January 15 2015

elb2

Another day, another bounty of interesting stories. NASDAQ’s latest futures push is energy…LME seeks fund liquidity (again), various musings on stock infrastructure, including the possible ‘great unbundling’ finally getting under way in Europe. Nepal stake up for grabs while Cinnober gain welcome development funds to further real-time finance.

Meanwhile in Premium, I open with some comments on the US stock debate: Rome Wasn’t Burnt in A Day – The US Stock Market Debate

(Subscribe Here at $120 p.a. per user to enjoy added insights and be part of the debate).

Public Markets

Nasdaq Plans Challenge To Energy Futures Duopoly (subscription)
Gregory Meyer – Financial Times
Nasdaq Plans Challenge To CME & ICE In Energy Derivatives
John McCrank – Reuters

PLY: There’s nothing like a real doozy of an idea to get the day going. Apparently NASDAQ will break into the already competitive energy market by offering cheaper prices. Well that worked so spectacularly under NLX, didn’t it? (Incidentally since they started charging a penny a contract, have they reached three figures of revenue yet?). Even at absolutely free, I remain bereft of evidence that NLX had any tangible buy side business.

NASDAQ continue to think linear and deliver odd projects that have no realistic chance of success. – all that tighfistedness in the accounting department ends up being partially squandered on these flights of folly..and I just cannot see what is different this time around! History suggests another capital drains which blights the groups overall transformation. I am not optimistic. Hopefully at least this market can be run in a fashion which does not lead to inferences of wash trades before I expect it to fail.

LME Launches Plan To Lure Funds, Boost Liquidity
Eric Onstad – Reuters

LME launched plans to boost liquidity on its electronic platform LMEselect on standard monthly dates to increase business from financial investors, such as hedge funds.

LME press release here.

PLY: Gosh it feels like I am back in about 2004. A consultation is launched to encourage more fund users – I am all for encouraging more liquidity and building LME but this is clearly deja vu one more time as Yogi Berra memorably noted. (If only Mr Berra would opine on warehousing I am sure it would be so much more interesting!). To be fair this is the first fund push under the current management but it has been pretty much a staple policy of the past 4 or 5 CEOs.

SEC Adopts Rules Establishing Regime For Swap Data Warehouses
Sarah N. Lynch – Reuters

SEC’s rules lay out a regulatory framework for “swap data repositories” like those operated by the Depository Trust & Clearing Corp, a specialized warehouse that collects trillions of dollars worth of swaps trades, shares it with regulators, and disseminates aggregated data to the public.

SEC press release here.

Post-War Ukraine ‘Natural’ As Warsaw Bourse Looks East
Konrad Krasuski & Maciej Martewicz – Bloomberg

After merger talks with Vienna failed last year [PLY: Thank goodness!], Warsaw bourse is turning east to help more Ukraine enterprises find funding in a country with 10 mostly illiquid bourses.

PLY: It is harsh to say Ukrainian bourses are illiquid, that sounds as if they are exceptional…rather they are only capturing the zeitgeist of the nation which is entirely illiquid. Alas. Ukraine has long been part of the GPW strategy, even before the country self-destructed from the Maidan out. GPW as I recall have had a rep there for some years.

JSE, NSE Partner To Grow African Capital Markets
Goddy Egene – This Day Live

Johannesburg SE (JSE) and Nigerian SE (NSE) are forging a new partnership that will lead to more opportunities for investors and companies in the African capital markets.

PLY: Groundbreaking insofar as previously I was not aware the JSE even recognised that any exchange south of the Levant existed in any meaningful form…

Orchestral Manoeuvres In The Dark (subscription)
Automated Trader

New research findings suggest that US trading rules may be providing dark venues a regulatory advantage over traditional stock exchanges by allowing some traders to circumvent time priority. There’s also some cynicism over whether the need to hide large block trades is overhyped amid calls for implementation of a “Trade At Rule”. Europe, meanwhile, has its own dynamic, with major exchanges like the LSE starting buy side-only order types in its dark pool.

