January 10 2014

elb2First up, I do opine on occasion beyond the wondrous world of financial market infrastructure (Yes it is a wonder I have the time) and tomorrow my personal “IPO” newsletter will have its first issue of the year). It’s broad brush stuff – email me if you want to be added to the list and, like Exchange Invest, it’s free.

Meanwhile back in the exchange universe: profound thanks today to Dr Jochen Biedermann, formerly of DB who is now offering his splendid services via the offices of the International Securities Consultancy. Noting it’s the 9th anniversary of DV Advisors coming into being, he commented on Linkedin this morning:

“We cannot imagine our industry anymore without your daily newsletter, Patrick!”

Thanks and good luck Jochen from myself, Florin and all the team for your kind words!

Today in a fascinating Exchange Invest (Issue 167), Euronext shuffles its management pack (at the bidding of the French government?), Indian Bond Futures approved, Trade Reporting deadlines causing stress, FTIL bid looming? BIST suffers unknown outage, CFTC moves goalposts on SEFs, Jignesh Shah 40 million dollars richer after first full week of 2014…

…Actually, I will stop there, today is one of those “you just have to scroll all the way” days – happy reading!

Public Markets

Euronext Names CEO Of Paris Exchange Amid French Scrutiny Of IPO
Businessweek

Euronext named Anthony Attia (former chief of staff to CEO Dominique Cerutti) as Paris Bourse CEO while the French government seeks to ensure its interests are protected in the company’s spin-off from ICE.

Euronext also named Lee Hodgkinson as head of its markets and global sales teams and said he will ultimately become CEO of Euronext London. Amaury Dauge was appointed CFO.

ICE is jettisoning Euronext after acquiring it through the purchase of NYSE Euronext in November, with plans to sell as much as 30 percent before an IPO, according to three people familiar with the matter.

As Euronext moves toward an IPO, the French and Dutch regulators who oversee the exchange have some differing views on its future, with both sides seeking to protect national interests, the people said.

PLY opinion on January 7th.

NYSE Euronext press release here.

PLY: French attention may be centred on gossip about Julie Gayet and ‘M. Flanby’ but the sound of deckchair shuffling is alive and well on board MV Titanic Bourse as the French government refuse to believe the business is unsinkable. Well it has four key chambers which surely cannot be breached simultaneously, right?

Lest anybody doubts the French power grab, the press release trumpets Attia’s appointment: “thereby strengthening the role of the Paris stock exchange.” Holland is a proud free trading nation, Belgium has had its stock market hollowed out – quite why everybody is so keen to let the French bureaucracy run rampant in destroying shareholder value and lowering the survival chances of Euronext, beggars belief. BATS, DB, TOMS and all other competitors must barely be able to believe their luck. The lure of a dramatic management turnaround now seems over thanks to the French machinations to preclude capitalism breaking out at the Bourse. The current situation looks likely to result in stasis, decay and the death of Euronext, perhaps before ICE can even offload all their stake…

Traders Struggle To Meet European Reporting Deadline (subscription)
Financial Times

Fund managers, banks, investors and corporations trading in Europe are struggling to meet a deadline in five weeks’ time for mandatory reporting of all their trades to regulators.

Industry estimates suggest about 1m legal entities that operate in the region will after February 12 have to report trade data from across all their asset classes.

PLY: I think it is fair to say there is a struggle out there but then again the industry deserves a pat on the back for making incredible progress, often when there was no real regulatory clarity (still isn’t in many places as the inestimably knowledgeable Danny Corrigan of CME wisely notes). A huge number of counterparties will be ready. That is a tribute to them and the various TRs in service. Still there will be stress and some likely will not make the Feb 12 deadline.

Bulgarian SE Affected By Political Turmoil
Novinite

PLY: Chairman Vasil Simov discussed how 2013 had been a year of challenge for BSE which is still on a privatisation ramp, alongside the national central depositary, at the launch of the company’s annual report.

Alcoa Chief Says No Plans For Legal Action Against LME
The Star

Alcoa Inc has no plans to follow Russian aluminum producer Rusal and launch legal action against LME aimed at overturning reforms to its warehousing policy.

SGX Partners e2i To Draw More To Stockbroking
MondoVisione

SGX is partnering NTUC’s e2i (Employment and Employability Institute) to draw more Singaporeans to the stockbroking profession and equip new joiners with the necessary skills.

PLY: Good to see SGX encouraging more people to join the thriving Singaporean financial hub.

