January 03 2014

elb2A Very Happy, Peaceful and Prosperous New Year!

This is a digest issue to bring you back up to date with what has been happening in recent days over the Festive Period following on from our previous digest at the start of the week. We will return with a full issue Monday, although I’m actually out of the office and enjoying a late New Year’s Holiday rolled into a Monday Epiphany…

Speaking of which, the NASDAQ epiphany for BIST has been signed while MCX has some new investor interest. The Great Spillmann steps down from his day job while Lusaka is on the launch ramp. BATS profiled, LME warehousing reforms ongoing, Lusaka to demutualise, Indian Central Bank going backwards, Batista sells out of BRIX.

…Thanks again for all the Festive greetings and happy scrolling:

Public Markets

Nasdaq To Acquire 5 Percent In Borsa Istanbul
Reuters

Nasdaq OMX will take a 5 percent stake in Turkey’s Borsa Istanbul while the state-owned Borsa Istanbul may acquire a 2 percent stake in the U.S. exchange operator in the future.

Nasdaq OMX press release here.

Bombay Bullion Plans Bid For MCX Stake After Regulator Order
Bloomberg

The Bombay Bullion Association, a traders’ group, plans to buy a 5% stake in MCX via a consortium led by the Universal Commodity Exchange Ltd.(UCX), another Mumbai-based bourse, from FTIL after the regulator declared Jignesh Shah unfit to run the nation’s biggest commodity bourse.

PLY: $20 million dollars is the current benchmark expectation of the price – a far cry from the dizzy values pre-NSEL…

Six Year High For London SE IPOs
MondoVisione

105 IPOs raise a total £15.7 billion in 2013.
62 AIM IPOs raise £1.1 billion.

LME Will Go Ahead With Warehouse Investigation, Enforcement Changes
Metal Bulletin

LME will go ahead with changes to its warehouse agreement and approval policy after a further consultation with shed owners…

Review Of 2013: LME – A Year That Went With A Bang
Metal Bulletin

Ever since HKEx CEO Charles Li signalled he intended to look more closely at warehousing, 2013 was always going to be remembered as the year that LME took out its bazooka.

PLY: Shadow warehousing will I expect be a developing story throughout the year…

Private Markets

A Stock Exchange Expands Its Global Reach
New York Times

PLY: A profile of BATS and how it has shaken up the industry. Interesting to see BME CEO Antonio Zoido on the attack against competitors.

CSE To Explore Options With MCX-SX On Trading Platform
Business Standard

Calcutta SE is exploring options with MCX-SX Clearing Corporation to resume trading on C-star platform, after deciding not to proceed further with BSE-promoted Indian Clearing Corporation Ltd (ICCL).

Shanghai SE Considers Launching High-Yield, Blue-Chip Board
Reuters

Shanghai SE is considering launching a board of high-yielding, blue-chip stocks to help raise the overall quality of firms listed on the bourse as part of a drive to boost its appeal to retail investors in 2014.

PLY: Time for no namby pamby nonsense with China volume umpteen: “Any listed companies found guilty of accounting fraud will be made to repurchase all issued shares and compensate investors, the exchange said.”

Zambian Exchange CEO Says Bourse To Demutualize This Year
Bloomberg

Zambia’s Lusaka SE, based in the capital of Africa’s biggest copper producer, plans to complete the sale of shares to investors this year while starting a market for smaller companies.

BSE Opens Investor Service Centres In B’lore, Pune And Jaipur
Business Standard

BSE has opened service centres in Bangalore, Pune and Jaipur to look into investor grievances as well as function as a facility for arbitration procedures.

ADX Seeks To Award Market Making Licence
The National

Abu Dhabi SE is in talks with banks and financial institutions to award a licence for market making.

Indonesia SE To Reduce Lot Sizes To Attract Investors
Reuters

Indonesia’s stock exchange will reduce trading sizes to 100 shares per lot from 500 shares and increase the maximum volume order to 50,000 lots from 10,000 lots, effective Jan. 6.

Mongolia Looks For Second Chance With Foreign Investors
Business Recorder

Saruul Ganbaatar, the deputy head of Mongolia’s stock exchange, hopes the country’s days of interventionist economic policies are over and new laws ensuring foreign investors’ access to the frontier market’s industries will bring back sorely needed cash.

