January 23 2014

elb2

Lots happening around here, with our subscription product all but ready for rollout (just ironing out paywall glitches currently), meanwhile we have begun sending out SIB News which we told you about in beta some months back. Social Impact Bonds are a funky new way to deliver services to the greater good while helping reduce direct government expenditure. It’s a fascinating area and we are delighted to be sending a newsletter to a key but growing list of people in the field (if you would like a briefings on SIBs, we will be happy to provide calls and presentations).

Meanwhile in Exchange Invest today, the LSE numbers are slightly ahead of consensus for Q3, Bloomberg blazes a trail in SEFs & gains SDR approval while EU Court rejects UK short selling case. There is one Bitcoin article you just have to read and lots of news on product, TRs, et al.

Public Markets

LSEG – Interim Management Statement For The Period To 22 January 2014
LSEG

Strong financial performance – Q3 total income +48% at £308.9 million, 9m ytd +38%, to £876.0 million.

Growth driven by organic increases in all segments, plus inclusion of LCH.Clearnet revenues; on an organic constant currency basis, Q3 revenues up 13%.

Capital Markets Q3 revenues up 21%, with good growth in primary markets as the number of new issues nearly doubled; secondary markets benefitted from improvements in cash equity and fixed income trading volumes.

PLY: LSE reports good progress integrating LCH.Clearnet with modest growth while Italian post trade revenue was +14% with slightly higher growth (16-17%) in indices, IT services et al. Encouraging numbers all round.

Euronext Sees Regulatory Backing For Spin-Off In Feb
Reuters

PLY: As in they expect to get the backing of the regulator for the spin-off in Feb, no danger Europe could move so fast as to spin-off in Feb as the headline infers to me… Note the article is suggesting a broad 1-1.5 billion Euro IPO pricing. This suggests clear slippage (are we surprised?) after all the recent clear sweep of French regulatory interventionism.

EU’s Top Court Rejects UK Challenge To Short-Selling Law
Reuters

The EU’s top court has dismissed Britain’s challenge to a law on banning the short-selling of shares in market emergencies, dealing a blow to UK attempts to limit the influence of EU rules on the City of London.

British Prime Minister David Cameron had been seeking to limit EU controls on London, the bloc’s biggest financial center, reflecting a broader attempt to renegotiate the country’s membership of the EU ahead of a promised referendum on staying in the bloc.

Topic discussed on January 22nd.

PLY: A setback for Britain and financial markets and more impetus to the UK to seek renegotiation or in extremis “Brexit.” Clearly with even the corporate luvvies at Davos unable to stymie debate on a likely further bout of Eurocrisis, the regulators want to be able to ban short selling – as if that will make the day of reckoning any more orderly. ESMA now has the poisoned chalice of something else to control with a skeleton staff of 150 while implementing MIFD II and policing/introducing a raft of other regulations (and apologies if I have been banging on about that point this week!).

EEX And CLTX Creating A Combined Global Offering
MondoVisione

EEX and CLTX have joined forces to create a unique global offering in the commodities sector. The acquisition, completed in December 2013, has already resulted in a combined group with over 300 members and 10 major asset classes. The deal has been enthusiastically welcomed by members of both exchanges.

EI reported on January 13th that EEX bought 52% of CLTX. A press conference was taking place in London today as EI closed for press.

Hong Kong’s SFC Urged To Strike ‘The Right Balance’ In Enforcement (subscription)
South China Morning Post

Hong Kong financial professionals said they support the Securities and Futures Commission in expanding its muscle on enforcement but warn that excessive zeal in an over-regulated market may discourage new listings.

Bloomberg’s Swap Data Repository (SDR) BSDR LLC Is Fourth SDR To Be Approved By CFTC
Forex Magnates

BSDR LLC, a subsidiary of Bloomberg LP, has been approved provisionally as a Swap Data Repository (SDR), becoming the fourth SDR after ICE Tradevault, CME Group SDR and DTCC Data Repository, to be provisionally approved by the CFTC, and registered to be able to trade in interest rate, equity, credit, foreign exchange, and other commodity asset classes.

