January 13 2014


A full weekend means lots of stories with Cleartrade selling a majority stake to EEX while (no surprise!) NYSE Tech is for sale. NYSE bites bullet on entire MCX stake for clear loss. SEBI isn’t interventionist claims chief, SGX eyeing more Indian markets, LIBOR reforms mooted, NYSE ATG delayed, ASX pushes protectionist agenda (again!), paperless trade for US equities mooted (again!), hiFX for sale…

Trust me, it will pay to scroll today, for both headlines and various insights, welcome to a fascinating Monday of Exchange Invest analysis:

Public Markets

EEX Acquires Majority Stake In CLTX

EEX has become majority shareholder, with a 52 % holding in Cleartrade Exchange (CLTX), financed by EEX book cash. This acquisition was agreed in Q4 2013 with all regulatory approval completed in December.

PLY: Good news for Cleartrade after INTL FCStone dropped the plan to buy the Asian online exchange in July 2013 and resumed it in October 2013 but EEX has scooped this interesting asset. Plaudits to EEX, good luck to making Cleartrade even more successful.

ICE Hiring Evercore To Sell NYSE Technology Divisions

ICE hired Evercore Partners to help break up the NYSE Technologies business.

Nyfix, SuperFeed, Wombat and Metabit will be offered to potential buyers through presentations in the second half of this month when ICE may approach potential suitors including Fidessa, ITG, KCG Holdings, Interactive Data and Bloomberg LP.

PLY: Utterly unsurprising news, even though within various NYSE Tech arms there has been a spirit of denial that a break-up could happen. There are some good assets here amongst the vast establishment spend. Multiple ramifications, time today for just one: could a break up of NYSE Technologies encourage a break-up of Euronext and thus help Amsterdam and Brussels break away from protectionist Parisian government influence?

NYSE Euronext Sells Entire MCX Stake In December Quarter
Business Standard

Global exchange giant NYSE Euronext has sold its entire of around 5% stake in MCX for about Rs 100 crore (USD 16.25 mln) during Q4.

NYSE, through its affiliate Euronext NV bought 2.4 million shares (4.73%) of MCX for about Rs 240 crore ($55 mln or $22.8 apiece) in June 2008.

Euronext NV looks to have sold these shares at between between Rs 400-Rs 500 per share. The average price of MCX for October-December quarter was around Rs 457 (USD 7.43).

(Euronext N V sold 565,000 shares of MCX at Rs 427.02 on the NSE, as reported on December 20th).

PLY: Overall we reckon NYSE lost something like 38.75 million dollars on this trade. Will there be any repercussions for the management responsible for this fiasco?

Nasdaq Briefly Halts Some Options Trading (subscription)
Wall Street Journal

Nasdaq OMX briefly halted trading at one of its three options exchanges Friday due to a computer-server problem which halted Nasdaq Options Market for 18 minutes. Trading reopened at 12 p.m. EST.

The issue was traced to problems with processing incoming data from a benchmark data feed that supplies options prices to traders.

Fewer Exchange Mergers, Better Trading Opportunities Possible In 2014
Options City

The global exchange outlook for 2014 could mean fewer exchange mergers, and exchange spin-offs as the year unfolds.

Additionally, heightened volatility could mean this year will be beneficial for options traders as debates over the tapering of the Federal Reserve’s quantitative easing program grow, said Patrick Young, executive director of advisory firm DV Advisors and publisher of the Exchange Invest newsletter.

After last year saw some merger activity in exchanges, with the NYSE-ICE tie up being the best known, this year will be quieter on that front, Young said.

PLY: Conflict of interest issues preclude me from applauding this commentator for his pithy insights.

NYSE, ATG Brazilian Equities Exchange Pushes Back Launch (subscription)
Wall Street Journal

A joint venture of NYSE Euronext and Americas Trading Group has pushed back its deadline for launching an equities trading exchange in Brazil as the startup grapples with the task of breaking a monopoly that has lasted for more than a decade.

PLY: Americas Trading System Brasil is now aiming for Q4 launch as it finds it more difficult to break into the the BM&F monopoly while ICE has interests in other assets to get into the country. Brazil has about 600,000 investor accounts for a population of nearly 200 million which compares poorly with, say, Poland which has about 1.6 million client accounts for less than 40 million people. Note that NYSE Technologies actually holds the 20% NYSE stake in this venture.

