July 11 2013

elb2 We lead with a fascinating story from BusinessWeek which could tip NASDAQ OMX into takeover target. Meanwhile, The FC Stone acquisition of Cleartrade has, alas, collapsed in the wake of Dodd Frank rule tweaks. In London, ICAP produced their results for Q1 while China metal warehouses could yet be available to LME. Interesting times, more stories and analysis below:

Public Markets

Nasdaq Top Deal Target

Businessweek

With the takeover of NYSE Euronext poised to close, buyers seeking the next exchange purchase will find no cheaper target than Nasdaq OMX Group Inc (NDAQ).

For potential acquirers, Nasdaq OMX has the lowest price-earnings ratio among exchanges valued at more than $5 billion even after surging 33 percent in 2013, according to data compiled by Bloomberg. NASDAQ recently made it easier for suitors by cutting the shareholder approval threshold for removing directors to a simple majority from a two-thirds vote.

PLY: A good story, well-researched although perhaps the problem with NASDAQ as target is that the US regulators may not be interested in an overseas buyer? Note the reminder of Chuck Schumer’s desperation for a merger of equals with DB and NYX.

At the same time, NASDAQ’s management have their own priorities and it remains to be seen how they develop the business form their interesting spell recently of acquisitions, launches and tech sales.

NYSE Euronext’s New SME Project Needs Market Support (subscription)

Financial News

NYSE Euronext has laid out plans to stimulate bond issues among smaller companies through its new EnterNext subsidiary, but efforts to revitalise access to finance for SMEs must go further, say industry observers.

PLY: Enternext is an experiment I hope succeeds even though their definition of SME and mine differs to a large scale (qv the Icap Securities & Derivatives Exchange (ISDX), formerly Plus – targeting funding from 150k – 5 million GBP, that is a real SME exchange).

NYSE Euronext Can Help Heal Libor Scars

Business Standard

The choice of NYSE Euronext as overseer of Libor could help heal banker’s wounds.

The exchange group’s outsider status may have worked in its favour. Thomson Reuters, also coveted the contract. Yet, its role in providing the data set to the British Bankers’ Association for setting Libor means it was tainted by involvement.

NYSE snapped up the contract from the BBA at the bargain price of one pound. No other commercial details are available, but Libor is the world’s pre-eminent benchmark, used to set upwards of $500 trillion worth of financial instruments. If NYSE Euronext can restore its credibility, the reputational fillip will be worth a great deal.

PLY: Thomson Reuters were unlucky here indeed and I think the author is slightly unfair on NYSE Euronext and exchanges’ generally who, after all, settle multitudes of options and futures every year without prejudice to a broad array of members…

Tie-up Of TSE’s Mothers, OSE’s Jasdaq Examined

The Japan Times

Japan Exchange Group Inc. will consider a future merger of the Tokyo Stock Exchange’s Mothers section and the Osaka Securities Exchange’s Jasdaq section, both for startups

The president of TSE Inc. also stressed the need to strengthen collaboration, if not mergers, with exchanges in Sapporo, Nagoya and Fukuoka.

PLY: Will Japan go to one exchange like the LSE managed all those years ago or will the market remain more like Germany with a key player and several interesting niches?

LME Nears Prize Of Warehouses In China

Reuters UK

China’s top planning body is preparing to let foreign exchanges open commodities warehouses in free-trade zones which would grant the London Metal Exchange coveted access to the industrial giant.

PLY: a triumph for HKEx after paying $2.2 billion (£1.5 billion) for LME last December with a determination to deliver LME-registered warehousing into China which had long eluded LME as an independent. This is good news for metals markets, and specifically, HKEx group.

Private Markets

INTL FCStone Drops Plan To Buy Asian Online Exchange Cleartrade

Reuters

U.S. commodities brokerage INTL FCStone Inc said on Wednesday it has dropped plans to buy an online commodities exchange in Asia due to complications posed by newly-issued financial regulations.

INTL FCStone, a mid-sized broker headquartered in New York, announced in mid-May it was seeking a controlling stake in Singapore-based Cleartrade Exchange but expanded Dodd-Frank financial regulations in the United States have scuttled the deal.

PLY: A shame that US regulation may preclude overseas expansion of financial players while Cleartrade must be deeply frustrated. No plans for an immediate new investor search but clearly this is likely to be on the cards in the near future…

Newedge Fined For Lax Oversight Of Manipulative Trades (subscription)

Wall Street Journal

Wall Street’s stock-market cops slapped a New York brokerage firm with a record fine for failing to stop computer-driven trading clients who sought to manipulate U.S. markets for nearly four years.

FINRA and several stock-exchange regulators fined Newedge USA LLC $9.5 million for lax oversight of the trading firms from early 2008 to late 2011.

ICAP: Q1 Revenue Rises on Volatility
Icap Set for Dawn of Swap Execution Facilities

Bloomberg / Wall Street Journal

PLY: Essentially ICAP Plc was flat in Q1 (revenue +2%) and expenses cutting continues apace. Fixed income Brokertec volumes were up 13% at $659 billion. EBS recorded slight declines in volume in June incidentally -6% at $128.8bln while Reuters was up 3% at $147 billion and FXAll recorded a record month in June at $123bln. Commodities volumes for ICAP in Q1 were down due to banks shutting desks. That business is mostly energy – will the knock-on hurt ICE? Probably not as swaps convert to futures and provide more volume to the futures exchanges. Probably…

The Interest rate / credit derivatives platform is “well advanced” for Dodd EMIR Frank according to ICAP CEO Michael Spencer.