PLY: We have added a page with details of SDRs as they apply and are registered, see here.

Private Markets

Bloomberg Leads SEF Market Share
Markets Media

Bloomberg has jumped to an early lead in the SEF sweepstakes, capturing an 85% market share across all asset classes for dealer to client swap execution facilities, according to data from Clarus Financial Technology.

“We’ve been pleased with the volumes and participation on Bloomberg’s SEF since the October launch,” said Ben Macdonald, Bloomberg’s head of product and president of Bloomberg SEF LLC. “Nearly 400 global firms, including all the major liquidity providers, have signed on to use our platform. As of mid-January, more than $800 billion in interest rate, credit, foreign exchange and commodity swap volume has been executed on our SEF.”

PLY: 85% is a simply staggering number for dealer-client transactions given almost 2 dozen approved/pending platforms! I actually find it hard to believe that any segment has so far broken so clearly for a single platform…

Nigeria Bourse CEO Says Close To Hiring Advisers For Share Sale
Businessweek

Nigerian SE is close to hiring external advisers as it prepares to distribute shares to its members and hold an initial public offering, said CEO Oscar Onyema.

PLY: Nigerian economic growth is anticipated at 6.75% this year with highly favourable demographics – could be a fascinating IPO.

Nigeria To Sell Abuja Commodity Exchange Stake To Revive Market
Businessweek

Nigeria’s government plans to sell its ownership of the Abuja Securities & Commodities Exchange by the middle of the year after missing an initial deadline in a plan to revive trading.

“The government wants to privatize the only commodity exchange and it had committed to doing it by the end of last year.It didn’t meet that deadline, but it’s planning to do something by the middle of 2014,” said SEC Director General Arunma Oteh.

PLY: Also a very interesting potential sale.

Irish SE Initiative Could Be A Flyer
Irish Examiner

A couple of years ago Enterprise Ireland asked a group of aviation lawyers, aviation financiers, lessors and other state agencies including the IDA to get together and brainstorm about how the aviation industry here could be fortified and expanded. One of the ideas that stemmed from that forum (on which I sit) was to encourage ISE to more actively promote its abilities to support the funding of the aircraft leasing sector. The response was enthusiastic.

EI reported on January 21st that ISE will introduce a market for aviation funding.

PLY: Irish broker Joe Gill discusses the way the Irish SE came to create this fascinating new market for aviation finance.

Bloxham Challenge Revocation From ISE
Irish Examiner

The creditors of liquidated stockbroking firm Bloxham could get 40% of what they are owed, rather than 10%, if the liquidator wins his challenge to ISE’s decision to revoke its membership, the High Court has heard.

Liquidator Kieran Wallace claims the decision of ISE to revoke the membership cost Bloxham €6m, was not made for proper purposes or for the benefit of the company as a whole, and should be set aside as null and void.

PLY: The ISE structure meant that on liquidation their share stake was lost in the exchange just when the exchange was considering restructuring to the business which would likely have resulted in clear benefit to the shareholders. A tricky situation. ISE followed the rule book but clearly the former brokerage scents cash!

EMEX, LLC Exceeds Expectations, Growth Exceeds 110% YoY
Digital Journal

EMEX, LLC is revolutionizing how energy is bought and sold through its live Exchange is expanding thanks to significant growth. The Energy Market Exchange, the real-time Exchange for commercial and governmental energy products and powered by the EMEX Reverse Auction online platform, has been successful in the Energy Procurement Sector and allowed EMEX to flourish within the deregulated states.

EMEX’s new offices include the Houston, TX’s headquarters doubling in size, and the opening of its first Northeast office, located in Trenton, New Jersey.

PLY: If you want to read today’s biggest hype press release, this one is it, I have taken the liberty of significantly watering down the liberal deployment of superlatives lest it detract from what is a very exciting story.

LMAX Exchange To Allow Trading In Ven
Wall Street Journal

LMAX Exchange, which is regulated by FCA, will today allow trading in Ven against the pound sterling and the dollar. The trades will be settled in pounds and dollar and any gains are likely to be liable for taxation.

