January 22 2016

elb2KRX preparing for 2017 listing, as investors complain about overly cautious NSE approach to IPO and NSE hits back. LME looking to use its state of the art technology to clear beyond metals. Worries about Trans Atlantic clearing remain as IEX refutes Citadel allegations. Blythe Masters’ Digital Asset Holdings gets swathe of new investors including, even, ASX. Oh and lots more…

Public Markets

New EU Rate-Swap Rule Will Deal A Big Blow To US

Hal S. Scott & John Gulliver – CNBC

A few clearinghouses in the US and Europe now manage most of the risk of the $550 trillion global swaps market. However, EU law is set to prohibit U.S. CCPs from clearing IRS for the largest EU banks on Feb. 21, and then for their clients, like investment funds and insurance companies, three months later on May 21. This prohibition would give LCH SwapClear a big leg up over U.S. rivals like the CME. It would also deal a blow to the competitiveness of the US as a global financial center, as more clearing would move to Europe.

PLY: Nothing in the Trans Atlantic dialogue in recent years has been overly edifying as two power blocs vie for power with apparently no interest in the wellbeing of the markets or the citizens. The EU in particular is behaving like a petulant child, but then again as Empires crumble they usually act irrationally and clearly the European Project is on the precipice of disaster – it may balance there for a few years yet but it won’t survive in its current form.


‘Flash Boys’ Hero Is Picking a Fight With Hedge Fund Citadel

Robert Schmidt & David Michaels – Bloomberg

PLY: Thus I would suggest that Citadel, who some may say exhibit a certain, inelegant, almost Messianic streak of superiority about their countenance, picked the fight with their multiple appeals to the SEC last year


LME Clear Eyes Clients Beyond Metals (subscription)


LME’s clearing house is in talks with a number of new members from outside the metals industry.

PLY: Elegant real time clearing solutions provider LME has a huge safety advantage against many incumbent clearing houses currently, aided by Cinnober’s unique software system. If you don’t get the gist of that, read my Zero Hour paper: Towards A Real-Time Global Marketplace.


Deutsche Bank Sheds Light On US Dark Pool (subscription)

Tim Cave – Financial News

Proprietary trading firms accounted for nearly a third of activity on Deutsche Bank’s US dark pool in 2015, according to disclosures by one of the first banks to reveal highly-sensitive information into trading on its electronic platform.

Private Markets

India Investors Join IPO Chorus For NSE

Ashley Coutinho, Abhijit Lele & Samie Modak – Business Standard

Government-owned entities have begun to mount pressure on the National SE (NSE) to expedite its listing process. Besides foreign private equity (PE) companies, domestic entities like IFCI, State Bank of India (SBI) and IDBI Bank have now expressed disapproval over the delay in getting the exchange listed.

NSE Seeks Sebi Nod For Self Listing

The Economic Times

Under pressure from the investors to get listed, the National SE (NSE) has approached Sebi to allow it to list on its own platform. Sebi norms do not allow exchanges to self-list. NSE’s dilemma is that it does not want to make its shares public on rival bourse BSE.

“It has been clearly articulated by the management recently that the board has taken a view to go ahead with the listing and there is every confidence that NSE will list in short order,” Ravi Narain, Vice Chairman, NSE.

PLY: NSE does get a bit prickly at times when outsiders don’t appreciate the thoroughness by which they make decisions and implement strategy. As previously mentioned multiple times, we know NSE is on a journey exploring IPO, this is a slightly interesting confirmation of the approach with a little more granular hope but at the same time, investors who have been frustrated by the various delays along the way have adopted a high pressure approach. Moreover, investors have little faith in SEBI which appears to be a dire anti-capitalist socialist blob unable to avoid interfering counterproductively at almost every opportunity, no matter how slight. NSE, is a pro market but cautiously managed, example of strategic excellence in exchanges. If NSE can make progress to a first world level and have SEBI recant the sheer stupidity of Jalan and enable own exchange listing then they will be rightly applauded. Meanwhile expect investors to keep the pressure up.


KRX Plans To List By H1 2017

The Economic Times

KRX is unlikely to be included in equity index compiler MSCI Inc’s developed market index, but officials will attempt to get the South Korea back on the list of countries up for review for inclusion in the index.


MSE To Sell 91% Equity In Subsidiary Company

Sangeetha Kandavel – The Hindu

Madras SE (MSE), one of the oldest stock exchanges in the country, intends to sell off approximately 91% equity stake in its subsidiary company MSE Financial Services Ltd.


Taiwan’s FSC To Allow Unlimited Day Trading From Feb. 1

China Post

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX and FTIL both up around 2% as we race to pixel despite the ugly head of AML rearing up in NSEL:

NSEL Ignored Black Money Norms: FIU

Palak Shah – The Economic Times

NSEL has a new problem. The now-defunct commodity spot exchange has been asked to cough up Rs 1.66 crore ($245k) in penalty by the Financial Intelligence Unit, a nodal agency that tracks the flow of black money. FIU says that NSEL was supposed to report details of transactions conducted on its platform to the FIU as all banks and brokers do. The notice says NSEL failed to adhere to its obligations under Prevention of Money Laundering Act (PMLA) despite knowing fully well that operations on its platform and that of its members were fully vulnerable to money laundering.

QV Premium: NSEL Scandal Brief – Part 16.

PLY: If India had a coherent system of legal redress – which clearly the delay in any sensible settlement for NSEL demonstrates it does not – the above would be useful data to hang on NEDs and others at NSEL. Rather the system festers and foreign bourses hope the new IFC in Gujarat will be a GIFT-horse. Yet, without a truly impressive, separate legal system, neither Mumbai IFC nor GIFT will really withstand clear due diligence.


