January 14 2014

elb2DB makes another small acquisition, Yen LIBOR charges, CFTC go for MAT proposals, MCX-SX rights issue, Thai Exchange to be attacked (and we don’t mean MTFs)? New EUREX clearing members, LSE tweaks international offering, Anthony Belchambers to step down as FOA head…

All this and more in today’s Exchange Invest, happy scrolling:

Public Markets

Deutsche Börse Deepens Push Into Asia Commodities (subscription)
Financial Times

As reported yesterday, Deutsche Börse is deepening its push into commodities trading in Asia by taking a 52% stake in Cleartrade Exchange.

The deal highlights how small strategic assets are becoming highly sought-after by some of the world’s largest exchange groups as they target Asia for long-term growth, especially in commodities.

The Frankfurt-based group is planning to build a derivatives clearing house in Asia, based in Singapore, and two weeks ago confirmed it planned to buy a 5 per cent stake in Taifex, the Taiwanese futures exchange, as it expands in the region.

PLY: Amongst many points I could make, two points to ponder: “Small strategic assets are becoming highly sought after” but how will future assets of this kind grow if there is not a better means to help seed and fund their development? In essence, who has the appetite for funding the future of finance? (Answers by email welcome!).

The clearing house centre of Asia increasingly looks to be focussed on Singapore (which is also Australia’s loss).

Deutsche Börse Buys Impendium Systems
Automated Trader

Deutsche Börse Market Data + Services has acquired Impendium Systems, a London-based firm that deploys cloud-based software solutions to enable regulatory compliance in Europe, North America and Asia-Pacific.

The acquisition was completed on 10 January 2014 for an amount in the single digit million euro range and is part of Deutsche Börse’s growth strategy of integrating technology and data offerings for clients.

Press release here.

PLY: As per Andreas Preuss’s comment at FESE Berlin Convention last year that the future of DB cannot involve significant acquisitions of exchange assets, the business offering side is being built out further…

MAT All Clear But CFTC Leadership Shuffle Could Hit Market
The Trade

CFTC is expected to pass all ‘made available to trade’ (MAT) filings for new SEFs, but uncertainty around leadership could affect the initial period of mandatory trading on the new platforms.

Mandatory trading on SEFs is expected to occur for some IRS products from 16 February and CDS from 26 February after a 30-day grace period from the CFTC’s ruling on the submitted MAT filings.

PLY: MAT news is a key move forward for ex-OTC Markets as the most liquid swaps have been proposed for MAT with apparent broad industry agreement as commoditisation of swaps trading continues.

The issue of regulatory uncertainty is a key which clearly in their haste to grow regulation exponentially, none of the current crop of regulators seem to have considered (q.v. not just Gensler at CFTC but Commissioner Barnier whose legacy is increasingly looking like a mountain of undecided chaos for his successor to sort out).

LSE Revamps International Order Book
FTSE Global Markets

LSE has upgraded its International Order Book (IOB) in a move to bring the Global Depositary Receipt market in line with SETS order book.

PLY: Longer hours and various granular improvements. Useful.

Canada Debt-Clearing House Makes Changes To Bond-Data Product (subscription)
Wall Street Journal

Canada’s main debt-clearing house last month had to make changes to one of its bond-data products and publicize it more widely after big market participants raised concerns that some information was being used for profit at their expense.

TMX, the Canadian stock-market operator that owns the clearing house, said it didn’t break any rules and responded quickly to address the concerns.

PLY: A messy situation. Modestly above storm in a teacup level but nothing like a major problem given TMX Group have acted rapidly and I am inclined to give them the benefit of any doubt here. True some participants may not have been clearly marketed the product but who goes big league bond trading without doing due diligence and keeping an eye on market support/data products? There is a big difference between low key marketing and keeping things secret.

MCX-SX Gets Shareholders’ Nod For Rights Issue Of Shares
The Financial Express

MCX-SX received approval of institutional shareholders to raise funds through issue of shares to them on a proportionate basis.

PLY: The back door dilution of FTIL gets the go ahead, also providing funds to help develop MCX under its new management team.

BNP Paribas, Morgan Stanley Join Eurex OTC Clear
waters technology

BNP Paribas and Morgan Stanley have joined Eurex Clearing’s central counterparty service for OTC derivatives, Eurex OTC Clear, for IRS bringing the service up to 32 clearing members.

Press release here.

Clearstream And Eurex Clearing Enhance Collateral Service
Deutsche Borse

Eurex Clearing has extended its collateral services by providing direct connectivity into Clearstream’s tri-party collateral management service, known as the Global Liquidity Hub.

