January 21 2014

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DB fires first salvo across bows of SS MIFID II as she prepares for launch. Austrian indices are go at EUREX while HKMEx may rise again? Irish SE innovates in aircraft funding, buyer eyes NCDEX stake, Rolet expounds equity finance for SMEs as Oman joins the frey. VIX expands, confusion over ramifications of ‘fit & proper.’ Interesting Bitcoin and crowdfunding stories as well as Trade Repositary news.

Welcome to today’s Exchange Invest, happy scrolling:

Public Markets

Deutsche Boerse Looks To Asia, Calls On Europe To Be Competitive
Businessweek
Deutsche Boerse Touts Frankfurt-China Financial Link
Reuters

DB said it will focus on Asia for growth this year and that European policy makers should ensure the region remains competitive.

“We will grow above all in Asia,” Reto Francioni, CEO of DB, said in a speech at the exchange’s New Year’s reception in Frankfurt.

PLY: For the local market, Reto Francioni has discussed building Sino-German financial trade from Frankfurt, while offering what looks like friendly suggestion but is really a chilling warning: “This will only succeed, however, if the important institutions, policymakers and the financial centre here all pull together as a team.”

Toronto Seeks Slice Of Hong Kong’s Turf For Listings (subscription)
South China Morning Post

TSX Markets President Kevan Cowan is keen to boost mining-heavy bourse’s profile in the region, in particular for mainland resources firms, adding to pressures on HKEx.

X. Rolet – Entrepreneurs Should Rely On Investors, Not banks
The Scotsman

START-UPS and small businesses should reject bank debt as their main funding because of the significant burdens and risks, the head of the LSE has warned.

PLY: Xavier Rolet expounds on a logical ecosystem which implicitly encourages crowdfunding; leads to AIM and beyond…

Private Markets

Trading On Combined BATS-Direct Edge Set For February
The Trade News

Trading on the combined BATS-Direct Edge US exchange will commence from 3 February after expected SEC approval in January.

All 4 equity order books will operate under the combined BATS Global Markets brand, although there will be no material changes to execution or routing. Eventually, Direct Edge’s 2 books will transition to BATS’ exchange technology.

PLY: …and battle will commence in earnest for US equity dominance.

L&T Infotech Eyeing Stake In NCDEX
The Economic Times

L&T Infotech, the I.T. services arm of engineering conglomerate Larsen and Toubro is evaluating options for a possible stake buy in multi-commodity exchange NCDEX.

“L&T Infotech is examining documents relating to the performance of NCDEX. The exchange is valued at around Rs 1000 crore (USD 162.6 mln) based on recent exits and under the current norms, L&T Infotech can pick up a maximum of 10% stake. A stake buy would boost the crucial BFSI (banking,financial services and insurance) vertical of L&T Infotech.”

EI reported January 10th Tech Mahindra expressing interest in a potential buyout of crisis-hit Financial Technologies which currently has a large stake in NCDEX rival MCX.

SIX Swiss Exchange: Q&A With CEO Christian Katz
FTSE Global Markets

Christian Katz is the CEO of SIX Swiss Exchange. In November last year, he was named as the new president of exchange lobby FESE.

Irish SE To Introduce Market For Aviation Funding
Bloomberg

ISE, which lists companies including Ryanair and Aer Lingus, will start an exchange for aviation-related debt as European and U.S. carriers seek additional sources of funding.

The exchange said 26 specialist debt securities with a combined value of $12.7 billion are listed on its markets. This includes $927 million of Enhanced Equipment Trust Certificates (EETC), sold by IAG SA, the owner of British Airways, which last year became the first U.K. airline to sell debt backed by aircraft.

“Ireland is a world leader in aviation finance and ISE is a world leader in debt listings,” ISE CEO Deirdre Somers said in the statement. The exchange wants “to make Ireland even more attractive for aviation issuers and investors.”

PLY: A splendid, intelligent move by ISE. They have a lead in aircraft financing dating back to their visionary plan to give the exchange life when many had written it off a decade or so ago and the idea of a dedicated aircraft financing board is an excellent move by Deirdre Somers and her team.

Second Wind For HKMEx
The Standard

The collapsed HKMEx, chaired by Barry Cheung Chun-yuen, might yet rise like a phoenix from the ashes again amid a mysterious transfer of share interest.

Cheung’s New Effort Holdings, the majority shareholder in HKMEx, transferred 23.75 million shares to Deluxe Treasure in October, the Companies Registry showed. Deluxe Treasure has now become the largest shareholder with 39.5 percent stake, followed by New Effort with 21.6 percent.

PLY: It would be good to see HKMEx survive – cost considerations must be key as the business could certainly be run a lot leaner than originally – and there is enormous opportunity for exchanges everywhere but particularly on the fringes of China’s mainland.

