January 21 2015

As I remarked yesterday, my latest video made with the good folks of Cinnober, discussing real-time clearing is now online.

cinnober 2


(If you missed it, the first video from this series is here).

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Today in Exchange Invest, another fascinating daily bulletin: TriOptima looks to forex forwards while the Hong Kong through train service could soon transport bonds and derivatives with stops in Shenzhen too. Forex ramifications rumble on, although no new losses reported (not a trend I am confident will continue). Is BGC edging the advantage over CME as it ‘wins’ another round of the bidding war? NYSE invests in world’s largest Bitcoin wallet in welcome cryptocurrency endorsement, Euronext Brussels to leave the Place de La Bourse…and much much more, happy scrolling:

Public Markets

SGX Q2 Net Profit $87 Million

Revenue $195 million, up 19% from year earlier
Operating profit: $102 million, up 15%
Net profit: $87 million, up 16%
EPS: 8.1 cents, up 16%
Interim dividend per share: 4.0 cents, unchanged

PLY: That ought to silence those who have been complaining about Magnus Bocker and his team for a while!

Interactive Brokers 2014 Results
Interactive Brokers

Interactive Brokers reported diluted EPS on a comprehensive basis of $0.51 for the year ended December 31, 2014, compared to diluted EPS on a comprehensive basis of $0.67 for 2013.

Excluding the effect of changes in the U.S. dollar value of the Company’s non-U.S. subsidiaries, the Company reported diluted EPS on net income of $0.77 for the year ended December 31, 2014, compared to diluted EPS of $0.73 for the same period in 2013.

Net revenues were $1,043 million (down 3% compared to 2013) and income before income taxes was $506 million for the year (up 12% compared to 2013).

PLY: An uptick at IBKR, albeit with the proviso that they lost money last week on the CHF kerfuffle.

CME Announces Increased Offer For GFI Group Stockholders To Receive $5.85 per GFI Group Share

Bid up to $5.85 per share from $5.60 per share, payable in a mix of shares of CME Class A common stock and cash.

As part of the revised offer, the GFI Management Consortium and certain affiliates have now agreed to forego a total of approximately $40 million in consideration that would otherwise be payable to them in the transaction. CME is passing along this foregone consideration in its entirety to GFI stockholders and is not contributing any additional consideration as part of this revised offer.

PLY: Caught in the pincers of BGC, GFI management are now distributing potential gains to other shareholders to help the CME bid but it was anyway trumped immediately:

BGC Announces Increase Of All-Cash Tender Offer To Acquire GFI Group To $6.10 Per Share
BGC Partners

PLY: Extension from January 29th to February 3rd. With CME effectively recycling GFI directors ‘gains’ to make their last bid, are they finally running out of steam here? The EGM on 27th promises to be fascinating.

For background, read our Premium post: BGC – CME – GFI Brief

NYSE Completes Minority Investment In Coinbase
Rebellious NYSE President Calls Bitcoin ‘Growth Market,’ Joins $75M Coinbase Investment
Michael del Castillo – Upstart
Coinbase Confirms $75M Raise From DFJ, NYSE, Strategic Banking Partners
Kim-Mai Cutler – TechCrunch

Coinbase announced that it has raised a serious $75 million growth round led by DFJ. Other participants include USAA Bank and NYSE, while existing investors including Andreessen Horowitz, Union Square Ventures, and Ribbit Capital also participated.

PLY: NYSE is investing in the fast expanding (largest) Bitcoin wallet provider, Coinbase. A growth market with potential, this investment contrasts with pretty much any of the deals from the old, unlamented (except by its bankers), NYSE Technologies Group.

Coinbase is an interesting business and NYSE investing around the Bitcoin space is a spectacular boost for cryptocurrency. Plaudits to Tom Farley for emphasising the “New” in NYSE. (Hopefully too it can help bring more pragmatic proposals to the ongoing issue of BTC regulation in New York).

FCA: News For Customers Of Alpari (UK) Limited

“The initial view in the early stages is that the client money is whole.”

Japan’s Financial Services Agency: Administrative Actions On Alpari Japan K.K.

Market Gives Thumbs Down To FXCM After Rescue Deal
Patrick Graham & Gertrude Chavez-Dreyfuss – Reuters

Shares in retail currency broker FXCM lost two-thirds of their value on Tuesday as the company laid out details of a rescue loan after $200 million of losses on last week’s shock removal of the cap on the Swiss franc.

