July 12 2016

elb2Out there in BigWorld, GB Chillaxer in Chief David Cameron is leaving office tomorrow, to be replaced by Theresa May who says “Brexit means Brexit” which sounds like a definitive statement given the clear mandate. Bring on the future of this great global opportunity as we reposition free trade in the AngloSphere and far beyond.

In the parish, DB1 LSE perplexes once more. This deal has from the very outset proven tiresomely incoherent with its attendant soap opera. The sheer waste of time and energy has been considerable, not forgetting the money expended for what I am still rather convinced will be a waste of time. However, I’m tiring of commenting, the deal has few merits, none that will survive antitrust and moreover all parties have soiled their reputations, such as they were. I’s tough to avoid commenting given the shuffling of T&C. Today’s reset leaves a lot of questions hanging, particularly, once again, over basic management competence.

To place any comment in context, we’re creating a Countdown today. Basing on the 351 days it took EU competition authorities to wisely reject the NYSE-DB1 deal in 2011/2012, from today we will counting down to the day the EU anti trust authorities throw out the simply untenable DB1 acquisition of its, er, equal, LSE. Thus we’re 140 days in since this deal was first announced (February 24 2016) which means we have 211 days on the countdown to a target zone where, hopefully, we can expect EU antitrust to reject this deal.

Public Markets

DB1 Lowers Shareholder Approval Threshold For LSE Deal

William Turvill – CITY A.M.

Amendment of Exchange Offer Acceptance Condition

DB1

LSEG: Evaluation Of Lowering The Minimum Acceptance Threshold For Takeover Offer By HLDCO123 To The Shareholders Of DB1

MondoVisione

DB1: Evaluation Of Lowering The Minimum Acceptance Threshold For Takeover Offer By HLDCO123 To The Shareholders Of DB1

MondoVisione

PLY: How disappointing it is to see DB1 shown once again to be either materially incompetent or simply so shortsighted as to be unable to do the basic maths of a deal. The Merger of Equal Desperation gains another notch to its notoriety… This is very very sad to see and bad for the standing of the parish.

As the FT notes, (below): “However, one top 20 shareholder said it was “a defensive move and shows how fragile the deal is…We were very surprised as it is diametrically opposed to what they said last week. It doesn’t fill us with great faith in their management.”

This is truly desperate stuff moreover inferring a tragic lack of self-awareness amongst management. I suspect neither DB1 nor LSE have even the remotest notion of the tirade of criticism which will be levied at this deal as soon as the antitrust discussions are opened in earnest. Indeed, the Belgian Finance Minister fired a high level shot across the bows of the Merger of Equal Desperation yesterday:

Belgium Warns On DB1-LSE Deal (subscription)

Philip Stafford, James Shotter & Alex Barker – Financial Times

The planned merger faces further opposition after Belgium warned European antitrust authorities that the deal could damage the country’s economy and market stability.

On the ‘Exchange Invest MOED Watch’ remember we’re at 211 days to antitrust saying no, based on the NYSE-DB1 scale. I would say the chances of the deal surviving are now no better than 10%, certainly below 20% and falling. Whatever the outcome, long-term reputational damage has been suffered by all the main parties involved and that’s very unfortunate…but entirely self-inflicted no matter how the future blamestorm may go.

QV Premium: DB1-LSE Merger Brief.

 

Euro Clearing May Move to Frankfurt (subscription)

Michael Bracher, Frank Drost & Katharina Slodczyk – Handelsblatt

DB1 thinks the lucrative euro clearing business should move from London to Frankfurt if its merger with the LSE goes ahead. It also extended the deadline for shareholders to accept the deal.

PLY: Plaudits to Will Mitting at FOW who seems to know that there may be a completely different location for Euro derivatives in the near future. A glance at Google Maps offers a revealing inference: FOW: What Does Google Know About DB1-LSE?

Frankfurt Pushes for U.K. to Access Single Market in Financial Services (subscription)

William Wilkes – Wall Street Journal

Frankfurt will push for the U.K. to be allowed the maximum possible access to the single market in financial services following the country’s vote to quit the EU, even as it hopes to attract jobs from a Brexit fallout.

