January 08 2015

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The BGC-CME-GFI tussle continues – clearly two’s company and three’s a crowd but quite who will get kicked out of bed now seems to be as complex as a Brazilian soap opera with a lot of the melodrama to match. BGC are masterfully making the running, grabbing the headlines and placing GFI under duress. It’s not so mission critical for CME if they get squeezed out but I doubt Mickey Gooch is enjoying this. Howard Lutnick on the other hand, looks to be thriving in a ‘heads he wins, tails he gets more for his stake’ scenario…

Metals warehousing proving problematic once more while MCX-SX claims solvency, adds fire to FDI flames. UAE favours bourse mergers (no pressure though…) and lots more news from around the world, ending with a heartening display that one Indian high school has learnt more about exchanges than perhaps the sum of all bourse knowledge in many other national education systems, happy scrolling:

Meanwhile, over in our Premium service (which subsidises the free provision of this daily newsletter): In addition to the recent series of briefs threading together the history of burning issues (e.g. NLX, The bidding war for GFI, PSE – PDEx Merger brief, overnight we have added a new digest of FTIL Stakes Sales) the latest new posts have concerned that hotbed of current platform growth, the bond market:

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Public Markets

BGC Seeks To Block GFI Sale To CME (subscription)
Philip Stafford – Financial Times

BGC Partners is to seek a strengthened mandate from shareholders of GFI Group to block the sale of the rival US interdealer broker to CME at the planned January 27th meeting by asking GFI shareholders to authorise BGC to vote on their behalf..

BGC’s Lutnick Offers Cash To GFI Brokers As Takeover Vote Looms
Zeke Faux – Bloomberg

Howard Lutnick, CEO of BGC Partners, will give GFI Group’s brokers cash for their restricted stock if his takeover bid is approved instead of CME’s.

BGC Extends All-Cash Tender Offer To Acquire GFI Group For $5.45 Per Share
PRNewswire

BGC Partners announced that it has extended the deadline for its fully financed, all-cash tender offer to acquire all of the outstanding shares of GFI Group for $5.45 per share to January 27, 2015.

The Tragic Romance Of BGC & GFI (subscription)
James Rundle – Waters Technology

The ongoing tussle between BGC and GFI over the latter’s future has provided constant twists and turns. But James questions whether GFI was ever going BGC’s way, or if it was always on the road to Chicago.

New Year, Same Old Warehouse Problems For LME
Andy Home – Reuters

Waiting times to remove metal from log-jammed locations will have flexed out again over the course of December, given last month’s large cancellations of aluminum at the Dutch port of Vlissingen and of zinc at the US port of New Orleans.

By just how much will be clearer when the LME releases its next monthly report on Monday.

Load-out queues, however, are only the most obvious manifestation of a storage system that remains obstinately dysfunctional.

UAE Favours Bourse Merger But Up To Exchanges
Reuters

UAE government would favour a merger of the main Abu Dhabi and Dubai bourses, but the decision is up to the exchanges themselves, economy minister Sultan bin Saeed al-Mansouri said on Wednesday.

SEC Mulls Exchange Plan To Loosen Trade Info Barriers
Ed Beeson – Law 360

SEC has launched proceedings to decide whether to approve an exchange operator’s bid to give broker-dealer clients a peek at how their affiliated market makers trade, or deny the plan amid concerns it would harm investors if it meant they get poorer trade execution.

International Securities Exchange (ISE) has proposed removing one part of a two-way information barrier it has established between member firms’ market maker units and their electronic access members, which trade on behalf of customers on an agency basis.

Standard Chartered Axes Equities Business, Retail Jobs In Cost Cut Push
Lawrence White – Reuters

CEO Peter Sands moved aggressively on Thursday, closing the bulk of its global equities business and announcing 4,000 job losses in retail banking plus 200 in the unprofitable equity division which had not achieved scale.

Rise In Proprietary Trading Hints At Limited FII Interest
Ashish Rukhaiyar – Livemint

Brokers trading with their own money are dominating India’s growing derivatives market, indicating limited participation from institutional and foreign investors.

“Overall, the industry standard tends to be that 65-70% of exchange trading in derivatives is proprietary short-term speculation enabling a minority of trades, which enable risk transfer and hedging for end users,” says Patrick L. Young, executive director at DV Advisors, a Europe-based capital markets advisory firm.

PLY: Interesting article from Ashish Rukhaiyar.

Private Markets

BSE Gets Sebi Nod To Launch Commodity Exchange
The Hindu Business Line

Bombay SE (BSE) has received capital market regulator Sebi-approval to launch its commodity exchange. The stock exchange has to now apply with the FMC for its permission.

MCX-SX – ‘We Have Filed Papers For Launching New Contracts’
Suresh P Iyengar – The Hindu Business Line

MCX-SX seems to be in comeback mode. It recently received approval from SEBI to change its name to Metropolitan Stock Exchange of India (mSXI). In an interview with Business Line, Saurabh Sarkar, MD, MCX-SX, clears concern over regulatory compliance.

PLY: Bringing clarity to some recent concerns, also interesting to see how a bandwagon continues to grow around FDI expansion for exchanges etc (see also this week’s Premium Post BSE’s Christmas Wishes – Is Indian Exchange Shareholding Reform Looming?). As for that ‘I’m too sexy’ branding…oh dear oh dear oh dear.

