January 12 2015


Like a terrier envisioning a particularly juicy postman’s leg, BGC has its fangs deep into the flesh of GFI and shows no sign of letting go now it is enjoying itself. Two weeks to go and we have the showdown albeit where the result will probably be inconclusive. That’s probably good for BGC and bad for GFI’s legacy management. Where it leaves CME is unclear.

Elsewhere NASDAQ has a cloud play for dark pool aggregation while POLPX renews NASDAQ technology. GMEX gets Virtu as market maker for its eagerly awaited Constant Maturity Futures (“CMF”). KRX privatisation still not clear as Myanmar calls for members and Indian regulators determine to restrict commodity markets and there is a raft of new product news and various interesting points about ETFs, regulatory and indeed reviewing a record year of inflows.

Happy scrolling…

Meanwhile, over in our Premium service (which subsidises the free provision of this daily newsletter), a brief tribute to that Hong Kong legend Ronald Li who was buried last week.

BSE’s Christmas Wishes – Is Indian Exchange Shareholding Reform Looming?
On Bonds & SEFs
The Bond Bubble
NEW: Vale: Ronald Li

(Q.V. Our new series of briefs threading together the history of burning issues (e.g. NLX, The bidding war for GFI, PSE – PDEx Merger brief, FTIL Stakes Sales, LSE – Frank Russell Deal Brief and over the weekend we have added a new digest of LME – Rusal Trial Brief) are also online to help you rapidly review these developing situations from one source).

Subscription to our Premium service is a mere $120 dollars per user / year. Subscribe Here to add to your knowledge & help keep Exchange Invest free. (If you need an invoice or have problems with the gateway, email me – we apologise, Paypal is a sucky interface for credit cards, we are looking at alternatives!).

…Finally for those interested in the SME end of the equation right down to the smallest of businesses, I am delighted to report that my Polish startup organisation “Mission ToRun” enjoyed a spectacular “Business Clinic” at the weekend with some 40 startups enjoying mentor sessions in person and by Hangout (participants came from as far afield as Russia). Not sure many will make it to public markets in the future but we may see some endeavouring to crowdfund in the shorter term – certainly early stage investment will be happening soon!

Public Markets

Decision Time For GFI Shareholders (subscription)
Philip Stafford – Financial Times

The GFI shareholder meeting scheduled for January 27 to vote on its sale to CME should be a date marked in the diary, stasis looks the most likely option, compared with an agreed deal with CME or rival BGC.

PLY: Interesting quotation from Jeff Sprecher, noting: “Whatever process the board of directors went through to sell that asset, we were not a part of it . . . We were not afforded the opportunity.”

The interesting point about Jeff’s comment is that it emphasises a pre-opened can of worms. GFI were known to be shopping their assets to investors for some time. Apparently GFI encountered no coherent interest until the 11th hour when CME rode in. However this statement from the ICE CEO adds further weight to the notion that GFI were clearly very selective whom they chose to approach. This again raises the issue: has the GFI management been acting in its own self-interest or pursuing a resolution in the best interest of all shareholders? I would not be surprised to find a vast quantity of litigation may follow, deal agreement or no deal agreement.

BGC Files Preliminary Proxy Materials & Issues Letter To GFI Shareholders
Automated Trader

BGC Partners has announced that it has filed preliminary proxy materials with SEC in order to solicit votes at the January 27, 2015 special meeting of GFI Group shareholders against the proposed merger with CME. In addition, the company has issued a letter to GFI shareholders.

BGC press release here.

PLY: The BGC letter notes: “Despite the clear superiority of our offer, we have faced continued obstacles and delaying tactics, which we believe are the result of actions taken by [GFI founder] Michael Gooch and [chief exec] Colin Heffron, who have a conflicting personal commitment to the joint CME/management bid for GFI and are actively sabotaging the transaction with BGC.”

The proxy issue is fascinating, probably giving BGC a chance to stop the CME bid even if its own bid is not accepted.

Meanwhile, as noted in the previous story, the phrase “active sabotage” has more than a whiff of pending litigation about it…

For a digest of events, see our Premium post The bidding war for GFI.

