January 08 2014

elb2JPM buys into Chi-X Global, settles Madoff case, Mexican energy reform, a curious case of conflict of interest between USE and MCX-SX? Intriguing snippets throughout the world of exchanges in today’s 165th EI, happy scrolling:

Public Markets

MEXDER CEO Jorge Alegria On Mexico’s Energy Reform
Open Markets

This month, Mexico’s legislature passed a potential game-changer for the country’s economy: energy reform.

While President Enrique Peña Nieto is not the first to present plans to propose reforms, hopes are high he could finally free up the Mexican energy market.

PLY: Interesting discussion with the engaging Jorge Alegria on a fascinating area of reform which has provoked controversy amongst the political opposition in Mexico but has enormous potential benefit.

Capita Asset Services & Clearstream Improve German ETFs
Deutsche Borse

Capita Asset Services and Clearstream have joined forces to establish a more streamlined, efficient and more secure issuance process for ETFs on the German market.

The partnership allows Capita, as registrar and asset managing services business, to open an issuance account with Clearstream and directly mark balances up or down in Clearstream’s books, as required.

PLY: It’s a slow day in public markets but this is a useful incremental fillip.

J.P. Morgan Settles Its Madoff Tab (subscription)
Wall Street Journal

After years of denying culpability in the Ponzi scheme, JPM agreed to $2.6 billion in payments to resolve charges it failed to police Mr. Madoff’s activities and entered into a rare pact with prosecutors intended to head off a criminal case.

PLY: The Chi-X investment by JPM is in the shareholder change section below…

Private Markets

BATS-Direct Edge Markets Increase Share In December
The Trade

Overall, the US equity market surged ahead 5.6% in 2013 to a total of US$50.9 trillion in value traded, from US$48.2 trillion in 2012, although a far cry from the strong performance witnessed in 2011, where the annual trading figure reached US$58.5 trillion.

December:

1) NYSE: US$1.043 trillion, 25.45% share of US equities (November 25.26%)
2) BATS-Edge: US$899.1 billion, 21.85% (Nov 21.78%)
3) Nasdaq: US$708.2 billion, 17.21% (Nov 17.26%)

Total trading figures for December reached US$4.1 trillion, down from US$4.9 trillion seen in November, due to the seasonal dip and fewer trading days.

Dark Pool Trading Is Climbing. Here’s Why
Traders Magazine

The dark markets have become so efficient that the costs of execution and market impact are lower than at the display markets where the take fees are the highest and market impact is the most significant.

PLY: A fascinating article by Keith Ross discussing the structure of the US marketplace which he sees as stronger than ever…

Will United Stock Exchange Merge With MCX-SX?
Livemint

United Stock Exchange (USE), the unprofitable new stock exchange, could merge with another exchange, perhaps MCX-SX, with which it has started preliminary talks, according to two people familiar with the development, who asked not to be named.

Both exchanges denied they were in talks.

PLY: Last week MCX-SX “handpicked” Mr Saurabh Sarkar to be the new CEO of MCX-SX while he held the same position at USE. Now we hear there are merger talks afoot. Am I alone in being a mite concerned that multiple parties could claim conflict of interest on various criteria if any such discussions have actually been held?

Zimbabwe: Nation Aims For Commodities Exchange
allAfrica

Zimbabwe’s hopes of establishing an Agriculture Commodity Exchange (ACE) by March 2014 have been dampened by persistent low grain and cereal output.

The country has been pushing since 2011 to establish a commodities exchange to address crop-pricing problems and stimulate production, but the project has yet to take off due to lack of funding and bickering within the government.

India – Report Securitised Debt Trades In 15 Minutes: SEBI To Bourses
The Hindu Business Line

Trades in securitised debt instruments (both listed and unlisted) should be reported within 15 minutes on the trade reporting platforms of exchanges (NSE, BSE or MCX-SX) from April 1, 2014.