The Year Of Bitcoin
RT

Like it or love it, bitcoin has been a constant theme of headlines for the past year, as 2013 marked its coming of age. Last year’s nerd money fad has become this year’s most talked about product.

PLY: I see the team have chosen a little missive by myself all about Bitcoin, thank you! (Actually while clearly in a conflict of interest, I do believe it is worth reading!).

Special Section: FTI, NSEL, India at the Crossroads

PLY: Since our last bulletin, investor interest has helped spur prices in FTIL (up 16%) and MCX (up 5%).

Meanwhile New Year’s Eve you probably missed the weekly default, the NSEL repayment tally of shame remains:

(N.B. Anticipated weekly repayment is Rs 174.72 crore, roughly USD 28,000,000)

Week 1: Rs 92.73 crore (USD 14.37 mln) paid
Week 2: Rs 12.05 crore (USD 1.79 mln) paid
Week 3:Rs 15.37 crore (USD 2.29 mln) paid
Week 4: Rs 7.77 crore (USD 1.21 mln) paid
Week 5: Rs 8.57 crore (USD 1.35 mln) paid
Week 6: Rs 11.45 crore (USD 1.82 mln) paid
Week 7: no payout – bank accounts frozen
Week 8: Rs. 2.85 crore (USD 457.9 k) paid
Week 9: Rs. 28.34 crore (USD 4.58 mln) paid
Week 10: Rs. 30 lakh (USD 49k) paid
Week 11: Rs. 29.05 crore (USD 4.72 mln) paid
Week 12: Rs. 11 crore (USD 1.77 mln) paid
Week 13: no payout
Week 14: Rs. 6.1 crore (USD 976.7k) paid
Week 15: Rs. 9 crore (USD 1.44 mln) paid
Week 16: Rs. 9 crore (USD 1.44 mln) paid
Week 17: Rs. 9 crore (USD 1.46 mln) paid
Week 18: Rs. 11.5 crore (USD 1.85 mln) paid
Week 19: Rs 12.64 crore (USD 2.04 mln) paid
Week 20: Rs 21 crore (USD 3.37 mln) paid

NSEL Defaults For 20th Time; Pays Rs 21 (USD 3.37 Mln) Cr Against Rs 174.72 Cr (USD 28 Mln)
The Economic Times

Crisis-ridden bourse NSEL paid about Rs 21 crore (USD 3.37 mln) against the scheduled payment amount of Rs 174.72 crore (USD 28 mln), defaulting for the 20th straight time.

NSEL has so far settled about Rs 296.14 crore (USD 47.6 mln) against about Rs 5,600 crore (USD 900 mln) due to 13,000 investors.

Fallen Stars: When The Big Guns Went Quiet
Business Standard

The year began well for Jignesh Shah. In February, he presided over the much awaited launch of equity trading in MCX-SX, completing a near-five-year journey.

Though the slow start and announcement of a commodities transaction tax in the Budget brought the group’s listed stocks, FTIL and MCX, down from their highs, nothing prepared his investors for the shock that was to follow in four months…

FTIL Stock To Stay Under Pressure
Business Standard

The problems at FTIL seem far from over.

PLY: FTIL remains in a bind. As much as 62.5% of its profits had been coming from NSEL (odd that Jignesh Shah then didn’t seek to better understand the business, no?) and the MCX dilution will boost cash (for NSEL repayments) but reduce earnings further…

FMC Allows NSEL To Pay Directly To IBMA Members
Moneycontrol

FMC has allowed NSEL to pay directly to members of IBMA which was set up by the bourse and is also one of its investors. IBMA, a subsidiary of the crisis-ridden NSEL, had reportedly invested about Rs 1,200 crore (USD 193 mln) in the bourse.

RBI Says No Promoter Should Control Any Exchange
Free Press Journal

The Reserve Bank has said it is not advisable to let a single group of shareholders to dominate the functioning of any exchange.

PLY: Welcome to Marxism 2.0. Now India is keen to collectivise ownership even of the core engines of capitalism. Madness.

FMC Gives More Time For Auditing NSEL’s Contracts
The Times of India

FMC has given more time till January 17 to Mumbai-based chartered accountants Chokshi & Chokshi for completing the forensic audit of the crisis-hit NSEL e-series contracts.