Nasdaq Looks To Operate Dark Pools For Banks (subscription)
Bradley Hope – Wall Street Journal

PLY: Lest anybody is confused, let’s simplify this concept using the jargon of equity markets: NASDAQ is seeking to systematically internalise the systematic internalisers who face increased costs for running their pools with greater regulatory oversight. NASDAQ sees this cloud of platforms as a means to create multilateral internalisation to run alongside its existing more transparent equity market.

ESMA Updates List Of Authorised CCPs – CME Clearing Europe Re-Authorised For Extended Activities & Services

ESMA has published an update of its list of central clearinghouses (CCPs) which are authorised under EMIR.

(You can also find the list of EMIR approved CCPs can be studied on our website here).

Betfair Resolutions Passed At EGM
Stock Market Wire

Betfair shareholders approved new articles of association at an EGM. They also approved proposals on share classes and repurchase.

Private Markets

KRX Privatization Still Uncertain
Korea Herald

According to the Finance Ministry and the FSC on Tuesday, KRX has eliminated the factors that have kept it from being privatized over the past six years.

BSE To Invest Rs. 150 Cr (USD 24 Mln), Establish India’s First Global Exchange At Gandhinagar
Virendra Pandit – The Hindu Business Line

Bombay SE (BSE) will establish an international exchange in GIFT SEZ-IFC, a multi-services Special Economic Zone (SEZ) being developed as the country’s first International Financial Services Centre (IFSC) by Gujarat International Finance Tec-City Company Ltd (GIFTCL), in Gandhinagar.

PLY: Interesting as IFSC projects have been plentiful over the years (Mumbai produced a 250 page report on the subject some years back for instance) but the idea of an international exchange from India would be interesting (albeit why not just liberalise the economy and let foreign investors into the existing markets?…q.v. within that question lies the reason why 50% of Rupee trade is already overseas!).

NSE Open To Global Tie-Ups With Exchanges For SME Platform: CEO
R Yegya Narayanan – The Hindu Business Line

PLY: Chitra Ramkrishna, MD and CEO of NSE ponders ways to potentially cooperate and cross list SME companies – albeit liquidity dissipated may be an issue but it’s worth examining all angles, SMEs desperately need more funding throughout the world.

Myanmar To Open Stock Market In Oct
Bangkok Post
Myanmar Invites Service Providers For Stock Exchange In Yangon
Global Post

The commission will grant four kinds of services licenses — underwriters, dealers, brokers and consultants, prescribing different levels of capital requirement for each, said the commission chairman U Maung Maung Thein, who is also Deputy Finance Minister. Application deadline is February 27th.

Earlier this month JPX signed a joint venture agreement to establish the Yangon SE.

SEC Strives Forward AFET- TFEX Integration

The SEC has moved forward the integration of the Agricultural Futures Exchange of Thailand (AFET) and the Thailand Futures Exchange (TFEX) in accordance with the Cabinet resolution on December 30, 2014, along with the transfer of work and personnel from the Office of the Agricultural Futures Trading Commission (AFTC).

Bitstamp Back Online After Attack

Bitstamp was back online Friday after going down last week following an attack by hackers, its CEO announced. Nejc Kodrič said security measures have been upgraded.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX and FTIL up 1%, situation stasis in terms of resolution.


POLPX Extends & Upgrades Technology Agreement With Nasdaq

Polish Power Exchange (POLPX) will tap Nasdaq’s X-stream Trading technology platform, having been a Nasdaq customer since 2005. The new agreement will extend this relationship beyond 2020.

PLY: NASDAQ produces great technology and POLPX clearly love their vendor but given the ubiquity of Trayport in energy in the European marketplace, does this really make sense? Given their ambition to expand around the region, it strikes me POLPX are inviting a connectivity kerfuffle that doesn’t help their cause.

Virtu Finds New Home For Its Algorithms
John Detrixhe – Bloomberg

Virtu will join GMEX, scheduled for launch in April to make markets in the IRS Constant Maturity Future (“CMF”) which GMEX have pioneered.

