January 24 2014


It’s France and Germany in the vanguard against the EU’s plans to reduce proprietary trading while NZX makes a modest sale. DB finally settles Iran sanctions, just as sanctions look to be on their way out, NASDAQ private market delayed, Coal trading for CLTX, Niederauer seeks tech guru status, all manner of ETF news and lots more.

It’s Friday, the weekend is looming and next week will be an exciting one – stay tuned to Exchange Invest!

Meanwhile, happy scrolling through today’s edition:

Public Markets

FTSE MV Exchanges Index Up 31.9 Percent In 2013 – JPX Best Overall Performer

PLY: BvB did well in Q4 as the Sobolewski effect delivered a successful IPO privatization. Likewise Abenomics propelled the merged JPX throughout the year while MCX was rebounding in Q4 thanks to the ongoing prospect of surviving the NSEL debacle (although its y/y performance was a dismal minus 71% – as NYSE shareholders know only too well). Dubai FM jumped during 2013 while BM&F Bovespa suffered along with Brazilian economic jitters and the likely arrival of competition.

Euronext Launches Multicurrency Trading Service For ETFs
NYSE Euronext

Euronext announced the launch of a multicurrency trading service for ETFs, including for the first time on a U.S. or European exchange, the Chinese Yuan Renminbi (CNY) and Hong Kong Dollar (HKD), subject to approval of relevant clearing authorities.

The new service will allow international investors to trade any Euronext listed ETFs in 20 different currencies. Euronext plans to make it available from Monday 17th February 2014.

PLY: Multi Currency trading is finally arriving, only a decade or so after I thought it would…

Germany, France Attack EU Plan To Curb Big Banks

Germany and France have attacked EU plans to curb banks’ ability to take market bets with their own money, warning that this could jeopardize a delicate economic recovery.

PLY: Anybody who doubts banking has become a crony capitalist enterprise sitting alongside government only needs to read the line above. Moreover, the concept that banking will grow the economy in the next decade is abstract in the extreme as the banks need to prop trade with gusto just to make their capital adequacy ratios. Of course the problem is that if the banks are restricted in trading then they might sell their gargantuan holding of bonds issued by states on the verge of a nervous breakdown, like, er, France…

NZX Sells NewsRoom To Sublime Group

NZX has agreed to sell its online news unit NewsRoom to Sublime Group for an undisclosed sum, after undertaking a strategic review of options for the business. The sale will take effect from the end of the month and won’t have a material impact on NZX’s results, having bought NewsRoom in 2007 for $1.18 million.

Auckland-based Sublime automates manual workflows to reduce the cost of doing business with Craig Pellett and Cowan Pettigrew as its biggest shareholders.

Deutsche Boerse To Pay $152 Mln Over U.S. Sanctions On Iran

Deutsche Boerse unit Clearstream agreed to pay $152 million to settle allegations that it held some $2.8 billion in securities in the US for the central bank of Iran (via an unnamed US bank, in some 26 securities), the U.S. Treasury said on Thursday.

We previously mentioned this settlement from the DB side in EI on October 29th regarding the US offer to DB, then DB accepting the offer on November 8th.

HKEx, Regulator To Discuss New Shareholding Structures

HKEx and the Securities and Futures Commission (SFC) will discuss a paper on new shareholding structures for publicly traded companies during Q1 before putting it up for public consultation.

The paper will touch on a broad range of topics, not just “weighted voting rights.”

PLY: Reviewing listing rules is a good idea, clearly a fair open market is in everybody’s best interests and that for my part ought to preclude “weighted voting rights” which are signs of crony capitalism and not a free market.

Private Market Joint Venture By Nasdaq, SharesPost Not Yet Ready To Launch
Wall Street Journal

Nasdaq Private Market, a joint venture between Nasdaq and SharesPost that was originally due to launch by the end of 2013, isn’t yet ready.

The platform is supposed to help loosen the market for private shares that has changed dramatically in the past two years. Back in 2011 and early 2012, many investors flocked to online trading sites like SharesPost and SecondMarket to purchase shares in hot private companies, especially Facebook, from other shareholders.

