January 19 2016

elb2In today’s EI Premium Content, I am examining the DB1 conundrum as it drops back to the peloton from the lead group of the exchange Pyramid.

China’s chief regulators offers to resign – or did the government just pull his strings to make him say that? Maijoor: One year delay for the (dismal) MIFID II may not be enough, and there’s more, happy scrolling:

Public Markets

China’s Chief Stock Regulator Has Offered To Resign

Benjamin Kang Lim & Kevin Yao – Reuters

CSRC Denies Report On Chairman’s Planned Resignation


The embattled head of China’s securities regulator, Xiao Gang, widely blamed by investors for mishandling a recent crisis that wiped over $5 trillion off the value of the Shanghai and Shenzhen stock markets, has offered to resign.

PLY: Presumably the Chinese government is now fighting over the strings in Mr. Gang’s back to decide what he does next.


EU Securities Chief Says One-Year Mifid II Delay May Not Be Enough

Michelle Price & Lisa Jucca – Reuters

PLY: After months of noting that MIFID II is a waste of time and ought to be scrapped, I note not one word of defence for this ghastly piece of legislation while even ESMA’s boss thinks the delay may need to be longer than the 12 months currently being proposed…


UK FCA Girds Itself For Lion’s Den

Huw Jones – Reuters

The political heat on FCA will be turned up on Wednesday when lawmakers probe why it scrapped a review into culture at banks that have had to pay billions in fines for ripping off customers and trying to rig markets.

PLY: This heat will be applied by politicians whose own state of self-regulation is broadly incapable of censuring errant members’ expenses claims, apparently.

Private Markets

Keler In Running To Establish Regional Clearing House

Budapest Business Journal

PLY: Repeating through a Hungarian lens, the process previously discussed whereby EBRD / Oliver Wyman produced a study suggesting a regional clearing house would help CCP products expand in CEE/SEE. The Keler KSZF is up against AthexClear, Austria’s CCP.A and KDPW in Warsaw.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX up 1%, FTIL up slightly more.


Is RBI’s Intervention In Currency Futures Markets Unfair?

Mobis Philipose – Livemint

The central bank’s increasing presence in the currency futures has led to an increase in open interest on exchanges in recent months. But on the flip side, participation by end-users has declined.

PLY: Oh the irony of it – apart from the ludicrous assertion that position limits can vary according to different institutions (defeating a central tenet of open access to ETD): in the modern age Gresham’s Law (as previously formulated by Copernicus), “bad money drives out good” now finds central bankers as the folks on the perceived wrong side of the ledger.


First Global Credit Expands Bitcoin Margin Trading to LSE

Avi Mizrahi – Finance Magnates

Looking for a way to invest your bitcoin in the UK market? First Global Credit, a firm that allows cryptocurrencies to be used as collateral margin to trade stocks and ETFs, has announced that it expanded the range of available equities to include shares traded on LSE.

PLY: Interesting development just as Bitcoin itself has some grave issues arising from its distributed firmament (or lack thereof).


TOM Publishes Report Analysing Liquidity On Options Exchanges


PLY: Interesting report, although I would contend December is hardly a representative trading month given the festive season & end of year. Nevertheless TOM ekes out a lead in Dutch options 76% to Euronext’s 73% for best price.


Serbian Power Bourse To Launch Day-Ahead Market On Feb. 17


Serbia’s South East European Power Exchange (SEEPEX) will launch a day-ahead market on Feb. 17 in a bid to foster a competitive, transparent and reliable electricity market for Serbia and southeast Europe.


Last Look To Remain Hot Topic In FX

Markets Media

ParFX, the wholesale spot foreign exchange electronic trading platform, said the practice of last look was one of the most topical issues of last year and will likely remain so in 2016.

PLY: Just because pickpocketing also remains common in many open markets across the world, from antiques to vegetables, doesn’t mean it enhances the overall commercial offering of the marketplace.


Tokyo Financial Exchange To Launch Dow-linked Derivative


Tokyo Financial Exchange will debut by June a new investment product tied to the Dow Jones Industrial Average, targeting retail investors seeking to expand their horizons outside Japan.


Borsa İstanbul: BIST-KYD Indices Ground Rules Are Revised


Career Paths

FOW reports that Tullett Prebon has hired former CEO of Newedge, Nicolas Breteau, as CCO.

Finance Magnates reports that Opera Trading Capital, a proprietary arm of BNP Paribas, has lost Paolo Nicolosi, the group’s Head of FX Alpha Proprietary Trading, after less than a year in the role. Mr. Nicolosi is joining Goldman Sachs.

Mr. Nicolosi served as the Co-Head of London Branch & Head of FX Alpha Proprietary at Opera Trading Capital, having joined the group back in July 2015. Prior to this role he had worked at BNP Paribas’ London-based FX Alpha desk for over three years, dating back to 2012.

Volante Technologies announced key new sales appointments: Rick Salk joins as Global Head of Sales; Nihit Ahuja, Ali Mentesh, Vidya Subramaniam and Peter Martin join as Sales Directors. Nihit, Ali and Vidya will be based in Volante’s London City office while Peter is based in Volante’s Dubai office.

FlexTrade Systems appointed Glen Sargeant and Marek Lewandowski as FX Sales Managers for the company’s EMEA region.  Based in the company’s London office, Sargeant will be responsible for buy-side client acquisition while Lewandowski will focus on cross asset acquisition opportunities with a specific focus on the FX space.

Financial Calendar

19.01 – Interactive Brokers Q4 2015 Results

20.01 – SGX Q2 Results for Financial Year 2016

New! 24.02 – NZX Preliminary 2015 Full Year Results

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

Analyst Notes

Macquarie Reaffirmed “Neutral” Rating On LSE – GBX 2,468 Price Objective

A full table of current analysis can be found on our Analyst Ratings page which is updated daily.


Chinese P2P Lender Lufax Valued At $19bn In Latest Funding Round (subscription)

Gabriel Wildau – Financial Times

Shanghai-based Lufax raised $1.2bn from investors including Bank of China Group Investment, Guotai Junan Securities Hong Kong and a unit of Minsheng Bank.

Other stories

ESMA Chairman Discusses Impact Of Interest Rates On Securities Markets



Basel Rules To Cost Banks €40m-€120m Each (subscription)

Laura Noonan – Financial Times

Global banks will have to spend between €40m and €120m each to implement global regulators’ latest rules on trading book capital, a new study from consultants Oliver Wyman claims.

The analysis also says regulators have “drastically understated” the impact the new rules will have on the capital requirements for banks’ trading operations. These divisions already have seen their returns cut by higher capital requirements imposed in the aftermath of the financial crisis.

PLY: I am minded to agree that regulators have “drastically understated” the impact of new Basel rules on banks’ trading operations. Then again, the concern always remains that no rule ever gets implemented without some consultants suggesting a degree of calamitous terror around it. Neither is definitively incorrect, rather both have lost their power to shock.

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