February 19 2014

elb2Interest is growing in the acquisition of various tech assets within the NYSE portfolio. FTIL are it seems both negotiating with Tech Mahindra & discussing an NSEL settlement while Michael Spencer is amongst the winners as Probability is acquired. Will CME develop ‘co-operability’ with Australia? Various SEF analyses and much more…

Issue 195 of Exchange Invest is celebrating that great economic brain (and sometime astronomer whose physical observations help shape our modern world) Nicolas Copernicus whose birthday is today – greetings from his birthplace of Torun, Poland. Scroll on:

Public Markets

ITG Considers Bid For ICE’s Nyfix Trading System (subscription)
Wall Street Journal

Under the deal being considered, ITG would buy Nyfix from ICE to bolster its networking business. Robert Gasser, president and CEO of ITG, was the CEO of Nyfix from 2001 until 2006.

PLY: Interest appears to be brisk for the marketable arms of NYSE Technologies including NYFIX and Wombat amongst others.

ICE Distances Itself From UK Tech Firm (subscription)
Financial News

ICE has signalled its intent to sell off its recently-acquired stake in UK technology provider Fixnetix by removing its shareholder representative from the company’s board.

PLY: Benjamin Chrnelich, CFO of NYSE Technologies left the Fixnetix board on February 12th, almost exactly 2 years since NYSE Tech commenced a tender offer to buy 25% of the company (16 Feb 2012). Of course, the likeliest reason is that this stake is for sale but then again it could also be that Mr Chrnelich is himself exiting NYSE Tech, as for example we saw with the departure of Roland Bellegarde from the board of Euronext’s small cap market last week ahead of his anticipated departure from the bourse divorcing from ICE.

Tech Mahindra And FTIL Come Closer On Deal Talks
The Economic Times
FTIL Rallies Another 5% On Deal Talks With Tech Mahindra
The Economic Times

FTIL the markets technology solutions leader that Jignesh Shah and his friends, Dewang Neralla and Paras Ajmera, have built over the years — may change hands in the wake of the NSEL crisis.

Mahindra & Mahindra Group company Tech Mahindra has shown interest in buying a sizeable equity stake in FTIL with due diligence ongoing apparently by EY and law firm Khaitan & Co. while Kotak Bank’s investment banking arm is also advising Tech Mahindra.

Tech Mahindra could subscribe to preferential shares issued by FTIL as well as buy a part of the equity block controlled by Shah and his family. Jignesh Shah, the founder of the FT Group, controls 45% in FTIL.

EI reported January 10th that Tech Mahindra expressing interest in a potential buyout of crisis-hit FTIL.

PLY: Clearly the EOW attachment order would have to be lifted (but see below for the story on out of court settlement negotiations by FTIL concerning NSEL too). However, this would give Jignesh Shah an exit and cash even after paying for the NSEL debacle which must be attractive. Such a deal will likely disappoint those with the most vociferous cases of ‘Shahdenfreude.’

WSE Acquisition Aquis Exchange Shares
WSE

Aquis Exchange confirms allotment of 230,416 Aquis Exchange shares to WSE at a price of 3,000,000 GBP (USD 5,000,000).

EI reported on August 7th WSE plans to acquire a 30% stake in Aquis Exchange.

PLY: Ultimately WSE expects to hold 36.23% of total shares and 30% of the economic and voting rights in Aquis (presumably some twist of options dilution). This is a sound speculation going forward. Hopefully we won’t have to record that the next WSE deal is the mooted Viennese disaster.

Spencer And Lewis Amongst Winners In Probability Takeover
London Evening Standard

ICAP founder Michael Spencer and billionaire Joe Lewis added a few more millions to their wealth today as a gambling software firm they both backed recommended an £18 million takeover.

Probability, which floated on AIM in 2006 and counts Ladbrokes and Paddy Power among its customers, has agreed the deal with GTech. The 50p-a-share offer values Spencer’s 17% stake at £2.9 million, and Lewis’s holding at £1.6 million. The takeover represents a tiny bolt-on deal for the €3 billion-turnover GTech, which is looking to capitalise on Probability’s ability to create and bring to market games for different devices in different jurisdictions. The shares jumped 52% or 16.5p to 48p on news of the swoop.

CME Chases Australian Alliance (subscription)
Financial News

CME is in talks to develop a clearing partnership with ASX, as the US futures giant looks to push into the Asia Pacific OTC derivatives market.

PLY: Very interesting. For one thing, the fact that CME is talking to ASX would suggest SGX already have eyes elsewhere (after all SIMEX’s early success was largely predicated on the Mutual OffSet agreement for EuroDollars with CME). Could that be London as so many rumours suggest? Tying into ASX makes sense as clearly the Australian banks have significant clout and the mooted system would create some form of interoperability dubbed “co-operability” to permit each clearing house’s members to access the other CCP. At the same time, wouldn’t CME be better off with a standalone Asian CCP like ICE and soon DB? Perhaps they prefer to have their European exchange issues sorted out first before mounting such a project.

