January 22 2014

elb2

SGX and IBKR 2013 results out as Corzine loses bid to avoid CFTC court challenge. TAIFEX expands to EUREX, CFTC “must marshal its resources,” everybody is talking about IPOs, especially from overseas, European Court to rule on Short Selling, Merkel Allies plan more moves against markets in wake of LIBOR.

Many job moves are just part of an interesting day for Exchange Invest readers, happy scrolling:

Public Markets

SGX Posts Q2 Net Profit Of $75 Mln
SGX

Revenue: $165 million ($162 million a year earlier)
Operating profit: $88 million ($90 million a year earlier)
Net profit: $75 million ($76 million a year earlier)
Earnings per share: 7.0 cents (7.1 cents a year earlier)
Interim dividend per share: 4.0 cents (4.0 cents a year earlier)

PLY: Profit bang in line with consensus of 75 million from what I can see (we’re just closing for press).

There has been a lot of negative talk about SGX being in a poor place but that is to ignore the history of Singapore’s domestic exchange(s) as an international player despite a modest local marketplace.

In essence, SGX has done an incredible job living effectively off its wits for years. They have been consistently innovative and I am sure they have plans to keep the franchise alive. Ironically they have proven the worth of Singapore and are now drawing in outside markets to the city state… SGX has vast optionality and a proven team built on years of effective operational management which has had a lot of western influence – not just from Magnus Bocker but of course previously with Tom Kloet (et al) too…

Interactive Brokers Announces 2013 Results
Interactive Brokers

Interactive Brokers reported diluted EPS on a comprehensive basis of $0.67 for the year ended December 31, 2013, compared to diluted EPS on a comprehensive basis of $1.13 for 2012.

On a non-comprehensive basis, diluted eps on net income of $0.73 for Y.E. Dec 31, compared to diluted eps of $0.89 for the same period in 2012.

Net revenues were $1,076 million; income before income taxes $451 million, compared to net revenues of $1,131 million & income before income taxes of $527 million for 2012.

PLY: IBKR weathered the storm of penny stock collapse in Singapore on a macro basis but it will likely be another year before arbitration is concluded on the debts, let alone money collected, leaving this $73 million hole in the middle of the accounts for 2013. Fortunately other revenues were strong in brokerage while low volatility is blamed for a decrease in market making profits (down 62% to $72 million during 2013).

Moscow Exchange Sells Its Stake In MICEX-IT
MondoVisione

MOEX has sold its 100% stake in MICEX-IT to trading portal Fabrikant.ru. The transaction is in line with MOEX strategy to dispose of non core assets. The decision to sell the stake was adopted by MOEX Supervisory Board in December 2013. The size of the deal is RUB 440 mln (USD 12.96 mln).

European Court To Rule On UK’s Clash With EU Over Short-Selling
Reuters

Europe’s top court will rule on Wednesday on a UK challenge to ESMAs powers to ban short-selling in an emergency, which Britain argues unduly shackles national supervisors.

PLY: The stakes are high here as ESMA seeks a strong EU-wide remit while financial centres are keen to see many powers consolidated at the national level (there is the rather ignored side issue that short selling bans have only induced more panic but, then again, since when has logic strayed into EU thinking of late?).

Significantly, if the court upholds the UK challenge then it may impact aspects of MIFID II, particularly the commodity restrictions introduced last week. Also being challenged by the UK at the EU court are bankers’ bonus restrictions (which already seem to have suffered a Maginot Line workaround), the FTT and the ECB’s determination to force some clearinghouses to relocate to the Eurozone.

US Swaps Trading Rules Have ‘Split Market’ (subscription)
Financial Times

New US legislation for swaps trading has dramatically fragmented the transatlantic market in the past three months, with European dealers unwilling to trade with US counterparts and shunning clearing, an ISDA study has found.

According to the report, volumes between European and US dealers had dropped 77 per cent since the introduction of the US legislation. The report, released on Tuesday, also said there had been greater price volatility and “a shifting in the nature of trading from cleared to bilateral risk management”.

PLY: Key sentence in this story: “ISDA said the decline probably hinged on the legal definitions of “US persons” drawn up by the Commodity Futures Trading Commission, the main US derivatives regulator.”

Too early to tell whether this is temporary or permanent although the CFTC’s designations of “US persons” et al has not really simplified things to my mind in a world of globally inter-connected international institutions.

Merkel Allies Call For Tough EU Response To Libor-Fixing Scandal
Bloomberg

German coalition lawmakers demanded a tough stance on regulating Libor, with greater supervision to shine a light on the role of banks in setting the international benchmark at the center of a rate-rigging scandal.

