February 22 2016

elb2IEX Exchange regulatory application coming to a head as BM&FBovespa raises bid for CETIP. China sacks chief regulator…& much more, happy scrolling:

Meanwhile  in Bigworld, apparently there’s going to be a referendum on the British membership of the EU based around something the heads of government dubiously wrote on the back of a drinks coaster over another big night out in Brussels last Thursday.

Public Markets

BM&FBovespa Raises Bid In Second Attempt To Buy Rival Cetip

Denyse Godoy – Bloomberg

BM&FBovespa said that it’s willing to pay 41 reais per share of Cetip, 7.2% more than the stock’s closing price on Friday. The payment would be in cash and in BM&FBovespa stock, with Cetip’s shareholders owning 11.8% of the merged company if the deal is completed. A previous offer announced in November was for 39 reais per share.


China Removes Stocks Regulator Head After Market Woes

Adam Jourdan – Reuters

Xiao Gang, Chairman of CSRC since 2013, had been succeeded by Liu Shiyu, Chairman of the Agricultural Bank of China (AgBank) and a former deputy governor of the central bank.

PLY: Deckchair shuffling I fear as China continues to show precious little comprehension of free market dynamics.


Leucadia’s Loan To FXCM: $144.7 Mln Repaid, $192.7 Mln Outstanding At Year-End

Maria Nikolova – LeapRate

QV Premium: FX – CHF Crisis – Brief.

PLY: So far so good for Leucadia which appears en route to a good return from FXCM’s risk management blind spot.


IEX Responds To Critics Of Its Exchange Application – “Clearing The Air By IEX”


IEX Sick Of SEC Delays On Exchange Approval

Kevin Dugan – NY Post

After five months IEX is tired of waiting for regulators to approve its application to become a full-fledged stock exchange.

PLY: It’s close to an inversion point. Either we permit competition – or, advocates for the arcanery of benchmarking against time intervals not conceived of when Reg NMS was written, will eke out a potentially massive Pyrrhic victory. Not regulating IEX will leave the media perfectly poised to perform a demolition job on what Main Street will perceive as Wall Street’s utter ambivalence towards the retail investor.


SEC Expects More ‘Dark Pool’ Fines This Year

Suzanne Barlyn & John McCrank – Reuters

SEC expects to bring more enforcement cases against “dark pools” this year, following a spate of record fines at the private stock-trading venues.

PLY: The trend is your friend…


Trad-X Strengthens IRS Market Presence With Eurex Clearing Partnership


The SEF Trad-X will launch a new central limit order book (CLOB) for EurexOTC cleared products on 21 February (the EMIR Frontloading date).


ESMA Adds List Of Clearing Members To Its Public Register On EMIR



US & EU Still Have Hurdles To Clear In Derivatives Détente (subscription)

James Rundle – Financial News

PLY: Details & devil therein amidst a negotiation where both parties have proven prickly in the past #Tricky.


Esma Pledges To Ease Reporting Burden On Trading Firms (subscription)

James Rundle – Financial News

Europe’s top markets watchdog is examining ways it can standardise trade reporting requirements.

PLY: Sound move by ESMA.


CFTC Signals Retreat Over ‘Source Code’ Repository (subscription)

Tim Cave – Financial News

CFTC has signalled a willingness to back down on controversial proposals allowing it to freely access the source code of high-speed traders, following complaints that it could lead to sensitive intellectual property being revealed.

PLY: This was a definitively analogue solution in a digital world and as such creates lopsided risks for government. A little more thinking is required if we are to achieve a happy medium of insight.

Private Markets

Bats Global Markets Unveils New Logo, Updates To Market Center Naming Conventions

Maria Nikolova – LeapRate

PLY: Apparently BATS removed Chi-X from the name in Europe. I thought they dropped it years ago…

Bats Gets Okay To Speed Manipulation Crackdowns

John McCrank – Reuters

If Bats detects manipulative trading patterns, the new rule allows it to contact the broker of the trader or firm in question and demand it suspend the offender’s access to the exchange.

PLY: Which is a good move albeit if that wasn’t in place 5 years ago, who was actually awake at the wheel? This is a great example of the everyday inanity of the anti-IEX argument. Clients can get ripped off for years in one venue it seems. However, transgress a time period faster than the bat makes contact with a baseball and it’s a calamity for US equity markets? Better late than never for BATS but as I recall, somewhere like  Liquidnet doesn’t permit HFT but would have a low latency reaction to removing those gaming the system…

(Pardon me for being one of those derivatives dunces who clearly just doesn’t get the micro-minutiae of the highly complex binary world of cash equities…but the US stock market in particular does seem masochistically over-complex).


KRX Has Organized A New Marketing Department



NCDEX Orders Forensic Audit Of Castor Crisis

Rajesh Bhayani – Business Standard

Report expected next month, exchange beefing up systems, plans to re-launch contract.


NSE’s Upper Hand Makes It A Continental Launchpad

Geoffrey Odundo, CEO of Nairobi Securities Exchange – The Worldfolio

As East Africa’s financial services hub, Kenya is a strategic dual listing gateway to not only East African capital markets but also as a strategic ‘jump-off’ point into the rest of the continent. Geoffrey Odundo, Nairobi SE CEO, explains why NSE should be any investor’s preferred exchange in Africa.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX up 1.5%, FTIL flat to slightly off.

NSEL-FTIL Merger May Not Speed Up Refunds To Investors

Jayshree P. Upadhyay – Livemint

NSEL has not listed the dues to investors who lost money in the payments crisis as a liability in its books.

QV Premium: NSEL Scandal Brief – Part 16 and NSEL-FTIL Merger Brief.

