January 30 2014

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Encouraging results from Bursa Malaysia and MarketAxess, Direct Edge’s William O’Brien keen to debate merits of Maker Taker. NCDEX share stake trade, EU acquiesces as Polish government discredits free markets, steals assets, endangers exchange stability; lots of product news, UK councils perhaps to organise crowdfunding projects…

Another interesting day and indeed fascinating to see how many intriguing projects are around currently. This space is becoming more interesting by the day. Welcome to our many new readers this week alone!

Here’s today’s Exchange Invest, let’s scroll:

Public Markets

Bursa Malaysia FY13 Net Profit At RM 173 Mln, Highest Since 2008
The Star

Earnings were 15% higher than the RM 150.59 mln (USD 44.95 mln) in FY12
Revenue rose 5.3% to RM 474.99 mln (USD 141.78 mln)
Return on equity was at 21%, an improvement by 3.0 percentage points.
Operating revenue increased by 13% to RM 439.8 mln (USD 131.28 mln)
Operating expenses were at RM 229.4 mln (USD 68.47 mln) at 48% cost to income ratio.

Report here.

PLY: Encouraging news from the Kuala Lumpur exchange…

MarketAxess 2013 Q4 & Full Year Results
MarketAxess

Fourth Quarter Financial Highlights

Revenues of $60.4 million, up 24.4%
Pre-tax income of $24.8 million, up 11.8%
Diluted EPS from continuing operations of $0.41, up from $0.38 excluding an $0.18 favorable tax adjustment in 2012
Total trading volume of $171.3 billion, up 14.9%
Estimated U.S. high grade market share of 13.9%, up from 13.6%

Full Year 2013 Financial Highlights

Record revenues of $238.7 million, up 25.1%
Record pre-tax income of $107.3 million, up 20.0%
Diluted EPS from continuing operations of $1.81, up 24.0% from $1.46 excluding an $0.18 favorable tax adjustment in 2012
Record total trading volume of $693.7 billion, up 17.7%
Estimated U.S. high grade market share of 13.8%, up from 12.4%

PLY: Likewise good numbers from MarketAxess.

Poland Plays With Fire Over Pension Reform (subscription)
Financial Times

As part of an overhaul of the country’s pension system, Warsaw will next week forcibly transfer from privately-managed funds to the state 150bn zlotys (€36bn) of Polish government bonds and government-backed securities, which will then be cancelled.

PLY: Eurostat made a horrible error when it set certain pillars and the end result has been Hungary and Poland de facto stealing citizens’ savings. This act would have rightly drawn condemnation under the Communists yet the response is depressingly muted when the theft has been permitted under a structure which piles shame on Poland and the EU. The consequences could yet be ghastly. Warsaw SE is reliant on those pension funds to buy IPOs and hold stock (with a Polish law which contravenes other EU rules) while western investment companies I have heard from are simply disgusted that their business has been stolen from them, let alone the fact that future pensioners have been robbed.

Given that the Polish government unreasonably exerts control over the stock exchange through a minority shareholding vehicle, there can be no doubt that despite the great efforts of Polish citizens, the government is now fixated on control and is demonstrating worrying economic illiteracy. Poland has great opportunity but the government is clearly an enemy of free enterprise and the people’s right to save for old age. This 36 billion Euro theft is a huge embarrassment for the EU. The worry now must be that IMF plans are deployed in the west to confiscate Eurozone savings until the sovereign debt crisis is balanced. These are dangerous times which can severely impact market infrastructure.

It’s Economics 101, Says DirectEdge CEO On ‘Maker-Taker’ Trading Debate
MarketWatch

The so-called maker-taker fee structure that U.S. exchanges have adopted is working just fine, says the Direct Edge CEO William O’Brien, respectfully disagreeing with other exchange CEOs.

“We are a big believer in all kinds of pricing structures that can meet different investor needs.It’s economics 101.”

EI reported Jeff Sprecher’s remarks on January 27th.

PLY: Somebody to defend Maker Taker – let’s see a reasoned debate and the respectful tones of Mr O’Brien are appreciated as we start that discussion.

CME Sells KCBT building
Reuters

CME has sold the 166,000-square-foot building that housed the KCBT to a Kansas-based real estate company Mariner Real Estate Management in all-cash transaction, according to a statement from Holly Duran Real Estate Partners, CME Group’s real estate adviser.

CME owned a majority of the building, and Highwood Properties Inc held a minority stake. Terms of the deal were not disclosed.

EI reported on November 27th 2013 that CME sold the home of its NYMEX for $200 million and agreed to lease back the trading floor and some office space while in 2012, it sold most of the historic CBOT building to a consortium of real-estate companies for $151.5 million and leased back space.

Australian Clearing Heats Up With LCH.Clearnet (subscription)
FOW Intelligence

LCH.Clearnet plans to challenge ASX in its own backyard by signing up Australia’s major banks to its IRS clearing service.