Private Markets

Borsa Istanbul Shut Down Due To Technical Problem
Hurriyet Daily News

An unexplained technological problem shut down trading at Turkey’s stock exchange Borsa Istanbul one and a half hours earlier than regular closing time yesterday.

Second Session on the Equity Market Started at 15:30 according to the exchange’s announcement.

PLY: Curiously BIST removed the release linked to in the last sentence which stated the Second Session had begun (we kept the link for posterity – it used to work, honest)… It’s hardly a scandal in keeping with the recent shenanigans in Turkey’s government but there is a hint of irony that the notice used to sit just above the NASDAQ OMX tech (et al) tie-up announcement… BIST clearly needs to have a better means of dealing with errors and keeping the market informed of such problems as even routine incompetence with announcements may lead to unfounded rumours of cover up. We look forward to a full detail of what went wrong from BIST to clear the air in due course.

Korea Exchange Considers Longer Hours While Mulling Acquisitions
Bloomberg

KRX plans to extend trading hours after the official close and may lengthen its six-hour regular trading day within five years to boost liquidity in the $1.2 trillion market, according to its first development plan since Choi Kyung Soo took over as chairman in October.

The bourse will consider acquiring foreign ATSs and exchanges over the next three years.

PLY: Having visited KRX in Seoul a while back, it is a fascinating business at the heart of the incredible pulsating South Korean economy from its twin Busan/Seoul HQ. Having already taken an interest in various local initiatives, it would be great to see KRX expand its footprint. It has capital and there are some great businesses out there it could acquire / invest in.

CFTC Said Ready To Push IRSs To Trading Platforms
Businessweek

CFTC is poised to push interest-rate and credit swaps onto trading platforms designed to make prices more transparent and competitive.

The mandate “is a real fundamental shift,” Kevin McPartland, head of market structure research at Greenwich Associates, said in a telephone interview. “It’s going to impact how the clients interact with the banks on a day-to-day basis.”

PLY: The only rule of government we can always guarantee is that whatever is initially legislated, soon ‘bracket creep’ will fundamentally extend the scope of the regulation. This is significant movement which suggests the heart of the CFTC’s interventionist wing is keen to build on the Gensler legacy.

As The OTC Marketplace Evolves, More SEFs May Rise (subscription)
waterstechnology

Barry Smith, director of global exchanges and trading venues at Equinix, discusses trends he expects to see in the OTC markets in 2014 and beyond.

PLY: More SEFs but probably a start to consolidation as well during the year. Barriers to entry are now so low, we’re looking at the equivalent to the gold rush phase of the late 1960’s early 1970’s in moneybroking (oh sorry, IDBs) where hundreds of tiny franchises competed for market share and a relatively few mega-moneybrokers emerged when frequent devaluations were a prelude to the last great Tectonic shift – Nixon exiting Bretton Woods – itself creating the first wave of the OTC trading cum derivatives revolution.

Shanghai SE Issues ‘Basel Bond’ Rules For Banks
Reuters

Shanghai SE has set conditions for listed banks to issue bonds on the bourse for the first time, in a move to offer banks a new channel to boost capital.

The China Securities Regulatory Commission (CSRC) and China Banking Regulatory Commission (CBRC) said in November that listed banks would be allowed to issue debt on Shanghai and Shenzhen bourses for the first time, in a step aimed at helping lenders meet tougher new capital adequacy requirements.

International Board For Gold Eyed In FTZ
Ecns

Shanghai Gold Exchange, the world’s biggest exchange for physical gold, plans to launch an international board in the pilot free trade zone during H1 to attract overseas capital to invest in the Chinese mainland gold market. The bourse is looking for a site for a bonded warehouse in the Free Trade Zone.

PLY: Lest you skimmed that blurb above, ponder the first sentence: the world’s largest exchange for physical gold is in China. Makes you wistful for the days when all attention was on the flags at the Rothschild London fixing…also ought to slam a piledriver between the eyes of exchange executives in London, New York, wherever, who aren’t fixated with getting out of their comfort zone and exploiting the great emerging market opportunity…

CISX Rebranded And Relaunched
The Telegraph

As previously reported on December 30th, after historical concerns about its operations, Guernsey’s trading centre has been revamped, but an investigation continues. CISX is now CISE (“Channel Islands Securities Exchange”) while a separate regulatory arm has been spun off, the “Channel Islands Stock Exchange Authority” (CISEA) – which will also vet new listings.

