February 24 2014

elb2CME Europe preparing to pivot into Energy? HKEx faces growth challenge, Goldmans notes MIFID II open access not as remarkable as it may have seemed although the European Commission are upping the ante for more open clearing? Various musings on HFTs, SEFs, alongside various interesting pieces of technology news…

Welcome to Monday’s Exchange Invest, scroll on:

Public Markets

CME Readies Energy Launch Amid FX Delay (subscription)
Financial News

A regulatory hold-up may force CME to open its European exchange with energy futures, not foreign currency trading as planned. The switch would put CME Europe, head to head with the dominant European energy futures exchange, Ice Futures Europe in London.

PLY: Seconds out, round two; on a double plane in fact. CME are deeply frustrated that central bankers are too busy trying to find the methadone substitute equivalent to the QE stimulant to actually resolve their trans Atlantic turf fight over forex futures. Therefore CME may leap back to something NYMEX already tried, albeit in a slightly reactionary fashion. Remember NYMEX Europe? A floor based market which was opened in September 2005 under interim CEO Sam Gaer and then closed in June 2006 under CEO Andy Gooch.

LME, Listing Challenges Ahead For HKEx (subscription)
South China Morning Post

Ahead of results due Wednesday, HKEx is facing the twin challenges of capturing more listings and devising strategies to turn LME into a growth engine.

Analysts believe the exchange could still report a profit growth of about 15-16% on the back of higher volume, but point out that the exchange lacks a strong growth engine.

Shareholders Favour A Cut In MCX-SX Rights Issue Pricing
Business Standard

MCX-SX is reviewing the pricing of its proposed rights issue. If some shareholders prevail, it may have to cut the price of its 1:1 issue. The exchange is planning to raise up to Rs 500 crore (USD 80.4 mln) and is making efforts to convince them on the pricing of Rs 10 a share (USD 0.16) of Rs 1 (USD 0.016) face value.

Goldman: Reaction To EU Derivatives Rules ‘Overblown’ (subscription)
Financial News

The reaction to new rules designed to create competition among European futures bourses is “overblown”, with the incumbent exchange groups set to be less affected than first thought, Goldman Sachs analysts say.

PLY: GS writing up what has been clear for some time now. The intervention by the EC though is remarkable as clearly they have the bit between their teeth. Nevertheless, pushing negotiation back on the agenda may now prove troublesome as the London factions have shown their teeth and the silos will be better prepared next time for any up front (or last minute) attacks…

NSX Successful Transition To An Inverted Pricing Model
MondoVisione

National SE (NSX) is issuing this Information Circular to provide an update to Exchange Equity Trading Permit (ETP) Holders that, the Exchange has successfully adopted the CBOE SE’s (CBSX) fee schedule — a fee schedule that pays the “taker” $0.0015 to remove liquidity equal to or above $1.

PLY: Thus paving the way to the closure of CBSX.

ICDX Partners With GMEX Group And ECC
Commodities Now

Indonesia Commodity and Derivatives Exchange (ICDX), also known as PT. Bursa Komoditi dan Derivatif Indonesia (BKDI) has signed an MoU with Deutsche Börse backed GMEX Group.

ICDX has also signed an MoU with the European Commodity Clearing AG (ECC) which is majority-owned by EEX.

MOEX To Retire Quasi-Treasury Shares
MondoVisione

MOEX has completed the buyback of 99,852,660 shares (representing 4.2% of its outstanding shares) from its subsidiary MICEX-Finance. MOEX intends to retire the shares and make the necessary amendments to its Charter in March.

If HFT Is Here To Stay It Needs To Be Regulated (subscription)
Financial Times

Mark Cuban, the cigar-tugging media entrepreneur and owner of the Dallas Mavericks basketball team, was in the news last week, railing against the seeming failure of American regulators to get to grips with what Mr Cuban reckons is the Number one threat to US national security: HFT.