EU Takes Hard Line On Soft Research Spend (subscription)
Tim Cave – Financial News

The clock has finally started ticking on changes to one of the most controversial topics in European equity trading: the use of share-dealing commissions to pay for research.

PLY: Tim surmises well as we await “the great unbundle.”

Private Markets

NRB To Divest Its Share From Nepse
Himalayan Times

Nepal Rastra Bank (NRB) — the central bank — is mulling over divesting its share from Nepal SE (Nepse), country’s only bourse established 22 years back on initiative of the government and private sector. NRB Governor Yubaraj Khatiwada invited interested private parties who want to buy NRB’s stake, at a function to mark Nepse’s 22nd anniversary.

NRB owns 34.60% share of Nepse. Likewise, the government owns 58.66%; NIDC Development Bank owns 6.12% and 0.62% shares are held by member brokers.

“HFT Influence” – The Real Story Behind The Latest Stock Exchange Fine
Themis Trading

Direct Edge was fined $14 million this week by the SEC for failure to disclose important information about how some of their order types worked. Before we get into the details of this latest case, we thought it was important to give you a quick review on the controversies that have plagued Direct Edge over the past few years.

Growing Adoption For IEX’S Latest Protective Innovation – IEX’s Newest Order Type Endorsed By Broker Subscribers, Grew To Account For 11% Of December Volume
MondoVisione

IEX announced accelerated adoption for its latest innovation: the Discretionary Peg Order Type (D-Peg). D-Peg was designed in response to an industry-wide issue: “crumbling quotes”, or slower, predictable changes in the National Best Bid and Offer (NBBO) of a stock. Due to the nature of a highly fragmented market, quote changes can take several milliseconds to occur and/or propagate over market data, creating an actionable signal for certain strategies.

PLY: I am pondering this. It strikes me as being a symptom of NMS dysfunction aka, a sort of successful way to drive over the potholes on a poorly maintained road.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX and FTIL up around 1.5%.

‘There Should Be More Competition In The Commodities Market’
Shaji Vikraman & George Mathew – Indian Express

After cleaning up the Augean stables of the country’s commodity markets, FMC is at the cross-roads. FMC chairman Ramesh Abhishek spoke to Shaji Vikraman and George Mathew on a host of issues relating to the market which was in turmoil over the NSEL payment crisis.

PLY: Chairman Abhishek sounds sensible although clearly “cleaning up” has not yet reached NSEL (albeit a market in regulatory limbo). Encouraging competition is welcome, as the disagreement with the RBI increases over allowing in third parties to the commodity exchanges. Interesting interview with a couple of pointed one liners, such as: “There is no influence of one person in the running of the exchange.” No prizes for guessing who that is aimed at, clearly…

Technology

Cinnober Selected To Receive EU Funding For Disruptive Client Clearing Technology
Cinnober

The European Commission announced that Cinnober has been chosen to receive financial support to develop a real-time risk margining and multi-asset client clearing system for European and international banks. The system will provide banks, and their clients, with an immediate and complete view of risk exposure across markets, enable more efficient use of capital and impart operational efficiencies across listed and OTC flows.

PLY: Good to see Cinnober getting some money to help develop more real-time clearing functionality which is urgently needed throughout the financial services firmament.

Brazil: Cleared For Take Off
Automated Trader

“After the crisis, there was recognition around the world that more effective regulation and better clearing systems were needed,” says Nils-Robert Persson, chairman of Cinnober, which provides the technology for Brazil’s new clearing house. “Here in Europe, we’ve talked about it for five years. In Brazil, they’ve taken action.”

APX & IRESS Announce Connectivity To New Trading Platform In Australia
APX

Asia Pacific SE (APX) and IRESS announced that IRESS will integrate support for the APX market into its well recognised trading platforms. This will provide order management and real time market data support for the APX market from the launch of the new NASDAQ OMX trading system, X-Stream, which APX intends to launch on 9 March 2015 subject to industry readiness.