Ven, which exists only in digital form was introduced in 2007, is currently used by members of Hub Culture, a social network that has 30,000 members, to buy and sell things.

PLY: Fascinating, of course Ven is not the first in such a situation as the little known Polish Commodity Exchange used to trade a future on the WOCU, another attempt at a basket trading unit currency.

Uganda – Explain Trading Of Shares – Minister Kiwanuka
New Vision

Finance minister Maria Kiwanuka has asked the leaders of the Capital Markets Authority and the Uganda Securities Exchange (USE) to demystify the trading of shares and bonds for Ugandans to gain interest in the business.

“USE must be a normal thing to Ugandans. Capital markets should be like mobile phones which are found in everyone’s house. We should make capital markets an everyday thing,” she said.

PLY: Encouraging. Something every Finance Minister ought to consider.

Why Bitcoin Matters
NY Times

A mysterious new technology emerges, seemingly out of nowhere, but actually the result of two decades of intense research and development by nearly anonymous researchers.

Political idealists project visions of liberation and revolution onto it; establishment elites heap contempt and scorn on it.

On the other hand, technologists – nerds – are transfixed by it. They see within it enormous potential and spend their nights and weekends tinkering with it.

PLY: Today’s must read, a tidy logical explanation of why cryptocurrency is the future written by Marc Andreessen who after all founded Netscape which is often a corollary for how Bitcoin is now and how cryptocurrency will likely grow…

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX and FTIL are flat today.

Threat Of EOW Action Spurs NSEL Defaulters To Settle Dues
Business Standard

PLY: The EOW shines again. Some tangible results as the Mumbai fraud squad cuts deals and gets money in for NSEL creditors which NSEL was itsel unable to do.

Mumbai Police Questions 4 Brokerages
Livemint

EOW of Mumbai police on Wednesday said it has questioned four brokerages in connection with NSEL settlement crisis: India Infoline Ltd, Anandrathi Commodities Ltd, Geojit Comtrade and Systematix Commodities Services Pvt. Ltd.

The EOW is probing the exposure of brokerages at NSEL, the manner in which they promoted investments in products offered by the spot exchange and loan disbursed to investors.

EOW Alleges NSEL Funds Diverted For Benami Holdings
Business Standard

PLY: Benami comes from Persian and denotes a property without a name, or nowadays is a term for property held by a nominee who is not the actual owner. It seems the fraud squad have discovered a modest Benami property portfolio on the books of NSEL defaulter Swastik Overseas Corp Ltd, who owe NSEL Rs 102 crore (USD 16.5 mln).

Technology

Traiana Connects To First Trade Repositories For EMIR Reporting
FX-MM

Traiana will provide connectivity to four trade repositories (CME, DTCC, Regis-TR, UnaVista) at the time of the EMIR deadline through its Harmony TR Connect trade reporting service. Support for additional trade repositories will be added after ESMA go-live date.

See all ESMA registered TRs here.

CME’s KCBT Wheat Contracts Now Available In Aspect Enterprise Solutions’ Market Data Portal
MENAFN

Kansas City Board of Trade (KCBT) contracts from CME are now available in AspectDSC, the Cloud-based market data and analytics portal from Aspect Enterprise Solutions.

Bitcoin Baron Keeps A Secretive Open Source OS Alive
Wired

One of the world’s longest-running open source software projects will live on, thanks to a Romanian bitcoin baron.

Recently, Theo de Raadt and the other engineers who oversee the OpenBSD operating system were hit with a $20,000 bill for the electricity that feeds the computers on which they test this venerable piece of software. After they revealed that the bill could bring the project down, Mircea Popescu, the Romanian who runs the online bitcoin exchange MPEx, stepped in to save them.

PLY: Interesting line: “the [Bitcoin] project has created a new class of very rich computer geeks. We call them the bitcoin nouveau riche, and many are sharing their money with their open source brethren.”