SEC Reviewing HFT Registration
Reuters

Securities regulators are studying whether more proprietary high-speed trading firms should register as broker-dealers, which would subject them to greater oversight. Outgoing acting director of the SEC’s Trading and Markets Division, John Ramsay, remarked that whether certain high-speed proprietary trading firms should be formally registered as brokers “is something we are looking at carefully.”

Euroclear Bank Selected For Settlement Of US Stocks By EuroCCP
MondoVisione

EuroCCP has chosen Euroclear Bank as sole settlement provider for all US-listed equities transactions struck on Turquoise, the pan-European trading venue.

Launch Of Tokyo SE & JASDEC’s Joint Service Enhancement Of Corporate Action Information Service
MondoVisione

TSE has started distributing Japan Securities Depository Center (JASDEC) Corporate Action information from February 24, 2014.

Private Markets

Karnataka Gets Unified Platform For Commodity Trade
Business Standard

Rashtriya e-Market Services, a joint venture between NCDEX and the Karnataka government, launched a first-of-its-kind unified market platform (UMP) on Saturday. The UMP will provide an electronic auction system across the state for transparent price determination. It will offer quality-based trading in Agricultural Produce Marketing Committees (APMCs) and online access to all APMC market functionaries. Participation would be open to all with unified market licences from the state government.

By-Laws Necessary To Launch Yangon SE
Eleven

SEC will be formed this year if the government manages to enact security exchange by-laws in time, according to Daiwa Securities which is assisting the Myanmar government to launch its first ever stock market by 2015. Parliament passed the Security Exchange Law in July 2013 but various by-laws and rules must be enacted before the SEC can be launched.

Citadel Sees Volume Surge In Its Citadel Connect Dark Pool
Reuters

Citadel Securities, one of the top market makers in U.S. stocks and listed stock options, said on Friday that volume on its off-exchange trading platform, Citadel Connect, has nearly tripled in the past year, making it one of the largest U.S. dark pools.

Cambodia Exchange To Receive Millions
Phnom Penh Post

Cambodia’s stock exchange will receive a $2.5 million funding injection from the South Korean government in an attempt to draw more corporate interest from companies who may want to go public.

The funds will go towards paying for Korea International Cooperation Agency-led training programs aimed at helping the government, the Securities and Exchange Commission of Cambodia (SECC) and the Cambodia Securities Exchange (CSX) rope in more firms.

BTC China To Lower Trading Commission Fee
newsBTC

Chinese bitcoin exchange BTC China this weekend announced plans to reduce trading commission fees from 0.3% to 0.1% for all users from noon (China time) on 24th of February.

BTC China announcement here.

Bitcoin Gets 121 Siblings
Times of India

The number of other virtual currencies present in the world-wide-web has reached 121.

Bitcoin Seen By Payment Networks As Little Threat To Dominance
Bloomberg

Visa and MasterCard, which processed $7.4 trillion in purchases last year, are among leading payment networks that devote thousands of words in filings to every perceived threat to their business. “Bitcoin” isn’t one of them.

“I’m a bit skeptical,” said Discover Financial Services (DFS) CEO David Nelms, who runs the fourth-biggest U.S. payment network after Visa, MasterCard and American Express. Other things pose “a lot more potential threats or opportunities than Bitcoin,” he said.

PLY: The fact that major payment systems just don’t get the future while themselves working off hideously antiquated and expensive platforms is, frankly, terrifying.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX and FTIL are both off 2% as the recriminations begin over the PwC report which has raised some uncomfortable questions about the quality of management and indeed regulation of NSEL.

Explain Auditor’s Findings On Violations: FMC To MCX
Indian Express

FMC has sought detailed comments from MCX on the findings of PwC on alleged violations in its books. In its interim report, PwC has indicated that MCX has violated several provisions of the Companies Act and SEBI guidelines.