Two senior CDU figures called for more transparency and the introduction of an overhauled system for rate-setting that allows for independent verification.

EI reported on January 17th that ICE has been confirmed as the new administrator of LIBOR from February 1.

PLY: No qualms here about bashing banks proportionately for their errors, although the LIBOR issues remain such a can of worms, I am not sure the politicians really realise what they are opening?

Century-Old London Gold Benchmark Fix Said To Face Overhaul
Bloomberg

Banks are considering an overhaul of London’s century-old gold benchmark used by miners, jewelers and central banks to buy, sell and value the precious metal.

The five banks that oversee the London gold fixing — Barclays, Deutsche Bank, Bank of Nova Scotia, HSBC and Societe Generale – have formed a steering committee seeking external firms to advise how the process could be improved.

The fixing is a rate-setting ritual dating back to 1919. Representatives of the five member banks spend from a few minutes to more than an hour on the telephone discussing buying and selling gold.

PLY: In the wake of LIBOR, many eyes are being trained on commodity fixes and certainly there is evidence that some commodities have absolutely been, er, fixed in the past although in many ways the London fix was always a somewhat transparent process. Such fixings are fascinating albeit they have been in decline as face to face meetings since, London’s tea auctions went online in the late 1990’s.

Euronext Sets Date For Shorter Settlements (subscription)
Financial News

Euronext markets have joined the list of European stock exchanges that plan to shorten settlement time to T+2 settlement period, rather than three days which is required under EU rules from January 1st, 2015.

Euroclear Bank & NSD Launch Cross-Border Services For Russian Corporate And Municipal Bonds
MondoVisione

Euroclear Bank’s post-trade services for Russian corporate and municipal bonds will commence on 30 January 2014. Via Euroclear Bank’s account with Russia’s central securities depository – National Settlement Depository (NSD) – all Euroclear Bank clients investing in corporate and municipal debt will be able to settle those trades and deposit their positions with Euroclear Bank.

PLY: Another incremental move by Russia – who will of course be perfectly placed by circa 2020 to pick up any business which escapes MIFID II strictures if the tourniquet of regulation is tied too tightly.

Turkey Has Vast Economic Potential: NASDAQ CEO
Hurriyet Daily News

Turkey’s move to consolidate the markets under BIST have been a positive development, and the market will become ‘a very strong regional player,’ says NASDAQ CEO Greifeld.

State-owned BIST will be ready to list its shares in early 2016, Chairman İbrahim Turhan had said.

PLY: Turkey has huge potential. The only problem may be the worrying political undercurrents somewhat separate from the world of the exchange itself.

Nasdaq Sees 2014 IPOs Benefiting From Stock Surge With Tapering
Bloomberg

Nasdaq OMX said the number of IPOs it handles may rise this year, buoyed by strong equity markets and the Federal Reserve’s announcement that it will reduce bond purchases.

Bruce Aust, who oversees listings at the second-largest operator of U.S. stock exchanges, predicted there will be a cluster of IPOs around April and May. There were 126 IPOs at Nasdaq last year, the most since 2007, as an economic recovery propelled markets to new records.

PLY: Here’s hoping but then again what if Bond yields pick up further, driving 30 years up to say 5-6% and then mortgage rates increase? I have my worries about the world economy (he said channeling his inner Marc Faber) but I hope Mr Aust is right. Sincerely I do!

ASX Tips IPO Market To Pick Up Steam (subscription)
The Australian

“Our visibility of the IPO pipeline in the second half of this financial year is strong,” Max Cunningham, general manager of listings and issuer services at the ASX, told DataRoom.

PLY: Again here’s hoping the world will have a great year for IPOs.

Foreign Exchanges Tempt Indian Companies To List
Business Standard

Officials from two global exchanges have been in India in the past two months in the matter. LSE and SIX Swiss Exchange have been here, talking to companies.

PLY: Remember that LSE’s AIM had a great run of Indian listings during the last global boom. The problem was that local multiples tend to apply to stocks even when they come from India which was booming in 2009-2010 when western stocks were in the doldrums…

NY Lawsuit Against Corzine Is Allowed To Proceed (subscription)
Wall Street Journal
Corzine Loses Bid for Dismissal of CFTC’s MF Global Suit
Bloomberg

Jon Corzine lost his bid for dismissal of CFTC’s lawsuit over the 2011 collapse of MF Global.

The judge said allegations by CFTC provide “reasonable inferences” that Corzine illegally transferred funds from customer-segregated accounts while he was chief executive officer of the New York City-based MF Global. More than $1 billion in customer money vanished. A former MF Global assistant treasurer is also accused.