But then the market cooled significantly. The Facebook IPO cost some late investors money. At the same time, late stage private companies started controlling how their shares are resold, seeking out institutional buyers for their shares and limiting access to individuals.

That caused trading platforms to readjust. SecondMarket, for example, now helps companies host their own secondary sales, and doesn’t work too much with individual investors.

As for those interested in investing directly in startups, new platforms such as AngelList emerged.

PLY: Secondary private company trading has been expensive and problematic. Facebook was a bit of a mirage in many respects, suggesting it was a huge opportunity. There is a market here but I have yet to be convinced it will allow vast fees to be charged in line with many models I have seen – particularly not given the near frictionless costs of dealing on established markets.

NYSE’s Niederauer On Sprecher, Twitter And Maker-Taker

PLY: A tale of opportunity cost and opportunities lost with the NYSE CEO being encouraged by the interviewer to provide advice to Jeff Sprecher. Hmmm, I think that was a question best avoided. The one pertinent point is that the boss and indeed Mr Niederauer ought not to be appearing together often – quite so, that is indeed management.

However, as to this tale of the digital revolution of NYSE, well…, oh hold on, there’s more:

NYSE Was Just Another Digital Business
The Street

What Duncan Niederauer really wants to talk about these days is what it takes to survive the digital economy.

“I will be in the job for one year as the head of the NYSE and the president at ICE…I would like just one of you journalists to write an article that says it’s a positive thing to have kept the NYSE alive and thriving with only 700 people instead of the 5,000 that we used to have.”

PLY: …Hmmm. Yes, sort of. I mean survival is all well and good – various European car companies survive thanks to pigheaded government intervention precluding progress while only using sub-60% of several factories’ productive capacity. Alas I just cannot buy this ‘great digital future person’ aura Mr Niederauer is promoting. NYSE endorsed the digital world a decade late (but with the crazed expenditure that underpinned/undermined the original dotcom bubble). The NYSE Technology story is a perfect business school case study of how not to do fintech. The resulting fiasco where NYSE was effectively shopping itself to buyers is a symbol of failure, not success (unless of course you received a lovely golden handshake for playing a part in the process).

NASDAQ CEO Greifeld Tells Peres: ‘Israeli Companies Are A Success Story’

Robert Greifeld, CEO of Nasdaq OMX, recently met with Israeli President Shimon Peres, and praised Israel’s technological success and innovativeness.

PLY: With over 70 Israeli companies listed on NASDAQ (and TASE in the throes of management change) Bob Greifeld had an audience, following his BIST agreement ceremony, with the Israeli President who offers some zingers of quotations, such as:

“Israeli audacity and the desire to change, to improve life standards and to dare – they are the true drive of Israeli companies…Israel relies on science, technology, and its human resources.”

Greifeld’s statement was a welcome validation while President Peres is highly lucid on the benefits of his nation’s entrepreneurial innovative dynamic.

Madoff Victims Win Right To Direct Appeal Over Interest

A group of Bernard Madoff’s victims won permission to appeal directly to a federal appeals court a bankruptcy ruling barring them from using the length of time they invested with the con man to add interest to their claims.

Private Markets

Markit Launches Global ETF Platform
ETF Daily News

Markit announced that it has integrated its suite of ETF products into a new web application that delivers sophisticated capabilities required for navigating the increasingly complex and global ETF universe.

PLY: Highly apposite timing given the growing complexity of ETFs.

CFTC’s Division Of Market Oversight Announces Trade Execution Mandate For Additional IRSs – trueEX, LLC’s Available-To-Trade Determinations Are Deemed Certified

CFTC DMO announced that trueEX, LLC’s self-certification of available-to-trade determinations (MAT Determinations) for certain IRS contracts is deemed certified.