BVB Pulls Data Off Vienna Feed (subscription)
Waters Technology

Bucharest SE (BVB) is no longer making its market data products available via Wiener Börse’s Alliance Data Highway (ADH) feed – which consolidates data from multiple local exchanges across Central and Eastern Europe – requiring clients to take prices directly from Bucharest or through the exchange’s existing network.

PLY: Vienna has assiduously tried to be a core hub for an Austro-Hungarian Exchange Empire but as is clear, the CEESEE group is becalmed – the banks clearly want to sell but the entity has little genuine business coherence (the Czech and Hungarian exchange subsidiaries have traction but the group overall is pretty stagnant). Meanwhile BvB is now run by former Warsaw CEO Ludwik Sobolewski who was always a touch, how might one put it, ‘immune’ to the charms of Vienna as he helped shape GPW as a key regional player to challenge and surpass the ‘Habsburg Boerse’ dream.

The key problem remains that for all the discussion of the “New Europe” the entire landscape remains, at best, an early adolescent but realistically still looks somewhat pre-pubescent.


Euro-Based Cocoa Futures To Struggle In Crowded Market
David Brough – Reuters

Last week ICE announced it will introduce a new euro cocoa product in April.

SSE To Allow Same-Day Trading For ETFs
Eduard Gismatullin – Bloomberg

FMC Wants Banks, FIIs Barred In Commodity Space
Ashish Rukhaiyar – Livemint

FMC doesn’t want foreign institutional investors (FIIs) and banks buying and selling Indian commodities futures. The regulator holds that allowing overseas entities to trade in commodities futures could mean too much flow of speculative capital, which may create imbalances in the market.

PLY: A good example of the strictly moronic practices at play in Indian, ahem, ‘markets.’ Restrictive socialism yearning for the “Hindu rate of growth” remains strong. For as long as it does, Indian markets will remain weak and the nation will fail to live up to anything like its potential.

DGCX Plans Yuan, Turkish Lira Futures In H2 2015
Siddesh Suresh Mayenkar – Gulf News

PLY: Building out the portfolio after the recent launch of Ruble, Yuan and Rand futures…

TOCOM To Suspend Trading Of Raw Sugar Futures
TOCOM: Raw Sugar Futures To Be Removed From The Nikkei-TOCOM Index

U.S. SEC Economists To Write Paper On Risky ETFs & Market Volatility
Sarah N. Lynch – Reuters

SEC Chief Economist Mark Flannery said he and colleagues had started working on a white paper about the extent to which ETFs “exacerbate financial volatility.”

The European ETF/ETP Industry Gathered A Record Level Of USD 62 Billion In Net New Assets In 2014

Career Paths

Bursa Malaysia appointed Tan Sri Amirsham Abdul Aziz public interest director and non-executive chairman effective March 1, 2015. Amirsham succeeds Tun Mohamed Dzaiddin Abdullah, whose term of appointment will expire on Feb 28.

Financial Calendar

This week

CME $2 annual variable dividend payment

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


Taiwan To Create New Crowdfunding Platform For Young Entrepreneurs
Midori Yoshimura – Crowdfund Insider

Taiwan’s Financial Supervisory Commission (FSC) plans to create a new crowdfunding platform, with a website active as soon as March 2015.

Other stories

Will 2015 Be A Happy New Year? (subscription)
Max Bowie – Waters Technology

Predictably, the New Year has brought a wave of new fees and policies from marketplaces, including a new minimum fee from Nasdaq for exchanges, ATS and broker-run trading platforms that use non-display market depth data from Nasdaq in their platforms. While the fee seems more aimed at standardizing how the exchange governs this type of usage rather than being an arbitrary price increase designed to raise revenues, no one likes the prospect of new costs—even though Nasdaq’s SEC filing says most of those affected will not pay higher fees as a result.

ESMA Publishes Updates To Q&As On AIFMD & Guidelines On ETFs & Other UCITS Issues

The 2 Q&As published contain updated questions and answers on the application of the AIFMD (page 16) and of the guidelines on ETFs and other UCITS issues (page 7).

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