July 09 2014

elb2Another day replete with intriguing exchange stories. FTIL makes first MCX stake sale as appeal against sale order fails. CCP ramifications as EUREX paper scores….albeit not as often as the German soccer team. Order types to go on a diet as exchanges and buy side concur on SEC proposals. NASDAQ OMX acquires private share business to bolster offering while China ponders options and KRX signs deal to enable more offshore RMB trading as LIBOR reform gains pace.

All this and much more in a free daily read which in its original beta test recipients wondered if there was enough material to sustain such a narrow market infrastructure focus!

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NEW:EUREX Clearing Paper Released

Euronext: Separation Anxiety?
– as we race to pixel, Euronext shares

Poland At the Crossroads
– the poster child of New Europe looks increasingly to be going off the rails worse than Miley Cyrus post Hannah Montana

NLX: Missed Opportunity
– like Spain’s much hyped world cup team, much hyped NLX had an open goal but they still couldn’t score…

NLX: Big Data: Easy to Find?
– given the quality of their surveillance system and data tools, I ponder why we don’t have more evidence to disprove my original hypothesis: The Butterfly (In)Effect

Public Markets

Jhunjhunwala Buys 2% Of MCX From FTIL
Free Press Journal

FTIL sold 1 mln shares of MCX to investor Rakesh Jhunjhunwala at 664.00 rupees each through the open market. According to NSE, FTIL sold 1.019 mln shares of MCX at 664.00 rupees, of which Jhunjhunwala bought 1 mln shares, representing about 2% stake of MCX.

PLY: A first MCX sale and through the open market too. The earlier above market price approach has clearly been abandoned. 2% down leaving at least 22% to go (presuming FTIL retains 2% as it is entitled to do).

SAT Dismisses FTIL Plea Against SEBI Order Declaring It Unfit
The Economic Times

The SAT today dismissed Jignesh Shah promoted FTIL plea against a SEBI order declaring it unfit to own stakes in market infrastructure institutions, stating that decisions by financial market regulators have bearing on each other.

The Securities Appellate Tribunal (SAT) also gave FTIL four weeks to divest its stakes in bourses, including MCX-SX.

PLY: As I understand it that is four weeks remaining from the original three month order… This article is accompanied by a library photo of Jignesh Shah at liberty. He is still incarcerated.

Nasdaq OMX Buys To Bolster Private Market Business (subscription)
Anna Irrera & Tim Cave – Financial News

Nasdaq OMX is to acquire US software company TruEquity which offers share management services for private companies, as it seeks to widen its slate of services for pre-IPO businesses.

PLY: The push for private share trading has yet to really bear fruit but meanwhile NASDAQ have acquired another useful property in the space.

Exchanges Urge Overhaul Of Trading Rules (subscription)
Financial Times

SEC’s High-Speed Trader Plan Embraced By Funds, Exchanges
Dave Michaels – Bloomberg

A sweeping blueprint designed by SEC to reduce conflicts of interest in the stock market won support from leaders of exchanges and large money managers.

ICE CEO Calls For Market-Wide Purge Of Order Types
Sarah N. Lynch – Reuters

“I am uncomfortable with having all of these order types. I don’t know why we have them. And I have started to unilaterally eliminate them,” said Jeff Sprecher.

PLY: Mot juste of the day…and bravo Jeff Sprecher for leading the US cash market infrastructure. When the extent of US equity market orders rivalled a Chinese restaurant menu I am surprised nobody else was pushing to simplify this dog’s dinner of unnecessary complexity.

At Senate Hearing, Wall Street Executives Share Concerns About The Market
William Alden – NY Times

Wall Street has no shortage of ideas on how to improve the stock market. The question is whether regulators think those ideas are worth heeding.

PLY: The regulators ought to certainly give credence to those with a history of sound thought processes and particularly those relative newcomers who are rethinking the business from all angles….particularly as the US regulators are mostly lawyers with scant financial market experience.