Lahore SE Partnered With SAFE In Marketing IPO Industry
Pakistan Observer

Lahore SE (LSE) in collaboration with South Asian Federation of Exchanges (SAFE) will organise a fourth annual IPO summit in Lahore on January 31st.

Dutch Bitcoin Exchange Bitplaats Expands To Belgium
Coindesk

Dutch bitcoin exchange Bitplaats has announced the expansion of its service into neighbouring country Belgium using the country’s dominant online payments platform, Bancontact/Mister Cash.

Bitcoin Me: How To Make Your Own Digital Currency
The Guardian

Bitcoin was never intended to be the only cryptocurrency because anyone can make their own version of it. The code which underpins the currency is released under what’s known as an open-source licence. Anyone can use it themselves, and alter any aspect they want, in order to create a whole new currency.

A whole class of alternative crypto-currencies, based on the fundamental aspects of bitcoin, have been created over the past couple of years. The first and biggest of the “altcoins”, called Litecoin, was created in 2011 to address some perceived flaws in the Bitcoin protocol.

Bundesbank Warns Over Bitcoin Risk (subscription)
Financial Times

Board member calls virtual currency ‘highly speculative’.

PLY: News that a Buba board member is anti-Bitcoin will only encourage the faithful (both pro and anti BTC!). Buba is offering a qualified warning which makes sense – Bitcoin has been volatile and hence caveat emptor…

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX firms 1.5% and FTIL soars another (limit up) 10% as value from sales continues to be priced into the market. That puts FTIL back at the highest level since August 1st 2013 when the NSEL crisis was in its infancy… Meanwhile there was another failure in the NSEL repayment schedule – plus ca change – with a paltry sub 400K dollars being repaid in week 21..

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
Week 21: Rs 2.45 crore (USD 394k) paid

NSEL Defaults 21st Time, Pays Rs 2.45 Crore (USD 394k) Against Rs 86.02 Crore (USD 13.9 Mln)
The Economic Times

NSEL today paid about Rs 2.45 crore (USD 394k) against the scheduled payment amount of Rs 86.02 core (USD 13.9 mln), defaulting for the 21st straight time.

With today’s pay-out, NSEL has so far settled about Rs 298.59 crore (USD 48 mln) against about Rs 5,600 crore (USD 900 mln) due to 13,000 investors.

FTIL Hits Five-Month High, Stock Surges 45% In Three Days
Business Standard

FTIL is locked in upper circuit of 10% at Rs 271 (USD 4.35), also its highest level since August, with no sellers in otherwise weak trading on BSE.

A combined 10.02 million shares changing hands till noon yesterday deals against an average 5 million shares that were traded daily in past two weeks on the BSE and NSE. There are pending buy orders for around 444,000 shares on both the exchanges.

Shares of Jignesh Shah-led FTIL are on a roll, and have rallied 45% in past three trading sessions amid reports that the company is selling its stake in National Bulk Handling Corporation and MCX.

FTIL Seeks Relief Against Stake Dilution In MCX
Livemint

Jignesh Shah-led FTIL on Wednesday sought relief in the Bombay high court against FMC order asking it to dilute its stake in MCX to 2%. The case will be heard on 9 January.

PLY: Which raises the intriguing question, is the current FTIL stock price surge driven by the lure of cash and cash alone? Would the price actually go down if FTIL were allowed to retain their exchange stakes?

FTIL’s SEBI Hearing Adjourned Till January 13
Business Standard

FTIL hearing before SEBI has been adjourned till January 13, to allow for the High Court proceedings to be heard first.

Crime Branch Chief Assures Of 100% Returns
dnaindia.com

Crime branch chief Himanshu Roy has assured the victims that 75 percent of the scam money is secured with the government and justice will be done.

PLY: Mr Roy has been doing brilliant work leading the EOW and a group of NSEL investors expressed their thanks yesterday during a ‘protest’ at EOW HQ where the investors remain keen to see justice meted out to the likes of Jignesh Shah.