Prague SE On Bearish Run
Radio Praha

Once a symbol of the comeback of capitalism, the PSE has celebrated a somber two decades with share trading volume down in recent years and questions being asked about its long term role.

PSE marked its twentieth anniversary last year, but its basic figures give it little cause to celebrate.

Total trading volume approached 175 bln crowns (USD 8.6 bln), or around half the level of 2012. Looked at through a longer perspective, the trading volume is down to less than a fifth of the level of its peak year of 2005. The 1,715 companies that once featured on the exchange during the heyday of the famous Czech coupon privatizations is now down to a few dozen. PSE is now part of a grouping including Vienna, Budapest and Ljubljana.

The only real bright spot for the Prague exchange last year was the ongoing expansion of its established electricity trading and the launch of gas trading activities.

PLY: The problem for Prague is that it is constrained within the political Austro-Hungarian empire more oriented to Viennese politics than economic growth while the Czech government have not supported the market (as is alas commonplace throughout the New Europe). Petr Koblic continues to run a good operation but is limited in his wiggle room to develop a business which after all is situated in the same city as some of the world’s best HFT players, let alone the vast opportunity of its central European location.

Oman – CMA Plans To List SMEs In MSM
Oman Daily Observer

Capital Market Authority (CMA) announced its plan to list SMEs in Muscat Securities Market (MSM).

PLY: Encouraging news – the more SME markets which are easily accessible at reasonable cost to issuers and investors alike, the better it will be for the world economy.

Bitcoin Judged Commodity In Finland After Failing Money Test
Businessweek

Bitcoin doesn’t meet the definition of a currency or even an electronic payment form in Finland, where the central bank has instead decided to categorize the software as a commodity.

PLY: If you want to understand the arcane nature of central bankers (all of whom are now running for cover as their jobs are under threat from the cryptocurrency revolution, think about this article as follows:

In 1900 had the roads minister thought like a modern central bank: the automobile would have been banned as it was not possible to define something with 4 wheels as a horse.

Are Bitcoins Futures? Depends Who’s Asking
Futures

Just asking? Like most people, the “virtual currency” is largely a mystery to me. Here are some choices of how CFTC might regulate it.

PLY: Excellent brief article by the incomparable Philip McBride Johnson. Remarkable that expansionist Chairman Gensler didn’t realise that one way or another cryptocurrency can clearly fall into the CFTC’s remit.

Nordic Investor Creates World’s Biggest Bitcoin Database
Reuters

A Nordic venture capital firm says it has built the world’s largest database of businesses dealing in Bitcoins in an effort to shed light on a virtual currency which has seen its value rocket in the past year.

Creandum said the database contained more than 300 companies trading Bitcoins – ranging from exchanges to payment processors and gambling companies – and was intended to give entrepreneurs and investors an overview of companies with a significant role in the Bitcoin system.

Satoshi Square Brings Bitcoin Trading To The Streets Of London
International Business Times

Alistair Charlton attends the UK’s first Satoshi Square, where bitcoin users descend on the City of London to trade the virtual currency and their thoughts on its future.

Special Section: FTI, NSEL, India at the Crossroads

PLY: A more muted day after yesterday’s excitement with MCX up almost 2% and FTIL slightly up ahead of the weekly default by NSEL.

No Directive To FTIL To Cut Stake In MCX: Regulator
Business Standard

The battle between FMC, and FTIL saw a new twist. FMC said it had not issued directives to FTIL to cut the stake in MCX below two per cent as it was understood that the former being not ‘fit and proper’, it could not hold stake in MCX over two per cent. The regulator, however, said it was within its jurisdiction to declare the FTIL not ‘fit and proper.’

PLY: Interesting, FMC may be able to decide you are not ‘fit and proper’ but they may not be able to demand a sale of stock. FTIL’s lawyers will doubtless keep probing for such issues.

SEBI Directed To Disclose MCX-SX Licence Grant Details
FIRSTPOST

Sebi has been asked by its Appellate Authority to disclose details through RTI on process related to grant of recognition to MCX-SX, as all such information may not be confidential any more.

We Want To Understand Conspiracy Angle In NSEL Case: Rajvardhan Sinha
Livemint

The payment crisis at NSEL has seen the arrest of several executives allegedly involved in it, the seizure of properties, including those of the exchange’s controversial promoter Jignesh Shah and even a class action suit.

All that in Act 1.

Now the economic offences wing (EOW) of Mumbai police will fix liabilities of those who have been named in the complaint, but against whom charges are yet to be pressed, EOW additional commissioner Rajvardhan Sinha said in an interview.

Technology

Xtrakter Partners With CME ETR For EMIR Reporting Tool
waterstechnology

European fixed-income trade matching and regulatory reporting service provider Xtrakter has launched a transaction reporting and post-trade matching engine, TRAX Repository Link (TRL), in a strategic alliance with the CME European Trade Repository (CME ETR).

