July 15 2014

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Millisecond timestamping anybody? Worried your OTC broker may not be able to afford a “new era” service? How much does a transaction tax cost? Would you like TTIP to include financial dialogue? What are institutional shareholders doing in MCX? Would the FCA really suppress free speech? Can you predict the future of Intrade? How much business did LX lose after the NY AG sued? Who are the WSE board candidates & who announced they would adhere to the precepts of IOSCO benchmark rules when issued?

…Just a few of the questions discussed today in Exchange Invest alongside an interesting new electronic platform rollout by Autilla powered by Cinnober. All this and more in today’s free Exchange Invest daily which marks our 14th month anniversary.

Meanwhile, if you like the free stuff and want to support us building out the industry platform for markets, please join our upper tier, it’s only $120 and keeps this daily newsletter peppering your career with insights, all at no cost…Subscribe to Premium here.

Public Markets

Institutional Shareholders’ Stake In MCX Declines
Ashish Rukhaiyar – Livemint

MCX has seen a steady exodus of institutional shareholders ever since the payments crisis at NSEL emerged in July 2013. According to the latest shareholding data disclosed by the company to stock exchanges, the total stake held by institutional shareholders has fallen to 36.89%, as on 30 June, from 58.38% on 30 June 2013.

PLY: It hasn’t reached Swan Breweries levels yet (where there were no institutional shareholders before Alan Bond’s spectacular financial demise if my memory serves me correctly) but that trend is both interesting and worrying…

SIFMA Publishes Recommendations For Enhancing Fairness, Stability & Transparency In US Equity Markets
MondoVisione

SIFMA published a set of recommendations on equity market structure for enhancing fairness, stability & transparency in the U.S. stock market.

Trading In Barclays Dark Pool Down 37% (subscription)
Bradley Hope – Wall Street Journal

Barclays U.S. dark pool trading fell by more than one-third after New York authorities accused the firm of misleading its trading clients. During the final week of June, 197 million shares traded on the Barclays dark pool, down from 312.1 million in the previous week, according to data released Monday by FINRA. Barclays was accused by the New York AG in a June 25 lawsuit of fraudulently misleading customers about how the LX pool operated.

Clock Synchronization With Traders Is Challenge For Regulators (subscription)
Bradley Hope – Wall Street Journal

As trading hits warp speed, market cops have a growing headache: Clocks can’t always keep up. FINRA and SEC—the primary overseers of U.S. stock markets—and the U.K.’s FCA are tightening rules to impose stricter time-keeping standards.

PLY: Here is a fascinating story which also presents an impasse aka how theory is wonderful but the universe is invariably partially flawed around the edges (previous variations in this tale include the spectacular implosion of hedge fund LTCM).

Regulators are right to demand as accurate a time stamp as possible BUT will millisecond timing be so uber accurate? I fear that even the best run off exchange facility with separate servers side by side in neighbouring racks in one data centre may not be able to offer uniform timing to this degree of accuracy at all times. Regulators need to be mindful of this as simply pursuing venues will be pointless at this degree of precision. A tricky situation…

Counter Closed: The Rules That Will Hit OTC Trading (subscription)
Anish Puaar – Financial News

As Europe prepares to introduce rules that will drive up the cost of OTC derivatives trading, fears are growing that some investors could be left in the cold.

PLY: In many ways more an investigation into the minds of bankers – a genus who broadly believe they have a God-given right to charge lavish fees for anything they do while complaining how much of a profit margin exchanges and CCPs make. (Investment bankers’ innate self-interest ensures their entities are not so profitable presumably?). The brave new world does have paperwork hassles as Anish Puaar notes here but that won’t stop the business changing and ultimately if the old OTC desks cannot afford to do business, their commoditised ETD brethren will do it instead. Cheaply.

MCX Pays Bulk Of Transaction Tax
Business Standard

In the 12 months since it took effect from July last year, the Union government is understood to have collected Rs 680-700 crore (USD 99.7-116.3 mln) from the tax on non-agricultural commodities traded on recognised national commodity exchanges.

Known as Commodities Transaction Tax (CTT, the levy is 0.01 per cent), the collection is somewhat less than the Rs 900-1,000 crore (USD 150-165.6 mln) estimated by the government. Sources say about Rs 600 crore (USD 99.7 mln) was collected from MCX and the rest from the other bourses with the bulk of the volume in metals and precious metals, and energy.

PLY: More proof of how transaction taxes don’t work – as always, the take is vastly below government estimates.

POLPX & European Markets
Polish Power Exchange

PLY: A useful primer on POLPX and the Polish energy market.

Private Markets

Don’t Bet Your Sporran On A Scottish Stock Market (subscription)
Alen Mattich – Wall Street Journal

With an independence ballot looming, a report emerges on the possibility of a Scottish SE…

PLY: Useful conclusion insofar as: why would investors prefer a Scottish market when London is right on the doorstep (not impossible, just difficult: ask Dublin). A Scottish exchange could survive albeit the problem is the government itself which is somewhat left-wing and not readily proximate to business friendly.

Fantasy Sports Meets Wall Street: Intrade Co-Founder Resurfaces
Steven Russolillo – Wall Street Journal

Ron Bernstein, a co-founder of the now-shuttered Intrade, earlier this year started a new site called Tradesports.com, a fantasy sports venue that allows users to buy and sell positions based on predictions for specific sporting events. Starting this week, the company is launching “long-term prediction” contests, which will give people a way to trade positions on events that are months in the future, such as the upcoming World Series or the Super Bowl.

