February 27 2015

elb2

BME profits bounce raising the question – Spain: dead cat or not? Growth anemic in Manila, FTIL announce further divestments are in the works as Invesco details how they have the equivalent of “Magnum PI” checking their best-ex. Interesting Romanian commodity news as wheat proves an exciting centrepoint to today’s product updates…

Meanwhile, in our Premium service, some thoughts on: Magnus Bocker – SGX Reflections and new Premium Briefs to remind you of various issues in the industry (updated daily) when news arises. All briefs can be found on our dedicated Briefs page via Exchange Invest Premium.

Latest briefs include:

The Bond Platforms Rush Brief – Part 1
ICE – NYSE Euronext Deal BriefPart 1, Part 2, Part 3
MILA Exchanges
SEE Link Project
Greater Mekong Subregion Exchanges Project
ASEAN Exchanges Project

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Public Markets

BME 2014 Financial Results
BME

BME reported net profit for the year 2014 of €164.9 million, an increase of 15.2% YoY – the highest annual net profit since 2008. Results in Q4 outstripped those of the other quarters in the year, with €42.7 million in net profit, up 12.4% compared to the same period in 2013, and 10.9% higher QoQ.

Revenue during Q4 was 14.2% higher than that generated a year earlier – totalling €93.4 million; €342.5 million over the entire year (+11.3%).

EBITDA for 2014 increased by 14.6% YoY to €239 million. EBITDA of €64.1 million posted in Q4 was 12.5% higher than in the same period of the previous year.

EPS in 2014 totalled €1.98, of which €0.51 corresponded to Q4

PLY: The delicious understatement in Peter Lenardos’ RBC comment “Regulatory and structural changes cloud BME’s outlook” says it all – much more diplomatically than I can muster.

Really, I want to love BME but they do make life hard for themselves and the Spanish government isn’t helping. I cannot believe that the Spanish economy will recover in plain sailing fashion from its previous purdah. Zero economic reform, indeed denial that reform is required, permeates society from the top down (maybe that’s where the exchange gets its own sense of abject denial?). Meanwhile the upstart hard left Podemos are launching themselves to giddy heights circa 30% in the polls with a classic Bolivarian delusion of socialist nirvana albeit without any oil reserves to squander. BME worries me despite these recent results which are to be applauded.

PSE 2014 Financial Results
GMA News

Net income reached P867.55 million (USD 19.7 mln), up 2.7%
Revenues expanded to P1.71 billion (USD 38.8 mln), up 4.1%

PLY: Anemic growth in a market where there is great opportunity but the sclerotic progress towards the Bond Exchange merger demonstrates the incoherence of the economy at a core legal-regulatory nexus.

FTIL In Talks To Sell Stake In ATOM, DGCX
Business Standard

FTIL has indicated it is exiting from its mobile transaction and payment gateway company, ATOM Technologies, by selling 95% stake in it. FTIL has also indicated it is in the process of divesting from Bourse Africa and Bahrain Financial Exchange, beside its 27.3% holding in Dubai Gold and Commodity Exchange (DGCX). It has also signed an agreement to sell 25.64% stake in Indian Energy Exchange (IEX).

FTIL Chairman Venkat Chary gave these indications in a letter addressed to its 68,000 shareholders. The letter asks them to oppose the Union ministry of corporate affairs’ suggestion of a merger of FTIL and NSEL.

Read our Premium briefs: FTIL Stakes Sales Brief and NSEL-FTIL Merger Brief.

Reliance, Axis MFs Get FMC Nod To Hold Up To 5% In MCX
Business Standard

FMC has allowed Reliance and Axis mutual funds (MFs) to hold up to 5% stake each in MCX. Any entity seeking to hold more than 2% in the commodity exchange has to take prior approval of the commodities market regulator. According to the holding pattern filed by the MCX, as of December 2014, Reliance MF held 2.16% in MCX, while Axis MF’s stake stood at 1.95%.

Short Selling Of A Shares Through Stock Connect To Start On 2 March
HKEx

Read our Premium briefs: HKEx – SSE – Stock Connect BriefPart 1, Part 2, Part 3.

First Derivatives Acquires Prelytix For Up To $20m To Boost Presence In Marketing Technology Sector
Andrew Saks-McLeod – Leap Rate

The acquisition of Prelytix forms part of First Derivatives’ strategy to penetrate additional vertical sectors, beyond its core in capital markets.

Invesco’s Cronin Has SEC Playing Catch-Up On Safe Trading
Sam Mamudi – Bloomberg

Kevin Cronin, global head of trading at Invesco Ltd., wasn’t going to wait for SEC to protect his customers.