Libyan SE Pushes Islamic Finance

FTSE Global Markets

The Libyan Stock Market has signed a memorandum of understanding with Shariah advisory firm Amanie Advisors in a bid to help Libya’s efforts to expand the role of Islamic finance in its economy.

Technology

Trading Technologies Launches MultiBroker Trading Solution

Trading Technologies International, Inc. (TT), a global provider of high-performance trading software for derivatives professionals, today announced the production release of its MultiBroker trading solution.

TT’s MultiBroker gives the buy side direct market access via multiple brokers from a single X_TRADER® Pro or API connection to TTNET™, TT’s fully managed global hosting solution. TT software routes orders through TTNET’s end-to-end architecture, never through a third-party network, providing superior speed, stability, and accuracy.

Products

Kenya SE To Introduce Derivatives & REITs

IVCPOST

The Kenyan regulator is on the verge of approving plans to introduce futures with a focus on interest-rate and foreign-exchange derivatives, and asset-backed securities as well as REITs.

ETFs are due to start next year.

Thailand FE Adds 10 Underlying Single Stock Futures July 15

The Thailand Futures Exchange pcl (TFEX), under The Stock Exchange of Thailand (SET), will add 10 underlying securities for stock futures, on top of the 50 currently available, and add the combination series of SET50 Index Futures and Gold Futures, starting from July 15.

All new underlying securities are constituents of the SET100 Index which have market capitalizations of more than THB 10 billion (approx. USD 333.3 million) and high liquidity.

Indexes

New Colombian SE Indexes

InvestorIdeas.com

CSE launch a family of six new indexes covering equities, fixed income and money markets.

Career Path

ICAP’s European Govt Bonds Head Leaves

The West Australian

London-based John King, who joined ICAP in 2005 after working at rival Tullett Prebon, is one of a handful of brokers to have left the company in recent weeks.

The company said at its annual results in May that it planned to increase cost-cutting by up to 120 million pounds over three years, including more staff cuts.

Changes in investors/shareholders

Hellenic Exchanges S.A.: Notification About A Significant Change In Voting Rights

The HELLENIC FINANCIAL STABILITY FUND (HFSF) informed the Company in writing on 09.07.2013 that, because of a triggering transaction on 03.07.2013 it indirectly holds, through companies controlled by it, 5.90% of the share capital of HELEX (from 3.40% before the transaction).

Financial Calendar

GFI Group Inc. Schedules Q2 2013 Earnings Release Thursday, July 25, 2013 post U.S. market close.

Analyst Notes

NASDAQ OMX EPS Estimates Cut by Credit Suisse – “Neutral” rating
IntercontinentalExchange reiterated by TheStreet Ratings as a “Buy”

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

Canada – Crowdfunding Proposal Could Spark Sask. Startups

Regina Leader-Post

Saskatchewan is boldly going where no province has gone before by being the first to allow equity crowdfunding – using the Internet to raise startup capital for small businesses – without having to file a prospectus or even register as an issuer with securities regulators.

The Financial and Consumer Affairs Authority proposal to exempt equity crowdfunding from securities rules would limit fundraising to a maximum of $100,000, no more than twice a year, and limit investors to a maximum investment of $1,000.

PLY: “This is a very modest proposal,” Dean Murrison, director of FCAA’s securities division, told a public information session in Regina on Tuesday is a very Canadian self-effacing remark as it directly and clearly gives a huge fillip to the potential for developing SMEs in Saskatchewan, the first Canadian province to introduce such rules..

Africa’s Crowdfunding Context: Starting Up Startups The African Way

Ventureburn

“Crowdfunding is the democratization of [funding] for startups,” says founder of Thundafund Patrick Schofield. People get the opportunity to directly vote with their wallets for the services or products they want.

There are as many as three in South Africa namely StartMe, FundFindand the most recent, ThundaFund. In Nigeria there’s StartCrunch while Kenya has M-Changa. In Ghana SlizeBiz focuses on angel investments as well as obtaining micro finance.

All of these initiatives share the popular principles borrowed from crowdsourcing that holds the idea of sourcing resources, services, ideas, or content from a large group of people to support one single project or purpose.

In Africa, crowdfunding could still be considered being in its beta phase but has the potential to evolve the startup financing culture of the continent.

Other stories

Derivative Rules: Global Problem Needs Global Solution

Reuters

PLY: An interesting overview of how extraterritorial impatience by CFTC may not help markets but there is a clear need for international regulatory cooperation…

Turkey launches inquiry into foreign exchange transactions (subscription)

Financial Times

PLY: The descent of politicians’ credibility is patently evident when they cry foul on speculators destroying their markets. According to multiple news media, thousands of Turkish protesters are unhappy with the government. Our job is not to analyse the politics of this protest. The simple fact is that investors dislike instability and the Turkish government believes it can ‘organise’ the markets with a not very invisible hand (qv the forced merger of Turkdex etc into Istanbul SE). That makes for a potentially explosive situation which could hinder the exciting success story of modern Turkey.

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