July 05 2013

elb2 Hello and Welcome to the last EI of the week and we’re on a roll after 5 days of intriguing news.

Our own best news is that we are delighted to welcome today, our first sponsor, Cinnober Financial Technology AB a business which powers all manner of aspects of the IT at many of the world’s most innovative and exciting platforms and exchanges. Thank you for your support!

Thanks too to all the many investors and industry executives who have been in touch recently to say how much you enjoy reading this daily. With sponsors like Cinnober we can continue, and indeed expand, our investor-centric coverage going forward to give you the best insight into financial markets infrastructure. We’re hoping to have some more good news on sponsors soon but in the meantime, thanks again to Cinnober – a great name to associate with Exchange Invest!

Meanwhile, in today’s news, it’s Turquoise doing the shuffling to its parent this week after Thomson Reuters did something similar with forex options the other day and some intriguing news from places as far flung as Israel, Chicago, Curacao, Dalian and wow watch those volumes explode in Russian Bonds!

Public Markets

LSE To Acquire Turquoise Derivatives

LSE press release

PLY: LSE will acquire Turquoise Derivatives by buying 51% of the shares from banks and transferring its own holding of the remainder to its main company thus creating a regulated exchange (UK: Recognised Investment Exchange (RIE) upgrading from an MTF (as Turquoise’s equities business remains).

Completion is due Q4, helping LSE exact a neat (and highly intelligent) shuffle to place the business into its exchange platform hence getting them straight into genuine head to head confrontation with multiple players as well as relieving the banks of potential EMIR-related regulatory worries (and indeed potentially delivering a better solution for bank traders too). Therefore a potential win win, especially for LSE in the wake of buying a majority of LCH.Clearnet…

Euroclear Powers Bond Trading To Most Since 2007

Businessweek

PLY: Another simple transparency and access transaction. Open up markets for everybody to trade, encourage established clearing links and “hey presto!” Moscow Exchange’s Bond trading surges with trading volumes up 71% y/y. As the article shows, there is still great upside too, compared to the volumes on WSE’s bond platforms in Poland.

Note how the arrival of clearing/settlement through Euroclear, and Clearstream International SA has helped boost the market overall. As this story notes: “Even as the exchange lost as much as 15 percent of the OFZ market to the two bond settlement systems, the “total size of the pie increased,” Alexander Afanasiev, the bourse’s chief executive officer, said.”

The Derivatives Loch Ness

OilPrice.com

Something unusual is happening in the global swaps markets.

The numbers already show the effects of the new regulations. CME IRS clearing jumped 64% in June m/m, to $66 billion.

Here’s the unexpected part. The surge in derivatives trading also seems to be reverberating around the world.

In Singapore, daily average volumes in derivatives trading hit a new monthly record in June. Up 77% from June 2012.

Same in India, where exchanges also set a June record for value of derivatives traded.

These happenings remind me of those photos of the supposed Loch Ness monster. You only see a small part of the creature–a head, a fin, some scales–emerging from the water. Never the whole beast, which always stays hidden beneath the murky lake.

PLY: A cute allegory for OTC especially as nobody can be precise just how big the monster of the deep really is… I am not so sure the knock-on effect was unexpected. For one thing the shining of a little light in major OTC markets was always liable to create a global reverberation while equally the very mention of “Taper” sent markets into a spin, all boosted volumes.

Dual Listing Dust-Up With Warsaw in Romania

Balkans.com Business News

Officials of the Bucharest SE (BvB) said yesterday that they disagree with the dual listing of Fondul Proprietatea (FP) on the Warsaw Stock Exchange (WSE).

Apparently Ludwik Soboleski, the ex-WSE CEO, recently appointed as BvB CEO agrees with this position of BvB board.

PLY: Here is a great piece of politics at work in Romania. “FP” is a huge legacy of the post-Communist settlement, holding property and assets which are managed by Franklin Templeton and currently listed in Bucharest. Templeton wants a dual listing. Meanwhile, stasis reigns and while SIBEX is connected to the Polish KDPW depositary, BvB has not done so yet. Shareholders want a dual listing to try to engender more liquidity in the shares and reduce asset value discount. Meanwhile the head of the newly unified Romanian regulatory board says he is against the dual listing of FP.

