February 25 2014

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ASX pondering T+2 move, Markit and Virtu gearing up for US listings. BME sniffing at some NYSE tech units but not buying a stake in Euronext. Is a Great Leap Forward looming for HKEx numbers? ISDA seeks administrator for benchmarks, Jignesh Shah looking in tricky predicament as Corporate Affairs Ministry wraps up NSEL report while Magical The Gathering Online Exchange has apparently disappeared into fairy dust and melted away – a challenging day for Bitcoin is unfolding…

Lots of other news too, especially in tech, so I will not detain you any further, welcome to Exchange Invest and happy scrolling:

Public Markets

BME May Evaluate NYSE Technology Units, Won’t Buy Euronext Stake
Nandini Sukumar – Businessweek

Bolsas & Mercados Espanoles (BME) may consider buying NYSE technology units that ICE is selling but won’t purchase a stake in European market operator Euronext NV before its IPO.

PLY: A lot of people are looking at the paperwork for NYFIX but rumour has it many investors are unclear about the business itself. I have not seen the original memoranda so can’t directly comment. (However, if you are amongst the ranks of the confused, fear not, I am available for calls to add transparency to the subject).

BME Rules Out Buying A Stake In Euronext (subscription)
Philip Stafford – Financial Times

PLY: On a trip to London, Javier Hernani, BME GM says the business is “prepared to face many threats.” I am not convinced. At the same time, Mr Hermani noted: “BME is not a financial institution. We will never take financial stakes in anything.” Hermani suggests there may be a way to outsource services for exchanges and pool resources with BME for processing – a sort of Spanish cloud for markets.

Gmex Eyes Indonesia For First Tech Deal (subscription)
Anish Puaar – Financial News

As EI first reported yesterday, Hirander Misra’s vehicle Gmex, has signed a MoU with ICDX, which includes the possibility of installing a trading platform and surveillance system at the Indonesian bourse (the first such deal for the nascent Gmex).

Gmex and ICDX will also explore ways to link their markets, which will allow London-based traders to access Indonesian derivatives that include contracts based on gold, tin, crude palm oil futures, and foreign currency contracts. Gmex is currently seeking approval to launch a London-based market for interest rate derivatives.

HKEx Profit Set For Largest Jump in Six Years?
Kana Nishizawa – Businessweek

HKEx will post its biggest quarterly profit growth in almost six years after new listings in the city surged, according to analysts. Net income in the three months through December climbed 38 percent to HK$1.19 bln ($153.4 mln) from HK$864 mln a year earlier, the exchange will report tomorrow, according to the average estimate of 18 analysts surveyed by Bloomberg.

The number of IPOs jumped almost fourfold to 48 from 13 a year earlier, while funds raised more than doubled to HK$107.2 bln from HK$45.2 bln.

Swaps Body Seeks Independent Administrator For ISDAFIX Rate
Huw Jones – Reuters

The International Swaps and Derivatives Association (ISDA) has started looking for an independent administrator for the ISDAFIX benchmark interest rate that is being investigated over alleged rigging.

ISDA is inviting tenders to administer and calculate the ISDAFIX benchmark, an interest rate widely used to help to price derivatives and other contracts, from Q2 2014.

ISDA statement here.

CME Fines Traders For Transactions That Worried Regulator
Tom Polansek – Reuters

CME on Monday announced fines against nine traders and clearing members for violating rules governing a type of transaction that U.S. regulators expressed concerns about last year. CME took action against a range of market participants for trades involving Exchange for Related Position transactions (EFRPs).

The actions came after CFTC in August said CME’s procedures for monitoring EFRP transactions were inadequate and required “significant and prompt improvement.”

PLY: Industry luminary Gary de Waal notes here the inevitability of a crackdown after the CFTC’s concerns last year.

ASX Eyes Shorter Trade Settlements
Elizabeth Redman – Business Spectator

PLY: Sensibly, ASX is consulting on the introduction of a shorter settlement cycle for cash market trades moving from T+3 to T+2 to move in line with the likes of the EU and Hong Kong.