PLY: Frankfurt dodges the worst of the Mutually Assured Destruction from recent EU discussion. After all, the debate is much more than just trade, given, for instance, the UK’s significant military strength and its vast intelligence gathering network which is not replicated amongst the other 27 nations.

 

IHS Stockholders & Markit Shareholders Approve Merger

Reuters

Merger expected to close July 12.

PLY: Leaving Lance Uggla to plot further moves towards world domination.

 

Thomson Reuters To Sell IP & Science Business For $3.55 billion

Reuters

Thomson Reuters agreed to sell its intellectual property and science business (deal previously discussed here and here) to private equity firms Onex Corp and Baring Private Equity Asia for $3.55 billion in cash. TMR will use $1 billion of the net proceeds to buy back shares, pay down debt and invest in its other businesses.

QV Premium: Exchange Deals Brief – M&As.

 

LSE Launches Online Private Placement Platform

MondoVisione

ELITE Club Deal will offer over 400 ELITE companies the opportunity to connect to institutional investors, private equity, VCs and other professional investors.

PLY: An interesting idea as the LSE tries to do something outside the pure public financing sphere. Elite will not be the only solution but it is one coherent approach.

 

JSE Successfully Moves To A Shorter Three Day Settlement Cycle

MondoVisione

PLY: Only one day above the western settlement scale now.

 

T2S Leads to Settlement Efficiencies

Shanny Basar – Markets Media

Banks are increasingly using a single or few points of access to settle cash and securities in Europe in the year following the start of operations of Target2-Securities, the project to harmonize securities settlement in the region.

 

SEC Tightens Rules To Stamp Out Spoofing

Hayley McDowell – The Trade

SEC has rubber-stamped a change to clock synchronisation standards to stamp out market abuse and spoofing.

In a statement released to market late on Friday, SEC approved a new clock synchronisation standard of 50 milliseconds – down from the previous requirement of one second – to record events in a trading life cycle.

The proposal to make the change was originally proposed in April of this year by FINRA, who explained to the SEC the current one second tolerance is no longer appropriate, given the increasing speed of trading in today’s automated markets.

 

The 350-Microsecond Trading Question

Rick Baert – Pensions & Investments

Greater transparency welcomed; benefit of IEX exchange pondered.

 

BIS Assigns Highest Rating To Russia’s Financial Market Infrastructure

MondoVisione

Russia’s FMI received the 4th level rating (highest possible) alongside with FMIs of Germany, France, Great Britain, Hong Kong, Singapore, etc.

PLY: Important to note simply because there is a horrible notion that Russia is somehow backward. Its financial market infrastructure is not the reflection of those crashcam videos beloved of YouTube viewers. Rather Russia has built a superbly coherent infrastructure, which, let’s face it had to move off T+0 to accommodate the creaking old western systems where T+2 is a giddy achievement.

 

HK’s IPO Market Benefits From Regulations Curbing Back- Door Listings (subscription)

Enoch Yiu – SCMP

Tighter IPO rules on mainland China and impending reform in Hong Kong have seen a rush of companies planning new listings in the city.

 

“Borsa Italiana Global Equity Market” Launched

MondoVisione

PLY: I am not entirely convinced “BIGEM” will prove an attractive acronym.

Private Markets

BSE To Float Separate Subsidiary For International Bourse

KR Srivats – The Hindu Business Line

As mentioned yesterday, BSE will float a separate subsidiary for its proposed international stock exchange in GIFT City at Gandhinagar, its MD & CEO Ashish Chauhan said on Monday. “We already have a board approval for setting up a new subsidiary. We will also have a separate CEO for this new company”.

Chauhan said that the BSE’s proposed international exchange would offer equity products including equity derivatives, commodity derivatives, etc. GIFT City is being developed by the Gujarat Government as the country’s first international financial services centre.

PLY: Very interesting. GIFT gets its exchange while a series of international entities were rumoured to have considered a venture in the centre…

QV Premium: India – GIFT Exchanges Brief.

 

Top China Commodity Exchange Has ‘Zero Tolerance’ for Abuse

Bloomberg

The Shanghai Futures Exchange has vowed it won’t tolerate any abuse of trading rules after the unprecedented boom-bust episode in Chinese commodities markets earlier this year, adding that its products aren’t for mom and pop investors.

