July 23 2014


Bill O’Brien ousted at BATS, Commissioner O’Malia to head ISDA. MCX-SX provoke massive vendor arousal as they seek to oust FTIL as systems provider. Jignesh Shah bail hearing reserved – again! Justin Hughes at Phillyfin launches full frontal attack on underperforming ITG, FTT news, benchmark/fix updates, interesting new product news and more all in today’s free Exchange Invest…

Meanwhile if you like the free stuff and want to support us building out the industry platform for markets, please join our top tier, it’s only $120 and keeps this daily newsletter free (You can subscribe here). Recent stories include:

New: FTIL: The Divestment of MCX

New: The Democratisation of Swaps aka The Citadel Inverse Repo Breakthrough

EUREX Clearing Paper Released

Poland At the Crossroads

NLX: Missed Opportunity

Public Markets

Bats Global President Exits (subscription)
Tim Cave – Financial News

William O’Brien, who was involved earlier this year in a heated exchange with Brad Katsuyama, the founder of IEX Group, on CNBC, left Bats today with “immediate effect”, the exchange said in a statement. Bats did not comment further on the reason for his departure.

O’Brien became Bats’ president after it completed a merger with rival US equities exchange Direct Edge in January. A former Goldman Sachs executive, he had been CEO of Direct Edge since 2007.

Joe Ratterman, Bats’ CEO, will resume the role of president, having held both the CEO and president roles from June 2007 to January this year. He joined Bats in June 2005 as a founding employee.

PLY: Bill O’Brien was always going to struggle to hold onto a top position when he came off second best in the merger. His perceived failure with Brad Katsuyama of IEX in April was one of those career-ending moments which are rare in the usually rather collegiate atmosphere of financial tv. Interesting to recall that he is a former Goldmans’ alumni, a group currently less important in the exchange world than it has been for some time (qv the demise of ‘Duncan the value destroyer’ at NYX).

O’Malia To Take Helm At ISDA (subscription)
Michael Mackenzie – Financial Times

Scott O’Malia, who this week quit as a commissioner at the main regulator of the US swaps industry, will become head of the leading global derivatives group. Mr O’Malia was named new CEO of ISDA, on Wednesday. The group represents some 800 users in the $700tn OTC derivatives market including banks, companies, insurers and major investment firms.

PLY: An interesting hire for ISDA although I feel a little uncomfortable about the proximity of the jump – directly from government office to an industry body which is expressly involved in trying to curtail or even roll back the recent reforms that will make post OTC markets better. Let’s look at it another way, if a New York taxi Commissioner joined Uber would the media simply shrug?

FTIL Clarifies On IEX News Item

With reference to the news item appearing in titled “FTIL Looks to Exit Indian Energy Exchange”, FTIL has Clarified to BSE as under: “As communicated to you earlier, that without prejudice to the legal rights and remedies, FTIL would like to exit from exchanges businesses. Accordingly, the process of divestment in exchanges is been evaluated considering all options including through IPO.

EI reported on June 18th that FTIL might exit IEX through an IPO.

PLY: FTIL eager not to seem desperate with one exchange holding where they have a window to divest.

MCX-SX Seeks To End Business Ties With FTIL
Sugata Ghosh & Ram Sahgal – The Economic Times

MCX-SX, which runs trading platforms for currency futures, debt and equity, has said its cost could dramatically reduce if the regulator allows the exchange to migrate to another technology vendor in a phased manner. Against Rs 80-90 crore (USD 13.3 – 15 mln) that FTIL charges the exchange every year, leading technology firms are willing to offer similar software solutions for Rs 20 crore (USD 3.32 mln).

Companies like CMC, HCL, TCS, Nasdaq and Cinnober have shown interest to be technology partner for MCX-SX, a source told ET.

PLY: As I mentioned a while back airlines are rejoicing at the increased volume from eager vendors seeking a passage to India. For FTIL this could yet be tantamount to a death sentence – the business appears to have gouged customers (compared with equivalent western contracts anyway) – ot at least a very very acute revenue haemorrhage.

ITG Holder Seeks Changes Or Company Sale (subscription)
Rob Copeland – Wall Street Journal

The price of shares in ITG climbed on Tuesday, after a small hedge fund went public with a letter urging the company to make management changes or put itself up for sale.