PLY: Very useful ongoing granular improvement as both Clearstream and Euroclear create their own versions of a highly efficient collateral service bringing the “Cinderella” of clearing to the ball at long last!

TriOptima Resumes Compression Of Cleared IRS With LCH.Clearnet Bringing Total Notional Eliminated To More Than $200 Trillion
MondoVisione

TriOptima today announced that it has resumed triReduce compression cycles within LCH.Clearnet’s SwapClear service, eliminating $16 trillion in notional principal with one EUR and one USD IRS cycle in the last month of 2013. This brings the cumulative total of notional compressed by TriOptima and SwapClear to $204 trillion.

PLY: When in doubt, we can always rely on TriOptima to help add to the collateral pool, cleanse swap lines and generally help participants sleep at night – keep up the excellent work!

Iberclear’s Mandate As Spanish Section Union Registry Manager Renewed
MondoVisione

BME subsidiary Iberclear, the Spanish CSD, has won a tender to continue performing its ongoing functions providing support to the National Administrator of the Spanish section of the EU Registry in relation to the EU trading scheme of greenhouse gas emission allowances and the Kyoto Protocol, for the period 2014-2017 with an option to extend it until 2019.

Sibex-Helex Collaboration Status
Sibex

Representatives of Sibex and the Helex Group will meet in Bucharest on 16-17th January 2014 to finalize the agreement that was initiated in 2013, regarding the cooperation between the two Exchange Groups.

PLY: Helex will be the de facto CCP as Romanian Clearing House didn’t seek to raise additional capital to comply with new EU rules. Quite what the game plan is to genuinely develop SIBEX appears opaque given another round of board changes recently and no clear strategy announced since Chairman/CEO Sima was dismissed and banned by the Romanian SEC for various indiscretions. SIBEX remains a great opportunity if a coherent plan is generated.

Private Markets

Thai Protesters Turn Focus to Stock Exchange (subscription)
Wall Street Journal

After turning central Bangkok into a flag-waving sea of protest Monday, antigovernment activists now say they are preparing to take their campaign to the next level by seizing Thailand’s stock exchange.

The protesters’ drive to force Prime Minister Yingluck Shinawatra from office has been marked by a series of escalating protests, each more ambitious than the last.

PLY: As a symbol of freedom, stock exchanges are a beacon for protest. Now the horribly convoluted quasi-oligarchical clashes in Thailand look to be headed towards the stock exchange. A mess for markets, a nightmare for investors and not serving the interests of Thailand’s development.

Virtu’s ‘Vinnie’ Steps Onto Center Ice (subscription)
Wall Street Journal

Through a blend of West Point rigor and Wall Street bravura, Vincent Viola pulled off a rare maneuver: amassing a billion-dollar fortune while staying largely beneath the radar.

That is changing fast, as Mr. Viola is set to take his trading firm public, casting a spotlight on his management style and rise to Wall Street power broker.

PLY: Good luck to Vinnie Viola as Virtu prospers…It will make an interesting IPO stock.

KRX Wins Bid To Host Nation’s Carbon Trading
Reuters

KRX will host trading under South Korea’s emissions trading scheme, set to become the world’s second biggest when it launches on Jan. 1, 2015, the Ministry of Environment said Monday, after defeating a rival bid from the Korea Power Exchange.

Nepse To Install Digital Signage
The Himalayan Times

Nepal SE (Nepse) will soon install digital signage that provides real-time trading information at various locations across the capital to lure more Nepalis towards the stock market.

HKMEx Chair Cheung Ordered To Repay HK$33.7m (USD 4.34 mln) Loan
The Standard

The chairman of the failed HKMEx, Barry Cheung Chun-yuen, was ordered by the High Court to repay a loan of HK$33.7 mln (USD 4.34 mln) with interest to a financial firm as well as HK$12,000 (USD 1 548) litigation costs.

Increased Institutional Equities Flow Drives Liquidnet’s Performance Globally In 2013
MondoVisione

Liquidnet, the global institutional trading network, announced strong performance globally for 2013.

PLY: As a Non-Executive Director of Liquidnet Europe clearly I am delighted with these excellent numbers and particularly the performance in Europe. Congratulations to Mark Pumfrey on his first year running the European business and all the Liquidnet team world-wide who contributed to these excellent results under the stewardship of founder, CEO and Key Man, Seth Merrin.

