February 20 2014

elb2DB1 encourages, TTIP encouraged, Franco-German axis pushing FTT. Tullett’s restructure Japanese business alongside possible Japanese second tier mergers, NASDAQ readies kill switch, REITs in Kenya, BM&F Bovespa edges into the OTC space. Chinese focused Sydney bourse relaunched, more Chinese IPOs, SEF talk, another IP platform – this time a Royalty Exchange deal…

All this and much more, welcome to Thursday’s Exchange Invest, happy scrolling:

Public Markets

Deutsche Börse Preliminary Results Q4 & Full-Year 2013
DB
DB Affirms Dividend Even As Profit Slips (subscription)
Wall Street Journal

In financial year 2013, DB’s net revenue declined 1% to €1,912.3 mln (2012: €1,932.3 mln) due to lower net interest income from banking business. This decreased to €35.9 mln (2012: €52.0 mln).

Operating costs amounted to €1,182.8 mln, a significant YoY increase (2012: €958.6 mln) due to exceptional items of €215.2 mln (2012: €36.2 mln). Exceptional items comprised costs of €86.2 mln, primarily for efficiency programs, and €129.0 mln to settle proceedings brought by the US Office of Foreign Assets Control (OFAC) (pertaining to Clearstream and Iran), of which €111.2 mln (US$151.9 mln) was attributable to the settlement payment and €17.8 mln mainly to legal costs. Adjusted for these one-off effects, costs increased by 5 per cent to €967.6 mln (2012: €922.4 mln), and were thus in line with the Group’s forecast of a moderate increase in operating costs.

Preliminary results Q4/2013: DB1 generated net revenue of €473.0 mln in Q4 2013 (Q4/2012: €447.7 mln). Operating costs amounted to €284.6 mln (Q4/2012: €253.7 mln). Adjusted for the costs of efficiency programs and legal costs in connection with the OFAC settlement, operating costs were €267.9 mln (Q4/2012: €247.1 mln). EBIT for Q4 2013 was €189.5 mln, compared with €185.2 mln in the prior-year period. Adjusted for exceptional items, EBIT amounted to €206.2 mln (Q4/2012: €191.8 mln). Basic EPS were €0.68 in Q4 2013, compared with €0.82 in Q4 2012. Adjusted for the exceptional items described above, basic EPS in Q4 2013 amounted to €0.74 (Q4/2012: €0.64).

PLY: Numbers on target or slightly ahead of analysts’ expectations with the dividend retained.

Deutsche Börse In Asia Push (subscription)
Financial Times

PLY: CFO Gregor Pottmeyer reiterates previous guidances that DB wants to do more business in Asia to deliver long-term growth.

Germany, France Back EU Tax On Derivatives
Reuters

France and Germany agreed that a planned pan-European tax on financial transactions should cover all derivatives products.

PLY: The May target suggests clear electioneering to coincide with European Parliamentary elections and one thing which even Brussels insiders will admit in their candid moments is that EU policy created by a rush to populism in financial matters is invariably toxic to economic growth.

Central Tanshi & Tullett Prebon Agree To Reorganise Joint Venture In Japan
Digital Journal

Tullett Prebon and its long-time Japanese j.v. partner, Central Tanshi, have agreed to reorganise their Tokyo business operations.

Following a strategic review by Central Tanshi of its Tokyo businesses, Central Tanshi has agreed to sell its stake in Yamane Tullett Prebon (Japan) Limited, which has operated as a j.v. since it was created in 1997. Yamane Tullett Prebon (Japan) Limited will become a wholly owned subsidiary of the Tullett Prebon Group and will be renamed “Tullett Prebon (Japan) Limited”.

JPX Weighs Merging Jasdaq, Mothers, TSE Second
Bloomberg

JPX will consider merging three smaller equity markets to simplify its exchange structure.

The merged Tokyo-Osaka bourse will weigh combining its Mothers, TSE Second Section and Jasdaq markets, Yasuyuki Konuma, executive officer for the new listings department, said in an interview in Tokyo yesterday.

“There are some who say it’s a problem that we have so many markets,” said Konuma. “We need to begin discussing whether we need to merge them, the merit being simplicity.”

Nasdaq To Offer ‘Kill Switch’ Feature By March 1 (subscription)
Wall Street Journal

Nasdaq OMX plans to offer a “kill switch” tool that will cut off trades when they exceed established position limits. The switch is designed to protect both firms and investors by limiting the damage of potential technological problems or other erroneous trading activity.

