January 14 2015

elb2

$5.60 Howard Lutnick applies what might be called the ‘Sprecher squeeze’ technique by upping the ante for GFI on CME but really we know the whole play is a splendid power play with Mickey Gooch as the man in limbo (at best). I have long thought IDBs provide terrific potential for reality tv but this merger melodrama takes us into a whole new realm. Those who can attend January 27th – bring popcorn and watch the battle of wits unfold… For today it’s a question of 15 more cents of duress applied by the BGC deal machine.

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BSE’s Christmas Wishes – Is Indian Exchange Shareholding Reform Looming?
On Bonds & SEFs
The Bond Bubble
Vale: Ronald Li
Postscript: Ronald Li Dealing Until The End
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Public Markets

BGC Boosts Offer To $5.60 For GFI As Vote On CME Takeover Approaches
Zeke Faux – Bloomberg

Howard Lutnick’s BGC Partners boosted its offer for GFI Group by 2.8% as he seeks to derail a takeover of the interdealer broker by CME.

BGC sent a letter to GFI offering $5.60 a share in cash, 15 cents more than its last proposal, New York-based BGC said in a regulatory filing. BGC said it would advance $61 million to pay any termination fees due to CME. GFI’s shareholders are scheduled to vote on CME’s offer of $5.25 a share on Jan. 27.

Dealpolitik: Where Was The Good Governance At GFI Group?
Ronald Barusch – Wall Street Journal

It looks like GFI’s board and management haven’t been a model of good corporate governance on this deal.

PLY: (for the background brief, see EI Premium: The bidding war for GFI) A highly prescient article, expanding on my recent remarks (e.g. last week and this week too). Mr Barusch provides an excellent outline of questions arising which really do not show the GFI board & management in the best possible light. It must be a tad embarrassing for CME to be in this process in some respects (not that they are in any way responsible for any GFI operation – yet – ) clearly it is always a stress to see corporate governance being left open to question. Moreover given that BGC have a proven track record of litigation…speaking of which:

Tullett Prebon Jumps As BGC To Pay $100 Million For Poaching
Zeke Faux – Bloomberg

Tullett Prebon climbed as much as 9.1% after BGC Partners agreed to pay $100 million to resolve claims of broker poaching. The agreement settles all outstanding litigation with New York-based BGC, London-based Tullett Prebon said in a statement.

PLY: Victory for TNT but at a reduced amount from the original claim for a cool billion amidst all manner of racketeering accusations. A one year hiatus in hiring from each other has been agreed. Now that may help allay fears of GFI management (concerned about their status according to the more senior GFI management – hmmm, I doubt there was a control group for this question) but then again the agreement includes GFI. So it means the GFI management would be in one way secure but at the same time, in the wondrously promiscuous open door approach to job hopping standard to IDBs, it also means GFI have a narrower window of potential career moves (well barring taxi driving that traditional standby).

SEC Puts Exchanges On Notice About Upcoming Examinations
Reuters
SEC Announces 2015 Examination Priorities – Priorities Focus On Protecting Retail Investors, Assessing Market-Wide Risks & Using Data Analytics
MondoVisione

SEC sent letters to stock exchange officials on Tuesday, alerting them about the agency’s plans to conduct a sweeping series of compliance examinations in 2015.

PLY: Amongst other issues, it will be interesting to see what SEC makes of what they seem to be implying as “alternative’ products entering the mainstream – it’s clear the digital era retail investor has much more choice (even before the SEC finally produce their long overdue crowdfunding rules) and it is important to see that regulators move towards education and risk management as opposed to the broad clunking fist of investor protection which is not helping anybody, least of all progressive users.

SGX Unveils Campaign To Help Investors Benefit From Smaller Board Lots
MondoVisione
Smaller Board Lots A Draw For Young Investors: SGX
Tan Weizhen – Today Online

The number of young adults opening Central Depository (CDP) accounts has surged over the last several years and SGX hopes its move to reduce board lot sizes to 100 shares from the current 1,000 shares will capture this investor segment and help to revitalise the moribund stock market.