ASX press release here.

Bringing New Investors In Equity Is A Challenge: Saurabh Sarkar
Rajesh Bhayani – Business Standard

PLY: A crisp interview with MCX-SX’s new MD / CEO Saurabh Sarkar who is trying to get the exchange to break-even while dealing with the post FTIL legacy and indeed even reviewing technology contracts alongside completion of a rights issue…

SEF Rollout Leaves Plenty Of Questions
Aaron Timms – Institutional Investor

Now that certain kinds of derivatives must trade on SEFs, the impact on swaps users and brokers remains unclear.

Private Markets

Markit & Virtu Race For New York IPOs (subscription)
Arash Massoudi – Financial Times

Two unique financial technology companies are preparing multibillion dollar IPOs, with both Markit and Virtu Financial seeking New York listings in the coming months.

Markit, the UK-based data provider, is aiming to raise at least $500m and seek a valuation of more than $5bn as early as Q2

At the same time, electronic prop trading business Virtu, is aiming to raise around $300m from a listing that would value it at around $3bn, as it too seeks a market debut around that time.

Both companies have filed confidentially under a provision of a recent US securities reform act which allows companies with revenues of less than $1bn to keep the process confidential until nearer the time of an IPO.

PLY: Two very different but equally fascinating IPOs are looming. Markit has become a 500lb gorilla by bringing together fabulous nuggets of data into very appealing (high margin) products while Virtu will test investors’ appetite for HFT-centric algo trading two years after Knight Capital suffered its very public near total meltdown.

Vietnam To Merge Stock Exchanges By 2015 – Vietnam Economic Times
Reuters

Vietnam plans to establish a unitary Vietnam SE by 2015, merging the existing Ho Chi Minh SE and the Hanoi SE, according to the State Securities Commission, the Vietnam Economic Times newspaper reports.

Mt. Gox’s Website Appears To Have Been Deleted (subscription)
Eleanor Warnock & Michael J. Casey – Wall Street Journal

The website of bitcoin exchange Mt. Gox became unavailable Tuesday and trading in bitcoin at the site appeared to have stopped.

Earlier Tuesday, the chief executives of six major bitcoin exchanges and businesses pledged to coordinate efforts to assure customers of the security of their funds.

Fate Of Mt Gox Questioned After Bitcoin Trading Suspended (subscription)
Ben McLannahan – Financial Times
Mt. Gox Offline Amid ‘Insolvency’ Charges
Steven Musil – CNET
Six Bitcoin Exchanges Work To Reassure Customers (subscription)
Michael J. Casey – Wall Street Journal

At noon in Tokyo the company’s website was taken offline, shortly after a prominent group of Bitcoin promoters posted a statement denouncing Mt Gox CEO Mark Karpelès.

In the hours that followed a document circulated online saying that the exchange had lost 744,000 Bitcoins – equivalent to almost 6 per cent of the 12.44m coins in circulation. Calls and emails to Mt Gox were not returned.

PLY: A big hit to BTC as Magical The Gathering Online Exchange has apparently disappeared into the fairy dust. A challenge for BTC but it can survive. Other key CEOs making their joint statement helps show a remarkable maturity for a nascent industry.

Back to Mt Gox, Steven Musil at CNET notes: “The exchange’s apparent shutdown was linked to an alleged hacking that went unnoticed for years, according to a purported internal Mt. Gox document circulating on the Internet. Labeled “Crisis strategy draft,” the document reports that the exchange suffered a loss of 744,000 Bitcoins, about $350 million at Monday’s trading, and outlines a scheme for restoring confidence in the exchange.”

‘Pony’ Botnet Steals Bitcoins, Digital Currencies: Trustwave
Jim Finkle – Reuters

Cyber criminals have infected hundreds of thousands of computers with a virus called “Pony” to steal bitcoins and other digital currencies, in the most ambitious cyber attack on virtual money uncovered so far, according to security firm Trustwave.

