January 23 2015


Good Day and welcome to Exchange Invest, the first daily bulletin after it became entirely evident the lunatics now run the European central banking asylum.

While Europe is “Dazed & Confused” then the US has a message suggesting “Flawed and Conflicted” concerning CME-GFI. Meanwhile the blob’s AGM is taking place in Switzerland, I have a column on the topic here. Forex ramifications swirls alongside accusations of conflict of interest for CFTC Commissioner Chris Giancarlo. Just a few of today’s stories, with added pith below:

Meanwhile, over in Premium Posts, a few staggering Chinese leverage numbers and 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
WSE – Wiener Borse Failed Merger Brief – Part 3 – August – December 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

IronFX Planning Bid For Alpari UK (subscription)
Financial Times

IronFX has confirmed it is interested in making a bid for Alpari, the UK retail foreign exchange broker that went into administration on Monday.

KPMG, which is running Alpari, is in discussions with a handful of parties and is hoping to sell the business in the coming seven days after receiving more than 40 EOI.

Alpari Declares Middle East Operations Still Going Strong, But Without MT5
Andrew Saks-McLeod – LeapRate

Alpari ME DMCC in Dubai remains fully operational, as the firm’s Middle Eastern operation is run separately from Alpari UK. The only change in service is a temporary unavailability of MetaTrader 5 due to servers being located in London.

75% Of Interactive Brokers Franc Losses From FX Futures, Not Spot FX
Forex Magnates

Providing critical details on their forex business in the company’s financials conference call, IB addressed what product was the biggest loser, who were the largest losers and the size of their forex business.

PLY: Interesting numbers from IBKR insofar as their future franchise in some ways demonstrates its enormous size as a broker, given that forex futures are a tiny slice of the overall pie yet IBKR clients can net lose $120 million there… Thomas Peterffy notes how the CME CHF futures actually offered greater leverage at their earlier margin rates than the IBKR leveraged forex offering.

France Seeks To Revive European FTT (subscription)
Alex Barker & Philip Stafford – Financial Times

France tried to revive Europe’s floundering FTT initiative on Thursday, urging 11 eurozone countries to regroup around a more expansive levy, imposed at “low rates”.

Eurozone finance ministers backing a tax — a group that includes France, Germany, Italy and Spain — hit a dead-end in December after almost three years of meandering efforts to agree a common European levy.

PLY: A classic case of EU 101: any proposal which has not been accepted will keep being reintroduced if it is proposed by France of Germany, until the others accept it…

BGC Partners, Inc.: Glass Lewis Recommends GFI Shareholders Vote Against “Flawed And Conflicted” Merger With CME

BGC Partners announced that Glass Lewis, a leading independent proxy advisory service, has recommended that shareholders of GFI Group vote AGAINST the merger agreement with CME at the special meeting of GFI shareholders scheduled for January 27, 2015.

PLY: “Flawed and Conflicted” is a pretty brutal statement for a proxy firm. Whoever wins the battle, collateral damage has been inflicted on some parties in this bruising battle which may or may not reach a conclusion next week at the EGM on January 27th.

CFTC Official Tied To Wall Street Profits From Merger Fight
Robert Schmidt – Bloomberg

PLY: Commissioner Chris Giancarlo comes under some pressure as his sales of GFI stock could suggest he was waiting for a GFI deal before selling out… Former George W Bush White House Chief Ethics lawyer Richard Painter is the smoking gun analyst here, noting how folk like Paulson sold all as soon as they were appointed (albeit Giancarlo did follow the rules…). Certainly the elongated sales process raises questions given that it strikes me lots of investors knew GFI were looking for a deal of some sort during the past year. A tricky situation.

Read our Premium brief: BGC – CME – GFI Brief

Barclays Fights Back In Dark Pool Case (subscription)
Gina Chon – Financial Times

Barclays has stepped up its efforts to persuade a US judge to throw out a case brought by the New York AG alleging the British bank misled clients about its secretive “dark pool” private trading venue.

Eric Schneiderman’s office filed an amended complaint against the bank on Wednesday further to the original fraud charges against Barclays in connection with marketing and operation of its dark pool in June last year.