ASX Managed Funds Services Gets ASIC Nod
Financial Standard

ASX has cleared the most significant hurdle on the road to its ‘mFund Settlement Service’ – the third incarnation of AQUA II – after ASIC gave it the go-ahead.

Now ASX must await approval from the Australian Transaction Reports and Analysis Centre (AUSTRAC) before it can go live.

The mFund Settlement Service, (previously: ASX Managed Fund Service), will streamline retail access to unlisted funds.

ASX Warns Inquiry Against Outsourcing Markets To Other Centres (subscription)
The Australian

ASX has told the first major inquiry into Australia’s financial system in more than 15 years that explicit measures and mandates could be required to ensure the nation does not one day find its markets have been “outsourced to overseas”.

In a submission to the draft terms of reference for the “Son of Wallis” inquiry chaired by former Future Fund chairman David Murray, ASX MD and CEO Elmer Funke Kupper has also cautioned against any temptation to “copy” the market structures and business models that operate in the US and Europe, saying the business model for the exchange here is more closely aligned to those in Asia.

PLY: ASX is increasingly placing itself on the wrong side of history, remaining curiously stubborn while heading down the well-trodden incumbent monopoly path of being eaten alive by competitive capitalism. Australia is at peril if it ignores the opportunity to once again lead the region in capital markets infrastructure, as opposed to permitting ASX’s reactionary protectionist game which can only harm Antipodean prosperity.

Papering Walls With Stock Imperiled As Bourses Mull Digital-Only

The paper stock certificate, a relic of the pre-electronic age, may finally be on its way out of the U.S.

ICE, and Nasdaq are considering a ban on newly public U.S. companies issuing paper shares, according to DTCC.

PLY: Bravo. Paperless settlement is the way to go.

Taking Steps To Rebuild Libor (subscription)
Financial News
Libor Blueprint Talks Consider Data Use (subscription)
Financial News

The reform of critical financial benchmarks will be a hot topic this year.

ICE is exploring ways of ensuring data on actual transactions is used in submissions for the new-look LIBOR as part of its new role as the benchmark’s administrator.

PLY: Clearly using real trade data is a useful fillip although some banks may not be averse to trading small clips to skew benchmarks but it is a step forward.

Private Markets

Financial Tech Firm HiFX Looks For £100m Sale
The Telegraph

UK Money transfer firm HiFX has private equity groups fighting for the business in a sale process run by PwC which may value it at £100m (USD 60m), as interest in technology-backed financial services companies increases.

Windsor-based HiFX was started by Shaun Taylor, Dan Butcher and Matthew Knowles set up in 1998 to compete with banks with the backing of the late drinks tycoon John Halewood.

The company now provides the Post Office’s international payments service.

Romanian Opens Bitcoin Exchange Platform
Romania Insider

Horea Vuscan, vicepresident of the Green Party from the city of Oradea has created btcxchange.ro and hopes to be able to move Bitcoin trading ‘to street level too’, for various payments. He has pledged to keep it fee-free this year.

‘Deep Cold Storage’ Vault Created For Virtual Currency Bitcoin
Russia Today

The Elliptic Vault is offering so-called “deep cold storage” to protect the cyber money from hack attacks.

Special Section: FTI, NSEL, India at the Crossroads

PLY: FTIL up 5%, MCX +3.5% as SEBI FTIL ‘fit & proper’ hearings are ongoing today, albeit probably inconclusively for now as various legal avenues remain open to FTIL. In this case uncertainty seems to be improving FTIL’s valuation, perhaps the market has priced in what it feels to be an inevitable ban and forced sale?

HC To Hear FTIL’s Plea Against ‘Fit And Proper’ Order On Feb 7
Business Standard

The Bombay High Court has shifted hearing of the FTIL case to the main bench from a supplementary board earlier. Pending before the court of Justice A S Oka, the case is scheduled for hearing on February 7. FTIL, however, is looking to advance the hearing amid fear of further regulatory action.

SEBI To Hear FTIL Today On ‘Fit & Proper’ Tag
The Financial Express

FTIL will face a tough task on Monday convincing the capital markets regulator that it is a ‘fit & proper’ entity to hold a stake in MCX-SX.

The listed entity’s problems have been compounded by Bombay High Court’s has deferred hearing of its appeal.

According to securities market lawyers, if courts grant interim relief to FTIL, SEBI will have to wait for the outcome of the legal battle as the actions initiated by the capital market regulator are entirely based on the order passed by FMC, which FTIL has challenged.