PLY: A key trial for CFTC. I have no inclination to provide any interference with the outcome and hope that due process continues and justice will be done.

Madoff Ex-Aide Knew Of Scheme To Pay His Son, Jury Told
Bloomberg

Bernard Madoff added the son of a “key” executive to his payroll even though he didn’t work there, a jury was told in the trial of five ex-employees accused of aiding the con man’s $17 billion Ponzi scheme.

PLY: In some respects (and I do not mean to the victims of this vile fraud), establishing the legal facts around MF Global may be more important than the ongoing Madoff trials – albeit justice and punishment where guilt is found, is a good thing.

Sibex – Helex Negotiation Updates
Sibex

During the negotiations round in Bucharest on 16-17 of January, Helex and Sibex have agreed final terms governing their cooperation. Pending approval by the two Boards and agreement on a limited number of technical aspects, the two exchanges expect the signing of the agreements to take place before the end of the month.

Private Markets

Thailand Challenges Singapore & Hong Kong With Foreign IPO Plan
Bloomberg

Thailand will allow IPOs of foreign companies for the first time as Asia’s 11th-largest equity market seeks to compete with Hong Kong and Singapore as a regional hub for stock listings.

Several Chinese companies have already expressed interest in selling shares in Thailand, and rules for the offerings will be announced this quarter, Vorapol Socatiyanurak, the secretary general of Thailand’s SEC, said in an interview in Bangkok yesterday.

PLY: Thailand has a great market, it’s just the country around it which is the problem. qv. Turkey above.

Bitcoin Is Not Just Digital Currency. It’s Napster For Finance.
Fortune

In the next year, Bitcoin will start its transformation from a mere currency into an entire open-source, decentralized exchange for everything from futures contracts to car rentals.

In 2013, bitcoin’s valuation didn’t just skyrocket, but its infrastructure, services, and adoption exploded as well, culminating in recent announcements that major online retailer Overstock.com and NBA team the Sacramento Kings would accept the digital currency as payment.

PLY: It’s the future, repeat after me… I am engaged in a lot of discussions / sessions developing BTC business currently, email for details if you are interested.

Bitcoin No Bargain As 47% Of Investors Go Bearish In Poll
Bloomberg

Almost half of international investors are bearish on Bitcoin, the most prominent of a group of virtual currencies that have enthralled entrepreneurs in technology and finance over the last year, according to a Bloomberg Global Poll.

Forty-seven percent of respondents say they would sell Bitcoin, while 11 percent say they’d buy it. Another 7 percent say they’d hold the virtual currency, while 35 percent say they haven’t got an opinion about it.

“When the taxi driver speaks about something, the bubble is here,” Francois Savary, chief investment officer at Reyl & Cie SA in Geneva, wrote in an e-mail.

PLY: Could be true, in fact I have a suspicion BTC is short-term overvalued but in the long-term…

Dividend News

Interactive Brokers declared a quarterly cash dividend of $0.10 per share. This dividend is payable on March 14, 2014 to shareholders of record as of February 28, 2014.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX is flat, FTIL is down 1.5% while few things in the sub continent remain as reliable as the ability of NSEL to default.

The NSEL repayment tally of shame remains: (N.B. Anticipated weekly repayment is Rs 174.72 crore, roughly USD 28,000,000)

Week 1: Rs 92.73 crore (USD 14.37 mln) paid
Week 2: Rs 12.05 crore (USD 1.79 mln) paid
Week 3:Rs 15.37 crore (USD 2.29 mln) paid
Week 4: Rs 7.77 crore (USD 1.21 mln) paid
Week 5: Rs 8.57 crore (USD 1.35 mln) paid
Week 6: Rs 11.45 crore (USD 1.82 mln) paid
Week 7: no payout – bank accounts frozen
Week 8: Rs. 2.85 crore (USD 457.9 k) paid
Week 9: Rs. 28.34 crore (USD 4.58 mln) paid
Week 10: Rs. 30 lakh (USD 49k) paid
Week 11: Rs. 29.05 crore (USD 4.72 mln) paid
Week 12: Rs. 11 crore (USD 1.77 mln) paid
Week 13: no payout
Week 14: Rs. 6.1 crore (USD 976.7k) paid
Week 15: Rs. 9 crore (USD 1.44 mln) paid
Week 16: Rs. 9 crore (USD 1.44 mln) paid
Week 17: Rs. 9 crore (USD 1.46 mln) paid
Week 18: Rs. 11.5 crore (USD 1.85 mln) paid
Week 19: Rs 12.64 crore (USD 2.04 mln) paid
Week 20: Rs 21 crore (USD 3.37 mln) paid
Week 21: Rs 2.45 crore (USD 394k) paid
Week 22: Rs 3.24 crore ( USD 526k) paid
Week 23: Rs 4.5 crore ( USD 726 k) paid

NSEL defaults 23rd time – pays 4.5 crore ( USD 726k). Press release here.