Technology

TMX Atrium Expands Moscow Connectivity To IXcellerate
MondoVisione

The new connection offers some of the lowest latency access between Moscow and key European financial centres, including London, Frankfurt and Stockholm.

Indexes

SECP Approves Futures Trading In KSE-30 Index
The News

The Securities and Exchange Commission of Pakistan (SECP) has approved futures trading in KSE-30 index in all three stock exchanges of the country that would start soon.

Career Paths

Trinidad and Tobago SE announced the appointment of former banker Michelle Persad as the exchange’s new CEO, effective January 1.

The Bulgarian Ministry of Finance demanded in a letter the dismissal of Assen Yagodin , Vasil Golemanski and Georgi Bulgarski from the Board of Directors of the Bulgarian SE (BSE) on the January 2014 General Meeting of Shareholders, investor.bg informs.

The letter from Minister of Finance Peter Chobanov to the BSE was sent on December 30, 2013.

The Ministry of Finance proposed Gergana Beremska – Karadjova Ivan Kutlov Spassov and Dimo Spassov​​.

PLY: Presumably a prelude to seeking privatisation, the government is reshaping the board of BSE.

Changes in Investors/Shareholders

J.P. Morgan Acquires Stake In Chi-X Global
MarketWatch

J.P. Morgan has acquired an equity stake in trading platform Chi-X Global, the eighth financial firm to become an owner in the company.

Chi-X was founded in 2008 by Instinet, a subsidiary of Nomura. Other owners include big investment banks like Bank of America,Goldman Sachs and Morgan Stanley.

Financial terms of the transaction weren’t disclosed.

Chi-X Global operates market centers in Australia, Canada and Japan. The firm sold its stake in pan-European stock exchange Chi-X Europe to BATS Global Markets in 2011.

PLY: An interesting deal which ought to help the various Chi-X Global markets maintain their momentum.

Financial Calendar

Interactive Brokers Q4 2013 financial results on Tuesday, January 21, 2014
NASDAQ OMX Q4 2013 financial results on Wednesday, February 5, 2014

CFTC announced that the Commission’s Technology Advisory Committee (TAC) will hold a public meeting on Tuesday, January 21, 2014 from 10 a.m. to 5 p.m. at the CFTC headquarters in Washington, D.C. – more details here.

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

Share Notes

Interactive Brokers Group SVP Milan Galik sold another 2,000 shares Friday, January 3rd at an average price of $24.41 (bargain $48,820.00). He now owns 843,517 shares. Mr Galik’s regular sales are chronicled on this specific page.

GFI Group major shareholder Michael Gooch sold 86,397 shares Monday, January 6th at an average price of $3.86 (bargain $333,492.42). He now owns 193,024 shares.Mr Gooch’s regular sales are chronicled on this specific page.

Analyst Notes

LSE “Buy” Rating Restated At Espirito Santo Investment Bank Research – GBX 1,990.50 Price Target
Charles Schwab Downgraded At Citigroup From “Buy” To “Neutral”

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 – Banks’ Exposure To Qualifying Clearing House Outside 15% Norm
Business Standard

Banks’ exposure to a qualifying clearing house would be kept outside the limit of 15 per cent of their capital funds applicable to a single counterparty, the Reserve Bank said yesterday.

“…As an interim measure, a bank’s clearing exposure to a Qualifying Central Counterparty (QCCP) will be kept outside of the exposure ceiling of 15 per cent of its capital funds applicable to a single counterparty,” the RBI said in a notification.

The exposure limit applicable to a single borrower or counterparty is 15 per cent of the capital funds of the bank.

Japan Launches Tax-Free Investment Accounts (subscription)
Wall Street Journal

After much fanfare, the activation of Nippon Individual Saving Accounts officially kicked off Monday.

Part of Prime Minister Shinzo Abe’s economic reform plan, the tax-free NISA system is designed to coax Japan’s chronic savers to put money into stocks, bonds, and other assets to spur domestic growth instead of just parking cash in regular bank accounts.

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