July 22 2014

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PLY: Commissioner O’Malia to leave CFTC, as FTIL seeks buyer for IEX stake while market reappraises state of Indian commodity exchanges as FTIL reduces MCX stake. Switches in CCP service to become lower latency via IDBs as Saudi Arabia opens stock market to foreign investors. All this and more in today’s free, daily, Exchange Invest:

Public Markets

Commissioner Scott D. O’Malia To Leave CFTC
MondoVisione

Commissioner Scott D. O’Malia sent the attached letter to President Barack Obama announcing his resignation from the Commission effective August 8, 2014.

FTIL To Sell 24.89% Stake In IEX, Appoints Axis Capital To Look For A Buyer
The Economic Times

FTIL plans to sell its entire 24.89% stake in power-trading platform Indian Energy Exchange (IEX) and has appointed Axis Capital to look for a buyer. Based on a recent deal in IEX stake Aditya Birla Private Equity purchased 8% of IEX from IDFC private equity fund for Rs 136 crore (USD 22.6 mln) the shares that FTIL wants to sell could fetch about Rs 423 crore (USD 70.3 mln).

MCX Deal Volume Reflects Current Mkt Scenario: NCDEX
Moneycontrol

The MCX deal was done at a valuation of about Rs 3000 crore (USD 499 mln), about 20 times FY14 earnings. Samir Shah, NCDEX MD & CEO says valuation reflects the current market scenario and everything that has been happened over the past one year.

He says the MCX trading volume has reduced post the NSEL crisis. Currently, MCX has a market share of 80% and NCDEX 15%. But, the important thing according to Shah is that the open interest market share has moved towards NCDEX from MCX.

SEBI Relaxes Norms For FTIL To Divest Stake In MCX
NDTV

To facilitate divestment by erstwhile promoters of MCX, capital market regulator SEBI has relaxed lock-in period for such stake sale in the commodity bourse. SEBI has allowed FTIL to bring down its stake to 1.99% in MCX. The relaxation has been given in order to allow FTIL to comply with directions from FMC, the commodity market regulator, issued in December 2013. In a communication to MCX on Monday, SEBI said the relaxation has been granted considering the peculiar nature of the case and cannot be construed as a precedent to obtain similar exemptions in future. It would be applicable “only for the limited purpose” to enable FTIL comply with the FMC order.

“Post divestment, MCX shall ensure that FTIL continues to lock-in at least 1.99% of the paid up capital of MCX for the unexpired period of lock-in,” SEBI said.

Kotak-MCX Deal: Is Cleansing In Commodities Market Over?
Moneycontrol

Kotak Mahindra Bank announced it was buying a 15% stake in the commodity-exchange MCX . With this move, FTIL, the parent company, becomes just a 5% holder in MCX. Will this pave a way for commodities market to become completely sophisticated or does it require further cleansing? Discussing the impact of the deal Ramesh Abhishek, chairman, FMC, said the regulator is glad that finally the FTIL divestment in MCX has happened as per its ‘fit and proper’ order.

CCP Switch Services Gain Traction
IFR

Swaps brokers are looking to capitalise on growing market demand to reduce the margin costs associated with central clearing, by launching services that allow users to switch between derivatives clearing houses with greater ease. Tradition and GFI Group are both building out infrastructure to allow participants to seamlessly switch exposures across the two major swaps clearinghouses, CME and LCH.Clearnet.

PLY: Interesting developments which will clearly keep CCPs on their toes although clearly it could raise concerns that margins may be undercut to retain business. Not that I can readily foresee either CME or LCH falling into this pitfall but it is clearly a possible risk…

Barclays ‘Dark Pool’ Trades Dry Up After High-Frequency Suit In US (subscription)
Nicole Bullock – Financial Times

Clients are fleeing Barclays’ “dark pool” in the wake of a US lawsuit alleging the UK bank misled them about high frequency activity in its private trading venue.

Barclays has fallen from second to 12th place in terms of volumes traded in US dark pools after news of the lawsuit emerged. The rapid decline means the group now lags behind rivals such as UBS, Merrill Lynch, Deutsche Bank, Morgan Stanley, Goldman Sachs and JPMorgan.

Wall Street Adapts To New Regulatory Regime (subscription)
Victoria McGrane & Julie Steinberg – Wall Street Journal

Four years after the Dodd-Frank financial law became reality, Washington’s regulatory machine is altering Wall Street in fundamental ways.

PLY: A useful breakdown of the changes in Dodd Frank to the traditional Wall Street intermediaries.

Private Markets

Thailand – SEC To Allow Listing Of Foreign Firms
Bangkok Post

Thailand will allow foreign companies to sell shares on the Thai stock exchange, both in an IPO and dual offering to enhance the Thai market’s competitiveness. The regulations, to be effective in August, will widen investors’ choice and in line with Asean offering under the Asean Capital Markets Forum framework, he said.

EI reported on April 1st that SET joined the Asean Exchanges project (seven stock markets from six countries: SET, Bursa Malaysia (BM), SGX, Hanoi SE (HNX), Ho Chi Minh SE (HOSE), Indonesia SE (IDX), and Philippine SE (PSE)).