ICAP’s EBS & SGX Collaborate On Asian FX Initiatives
MondoVisione

ICAP and SGX announced a strategic partnership to boost the growing Asian currency market. EBS, ICAP’s market-leading electronic FX business, and SGX will collaborate and develop a new range of Asian currency products and services that complement the FX OTC and futures markets in Asia.

Qatar Exchange Keen To Offer Dual Listing For German Cos
Gulf News

Qatar Exchange said it is keen to offer dual listing for German companies to attract institutional investors as it welcomed a delegation led by DB1 Deputy CEO Andreas Preuss.

Bold Action Needed On Capital Markets Union (subscription)
Simon Lewis – Financial News

The EU is facing a growth crisis: output is flat, unemployment remains high and investment is falling. Even if, as widely expected, the ECB soon tries full-on quantitative easing, it will not be enough.

PLY: Locked behind the paywall, I can’t read this but presumably it says the obvious stuff: abandon the Euro (deploy rat/sinking ship analogy as required), ditch the daft subsidy regimes which skew free enterprise, make it easier to employ people and generally get out of every entrepreneur’s way instead of stoking a hideously inept corporate socialist bureaucracy. Oh abandoning most of the current slew of rather counterproductive EU capital markets regulation would be handy too.

Maybe I have slightly the wrong slant but there is clearly no lack of need to change the failing European ‘experiment.’

Private Markets

DRW To Acquire Smaller Rival Chopper Trading (subscription)
Gregory Meyer – Financial Times

DRW Trading has agreed to acquire smaller rival Chopper Trading in a deal that will fuse two of the best-known companies in Chicago’s proprietary trading community.

Dubai Mercantile Exchange Chief Charts A Course East For Prosperity
Frank Kane – The National

Interesting interview with DME CEO Christopher Fix whose strategy centred on Oman crude seems to be working (a good example of my ongoing client discussions concerning broadening benchmarks in the digital age).

Special Section: FTI, NSEL, India at the Crossroads

PLY: Slight down day, circa 1% off in both MCX and FTIL.

Products

CBOE Begins Disseminating Volatility Index Values On Three Of CME’s FX Options Contracts: Dollar/Euro, Dollar/BP And Dollar/Yen
Market Watch

White Paper On Fund Use Of Options In Portfolio Management Released
CBOE

Career Paths

OTC Markets Group hired former NYSE executive Robert Power as its new corporate client relationship director.

Manoj Narang, the co-founder of high-frequency trader Tradeworx Inc. and one of the staunchest defenders of today’s computer-accelerated American equity market, has left the firm.

Veteran Goldman Sachs banker Ravi Singh has joined the new electronic bond trading venture TruMid as President.

Calypso Technology appointed Venkatesh Ramasamy as SVP for Business Services and Utilities.

Board Dust-Up At U.S. Futures Overseer Said To Draw CFTC Review
Silla Brush – Bloomberg

PLY: When it comes to psephological excitement, the US NFA board hustings excites a few people around the Loop while the world yawns. Well most years anyway. This year we have a cat fight extraordinaire as James Koutoulas has alleged “that the group tried to cover up the fact that it never nominated a slate of directors who joined the board last year. Koutoulas said the market’s main federal regulator, CFTC, is investigating his claims after he filed a whistleblower complaint.”

NFA Chairman Chris Hehmeyer says it isn’t true. Water coolers around Chicago may be aquiver but so far traction for the allegations outside the US futures industry has been limited.

SEC Names Wall St. Heavyweights To New Rules Advisory Panel
Sarah N. Lynch – Reuters

U.S. securities regulators have tapped a list of well-known stock market experts to serve on a new advisory panel tasked with helping shape rules affecting high-speed traders and dark pools.