PLY: Not before time. The ASX has all the hallmarks of being a reactionary flaccid monopolist and hence competition is urgently required in the vibrant Australian derivatives marketplace.

EU Unveils Plan On Proprietary Trading (subscription)
Wall Street Journal
What Does Europe’s ‘No Prop Trading’ Plan Mean? (subscription)
Wall Street Journal
Europe’s Bid To Reform Mega-Banks Hits Resistance In France
Reuters

EC press release here.

PLY: Sadly the EU backed away from the sensible move to separate retail from investment banking while the French and German governments are already complaining on one hand about the proposals while claiming to bash banks on the other. Hypocrisy remains one of governments’ key strengths. I expect to write more about this in an upcoming Op-Edge column for RT.

Tanzania Bourse And London SE To Enhance Ties
Daily News

Dar es Salaam SE has partnered with LSE to build capacity of the local market stakeholders in a bid to accelerate bourse development.

Private Markets

Oman India Joint Investment Fund Picks Additional 5.3% Stake In NCDEX For $8M
VCCIRCLE

Oman India Joint Investment Fund (OIJIF), a private equity fund sponsored by Oman’s sovereign wealth State General Reserve Fund and India’s largest lender State Bank of India, has picked up another 5.3 per cent stake in NCDEX from Jaypee Capital Services Ltd for Rs 49.56 crore ($7.87 mln).

The deal was closed late last month and came as a second leg of a transaction where previously OIJIF teamed up with other investors to buy a stake in NCDEX.

PLY: Interesting how NCDEX which is not an FTIL asset has been the subject of investment recently, presumably as investors perceive a revamp of commodity trading helping NCDEX back from losing a lot of market share in recent years.

Introduction Of T+2 Standard Settlement Period At Oslo Børs VPS
MondoVisione

Oslo Børs VPS Group will move to a settlement cycle of T+2 for all applicable instruments 6 October 2014 for the Norwegian market, from a T+3 standard currently, in line with upcoming EU rules.

Nigerian SE Joins Global Surveillance Group
WorldStage

NSE is the latest bourse to be admitted by the Intermarket Surveillance Group (ISG) as the alliance recently informed NSE that its application to join the ISG was successful after a rigorous review process.

SEC: Scottrade Agrees To Pay $2.5 Million & Admits Providing Flawed “Blue Sheet” Trading Data
MondoVisione

SEC charged Scottrade of St Louis, with failing to provide the agency with complete and accurate information about trades done by the firm and its customers, which is commonly called “blue sheet” data.

Kenya: Nairobi Coffee Exchange Resumes Trade
All Africa

Trading has returned to the Nairobi Coffee Exchange after a week-long closure that saw farmers forego payments. The suspension was a result of wrangles between producers, millers and county governments who have since successfully negotiated for the reopening on the market.

“Farmers were not paid last week when the exchange was suspended and unfortunately this is the time when we are expecting a lot of coffee in the market,” said the Nairobi Coffee Exchange CEO, Daniel Mbithi.

IEM Owners Face Arrest Over Steel Delivery Default
Business Standard

The city police’s economic offences wing (EOW) is on the lookout for two directors of Indian Exchange of Metal (IEM), J K Arora and Sahil Arora, absconding after failing to deliver steel to traders who traded in steel futures on NCDEX. IEM was an approved warehouse of NCDEX in Ghaziabad.

Bitcoin Fan Slaps Notice On RBI, Seeks Framework
dna India

Confusion over the status of Bitcoin in India, has prompted one of its advocates to demand a clear legal framework from the Reserve Bank of India (RBI).

Bitcoin Needs Tighter Rules Than Banks, Say Prosecutors
Bloomberg

Virtual-currency firms should face regulations that are tougher than those for established financial-services providers because of their ability to hide criminal activity, according to law enforcement officials.

PLY: Fair and proportionate regulation makes sense. Over-regulation will simply drive the new currency markets underground. Sadly America’s elected system of prosecutors are often devoid of basic logic as appears to be the case here. I mean remind me, how much drugs trade did (insert random name of bank here, hmmm, today let’s say:) HSBC, fund in (likewise insert random jurisdiction) Mexico? (From the Mexico subsidiary to the US I believe HSBC sent $7 billion alone – or nearly the total value of BTC, from a single subsidiary of one bank). Proportionality, please, not prosecutorial hysteria.

Dividend News

MarketAxess declared a quarterly cash dividend of $0.16 per share of common stock outstanding, to be paid on February 27, 2014 to stockholders of record as of the close of business on February 13, 2014. This represents an increase of $0.03 per share in the quarterly cash dividend.

Bursa Malaysia – a final single-tier dividend of 16 sen per share will be recommended for shareholders’ approval at the forthcoming AGM.

Special Section: FTI, NSEL, India at the Crossroads

PLY: Slight peace from exhaustion as news pauses from the NSEL crisis today. MCX is down nearly 3%, FTIL down 5%.