Now, here it is interesting to see what Ludwik Sobolewski may be saying: is he playing along with the regulator for now until he gets a chance to review the situation (although he was aware of it while in Warsaw) or is it part of his own plan to create a Bucharest which operates away from Warsaw SE where some recent media comment might be interpreted as him being bitter as a result of his exit last year?

Private Markets

Tradeweb Becomes Second SEF Applicant (subscription)

Financial News

Fixed income and derivatives trading platform operator Tradeweb has become only the second firm to request approval from US regulators for a trading venue created via the G20’s post-crisis reform agenda, as it positions itself to benefit from a migration of activity away from over-the-counter markets.

PLY: So far Bloomberg and Tradeweb have applied but no IDB has yet joined the process…

Six Australian Companies Seek Startup SE Listings

startupsmart.com.au

PLY: The big news here is that after speaking at Young Markets last month, founder Ian Haet & team have been hugely busy with 97 companies seeking listings in less than a month of operations. SSX is based in Curacao, and regulated by the Dutch Caribbean Securities Exchange.

Interesting geographic mix, here’s the top five: India (16), Nigeria (12), Argentina (9), Australia and Brazil (6) each. Sounds like a very encouraging start for SSX!

TASE Proposes Measures To Boost Liquidity

globes.co.il

Tel Aviv Stock Exchange (TASE) CEO Esther Levanon has submitted to the TASE board of directors a work plan to improve trading volumes. The plan was also sent to the liquidity committee, which Israel Securities Authority chairman Shmuel Hauser recently established.

PLY: Interesting that capital requirements for TASE members are amongst the proposals. We wish TASE every success in developing a deeper more liquid market to enhance Israel’s economy and especially its dynamic IT/start-up culture.

Products

China’s Dalian Commodity Exchange Awaits Beijing’s Nod For Iron Ore Futures

Platts

China’s Dalian Commodity Exchange, (DCE), has submitted a formal application to the China Securities Regulatory Commission (CSRC), to list iron ore futures.

Indexes

BM&FBovespa Considering Ibovespa Methodology Changes

Bloomberg

BM&FBovespa SA is considering changing the way it determines the relative importance of individual stocks in its benchmark index.

PLY Change may be 2-3 years away but interesting to see Brazil trying to stay ahead of the index game with various competitors circling on their patch!

Financial Calendar

Interactive Brokers Group plans to announce Q2 financial results Tuesday, July 16, 2013

SGX To Post FY 2013 Results On 23 July

CME Group Inc. will announce earnings for Q2 2013 on Thursday, August 1, 2013

Analyst Notes

NASDAQ OMX Group’s Buy Rating Reaffirmed at Macquarie (NDAQ) -$37.00 price objective

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.

Changes in investors/shareholders

Hellenic Exchanges S.A.- Notification About A Significant Change In The Number Of Voting Rights

JPMORGAN ASSET MANAGEMENT HOLDINGS INC. informed the Company in writing on 03.07.2013 that, because of a triggering transaction on 01.07.2013 it indirectly holds, through its subsidiary JPMORGAN ASSET MANAGEMENT (UK) LTD, 5.00% of the share capital of HELEX.

Crowdfunding

Bank Economists Warn Of Disruptive Threat From Mobile And Crowdfunding

Finextra

Banks that fail to invest in mobile technology and crowdfunding platforms risk being swept away by a wave of disruptive innovation warn economists at US bank BBVA Compass.

PLY: The threat also clearly applies to exchanges and every other intermediary who fails to adapt but certainly banks are in the front line to be disrupted by crowd and social finance movements.

Zoomaal Launches First Crowdfunding Platform For The Arab World

Wamda

The Middle East’s newest crowdfunding platform, Zoomaal, launched yesterday, offering entrepreneurs, artists, and socially-minded doers the chance to fund their projects through crowdsourced donation.

PLY: Retail investors especially in the gulf region have often found existing markets not especially open to them and therefore crowdfunding could be particularly ripe in this region. There are multiple trade links and a vast potential to develop the Arab world where capital is (like, well, everywhere else!) desperately needed for start-ups and small businesses.

Other stories

China May Allow More Overseas Futures Trade

Reuters

China is considering allowing more firms and individuals to trade commodities futures contracts on overseas exchanges, a source with knowledge of the discussions said, as Beijing looks to open up its capital markets.

PLY: We saw how open markets have benefitted Russian bonds above. Now the 500lb gorillas of growth which need two way access to the world and vice versa are China and India: both will benefit enormously from the process although clearly governments are concerned in both locations…

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