FMC Plans Boost For Commodity Markets
Business Standard

FMC is planning several steps in the New Year to revive the commodity markets, which were hit badly by the NSEL scandal in 2013. The regulator is planning to reduce the curbs on individual members and clients and encourage hedgers in the market.

A New FMC For The New Year
Business Standard

Scams are good. The 1992 Harshad Mehta scam saw the securities market regulator emerge as a strong watchdog, empowered by Parliament. Two decades later, the spectacular scam at NSEL has done something similar to the commodities market regulator FMC.

PLY: If the FMC can help rebalance commodity markets trading to encourage hedging and help growers/producers of all sizes it will be a great boost to the Indian economy.

Technology

South Korea Exchange Rushes To Implement ‘Kill Switch’ (subscription)
Financial Times

Korea Exchange (KRX), is rushing to implement a “kill switch” system designed to minimise the fallout from trading algorithms going wrong.

Tech Beat: Outsourcing Comes At A Price (subscription)
Financial Times

PLY: An interesting discussion about strategic infrastructure, the safety of the markets and how IOSCO are now focussing on the issue which has origins in dotcom. Given space limits, an understandably superficial look at speed alone but it raises interesting points.

Products

NCDEX Launches Cotton Seed Futures Contract
4-traders

NCDEX launched Cotton seed futures January 2, 2014.

ICEX Decides Not To Launch Fresh Contracts Until Situation Improves
Business Standard

Indian Commodity Exchange (ICEX), the country’s fourth-largest commodity exchange, has decided not to launch fresh contracts for the time being in the wake of the ongoing weak sentiment in commodity futures market.

Indexes

NYSE Euronext Introduces New Amsterdam Equity Indexes
ETF STRATEGY

NYSE Euronext has introduced two new Dutch equity products: the AEX All-Tradable Index and the AEX All-Tradable Alternative Weighting Index.

HKEx’s AHFT To Include Block Trading, Mini HSI Futures And Mini HHI Futures From 6 January 2014
HKEx

HKEx will introduce Mini Hang Seng Index (Mini HSI) and Mini H-shares Index (Mini HHI) Futures as well as its Block Trading Facility (BTF) to its After-Hours Futures Trading (AHFT) session starting on Monday, 6 January 2014.

Warsaw SE: WIG30short And WIG30lev Published As Of 2014
MondoVisione

Warsaw SE started to publish the WIG30short and WIG30lev indices on January 2nd.

Career Paths

The bankers-dominated selection committee of MCX on Thursday elected Manoj Vaish as MD and CEO of the bourse, under regulatory glare following troubles at the promoter group.

Market regulator SEBI has approved the appointment of Saurabh Sarkar as the new MD and CEO of MCX-SX. Sarkar, who now heads the United Stock Exchange (USE), is likely to take charge in February.

Long-standing Executive Board member Jürg Spillmann (62) has decided to retire at the end of the year from the Executive Boards of the Eurex companies. Spillmann served as Deputy CEO of Eurex Zürich AG and Eurex Frankfurt AG from their launch in 1998, and of the Eurex Clearing AG.

He will become a member of the Board of Directors (supervisory board) of Eurex Zürich AG with effect from January 2014, and will remain on the Supervisory Boards of the European Energy Exchange AG (EEX) and European Commodity Clearing AG (ECC) as Deputy Supervisory Board Chairman.

PLY: Good luck to the new Indian exchange heads, they will need to be brave and resolute in the face of a precarious regulatory system and that will prove very challenging. To Jürg Spillmann my plaudits on what has been an exceptional career by an individual who has made his mark on the industry with, in every respect, panache. His calm, mature bearing will be an excellent addition as a non-executive director.

Changes in investors/shareholders

Brazil’s Eike Batista Sells Stake In Another Firm
Wall Street Journal

Brazilian businessman Eike Batista who in September said he had lost most of his multibillion dollar fortune, sold in mid-December his stake in the Brazilian Intercontinental Exchange (BRIX), in which he had a partnership with other three local businessmen and with ICE.

Mr. Batista expressed his “desire to prioritize time and resources” earlier in 2013 and finally exited the partnership before the end of the year, said Levindo Santos, BRIX CEO, in a telephone interview Thursday.

Start-up BRIX was founded in late 2010 as an electronic platform for the trading of electricity, Mr. Santos said. The company initially had five partners. The partners each had a stake of around 20% in the electricity trading platform, Mr. Santos said. Now the remaining four partners have increased their stakes, buying Mr. Batista’s share for an undisclosed amount, Mr. Santos added.