Bitcoin And Its Imitators: A Marketplace Worth $12bln
Boston Globe

Welcome to the weird, wild world of cybercurrencies, where Bitcoin is king and Catcoin, BBQcoin, Sexcoin, Coinye, and HoboNickels form the palace court. (Well, maybe not HoboNickels.) There are now more than 70 Bitcoin alternatives, according to one list, a financial marketplace worth more than $12 billion.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX down 4% and FTIL off 2% as we have the weekly default of NSEL while markets retrace recent gains following the delay of the ‘fit & proper’ hearing by SEBI to allow for court proceedings.

FTIL’s Next SEBI Hearing On February 12
Business Standard

SEBI has agreed to push FTIL’s hearing to February 12 as another appeal filed by the company against the FMC ‘fit & proper’ order is pending before the Bombay High Court (HC).

EOW Summons Three Brokerages In NSEL Case
Livemint

The economic offences wing (EOW) of the Mumbai police on Monday said it had summoned representatives of three brokerages to appear before the agency within the next three days in connection with the payment crisis at NSEL: Nirmal Bang Commodities Ltd., Ventura Capital Ltd.and Best Deal Commodities Ltd.

The agency is also planning to summon representatives of at least 3 other brokerages—Anand Rathi Commodities Ltd., Motilal Oswal Commodities Broker Pvt. Ltd. and Geojit Comtrade, saying it had found discrepancies in the books of accounts of these brokers.

Will The EOW’s ‘Strategy’ Pay Off?
Business Standard

Companies approaching the market for IPOs file documents that run into hundreds of pages. Though the purpose of these is disclosure, key and relevant information lies buried in mountains of trivialities dumped by the company. While some may do so inadvertently, some use this style of disclosure to conceal rather than reveal.

This could also be true of charge sheets running into thousands of pages. The Economic Offences Wing (EOW) of the Mumbai police has filed a 9,000-odd page charge sheet in NSEL case. A vast majority of investors are left feeling it is not seeing the wood for the trees. During the course of its investigations, the EOW collected 24 terabytes of data from eight laptops, 45 hard disks, seven pen drives, a desk top and an unspecified number of compact discs and DVDs.

PLY: N Sundaresha Subramanian details a point I mentioned in passing last week. The sheer complexity of these case files may yet prove an impediment to administering justice… It would be a pity to see the hard work of EOW not end up with the results their diligence suggests.

CBI Likely To Seek Licensing Records Of NSEL From States
Business Standard

The Central Bureau of Investigation (CBI) is likely to seek from the state governments records relating to licences given to NSEL as part of its inquiry focussing on licensing norms allegedly violated by the bourse.

NIF May Turn Co-Plaintiff In Modern India Suit Against NSEL
The Economic Times

National Spot Exchange Investors Forum (NIF) may join a representative suit (similar to a class action) as co-plaintiffs filed by Modern India against NSEL and its promoter, among others, if the Bombay High Court admits it on January 15.

Technology

TCS In 5-year Deal With United SE
The Hindu Business Line

The United Stock Exchange (USE) has signed a five-year contract to Tata Consultancy Services for deploying and managing a new online trading system as part of its quest to turn profitable next fiscal.

PLY: TCS now have an end to end system for exchanges and market platforms and are keen to have a reference site. This also has ramifications for FTIL. Presumably this is also motivation Mahindra to acquire appropriate assets to operate in the space aka FTIL.

Trading On Customer Experience
CIO

PLY: Engaging interview with ASX Group CIO, Tim Thurman, who follows in a long line of vaunted occupants of the position such as Rory Collins (first man to oversee transition of an open outcry legacy exchange to electronic markets and subsequent CIOs such as Mike Aikins who now runs technology for ASX competitor Chi-X Australia).

S&P Cap IQ Adds SGX Data To Low-Latency Feed
waters technology

After extending its QuantFEED and QuantLINK solutions through HKEx Orion program, as reported on January 10th, S&P Capital IQ Real-Time Solutions (formerly French low-latency data vendor QuantHouse, which S&P acquired in 2012) has added SGX to its QuantFeed consolidated data feed and QuantLink fiber-optic network.

AQR Capital Management Selects Fidessa Sentinel
waters technology

Connecticut-based AQR Capital Management has implemented Fidessa’s Sentinel pre- and post-trade solution to automate its trade compliance management across all business lines.

Traiana Selects Duco Reconciliation Tech Ahead Of SEF Regs
Automated Trader

Traiana, the provider of pre-trade risk and post-trade processing solutions, has launched a new service to reconcile client reference data ahead of the introduction of mandatory electronic trading of swaps on SEFs.