Forex Turmoil Brings Regulatory Issues Into Sharp Focus (subscription)
Miles Johnson, Harriet Agnew & Caroline Binham – Financial Times

Several years ago a consultant was speaking to an offshore FX brokerage who was eager to start marketing their trading platform to retail investors in the UK.

Having looked over their business model, which involved setting up shop with only off-the-shelf online trading software and a slender amount of starting capital, the consultant quizzed the entrepreneurs about their risk management.

One entrepreneur replied: “What is our risk management? Well, we all have foreign passports.”

PLY: Article notes the peril of passporting insofar as 73 of approx 90 operating in the UK come from elsewhere in the EU. 54 alone come from Cyprus. The article goes on to suggest “most larger retail brokers have grown into sophisticated companies that have avoided running into regulatory issues,” – that comment appears somewhat generous given some fines levied in recent years, such as FXCM. The key factor is that very very few players are regarded in the broader market as being particularly credible.

The rich irony is that in one place where a wholesale regulatory overhaul would be welcome, it appears, regulators are reluctant to tread, while capital raising processes such as crowdfunding scream out for more flexibility to help business…

Q.V. Read EI Premium posts, including:

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

Regulator To Review Leverage Limits For Currency Trades (subscription)
Andrew Ackerman – Wall Street Journal

The National Futures Association is considering whether to alter a cap on borrowed money, or leverage, for currency bets in response to last week’s market tumult..

CME Releases White Paper: “Clearing – Balancing CCP & Member Contributions With Exposures”

White paper detailing the company’s position on a variety of issues facing CCPs in today’s financial markets, particularly the question of how much “skin in the game” clearing houses should contribute to a market’s financial safeguards.

PLY: Which I will read with interest.

HKEx CEO Said Expects Shenzhen Link This Year
From Shanghai-Hong Kong Stock Connect To Establishing A “Mutual Market”

HKEx expects to extend its landmark Shanghai trading link to the Shenzhen SE this year, the bourse’s CEO said on Tuesday.

Shenzhen-HK link previously discussed here and here.

OCC Announces Innovative New $1 Billion Committed Repurchase Facility – Increasing Total Liquidity Resources To $3 Billion

Pre-funded, $1 billion committed repurchase facility with a leading pension fund. This new facility increases OCC’s overall liquidity resources from $2 to $3 billion, while diversifying OCC’s committed lenders to include qualified pension funds in addition to OCC’s existing participant base of banks and broker-dealers. Committed liquidity facilities are a critical resource to CCPs like OCC, ensuring that sufficient capacity is maintained to fund payment obligations to clearing members in a timely way, and thereby promoting the uninterrupted flow of financial markets.

PLY: Very interesting.

Agreement Between Mongolian SE & LSE Extended
English News

An agreement established between the Mongolian SE and LSE is being extended by three more years without any allocation of additional expenses from the state budget. The two sides will continue to cooperate at a strategic partnership level.

Euronext Brussels To Relocate

Euronext Brussels confirmed plans to relocate to the Marquis Building, Rue du Marquis, 1 in Brussels, next to the Central Station. The move will take place at the end of May 2015.

PLY: Not clear what is happening to the small but perfectly formed Leon-Pierre Suys designed period exchange building in the heart of Brussels (on the Place de la Bourse indeed – quelle coincidence!) but it was clearly not the right space for a digital Euronext moving forward.

Private Markets

CFTC Issues Order Of Registration For TOCOM

Tokyo Commodity Exchange, Inc. (TOCOM), becomes a Foreign Board of Trade.

AFET Seeks Grace Period On Capital Requirement
Nuntawun Polkuamdee – Bangkok Post

Agricultural Futures Exchange of Thailand (AFET) has asked the market regulator for a two-year grace period to raise the capital required to be a brokerage member of the Thailand Futures Exchange (TFEX). AFET asked SEC during a discussion about the merger between the two futures exchanges. At the end of last year the government demanded the two exchanges be merged by July this year.

Dividend News

Interactive Brokers BoD declared a quarterly cash dividend of $0.10 per share. This dividend is payable on March 13, 2015 to shareholders of record as of February 27, 2015.

Special Section: FTI, NSEL, India at the Crossroads

PLY: Both FTIL and MCX off slightly less than 1%.


Zagreb SE Successfully Goes Live With Ancoa’s Market Surveillance Platform

Ancoa has successfully integrated its real-time market surveillance capabilities with the Zagreb SE’s (ZSE) trading platform across all trading segments; their regulated market, MTF and OTC trading platform.