Financial Industry Unites To Face Mifid II (subscription)
Financial News

Brokers, fund managers and stock exchanges across Europe are planning to harmonise their input to MifidII in a rare case of coordinated industry collaboration on new regulations.

The group, which held its first meeting in early February, comprises executives from Barings, Axa Investment Managers, Deutsche Bank, Bank of America Merrill Lynch, Morgan Stanley, Nasdaq OMX and Six Swiss Exchange.

PLY: A broad church which hopefully will help garner a better set of rules once we actually see the eagerly awaited draft law.

TABB Group: Incumbents Are Prepared As SEFs Go Live
Traders Magazine

Tabb Group analysts Radi Khasawneh and Colby Jenkins have compiled a report, “SEFs Go Live: Incumbents Sitting Pretty (registration required).

PLY: Interesting numbers – after 4 months of trading, the leading IDB quartet split is 94% of the IRS SEF market with ICAP at 30%, TNT 25%, BGC 24% and Tradition on 19%. So early leader is unsurprisingly ICAP but perhaps with not as big a lead as many might think while the field is pretty evenly split amongst them. The 6% of the dealer to customer pie is split 78% Bloomberg, 21% Tradeweb and 1% to Javelin which means a lot of platforms are not yet on the measurement scale with more than a dozen active out of 19 approved.

Dealers & SEFs Divided Over Sponsored Access (subscription)
Risk

PLY: As usual in a ‘he says she says’ article format there is no real clarity but it is interesting to observe how so many participants remain trenchant while Tradeweb CEO Lee Olesky is gently pragmatic on providing customers with differing access services.

Eurex’s Welcome Transparency (subscription)
Financial Times

PLY: Phillip Stafford follows up on the useful illumination by EUREX into 414 milliseconds of a trading day. As I mentioned in a low latency reaction when the news was published Monday.

40 Eurex Members Are HFT firms (subscription)
Futures and Options Intelligence

Out of 437 firms that are members of Eurex, 40 fulfilled the criteria to be defined as HFT on a definition from German financial regulator BaFin.

PLY: Clearly EUREX will be keen to ensure they do not lose any volume as a result of the regressive parochial actions of Germany’s regulators.

NASDAQ OMX Opens New Office In Manila, Philippines
NASDAQ OMX

NASDAQ OMX has opened a new office in Manila to provide service and support to its global Corporate Solutions unit, particularly for its IR business.

PLY: Parish announcement, yes, I know, a bit boring, indeed, but then again I continue to bore happily on why I think NASDAQ’s IR/solutions acquisitions from TMR was an inspired move a year or so back.

Fidessa Boosts Singapore Presence (subscription)
Financial Times

Fidessa has added a third co-location centre in Asia with an agreement to set up its trading and market data services at SGX.

Fidessa press release here.

EEX To Expand Service Portfolio In REMIT Framework
MondoVisione

EEX will expand the options for timely and effective disclosure of insider information for market participants in the “Regulation on Market Integrity and Transparency” (REMIT) framework, facilitating publication as well as forwarding information to the competent authorities, such as the Agency for the Cooperation of Energy Regulators (ACER).

Private Markets

BSE, NSE Find Widespread Violation Of Listing Norms
Livemint

At least 626 BSE-listed and 151 NSE-listed companies were found to be flouting the capital market regulator’s equity listing agreement and corporate governance norms.

PLY: Clearly room for improvement but at least the exchanges have identified the problems.

NCDEX Slashes Transaction Charges
Business Standard

NCDEX has slashed transaction charges in non-deliverable commodities following approval to introduce “differential transaction charges” by FMC.

FMC has approved NCDEX to launch ‘silverhedge’ contract after a successful ‘goldhedge’ launch. ‘Silverhedge’ price will exclude import duty and premium, therefore, reflecting the global price directly.

Mt. Gox To Resume Withdrawals Soon
cnet

Mt. Gox apologized Monday for suspending withdrawals and promised to resume withdrawals soon having suspended withdrawals February 7th.

Mt. Gox press release here.

Bitcoin Experiment In Real Life (subscription)
Wall Street Journal

PLY: The usual tedious headlines and then the pleasant surprise that actually you can buy cupcakes and clothes with nascent cryptocurrency…

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX and FTIL are both +5% presumably on the back of news of a Mahindra acquisition in FTIL which would likely improve the standing of all parties in the Indian, and broader, exchange community.

Of course NSEL defaulted yesterday as usual but, as previously noted, it’s the dogged dudes of the Mumbai fraud squad who have tied up the vast bulk of assets right now. Anyway, another 600K US helps things along on that basis. FTIL appear to be positioning for an out of court settlement which is logical given how much the shortfall has narrowed of late. Things are looking up, although the regulatory backlash remains…and some might note that the core agricultural spot markets still need better marketplaces!