MCX Row: Around Rs 900 Crore (USD 144.8 mln) Spent In Transactions With Hundreds Of Related Parties, Finds PwC Audit
The Economic Times

Cozy deals, missing papers, strange links and transactions with untraceable entities seem to shroud India’s only listed exchange, MCX. Close to Rs 900 crore (USD 144.8 mln) have been spent by the bourse, the cash-cow of FTIL, in dealings with hundreds of related parties.

PLY: News like this would logically push a Mahindra takeover of FTIL forward as Jignesh and co will be foolish to keep fighting in the wake of what appears a damning report? Claiming they didn’t know what management were doing in MCX either of course only leaves open a clear validation of the not ‘fit & proper tag’ already hanging over them.

We Are Reviewing Shareholding Guidelines: FMC Chairman
Moneycontrol

FMC said it is considering modifications in the corporate governance norms and examining shareholding guidelines.

PLY: FMC Chairman Ramesh Abhishek appears to be drinking from the same well as SEBI here; a micromanagement manifesto which will only delay development. Choosing national champions does not work, nor does picking shareholders for exchanges. Had SEBI been in charge of markets overseas would they ever have given a guy called Jeff Sprecher the chance to own an exchange when he was able to buy London’s IPE? Probably not, such is their natural reactionary preponderance for older large corporates…

FTIL – Not Averse To Stake Sale: Jignesh Shah
Livemint

“We are not averse to a stake sale. However, we will not be able to comment on who we would want to sell to,” Shah told reporters on the sidelines of the company’s 25th AGM in Chennai last Friday.

“We do not require funds but a strategic partner will help in growth,” Shah added.

PLY: Jignesh seems to think he is staying around… I am not convinced Mahindra really want to risk their brand with his presence if they invest?

Attachment Notice To NSEL Borrower ARK
Business Standard

The economic offences wing (EOW) of the city police has sent a notice to attach more assets of NSEL borrower ARK. The estimated market value of the properties attached by the EOW is Rs 5,432 crore (USD 874.15 mln), 98 per cent of the dues of the exchange. The EOW is going to send notices to freeze more assets of Mohan India. This will take the value of frozen assets to Rs 5,588 crore (USD 899.25 mln).

Technology

TPI, Nasdaq Ally For eSpeed Treasury Data, Sales Deal (subscription)
waters technology

Tullett Prebon Information (TPI) & Nasdaq OMX will partner to integrate benchmark US Treasury bond data from Nasdaq’s eSpeed electronic trading platform into TPI products and services.

Trayport’s Enables Clients To Meet EMIR Trade Reporting Obligations
MondoVisione

Trayport announced that 10 of its clients are successfully using the Complete reporting solution to report OTC derivative trades under EMIR. A number of other clients are set to go-live imminently.

BATS–Direct Edge To Equalize NY4, NY5 Latency, Post-2015 Equinix Move (subscription)
waters technology

BATS Global Markets will ensure that trading members of its BATS and Direct Edge exchanges will experience the same latency whether they co-locate in datacenter provider Equinix’s Secaucus, NJ NY4 or NY5 facilities when the US equities and options exchange operator consolidates its matching engine platforms on BATS technology in the new NY5 datacenter next year, as part of a post-merger integration process.

The matching engine migration was previously reported in EI on February 20th.

Fidessa Eyes Asia-Pac Data, Connectivity, Co-Lo Expansion (subscription)
waters technology

Trading technology and market data provider Fidessa plans to expand its connectivity network to China’s futures markets and may consider setting up new co-location sites in Southeast Asia, including in Thailand and Malaysia, depending on client demand, after signing a co-location agreement with SGX last week.

‘Location, Location, Location’ Is Only Half the Battle
waters technology

PLY: Max Bowie muses: “Wherever you feel at home, your location is ultimately only as good as the leverage it provides.”

The Trouble With Brazil’s Post-Trade Automation In A Global Economy
Wall Street and Technology

Bovespa has reported an almost 70 percent increase in equity trading in the past three years, reaching R$810 billion ($339bn) in total value traded in 2013.

