July 09 2013

elb2 One of those downright interesting days. No massive earth shaking moves but the tectonic plates are jiggling in multiple areas from options trademarks through bankers buying into swaps exchanges and the growing debate over clearing house probity. The latter needs airing just so everybody understands the situation well and transparency can only help improve understanding.

Meanwhile, we have a couple of interesting micro deals on the go currently, any interested investors who are at or below the 1 million dollar ticket threshold please get in touch.

Public markets

TOM, BinckBank Infringe Euronext Trademark Rights, Court Says


The Order Machine, the Dutch alternative trading system 25 percent owned by Nasdaq OMX Group Inc., infringed NYSE Euronext trademark rights by using AEX-Index ticker symbols.

TOM and Amsterdam online broker BinckBank NV (BINCK), must remove all AEX-ticker symbols, used to indicate options based on NYSE Euronext’s benchmark AEX-Index for Dutch stocks, from their websites within 4 weeks, The Hague District Court said in a preliminary ruling.

Euronext market share of index options has fallen 30 percent since TOM and BinckBank began offering options based on the AEX-Index Jan. 21, Euronext told the hearing.

PLY: TOM has aggressive plans to carve out up to 40% of Dutch options trading by the end of the year and is even claiming partial victory in this suit. It’s an interesting development which may affect the break-up value of Euronext as these products would fall into the Euronext vehicle and not LIFFE when ICE disposes of the Franco-Benelux plus Portugal bourse. Interesting too how the IP of the options does not seem to protect AEX from being copied in Holland…

CME Chief Defends Clearing Houses’ Growing Role (subscription)

Financial Times

PLY: Terry Duffy provides a characteristically robust defence of the CME. FT’s Philip Stafford provides a useful breakdown regarding how clearinghouses have a lot more lines of support than just their capital base…

That said, the problem with any form of clearing house run would be that if the clearing house ever reached close to its core of reserves, let alone the insurances it holds, then there would surely be such a flight in capital terms that the system would have difficulty at least functioning for some days?

NB I am not suggesting this is highly plausible. However if any investment bankers want to call this a six sigma event then I will naturally be terrified.

Deutsche Börse Joins $20m Zimory Funding Round


Berlin-based cloud management software firm Zimory has raised $20 million in a funding round led by Deutsche Börse, with which it is working to build a trading venue for outsourced storage and computing capacity.

PLY: I really like the concept of the Deutsche Börse Cloud Exchange due for launch early next year and so it is hardly surprising to see DB part funding this round for project partner Zimory. Does it herald more such PE/VC funding by exchanges of new ideas I wonder? It would make sense as there are lots of niche ideas around which don’t really fit immediately into the significant hierarchies of the large department store bourses.

Regulations ‘disproportionately’ hit small exchanges

The Trade

New regulation is having a disproportionate effect on smaller exchanges, according to CEE Stock Exchange Group (CEESEG) CEO Michael Buhl.

“We have always run a very lean central counterparty (CCP), but the changes coming from EMIR mean we have had to raise capital from investors,” Buhl said.

PLY: A good article and some highly pertinent remarks from Michael Buhl here. He is quite right that EMIR per se has reinforced big CCPs and really added nothing much except cost to the smaller CCPs. It may not be unreasonable to consider tiering of CCPs in the future to try to avert either mega-capitalisation for small clearing houses or, worse still, a clearing minnow taking on a binge of former OTC leveraged products.

Finally note the key line repeated in this interview: discussion of co-operation with Warsaw SE. Rumour has it that the toxic shareholder oblivious concept of declining Vienna tying up with ascending Warsaw is losing ground. That can only be good for markets. There is huge opportunity in the New Europe but this merger could never capitalize on it…

Private Markets

Morgan Stanley Eyes Futures Exchange (subscription)

Financial Times

Morgan Stanley “plans to make a strategic equity investment” in Eris Exchange. Eris specialises in “swap futures” and was created by five proprietary trading firms including Getco, DRW Holdings and Infinium Capital Management.

Last September the Chicago-based exchange won further investment from asset managers Fidelity and State Street, but Thursday’s deal with Morgan Stanley will be the first announced investment in Eris from a large swap “dealer” bank.