Dark-Pool Platform Luminex Raises Bar For Transparency (subscription)
South China Morning Post
The Cost-Benefit Of Luminex (subscription)
Timothy Bourgaize Murray – Waters Technology

Luminex, a newly-proposed trading venue operated by and for nine sizable investment managers, made major waves this week, even as it remains months away from completion. How serious might the consequences be, and for whom?

As discussed already in Premium post: Luminex – Crazy Name, Crazy Development?

Investors Wanting To Stay Anonymous Hide In Asian ‘Dark Pools’
Eduard Gismatullin – Bloomberg

When Kent Rossiter seeks to place large orders to trade Asian stocks — a common scenario given his employer, Allianz Global Investors, is among the biggest asset managers — he finds computers are his allies.

To ensure competitors don’t sniff out his plans and make it more expensive to buy or sell, Rossiter turns to platforms such as Liquidnet and ITG. In the old days, he would’ve used a human broker. The Hong Kong-based trader isn’t alone, fueling a boom in volume at electronic block-trading systems — sometimes called dark pools — that give investors anonymity.

Why 34 European Stock Markets Aren’t Enough For Project Plato
John Detrixhe – Bloomberg

Eight financial institutions have rallied behind Plato Partnership Ltd., a venue designed to exploit a loophole to the new rules: a get-out clause for the biggest trades.

The group will make a tool for buying and selling large orders of European shares a centerpiece of its proposed dark pool, Stephen McGoldrick, the project’s director, said during an interview. Six banks — Barclays Plc, Citigroup Inc., Deutsche Bank AG, Goldman Sachs Group Inc., JPMorgan Chase & Co. and Morgan Stanley — have signed up because they fear the rule changes will make it more expensive to trade some European stocks.

Turkey Courts High-Speed Traders As Exchange Faces Competition
John Detrixhe & Constantine Courcoulas – Bloomberg

BIST will rev up its trading engine this year with Nasdaq’s help, seeking to court the latest generation of computerized strategies with the upgrade due to go live September 21st.

Casualties Mount In High-Speed Trading Arms Race (subscription)
Gregory Meyer, Arash Massoudi & Philip Stafford – Financial Times

U.S. CFTC Grants SGX U.S. Futures Clients Direct Access

LCG Sees Charles-Henri Sabet’s GLIO Start To Convert Loan Notes Into Shares
Andrew Saks-McLeod – Leap Rate

On January 20, London Capital Group (LCG) approved a notice from Charles-Henri Sabet’s GLIO Holdings Limited to convert 1,688,000 loan notes of £1.00 each in LCG at a price of 25.02p, accompanied by an application for 9,000,000 ordinary shares of 10p each to be admitted to trading on AIM.

CFTC Issues Order Of Registration For Singapore Exchange Derivatives Trading Limited
CFTC Issues Order Of Registration For Bursa Malaysia Derivatives Berhad

ESMA Adds Athens Exchange Clearing House To Its List Of Authorised CCPs

(You can also find the list of EMIR approved CCPs can be studied on our website here).

Private Markets

BATS Successfully Completes Direct Edge Integration; U.S. Market Share Remains 21%
BATS Global Markets

BATS Global Markets reported the successful and complete migration of the legacy Direct Edge stock exchanges, EDGX and EDGA, to the proprietary BATS technology.

Kazakh Central Bank To Reduce Its Stake In KASE

The National Bank of Kazakhstan intends to reduce its stake in the capital of the Kazakhstan SE (KASE) in a bid to attract strategic investors to the bourse, to below 25%.

According to KASE, the National Bank held 471,949 shares of the stock exchange, or 50.1001%, as of January 1, 2015.

Thai Bourse Teams Up With Alliances To Enhance Thailand’s Sustainable Investment

Winklevoss Twins Aim To Take Bitcoin Mainstream With A Regulated Exchange
Nathaniel Popper & Sydney Ember – NY Times

Now two of the biggest boosters of the virtual currency, Cameron and Tyler Winklevoss, are trying to firm up support by creating the first regulated Bitcoin exchange for American customers — what they are calling the Nasdaq of Bitcoin, or Gemini.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX up around 1.5%, FTIL down by a similar amount.

Lenders Move High Court Opposing FTIL-NSEL Merger
Khushboo Narayan – Livemint

Four creditors of FTIL, Union Bank of India, Syndicate Bank, DBS Bank Ltd and Standard Chartered, have moved the Bombay high court opposing the government’s decision to merge the company’s unit NSEL with the parent..