Police, NSEL Investors Spar Over Filing Cases
The Economic Times

A top cop who promised aggrieved NSEL investors that the police would pull out all stops to make this year’s Diwali – after last year’s dampener – an affair worth remembering for them, might just fall short of keeping his words despite his best efforts.

PLY A pity if Diwali is spoilt of course but the police efforts have been remarkable and from my standpoint, the greatest effort in the broad (but sadly ineffective) Indian government, ahem, ‘machine.’

Building Confidence Is Our Priority: MCX Chairman
Business Standard

Satyananda Mishra, the newly appointed chairman of the country’s largest commodity exchange MCX, is a 1973 batch IAS officer and served in recent past as India’s chief information commissioner. In his first media interview, Mishra spoke to Rajesh Bhayani on a host of issues facing MCX is facing and how he plans to put things on track.

PLY: Blandishments without any vision. Mr Mishra is a career Indian civil servant. It’s early days but I do feel Indian markets could do with a bit of vigour and vision – neither appears in this dull interview.

Technology

SGX To Introduce Circuit Breakers On February 24
MondoVisione

SGX will introduce circuit breakers in the securities market from 24 February as an additional market safeguard.

Thomson Reuters Launches Accelus Market Surveillance
MondoVisione

Thomson Reuters announced a strategic partnership with b-next, a provider of capital markets compliance solutions, to enable compliance managers at both buy side and sell side institutions to meet the ever increasing challenge of monitoring their firm’s trading activity.

Through the partnership, Thomson Reuters Accelus Market Surveillance integrates b-next’s systematic surveillance capability with Thomson Reuters multiple capabilities.

PLY: A deal with potential for both parties provided the system gets enough impetus from within the consistently labyrinthine Reuters ‘structure.’

ASX Welcomes ACTIV Financial To The Australian Liquidity Centre
MondoVisione

ASX today announced that ACTIV Financial, a global provider of real-time, multi-asset financial market data, will co- locate at the ASX Australian Liquidity Centre (ALC) for low-latency access to ASX data.

Renewed Orc Offering
MondoVisione

Building on Orc’s technology leadership, industry expertise and commitment to R&D, new Trading and Electronic Execution offerings have been introduced, backed by Professional Services.

PLY: Orc have increased the scope of their system, for so long beloved of options traders in particular. Have they made it better? Time will clearly tell.

OneMarketData Partners With Wall Street Horizon To Enhance One Quant Data Repository
MondoVisione

OneMarketData, LLC, a leader in tick data management and analytics, has entered into a partnership with Wall Street Horizon (WSH), a Woburn, MA-based data provider in order to enhance its historical reference and pricing data repository, OneQuantData, using WSH’s Single-Stock Events Calendar Data.

Products

Big Bets On Power Cleared By Regulator (subscription)
Financial Times

Speculators facing a clampdown in commodities markets have a new place to take big positions: electric power.

One of the world’s leading energy exchanges last week won regulatory clearance to dramatically loosen “position limits” for large traders in US power futures, in some cases increasing the cap 20-fold. Its main rival now seeks to do the same.

The manoeuvring comes as CFTC otherwise moves to impose tough new limits on the number of commodities futures held by hedge funds, banks and other speculators.

But the chronically budget-constrained CFTC has left limits on electricity under the control of exchanges “because the commission must marshal its resources”, it wrote last month.

ICE last Tuesday raised limits on speculation for more than 170 electricity futures and options linked to markets from California to New England. In Texas, where wholesale power prices jumped wildly during this month’s “polar vortex” cold wave, limits on several contracts rose by a multiple of 10.

PLY: The resource versus risk issue writ large for regulators. How long before the Emperor’s lack of clothes becomes a market crisis (and again I am not picking on the realistic CFTC here, re-regulation is creating a global crisis of, er, regulation)…

TAIFEX To Launch Products Overseas
Focus Taiwan

TAIFEX will launch Taiwan Stock Exchange Capitalization Weighted Stock Index (TAIEX), in daily expiring contracts on Eurex Exchange, May 15.

DB purchased 5% in TAIFEX from Yuanta Financial Holdings, a 47 million USD bargain reported January 6th.

PLY: The, er, invisible hand of Reto’s Asian footprint discussed yesterday…

PEGAS: Powernext To Launch PEG TIGF/PEG Sud Spot Spread Contracts On 4th February
MondoVisione

Powernext will launch a Spot spread contract between TIGF and GRTgaz Sud delivery zones February 4. This new product will be listed for all Spot maturities on PEGAS, the common natural gas platform launched by Powernext and EEX.