PLY: Thus defenestrating the Indian corporate code makes precisely zero sense from even the restitution angle.


NYSE Embarks On High-Stakes Technology Shift For Its Exchanges

Annie Massa – Bloomberg

NYSE is moving its markets to a single software platform called Pillar, a move that its owner ICE hopes will allow it to shed its image of having clunky, out-of-date technology.

PLY: Of course only a few years ago, there was a CEO at NYSE who would have had you believe the NYSE was a hotbed of technological achievement… An era that now seems like a distant dream masquerading as a business school case study in how not to do M&A or management. Expect NYSE to be blessed with working technology soon.


Rapid-Fire Tech & Algorithmic Wizardry Of Flash Traders

Simon Rowe – Irish Independent

Ireland is fast-becoming a European hub for HFT firms.

PLY: Really just an extension of the prop trading businesses which have been congregating in Ireland for over 20 years, partly through tax incentives and also even dating back to the IFSC’s European NYBOT floor…


Pros Of A Spot Gold Exchange In India

Joshy Jacob & Jayanth R. Varma – Livemint

…would help much to create a vibrant gold ecosystem matching India’s large share of global gold consumption.


Dwolla is Back, But Focused on Blockchain, Not Bitcoin

Bailey Reutzel – CoinDesk

After a series of mishaps working with bitcoin startups – including the infamous, now-defunct exchange Mt Gox, Dwolla rides again.


Some Still Love Coal As Exchanges Battle To Dominate Market

Mathew Carr & Matthew Leising – Bloomberg

The organic rock used to generate 40% of the world’s electricity is at the center of a hard-fought battle for trading revenue in Europe between CME and ICE. CME has been winning for the past three years as the Chicago-based bourse offered incentives to brokers and simpler trading. ICE, the dominant energy market in the region, cut fees to zero and bought a trading software provider (Trayport) to get direct access to brokers.

PLY: Interesting discussion focused on the futures end of the market, missing out the architect of the Single Coal Trading Agreement (SCoTA), UK based MTF GlobalCoal.


CME – Launch of LNG DES Japan (Rim) Futures Contract



NYSE Drops Proposal To Flag ‘Aberrant’ Trading In ETFs

Trevor Hunnicutt – Reuters

The exchange in late January dropped a request with federal regulators that would have let it discourage traders and market-data companies from relying on ETF prices “that the exchange determines to be inconsistent with the prevailing market.”

PLY: A pragmatic return to “caveat emptor” appears to be in order.


FM Jaitley, This Is What Commodity Traders Seek From You

Financial Express

MCX Urges Government To Scrap CTT

The Economic Times

Former Finance Minister P Chidambaram introduced CTT in commodity futures trading to universal industry opposition.

MCX urged the government to scrap CTT and allow foreign stock bourse/financial bodies to hold up to 15% stake in the recognised commodity bourse.

Career Paths

Faulty ‘Circuit-Breaker’ Blamed For Regulator’s Fall (subscription)

Summer Zhen – SCMP


Bank Chief Made Head Of CSRC After Months Of Turmoil In Stock Markets (subscription)

Zhou Xin – SCMP

Xiao Gang to step down as investors still spooked by botched introduction of ‘market-calming’ mechanism last month; Liu Shiyu, Chairman at the Agricultural Bank of China, named as new chief of CSRC.


BGC Partners Broker Forced To Delay Jumping Ship To Rival ICAP

Misa Han – AFR

Anthony Hickey, a senior IRS broker at BGC Partners, has been banned from working at ICAP until September this year, after Justice James Stevenson of the NSW Supreme Court found BGC needs time to take “whatever steps are within its power” to preserve its client connections. This also means Mr Hickey will not be paid the $500,000 sign-on bonus with ICAP until September.


Lukasz Hardt has resigned from the board of GPW due to his talking a position on the board of the Polish Central Bank as the ‘new’ government shuffles a few deck chairs before the inevitable recession.

Financial Calendar

23.02 – CFTC’s Technology Advisory Committee Meeting

24.02 – NZX Preliminary 2015 Full Year Results

25.02 – WSE Annual Report 2015

25.02 – CFTC’s Energy & Environmental Markets Advisory Committee

26.02 – Record date TMX $0.40 dividend

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


UK P2P Lending Grows Over 80% In 2015

P2P Banking

P2P Sheds ‘Alternative’ Label & Moves Into Mainstream (subscription)

Emma Dunkley – Financial Times

When Zopa, the world’s first P2P lending platform, launched in the UK in 2005, the concept of “alternative finance” seemed revolutionary.

PLY: Gosh it seems like only yesterday, in a private forum, I was completely wrong (putting it politely) according to a Bank of England board member, for extolling that within a decade P2 lending would be materially significant… Fortunately for fiscal foresight, that director has returned to the fiscal safe space of academia.

Other stories

Change of Regulator Sets Stage for Overhaul of China’s Markets (subscription)

Lingling Wei – Wall Street Journal

The removal of Xiao Gang as China’s top securities cop marks the beginning of an overhaul of financial regulators in the face of a deepening economic slowdown.


Chairman’s Address At SEC Speaks – “Beyond Disclosure At The SEC In 2016”, Chairman Mary Jo White, Washington, DC, Feb. 19, 2016


Remarks At “SEC Speaks” – What Lies Ahead? The SEC In 2016, SEC Commissioner Kara M. Stein, Feb. 19, 2016



The Falling Leaves Of The Buttonwood Tree, Rick A. Fleming, Investor Advocate, U.S. SEC, Feb. 19



Financial Services Regulatory Authority Of Abu Dhabi Global Market Joins IOSCO


PLY: Welcome to the global regulators’ body, Abu Dhabi.


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