the scandal-hit Libor interest rate, aim to make markets more transparent after the 2007-09 financial crisis, but both measures now face delays.

The European Parliament’s economic affairs committee found itself split on Monday over regulating money market funds, a trillion euro sector in the 28-country bloc.

PLY: It is heartening that in the race to meet deadlines the EU is actually avoiding some decisions as opposed to adding new layers of rubbish regulation, particularly given what a horrible mess the Mifid II compromise looks like being from many angles. Political discretion is to be encouraged, as in this case.

FX Traders Facing Extinction As Computers Replace Humans

A widening probe of the foreign-exchange market is roiling an industry already under pressure to reduce costs as computer platforms displace human traders.

Electronic dealing, which accounted for 66 percent of all currency transactions in 2013 and 20 percent in 2001, will increase to 76 percent within five years, according to Aite Group LLC, a Boston-based consulting firm that reviewed Bank for International Settlements data. About 81 percent of spot trading — the buying and selling of currency for immediate delivery — will be electronic by 2018, Aite said.

This site is protected by Comment SPAM Wiper.