January 19 2015

elb2Forex came to dominate Friday and through the weekend as the Swiss Franc apocalypse ripped a few elements of the (retail) forex firmament somewhat asunder.

I have waded in on our Premium service with a few comments in relation to what has been a sorry test of a flawed market where the banks appear to rip everybody off while the brokers have all too often exploited customers downstream. Regulators do not seem to appreciate the holistic flaws to the system which is also disappointing – but then again I am not sure anybody ever listens to my ongoing calls for holistic regulation.

I am refraining from too much forex pith within this daily as it is a pretty full Monday morning issue, my first rounds of comments are here in Premium:

NEW: CHF Forex Fiasco Strike One: MacroEconomic
NEW: CHF Forex Fiasco Strike Two: Market Infrastructure

Also today in your free Daily Exchange Invest NASDAQ sells tech to Osaka, Schwab profits up, BATS looks at large shareholder KCG’s HotSpot fx platform. Buy side bolts from UBS market after SEC fine (not sure why they didn’t notice the problem before). CME alters data fee legacy issues, will the members feel justice has been done? All this and more in a bumper daily Exchange Invest:

Public Markets

Charles Schwab Profit, Revenue Rise (subscription)
Michael Calia & Daniel Huang – Wall Street Journal

Q4 profit rose 9.7% as revenue and net income growth set new records.. Schwab posted earnings of $350 million, from $319 million,.per-share basis, earnings rose to 25 cents from 23 cents. Revenue +8.1% to $1.55 billion from $1.44 billion.

Charles Schwab press release here.

BATS In Talks To Buy KCG’s FX Trading Platform Hotspot
Jessica Toonkel & John McCrank – Reuters
Hotspot FX Sees Best Ever Volumes Day At $61.7 Billion On ‘Swiss Franc Thursday’
Leap Rate

BATS Global Markets is in discussions to buy institutional foreign exchange trading platform Hotspot from KCG Holdings for nearly $400 million.

PLY: KCG owns 16.5% of BATS incidentally. Could the potential fallout from the clear dysfunction of forex trading writ large by the SNB’s catalyst impact a transaction? While I see huge value for forex platforms run legitimately going forward, the issue (even for an institutional market like Hotspot) may be an overhang of new rules, once regulators finally opt to address this rather messy market overall (i.e. not Hotspot, the broker-dealer farago of forex in general).

Swiss Franc Shock Shuts Some FX Brokers; Regulators Move In
Anirban Nag & Steve Slater – Reuters
FXCM To Get $300 Million Rescue Package From Jefferies (subscription)
Telis Demos & Christina Rexrode – Wall Street Journal
CFTC Reviewing FXCM After FX Swings
Reuters

PLY: It’s a meltdown in the retail market where a classic forex formula finally delivered some mathematical certainty:

GS * RB * OLP = C

(“Guaranteed Stops versus Repricing Banks with Over Leveraged Punters equals Carnage”)

In a remarkable volte face, FXCM may recover from their $225million client money hole thanks to Leucadia National (Jefferies’ parent) money and buy Alpari who were wiped out.

Leucadia press release here.

Alpari: Important Announcement
MondoVisione
FCA In Talks With Collapsed FX Broker Alpari
Reuters
Pepperstone Eyes Alpari (subscription)
James Glynn & Gillian Tan – Wall Street Journal

Online currency trader Pepperstone Financial Services, based in Melbourne, Australia, is considering bailing out retail broker Alpari (U.K.) Ltd.

OANDA Declines To Buyout Rivals, While CMC Markets & Monex’s TradeStation Report All Is Well
Mike Fox – Leap Rate

Who’s Getting Caught In The Swiss Franc Fallout? (subscription)
Tommy Stubbington & Chiara Albanese – Wall Street Journal

…New Zealand-based currency trading company Global Brokers NZ Ltd., closed down.

Online broker London Capital Group, suffered some losses as per this statement Friday:

Six In Ten Mom-and-Pop Currency Traders Lose Money Each Quarter (subscription)
Erik Holm – Wall Street Journal

Among six of the biggest firms that allow U.S. retail traders to play in the currency market, a weighted average of 38.3% were profitable, according to Forex Magnates. In other words, more than six in ten were unprofitable.

PLY: Which leads many to wonder why they do it (and indeed speaking anecdotally, I don’t recall meeting any of the 4 in 10 who make money!) – Hmmm maybe anthropologists will discover there is a third “F in humans’ core reactions, it’s actually “Fight, Flee, Forex?”