Brazil Approves BM&FBovespa’s Post-Trading Platform For Some Notes
Reuters

BM&FBovespa SA received approval from two Brazilian regulatory agencies for permission to operate a platform to register, clear and settle certain securities, in a key step as Brazil’s sole financial exchange seeks to expand into OTC fixed income instruments.

According to a securities filing on Tuesday, BM&FBovespa’s iBalcão post-trading platform for the OTC securities market was approved by securities industry watchdog CVM and the central bank.

The iBalcão platform will initially offer registration, clearing and settlement services for certificates of deposit (CDBs), real estate-backed credit notes (LCIs) and structures notes (COEs), the São Paulo-based bourse said.

BM&FBovespa press release here.

SGX May Miss Revival Of Chinese IPOs (subscription)
Business Times

Even as IPOs of Chinese companies are back in favour on major stock exchanges globally, the Singapore market seems to have missed out on this revival.

A stream of Chinese IPOs is expected to flow into the Hong Kong and US markets this year, while the mainland bourses in Shanghai and Shenzhen are set for a record year following the lifting of a ban on new IPOs.

PLY: Pricing and past accounting scandals on SGX are cited in this story yet that makes little sense given that US IPOs of Chinese stocks alone have had multiple accounting ‘problems.’

CFTC Relief Dampens ICAP Cross-Border Headstart
IFR Asia

Swaps brokers are taking starkly different views on how their European platforms will be affected by the Dodd-Frank electronic trading mandate even as SEFs go live this week.

ICAP, the biggest broker by volume in the interest rate swaps market, applied to the CFTC in January to register its London-based electronic platform as a SEF, believing it would give it a headstart in the European market. But those plans have been at least temporarily scuppered by CFTC guidance that last week clarified the reach of its SEF rules into foreign jurisdictions, significantly altering the landscape for electronic platforms executing on behalf of US clients across borders.

It was previously assumed that European platforms would have to cut off US clients when SEF rules went into place this week, but the CFTC has given foreign jurisdictions breathing room in implementing SEF-equivalent rules until March 24.

While the no-action relief opens a previously closed-off avenue for European platforms looking to service US clients, uncertainty remains over whether non-US regulators will succeed by this deadline.

Saudi SE (Tadawul) & Bursa Malaysia (MYX) Sign Cooperation Agreement
Zawya

Saudi SE (Tadawul) and Bursa Malaysia have entered into a MoU to deepen and formalize existing cooperation between the two exchanges.

Royalty Exchange & ICAP Patent Brokerage Create New Opportunities To Invest In Patent Royalties
PR Newswire

Royalty Exchange, the world’s only online auction marketplace for royalty-based assets, confirmed today it is entering the intellectual property (IP) market by announcing a collaboration with ICAP Patent Brokerage, the global leader in patent and IP transactions. Royalty Exchange and ICAP Patent Brokerage will team up to offer patent royalties for sale at auction through the Royalty Exchange website.

PLY: An interesting market, Royalty Exchange, new to us and another development in the growing IP sector.

Private Markets

Australia’s New Exchange Offers Fast Track For Chinese Firms
Reuters

Australia’s newest stock exchange launched on Thursday with plans to attract Chinese companies that want to dodge red tape at home and shake off regulatory pressure on valuations, in the latest challenge to ASX’s near monopoly.

Sydney-based Asia Pacific Exchange (APX) hopes to attract Chinese companies by providing quicker listing and a more stable regulatory environment than can be found in Shanghai or Shenzhen, where the process can take years.

PLY: The latest incarnation of what was once Austock Exempt where SFE was listed, now oriented to Chinese listings. There is clearly a lot of content around in that market. The tricky bit is there have been a lot of plain and simple cons too which may discourage investors. Presumably ace Sydney scam searcher, John Hempton of Bronte Capital will be keeping a keen eye on new listing.

Colombian Exchange Resumes Bond Trading After 2 1/2-Hour Halt
Businessweek

Trading in the MEC Plus Bond system was halted from 8:30 a.m. to 11:00 a.m. in Bogota, Bolsa de Valores de Colombia (BVC) said in an e-mailed statement.

FAO/PLY: BVC runs a separate system for cash bonds while BVC has been using Nasdaq OMX’s technology since 2007 through the X-stream trading platform and the agreement was extended in 2012 for 5 years for equities and derivatives.

(An earlier edition suggested the Bond technology was also NASDAQ OMX – this is incorrect and we apologise for the error).