TRL will be providing technology to route, translate and validate derivative transactions to CME ETR. CME ETR will then be able to store the reported transactions and pair across other approved trade repositories to comply with the requirements of EMIR.

Under EMIR, all OTC and listed derivative trades will be required to be reported to a registered trade repository as of February 12, 2014.

Kyriba Partners GRC For EMIR Reporting
waterstechnology

GMEX-backed GRC has announced a partnership with Kyriba, enabling the vendor’s clients to implement a reporting system that complies with EMIR requirements.

Kyriba supplies cloud-based treasury offerings to its clients, who will be able to use GRC’s end-to-end platform to meet the reporting mandates, due in mid-February.

Zimbabwe SE Eyes Automation Deal
New Zimbabwe

ZSE has said negotiations with Seal InfotechMiddle East, the company which won the tender to install the bourse’s automated trading platform are underway and will be concluded next month.

The initial 11 shortlisted bids were narrowed down to two, leaving CIS/CMA Small Systems of Sweden and Infotech from the Middle East to compete.

KVH To Start Offering PCI DSS Compliant Cloud-based Service- In Partnership With Link
MondoVisione

KVH Co. Ltd., Asia’s leading information delivery platform headquartered in Tokyo, Japan, today announced it has launched the cloud service “KVH PCI DSS Ready Cloud” compliant with PPCI DSS, a proprietary information security standard for organizations handling cardholder information, in partnership with Link, Inc.

Indexes

Eurex Exchange Plans To Launch ATX-based Futures & Options
Forex Magnates

Eurex has announced an initiative to launch four new futures and options packages beginning February 10, 2014, based on the Austrian Traded Exchange (ATX) and an amalgamation of other Eastern European indices, according to a Eurex statement.

Eurex press release here.

PLY: No clear sign of whether there is a cut-off to this deal if Warsaw buys Vienna as (sadly) has been mooted. If not, the lack of foresight will be another damning indictment of the Austrian exchange’s management who bought Xetra technology then were caught napping when EUREX lifted their single name derivatives volume leading to this hastily arranged deal to licence the Austrian index.

CBOE To Extend US Vix Trading To Asia Hours (subscription)
Risk.net

CBOE confirmed that it is planning to extend Vix trading to Asian business hours but it hasn’t yet set a start date.

After A Long Wait, NSE Will Launch VIX Trading
The Economic Times

SEBI has finally given its go-ahead to the National SE to launch derivatives on its volatility index, VIX. Over the next few days, the exchange will start futures and options contracts on the index, which measures market volatility, said two officials familiar with the development.

Liv-ex Launches Broader Fine Wine Index As Bordeaux’s Dominance Declines
Harpers

Liv-ex has broadened the scope of its fine wine analysis with the launch of its Fine Wine 1,000 index, as Bordeaux’s dominance of the market wanes.

Financial Calendar

Today
Interactive Brokers Q4 financial results

Tomorrow
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.

Analyst Notes

Credit Suisse Upped Their Target Price Of LSE from GBX 1,780 To GBX 2,000 – “Outperform” Rating
ICAP Downgraded At HSBC To “Underweight” – GBX 410 Target Price

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

Crowdfunding For The Institutional Set
Institutional Investor

What is the easiest way to raise thousands of dollars, or even a million, to open a restaurant, produce a film or benefit a charitable cause? All current buzz points to crowdfunding.

PLY: A useful primer / review from Jeffrey Kutler.

Wells Fargo Bans Staff From Investing In P2P Loans (subscription)
Financial Times

Wells Fargo has banned its employees from lending their own money through peer-to-peer loan platforms.

PLY: Banks will protect their monopolies as best they can, even if it means restricting the actions of their staff. It won’t prevent the decline of banking.

Other stories

Question Of Volcker Rule Foreign Coverage Answered
Securities Lending Times

Frank Mayer, Timothy McTaggart and Jonathan Levin of law firm Pepper Hamilton LLP have asserted that “location, location, location” is the most important aspect of the Volcker Rule’s requirements on foreign banking entities.

The US regulation, which prohibits banking entities and nonbank financial companies from engaging in proprietary trading and restricts their relationships with hedge funds and private equity funds, will also have a direct impact on foreign banking organisations and foreign operations of US banking entities.

The firm stated that banking entities covered by the Volcker Rule include companies that are treated as bank holding companies (BHCs) under the International Banking Act.

Northern Ireland Is Attracting Its Share Of Financial Services
Irish Times

PLY: Dropped into the mix given it discusses my birthplace and having been part of some early meetings to try to get a conscious NI financial sector going 25 years ago, the results have been tremendous especially thanks to the creation of Titanic Quarter. However, a big question mark hangs over the future spin-off of NYSE Technology (which as we discussed last week is a break-up/sell-off).

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