January 22 2015

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PLY: Today in Exchange Invest, BGC gains edge from proxy firm as Chinese options excite interest at home and on SGX. US calls for better retail forex regulation. BlackRock and MarketAxxess extend corporate bond platform to Europe. NYAG increases moves against Barclays… and much more, happy scrolling on the day the ECB looks set to announce it has entirely lost control / the plot, er, will introduce Eurozone QE…

Meanwhile, over in Premium Posts, a few staggering Chinese leverage numbers and of course a discussion on Luminex which still sounds like a French manufacturer of blenders…

NEW: A Margin For Concern – aka China’s Leveraged Worries
NEW: Luminex – Crazy Name, Crazy Development?

The Latest Premium Briefs provide the history to the stillborn attempt to shoehorn Warsaw and Vienna together which eventually crumbled last year:

WSE – Wiener Borse Failed Merger Brief – Part 1 – April – September 2013
WSE – Wiener Borse Failed Merger Brief – Part 2 – October 2013 – July 2014

Our Premium service is now on a real roll – can you afford not to be a subscriber? $120 per user/year and it helps keep EI Free. Subscribe here or email and I will invoice you forthwith.

Public Markets

ISS Recommends GFI Shareholders Vote Against “Economically Inferior” Merger With CME – ISS Also Recommends That GFI Shareholders Tender Their Shares Into BGC’s “Economically Superior” Offer
MondoVisione

Influential US proxy voting advisory service ISS has recommended shareholders of GFI Group to vote against a deal to be purchased by CME, albeit noting:

“Either of the two competing offers is likely to deliver greater value to unaffiliated shareholders than remaining standalone.”

FXCM Hobbling Shows Retail Rules Need Review, CFTC’s Bowen Says
Silla Brush – Bloomberg
Statement Of U.S. CFTC Commissioner Sharon Bowen Regarding Recent Activity In The Retail FX Markets
MondoVisione
FXCM Revises FX & Gold Margin Requirements
Globe Newswire

CFTC should consider tighter regulation of retail currency trading after losses from the Swiss franc’s surge last week left a leading brokerage in need of a $300 million rescue, according to a member of the panel.

PLY: Have to agree with Sharon Bowen but will the regulators just tinker / restrict or actually regulate the market in a cohesive, holistic manner?

Alpari Tried To Close Business A Year Ago; FXCM Ups Margins
Patrick Graham – Reuters

The co-founder of Russian-owned Alpari applied a year ago to wind up the parent company of its retail currency brokerage, fearing it was “doomed” long before the company’s collapse from trading losses last week, he said on Wednesday.

PLY: Interesting, a clear split about Alpari UK strategy is aired in public by a group co founder.

GAIN To Cover Clients’ FX Negative Balances From Jan. 15 Franc Trades
Gertrude Chavez-Dreyfuss – Reuters
Are You Covered? These Brokers Forgive Negative Balance following CHF Crisis
Forex Magnates

In a letter to clients obtained by Reuters, GAIN said on Wednesday it will forgive the negative balances incurred by FOREX.com’s retail clients “where permitted by regulation.” FOREX.com is Gain’s retail currency trading platform.

GAIN joins OANDA among the brokers who have announced they are forgiving negative balances.

PLY: Hmmm, I am really not sure this one works for me on many levels. True capitalism ought to allow service providers to do what they want. Perhaps it is regulation which concerns me, as I well recall a moronic edict from the UK regulators in the 1990’s whereby if I had a negative balance in one currency, my broker had to charge interest. This lead to all manner of frustrating hassle in transferring a few dollars hither and thither. Now, it seems, so long as you more than emptied your account, all is forgiven…

CME, U.S. Futures Regulator Take Action After Swiss Franc Shock
Tom Polansek – Reuters

CME & NFA have separately altered oversight rules as they brace for more volatility.

NFA have temporarily increased the minimum security deposit to 5% from 2% in Swiss Franc trades and increased to 3% for Swedish krona and Norwegian krone markets.