Experts tapped for SEC’s panel include BATS Global Markets CEO Joe Ratterman, Convergex CEO Eric Noll, formerly of Nasdaq, and Joe Mecane, a market structure expert who last year departed NYSE and now works as a MD for Barclays PLC.

SEC said the 17-member panel will “provide a formal mechanism” for the agency to receive advice on a number of areas.

Members of the Equity Market Structure Advisory Committee are:

Matthew Andresen, Co-Chief Executive Officer, Headlands Technologies LLC
Reginald Browne, Senior Managing Director & Global Co-Head, ETF Group, Cantor Fitzgerald & Co.
Kevin Cronin, Global Head of Trading, Invesco Ltd.
Brad Katsuyama, President and CEO, IEX Group Inc.
Ted Kaufman, Professor, Duke University Law School and former U.S. Senator from Delaware
Richard Ketchum, Chairman and CEO, FINRA
Manisha Kimmel, Managing Director, Financial Information Forum
Mehmet Kinak, Vice President and Head of Global Equity Market Structure and Electronic Trading, T.Rowe Price Group
Andrew Lo, Charles E. and Susan T. Harris Professor of Finance and Director, Laboratory for Financial Engineering, MIT Sloan School of Management and Chairman and Chief Investment Strategist, AlphaSimplex Group
Joseph Mecane, Managing Director, Barclays PLC
Jamil Nazarali, Senior Managing Director & Head of Execution Services, Citadel Securities
Eric Noll, President & CEO, Convergex Group
Maureen O’Hara, Robert W. Purcell Professor of Finance, Johnson Graduate School of Management, Cornell University and Chairman of the Board, Investment Technology Group Inc.
Joe Ratterman, CEO, BATS Global Markets Inc.
Nancy Smith, Corporate Secretary & Chief Integration Officer, AARP
Chester Spatt, Kenneth B. and Pamela R. Dunn Professor of Finance, Tepper School of Business, Carnegie Mellon University and Director of its Center for Financial Markets
Gary Stone, Chief Strategy Officer, Bloomberg Tradebook LLC

SEC announcement here.

PLY: Good to see Brad Katsuyama of IEX represented while NYSE and NASDAQ are absent. Joe Ratterman is a conspicuous executive heavy hitter alongside Richard Ketchum while Chester Spatt, now in academia, used to be the SEC’s own Chief Economist (until 2007) before resuming his academic career.

Financial Calendar

Next week

SGX Q2 Results For Financial Year 2015 (FY2015)
Interactive Brokers Q4 Results

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

Share Notes

Interactive Brokers Chairman Earl H. Nemser sold 4,306 shares Thursday, January 8th at an average price of $29.00 (bargain $124,874.00). Mr. Nemser’s regular sales are chronicled on this specific page.

Analyst Notes

Barclays Lifted Their Price Objective On ICE From $244.00 To $250.00 – “Overweight” Rating
NASDAQ OMX Price Objective Raised By Barclays From $50.00 To $54.00 – “Overweight” Rating
LSE “Overweight” Rating Reaffirmed By Barclays – GBX 2,550 Price Target
TMX Target Price Cut By RBC Capital From C$55.00 To C$54.00 – “Underperform” Rating

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

diliger Taps Crowd Funding For Growth Capital
MondoVisione

Fintech marketplace diliger is commencing a raise of £500,000 in growth capital, using Crowdcube. Pre-money valuation is £1,500,000.

Other stories

CFTC Chairman Massad Announces Trip To Asia To Continue Dialogue On Swaps Market Reform
MondoVisione

CFTC Chairman Tim Massad will travel to Beijing, Hong Kong, Tokyo and Singapore in January to meet with government officials and market participants.

PLY: I keep hearing encouraging noises about Chairman Massad, hopefully the positive feedback loop will continue from Asia too.

Kenya: Talks On Capital Market Net Gains Tax Called Off
Constant Munda – allAfrica

Talks between the government and brokerage firms on implementation modalities of the 5% tax on net gains from sale of shares and bonds have been postponed indefinitely.

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