Trustwave said on Monday that it has found evidence that the operators of a cybercrime ring known as the Pony botnet have stolen some 85 virtual “wallets” that contained bitcoins and other types of digital currencies. The firm said it did not know how much digital currency was contained in the wallets.

PLY: Encryption is clearly vital here, leaving cryptocurrency ‘open’ is like sticking your wallet hanging out of the back pocket of your jeans…

Japan’s Top Regulators Suggest Mt. Gox Intervention Unlikely
Pete Rizzo – CoinDesk

Japan’s financial authorities are reportedly distancing themselves from any potential responsibility, should the troubled exchange default on its service obligations.

Alabama Regulator To Sound Alarm On Bitcoin
Chuck Jaffe – MarketWatch

Joseph Borg, state securities administrator in Alabama and a past president of the North American State Securities Administrators Association, says he plans to issue a consumer alert Tuesday, suggesting that if consumers and investors have trouble redeeming bitcoins or cashing out of their accounts, they stop trading—or adding to their holdings on account—until issues are resolved.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX is up 1.5%, FTIL up 2.5% while we await the latest report from the Corporate Affairs Ministry (MCA) which is expected to find: lapses and breaches of corporate law. Hence, the prospect of legal action against Jignesh and crew appears to have ratcheted up considerably.

FTIL: Outcome Of Adjourned AGM
Moneycontrol

FTIL announcement here.

MCA Finalises NSEL, MCX, FT Probe Report
Malvika Jain – Moneycontrol
MCA Finds Lapses By NSEL Promoters; SEBI Probes MCX, FTIL
Zeenews
FTIL May Be Held Liable For Company Law Violations By NSEL
Aman Malik & Khushboo Narayan – Livemint

MCA is believed to have found serious violations of companies law by the owners of crisis-ridden NSEL, while market regulator SEBI is also investigating corporate governance-related lapses by the group’s two listed entities – FTIL and MCX.

Technology

CME Eyes Summer Data Protocol Switch (subscription)
Faye Kilburn – waters technology

CME is preparing to launch a new version of its market data platform later this year, MDP 3.0, which will feature a binary market data protocol designed to reduce the bandwidth required to deliver CME market data.

TSE To Offer Corvil Clear Latency Performance Management To Trading Network Users
MondoVisione

Tokyo SE (TSE) will begin offering CorvilClear latency performance management as-a-service to users of its arrownet network, permitting deeper insight into the quality of trade and market data communications between the TSE and the client’s own systems.

NSE To Introduce New Trade Notification System
NSE

Nigerian SE (NSE) will discontinue the old trade notification system, Trade Alert and introduce a fresh notification system known as X-Alert to all investors in March 2014.

Thomson Reuters Enhances Eikon Desktop For Buy-Side
Automated Trader

Thomson Reuters has announced the roll out of a number of new features for the buy-side on its financial markets desktop, Thomson Reuters Eikon including an MS Office add-in and new visualisation tools via StartMine models.

Schwab Announces Roll Out Of Schwab OpenView Mobile
Charles Schwab

Schwab Performance Technologies (SPT) has rolled out Schwab OpenView Mobile, a customizable app that RIAs can use to create a turnkey, branded mobile presence for their firms, enabling 24/7 connection with clients. SPT will work with participating firms to create the firm-branded app and each firm will then submit their app to Google Play and iTunes App Stores.

Abacus Partner With ImagineerTechnology
MondoVisione

Abacus, a provider of hosted IT solutions for hedge funds and private equity funds, and Imagineer Technology, which provides alternative asset managers a suite of technology tools that promote and facilitate efficient business processes, announced a strategic partnership to host Imagineer’s Clienteer software platform in the AbacusFLEX private cloud environment.