The NSEL repayment tally of shame remains: (N.B. Anticipated weekly repayment is Rs 174.72 crore, roughly USD 28,000,000)

Week 1: Rs 92.73 crore (USD 14.37 mln) paid
Week 2: Rs 12.05 crore (USD 1.79 mln) paid
Week 3:Rs 15.37 crore (USD 2.29 mln) paid
Week 4: Rs 7.77 crore (USD 1.21 mln) paid
Week 5: Rs 8.57 crore (USD 1.35 mln) paid
Week 6: Rs 11.45 crore (USD 1.82 mln) paid
Week 7: no payout – bank accounts frozen
Week 8: Rs. 2.85 crore (USD 457.9 k) paid
Week 9: Rs. 28.34 crore (USD 4.58 mln) paid
Week 10: Rs. 30 lakh (USD 49k) paid
Week 11: Rs. 29.05 crore (USD 4.72 mln) paid
Week 12: Rs. 11 crore (USD 1.77 mln) paid
Week 13: no payout
Week 14: Rs. 6.1 crore (USD 976.7k) paid
Week 15: Rs. 9 crore (USD 1.44 mln) paid
Week 16: Rs. 9 crore (USD 1.44 mln) paid
Week 17: Rs. 9 crore (USD 1.46 mln) paid
Week 18: Rs. 11.5 crore (USD 1.85 mln) paid
Week 19: Rs 12.64 crore (USD 2.04 mln) paid
Week 20: Rs 21 crore (USD 3.37 mln) paid
Week 21: Rs 2.45 crore (USD 394k) paid
Week 22: Rs 3.24 crore ( USD 526k) paid
Week 23: Rs 4.5 crore ( USD 726 k) paid
Week 24: Rs 2 crore ( USD 322 k) paid
Week 25: Rs 8.62 crore (USD 1.38 mln) paid
Week 26: Rs 1.05 crore (USD 169k) paid

Week 27: Rs 4.1 crore (USD 660k) paid defaults 27th time – see NSEL announcement here.

FTIL Proposes Out Of Court Settlement
Moneycontrol

Sources have said that beleaguered FTIL is in talks with investors for an out of court settlement.

The company is likely to pay more than Rs 1,100 crore (USD 177 mln) to investors and may raise Rs 400-500 crore (USD 64 – 80 mln) by pledging some of its assets. But shareholders may challenge the out of court settlement.

These assets include FT towers, the DGCX in which it holds 31 percent equity, plus two merged exchanges Bourse Africa and Mauritius’ Global Board of Trade (GBOT).

Govt Monitoring Actions Of Several Departments In NSEL Crisis
The Economic Times

The government is monitoring the actions of several departments regarding the payment crisis at NSEL, Parliament was informed today.

According to the report, the NSEL episode may not have any major systemic impact. However, there are certain recommendations in the report on which follow up actions are required to be taken by the concerned ministry or department.

Technology

Javelin SEF Announces Clearing Connectivity For IRS Trading With Nine Firms
Digital Journal

Javelin Capital Markets has connected to nine individual clearing firms to facilitate post-trade clearing of interest rate swaps on Javelin SEF.

Javelin SEF can now send customer trades for clearing acceptance at LCH or CME to the following clearing firms: Bank of America, Barclays, Citigroup, Credit Suisse, HSBC, JP Morgan, Newedge, Nomura and RBS.

Dhaka SE Goes Live With Its New Surveillance System InstantWatch Market From Trapets
bobsguide

The Chairman of Bangladesh SEC (BSEC) Prof. M Khairul Hossain yesterday inaugurated InstantWatch Market as chief guest at Dhaka SE (DSE). “The installation of the software will enhance the capacity of the DSE to detect suspicious transactions” he said.

BSEC has since December 2012 been using Trapets surveillance system, InstantWatch Market. Since then, 44 different types of manipulation have been detected.

Products

Pakistan Launches Secondary Market Trading Of Govt Debt Securities Through KSE
Online News

The Finance Minister Mohammad Ishaq Dar launched the secondary market trading of Government debt securities through Karachi SE’s Bond Automated Trading System (BATS).

Indexes

Eurex Expands MSCI Portfolio For US Investors (subscription)
Futures and Options Intelligence

Eurex is set to boost its emerging markets franchise by providing eleven additional MSCI index futures for US investors, following approval from the CFTC.

Xinhua Backs New Chinese Stock Index
Shanghai Daily

Xinhua Golden Bull 50, a stock index designed by China’s official Xinhua News Agency and China Securities Index Co., Ltd, was launched at Shanghai SE on Tuesday.

Career Paths

NASDAQ OMX’s new Manila office will be overseen by Emanuel Sarte, Head of Operations.

Financial Calendar

Friday

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.

Crowdfunding

Equity Crowdfunding Portal PennStarter Launched
Crowdfund Insider

Headquartered in Coeur d’Alene, Idaho, PennStarter, part of privately owned broker-dealer Pennaluna & Company, has announced they are using their equity funding portal to represent advertised investment opportunities under the JOBS Act.

Other stories

In Reversal, Ex-Madoff Aide Takes Stand In His Own Defense
Reuters

In an unusual move, Bernard Madoff’s former back-office director took the witness stand in his own defense on Tuesday, telling a federal jury that he had no idea his boss was operating a Ponzi scheme until the day Madoff was arrested in December 2008.

PLY: Am I alone in pondering just how somebody could be responsible for a back office and yet be unaware that an operation with as many trades as Madoff’s was a total fiction?

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