PLY: Legal delays will always be an issue in such processes as FTIL are doubtless determined to exhaust every possible process before they accept what feels from afar rather like an inevitable fate.

FTIL Questions Deadline For Stake Dilution In Bourse
The Times of India

FTIL has told the country’s largest commodity exchange that it should not impose a deadline for equity dilution and wait for the court verdict since the FMC’s order has been challenged.

Licensing Issues Of NSEL Come Under CBI Scanner
Business Standard

The licensing issues of NSEL have come under the scanner on CBI which is carrying out an inquiry into alleged violations by the bourse facing multiple probes into financial irregularities.

The sources said the agency was contemplating to close the enquiry because of an ongoing probe by the Economic Offences Wing of the Mumbai Police but during the course of its enquiry it found some leads which prompted it to dig deeper into the issue.

Modern India And 3 Others File Representative Suit
Business Standard

Four companies – Modern India, Shree Rani Sati Investment Finance, Modern Derivatives & Commodities and F Pudumjee Investments – have filed a representative suit in the Bombay High Court against NSEL, FTIL and 36 others for the recovery of money in the Rs 5,600-crore (USD 910 mln) scam.

The petitioners appealed to the court to appoint the Commissioner for Taking Accounts to ascertain the loss incurred by them as well as other investors in NSEL and want their money to be distributed to them by the Commissioner for Taking Accounts after ascertaining the loss. The high court has convened the hearing on January 15.


Dalian Commodity Exchange “Handheld Options” App Goes On Line

On January 10, via its official Wechat subscription account DCE has launched a mobile phone App to help develop the options market.


SGX Mulls More India-Based Products
Business Standard

SGX plans to launch more India-based products to provide opportunities for global investors interested in tapping the Indian market following an encouraging response for SGX-Nifty futures & options.

PLY: Story quotes the charming SGX SVP Rama Pillai and is entirely logical. Key issues are raised here; amongst them the danger for India of parochial regulation on multiple fronts. Having faced down Japan over NIkkei futures in the past I doubt the progressive city state marketplace will have any qualms in exploiting any inadequacy of internationalism within the sub-continent.

LME Looking To Launch U.S. Aluminum Premium Contract

LME is considering launching a U.S. aluminum premium contract, expanding its most-traded product after years of criticism over high physical prices.

The contract would reflect the cash premium that is paid on top of the LME benchmark for physical delivery, Matt Chamberlain, head of business development, told Reuters.

PLY: A logical development.

Career Paths

Mats Wilhelmsson has set up his own consultancy WW Konsult while remaining a minority shareholder and non-executive director with trade surveillance system Scila which he co-founded.

PLY: I wish Mats every success, one of the visionary gentlemen in our industry.

Nasdaq OMX‘s Eric Noll, who oversaw the exchange’s U.S. trading business during a glitch-prone reign, has left to join ConvergEx Group as president, effective immediately. First reported November 26th.

CALPERS CIO Joe Dear is taking leave to resume cancer treatment, California’s $282 billion pension fund for public employees said on Thursday. Senior Investment Officer for real assets Ted Eliopoulos will serve as acting finance chief, Calpers spokesman Brad Pacheco said.

SEC announced that Myron Marlin will be leaving the SEC after nearly five years as communications director.

Raymond James Financial said that Chet Helck, the chief executive of its global private client group, will retire in February.

Scott Curtis, president of Raymond James Financial Services and its 3,200 independent contractors, and Tash Elwyn, president of Raymond James & Associates and its 2,400 directly employed brokers, will join the firm’s executive committee, pending board approval in February.

‘Data intelligence’ specialist Potentiate has appointed Tim Pickard as Director of Visualization and Analytics.

Potentiate was launched in 2010 by three Australian research and technology businesses: Infotools Australia, panel management and survey deployment specialist Plenari and online sample firm SampleWorx.

Pickard joins from NASDAQ OMX where he led the Asia Pacific operations team, providing investor relations, PR and multimedia solutions to a large number of listed companies in Australia and Asia.

Nomura appointed Todd Sandoz as global head of execution services and equity trading.

Sandoz joins from Credit Suisse, where he spent 17 years and was most recently head of global foreign exchange and short-term interest rates trading in London.

Saxo Bank has hired Matteo Cassina as its global head of institutional business. Cassina will be based at the firm’s London office.