Philadelphia Investment Management of San Francisco LLC also disclosed in its letter a 6.3% stake in ITG’s common stock and said ITG’s “results and stock performance have dramatically lagged every publicly traded peer that we believe is relevant.”

Dated July 21, the letter was sent to ITG Chairman Maureen O’Hara from Justin Hughes, partner at the $600 million hedge-fund firm.

PLY: Justin Hughes is a wise analyst and a sound investment manager, if he is fed up with ITG then there are good grounds to listen to his case…

Facing Up To The FTT
Elliott Holley – Banking Technology

A European FTT on equities and derivatives trades could be damaging for European liquidity levels and the City of London, but it also looks set to impose serious operational challenges for banks, brokers and their buy-side clients following the failure of a UK appeal to the European Court of Justice earlier this year.

PLY: Yip. …Try inserting the phrase “reverts funding for business back to the stone age” for added emphasis.

CFTC Releases Rule Enforcement Review Of ICE Futures U.S.

CFTC notified ICE Futures U.S. of the results of a rule enforcement review completed by CFTC’s Division of Market Oversight. The Division assessed the Exchange’s compliance with elements of Core Principles 4 and 5, relating to the Exchange’s market surveillance program.

Global Watchdog Recommends Multi-Pronged Reform Of Libor Benchmarks
Huw Jones – Reuters
Reforming Major Interest Rate Benchmarks

Global regulators have proposed a twin-track approach to ensuring that interest rate benchmarks are less prone to manipulation by recommending safeguards to the current system and also by developing alternatives.

PLY: Essentially trade data driven approaches are the way forward, as opposed to banks sticking fingers in the air and finding they spot the breeze in a direction which suits their book…

IOSCO Reviews Implementation Of Benchmarks By Interest Rate Administrators

IOSCO’s Review of the Implementation of IOSCO’s Principles for Financial Benchmarks by Administrators of Libor, Euribor and Tibor was published as part of the Financial Stability Board’s (FSB) report on Reforming Major Interest Rate Benchmarks. The IOSCO Report assesses the three major interest reference rates against the internationally agreed and endorsed IOSCO Principles for Financial Benchmarks.

Credit Suisse CEO Says He Remains Confident In Dark Pools
Julia Verlaine & Jeffrey Vögeli – Businessweek

Credit Suisse CEO Brady Dougan said he remains confident in private trading venues following a probe into a dark pool operated by Barclays.

PLY: As always the breadth of the issue means the story is confusing if not almost meaningless as we can presume the CS CEO means systematic internalisation but not Institutional Liquidity Pools? Presuming it’s the former, I can almost but not quite entirely, disagree with everything Mr Dougan asserts in that specific context.

FMC To Issue Net Worth, Audit Norms For Warehouses
Business Standard

FMC plans to issue new guidelines clearly stipulating the financial criteria including net worth for warehouses, which are recognised and used by the commodity exchanges. The issue of monitoring stock in warehouses came up after the failure of NSEL. FMC had earlier said that warehouses recognised by the commodity exchanges should be registered with the Warehouse Development and Regulatory Authority.

PLY: Those who watched the nightmare of NSEL unfold would start with being somewhat satisfied just to know the warehouse itself physically was a warehouse, let alone what might be in it… The Indian warehouse scene raised “surreal” to a whole new level in commodity markets last summer. See also the great Rene Magritte painting “Ceci n’est pas une warehouse” depicting an industrial structure just outside Mumbai shaped like a pipe.

SGX Opens Liaison Office In India

SGX announced that, following approval from the Reserve Bank of India, its Liaison Office in India has commenced operations.

PLY: A useful expansion by Singapore to take advantage of various traditionally strong ties between the sub-continent and the city state, which are expounded here by that splendid communicator Magnus Bocker:

Bank Nifty Is A Possibility On SGX If There Is Investor Interest: Magnus Böcker & M Ramaswami
Business Standard

Interview with Magnus Bocker, SGX CEO and President

Private Markets

India – Consolidation In Commex Segment
Dilip Kumar Jha – Business Standard

Commodity futures trading in India is passing through a consolidation phase. Two nationwide ones, Indian Commodity Exchange (ICEX) and Universal Commodity Exchange (UCX), have shut down in a short span. A third, National Multi Commodity Exchange (NMCE), is struggling to restore traders’ confidence.

EI reported on July 17th that UCX suspended trading and on February 10th that ICEX is set to be closed.