Liquidnet Reimagines The Way The Buyside Trades With Launch Of Liquidnet 5

PLY: What ought to have been an interesting upgrade announcement for Liquidnet with the arrival of a great new system has been entirely overshadowed with news of Luminex and others such as Project Plato, above. Plato is a sell side initiative but Luminex is absolutely a tank on the lawn of the home turf of the original Institutional Liquidity Pool.

In other words Liquidnet has capably reimagined the way the buyside trades through it while simultaneously the buyside is reimagining how it trades with Liquidnet.


Integrated Latam Bourses To Offer Debt In 2016, Sector Indexes

Latin American Integrated Market (MILA) which comprises the bourses of Chile, Colombia, Peru and Mexico, plans to include debt instruments in 2016 and indexes for sectors such as mining and energy.

Marking the inclusion of Mexico into the combined market, the officials warned, however, that they expect a slow pick-up in cross-market trading. So far, just one trade has been made by a Mexican brokerage using the platform since early December.

Icap Readies European Bond Data Feed, Historical i-Swap Data (subscription)
Waters Technology

Icap’s information services business is preparing to launch a new market data product for European bond data as part of a new push to commercialize market data from its electronic trading business in 2015. Icap already offers market data for US treasury bond from its Brokertec fixed income trading platform, which it distributes via Thomson Reuters’ Eikon desktop, but is now launching a separate product covering European government bonds.

You Can’t Transform Bond Trading Without Dealers, Greenwich Says
Matthew Leising & Annabelle Ju – Bloomberg

As new trading platforms seek to change how business is done in the $7.7 trillion U.S. corporate bond market, a research firm has a warning: Don’t shun the banks that traditionally facilitated transactions.

Eighteen electronic trading systems are currently competing for orders, according to a report from Greenwich Associates. Although part of their business model involves solving a conundrum — the liquidity drought caused by banks withdrawing from the market in response to new regulations — success hinges on including the dealers, analyst Kevin McPartland said.

Read our Premium post On Bonds & SEFs.

Career Paths

ESMA: Call For Candidates For The CRSC CWG

ESMA is renewing its consultative working group for the Corporate Reporting Standing Committee.

Financial Calendar

Next week

GFI Group special meeting of stockholders to vote on the transaction with CME
Nasdaq Q4 Financial Results
ITG Q4 2014 Financial Results

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


RBS Strikes P2P Alliance (subscription)
Emma Dunkley – Financial Times

RBS has struck a deal with two peer-to-peer lending platforms to provide small businesses with wider access to finance, following government plans to make UK banks help customers find alternative funding.

The state-backed bank has formed a partnership with Funding Circle and Assetz Capital that will enable it to refer some smaller businesses that it is unable to finance on to the platforms.

Other stories

Why Libor Is Just The Latest Chapter In Britain’s Obsession With Punishment
Charles Kuhn & Ben Rose – CITY AM

Britain’s enduring obsession with punishment has resurfaced in its response to the Libor scandal. The number of UK traders charged for Libor-related offences by the Serious Fraud Office has reached 13, placing Britain far ahead of other European countries in its tally of prosecutions for benchmark manipulation.

Investigations continue and the UK authorities have indicated that there are more prosecutions to come.

PLY: Interesting reading.

RP Martin Execs David Caplin & Jeremy Kraft Fined & Banned Over Libor Manipulation
Catherine Neilan – CITY AM

The former CEO and former compliance officer of IDB RP Martin have each been fined a six-figure sum and banned from holding senior roles at financial services firms “for compliance and cultural failings”.

David Caplin, who had been at the firm for at least 17 years, has been ordered to pay £210,000, while Jeremy Kraft, who was at Martins for nearly nine years, received a £105,00 fine from the Financial Conduct Authority.

Keynote Address By CFTC Chairman Timothy G. Massad Before The Monetary Authority Of Singapore – The Future Of Financial Market Regulation, January 23, 2015

Sebi Relaxes Norms On Delisting Of Shares
Anirudh Laskar – Livemint

Sebi, on Thursday, relaxed its recently announced delisting norms, after certain practical difficulties were highlighted by market participants.

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