Euronext Looks At Other Commodity Markets After Dairy Revamp
Gus Trompiz – Reuters

Euronext is looking at sugar, biofuels and metals as potential markets as it expands in commodities following an overhaul of its dairy derivatives, in addition to existing cereal and oilseed products.

PLY: Euronext builds its commodity expertise post IPO, good move.

CME To Impose 1% Charge On Swiss Franc Deposits

CME will start to charge a 1% rate for member clearing firms on Swiss franc deposits held at CME beginning Jan. 22.

China Weighs Allowing Bond Trades On Hong Kong-Shanghai Link
Eduard Gismatullin & Fion Li – Businessweek

China is considering allowing international investors to buy bonds and ETFs through the link between the Hong Kong and Shanghai bourses.

HKEx CEO Eyes Derivatives With Shenzhen (subscription)
Cian Burke – FOW

Charles Li, HKEx CEO, has said the firm is looking to replicate the Shanghai-Hong Kong Stock Connect Link to establish a Shenzhen-Hong Kong link to trade equity derivatives.

LME Extends Publication Of Live Forward Price Curves

LME has extended the publication of its live forward price curves for each metal following last year’s review of the exchange’s ring open outcry trading platform. The forward price curves, which were previously published for the ring’s afternoon kerb trading session only, now cover all trading times in the ring.

LME press release here.

PXIL Seeks CERC’s Approval For Introduction Of Two Day Spot Product
Sanjay Jog – Business Standard

Power Exchange India (PXIL) – promoted by NSE and NCDX – has sought the permission of the Central Electricity Regulatory Commission (CERC) to introduce ‘two-day ahead spot’ (2D-Spot) and ‘extended evening day ahead spot’ products.

CLS Collaborates With TriOptima To Deliver New FX Compression Service

CLS Group and TriOptima announced they will be collaborating to deliver an FX forward compression service to the market.

PLY: Very interesting – the TriOptima juggernaut finds an exciting new area for development.

French-German Office For Renewable Energies & EPEX Spot Issue Joint Paper On Direct Marketing Of Renewable Energy – An Analysis Of Market-Based Support Schemes In France And Germany

PLY: Published on the day it was writ large for the world to see that the UK had the most energy demand and the least renewable delivery – the wind farm boondoggle is a disgraceful farce while renewable energy remains a tax arb scheme with no clear sustainability beyond endless subsidy. “Market-based” support systems strike me as an expensive oxymoron.


FTSE Launches Global Sustainable Yield Index Series

Career Paths

Eva Holt, a former offshore lawyer from Walkers’ Jersey office has joined Cayman Islands SE as deputy head of listings and compliance, effective 5 January 2015.

OCC announced that John Grace has joined OCC as EVP & Chief Risk Officer.

California Public Employees’ Retirement System (CalPERS) Board of Administration unanimously re-elected Rob Feckner as Board President and elected Henry Jones as VP. Feckner will be serving his 11th term as president, while it will be Jones’ first vice presidential term.

Dion Global Solutions has appointed David Bowles as Regional Director for Australia and New Zealand.

Financial Calendar

New announcements

BGC Partners’ Q4 And Full Year 2014 Financial Results – February 11, 2015 (press release here)
NZX 2014 Full Year Financial Results – Tuesday, 17 February

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

Share Notes

CBOE COO Edward L. Provost sold 5,000 shares Thursday, January 15th at an average price of $64.75 (bargain $323,750.00). He now owns 85,734 shares.

Analyst Notes

ICE Downgraded By Zacks From “Outperform” To “Neutral” – $220.00 Price Target
Citigroup Upgraded CME From “Neutral” To “Buy rating- $86.00 price objective

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.


Bitcoin-Powered Crowdfunding App Lighthouse Has Launched
Stan Higgins – CoinDesk

The beta version of the app, which developer Mike Hearn described as a specialized wallet for decentralized crowdfunding, is now publicly available for download.

Other stories

Bitcoin Exchange Operator Tied To Silk Road Gets 4 Years
Bob Van Voris – Bloomberg

The operator of a Bitcoin exchange, Robert Faiella, a former plumber living in Florida, tied to the illicit online drug bazaar “Silk Road” was sentenced to four years in prison after pleading guilty to running an illegal money business.

Keynote Remarks Of CFTC Chairman Timothy G. Massad to FIA – Tokyo, Japan

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