Is NMCE Looking To Wind-Up Ops?

It is tough times for the commodities market – after the levy of CTT, and the NSEL fiasco, volumes in the commodity space have dropped by more than 40%. This has forced two commodities exchanges – Anil Ambani promoted ICEX, and Ketan Seth promoted UCX to shut their trading operations over the last one year. Now, the country’s third largest commodity exchange, the National Multi Commodity Exchange (NMCE), famous for its rubber trade is also facing threat of a possible closure.

Register With CDS Or Get Delisted: Nepse Tells Companies

Nepal Stock Exchange (Nepse) has given listed companies a month-long ultimatum to register with Central Depository System and Clearing Ltd (CDSCL) or face consequences.

PLY: No recent updates on the Nepse trading system update – last thing I heard on the grapevine was that they were trying to pay local fees for international consultants. Camels / eyes of needles / threading…that’s a general gist.

Ex-Goldman Trader’s Bitcoin Exchange To Fill Mt. Gox Void
Pavel Alpeyev – Bloomberg

Yuzo Kano quit Goldman Sachs twice: once for a rival bank, the second time to open Japan’s first bitcoin exchange since the collapse of Mt. Gox.

PLY: Hmmm, Goldman alumni may be being ousted from the legacy exchanges but some are appearing in the brave new world of cryptocurrency…

Special Section: FTI, NSEL, India at the Crossroads

PLY: Relative calm at MCX, up a mere 1% as FTIL goes wild: limit up 10%, although given MCX-SX is in the vanguard of trying to exit their commercial arrangements with FTIL, the market may be only looking at the exchange sale side of the story (and after all cash received there has to go towards repaying any shortfall and perhaps punitive damages from NSEL). Still no bail for Jignesh Shah meanwhile:

NSEL Scam: Jignesh Shah, If Granted Bail, Faces ED Grilling
Virendrasingh Ghunawat – India Today

Bombay High Court on Wednesday again reserved its order on the bail plea of Jignesh Shah. Shah has been in judicial custody for almost 75 days now and is entitled to bail since the 60-day period for filing a charge-sheet is over, said his lawyer Mahesh Jethmalani. Justice Abhay Thipsay reserved his order again till Thursday or even Friday.

If legal sources are to be believed, then there is a high possibility that Shah will get bail this time.

But even if that happens, Shah’s troubles will not get over so easily since someone is desperately waiting for him to come out of Arthur Road jail. It’s the Enforcement Directorate (ED).

In NSEL Scam, Lifting Of ‘Corporate Veil’ Key To Reach FTIL
The Economic Times

The reports of PwC should not divert our attention from the main issues involved in retrieving the `5,600 crore (USD 930 mln) for the NSEL investors, who seem strangely gullible but greedy. But a contract on an exchange that is fully novated by a clearing house is a contract that must be honoured. The following reports further support the adage, “facts are stranger than fiction”:

Notes to accounts of FTIL claim the company, NSEL, being a separate and independent entity, it had no responsibility or liability towards the dues or claims against the NSEL (as filed on BSE).

PLY: Another marvellous phrase describing: “NSEL investors, who seem strangely gullible but greedy.”

Maria Appoints His Man As Chief Investigator Of NSEL Probe
Mumbai Mirror

The ongoing Economic Offences Wing investigation into the NSEL scam has taken a new turn, with Commissioner of Police Rakesh Maria indirectly taking control of the probe by appointing a man who enjoys his confidence as the chief investigator.

PLY: The Mumbai fraud squad seem to be back on the front foot and batting with gusto. That is good news and hopefully more resolution to NSEL will occur sooner as opposed to the traditional Indian post fraud, later option.


BIST Trading Halted For One Hour By Technical Glitch
Hurriyet Daily News

Trading on Turkey’s main stock exchange Borsa Istanbul (BIST) halted for around one hour shortly after it opened Tuesday, due to an undisclosed technical problem. “The transactions at BIST have been stopped due to a technical breakdown,” a statement released by BIST said after transactions stopped. The trading resumed as of 10:55 a.m. as the technical problem has been cured.

Corvil Launches Streaming Analytics Platform To Mitigate IT Risk In Electronic Trading (subscription)
Ivy Schmerken – Wall Street & Technology

To detect risks in electronic trading, Corvil is moving beyond latency management to help banks and exchanges run real-time analytics on petabytes of data that can be migrated to big-data systems.