Ban HFT? ‘Absolutely Not!’ Financial Executives Tell Senators

Ban HFT, anyone? No thanks.

PLY: Never a logical option even at the height of Lewis Mania.

ICE Prepares Deeper Reform Of Libor (subscription)
Philip Stafford – Financial Times

ICE is preparing to ask banks that submit Libor rates for more of their internal transaction data as the derivatives exchange operator rehabilitates the scandal-hit benchmark.

The US group has begun asking some banks for more details of deals they have conducted and has also started testing a new ICE-built system to collect and validate rates the banks submit, according to two people familiar with the situation.

PLY: An encouraging way forward to rebuild benchmark confidence.

NASDAQ OMX June 2014 Volumes, 2Q14 Est. Revenue Capture

NASDAQ OMX reported monthly volumes for June 2014, as well as quarterly volumes and estimated revenue capture for the quarter ending June 30, 2014, on its investor relations website.

A data sheet showing the monthly volumes and quarterly capture rates can be found here.

Clearing Houses To Publish Risk Models (subscription)
Philip Stafford – Financial Times

Clearing houses will be required to publish their models for calculating traders’ risk in their derivatives trades under principles set to be endorsed by global securities regulators.

The industry has agreed to guidelines requiring more transparency in the models they use to calculate their resources in a default and their customers’ margin requirements, according to two people familiar with the discussions.

PLY: Calculation transparency is good. Now can anybody find an argument to defend the anonymity of market making scheme participants?

DB1 Defends Greater Role For Clearing Houses (subscription)
Philip Stafford – Financial Times

Deutsche Börse (DB1) has defended the elevated role of clearing houses post-financial crisis amid growing calls for the risk managers to face tougher oversight to protect them from default.

On Tuesday, its Eurex Clearing subsidiary published a white paper arguing the industry’s position as the market’s “shock absorbers” gave global authorities such as central banks more flexibility to manage a systemic event.

See our Premium post EUREX Clearing Paper Released.

PLY: Hmm. EUREX are about as defensive here as Germany were last night in the world cup (with a 7-1 defeat of Brazil: what were they playing, baseball?). EUREX have led on the clear arguments why there is no going back from CCP civilisation. Anybody trying to argue against CCP is merely a banker of the most deluded kind…On the cusp of photosynthesis in other words.

ECB And UK Set To Clash In Court Over Clearing Houses (subscription)
Sam Fleming – Financial Times

Britain will step up its legal battle on Wednesday as it challenges EU rules that would damage the City of London by forcing clearinghouses to decamp operations to the eurozone.

Lawyers for the UK will tell the European Court of Justice why the government believes policies from the ECB on the location of institutions that clear euro-denominated transactions are contrary to single market rules.

PLY: No argument. This is protectionism and government manipulation pure and simple, even if the “Brussels Gazette” aka “the pink socialist paper” cannot cope with criticism of of its beloved leviathan.

Questions Remain Over US CCP Liquidity Rules (subscription)
Joe Rennison – Risk

Markets regulators will not require CCPs to have contractual liquidity commitments – but Fed is said to retain concerns and CCPs need approval from both camps.

SGX Launches Liquidity Hub In Hong Kong

SGX announced the launch of its liquidity hub at HKEx Data Centre.

World Gold Council Forum Discusses Reform Or Replacement Of The Gold Fix

The World Gold Council, convened a roundtable debate to discuss how to modernise the London Gold Fix.

PLY: Lots of marvellously misinformed media comment around mistaking the fix as competitive to 24 hour electronic trading. Complementarity is all.

Private Markets

IEX Bumps Up Planned Fundraising To $75m (subscription)
Nicole Bullock, Michael Mackenzie & Philip Stafford – Financial Times

IEX Group, the US equity trading venue that aims to level the playing field between high-frequency traders and traditional investors, has bumped up the size of its planned fundraising to $75m from a proposed $50m after receiving strong backing from investors.