Bloxham Exec Treated ISE Stake As Asset
Irish Examiner

A former executive of collapsed stockbroking firm Bloxham signed annual accounts in 2012 treating a €6.2m valuation of its membership of the Irish SE as an “asset” in the absence of regulatory approval for a proposed restructuring which would permit corporate members to get monies from the exchange company’s €45m reserves, the High Court has heard.

EI reported yesterday that the creditors of 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

CISX Restructure: All Change For Channel Islands Securities Listings?

Last month, the Guernsey court approved a scheme of arrangement which saw the creation of a brand new Channel Islands stock exchange.

PLY: A useful brief. CISX has tightened up its AML / KYC processes in particular.

SEC Approves Rules For NSE’s Investors’ Protection Fund
This Day Live

Hope of investors in the Nigerian capital market receiving compensation for losses from negligence or bankruptcy of stockbroking firms brightened Thursday following SEC approval of rules governing the operation of the Nigerian SE Investors’ Protection Fund (IPF).

EI mentioned the topic on January 16th.

Saxo Bank Launches Social Trading Platform

Denmark’s Saxo Bank has launched a new social trading platform, allowing users to see / copy trades of top-ranked rivals, follow favorite traders, swap ideas and gauge the market mood through an online network.

PLY: Saxo copies eToro, Tradeo, Oanda etc.

Lew Calls Bitcoin A Place To Hide, Shares Dimon’s ‘Incredulity’

The U.S. government needs more time to assess the Bitcoin “phenomenon” to ensure the virtual currency isn’t used for unlawful purposes, Treasury Secretary Jacob J. Lew said.

Lew, said he discussed Bitcoin with JPMorgan CEO Jamie Dimon and shares a “certain incredulity” about it.

PLY: Mass mountain groupthink at Davos as the 2008 unanimous optimism is revisited and the world’s corporate ‘elite’ are out in force, brazenly demonstrating their ignorance of the future. On Bitcoin, there has been a massive pushback by the establishment in recent weeks as central bankers and their commercial banking cousins have come to realise that their tenuous place in the financial food chain is under threat.

Bitcoin A Fool’s Gold Standard
NY Times

I am confident that the pseudocurrency’s popularity shows widespread economic amnesia. If Bitcoin ever became a real currency, it would suffer from the crippling problems of the gold standard.

The underlying problem is the belief that Bitcoin’s independence from government is a good thing. This libertarian notion could hardly be more wrong. Money is a common good for the whole society, and in the contemporary world governments are the pre-eminent social guardians.

PLY: A wondrous piece of ‘pseudoscience’ as befits a professional economist. Sadly I fear this columnist could not be more wrong in his linear extrapolation on multiple counts but then again he notes his technological ignorance in the first sentence. His position is to represent the status quo and thus not to even consider embracing change.

All great innovations have met with remarkable reaction from the establishment and the truth here is that open source money means choice which is not appreciated by an oligopolistic money cabal raised on medieval monetary practice (with added QE mania) Cryptocurrency is not a binary choice between Bitcoin versus some quantitatively manipulated government coin.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX is off 4%, FTIL down 5% on an otherwise fairly quiet day for the broad market (down circa 1%) as India prepares to celebrate Republic Day at the weekend, marking the 1950 introduction of the constitution. News on the NSEL crisis is having a pause today but with those share moves clearly some rumours (at least!) are afoot!


NYSE Euronext Files To Allow ‘Nontransparent’ ETFs To List, Trade (subscription)
Wall Street Journal

ETF managers got a boost to their efforts to capture a bigger part of the $7 trillion market for stock mutual funds.

NYSE Euronext filed a request with SEC on Thursday to adopt a new rule that would permit “nontransparent” ETFs to list and trade on Arca.

PLY: Currently ETF sponsors must report securities held in each portfolio daily, now the move would be to a quarterly basis more in line with traditional mutual funds. Interesting.

CLTX To Launch Coal Futures In Q1

CLTX plans to launch coal futures in Q1 of this year, expanding the reach of new owner EEX, CLTX’s CEO said on Thursday.