PLY: BRIX seemed to be becalmed of late and Mr Batista’s collapse cannot have helped. Presumably the operation will be full steam ahead again with the new 4 party arrangement.

Financial Calendar

Today

Record date 6.60p ICAP interim dividend
Record date CBOE special cash dividend of $0.50

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

Share Notes

Following his sale of 11,867 shares Friday, November 22nd at an average price of $24.21 (bargain $287,300.07) reported on November 27th, the sale of 12,117 shares Tuesday, November 26th at an average price of $24.28 (bargain $294,200.76) reported November 28th, the sale of 14,303 shares Thursday, December 5th at an average price of $24.56 (bargain $351,281.68) reported December 9th, the sale of 15,237 shares Wednesday, December 11th at an average price of $24.16 (bargain $368,125.92) reported December 16th, the sale of 13,376 shares Friday, December 13th at an average price of $24.45 (bargain $327,043.20) reported December 18th, the sale of 15,094 shares Thursday, December 19th at an average price of $24.28 (bargain $366,482.32) reported December 23rd and the sale of 11,125 shares Thursday, December 26th at an average price of $24.61 (bargain $273,786.25) reported December 30th Interactive Brokers Chairman Earl Nemser sold another 11,010 shares Monday, December 30th at an average price of $24.48 (bargain $269,524.80).

Following his sale of 8,365 shares Wednesday, November 20th at an average price of $23.77 (bargain $198,836.05) reported November 25th, the sale of 8,365 shares Tuesday, December 3rd at an average price of $24.56 (bargain $205,444.40) reported December 5th, the sale of 7,952 shares Thursday, December 5th at an average price of $24.56, (bargain $195,301.12) reported December 9th, the sale of 8,054 shares Monday, December 9th at an average price of $24.54 (bargain $197,645.16) reported December 12th, the sale of 8,472 shares Wednesday, December 11th at an average price of $24.16 (bargain $204,683.52) reported December 16th, the sale of 7,437 shares Friday, December 13th at an average price of $24.45 (bargain $181,834.65) reported December 18th and the sale of 7,555 shares Tuesday, December 17th at an average price of $24.29 (bargain $183,510.95) reported December 20th Interactive Brokers CFO Paul Jonathan Brody sold another 6,185 shares Thursday, December 26th at an average price of $24.61 (bargain $152,212.85) and 6,122 shares Monday, December 30th at an average price of $24.48 (bargain $149,866.56).

Following his sale of 52,309 shares Monday, December 23rd at an average price of $3.92 (bargain $205,051.28) and 71,377 shares Thursday, December 26th at an average price of $3.89 (bargain $277,656.53) both reported December 30th GFI Group COO Ronald Daniel Levi sold another 86,842 shares Monday, December 30th at an average price of $3.81 (bargain $330,868.02). He now owns 708,827 shares.

Analyst Notes

Zacks Upgraded ITG From “Neutral” To “Outperform” – $21.80 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.

Crowdfunding

10 Fun Facts About Crowdfunding
Reuters

While crowdfunding is older than the Statue of Liberty in New York, the advent of web 2.0 and internet-mediated platforms has caused crowdfunding to gain a lot of traction in the last few years.

Other stories

Leawood Firm Acquiring Board of Trade Building
kansascity

The Kansas City Board of Trade building, on the market since grain-trading operations ended last summer, is being sold to Mariner Real Estate Management LLC, a Leawood real estate investment firm.

The buyer plans to complete its purchase of the six-story building at 4800 Main St. on Jan. 27, Glenn Stephenson, vice president of Highwoods Properties, said Thursday. Highwoods owns 49 percent of the building. The remaining majority share is owned by CME.

The financial details of the transaction were not disclosed.

Latvia Joins The Euro Area
MondoVisione

The euro has been successfully introduced in Latvia. The number of EU Member States using the single European currency has therefore increased to 18, thereby raising the number of Europeans sharing the currency to some 333 million people.

PLY: Pooled debt liability programme built on sand expands, Brussels cheers, Latvians not allowed to choose their currency…

Finra Targets Brokers With Many Complaints (subscription)
Wall Street Journal

The U.S. brokerage industry’s self-regulator said it would create a special enforcement team focused on brokers with a pattern of customer complaints.

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