Kenyan Exchange To Sell Shares In Africa’s Second Bourse IPO
Eric Ombok – Businessweek

Kenya’s stock exchange will become the second publicly traded African bourse with an IPO from July 24 to Aug. 12.

KRX Enters Into A Comprehensive MOU With Bank Of China For Cooperation

KRX entered into a comprehensive MOU with the Bank of China on 4th of July, 2014.

PLY: The offshore RMB market will now be available in South Korea too.

About 2,600 Regional Brokers Default On Fees
Sachin P Mampatta – Business Standard

The unpaid dues of 2,591 regional exchange stock brokers are holding up the exit plans of at least 10 bourses. Seven other exchanges, which have not yet applied for an exit, also have dues. This brings the cumulative owed from regional exchanges to Rs 100 crore (USD 16.7 mln).

The bourses whose exit is held up because of dues are Cochin, Bangalore, Ludhiana, Gauhati, Pune, Bhubaneswar, Madras, Delhi and Jaipur, in addition to the OTC Exchange of India.

The seven exchanges that are yet to apply for an exit are bourses from Magadh, Vadodara, Ahmedabad and Kolkata, in addition to UP SE, Madhya Pradesh SE, and Inter-connected Stock Exchange of India.

Vadodara SE Fails To Submit Exit Plan To SEBI
The Economic Times

Vadodara SE has failed to meet the second deadline – July 7 (extended from May 30) – set by the market watchdog SEBI to submit its voluntary exit plan.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX is up 1% with FTIL down nearly 3% despite the first FTIL stake sale in MCX.

Time For Government To Release NSEL Out Of Deep Freeze
The Economic Times

When the central government urges states to dismantle the Agricultural Produce Marketing Committee Act or at least to remove perishable produce from its ambit, it needs to complement the move with the promotion of electronic spot exchanges.

The NCDEX-promoted exchange is at work. NSEL lies trapped in scam, ignominy and legal shackles. It is time for the government to bring this exchange out of deep freeze, release it from the control of the promoter group and put it to work to bring farmers and agri-buyers together.

PLY: Fascinating stuff as the Modi government deconstructs the licence raj of India from the inside out. Clearly proper producer-supplier focussed agricultural markets have a great future…


Kynetix Launches Trade Exceptions Software For LME Clear Go-Live

Kynetix, launched new trade exceptions software for members clearing through LME Clear.

MarkitServ Connects To KRX For Swaps Clearing
Automated Trader

OTC derivatives processor MarkitSERV, is now connected to KRX.

ICE Selects Morningstar To Provide Financial Data For The Redesigned NYSE.com
PR Newswire

ICE has selected Morningstar to provide comprehensive financial data & web solutions for NYSE’s redesigned website, www.nyse.com .

Abacus Group Launches Abacus FileDriver – New Service Will Allow Investment Firms To Efficiently Manage Routine File Transfer Processes

Abacus FileDriver will help investment companies automate routine file transfers and protect against disruptions caused by failed file transfers.

Cellbroker & Solution Tech Choose Perseus LiquidPath – 7,000 Traders Access BM&FBovespa From One Location Through LiquidPath On The Tryd Trading Platform

Perseus Telecom, announced SolutionTech and Cellbroker’s Tryd Trading Platform exclusively relies on LiquidPath, the Perseus fully managed services solution.


DGCX Plans Spot Silver After Gold
Claudia Carpenter – Businessweek

DGCX will consider starting a silver contract for immediate delivery after spot gold is introduced in Q3 alongside existing gold futures.

DGCX To Relist Indian Rupee Options Contract On July 18

DGCX announced the re-listing of its Indian Rupee Options contract July 18 following a temporary suspension in 2013 to facilitate migration to a new trading infrastructure.

China Moves Cautiously Towards Options Market Launch This Year
Elliott Holley – Banking Technology

Although equities and futures are traded in Hong Kong, Shenzhen and Shanghai, there has been no functioning options market.