In a world of robotic trading and dark pools, where stock buyers can have no idea where their orders go or how much in fees their broker might be paying or receiving, Cronin has assembled a team of equities detectives over the last few years to make sure his clients get fair deals. The number of times trading platforms have subsequently been temporarily blocked from handling Invesco orders “gets into the double-digits,” Cronin said.

“We can argue that it’s a shame that it has to come to this,” he said. “But on the other hand, where there’s complication there’s opportunity.”

PLY: Bravo and a thrice-Hip-hooray combo of endorsement for Mr Cronin who is clearly getting to grips with best execution in precisely the same way many others aren’t (not even EU regulators according to yesterday’s damning ESMA study). The one question the SEC ought to be instantly asking itself is what it really is there to do…given that it has allowed the US equity industry to morph into a horrible contortion of efficiency (often at SEC’s own insistence) and now is asking practitioners to identify the problems…

CFTC Requests Public Comment On Application Submitted By CME Clearing Europe Limited for Registration As A DCO
CFTC

Romania – Brokers Can Administer Commodities Markets (Romanian version)
Ziarul Financiar

FSA approved rules allowing brokerage companies to administer commodities markets, sell credit and private pensions.

PLY: Very interesting: Romanian brokers can now create markets in commodities. Our Romanian office will be following up on this, clearly.

Private Markets

NSE To Set Up Global Exchange At IFSC-GIFT In Gandhinagar
The Hindu Business Line

In an attempt to become India’s first International Financial Services Centre (IFSC), GIFT City is set to house a second international exchange in Gandhinagar.

National SE(NSE) on Wednesday signed a MoU with GIFT SEZ Ltd, a subsidiary of Gujarat International Financial Tec-City, to set up an international exchange in the GIFT SEZ area being developed as India’s first IFSC.

The new exchange will provide an electronic platform for facilitating trading, clearing and settlement of securities, and will also explore the possibility of starting trading facilities in different asset classes including equities, interest rates, and currencies, among others.

Notably, NSE will be the second exchange after Bombay SE (BSE) to set up an International Exchange at GIFT. In January this year, BSE had announced investment of up to Rs. 150 crore (USD 24 mln) along with its associates and members to set up an exchange in a built-up area of up to 300,000 sq ft.

GIFT City To Use Collective Investment Scheme Funding For 2nd Phase
Ashish Rukhaiyar – Livemint

GIFT Collective Investment Management Co. Ltd, India’s first and only registered collective investment scheme (CIS), will fund the development of the second phase of the Gujarat International Finance Tec-city Co. Ltd, or GIFT City, billed as India’s first global financial services centre.

PLY: Readers will note that the location for this ‘first’ Indian IFSC is in the heart of Gujarat aka the home region of PM Modi, and not in Mumbai which has long had ambitions but never quite followed through coherently (partly as a result of the usual political/regulatory stasis)…

Tocom To Revise The Rules For The Issuers Of Warehouse Receipt Of Precious Metals
MondoVisione

Former Goldman Sachs Director Launches Bitcoin Derivatives Brokerage Crypto Facilities
Giulio Prisco – Bitcoin Magazine

Crypto Facilities Ltd., a London-based broker founded by former Goldman Sachs Executive Director Timo Schlaefer, has announced the launch of its bitcoin derivatives trading platform.

Dividend News

BME will submit to the GMS for approval the distribution of a gross €0.89 per share supplementary dividend, which, if approved, will be effective on 8 May. The amount to be paid as a supplementary dividend represents a 38% increase on that paid in 2013. The ordinary dividend in 2014 will increase by 15% from 2013. The company’s payout remains at 96%.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX and FTIL are both flat ahead of tomorrow’s Indian budget where pressure is growing, as after 9 months, the Modi government has not shown much evidence of its reformist spirit (partly as a result of not controlling the upper house) but they need to regain the political initiative after being essentially annihilated by upstart anti-corruption Aam Aadmi party in the Delhi legislature elections earlier this months.

Products

EU Wheat Market Stalled By Competing Futures Contracts
Valerie Parent & Gus Trompiz – Reuters

The upcoming launch of two European wheat futures contracts has stalled forward selling of the region’s upcoming 2015 crop, with operators left guessing which of the new products will take off.

Euronext will kick off a new, premium wheat contract on March 2, betting that addressing quality issues raised by a rain-hit harvest last year will justify the complexity of running it in parallel to its existing wheat futures that are a European benchmark.

“Futures live off physical contracts that are linked to them. All the people who have contracts against Euronext’s No. 2 (existing) futures are wondering if they are going to have to switch to the No. 3.”

In a further shake-up to Europe’s wheat market, CME is expected to launch within weeks its own futures (announced here) that should offer different quality standards and a distinct physical delivery model.