Technology

Nasdaq Announces TradeGuard, New Risk Management Solutions
Wall Street & Technology

Nasdaq announced TradeGuard, a product suite of risk management tools to expand its Access Service business. TradeGuard is an upgrade of the enterprise risk management platform formerly known as FTEN before its acquisition by Nasdaq in late 2010.

Press release here.

N2EX Day-Ahead Auction – New Products
N2EX

Flexi Order extended to include blocks as well as single hours; these can also now be submitted as both bids & offers to the NordPool spot electricity market along with other new order functionality.

Nasdaq OMX– INET – Execution Algorithms Enhancement, Monitoring Of Child Orders
Nasdaq OMX

NASDAQ OMX has implemented a set of Execution Algorithms available via the INET Nordic FIX protocol and Nordic Workstation. The service is available since January 9, 2014.

Javelin SEF Goes Live With Traiana’s CreditLink For IRSs
PR Newswire

Javelin SEF announced today that it is now live with Traiana’s CreditLink service for real time pre-trade credit checks on interest rate swap trades.

Options Adds Quincy Extreme Data To Electronic Trading Platform
Automated Trader

Options, the private financial cloud provider, has announced the availability of Quincy Data’s Quincy Extreme Data (QED) service, enabling the managed service provider to offer low latency data to customers trading across markets in Equinix NY4 and the CME.

Products

OneChicago Launches OCX.Weekly Futures
PR Newswire

OneChicago (OCX), an equity finance exchange, today announced the launch of OCX.Weekly futures as part of the OCX.NoDivRisk futures product suite. Pending regulatory approval, OneChicago will be releasing its physically settled OCX.Weekly futures product with next day settlement for the stock delivery upon expiration.

MCX Pulls Mild Steel Contracts
Business Standard

MCX has decided to withdraw mild steel/billets’ contracts from its platform April onwards due to the lack of liquidity.

Career Paths

CITY A.M. reports that a former executive at BGC has been banned from senior roles in financial services after he tried to encourage staff at rival Tullett Prebon to break their contracts and work for him.

Anthony Verrier was accused of hiding evidence by reporting eight Blackberries lost between April 2008 and April 2009, so incriminating texts on them would not be seen.

He had previously worked at Tullett and when he moved to BGC tried to persuade other staff to break their contracts and move with him, successfully persuading thirteen to sign contracts to move.
FCA said he will not again work in any regulated activity in the industry.

Tullett Prebon appointed David Shalders as an independent NED, with effect from 27 February 2014. He will also be a member of the Remuneration Committee.

Pimco on Wednesday promoted another four of its top investment managers into more strategic roles, expanding the pool of potential successors to the fund management firm’s co-founder and star bond picker Bill Gross following the sudden resignation of his previous heir apparent.

Mark Kiesel, Virginie Maisonneuve, Scott Mather and Mihir Worah, currently managing directors at Pacific Investment Management Co, will become deputy CIOs, following the departure of CEO Mohamed A. El-Erian – discussed on January 22nd.

Investec has named Ben Smith as its new head of investment banking in Australia, following the resignation of Christian Nicks as the South African-based bank shrinks its local operations.

Financial Calendar

Today

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

Next week

CME Q4 2013 results
SunGard Q4 2013 results
NASDAQ OMX Q4 2013 results
TMX Q4 2013 results
6.60p ICAP interim dividend payment
CBOE Q4 2013 results

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

Analyst Notes

LSE “Outperform” Rating Reiterated At Credit Suisse – GBX 2,000 ($32.95) Price Target
Interactive Brokers Upgraded By Keefe, Bruyette & Woods From “Market Perform” To “Outperform”

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

Council Crowdfunding Platforms Could Tap Into The Goodwill Of Communities
The Guardian

The idea is for councils to produce local online crowdfunding platforms with other public services to attract funding, skills or other resources that contribute to local projects.

Crowdfunding is growing in popularity and it is possible that there is scope for local authorities to harness the community benefits it could bring.

PLY: A good idea for councils to try albeit hopefully they will not spend too much on the infrastructure as is their wont!

Other stories

WFE Publishes 2013 Global Market Highlights
Commodities Now

WFE has published its annual survey of global markets. WFE found that for the second consecutive year, the global market capitalization of WFE members has increased, rising 17.4% compared to the 2012 figure of 15.1%.

The rise in global market capitalization had a significant effect on Asia Pacific, where trading volumes surged by 47% in local currency terms; however, the Americas and EAME were not as affected, increasing trading volume by only 1%.

Full report here.

EBA Issues Recommendation On The Use Of The Legal Entity Identifier (LEI) For Supervisory Purposes
MondoVisione

European Banking Authority (EBA) published a Recommendation on the use of unique identification codes for supervisory purposes for every credit and financial institution in the EU.

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