Products

ICE Dumps Pepper In Singapore To Pave Way For Asia Growth
Chanyaporn Chanjaroen & Nandini Sukumar – Businessweek

After the $150 million acquisition of SMX closed this month, ICE began renovating its newly purchased SMX, delisting all contracts such as black pepper and metal futures. A transition to its own trading and clearing platforms and restart of SMX will take place later this year. As Europe seeks to weaken the quasi-monopolies at futures markets, the Asian beachhead gives ICE CEO Jeff Sprecher more flexibility to shift trading elsewhere.

PLY: Clearly closing pepper for the likes of oil could induce many commentators to a raft of puns. I’m concentrating on the significant value add in this business for regulatory optionality as well as pure play business development.

High Hopes For Brazil’s Onshore Structured Products Market (subscription)
Richard Jory – Risk

After years of promises with nothing to show for it, Brazil has finally made good on its intention to create an onshore structured products market. Since the beginning of January, the equivalent of $80 million of products have been listed with clearing house Cetip, with some bankers predicting that production levels will settle quickly into half a billion dollars a month. How’s that for pent-up demand?

PLY: Remember ICE alone has various ventures betting on pent-up demand in Brazil.

Indexes

Launch Of India Vix Futures Driven By Institutional Investor Demand (subscription)
Justin Lee – Risk

National SE (NSE) is about to launch the fourth Asian equity volatility index this week: India Vix futures (NVix). However, concerns remain over the lack of market-makers for the product.

The February 26 launch is the latest in a series of volatility products on Asian indexes, following the S&P/ASX 200 Vix index in October last year and similar moves by the Osaka and Hong Kong exchanges in 2012.

EI reported on February 10th that NSE will launch futures contracts on India VIX.

Career Paths

Tadawul (Saudi SE) members considered and approved the nomination of Khalid I. Al-Rabiah as chairman, and Abdulrahman M. Al-Mofadhi as vice chairman, respectively of the Board of Directors.

Stock Exchange of Thailand (SET) has appointed Prapan Charoenprawatt as SVP of SET and president of its Market for Alternative Investment (mai), helping SMEs raise funds and enhance quality and sustainability, effective March 1, 2014.

The California Public Employees’ Retirement System (CalPERS) has named Wylie A. Tollette as the pension fund’s Chief Operating Investment Officer (COIO). Tollette takes over the position previously held by Janine Guillot, who left CalPERS in July 2013. Tollette will start as COIO on March 31.

Financial Calendar

Tomorrow
HKEx financial results

This week
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.

Analyst Notes

Zacks Reaffirmed Their “Neutral” Rating On Interactive Brokers – $23.00 Price Target
Betfair “Buy” Rating Reiterated At Numis Securities – GBX 1,300 Price Target

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

India – New Norm For OTC Trades
The Hindu Business Line

From April 1 all entities regulated by the Reserve Bank of India should report secondary market OTC trades in corporate bonds and securitised debt instruments within 15 minutes of the trade on any of the stock exchanges (NSE, BSE and MCX-SX). These trades may be cleared and settled through any of the clearing corporations (NSCCL, ICCL and MCX-SX CCL).

OCC’s BoD Joins Board Leadership Organization NACD
MondoVisione

OCC announced today its BoD has become a Full Board Member of the National Association of Corporate Directors (NACD), demonstrating OCC’s commitment to the highest standards of corporate governance and board leadership.

Aide Saw Madoff as ‘Big Brother’ (subscription)
Christopher M. Matthews – Wall Street Journal

In a surprising move, Bernard L. Madoff’s longtime secretary took the stand in her own defense Monday in Manhattan federal court, testifying she viewed the disgraced financier as her “big brother” and trusted him so implicitly that she never questioned any of his instructions.

Annette Bongiorno, who worked closely with Mr. Madoff for 40 years, described in affectionate terms her relationship with the Ponzi schemer. She said she once referred to Mr. Madoff as “my hero,” and never suspected he was running a fraud that led to an estimated $17 billion in cash losses for investors.

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