PLY: Remember how the Chinese regulators dealt with Everbright Securities. Incidentally, they don’t seem to have had an HFT issue since…

QV Premium: China’s Everbright Securities Trading Error – Brief.

 

BSE Taking Steps To Curb Illegal Money Flow Into Penny Stocks

Business Standard

 

LMAX Calls on UK Regulators to Lead FX Market Reforms After Releasing Report

Steven Hatzakis – Finance Magnates

PLY: Another entirely justified call asking for a last look at the utterly egregious process of last look which has no business existing in modern markets.

 

Tadawul – The Implementation Of The New Trading Commission For Listed Shares

MondoVisione

 

Decentralized Exchange Turns Up ‘HEAT’ With Blockchain Start-Up Support

Roger Aitken – Forbes

The Decentralized Conglomerate (DC), and the network of services comprising the ICO OpenLedger (ICOO) asset, which Danish crypto exchange CCDEK is a party to, embark on their inaugural project after a revamp of it website this coming week.

PLY: Interesting, have a read and ponder the new world order…whatever it may be.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX and FTIL flat to slightly worse this morning.

Technology

Developer Claims Ethereum is Stolen Intellectual Property, Files Complaints with FBI

Olusegun Ogundeji – Cointelegraph

Products

Euronext To Offer MiFID II-compliant Trade Publication & Transaction Reporting Services

Euronext

 

CBOE to List SPX Monday-Expiring Weeklys Options

CBOE

 

NSE Unveils Online Bidding Platform For Gold Bond Issuance

Business Standard

 

Thomson Reuters Adds EBS To Its Post-Trade Network

MondoVisione

 

Staying Ahead of the Regulatory Curve in FX

Matthew Hill, Markit – Traders

Regulatory reform, including Basel III, Dodd-Frank, EMIR, and MiFID II has led to significant changes in market dynamics including the move to-exchange-style trading and centralised clearing for products that traded over the counter, even within the FX market. However, despite years of discussions and proposals, many aspects of the regulation of OTC FX markets remain unresolved. For example, neither European nor US regulators have reached consensus on mandating clearing of FX non-deliverable forwards (NDFs) and it is not yet clear when the final decision on this matter will be made.

 

State Street To Pilot GlobalCollateral’s Margin Settlement Messaging Service

MondoVisione

Career Paths

Reuters reports that UBS has appointed former LSE Chairman Chris Gibson-Smith as Vice-Chairman of Corporate Client Solutions in EMEA region.

Gibson-Smith will be based in London and work directly with the co-heads of its UK investment banking business, William Barter and David James.

Malta’s Economy Minister Chris Cardona announced (reported by Malta Independent) that Malta SE will have a new GM in place come September. Alfred Sammut will be filling the GM role a full five months after he was approved for the position.

Traders reports that Citadel named Steven Lieblich, 30-year veteran of Morgan Stanley, as CTO for the firm’s hedge-fund business. Lieblich will report to Citadel CEO Kenneth C. Griffin.

Also reported by Traders, IEX’s buy-side Trading Advisory Committee selected the following interim Member Representative Directors: Brian Levine, Partner & Co-Head of Global Equities Trading & Execution Services at Goldman Sachs, and Jatin Suryawanshi, MD & Head of Global Quantitative Strategy at Jefferies.

Alberta Securities Commission (ASC) announced that the Lieutenant Governor in Council has appointed Maryse Saint-Laurent, ICD.D, as a member of the ASC for a three-year term commencing July 7, 2016.

Dr. Ian Beddis, Brad Nemetz, Q.C., and Ann Rooney, FCA, ICD.D have been re-appointed as members of the ASC, each for a three-year term. Ms. Rooney has also been named lead independent member, a position that is appointed annually.

The ASC recognizes with gratitude the valued service of Daniel McKinley, FCA, ICD.D, whose three-year term with the ASC expired on March 31, 2016.

Financial Calendar

20.07 – ICDA Cyber Risk London Conference

20.07 – Record date WSE 2015 PLN 2.36 dividend

21.07 – Adjourned WSE Ordinary General Meeting to resume proceedings

New! 28.07 – ITG Q2 2016 Results – press release

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

Other stories

OCC Comments On Revisions To Basel III Leverage Ratio Framework

MondoVisione

 

 

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