Using technology provided by Duco the service reconciles reference data from CCPs, SEFs, FCMs, buy-side firms and swap data repositories. It is currently being rolled out to all Harmony CreditLink and CCP Connect customers for rates and CDS.

Exegy Readies Software-Based Trading Application Platform
waters technology

St. Louis, Mo.-based hardware ticker plant vendor Exegy is preparing to launch a lightweight version of its ticker plant, dubbed Trading Application Platform (TAP), that will enable users to quickly deploy data and trading applications

Dalian Commodity Exchange Opens Public Wechat Platform
MondoVisione

DCE officially opened a public Wechat platform January 9.

Career Paths

Anthony Belchambers has announced his intention to step down as CEO of the Futures and Options Association (FOA). He will, however, stay on as Special Advisor to the Board.

Anthony will be succeeded by Simon Puleston Jones, who joins the FOA as CEO on 10 March 2014 from Barclays’ Investment Bank (previously known as Barclays Capital).

FOA press release here.

PLY: Congratulations to Anthony on an incredibly successful (and lengthy!) tenure as CEO of FOA. In recent years the broad industry body has been somewhat diminished by becoming a de facto bank lobbying organisation. More recently it became a quasi-chattel of the FIA, itself now a bank dominated organisation which formerly represented futures brokers (when a great many were independent). The industry is changing but industry bodies seem to be largely clustered with the pure sell side which is not healthy for a broad debate on the future. Nevertheless, good luck Anthony, yours has been a very beneficial tenure for the industry and I wish you every success in the future.

Marianne Brown is to leave as CEO of Omgeo, after seven years following its takeover by DTCC.

Ms Brown, a former NYSE executive, will be replaced on February 21 by Paula Sausville Arthus, a DTCC executive who has been on Omgeo’s board for five years.

PLY: All the best to Paula Sausville Arthus and Marianne Brown for the future.

Financial Calendar

Today
CME $2.60 annual variable dividend payment

Friday
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

Interactive Brokers Group SVP Milan Galik sold 2,000 shares Thursday, January 9th at an average price of $23.73 (bargain $47,460.00). He now owns 839,517 shares. Mr Galik’s regular sales are chronicled on this specific page.

Analyst Notes

Credit Suisse Cut Their Price Target On Betfair From GBX 1,185 To GBX 1,085 – “Neutral” Rating
ICAP Downgraded At Goldman Sachs To “Sell” – Currently GBX 440 Price Objective Up From GBX 400
Tullett Prebon Downgraded At Goldman Sachs To “Neutral” – Currently GBX 430 price objective, Up From Previous Price Objective Of GBX 410

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

Denmark Establishes Danish Crowdfunding Association
Crowdfund Insider

The Danish Crowdfunding Association has been launched by two entrepreneurs Michael Eis, founder of booomerang.dk and equity crowdfunding platform CrowdInvest.dk, along with Frederik Ploug Søgaard, founder of FinanceLab and MarketingLab.

PLY: Good to see Denmark creating a national crowdfunding association.

Other stories

HKEx CEO: “We Are Not Ready For China’s Boom”
Gulf Business
Hong Kong Needs to Lift its Game, Says Li (subscription)
Wall Street Journal

“Hong Kong is a major beneficiary of China opening up, but the risk is that China changes too fast,” HKEx CEO Charles Li said.

As China inexorably marches on as the world’s second largest economy, experts have called for Hong Kong to deepen its financial capabilities.

“The opportunity is massive and Hong Kong is not ready. We have a narrow window and China needs us. Unless we can provide a relevant value proposition, we could be surpassed by other financial centres.”

PLY: Affirmative. Financial centres aren’t the direct agenda in this focussed newsletter but it must be noted there is a lot of potential for flux in this area which will impact exchanges and the dynamics of financial centres are not especially well understood.

Three Former Rabobank Traders Charged With Fraud (subscription)
Wall Street Journal

The U.S. Justice Department on Monday charged three former Rabobank derivatives traders (Paul Robson of the U.K., Paul Thompson of Australia and Tetsuya Motomura of Japan) with fraud in connection with their alleged manipulation of Yen LIBOR

NASDAQ OMX Requires ABN AMRO To Pay A Fine Of SEK 200.000 (USD 30.7k)
NASDAQ OMX

The Disciplinary Committee has issued a ruling in which ABN Amro NV has been fined SEK 200.000 (USD 30.7k).

On the morning of August 28, 2013 the SEB A share opened significantly lower than the previous day, and the Exchange subsequently decided to cancel all trades that had taken place in the opening cross.

PLY: ABN Amro pays fine for sponsored access client whose HFT algorithms went awry…

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