Bitcoin Centre NYC Launches Open Source ATM Software
International Business Times

A New York City institution for promoting bitcoin has released proprietary hardware and software that enables developers to create and operate inexpensive bitcoin automatic teller machines.

The Bitcoin Centre NYC, an educational institution for promoting awareness of cryptocurrencies, and its strategic partners released the hardware and software, in a move to open source every aspect of a working bitcoin ATM.

PLY: Open source means a crowd. Not a mob (that’s downtown Kiev currently); a crowd. Crowds get things done and change the world in their way and ultimately the authorities find it difficult to hem them in. That is precisely why cryptocurrency is here to stay…

Products

Euronext To Launch Rapeseed Meal, Oil Futures This Year
Reuters

Euronext will this year launch futures and options for rapeseed meal and oil to offer a full suite of rapeseed derivatives to a growing market spanning food, livestock and biofuel sectors.

NYSE Euronext press release here.

Indexes

S&P GCC Composite Shariah Dividend Index Launched By S&P Dow Jones Indices
MondoVisione

S&P Dow Jones Indices will launch of the S&P GCC Composite Shariah Dividend Index which is designed to measure the performance of the highest yielding, Shariah-compliant stocks from the Gulf Cooperation Council (GCC) region that meet respective liquidity, dividend growth, and dividend sustainability criteria.

Career Paths

MCX has appointed Mr. Rajiv S. Abhyankar, GM (Treasury and Investments), Bank of Baroda, as Shareholder Director on the Board of the Company, subject to FMC approval.

Betfair announced that Joshua Hannah has stepped down from his position as a NED of the online gambling company.

Digital brand strategist Peter Thomson has joined the Seedrs team as their new CMO for the investment crowdfunding platform.

Thomson was previously at the Innovation Warehouse, a startup investment fund. He also has authored a book “Tickle” published in 2013 pertaining to targeting B2B customers using social media.

Financial Calendar

Next week
ITG Q4 2013 financial results on Thursday, January 30, 2014

MarketAxess 2013 Q4 and full year results on Wednesday, January 29, 2014

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

Share Notes

Charles Schwab EVP George A. Gill sold 20,892 shares Tuesday, January 21st at an average price of $26.90 (bargain $561,994.80). He now owns 52,141 shares.

Analyst Notes

ICE New Coverage: $241 Price Estimate On Derivatives Growth, Regulation
Trefis

We are launching coverage of ICE with a price estimate of $241, which is about 15% above the current market 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

Wells Fargo Move Acknowledges Lending Club As Competitor
SFGate

Lending Club, a peer-to-peer lending platform based in San Francisco, was surprised to hear this week that Wells Fargo has banned at least some employees from investing in its business – which connects individual borrowers and individual lenders over the Internet – because it competes with the giant bank.

That’s because Lending Club’s biggest shareholder, with a 19.5 percent stake as of December 2012, is Norwest Venture Partners, a wholly owned subsidiary of Wells Fargo. Lending Club also does its corporate banking with Wells Fargo.

“We are a little puzzled,” said Scott Sanborn, Lending Club’s COO “We have reached out (to Wells Fargo) for clarification.”

EI reported Wells Fargo move on January 21st.

PLY: A fascinating tale. I have a lot of time for the good folks of Norwest VP whom I helped with Due Diligence in their NSE (India) stake purchase a few years back. Meanwhile Wells Fargo have given Lending Club (and P2P as a whole) massive positive publicity through this manoeuvre.

Other stories

AlphaMetrix: We Did Nothing Wrong!
AllAboutAlpha

The firm appeared to have been insolvent since 2010, according to corporate monitor turned receiver Deborah L. Thorne, following a review of the company’s finances. Ironically, that was the year the firm was highlighted in the Crain’s Fast Fifty, published in June 2011, which stated that AlphaMetrix had 2010 revenues of $41.7 million, 87 employees and a five-year growth rate of 8,030%. It also was the year the firm introduced the signature conferences that would later catapult it into infamy.

PLY: A fascinating tale by Ginger Szala discussing the rise and meteoric fall of AlphaMetrix.

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