Germany-based EEX, which offers European power, natural gas, coal and emissions trading products, bought a 52 percent stake in CLTX, which focuses on shipping products, in December last year (reported on January 13th).

PLY: With temperatures having now dipped to -21 this week in Poland, my properties are once again long coal. An interesting market for CLTX to tackle.

Oslo Bors Expands In Sweden With Burgundy

Oslo Børs Burgundy is expanding its offering in the Swedish market with two new retail segments for Exchange Traded Products available from 27 January 2014 including ETNs and various warrants (call and put).

Tradeweb Launches Floating Rate Notes For U.S. Treasury Trading

Tradeweb has added U.S. Treasury Floating Rate Notes (FRNs) to its institutional Treasury trading platform with liquidity from 16 dealers.

FRNs are the first new security launched by the Treasury since 1997, and will have a two-year maturity with a rate that is indexed to the highest accepted discount rate of the most recent 13-week Treasury bill auction, and will be reset when the bill is auctioned each week. As interest rates rise, the security’s interest payments will increase, and vice-versa.


Launch Of The Solactive Diversified USD Covered Bond Index

Listed last week on NYSE Arca, the Solactive Diversified USD Covered Bond Index’ objective is to provide exposure to a diversified pool of USD denominated international bonds that offer high credit quality and attractive yield potential.

Career Paths

The former chairman of NYSE Euronext, Jan-Michiel Hessels, has joined private equity firm General Atlantic as a special adviser.

Hessels was NYSE Euronext chairman from 2000 to 2013, will help General Atlantic find new investment opportunities as well as “provide strategic support for the firm’s portfolio companies.”

Tom Conigliaro has joined Markit as MD based in New York responsible for leading the vendor’s trading services business.

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

Next month

SunGard Q4 2013 Results on February 4, 2014
Financial Technologies (India) Ltd 25th AGM – February 21, 2014

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

Share Notes

Interactive Brokers Group CFO Paul Jonathan Brody sold 8,279 shares Tuesday, January 21st at an average price of $22.82 (bargain $188,926.78). Mr. Brody’s regular sales are chronicled on this specific page.


Top 30 Influential Leaders In The Crowdfunding Industry (Infographic)
Venture Beat

Israeli equity crowdfunding platform OurCrowd worked with marketing firm Evolve Inc. to handpick a list of 800 influential members of the crowdfunding community.

Other stories

Everbright Securities Sees 2013 Profit Down Due To Aug Glitch
Global Times

Everbright Securities Co Thursday said that its profit in 2013 is expected to drop 78.79% y/y to 212.7 million yuan ($35.2 million), and its revenue to increase 11.33 percent year-on-year to 4.06 billion yuan in 2013 following losses incurred from a trading glitch in August which we first reported on August 20th 2013.

Goldman Looks To Ban Some Chat Services Used By Traders (subscription)
Wall Street Journal

Goldman Sachs is planning to ban traders from using some computer-messaging services in a bid to protect proprietary information at the heart of its sales-and-trading operation.

Under a new policy, the Wall Street firm won’t allow person-to-person communication over instant-messaging services created by Bloomberg LP, Yahoo, AOL and other third-party providers including Pivot, according to a draft of a memo reviewed by WSJ. Pivot is a unit of CME.

PLY: It looks as if Bloomberg and Reuters are being handed a duopoly by the banks for chat services…

CME Market Insights: Wait Continues for Centralized Supervisor of European Banking System (subscription)
Wall Street Journal

A new research report — Watching European Bank Reform — from CME Group assesses the prospects for European banking reform and examines the barriers and opportunities ahead.

The stagnant growth environment in the Euro-zone is still reflected in GDP numbers, with 2013 estimated year-over-year GDP growth of -0.4%, showing only a modest improvement from the -1% posted in 2012 and forecasted growth for 2014 of 1% provides a hint of optimism.

PLY: Slightly outside the direct exchange arena but worth perusing as it demonstrates some of the appallingly inadequate government and governance of Europe’s ailing currency.

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