PLY: As a co-founder and former director of Intrade myself, I am delighted to see Ron making valiant efforts to keep the business running in another direction, building the Tradesports name out as a fantasy prediction market. (Disclosure: yes I do have a few shares left post dilution but not enough to really justify this sentence other than for perfect accuracy…).

Bitcoin J.V. To Bid For Mt. Gox Assets (subscription)
Takashi Mochizuki – Wall Street Journal

BitOcean, a Beijing-based bitcoin automated teller machine maker, will team up with Atlas ATS, a New York-based exchange-platform provider that has worked for large Wall Street financial institutions to create a new BTC exchange in Japan while the new venture, BitOcean Japan, also hopes to purchase the assets of Tokyo-based Mt. Gox.

Special Section: FTI, NSEL, India at the Crossroads

PLY: FTIL is flat and MCX is up 2%. Jignesh Shah still resides in jail.

NSEL Plans Recovery Suits Against Defaulters
Financial Express

NSEL has conveyed to the commodity markets regulator that it will file recovery suits and lodge FIRs against all defaulting members.

PLY: Good, please hurry up.

Technology

Autilla Goes Live With Innovative Marketplace For Precious Metals Trading
Cinnober

The global precious metals marketplace, Autilla, announced that it is now live with their new electronic trading platform, powered by Cinnober Financial Technology. The migration of the OTC broking of precious metals onto a proven electronic trading platform enables Autilla to provide banks with a highly flexible and compliant trading system. This innovative initiative, which is available to wholesale participants in LBMA, is enabled by Cinnober’s TESS Connect & Go.

PLY: Another interesting Cinnober rollout as Autilla builds a post OTC electronic platform for LBMA wholesale traders.

Broadridge Investment Management Solutions Unveils New Mobile, Web-Based Reporting Tool
MondoVisione

Broadridge Financial Solutions expanded its set of buy side solutions with the launch of Report Manager.

Indexes

Markit In IOSCO Benchmark Compliance
Asset Servicing Times

Markit has confirmed that it will administer its benchmarks in compliance with IOSCO final report on Principles for Financial Benchmarks.

Career Paths

WSE announced that it received on 14 July 2014, from the shareholder Powszechna Kasa Oszczędności Bank Polski S.A. the nomination under the general rules of Mr Jakub Papierski as a candidate for a member of the Exchange Supervisory Board.

As reported on June 20th, other candidates as independent members of the Exchange Supervisory Board are:

Waldemar Markiewicz – President of the Polish Chamber of Brokerage Houses, CEO of DB Securities SA since 1999
Marek Słomski – President of the Management Board of ING Securities SA in Warsaw since 1996
Mariusz Patrowicz – An entrepreneur since 1989, in 2006 he founded the company Investment Friends SA

EI reported on June 27th that Mr. Paweł Tamborski was elected / imposed by government fiat President of the WSE Management Board.

At the twenty-sixth AGM on 11th July 2014, Grant Angwin of Johnson Matthey was elected as the Chairman of the LBMA.

Calastone, the global funds transaction network, has appointed James Colquhoun former CFO of AOL’s European Operations, as their new CFO.

The Office of Financial Research (OFR) announced the addition of 11 new members to its Financial Research Advisory Committee.

John Campbell, Harvard University
Lou Crandall, Wrightson ICAP LLC
Stephen Daffron, Interactive Data Corporation
Beth Hammack, Goldman Sachs
Darryll Hendricks, UBS
Simon Johnson, Massachusetts Institute of Technology
Andrew Metrick, Yale University
David Puth, CLS Group Holdings/CLS Bank International
Chester Spatt, Carnegie Mellon University
Lynn Stout, Cornell University Law School
Kay Vicino, Northern Trust

Financial Calendar

This month

Interactive Brokers Q2 Financial Results – Tuesday, July 15, 2014
LSEG Q2 Financial Results – Wednesday, July 16, 2014
DFM BoD Meeting – Thursday, July 17, 2014
NASDAQ OMX Q2 2014 Financial Results – Thursday, July 24, 2014
DB1 Q2 2014 Financial Results – Thursday, July 24, 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

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

Analyst Notes

CME Upgraded By Zacks From “Underperform” To “Neutral” – $74.00 Price Target

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

Equity Crowdfunding: New ‘Secret’ Rules For Social Media Users – A “Terrifying Misuse Of Legislation”
MondoVisione

A briefing and submission to Ministers handed to Treasury officials today documents how FCA is abusing legislation created before the social web existed to gag its use with equity Crowdfunding. Their action, which extends to anyone even mentioning a crowdfund online, is also threatening free speech and free expression, according to leading lawyers.

PLY: Barry James does love a good rant and here he is really getting his teeth into his bete noire, the FCA. That said, the UK regulator does appear to have got itself into a tricky situation by failing to catch the zeitgeist of the brave new world crowdfunding is creating: think of it like street slang and the Oxford English Dictionary. Eventually enough people use a word or phrase and the OED includes it. The FCA is having difficulty appreciating the difference between the old world where it could regulate much more easily in a restrictive fashion and the new one which is much more multilateral and can simply offshore to avoid regulatory fiat.

Other Stories

Financial Industry Associations Urge TTIP Negotiators To Include Financial Services Regulatory Coordination In US-EU Trade Agreement
MondoVisione

PLY: Expect “thin end of the wedge” comments in various circles which fear TTIP but more regulatory coordination would be useful given the sorry state currently of Trans-Atlantic relations in many respects between the US and EU regulators (both of which can receive ample blame).

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