July 18 2014


ESMA rolls back from causing total derivatives chaos while DFM profits surge. Alibaba IPO delayed. Are banks using CLS as a tool of protectionism against exchanges in forex trading? New CEO for Tulletts and multiple intriguing stories make up today’s free Exchange Invest Daily…

Public Markets

DFM Net Profit Surges 384% To AED 467.6 Mln (USD 127.4 Mln) During H1 2014

Dubai Financial Market Company (PJSC) H1 2014 results record a net profit of AED 467.6 mln (USD 127.4 mln) (+384%). The Q2 2014 net profit reached 252.5 mln (USD 68.8 mln) (+263%). H1 2014 revenue of AED 552.1 mln USD 150.4 mln) (+209.4%). Q2 2014 revenue AED 296.5 mln (USD 80.8 mln) (+163.08 %).

PLY: An impressive percentage increase, to put it mildly.

Respite For Derivatives Deals From Incoming European Rules (subscription)
Philip Stafford – Financial Times

Swaps dealers and banks are set to win a respite from meeting incoming European derivatives rules after regulators admitted their implementation put market participants’ right to legal certainty of their contracts at risk. The European Commission has agreed with a proposal suspending the status of derivatives deals entered into from March 18 until the region’s main regulator determines which instruments should face mandatory clearing later this year.

PLY: Perhaps the only logical option for the EU juggernaut when it was finally realised their rules could cause chaos if hurried.

SEC Scuttles Nasdaq Options Rebate Plan
John McCrank – Reuters

SEC has denied a plan by Nasdaq OMX to offer rebates to some of the biggest customers of one of its options exchanges, based on the amount of trading they do across all three of Nasdaq’s options markets.

Nasdaq’s plan would have run afoul of rules stating that an exchange’s fees cannot be unfairly discriminatory or hinder competition, the SEC said in an order posted on its website on Thursday.

CME Throws Down Gauntlet In Race To Run Gold Fix
Clara Denina & Jan Harvey – Reuters

CME would be happy to administer, with Thomson Reuters, the global price benchmark for gold known as the “fix”, a day after banks effectively called time on the current arrangement.

EI reported yesterday that London Gold Market Fixing Limited (LGMFL) intends to appoint a third party administrator for the gold fixing process.

As reported on July 14th CME & Thomson Reuters are confirmed as winners of the London Silver Fix bid.

LME vs Rusal (Part 2) Will Be Legal Not Market Drama
Andy Home – Reuters

The legal battle between LME and Russian aluminum giant Rusal will resume on July 29 with LME appealing a previous British High Court ruling that it failed properly to consult on a proposal for cutting load-out queues at some of its registered warehouse.

CME To Expand Paired Delivery As Banks Rethink Third-Party CLS
Joel Clark – FX Week

CME will extend its new paired-delivery model for the physical settlement of foreign exchange futures from Europe to the US in September, as banks step back from the provision of indirect settlement through CLS to financial market infrastructures (FMIs), which include exchanges and CCPs.

PLY: A worrying development as the bank dominated CLS may be claiming issues in the rules but the worry remains that they are merely serving their bank paymasters. That could have massive ramifications, whether or not the accusation is explicitly proven, as the government regulatory complex would have to take account of an arguable bank cartel closing down competition for financial products. Developing…

Will Financial Tech Exit MCX In Time?
Rajalakshmi Nirmal – The Hindu Business Line

MCX has been skyrocketing with FTIL selling its stake in the company. Over the last one week, FT has been offloading its stake in MCX in the open market.

The deadline given by FMC for FT to reduce its stake in MCX is nearing. FT will have to bring down its stake in MCX to 2% by August. Currently FT holds 20% in MCX. If it fails to comply with this order, MCX will not be allowed to launch contracts beginning 2015.

PLY: No FTIL probably won’t make it by the drop dead date but the regulators would be dumb not to allow them just a little grace as it will be a much less messy exit.

SEC Targets 10 Firms In HFT Probe – SEC Document
John McCrank – Reuters

SEC has been seeking information on 10 registered broker dealers as part of an ongoing investigation into HFT strategies, according to an internal SEC document reviewed by Reuters.