Career Paths

HKEx welcomes Tan Siew Boi, May, the new Chairman of the Hong Kong Interbank Clearing Limited (HKICL), to its Risk Management Committee (RMC) in accordance with the Securities and Futures Ordinance. Ms Tan replaces Benjamin Hung, the former chairman of HKICL.

JSE announced that Donna Oosthuyse, currently the MD and Chief Country Officer of Citi South Africa will join the JSE Executive as Director: Capital Markets.

Singapore Exchange Derivatives Trading Limited (SGX-DT) announced Ringo Chiu as the Chief Representative of its newly launched Hong Kong branch.

Rob Laible, formerly head of program trading and electronic execution for Asia at Australian bank Macquarie Group, joined Liquidnet this week in a newly created role as head of global performance team.

FN reports that Cantor Fitzgerald’s European CFO, Gregory Hutt, has left the company and is joining BNY Mellon subsidiary Pershing as CFO.

Lesley Campbell has joined financial broker Vantage Capital Markets (VCM) as Head of Commodity Business Development, Asia, having resigned as an HKEx senior VP in March this year.

CFTC Commissioner J. Christopher Giancarlo announced the appointment of Jason Goggins and Marcia Blase to his senior staff.

FCA confirmed the appointment of Catherine Bradley as a NED to its board.

Business Standard reports that Ramesh Abhishek’s term as chairman of FMC has been extended. Abhishek, a 1982 batch officer of the Indian Administrative Officer (Bihar cadre), was appointed the FMC’s interim chairman after B C Khatua’s tenure came to an end in 2011. On September 24, 2012, Abhishek was appointed chairman.

PLY: Despite various challenges on his watch, it makes sense to maintain cohesion now at FMC with various actions still unresolved directly in their orbit and contiguous to it.

Swiss Futures and Options Association (SFOA), announced the appointment of Dan Day-Robinson as a Member of the Board and Vice-Chairman of the Association.

PLY: Having been rescued from the trolley en route to to the morgue by Chairman Otto Naegeli, attempts to remove SFOA from life support and give it a purpose clearly continue. Dead wood on the board has been purged although the association has struggled to find a purpose for the best part of a decade now. Incoming Deputy Chairman Dan Day-Robinson adds gravitas to a board which retains several excellent members. Is a succession plan looming given Otto’s term as Chairman expires at the September AGM? As a former board member of SFOA I applaud Otto’s efforts in managing the SFOA crisis from the nadir and welcome Dan Day-Robinson as a breath of fresh air to blow purpose into a crumbling old club.

Financial Calendar

New announcements

NASDAQ OMX Q2 2014 Financial Results – Thursday, July 24, 2014
Interactive Brokers Q2 Financial Results – Tuesday, July 15, 2014
Tullett Prebon H1 Financial Results – Tuesday, 29 July 2014
Thomson Reuters Q2 2014 Financial Results – Wednesday, July 30, 2014
SGX – Financial Year 2014 (FY2014) Financial Results – 31 July 2014
BGC Partners Q2 Financial Results – Thursday, July 31, 2014
CBOE Q2 2014 Financial Results – Friday, August 1, 2014
TMX Q2 Financial Results – Thursday, August 7, 2014
NZX H1 2014 Financial Results – Monday, 11 August 2014

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

Analyst Notes

ICE “Overweight” Rating Reaffirmed By JPMorgan Chase – $230.00 Price Objective
JPMorgan Chase Lifted Their Price Target On CME From $67.50 To $68.00
JPMorgan Chase Reduced Their Price Objective On CBOE From $49.00 To $48.50

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.

Other stories

SCA Sets Up Body For Tighter Supervision
Haseeb Haider – Khaleek Times

The Securities and Commodities Authority (SCA), the UAE’s financial market regulator, has said it would tighten supervision of the stock exchanges to check sharp fluctuations in shares.

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