February 23 2015

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So we have the deal which ends the first Brazilian soap opera concerning the future of GFI – now how about the spin-off show “What Mickey Does Next?” Commissioner Giancarlo questioned by American left while Virtu files for IPO… Small cap exchanges mooted by SEC as there are signs of competition in South Africa and a remarkable statistic in the NSEL crisis. All this and much more can be scrolled below…

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MILA Exchanges
SEE Link Project
Greater Mekong Subregion Exchanges Project
ASEAN Exchanges Project
Bulgarian SE Sale
ICE – SMX Deal
DFM – ADX Merger
BATS – Direct Edge Merger

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Public Markets

BGC Partners & GFI Group Reach Agreement
BGC Partners
BGC Partners Set To Buy Rival GFI Group
Reuters

GFI board supports BGC’S $6.10 per share tender offer and recommends GFI Stockholders Tender Their Shares to BGC.

BGC to Appoint 6 out of 8 Directors on Expanded GFI Board
Stockholders Representing Almost 48% of GFI Common Shares Supported Tender Offer
BGC Extends Tender Offer Deadline to February 26, 2015; No Further Extensions Expected

GFI Stockholders Who Miss the February 26 Deadline May Have to Wait Until Restriction Lapses on January 30, 2016 for an Opportunity to Receive $6.10 per Share

PLY: If the integration is wholly additive, then ICAP has a closer competitor while TNT is now some way distant in third place. It will be interesting to see how well the integration goes and indeed whether some assets such as Trayport or Fenics may yet be disposed of separately. Whither Mr Gooch? I find it hard to believe he will remain in situ for long…

QV our Premium brief: BGC – CME – GFI Brief.

Elizabeth Warren Questions Stock Sales By Trading Commissioner
Robert Schmidt – Bloomberg

Two Democratic lawmakers are raising ethics questions about CFTC member J. Christopher Giancarlo’s ties to his former employer, GFI.

Senator Elizabeth Warren of Massachusetts and Representative Elijah Cummings of Maryland wrote to Giancarlo Friday, requesting documents about his sale of GFI Group stock. As Giancarlo unloaded his holdings last year, the firm’s stock price surged on news it was a takeover target.
Warren and Cummings also asked Giancarlo how he would handle any conflicts related to GFI’s sale.

PLY: I must admit that on the face of it, I find this hard to take as much more than politicking by populists with an anti-market agenda. When Giancarlo left GFI the group had long been trying to find an investment deal to help it make the post OTC transition. True Giancarlo probably left himself open to some criticism through a tiered sale as opposed to just dumping all his stock. However, this strikes as much of grandstanding as it does of reasonable discussion from a US government who have been notoriously incapable of bringing bankers to justice who indulged in dubious lending practices…

Virtu Financial Again Files For IPO
Reuters

Virtu Financial has filed a new prospectus for an IPO, a U.S. regulatory filing on Friday showed. Virtu plans to raise $100 million by listing on Nasdaq, though that figure is an estimate used to calculate the registration fee with SEC.

Read our Premium brief: Virtu Financial IPO Brief.

SEC Mulls Promoting Creation Of U.S. Venture Exchanges -White
Sarah N. Lynch – Reuters

U.S. regulators are considering taking steps to promote the creation of “venture exchanges” that aim to help smaller companies get listed and actively traded, SEC Chairman Mary Jo White said on Friday.

“It is something we have been encouraging for some time. There have been venture exchanges approved by the SEC before.”

PLY: Given SEC are apparently so enthusiastic about small cap financing, why have they still not written crowdfunding rules?

truEX Chief Sees Rapid SEF Consolidation In 2015 (subscription)
Luke Jeffs – FOW

The CEO of truEX has predicted this year rapid consolidation in a market that has proliferated in the past two years.

Read our Premium post: On Bonds & SEFs.

Shining A Light On The Importance Of Dark Pools (subscription)
Rob Boardman – Financial Times

PLY: An excellent Opinion piece by Rob Boardman, head of ITG Europe who ponders amongst other items, the imbecility which is the volume cap within MIFID II. As a device to help savers rediscover offshore markets, I continue to believe MIFID II is an excellent device. As a means to encourage European markets, it is a rank disaster.

Why Stockbrokers Shelved Threat To Stop Nairobi Securities Exchange Trade
Jackson Okoth – Standard Media

PLY: Brokers frustrated by new capital gains tax collection methods, threaten an exchange strike. It’s almost like Atlas Shrugged, the Nairobi Mix.

CME Fines Broker Newedge $1.75 Mln For Metals Market Violations
Reuters

CME fined derivatives broker Newedge USA $1.75 million for violating rules in metals markets over two years. The penalty covers Exchange for Related Position (EFRP) transactions.

Still Much Darkness In LME’s Transparency Drive
Andy Home – Reuters

LME has been publishing its Commitments of Traders Report (COTR) for just over six months.

PLY: Confusion seems to be an element of the LME COTR as it encounters some growing pains…

Icap Faced Triple Whammy But Still Did Better Than Rivals (subscription)
Sarah Spikes – Financial News

Icap is continuing to face big challenges in its industry but it has done a better job than rivals of rolling with the punches. The question now is how Michael Spencer will navigate the next decade in which his company will increasingly compete with its own clients and as revenues from its original business, voice broking, decline.

PLY: In some ways clearly ICAP may compete with its own clients but at the same time the traditional banks look likely to play a lesser role in the post OTC world (if nothing else because new entrants must de facto take market share even presuming ceteris paribus dealing from the incumbent banks). It’s a fascinating time to be an IDB and it must be all the more intriguing to be the 500lb gorilla in the jungle…

QV also our premium post ICAP Explores A New Galaxy and the excellent (open access) guest posts by Jake Pugh here and here.