PLY: I can see arguments concerned about splitting the wheat market but then again after hearing those panicking last year about the quality of wheat during a bad harvest, Euronext were right to act. Moreover, the issue is surely one of both foresight and the changing world of commodities. Once upon a time, not so long ago, derision was heaped upon all who suggested any European commodities would survive in the face of America’s superior pits. Nowadays there are very tangible regional commodity contracts in an electronic (and hence more easily diversified) era. There is a market for the 3 qualities – to only have two going forward would leave a gaping opportunity for competitors. Euronext are right to move forward even if it may mean a few weeks of disruption in the meantime.

CME To Tweak Wheat Price Limits To Avoid Trade Disruptions
Reuters

CME in May plans to tweak its rules for determining daily price limits for wheat futures out of concern that existing procedures could potentially distort spread trades.

CFTC Mulls Tweaks To Rules For Uncleared Margin
Douwe Miedema – Reuters

CFTC is considering some changes to proposed rules for margin for derivatives traded without the intermediation of clearing houses, the head of the agency said on Thursday.

Chairman Tim Massad said discussions with international regulators had brought to light some differences between the regimes in Europe and Japan.

“I am willing to consider some changes to our proposed rule in order to ensure greater consistency,” Massad told a business audience in a speech:

Remarks Of CFTC’s Chairman, Timothy G. Massad, Before The Coalition For Derivatives End-Users
MondoVisione

ISDA Outlines Key Principles For Further Improving Regulatory Transparency & Derivatives Trade Reporting
MondoVisione

Commexes Told To Make Base Metals Delivery-Based
Ram Sahgal – The Economic Times

Aiming to deepen the non-farm futures market, FMC has directed commodity bourses, including the country’s largest and only listed one MCX, to work towards making base metals deliverable in the next six months.

The Commodities Market Needs A Strong Regulator: P K Singhal
Rajesh Bhayani – Business Standard

The Union Budget for 2015-16, being presented on Saturday, is expected to address the issue of commodities market-related reforms. P K Singhal, joint MD of MCX, speaks to Rajesh Bhayani.

Kenya – NSE Plans To Launch Currency Futures
Lola Okulo – allAfrica

Nairobi Securities Exchange (NSE) product development manager Terry Adembesa said yesterday that plans are at an advanced stage to launch currency and index futures before the end of June.

Career Paths

SEC announced that Karen L. Martinez, Regional Director of the Salt Lake office, is leaving the agency and retiring this summer.

BoD of the Amman SE (ASE) elected Mr. Azzam Ya’eesh as Vice Chairman of the Board in its meeting held on Monday, February 23, 2015.

Financial Calendar

Today

Record date CBOE $0.21 quarterly cash dividend
Record date Interactive Brokers $0.10 quarterly dividend

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

Crowdfunding

Money-Shaped Crowd Sought By Equity Issuers (subscription)
Lucy Burton & Anna Irrera – Financial News

The market for IPOs has been gasping for innovation for a long time, with a growing number of equity bankers keen to reduce risk by securing investment before a deal launches. So when Burgundy winemaker Domaine Chanzy said it would crowdfund itself to an AIM listing earlier this month, the market raised a glass.

Europe Wants A Capital Markets Union – Crowdfunding Can Be A Catalyst
JD Alois – Crowdfund Insider

P2P Lender Bondora Targets Europe (subscription)
Tracy Alloway – Financial Times

P2P lender Bondora is preparing to launch a pan-European lending platform after securing $5m of financing from one of the early backers of Lending Club, the world’s biggest “P2P” company.

Other stories

Readout Of SEC Chairman Mary Jo White’s Meeting With EU Financial Services Commissioner Jonathan Hill
SEC

Opening Statement Of CFTC Commissioner J. Christopher Giancarlo Before The First Meeting Of The CFTC’s Energy & Environmental Markets Advisory Committee
MondoVisione

Kenya’s Treasury Loses Capital Gains Battle Against Stockbrokers
AFK Insider

Treasury secretary Henry Rotich has shifted the burden of paying and accounting for capital gains tax to investors at the Nairobi Securities Exchange (NSE).

This ends the fight with stockbrokers that nearly paralysed trading at East Africa’s largest bourse.

Mr Rotich on Wednesday told the Business Daily that the Treasury, the Kenya Revenue Authority (KRA) and the brokers had agreed that the task of accounting for the tax be left to investors — not the market intermediaries.

FAO: Earlier this week EI reported that the NSE brokers shelved the threat to stop trading at NSE after the intervention of the Capital Markets Authority (CMA) officials. The dispute centred around placing the onus on brokers to collect capital gains tax.

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