ASX Selects Digital Asset to Develop Distributed Ledger Technology Solutions


ASX Builds Blockchain For Australian Equities

James Eyers – SMH

ASX will protect itself against disrupters by redesigning its technology systems to use a “blockchain” that will allow near real-time settlement of equities trades and slash administration costs.

ASX is working with Digital Asset Holdings to build a “distributed ledger” that could ultimately replace the clearing and settlement systems provided by the ASX through its CHESS platform. ASX has paid $14.9 million for a 5% equity stake in the New York-based company.

PLY: Given the widespread number of early adopters in Blockchain in Australia, it is interesting that ASX has gone with Digital Asset Holdings – I wonder if La Masters is aware of the reputation risk of dealing with the Sydney-based monopolist which repeatedly has appeared broadly unwilling to help the Australian market develop beyond its own narrow self-interest?


Blockchain Startup Gets Big-Bank Backing (subscription)

Telis Demos – Wall Street Journal

Euclid Opportunities invests In Digital Asset Holdings – Strategic Investment Made Through ICAP’s Early Stage Fintech Funding Business


Digital Asset Holdings, a startup trying to develop mainstream uses for blockchain technology and led by star banker Blythe Masters, has raised more than $50 million from 13 investors including J.P. Morgan Chase, Citigroup, BNP Paribas, CME and Accenture.


FCA’s Makoto Seta: ‘Blockchains Will Transform The Way Regulators Work’

Ian Allison – IBT

PLY: One lives in hope.


Outlook 2016: Blockchain Technology Is Coming

John D’Antona Jr. – Traders Magazine


China Mulls Answer To Bitcoin With Digital Currency Study

Lulu Yilun Chen & Justina Lee – Bloomberg

People’s Bank of China (PBOC) said it is studying the prospects of issuing its own digital currency and aiming to roll out a product as soon as possible, contending that alternative payment systems can improve the efficiency of global transactions.

PBOC set up a research team in 2014 to study digital currencies and application scenarios. PBOC consulted with experts from Citigroup and Deloitte, though it didn’t specify what technology it would be using to issue its digital currency or how it would work in relation to the yuan.


Talk Of Blockchain Eclipses Basel III At Davos (subscription)

Gillian Tett – Financial Times

PLY: I find this more worrying than heartening – the blobsters of Davos – an annual retreat for multinational corporate ambition and the electoral trough – are apparently convinced Blockchain is salvation. This demonstrates they have turned entirely inwards from actually delivering any attempt at growth and are now just trying to save costs by tweaking the plumbing… They never actually did vision at Davos (just look at the guest list of mediocrity, it was unlikely to ever have the few lateral thinkers overpower the linear infantry of pollie-blob-c-suite placemen, but hey it gives 24 hour tv news a chance to feel good about itself.


Nymex To Add Petroleum Incentives On February 1 (subscription)

Alice Attwood – FOW

CME’s Nymex exchange will add on Friday a new incentive programme to boost market liquidity in international petroleum trading.


Bahrain Bourse To Trade T-bills As State Debt Swells


Bahrain Bourse would list and trade Treasury bills issued by the government, which is trying to broaden the investor base for its debt as sliding oil prices put state finances under pressure.


Thai Bourse & SEC To Launch “Digital IPO,”One-Stop Digital Listing Service From Jan 25


PLY: Great stuff, something I have advocated for years.


Traiana, Trax Partner Over Repo Matching Service

Maria Nikolova – Leap Rate

Traiana, part of ICAP, and Trax, have formed a business alliance to offer the industry an interoperable Repurchase Agreement (repo) matching service.


ISDA IRDs Market Analysis: 67% Of Notional Cleared – Compression Reduces Market Size By 62%



Canadian Securities Regulators Seek Comment On Rules Protecting Customer Collateral For Cleared Derivatives



Iran’s Financial Regulator Plans Mortgage-Backed Securities Market

Bernardo Vizcaino – Reuters


BNP Paribas Supporting €GCPlus Market

Asset Servicing Times

BNP Paribas Securities Services has launched a clearing, settlement and custody service for clients trading euro cash liquidity through €GCPlus, a centrally cleared triparty repo-secured financing market developed by Banque de France in collaboration with LCH.Clearnet SA and Euroclear.

Career Paths

CNBC Transcript: Interview with Carsten Kenteger, CEO of Deutsche Borse


PLY: Kengeter: “I think it’s cautiously optimistic Davos man thing.” Surmises succinctly an interview about economics not DB1.

Anne Stausboll, CEO for the California Public Employees’ Retirement System (CalPERS),  announced she will retire as the head of the nation’s largest public pension fund on June 30, 2016.

Ludwik Sobolewski, CEO of the Bucharest SE will become Non-Executive Chairman of Highway Capital PLC.

Financial Calendar

Next week

25.01 – ESMA Open Hearing For Validation And Review Of CRA Methodologies

26.01 – CFTC’s Technology Advisory Committee

28.01 – Nasdaq Q4 2015 Results

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

Analyst Notes

LSE “Outperform” Rating Reiterated By Credit Suisse – GBX 2,900 Price Target

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


FCA Proposes More Flexibility For Crowdfunding Platforms

Huw Jones – Reuters

FCA proposed giving crowdfunding platforms flexibility in how they handle money from investors after complaints the existing regime is too burdensome.

PLY: Good to see FCA listening as their crowdfunding regulations are indeed far too prescriptive.

Other stories

CFTC Launches Whistleblower Program’s Website



IOSCO: Emerging Market Regulators Reinforce Commitment To Strengthen Resilience While Ensuring Fair And Orderly Markets



SEC: Opening Remarks To The Investor Advisory Committee, Chair Mary Jo White, Jan. 21, 2016


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