PLY: Allston Trading LLC; Hudson River Trading LLC; Jump Trading LLC; Latour Trading LLC, (an affiliate of Tower Trading); Merrill Lynch; Octeg LLC, (now a unit of KCG); Tradebot Systems Inc; Two Sigma Investments LLC; Two Sigma Securities LLC; and Virtu Financial.

Commission Struggles To Refine FTT Revenues Estimates (subscription)
Anish Puaar – Financial News

The European Commission has been unable to revise its revenue projections from the proposed FTT after requests for estimates from member states were ignored.

In its original proposal for an FTT in February 2013, the European Commission estimated €57 billion would be collected annually from the levy, a figure that was condemned as inaccurate by the finance industry.

PLY: Apparently the EU asked the consultancy Grimm Brothers Inc to provide some empirical evidence how much money an FTT might raise but it transpires they went out of business after the last boom in fairy tales a few centuries back.

Don’t Outsource Risk, ASX Head Warns
Andrew White – The Australian

ASX chief executive Elmer Funke Kupper has called for regulators to take a conservative approach to one of the signature G20 reforms — moving the $600 trillion OTC derivatives market to central clearing houses.

Mr Funke Kupper said governments and regulators should not be outsourcing systemic risk to other jurisdictions by allowing cross-currency clearing of instruments such as IRS, which are used by banks and customers to manage risk.

PLY: Elmer speaks the mantra of the (Premium Post) Homer Simpson buffet

Alibaba NYSE Debut Slides Beyond August (subscription)
Nicole Bullock – Financial Times

Alibaba’s hotly anticipated IPO – which is expected to be among the largest ever stock market listings – will not come until after the US Labor Day holiday on September 1. The Chinese e-commerce company is expected to raise about $20bn when it comes to the market, rivalling the Agricultural Bank of China’s $22.1bn IPO from July 2010, currently the largest on record.

Private Markets

South China Morning Post Article About TOCOM Providing DMA From Hong Kong

On July 16, 2014, TOCOM held a seminar introducing its offering of DMA among other things to market participants in Hong Kong. Ahead of the seminar, South China Morning Post interviewed Mr. Hamada (Senior Executive Managing Officer & COO of TOCOM) about TOCOM providing DMA to market participants in Hong Kong and posted the related article.

NY DFS Releases Proposed Bitlicense Regulatory Framework For Virtual Currency Firms

Benjamin M. Lawsky, Superintendent of Financial Services, announced that the New York State Department of Financial Services (DFS) has issued for public comment a proposed “BitLicense” regulatory framework for New York virtual currency businesses. The proposed regulatory framework – which is the product of a nearly year-long DFS inquiry, including public hearings that the Department held in January 2014 – contains consumer protection, anti-money laundering compliance, and cyber security rules tailored for virtual currency firms.

PLY: New York gets on with providing a workable framework while the EU throws its hands up in horror and without irony tries to destroy innovation while promoting an innovation economy initiative (as dumbly as ever top down of course…that always works, just look at North Korea’s tech industry managed from Pynongyang).

To be fair on the EU fringes the likes of the Isle of Man are making great strides to encourage cryptocurrency business.

Bitcoins Can’t Shake Bubble Image In Poll After 45% Drop
Olga Kharif – Bloomberg

Bitcoin, are poised to tumble further, according to the latest Bloomberg Global Poll of financial professionals.

PLY: In other news, a majority of turkeys polled by Bloomberg reckoned October will last forever, thus removing the Thanksgiving threat. Probably time to buy Bitcoin on the above insight…

Special Section: FTI, NSEL, India at the Crossroads

PLY: A quieter day in the volatile world of MCX stake sales with MCX down 1% and FTIL minus 3% while Jignesh Shah remains behind bars, latest appeal adjourned until today.

Hearing On Bail Plea Of NSEL Scam Accused Jignesh Shah Adjourned
The Economic Times

The Bombay High Court adjourned hearing on the bail plea of former FTIL Chairman Jignesh Shah, who was arrested on May 7 in connection with the NSEL scam. The next hearing is scheduled for Friday. Shah’s bail plea was adjourned by the high court due to paucity of time, the fourth time since an appeal was filed in the higher court. Earlier, the sessions court witnessed 14 adjournments in the case before the bail plea was rejected. So far, the bail appeal has been adjourned 18 times for various reasons.