ICEX Plans Rights Issue As Part Of Revival Plan
Ram Sahgal – The Economic Times

Indian Commodity Exchange (ICEX), promoted by Reliance Capital and MMTC, is considering a rights issue as part of a plan to revive the exchange which suspended operations in April last year after sustained losses.

ZSE To Miss Automation Deadline, Slow Migration To CSD Blamed
Zimbabwe Daily

Zimbabwe SE (ZSE) is likely to miss its stated plans to implement the historic ATS by end of Q1due to problems in migration to the CSD.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX flat, FTIL up 1%, no other news.

Technology

KRX Exports Market Surveillance System To SEC Of Thailand
MondoVisione

Location, Location, Diversification—Which Is More Important In 2015? (subscription)
Max Bowie – Waters Technology

PLY: Given such an ostensibly dry topic, Max Bowie adds life and elucidation to the topic, an interesting column, worth reading.

Seven Financial Technology Startups Selected For FinTech Innovation Lab London
Business Wire

Atsora, Cytora, Duco, PontusVision, Ripjar, Torusware and xWare42 enter 2015 Lab.

PLY: Plaudits all round, especially to the team of Duco who have built an interesting business already. I am wondering if they aren’t too mature to be in an accelerator though. After a feeling of delight for the Duco team, I had a modest feeling of relief as not being involved with this accelerator, at least my liver doesn’t have to endure the potential danger of ‘mentoring’ industry mainstays like Patrick Thornton-Smith. Hmmm, maybe the plan is to create a reality tv show based around fintech ‘startups?’ Compared to many less exciting folks, the Duco team could really add some value there. Anyway well done, hope the programme works out for one and all.

Products

LSE-Owned Market Boosts Efforts To Resurrect Corporate Bonds
John Detrixhe – Bloomberg

LSE’s bond platform, MTS Group, is adding technology developed by B2SCAN that helps European investors find banks willing to trade the corporate debt they want to buy or sell. If a match is found, the transactions would be executed on the MTS Group system.

LSE press release here.

PLY: See also this week’s Premium posts On Bonds & SEFs and The Bond Bubble

ICE Adds Israeli Shekel, Turkish Lira & Polish Zloty Contracts
Victor Golovtchenko – Forex Magnates

Amid increasing demand for additional products on the foreign exchange market, ICE has added new tradable contracts, including US dollar crosses with the Israeli shekel, the Turkish lira and the Polish zloty.

ICE press release here.

PLY: ICE adds contracts in some volatile Euro-fringe currencies. At least it makes life easier for me to hedge my Zloty positions…

KRX Opens Emissions Trading Market On January 12, 2015
MondoVisione

India – Exchanges Want Sweeping Changes In Proposed Liquidity Enhancement Scheme
Dilip Kumar Jha – Business Standard

The liquidity enhancement scheme (LES) proposed by FMC on commodity futures exchanges require a change in format to make it successful.

BitMEX Launches Bitcoin Volatility Futures Contract (subscription)
Alice Attwood – FOW

Derivatives market, Bitcoin Mercantile Exchange (BitMEX), has launched the Bitcoin 30 Day Historical Volatility Futures Contract.

Career Paths

Icap has promoted Justyn Trenner to the newly created role of global head of strategy of EBS.

Algomi, the network company providing information-matching solutions for the optimisation of fixed income liquidity, recruited Jesper Bruun-Olsen as its Head of Asia-Pacific operations.

Financial Calendar

January 27, 2015

GFI Group special meeting of stockholders to vote on the transaction with CME

New announcements

Interactive Brokers Q4 Results – Tuesday, January 20, 2015
Thomson Reuters Full-Year And Q4 2014 Earnings – Wednesday, February 11, 2015.
Nasdaq Q4 Financial Results – Thursday, January 29, 2015

Nasdaq press release here.

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

Analyst Notes

ICE Price Objective Raised By Credit Suisse From $225.00 To $245.00 – “Outperform” Rating
CME Target Price Lifted By Jefferies Group From $93.00 To $97.00 – “Buy” Rating
Citigroup Reiterated Their “Buy” Rating On NASDAQ OMX – $56.00 Price Objective
CBOE Price Target Increased By Jefferies Group From $54.00 To $61.00 – “Hold” 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

Lending Club’s IPO & The Unravelling Of The Banking System As We Know It
Jason van den Brand – The Huffington Post

When history is written, the Lending Club IPO will serve as the tipping point for the disruption of the traditional lending model, and ultimately the unraveling of the banking sector as we know it. With vertical markets adding up to tens of trillions of dollars, coinciding with a perfect storm of consumer-behavior shifts and record high anti-bank sentiment, it’s no wonder that investors and consumers alike are screaming “revolution!”

In raising $870 million dollars, the Lending Club IPO accomplishes three major things: money for growth, consumer accessibility, and market validation.

PLY: The “Capital Market Revolution!” continues to thrive and disintermediate…

Other stories

LME Boosts Outreach Strategy With New Education Offering
LME

Global expansion aforethought…

Stock Exchange: A Wisdom Platform For Wise Investors
British Council

PLY: A heartwarming project from a school in New Delhi…

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