Career Paths

The Exchange Council of the Frankfurt SE was reconstituted on 21 January 2014. The members re-elected Dr Lutz R. Raettig (Morgan Stanley) as Chairman. His Vice Chairman is once again Dr. Werner Brandt (SAP AG).

Dr Christine Bortenlänger (Deutsches Aktieninstitut) and Prof Peter Gomber (Goethe University of Frankfurt/Main) were elected as investor representatives.

Press release here.

PLY: Congratulations to Peter Gomber on his elevation, he has been a key figure in maintaining the profile of exchanges via his academic activities.

The Exchange Council of Eurex elected a new chairman as well as the vice chairman for a period of three years. Carola Gräfin von Schmettow, member of the Management Board, HSBC Trinkaus & Burkhardt AG, was appointed as Chairman, Johannes Pieterse, MD, Optiver VOF was elected as Vice Chairman.

Prof. Lutz Johanning, WHU – Otto Beisheim School of Management, and David Alan Martin, J.P. Morgan Securities Ltd., have been elected to serve as investor representatives on the Council.

Press release here.

According to Traders Magazine, PDQ ATS has hired a pair of NYSE alumni, Peter Jenkins and James Ross as part of the firm’s push into the institutional equities business.

Jenkins joined from AX Trading Group, where he served on the board of directors, and as president where he oversaw business development and institutional sales.

Ross, a 25 year pro, also came from AX ATS where most recently served as COO.

Both Jenkins and Ross report to CEO Keith Ross.

TABB Group hired former IDC Research senior executive Brien Henderson as a partner and MD, sales and marketing.

Matt Trudeau joined IEX Group as head of product. He previously held a similar position at Instinet’s Chi-X Global. He reports to chief operating officer John Schwall.

Indian Energy Exchange (IEX) has appointed S N Goel as its CEO and MD.

Prior to this appointment, Goel was director (marketing & operations) at PTC India Ltd. He has also served as executive director with NTPC.

SunGard announced that effective February 24, 2014, Marianne Brown, former Omgeo CEO and president , will become the COO of its Financial Systems business.

The European Council adopted a decision appointing Sabine Lautenschläger to the executive board of the European Central Bank for a term of eight years as from 27 January 2014.

Mohamed El-Erian, CEO of the world’s largest bond fund, Pimco, will leave in March.

News Corp said that Dow Jones CEO Lex Fenwick is leaving News Corp and will be replaced by William Lewis as interim CEO.

PLY: A lot of moves today and good to see Marianne Brown smoothly transitioning from Omgeo to a key position with SunGard. The departure of Mohamed El-Erian from Pimco is a shock despite last year’s returns while Will Lewis’ stratospheric rise through the News Corp ranks (formerly of the UK Daily Telegraph) is fascinating if only because it demonstrates the problem for DJ: a great news product but without clear terminal distribution in an era where Bloomberg and Reuters dominate. It will require nimble movements and agile thinking to see DJ newswires return to the prominence their quality reporting deserves.

Financial Calendar

This month
ITG Q4 2013 financial results on Thursday, January 30, 2014

Next month – new announcement

NZX preliminary 2013 full year financial results – Friday, 21 February 2014.

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

Analyst Notes

ICE Is Now In Oversold Territory
Zacks

ICE share price has entered into oversold territory with an RSI value of 28.8. The Zacks Consensus Estimate for ICE for the full year period has narrowed 4 cent over the past two months to $8.16 per share. Currently, ICE has a Zacks Rank #2 (Buy), suggesting that now might be a good time to get in on after its recent drop.

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.

Other stories

Moscow Exchange: Free Float Methodology Change
MondoVisione

MOEX is to introduce an updated free float methodology on 27 January. MICEX Stock Exchange’s management and Moscow Exchange’s Executive Board approved the document on 17 January.

The new methodology is available here.

CFTC To Form An Interdivisional Working Group To Review Regulatory Reporting
MondoVisione

CFTC Acting Chairman Mark P. Wetjen, joined by Commissioners Bart Chilton and Scott O’Malia, announced the formation of an interdivisional staff working group to review certain swaps transaction data recordkeeping & reporting provisions.

CFTC Announces Public Meeting Of The Technology Advisory Committee, Has Been Cancelled
MondoVisione

CFTC cancelled its scheduled Commission Technology Advisory Committee (TAC) today due to the closure of all Federal government agencies because of inclement weather in the Washington Metropolitan area.

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