PLY: As previously stated I always liked CISX, it created a space for itself demonstrating just what value microexchanges can provide. Moreover, with Chairman, eminent VC figure Jon Moulton, and his deputy Stephen Hargreaves, billionaire co-founder of investment managers Hargreaves Lansdown, the non-execs are AAA impressive. Let’s hope the revamped executive team can continue this exchange’s remarkable progress.

Towards The Creation Of The Swiss Power Exchange – Swiss Stakeholders And EPEX SPOT Discuss Market Coupling On Swiss Borders
MondoVisione

Topics discussed were the creation of the Swiss Power Exchange, a function which is vital for the implementation of Market Coupling (a tool for integrating physical power markets) on Swiss borders to enable better integration for Switzerland with the EU Internal Energy Market.

Bitcoin Exchanges Scramble In China (subscription)
Wall Street Journal

Bitcoin exchanges in China are trying to maneuver around tight rules imposed by the central bank, while confronting the issue of Alibaba banning Bitcoin related sales on its e-commerce platform.

Which Asian Countries Get Along Best With Bitcoin?
TECH IN ASIA

PLY: A useful swift run through multiple Asian nations and how they approach Bitcoin. Interesting to see that Thailand may be considering repealing their outright ban on BTC.

Bitcoin Tax Rules Needed For Clarity, Taxpayer Advocate Says
Businessweek

The U.S. Internal Revenue Service should give taxpayers clear rules on how it will handle transactions involving Bitcoin and other digital currencies, Nina Olson, the National Taxpayer Advocate, said yesterday.

Special Section: FTI, NSEL, India at the Crossroads

MCX is down nearly 6% and FTIL also takes a pause in recent price escalation 13%) while the story emerges that FTIL might be bid by Tech Mahindra is a fascinating development.

FTIL Stock Zooms 77% In 5 Sessions On MCX Stake Sale, Dilution Buzz
The Economic Times

Going by the way the FTIL stock has been behaving over the past few sessions, few would believe the promoter of crisis-hit spot exchange NSEL was in the eye of a storm.

FTIL rose 77% over five trading sessions through Thursday, when it closed at Rs 328.4 apiece (USD 5.3).

PLY: In other words, the market cap of FTIL went from 856 crore Rupees on January 3rd to about 1442 crore Rupees today. Or a healthy market cap increase of about 94.5 million US dollars. The EOW of the Mumbai police hold at least 18% of FTIL (we believe Jignesh’s own name stake) and Mr Shah controls some 45% of FTIL, his net worth has improved by roughly 42 million dollars (pre any NSEL payments). Not a bad start to a year after 2013 was an annus horribilis…

Mr Shah could yet walk away from FTIL even after paying all immediate liabilities to NSEL with a significant sum if he decides/is forced to…oh, I am getting ahead of myself:

Tech Mahindra Looks To Buy FTIL
The Economic Times

Sources with direct knowledge share that Anand Mahindra’s Tech Mahindra is keen on buying Jignesh Shah’s FTIL if the promoter is asked to sell his stake as part of the NSEL proceedings.

Tech Mahindra has initiated an evaluation of FTIL for a buyout possibility, sources suggest. “It is the trading platform capability that Tech Mahindra is keen on acquiring which may have global market” a source indicated.

After it’s experience with Satyam, Tech Mahindra is eyeing another crisis-hit company for acquisition.

Sources said that Tech Mahindra wants to regain its strength in the BFSI segment which had been hit hard in the Satyam portfolio. FT may provide enough traction in this vertical.

PLY: Fascinating. Satyam Chairman Ramalinga Raju admitted to manipulating the accounts by about 1.5 billion and Mahindra scooped up the company beginning with 46% in a subsequent auction. Jignesh Shah is one of those founders who probably never intends to sell his FTIL shares although he might be advised to consider taking a lump of cash from Tech Mahindra and walking away to lick his wounds and then bound back onto the world stage, perhaps in a different sector?

Meanwhile note that Gesco, controlled by the Sheth family hold 8% of FTIL and they have history with Mahindra, using them as a white knight to thwart a hostile takeover bid by Dalmia some years ago. Equally, Mahindra is close to the Kotaks who are believed to be interested in taking a stake in MCX. Doubtless there are intense discussions all over Mumbai currently…

Police To Start Interrogating NSEL Brokers From Saturday
Business Standard

The Mumbai Police Economic Offences Wing investigation of the NSEL crisis is zeroing in on the brokers of the exchange.

Notices will be sent from Friday to the brokers; from Saturday the interrogation will begin.