Q.V. Read EI Premium posts, including:

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

NY AG Eric T. Schneiderman Files Amended Complaint Against Barclays Capital Inc. And Barclays Plc. – Barclays Dark Pool Lawsuit May Widen – NY AG Says Barclays Isn’t Cooperating with Investigation
MondoVisione
Barclays Rejects Claims In Amended New York Lawsuit Over ‘Dark Pool’
Reuters

In court filings, the New York AG said he has uncovered new evidence that Barclays cheated clients and investors, and that top executives knew what was happening.

Schneiderman also said that Barclays has refused to cooperate in his probe, and refused to allow two top equities electronic trading executives he had subpoenaed to submit to questioning.

PLY: An ugly showdown is looming.

Schneiderman announced fraud charges against Barclays in connection with marketing and operation of its dark pool in June last year.

ADM Takes Over ICAP’s Base Metals Broking Business
Eric Onstad – Reuters

ADM Investor Services International Ltd (ADMISI) has boosted its commodity division with a transfer of the base metals broking operations from major broker ICAP, it said on Wednesday.

CFTC Non-US Exemption Programme Needs Clarity (subscription)
International Financial Law Review

New CFTC staff letters suggest the early stages of an exemptive programme for non-US clearinghouses. This would give foreign clearinghouses more flexibility, though few details are available at this point.

CFTC Commissioner Mark Wetjen On CFTC Approval Of TOCOM As An FBOT & SEF Remarks
MondoVisione

Mark Wetjen notes: “Embracing a foreign SEF regime would be a useful step toward implementing the CFTC’s cross-border framework and would also help prevent unnecessary fragmentation of the global swaps market.”

EU Capital Markets Plan Does Not Need A Super-Regulator-Official
Huw Jones – Reuters

The EU’s plan to build a capital market union (CMU) will not include a super-regulator for markets in the same way the ECB now supervises top euro zone lenders, a senior EU official said on Wednesday.

The comment will assuage concerns in Britain, the bloc’s biggest securities market, that a push by Brussels for a new, more powerful EU regulator to oversee the City of London financial sector would stoke anti-EU sentiment ahead of a general election in May.

SEBI Under CBI Lens
Sucheta Dalal – Moneylife

Will SEBI’s draconian powers be curtailed?

Among the many hurried and ill-considered legal amendments pushed by the United Progressive Alliance (UPA) government in its last months in office was the comprehensive amendment to the SEBI Act. The amendment has made SEBI among the most powerful capital market regulators in the world. It allows SEBI to seize assets, settle claims through consent or order the arrest of a person without intervention or ratification by a judicial forum. This was done even though SEBI’s handling of civil powers, such as consent and adjudication, were arbitrary as well as capricious. SEBI has consistently refused to issue detailed speaking orders in consent cases and there are innumerable instances where similar charges have led to vastly different settlement terms or penalties.

PLY: Indian regulators need to resolve problems not flex muscles. Less is definitely more in the case of SEBI benefitting markets,

SEC Announces Charges Against Standard & Poor’s for Fraudulent Ratings Misconduct
SEC

SEC announced a series of federal securities law violations by Standard & Poor’s Ratings Services involving fraudulent misconduct in its ratings of certain commercial mortgage-backed securities (CMBS).

S&P agreed to pay more than $58 million to settle the SEC’s charges, plus an additional $19 million to settle parallel cases announced today by the NY AG’s office ($12 million) and the Massachusetts Attorney General’s office ($7 million).

Private Markets

Introducing LedgerX: Bitcoin Options Exchange Awaiting CFTC Approval
MondoVisione

Special Section: FTI, NSEL, India at the Crossroads

PLY: FTIL and MCX flat as there is some encouraging news:

Good News For NSEL Investors As Government Mulls Funds Recovery
Shrimi Choudhary – dna

The victims of NSEL scam may soon get their lost money back. After attaching properties worth more than the scam amount of Rs 5,600 crore (USD 909 mln), the government is now considering setting up a special court of Maharashtra Protection of Interest of Depositors (MPID) or a Special Competent Authority with independent infrastructure to fast-track the recovery process.