NZX: Completion Of SuperLife Acquisition & Notice Of Resignation
MondoVisione

NZX announced completion of its acquisition of leading NZ superannuation and passive funds manager SuperLife Limited.

HKEx Proposes Reintroducing Closing Stock Auction
Kana Nishizawa – Bloomberg

HKEx proposed to reintroduce a closing auction it scrapped almost six years ago.

HKEx announcement here.

Presentation by HKEx Head of Market Operations Roger Lee at a Media Briefing on Proposals to Introduce Volatility Control Mechanism (Securities & Derivatives) & Closing Auction Session in equities: here.

Hong Kong-Shanghai Stock Link Needs Time To Improve: China Regulator
Reuters

The chairman of China’s securities regulator said on Monday it will take time for trading (statistics here) on ‘through train’ to grow as international investors get familiar with China’s securities rules while regulators improve the scheme.

CME Ends Legacy Data Fee Waiver (subscription)
Faye Kilburn – Waters Technology

CME has removed a fee waiver for legacy clients of its real-time market data, who previously received the data for free as an incentive to trade. On Jan. 1, CME began charging data fees to legacy clients who had a fee waiver in place prior to March 2014, for real-time market data from its CME, CBOT, Nymex and Comex markets. Legacy customers must now pay monthly per-device fees of $42.50 for real-time CME data.

On January 09 we reported about CME raising transaction and clearing fees, second increase in 13 months.

PLY: The shuffles in data were something we highlighted last year when the clipboard wielding consultant classes clenched their teeth into the bone of data fees without considering the market dynamics of how such things came to pass nor the impact on counterparties. Besides, the more cheap data the exchanges pump out, the more business they will get but few seem to appreciate this. CME looks more like it is trying to pay for the blob than encourage trade I fear – whether true or not that is certainly the perception of many. I get the message that CME is currently under some element of austerity but perhaps the lady golfers should be sacrificed for the benefits of coherent messaging?

EU Buyside Firms Spooked By UBS Dark Pool Fine (subscription)
Tim Cave – Financial News

Some European buyside firms are asking their brokers to stop routing orders to UBS’s European dark pool, after the Swiss bank agreed to pay a record fine ( $14.5 mln – reported Friday) relating to a US version of the venue.

PLY: The worrying thing about the buyside is how they consistently play catch up when it comes to these issues. Too many are total laggards without holistic best execution and the fact that they are ‘locking the UBS stable door after the horse has bolted’ surely only demonstrates an element of ignorant complicity as opposed to being proactive in the business of getting the best deal for their customers? The buy side is already fragmenting of course with many institutions eager to capture best execution but too many appear dubiously wedded to ancient practices with no desire to look at the brave new world of execution which has after all been with us for a decade even in Europe…

London’s AIM: A Pool That Must Be Made Safe For All (subscription)
Colin McLean – Financial News

Can London’s Alternative Investment Market survive? Created as a lightly regulated junior exchange, it is failing to live up to its promise of fostering enterprise.

Europe & Hong Kong Clearing House Deal (subscription)
Cian Burke – FOW

ESMA & the Hong Kong Securities and Futures Commission (SFC) are set to enhance cooperation on the monitoring of Hong Kong’s qualified CCPs continued compliance under EMIR.

Announcement here.

Banking On The Regulatory Status Quo
Points & Figures

PLY: A Guest post by one Patrick L Young on Jeff Carter’s mult-faceted blog discussing the future of finance…

Private Markets

SIX Swiss Exchange Launches Innovative New Corporate Bonds Trading Platform
MondoVisione

PLY: An attempt to create a platform which also encourages larger block trades in bonds.

Bitcoin Exchange Processor EgoPay Freezes Funds, Disables API
Emily Spaven – Coin Desk

Electronic payment processor and gateway EgoPay has frozen accounts belonging to a number of its clients, including cryptocurrency exchanges such as BTC-e and Bitmarket.pl.

BTC-e told CoinDesk that EgoPay is denying it access to $80,000 of its funds having placed this sum in a “frozen wallet”.

Special Section: FTI, NSEL, India at the Crossroads

PLY: Both MCX and FTIL up 1%.

Commodities Market Out Of NSEL Shadow: FMC Chief
Rajesh Bhayani – Business Standard

PLY: Interview with FMC Chairman Ramesh Abhishek…can’t say I follow how the commodities market is out of the NSEL shadow. In the rest of the world nowadays alas the Indian commodity market is (unfairly) defined by NSEL and little else. A lot more resolution action is required.