TOCOM Receives Authorization From SFC As ATS
MondoVisione

Tokyo Commodity Exchange (TOCOM) received authorization to provide Automated Trading Services (ATS) from the Hong Kong Securities and Futures Commission (SFC).

Traders Unlikely To Bite NCDEX’s Lower Fee Bait
The Economic Times

As EI reported yesterday, NCDEX has slashed transaction charges – from Rs 1 per lakh to just 30 paise from Wednesday — on nonfarm products like gold, silver, crude oil, etc, to gain market share at the expense of its rival MCX. But, will traders and hedgers bite the bait?

PLY: NCDEX also needs more liquidity and narrower bid offer spreads to help reduce associated market impact costs.

SET Keen To Expand Across Region
Bangkok Post

Stock Exchange of Thailand (SET) is studying the establishment of a Greater Mekong Subregion (GMS) board to attract investors. EVP Pakorn Peetathawatchai said such a move would be part of SET efforts to become more of a major player in Southeast Asia. The GMS comprises Cambodia, Laos, Myanmar, Thailand, Vietnam and Yunnan province in southern China.

HKMEx Three Set For Trial
The Standard

The District Court has concluded there is sufficient evidence to show the three mainland defendants involved in the collapse of HKMEx have committed fraud.

Judge Johnny Chan Jong-herng ruled yesterday there is strong prima facie evidence for him to find that Dai Linyi, 56, Li Shanrong, 49, and Lian Chunren, 50, have a case to answer on the charges against them.

Israel Warns Public On Bitcoin Risks, Mulls Regulation
Reuters

Israel said on Wednesday it was considering regulation of bitcoin and warned citizens that using such decentralised virtual currencies was risky.

PLY: Some pragmatic regulation would be welcome.

Bitcoin Exchange Prices Plummet As Investors Brace For Bankruptcy
Wired

PLY: A fascinating backwardation: the risk of possible bankruptcy filing, leaves many keen to hold US dollars (perceived easier to extract from administration or liquidation) as opposed to Bitcoins, hence a huge ‘arbitrage’ has opened (if you can access it) between the once world leading Japanese exchange and other markets.

Silk Road 2.0 Pledges To Repay £1.7 Million To Users After Bitcoin Theft
International Business Times

Online black market Silk Road 2.0 has pledged to pay back more than £1.7 million worth of bitcoins stolen from its servers during a heist last week. Silk Road 2.0 moderator Defcon said the website would refund the more than 4,000 bitcoins stolen during the heist and would not pay its staff until users had been reimbursed.

Dividend News

Deutsche Börse’s Executive Board is proposing a stable dividend of €2.10 per share for financial year 2013 (2012: €2.10). This still requires the formal approval of DB’s Supervisory Board, which today expressed its support, and of DB’s shareholders at the AGM on 15 May 2014.

Special Section: FTI, NSEL, India at the Crossroads

PLY: FTIL soars up 4.5% as the Tech Mahindra sale story gathers momentum while MCX is flat on news of the departure of the CFO.

FTIL Denies Comments On Stake Sale To Tech Mahindra
Equity Bulls

FTIL has clarified with reference to the news item appearing in a leading financial daily dated February 19, 2014 titled “Tech M and FT Come Closer on Deal Talks” reported yesterday by EI.

In a notification to the stock exchange the company said that, as a policy it does not wish to comment on any speculative news article. It also said that they would not like to offer any comments on the said news reporting and also on the price rise of the company’s share.

FTIL clarification here.

PLY: So that clarification is in fact a no comment note but said with just enough fanfare to gently keep the momentum going that there is a deal…

MCX Advertises For Bankers For Divestment Of Assets
Livemint

MCX is seeking to appoint investment and merchant bankers for divesting stakes in a “few ventures”, according to an advertisement in The Economic Times newspaper on Wednesday.

PLY: “MCX, a unit of FTIL, did not divulge details of the ventures it wants to divest” but we can presumably guess that these likely include other exchange assets aka 5% of MCX-SX, 26% in MCX-SX Clearing Corp and 3.4% in Dubai’s DGCX.

Technology

BATS Global Markets Selects Equinix’s Secaucus Data Center For BATS And Direct Edge Exchanges
BATS

BATS has selected Equinix as its primary data center provider for all of the BATS & Direct Edge exchange platforms.