PLY: Interesting as Eris becomes perhaps a key chosen venue for the futurisation of swaps? At the same time, the banks are likely to ‘double down’ across a range of platforms in the early stages of the post-OTC battle for liquidity. What is key is that the banks seem to be abandoning their desire to maintain OTC execution ahead of the mandatory CCP. Here it would appear the regulators have done well in pushing greater transparency into the market.

East Africa Hopes To Have Regional Exchange


East Africa’s dream of a regional stock exchange that merges into one the stock markets of the five East Africa Community member states is likely to take off in a year or two.

“Definitely we want to have one stock exchange. Technically, I think we are almost there. Maybe it will happen in about a year or two,” said Kenneth Kitariko, Chief Executive Officer of African Alliance, Uganda’s leading brokerage firm. Mr Kitariko is also a member of the Governing Council of the Uganda Securities Exchange.

The regional stock exchange would involve the integration of capital markets of four Eastern African countries, including Kenya, Uganda, Tanzania, Rwanda. Burundi, currently does not have a stock market.

NFA Fines Interactive Brokers $300,000 In Settlement


PLY: IB gets knuckles rapped…


Kenya To Introduce ETFs


Nairobi Securities Exchange (NSEASI), will begin offering exchange-traded funds.


TMX Atrium Upgrades North American Infrastructure

TMX Atrium, provider of smarter infrastructure solutions for the financial community, has implemented an upgrade to offer TMX Atrium community members flexible and fully scalable access to multiple markets across North America and into Eastern and Western Europe.

Changes in investors/shareholders

Betfair Drops 4% On Talk Of £88m Stake Sale

The Guardian

Traders said that 11m shares, or 10.57%, was being sold on behalf of Softbank, with Goldman Sachs reportedly paying 809p each. Betfair has dropped 38p to 841.5p.

It appears the shares were placed with institutional investors at 827p each.

PLY: I presume this means the shares were just placed at 827 via Goldmans and not bought and sold at this impressive spread.

Financial Calendar

Second Quarter Earnings Reminder

Nasdaq OMX – July 24, 2013 at 8:00 a.m. EDT.
NYSE Euronext – July 30, 2013 at 7:00 a.m. EDT.
CME Group Inc – August 1, 2013 before the opening bell rings.
TMX Group Ltd – August 01, 2013
BGC Partners, Inc. – August 01, 2013
CBOE Holdings – August 2, 2013 prior to the market’s open.
IntercontinentalExchange, Inc. – August 6, 2013.
Interactive Brokers Group – July 16, 2013
SGX – July 23, 2013

Analyst notes

Zacks Downgrades CBOE Holdings to “Neutral”
JP Morgan Cazenove reissued their “Neutral” rating on Betfair Group
TD Securities dropped their price objective on shares of TMX Group from C$47.00 to C$45.00 – “Reduce” rating

NASDAQ OMX Gets Lower 2Q Estimates From Sandler O’Neill

The Options Insider

Sandler O’Neill have trimmed NDAQ Q2 EPS from 64 to 62 cents thanks to higher-operating expenses from $237m to $246m.

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.


Why Crowdfunding Hasn’t Caught On In Asia


With over 600 platforms worldwide, crowdfunding has grown from a $530 million industry in 2009 to nearly $2.7 billion last year, according to a recent study by Massolution, a research firm specializing in crowdsourcing businesses.

Platforms in Asia, home to more than half of the world’s population, were responsible for only $33 million in funding last year — just over 1% of the total raised, according to the study.

Crowdfunding For Environmental Change

PC Magazine

Maybe there’s an unsightly vacant lot in your neighborhood that needs cleaning up. Or maybe Hurricane Sandy or an ExxonMobil oil spill devastated your community. Whereas residents previously had to rely on the government to lend a hand or pick up their own rusty shovel, they are now granted another promising option: crowdfunding it back to health.

PLY: This leaves us neatly in another area where we have a daily newsletter: if you are interested in Social Impact Bond funding then check out our daily newsletter here.

Other stories

Sierra Leone bourse Struggles To Attract Investors In A Sea Of Plenty

Africa Review

Sierra Leone`s bourse, seen as slumbering ten years after it opened its doors, looks to have been fired up by the introduction of the first western style investment firm.

JP Anderson SL (Ltd), which last week graduated 21 business advisors to serve as stockbrokers, becomes the third investment banking institution in the country.

PLY: You might have missed the explosion in the Sierra Leonian economy…not (yet) followed by stock market growth but this may change…

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