Technology

Nasdaq To Provide Trading Platform For Osaka Exchange (subscription)
Eleanor Warnock – Wall Street Journal

Nasdaq will provide a new trading platform for Japan’s largest derivatives bourse, including real-time market surveillance and pre trade risk management technology. Installation expected after 2015.

Nasdaq press release here.

NYSE Scraps Display Device Netting, Tweaks Non-Display Policy (subscription)
Waters Technology

PLY: Can’t open the file and the short blurb just made me dizzy. Something has happened; ask whoever looks after the bills for your terminals.

Products

Euronext To Launch Revamped Dairy Derivatives By End-March
Reuters

Euronext’s new dairy derivatives, announced in November, are scheduled for launch on its Amsterdam derivatives market at the end of Q1.

Grain Trade Risk In EU Moves
Farmers Weekly

Farmers’ ability to buy and sell on forward and futures markets could be severely limited by MiFID.

Commencement Of Trading On The First ETF In EGX
MondoVisione

Indexes

JPX: Start Of Calculation & Publication Of Currency Hedged JPX-Nikkei Index 400
MondoVisione

JPX, Tokyo SE & Nikkei Inc. will begin calculating currency hedged indices of the JPX-Nikkei Index 400 to improve convenience for foreign investors.

Career Paths

LME announced the appointment of John Lee as Chief Technology Officer.

He joins from ICE/ NYSE Euronext where he most recently led the technology delivery for a new clearing house for LIFFE. Following ICE’s acquisition of NYSE Euronext, John’s responsibility switched to the integration of the LIFFE market with ICE Clear Europe, which was successfully launched in July 2013.

PLY: Clearly even retail forex punters can equate that LME CEO Garry Jones was formerly head of LIFFE and has now employed his former colleague.

E*TRADE Financial Corporation announced that James P. Healy has been appointed to the Company’s BoD and Risk Oversight Committee, effective immediately.

ISDA Announces Key Organizational Changes
MondoVisione

ISDA announced several organizational changes in ISDA’s Public Policy and Regulatory and Legal teams.

Steven Kennedy has been appointed Global Head of Public Policy, a newly created position intended to more effectively coordinate and manage ISDA’s regional policy and advocacy efforts and to develop a global public policy strategy on key cross-border issues.

Mr. Kennedy joined ISDA in January 2011, and over the past four years has held a variety of positions, most recently serving as ISDA’s Head of Strategy, Research and Communications. Mr. Kennedy will continue to oversee ISDA’s Communications and Research teams. The Global Communications team is now headed by Nick Sawyer, formerly Head of Communications for Europe. Mr. Sawyer joined ISDA in early 2014 from Risk magazine, where he was Editor-in-Chief. The Research team continues to be led by Audrey Costabile, PhD. Based in New York, Mr. Kennedy will continue to report to ISDA CEO, Scott O’Malia.

To further expand ISDA’s technical capabilities, a new Regulatory and Legal Practice Group has been established within the Office of the General Counsel, led by Washington, DC-based Bella Rozenberg, who joins ISDA from CFTC, where she worked in the Office of the General Counsel and Division of Market Oversight. She reports to David Geen, ISDA’s General Counsel.

ISDA has also appointed Mary Johannes, Head of US Public Policy, to lead its non-cleared margin implementation initiative. Ms. Johannes replaces Athanassios Diplas, Senior Advisor to the ISDA Board. Christopher Young has been promoted to Acting Head of US Public Policy, based in Washington, DC, and will fill in for Ms. Johannes.

Financial Calendar

This 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

ICE General Counsel Johnathan H. Short sold 4,393 shares Wednesday, January 14th at an average price of $208.61 (bargain $916,423.73). FHe now owns 8,754 shares. ICE insider stock transactions are chronicled on this specific page.

Crowdfunding

Massachusetts Crowdfunding Exemption Called “A Breath of Fresh Air”
JD Alois – Crowdfund Insider

Massachusetts, a state known for its leery stance to investment crowdfunding, released “emergency regulations” thus becoming the next state to have legalized crowdfunding in lieu of federal rules.

Other stories

FESE: Response To ESMA Guidelines On The Application Of C6 & C7 of Annex I MiFID
MondoVisione

Remarks Of CFTC Chairman Timothy G. Massad Before The Asian Financial Forum, Hong Kong
MondoVisione

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