Saudi To Open Up $531 Billion Stock Market To Foreigners
Deema Almashabi, Zahra Hankir & Weiyi Lim – Bloomberg

Saudi Arabia will open up its stock market to international investors in H1 2015, giving foreigners greater access to the Arab world’s biggest bourse as the oil-rich kingdom seeks to diversify its economy.

PLY: Authorised institutions only for the first wave at least, more details to follow…

ZSE Demutualises, Paves Way For Listing
Reuters

Zimbabwe SE (ZSE) has been transformed into a company from a mutual society, opening the way for a public listing on the bourse it operates, finance minister Patrick Chinamasa said on Monday.

ZSE has been owned and run by stock brokers since 1946, but after demutualisation the brokers hold 68% while the government owns the remaining shares. Chinamasa said stockbrokers and the government would sell half their shares when ZSE lists. He did not give a date for the listing, but an official from the local bourse said this should happen within three years.

PLY: Given how the Zimbabwean government has been somewhat, er, ambiguous, about core land rights and property values, international investors may not be rushing to buy the ZSE IPO…

IPXI Prices First Offerings – Intellectual Property Market Opens For Trading – ULR Contracts On Stored Value Card Technology Owned By JPMorgan Chase Bank, N.A.
MondoVisione

Intellectual Property Exchange International, Inc. (IPXI), the world’s first financial exchange for licensing and trading intellectual property (IP) rights, announced that on Friday it successfully closed its first two initial offerings of unit license rights. The offerings are based on patent rights to prepaid stored value card (SVC) technology owned by JPMorgan Chase Bank, N.A. Trading on the contracts can now take place on the IPXI Trading Platform.

PLY: Building the story of IPXI which was discussed at my Young Markets conference last year.

Can New York’s BitLicense Prevent Another Mt. Gox Catastrophe?
Stan Higgins – Coindesk

The release of proposed digital currency business regulations by the New York Department of Financial Services (NYDFS) has raised numerous questions, many of which focus on the threat to innovation in the space and the impact on broader adoption. Yet one question that may be worth considering is this: will these regulations stop another Mt. Gox catastrophe?

PLY: Hmmm, arguably the wrong question to ask as regulation never prevents catastrophe, it just tends to prevent the same catastrophe happening within a generation. The issue with the NY AG proposals on BTC are actually that they ban banks from holding cryptocurrency – which if nothing else is a subtle way of bashing the declining banking business model although I suspect the AG hasn’t thought about it this way…

Special Section: FTI, NSEL, India at the Crossroads

PLY: A flat MCX pauses for breath after recent excitement with stake sales while FTIL is up another 5% as the sales programme is well under way for MCX and likely about to happen for IEX too. Oh and yes, Jignesh remains locked up:

Jignesh Shah Bail Plea: Bombay HC To Pronounce Order On 22 July
Khushboo Narayan – Livemint

Bombay high court on Monday reserved its order on the bail application of Jignesh Shah who was arrested in connection with the payment crisis at NSEL. The court will pronounce its order on 22 July. Shah has been in judicial custody since 7 May.

On Monday, justice Abhay Thipsay asked the Economic Offences Wing (EOW) of the Mumbai Police to produce evidence to support its claim that Shah benefited from the payment crisis at NSEL. “What gain has Shah made? I fail to understand how is his case any worse than that of Anjani Sinha,” said Thipsay. Former NSEL CEO Sinha, secured bail in May.

Nafed Seeks 12% Cut On NSEL Dues
Dilip Kumar Jha – Business Standard

The public sector National Agricultural Cooperative Marketing Federation of India (Nafed) has sought 12% cut in its dues payable to the scam hit NSEL. Nafed, also a minority shareholder at NSEL, owes Rs 102 crore (USD 17 mln) to NSEL. The public sector commodity trading company procures cotton, pulses and other farm output directly at the minimum support price (MSP) from farmers in an attempt to dissuade them from distress sale. But, three years before the payment crisis erupted at NSEL in July 2013, Nafed had engaged the FTIL promoted private online spot commodity trading company to procure cotton on its behalf.

Technology

Tech Beat: The New Markits (subscription)
Philip Stafford – Financial Times

Market infrastructure providers are providing venture capital to start-ups as senior banking executives accept a radical approach to technology may be the only way to survive in their present form. A triple whammy of tougher regulation, low volumes and ever-rising fixed costs are forcing senior executives in banks to accept substantial change, potentially opening the capital markets to changes from which it has hitherto been immune.

PLY: Appropriately enough, I am today adding the pith to Exchange Invest from cafe Le Labo at the Rainmaking startup loft in Berlin, a fashionable centre for tech startups these days, as part of a tour for our Polish startup group Mission ToRun.

Thomson Reuters Expands Access To Dubai Mercantile Exchange Via Thomson Reuters Eikon – Customers Of Thomson Reuters Flagship Financial Markets Desktop Can Now Access The DME Via CME Direct Integration In Eikon
MondoVisione

Customers of Thomson Reuters Eikon can now access the Dubai Mercantile Exchange (DME), the premier energy futures and commodities exchange in the Middle East. This announcement follows an earlier announced agreement between Thomson Reuters and CME, DME’s majority shareholder.