Cassina, who has served as the head of Prime Access SM for Goldman Sachs and head of Total Trader for Merrill Lynch, will report to the co-chief executive offices and co-founders of the bank, Kim Fournais and Lars Seier Christensen.

RBC Wealth Management appointed Tim Houghton as head of business development for British Isles & Caribbean.

NIKKO Asset Management appointed David Semaya as chairman. Semaya will join the company as non-executive chairman effective April 1 and is expected to become executive chairman on Sept. 1.

ORIEL Securities announced a number of senior appointments. Paul Morris joined the corporate advisory team. James Grace joined Oriel following 18 years as a director in corporate finance and part of the senior management team at Investec Investment Banking & Securities. Alan Carter and John Cahill also joined from Investec where they were members of the UK real estate research team. Bill Barnard joined from Societe Generale where he was a director covering specialty and other finance including consumer finance, listed private equity and inter-dealer brokers.

ALQUITY Investment Management appointed Mike Sell as head of Asian investments.

Financial Calendar

CME $2.60 annual variable dividend payment

CBOE $0.50 special cash dividend payment

Next week
Interactive Brokers Q4 financial results
SGX Q2 Results

This month
ITG Q4 2013 financial results on Thursday, January 30, 2014

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

Share Notes

Following his sale of 1,783 shares at an average price of $224.60 (bargain $400,461) reported January 7th NYSE Euronext COO Thomas Farley sold 8,268 shares Wednesday, January 8th at an average price of $227.01 (bargain $1,876,918.68). He know now owns 5,137 shares.

Interactive Brokers Group Chairman Earl Nemser sold 15,379 shares Wednesday, January 8th at an average price of $23.83 (bargain $366,481.57). Mr. Nemser’s regular sales are chronicled on this specific page.

Interactive Brokers Group CFO Paul Jonathan Brody sold 8,550 shares Wednesday, January 8th at an average price of $23.83 (bargain $203,746.50). Mr. Brody’s regular sales are chronicled on this specific page.


FESE Response To The Consultation On Crowdfunding In The EU

PLY: An interesting, proportionate response from FESE seeking a level playing field which does not discriminate against exchanges and also encourages IPOs. Neither concept ought to worry crowdfunding exponents as they anyway will want to encourage development of companies to public platforms when pertinent (FESE are fighting rearguard actions against the PE industry here who are perceived to have the ear of the Eurocracy). The Prospectus Directive issue is a thorny one insofar as crowdfunding requires clear, proportionate rules which permit cheap product delivery – if lawyers/accountants and so forth have to be involved in writing crowdfunding documentation it will kill the industry in Europe.

Other stories

SEBI Is Not An Activist: Sinha
The Hindu Business Line

Asserting that securing the trust of investors was crucial to sustain capital market growth, SEBI Chairman U.K. Sinha rued on Saturday that recent scams and market misconduct had eroded investor trust.

Sinha also said criticism that SEBI was playing an “activist” role in disciplining errant businesses was unfounded as the regulator was only looking to build long-term trust in Indian markets.

PLY: I fear Mr Sinha doth protest too much. SEBI strikes me as the very epitome of an activist regulator which appears to intervene, micromanage and politic behind the scenes as well as through various direct / committee control initiatives (Jalan etc) which themselves drain market confidence. Investor trust is crucial as Mr Sinha rightly asserts. Nevertheless, SEBI micromanagement is not the way to go, nor is manipulating competition practice. SEBI needs to prove that it is a wise, hands off regulator day to day while maintaining a level playing field to help develop India’s huge (still stifled) market opportunity.

Introduction Of New Price Caps In The N2EX Auction – Effective 15th January
Nasdaq OMX

N2EX is going to introduce new minimum and maximum price caps of £-500 and £3000 in the N2EX auction, replacing the current minimum and maximum caps of £0 and £2000. This will take effect from the 15th January 2014 for delivery on the 16th January 2014.

SEBI To Soon Come Out With Norms On Corporate Governance Model
The Economic Times

SEBI said it will soon come out with detail framework on corporate governance structure that could also include a number of directorship a person can hold as an independent director.

SEBI in its next board meeting will take up a proposal of new corporate governance norms for approval and after the board’ nod it will come out with detailed guidelines.

PLY: Some useful proportional “guidelines” will be welcome to improve Indian corporate governance, good luck to SEBI creating a useful but not overly prescriptive framework.

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