DB1’s Clearstream Legal Battle
Reuters

Relatives of U.S. soldiers killed and wounded in a 1983 Beirut bombing have been barred by a U.S. judge from seeking $1.6 billion in assets belonging to Iran’s central bank and held by a unit of German exchange operator Deutsche Boerse. U.S. District Judge Katherine Forrest in New York said in a decision released on Friday that they could not pursue assets owned by Iran’s Bank Markazi and held in Luxembourg because she does not have jurisdiction over the funds.

Clearstream had argued for the case to be thrown out because U.S. courts have no jurisdiction over funds held in Luxembourg with no direct link to the US.

PLY: Hopefully, finally Clearstream can rest easy after the ongoing slew of lawsuits which have frequently demonstrated US extra-territoriality to over-ride other nations’ laws.

Private Markets

IFCI Close To Selling Stake In NSE
Vrishti Beniwal – Livemint

Industrial Finance Corporation of India Ltd (IFCI), may sign an agreement to sell part of its 5.5% stake in the nation’s biggest stock exchange in three days. IFCI is in advanced talks with an overseas private equity fund to sell 1.1% stake in the National SE (NSE). PwC is helping the New Delhi-based company with the sale, CEO Malay Mukherjee said.

Previous discussions on the topic here, here, here and here.

IDBI Bank also plans to sell a stake in NSE, as mentioned in December.

Delhi-based finance company IFCI, holds 5.55%. IDBI Bank owns 4.99% stake in NSE.

IEX Hits Growth Goal In A ‘Flash’
Kevin Dugan – NY Post

PLY: Plaudits to Brad Katsuyama and team, IEX “is within spitting distance of averaging 1% of the monthly trading volume in the US stock market — a major milestone toward its stated goal of becoming a registered exchange.”

Interview With A “Flash Boys” All-Star: Ronan Ryan From IEX
ValueWalk

PLY: Interesting reading…

Pattern Of Disobedience At Direct Edge Said To Spur Record Fine
Sam Mamudi, Dave Michaels & Annabelle Ju – Bloomberg

In January, SEC revealed an unprecedented $14 million penalty against two markets formerly owned by Direct Edge. The sanction was so large, according to two people familiar with the matter, because Direct Edge failed for years to meet agency requests to seek approval for a set of trading instructions known as order types and also broke the terms of a 2011 settlement with the regulator.

Will S. Africa See The Birth Of A Second Stock Exchange?
Nicole Cassandra Naidoo – CNBC Africa

A consortium of companies is in the process of making an application to the FSB to register 4 Africa Exchange (4AX) as a licensed stock exchange, led by niche independent investment banking and advisory firm, Bravura. Initially the target is currently OTC traded markets including shares in BBEEE schemes and limited participation share entities.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX surge 7% as FTIL is up 1% but the big news is how few from the many vexed folks out there have actually made claims against NSEL so far…

Did NSEL Brokers Take The System For A Ride?
Rajesh Bhayani – Business Standard

As cases related to the crisis-ridden NSEL progress, a fresh set of information suggest NSEL brokers might have been taking the system for a ride. According to the NSEL data, brokers modified client codes as many as 300,000 times, which is very unusual. Client codes are changed after the deal on the exchange is done in one name and then transferred in another name and allowed only for bona fide mistakes.

PLY: Clearly 300,000 bona fide mistakes appears a little unlikely but it also begs the question just why no regulator has already been fining brokers for extreme incompetence at least?

Of The 13,000 Hit By NSEL Scam, Only 20 Made Claims For Less Than Rs 20 Cr (USD 3.2 mln)
Palak Shah – The Economic Times

Only a handful of the 13,000 investors said to have lost in the NSEL scam have come forward to claim their money.

PLY: Sound remarkable? Well it seems as always that the investors action group believe the list is already with NSEL and hence they have no reason to seek more data.

Technology

Lahore SE Goes Live With New Algorithmic Trading System
Adil Siddiqui – Forex Magnates

Pakistan’s second largest trading venue, the Lahore SE (LSE), extended its electronic trading capabilities with the launch of a new algorithmic trading system.

Products

MOEX: Derivatives Market Introduces New Policy For Exercising Options
MondoVisione

Financial Calendar

This week

MarketAxess $0.20 quarterly dividend payment
Record date Thomson Reuters $0.335 quarterly dividend
Record date CBOE $0.21 quarterly cash dividend
Record date Interactive Brokers $0.10 quarterly dividend
CFTC Energy and Environmental Markets Advisory Committee (EEMAC) public meeting

New announcement

CFTC will hold a public roundtable on March 5, 2015, from 9:00 a.m. to 5:00 p.m., to discuss issues related to recovery and orderly wind-down of Derivatives Clearing Organizations (DCOs).

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

Analyst Notes

Barclays Upped Their Target Price On ICE From $256.00 To $268.00 – “Overweight” Rating
NASDAQ OMX Price Target Upped By Barclays From $55.00 To $56.00 – “Overweight” 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

European Market For Online Alternative Finance Surges (subscription)
Harriet Agnew – Financial Times

The European market for online alternative finance grew by 144% last year to almost €3bn and could hit €7bn this year as companies look to tap new sources of capital, according to a new report published by the University of Cambridge Judge Business School and professional services firm EY.

Other stories

Chairman’s Address At SEC Speaks 2015 By Mary Jo White
MondoVisione
Remarks At The “SEC Speaks” Conference, Commissioner Kara M. Stein, Feb. 20, 2015
MondoVisione
Remarks At The SEC Speaks In 2015, Commissioner Daniel M. Gallagher, Feb. 20, 2015
MondoVisione

Better Finance Demands That “Dark” Capital Market “Venues” Such As “Systematic Internalisers” Treat Individual Investors As Fairly As The Regulated Markets
MondoVisione

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