The influx of foreign assets into Brazil has market participants looking to adopt global best practices in post-trade automation to mitigate unnecessary operational and counterparty risk.

Products

Volatility Powers Increased Structured Products Trading In Germany (subscription)
Risk

The Stuttgart and Frankfurt exchanges are benefiting from an uptick in the amount of structured products traded in Germany, helped by the recent spurt of market volatility.

FX Industry Leans On Emta For SEF Benchmark Solution
FX Week

SEFs are putting pressure on the Emerging Markets Trade Association (Emta) to use the industry body’s foreign exchange templates to negate SEFs’ responsibility for proving that benchmarks that are used for swaps contracts are not manipulated.

Career Paths

HSBC announced that Kathleen Casey (US SEC Commissioner 2006-2011) has been appointed a Director with effect from 1 March, 2014. She will be an independent NED and will become a member of the Group Audit Committee and the Financial System Vulnerabilities Committee.

Mark Karpelès, CEO of Mt. Gox, the embattled Tokyo-based bitcoin exchange, resigned on Sunday from the board of the Bitcoin Foundation, according to a person familiar with the situation.

Financial Calendar

Today

Record date Thomson Reuters $0.33 quarterly dividend

This week

HKEx financial results
MarketAxess $0.16 quarterly dividend payment
Record date BGC Partners $0.12 quarterly dividend
Record date CBOE $0.18 quarterly dividend
Record date Interactive Brokers $0.10 quarterly dividend

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

Share Notes

CME Director C Odom II sold 2,000 shares Wednesday, February 19th at an average price of $75.91 (bargain $151,820.00). He now owns 2,003 shares. Mr. Odom’s regular sales are chronicled on this specific page.

Interactive Brokers Group SVP Milan Galik sold 1,800 shares Wednesday, February 19th at an average price of $21.67 (bargain $39,006.00). He now owns 815,717 shares. Mr. Galik’s regular sales are chronicled on this specific page.

Analyst Notes

CBOE Upgraded At McLean Capital Management From “Neutral” To “Buy”

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.

Other stories

Banks’ Hopes Rise For Clearing Capital Reprieve (subscription)
Financial News

Rules that looked set to severely affect European banks’ ability to trade across Asia are likely to be delayed, in a development that will offer relief to a swathe of the institutions active in the region.

China To Streamline Securities Watchdog In Efficiency Drive
Reuters

China plans to overhaul its securities regulator, merging some departments and creating four units to fill existing gaps, as it looks to reduce unnecessary red tape and create more effective oversight of its fast-developing markets.

India – FMC Planning Single Depository For Commodity Exchanges
The Hindu Business Line

FMC is considering having a single depository house for all the commodity exchanges following the settlement crisis at NSEL.

SEC: Credit Suisse Agrees To Pay $196 Million And Admits Wrongdoing In Providing Unregistered Services To U.S. Clients
MondoVisione

SEC announced charges against Credit Suisse for violating the federal securities laws by providing cross-border brokerage and investment advisory services to U.S. clients without first registering with the SEC.

UK’s FCA Statement: Reminder To Investors With Investments Linked To Bernard Madoff That The Deadline For Submitting Compensation Claims Is 28 February
MondoVisione

Investors with investments linked to Bernard Madoff may have the opportunity to claim compensation. To check for eligibility, investors are advised to check the eligibility criteria listed on the Department for Justice web site, at : www.madoffvictimfund.com The deadline for submitting compensation claims is 28 February 2014.

Ex-Madoff Aide On Trial In N.Y. Wins Dismissal Of Two Counts
Reuters

One of five former Bernard Madoff aides on trial for abetting his massive Ponzi scheme will face two fewer counts when the case goes to a jury, after a judge agreed to throw out charges that he arranged for his son to get a no-show job at the firm.

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