There are 24 brokers whose share was higher in NSEL volumes; they will be called first. The wing is forming a special team.

PLY: The brokers were quick to blame the exchange for all the problems when the scandal first broke last summer.

Technology

S&P Capital IQ Extends Trading And Data Services Through HKEx
waters technology

S&P Capital IQ Real-Time Solutions has reinforced its Asia offering by extending its QuantFEED and QuantLINK solutions through HKEx Orion program. The new service provides participants with faster access to both trading platform and market data services.

This move follows S&P Capital IQ’s co-location to HKEx’s data center in Tseung Kwan O, Hong Kong earlier this year.

Financial Firms Seek Startup Solutions To Trade Better, Faster
Chicago Tribune

PLY: An interesting article discussing various tech apps for trading developed in and around Chicago, worth reading.

Products

NSE, BSE & MCX-SX To Launch Interest Rate Futures This Month
The Economic Times

NSE, BSE and MCX-SX got Sebi’s approval to launch new interest rate futures in long tenure 10-year government bonds and these investment products would hit the market later this month.

Live trading in the new interest rate futures (IRF) will begin on NSE on January 21, while MCX-SX said it will also go live this month but did not give the exact date for the same.

PLY: Bond futures are a long overdue great leap forward for India. It will be fascinating to watch their development and whether any exchange can take a dominant position.

NCDEX To Launch Gold Futures Contract From January 16
The Economic Times

NCDEX is set to launch gold futures contract from January 16.

Career Paths

Ex-Tbricks COO Urs Rutschmann has joined real-time market information and electronic trading solutions provider Infront in the capacity of COO.

Financial Calendar

Next week

CME $2.60 annual variable dividend payment
CBOE $0.50 special cash dividend payment

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

Share Notes

GFI Group major shareholder Michael Gooch sold 13,603 shares Tuesday, January 7th at an average price of $3.87 (bargain $52,643.61).Mr Gooch’s regular sales are chronicled on this specific page.

Analyst Notes

Keefe, Bruyette & Woods Raised Price Objective On Interactive Brokers From $23.00 To $24.00
Nomura Began Coverage On Charles Schwab – “Neutral” Rating And $23.00 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

SEC’s Proposed Crowdfunding Regulations: Six Deadly Sins
Crowdfund Insider

Where is the Crowd?

At last check, there were less than 100 comment letters submitted to the SEC regarding the proposed crowdfunding regulations – not very impressive by Kickstarter’s benchmarks for successful crowdsourced projects. Though there is likely to be a flurry of new comment letters as the February 3 deadline approaches, I remain concerned about the relative lack of comments, more than two months after the proposed regulations were made available to the public.

PLY: An interesting point indeed as the number of interventions also tend to skew towards Wall Street and other incumbents who are invariably pushing reaction to avoid what they perceive (wrongly) may be competition for their existing franchises.

Other stories

Singapore To Consider Tougher Stock Market Rules
Reuters

Regulators in Singapore are planning to issue a consultation paper that will propose tighter rules for companies looking to list in the city-state, months after the stock exchange was hit by a penny stock scandal.

FOW Person Of The Year 2013
Futures & Options World

PLY: Congratulations to FOW Man of the Year Jeff Sprecher. Hardly surprising given his crowning achievements during 2013.
(Personally I loathe the barfalicious politically correct term “Person”. It sounds like Jeff Sprecher has been castrated. Why can’t it just be a Man or a Woman of the Year depending on who gets the vote?).

SEC Announces 2014 Examination Priorities
MondoVisione

SEC announced its examination priorities for 2014, which cover a wide range of issues at financial institutions, including investment advisers and investment companies, broker-dealers, clearing agencies, exchanges and other self-regulatory organizations, hedge funds, private equity funds, and transfer agents.

PLY: Will the exams test morals, skills, virtues, understanding? Or can we expect the usual low grade crammer fodder where you remember lots of nebulous facts that the interweb can remind you of while you concentrate on being an efficient intermediary with a conscience.

Europe Strengthens Its Carbon Market For A Competitive Low-Carbon Economy
MondoVisione

The European Commission welcomes today’s vote by EU governments gathered in the Climate Change Committee to postpone the sale of 900 million carbon allowances in the 3rd phase of the EU’s Emissions Trading System (EU ETS) which runs up to 2020.

PLY: I have to admit to not paying a lot of attention to this but it appears that a market initiative (good) had been impeded by the usual incompetent EU central planning.

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