Products

Turquoise Expands Clearing Choice For ETF Trades (subscription)
Anish Puaar – Financial News

Turquoise, LSEs alternative equity market, will start offering a choice of clearing house for ETF from Monday, joining rival Bats Chi-X Europe. From July 21, ETFs and exchange-traded commodities traded on Turquoise can be cleared through LCH.Clearnet or Six x-Clear, as well as incumbent clearing house EuroCCP, according to a notice on the market’s website.

As reported by EI on July 14th, BATS Chi-X Europe extended clearing house choice with LCH.Clearnet and Six x-clear for ETFs and ETPs, service available beginning with Monday, July 21st.

PLY: BATS led, Turquoise sensibly followed, competition makes markets better, cheaper and more efficient – a simple fact that must not be lost amidst the controversy over various systematic internalisation fracas’.

Credit Suisse To Exit Commodities After Big Loss
Jeffrey Vögeli & Elena Logutenkova – Bloomberg

Credit Suisse said it will exit commodities trading as a $2.6 billion fine to settle a U.S. tax investigation pushed the Swiss bank to its biggest quarterly loss since 2008.

PLY: Credit Suisse exits commodity trading while yesterday Morgan Stanley announced they were upscaling their presence…

FMC Nod To NCDEX’s Forward Contracts
Free Press Journal

NCDEX is likely to get the FMC’s approval this week to launch forward contracts, FMC Chairman Ramesh Abhishek said. “We may give our approval to the proposal in two-three days,” he told Cogencis. Initially, NCDEX will launch forward contracts in sugar and maize, Abhishek said.

Career Paths

ICE Starts Hunt For Interest Rates Chief (subscription)
Philip Stafford – Financial Times

ICE is preparing to deepen its push into off-exchange derivatives markets in Europe, beginning with the search for a head of its interest rates business.

The US derivatives operator has appointed Heidrick & Struggles to lead the search, according to three people familiar with the talks. The recruitment company helped place Suneel Bakhshi as the CEO of LCH.Clearnet earlier this year.

Interview For MCX Lead Post On Friday
The Hindu Business Line

MCX will conduct interview for the post of MD on Friday. It has shortlisted 15 candidates from 60 applications it received for the post which has been lying vacant for the last two months. FMC designated the exchange’s Executive Director PK Singhal as interim MD after Manoj Vaish put in his papers, just three months after assuming office. Vaish left the company on 10 May.

The Stock Exchange of Thailand (SET) announces (press release here) the promotion of four key executives:

Effective August 1, Supakit Jirapraditkul will become Executive VP and Head of Market Supervision Division; Pataravasee Suvarnsorn is promoted to SVP Market Operations Service Group; Pannavadee Ladavalya Na Ayudhya is promoted to SVP and Group Head Communication & Administration; and Noppakao Sucharitakul is promoted to SVP and Group Head Customer & Channel.

Lanka Business reports that Sri Lanka’s Colombo SE (CSE) said Aravinda Perera, MD of Sampath Bank Plc has been appointed a director. He replaces Krishan Balendra who resigned from the board on June 05, after completing his term as chairman, CSE said.

SEC announced it has named Mark J. Flannery as its chief economist and director of its Division of Economic and Risk Analysis (DERA), which provides interdisciplinary analysis to help inform the Commission’s policymaking, rulemaking, enforcement, and examinations.

Press release here.

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

New announcement

SunGard Q2 Financial Results – Friday, August 1, 2014

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

Share Notes

Interactive Brokers SVP Milan Galik sold 1,800 shares Friday, July 18th at an average price of $22.12 (bargain $39,816.00). He now owns 758,117 shares. Mr. Galik’s regular sales are chronicled on this specific page.

Charles Schwab major shareholder Charles R. Schwab sold 487,466 shares Friday, July 18th at an average price of $27.45 (bargain $13,380,941.70). He now owns 797,448 shares. Mr. Schwab’s regular sales are chronicled on this specific page.

Other Stories

Statement From FIA President And CEO Walt Lukken On The Resignation Of CFTC Commissioner Scott O’Malia
MondoVisione

LME Dealers Fined $23,480 For Standing Up During Trading
Agnieszka Troszkiewicz – Bloomberg

LME fined almost all of the dealers buying and selling copper on its open-outcry floor a total of 13,750 pounds ($23,480) and suspended one for standing up during a trading session.

Seven traders were fined 1,250 pounds each for breaking a rule that states dealers must remain seated at all times while dealing on the LME floor, known as the ring, the bourse said in a notice dated July 18. Two traders were each given 2,500-pound fines because it was their second offense in three to six months, according to the notice. There were 11 LME floor-trading companies when the rule was broken July 11.

Istanbul Seeking Finance Hub Status Grapples With Delistings
Isobel Finkel & Constantine Courcoulas – Bloomberg

Turkish companies with small free floats are applying to delist from the stock exchange as the government says it’s switching to an emphasis on quality over quantity in its ambitions to make Istanbul a financial center.

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