Products

CME Launches The ‘Futures Institute’ To Help Develop Traders In The Futures Markets
CME

CME announced the launch of the Futures Institute, a new online platform for futures and options on futures education, trading simulation and market research. The Futures Institute works with partners across the industry to distribute best-in-class education.

BME Launches Enhanced Services To The Spanish Equity Derivatives Market
MondoVisione

BME launched new services provided to the Spanish equity derivatives market. Though some of these have been in place since 2011, MEFF and BME Clearing have expanded and enhanced them since then, including flexible products.

Indexes

Athens SE New Corporate Bond Index
MondoVisione

Athens SE announces the creation of the «Hellenic Corporate Bond Index» which will be used as a Benchmark for the performance of funds and other financial products or as an investment product in the future.

Career Paths

Nasdaq announced the appointment of Salil Donde as EVP and Head of Global Information Services. In this role, Mr. Donde will be responsible for leading the strategic direction of the business while managing the success and growth of Nasdaq’s current data and index products. Mr. Donde will report directly to Adena Friedman, President of Nasdaq. He will be based in New York and will start on February 5.

Tullett Prebon Information has expanded its commercial team with three new business development appointments in Dubai, Singapore and Shanghai.

Leigh Carpenter will take on the role of Sales Executive responsible for managing TPI’s growing business in India, the Middle East and Africa. He will be based in Dubai.

As TPI’s new Head of Business Development based in Singapore, Rhys Spencer will be responsible for managing existing relationships and growing the customer-base in South East Asia, Hong Kong and South Korea.

TPI has also appointed Rain Tian as Business Development Manager in China, based in Shanghai.

Financial Calendar

Next week

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

New announcement

Markit Q4 & Full Year 2014 Financial Results – Wednesday February 11th 2015
Financial Stability Oversight Council – January 21st 2015

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

Share Notes

ICE COO Thomas W. Farley sold 5,871 shares Monday, January 12th at an average price of $217.36 (bargain $1,276,120.56). He now owns 7,348 shares. ICE insider stock transactions are chronicled on this specific page.

Analyst Notes

LSE “Neutral” Rating Reiterated By JPMorgan Chase – GBX 2,330 Target Price
Goldman Sachs Lowered CBOE From “Neutral” to “Sell” Rating – $56.00 Price Objective
CME Has Earned An “A+” Credit Rating From Morningstar.

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

Indiegogo Signals A Blending Of Crowdfunding & Commerce
Nick Shchetko – Wall Street Journal

Indiegogo, one of the largest crowdfunding sites, recently announced a new feature called InDemand that lets project creators take pre-orders after the deadline has passed on their campaigns. For a 4% fee plus processing, creators can avoid the hassle of creating, running and promoting a separate Web storefront, selling directly through their Indiegogo pages.

Sebi Consulting On Norms On Crowdfunding
The Hindu

Sebi is holding consultations for “evolving guidelines” on crowdfunding that will help start ups raise funds.

Other stories

FESE European Equity Market Report – Year 2014 Figures
MondoVisione

The European Equity Market Report is a piece of analysis that allows for an accurate comparison of trading statistics across European trading venues.

SIFMA Issues 2014 Year In Review
MondoVisione

SIFMA issued our 2014 Year in Review. The report highlights the work of more than 10,000 professionals from 500 member firms who participate in 100 committees and countless working groups to advocate in support of effective and resilient capital markets.

Republican Assault On Dodd-Frank Act Intensifies (subscription)
Barney Jopson – Financial Times

Republicans are intensifying an assault on the Dodd-Frank financial reform act in the second week of a new Congress with the House of Representatives voting on Wednesday to delay an element of the post-crisis legislation.

While Republican leaders have not placed much emphasis on softening Dodd-Frank in their public statements — partly due to continued public suspicion of Wall Street — their legislative action shows that unpicking the act is a high priority.

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