The Direct Edge Exchanges – EDGA and EDGX – will remain at their current location at Equinix’s NY4 data
center in Secaucus, N.J. until January 2015 when they will migrate to BATS’ technology in Equinix’s NY5 data center. In Q2 2015, the BATS BZX and BYX Exchanges, and BATS Options, will move to NY5 from their current location of NJ2 in Weehawken, N.J.

NYSE Liffe Taps SuperDerivatives Volatility Data For Settlement Pricing (subscription)
waters technology

Vendor SuperDerivatives has begun providing Liffe with volatility data to enhance daily settlement price calculations for flexible FTSE 100 options, after the recent options maximum expiry extension to 10 and a half years.

SunGard Supports Gemini Hedge Business
Asset Servicing Times

Gemini Hedge Fund Services has chosen SunGard’s Hedge360 back-office management application suite, as its platform of choice.

Products

NCDEX Launches Silver Hedge Contract
The Economic Times

NCDEX launched its Silver Hedge contract. The unit of trading of the contract is 15 kg.

Kenya Bourse Plans Derivatives, REITs To Boost Market Value
Businessweek

Nairobi SE plans to start trading derivatives and real estate investment funds this year as sub-Saharan Africa’s third-biggest bourse targets a fourfold rise in its market capitalization by 2023.

A system for trading derivatives has already been installed and the exchange has sent its rules on trading of REITs to the Capital Markets Authority for approval, Head of Market and Product Development Donald Ouma said in an interview yesterday in the capital, Nairobi.

China’s Bohai Commodity Exchange Launches REE Dy2O3 Spot Contract (subscription)
Metal.com

China’s Bohai Commodity Exchange launched a dysprosium oxide (Dy2O3) spot contract, hoping to create a price discovery vehicle for this important rare earth element (REE).

Indexes

NASDAQ OMX Launches Two New Indexes In The NASDAQ IBIS Index Family
NASDAQ OMX

NASDAQ OMX has introduced two new indexes on the Global Index Data Service 2.0 (GIDS 2.0) – the NASDAQ IBIS Focused Growth Index (NQIBIS); and the NASDAQ IBIS Focused Growth Total Return Index (NQIBIST).

Career Paths

Hemant Vastani, MCX CFO has resigned from the company, only weeks after the appointment of new CEO Manoj Vaish.

Myron S. Scholes, Nobel Laureate in Economic Sciences and the ‘Frank E. Buck’ Professor of Finance, Emeritus, at the Stanford Graduate School of Business, has returned to the CME‘s Competitive Markets Advisory Council (CMAC).

CMAC was organized by Scholes and CME Group Chairman Emeritus Leo Melamed in March 2004. The Council consists of financial experts, including Nobel Prize winners, serving as a “think tank” to develop and provide advice to the Board in the form of policy, analysis, position papers and other strategic recommendations on significant market issues.

CME press release here.

The Minister of Finance has appointed lawyer and banker Zuraidah Atan as public director of Bursa Malaysia Bhd.

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.

Analyst Notes

LSE “Outperform” Rating Reiterated At Credit Suisse – GBX 2,000 Price Target
ICAP “Overweight” Rating Reiterated At Barclays
Barclays Upped Their Price Target Of Tullett Prebon From GBX 325 To GBX 350 – “Equal Weight” 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.

Crowdfunding

Australia – Equity Crowdfunding Comes To Startup Scene
TechWorld

Australian startups struggling for cash have a potential new source of funding with the launch of VentureCrowd, an online equity-based crowdfunding platform developed by Artesian Venture Partners.

VentureCrowd opened this morning with more than 200 registered investors and 36 startups that have been pre-screened by about 20 Australian accelerators, incubators, angel groups and university programs.

The launch comes only days after the Australian launch of OurCrowd, a platform with a similar business model from Israel and the expansion into Australia by Indiegogo, a rewards-based crowdfunder similar to Kickstarter.

Other stories

SIFMA And AFME Statement On TTIP Negotiations
MondoVisione

SIFMA President and CEO Kenneth E. Bentsen, Jr. and AFME CEO Simon Lewis, whose respective memberships are comprised of firms that engage for their clients in all aspects of the transatlantic financial marketplace, today issued a statement on this week’s TTIP negotiations.

PLY: Bentsen and Lewis are keen to promote the TTIP framework as a means to enhance regulatory co-operation and overall market opportunity. That can only be a good thing for all markets. Anything which reduces the US and EU creating separate regulations would be welcomed. Moreover hopefully TTIP can reduce the danger of toxic transaction taxes. Moreover, it could endanger the EU’s approach to open clearing adopted at the last moment in MIFID II.

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