PLY: Racing to pixel, is that 14 adjournments plus 18 adjournments in different processes to make 32 in total? Even 14-18 seems like a range wherein I would be a touch paranoid that the judiciary is sending me a message if I were behind bars…

NSEL Scam: Show Evidence Of How Jignesh Shah Gained Monetary Benefit Says Mumbai High Court
Ram Sahgal – The Economic Times

The judge hearing the bail application of Jignesh Shah, who headed the company that promoted scam-hit NSEL, may consider a request by a few investors on the ill-fated bourse that they be allowed to make a presentation on how transactions were undertaken on it when the hearing continues on Friday.

This, lawyers said, was only to help the judge appreciate technical details of transactions and will have no legal bearing on Shah’s bail application. The public prosecutor and the investors’ advocate have argued that the transactions, while conducted on an exchange, were in reality financing deals under the garb of commodity trades and alleged that Shah was aware of this.


Perseus Telecom’s High Precision Time Now Available In CoreSite’s Northern Virginia Market

CoreSite Realty Corporation, a provider of secure, reliable, high-performance data center solutions, announced the availability of High Precision Time, a new certified timing service by Perseus Telecom, within CoreSite’s Northern Virginia Market. Perseus is a leading provider of high-speed global connectivity and managed services for the financial markets, iGaming, multi-media and eCommerce communities.

INTL FCStone Chooses Duco For Listed Derivatives

INTL FCStone Ltd., part of INTL FCStone Inc. has adopted Duco Cube as the hosted reconciliation solution for its exchange traded derivatives and LME business units. The service went live within a 7 day period and has been up and running since June.


TFEX To End Silver Futures From Night Session Of July 31, 2014

Thailand Futures Exchange PCL (TFEX), under the Stock Exchange of Thailand group, has received an approval from SEC, allowing the exchange to remove silver futures from its trading board, effective from the night session of July 31, 2014. Trading of silver futures will remain operating until the end of afternoon session of that date.

A Utility For Foreign Exchange Trading (subscription)
Financial Times

Banks, asset managers, export companies and anyone else with a passing interest in a properly functioning foreign exchange market should not take off on their summer holidays just yet. A key consultation document on fixing the shortcomings of the forex market, published on Wednesday by global policy makers at the Financial Stability Board, gives respondents only until August 12 to take a view on a set of 15 important reform ideas.

PLY: Before we create a Comintern for Currency trading platform as a big top down project (a sure fired consultant fee winner and guaranteed budget over-run), might it not be a better idea just to organise a proper clearing system for forex? You know like CLS only open, accessible and fair. Transparent would be good too while we’re at it…


DAX Serves As Basis For First European ETF In China
Deutsche Borse

The DAX index underlies the first ETF based on a European index that will be available in China. The HuaAn Germany DAX 30 ETF was introduced by HuaAn Asset Management Co. Ltd. on July 14, 2014 and will later be listed on the Shanghai SE.

Career Paths

MV reports that Tullett Prebon appointed John Phizackerley as an executive director and CEO of the Company, with effect from 1 September 2014. Further to the announcement on 3 June 2014, Terry Smith will stand down as an executive director and CEO of the Company, on 31 August 2014.

John Phizackerley held a number of senior management positions at Nomura International plc from 2009 to 2013, including CEO EMEA from March 2011 to May 2013. Prior to joining Nomura, John Phizackerley worked for Lehman Brothers from 1986 to 2008 in roles including head of research, co-head of Equities and Chief Administrative Officer EMEA. He started his career as an underground mining engineer with Anglo American Corporation of South Africa.

Senior VP at the Victoria Mutual Group, Allan Lewis, has been elected Chairman of the Jamaica SE, (JSE). During a meeting of the Board, MD of Barita Investments, Ian McNaughton was elected Deputy Chairman.

Financial Calendar

This month

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

Numis Securities Reissued Their “Add” Rating On LSE

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

SEC Statement On The Anniversary Of The Dodd-Frank Act

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