PLY: Precisely what is required. Auction all encumbered assets ASAP, please.

Technology

Russell Investments & Integral Launch Comprehensive Execution Service For Institutional Investors — Designed To Fix The Fix
Business Wire

Russell Investments and Integral Development Corp., a leading FX technology company, announced the launch of Russell FX Network (RFX Network), a new end-to-end trading solution for the buy-side community for netting, execution and allocation of fx transactions.

RFX Network allows buy-side firms to automate execution of complex trade lists in a novel solution that combines internal netting within an investor’s trading portfolio with external matching amongst the larger buy-side community. RFX Network combines two technology solutions developed by Integral — powerful internal netting capabilities and an FX facility that matches customer interests at the midrate — into a comprehensive FX execution service.

KRX Signs MoU With Markit Ltd.
MondoVisione

NSE Gets Ready For Day Trading With New Platform
Reuters

Nairobi SE is buying a new securities settlements platform to cut transaction times and allow for the introduction of day trading, a senior official said on Wednesday.

Rose Mambo, the chief executive of the bourse’s Central Depository and Settlement Corporation (CDSC), told Reuters the system would go live in September.

Products

China – Stock Option Launch Will Be Slow
Lu Jianxin & Jake Spring – Reuters

China’s first stock options will launch next month (previously mentioned here) with limited access to investors due to their risky nature.

SGX Plans China Equity-Index Options Amid Futures Demand
Jonathan Burgos & Adam Haigh – Bloomberg

SGX is in talks with the CSRC on when the Singapore bourse can introduce options on the FTSE China A50 Index, with approval likely to come after such products are introduced on the mainland. Volume on China A50 futures traded in Singapore surged 183 percent in the three months ended Dec. 31.

“We’re awaiting CSRC guidance on when they are ready to let options trade overseas,” said Ramaswami. “We are not in a great rush. The futures have some room to grow and options does provide a second stage of growth.”

PLY: Options on the Chinese Index will be an exciting development for SGX. Readers may recall how Nikkei 225 futures helped bolster SIMEX volumes during the 1990s. This is an opportunity of even greater magnitude with the futures already building traction healthily.

J.P. Morgan Creates Unit To Meet New Bond Trading Patterns (subscription)
Christopher Whittall – Wall Street Journal

J.P. Morgan Chase has set up a new 12-person unit focused solely on trading credit index products such as CDS benchmarks and ETFs., in response to increasing customer demand to trade indices instead of individual bonds where liquidity has been drying up.

BlackRock & MarketAxess Target Europe (subscription)
Philip Stafford – Financial Times

BlackRock has brought its year old corporate bond trading venture with MarketAxess to Europe to try to offset the retreat of large investment banks from the market.

Read our Premium post: On Bonds & SEFs

MEFF Launches New Contract On Stock Dividend Futures
FTSE GM

As of January 27th, MEFF, the Spanish Derivatives exchange operated by BME, will list for trading and registration Single Stock Dividend Futures contracts with a larger contracts size..

Sebi To Meet On Thurs To Amend Warrant Regulations
Nayantara Rai – Moneycontrol

Sebi will be meeting on Thursday to amend regulations for partly paid shares and warrants, to align it according to the RBI rules.

Career Paths

Nasdaq Entrepreneurial Center, a newly-formed non-profit organization dedicated to promoting and delivering educational support to ambitious entrepreneurs, named Nicola Corzine as its Executive Director.

PLY: Not quite sure what the precise concept is here but clearly anything which encourages entrepreneurship in the face of the blob is to be hugely encouraged.

SEC announced that Norm Champ, Director of the Division of Investment Management, will leave the agency later this month after five years serving in senior leadership positions.

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.

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