Tata Consultancy Services Partners With MapR Technologies To Help Customers Easily And Rapidly Capture Value From Big Data

Tata Consultancy Services (TCS), a leading IT services, consulting and business solutions organization, announced a new partnership with MapR Technologies, Inc., provider of the top-ranked distribution for Apache(TM) Hadoop(R), to help enterprise customers easily and rapidly capture critical big data insights. The partnership’s new big data offerings will shift the IT cost curve and allow companies to strategically reimagine their business models.

PLY: Interesting.


TOCOM Eyes Launch Of World’s First LNG Futures In 2016
Business Recorder

TOCOM is considering launching futures for liquefied natural gas (LNG), power and coal at the same time in 2016 in response to liberalisation of the power market for homes that year, which has whetted utilities’ appetite for risk hedging.

University College London Validates GMEX Constant Maturity Future – UCLPperforms Study To Evaluate Viability Of Unique Aspects Of GMEX Constant Maturity Future Product

A team from the Computer Science Department of University College London (UCL), led by visiting professor Donald Lawrence, carried out an independent evaluation of the overnight process that maintains the Constant Maturity aspect of the GMEX Interest Rate Swap Index Average (IRSIA) Constant Maturity Future (CMF) product as an alternative to Interest Rate Swaps (IRS).

PLY: Good to hear from Donald Lawrence in despatches. An interesting piece of research which adds a bit of intellectual heft to the proposed GMEX CMF concept.

DCCC Completes First Physical Delivery Of Plastics Futures Contract – 200 Tonnes Of Polypropylene Delivered On 40 Contracts

Dubai Commodities Clearing Corporation (DCCC), the CCP service provider, wholly owned by DGCX, has successfully completed its first physical delivery against the region’s first plastics futures contract.

PLY: Plastics: the new metals…then look forward to nanostructures too. Commodities are about to see their most exciting expansion in decades and that’s before we even consider all the subsidies in the old markets (or non-markets to be pedantic) which must by their very nature subside if governments in all corners of the earth are to avoid bankruptcy… Good milestone for the excellent DGCX in the meantime.

The Emergence Of New Listed Products And Instruments (subscription)
Renaud Huck (Eurex Exchange) – Risk

With the move to exchange clearing, European firms will join US buy- and sell-side firms in creating a new trading environment. However, many questions remain unanswered and challenges confront the industry during this transition. Renaud Huck, head of buy-side, Eurex Exchange, discusses the firm’s plans for products and approaches to meet the challenges of the new environment.

Career Paths

BATS announced the departure of William O’Brien as President, effective immediately, with CEO Joe Ratterman reassuming the additional role of President.

Mr. Ratterman previously held both the CEO and President roles from June 2007 through January 2014. He joined BATS in June 2005 as a founding employee.

BATS press release here.

Scott O’Malia was named new CEO of ISDA, on Wednesday.

HKEx has appointed Roger Lee to head its new Market Operations group, reporting to Romnesh Lamba, Co-Head of Global Markets. Mr Lee was previously Head of Structured Products, Fixed Income and Primary Market Information in HKEx’s Listing and Regulatory Affairs Division. Market Operations comprises Cash Trading, Derivatives Trading and Market Data and is part of HKEx’s Global Markets Division.

Mr Lee joined the Stock Exchange of Hong Kong (now a wholly owned subsidiary of HKEx) in March 1997 and has had several senior HKEx roles, including Head of Information Services, Head of Cash Market, Co-Head of Information Technology and Head of Listing Operations.

Wayne Wong, SVP in the Listing and Regulatory Affairs Division, has succeeded Mr Lee as the division’s Head of Structured Products & Fixed Income and Primary Market Information.

HKEx has also accepted the resignation of Bryan Chan, Co-Head of Equities, Fixed Income and Currency (EFIC) in the Global Markets Division, for family reasons effective 20 September 2014.

Mr Chan joined HKEx in 2000 and has since served many different functions including Group Risk Management, Clearing, Information Services and Global Markets. Mr Chan is currently also a key member of the Shanghai-Hong Kong Stock Connect project. He will continue to be involved in the project until his departure.

hedgeweek reports that Alain Demarolle has been appointed as non-executive chairman of the BoD of LCH.Clearnet SA, the group’s French-based entity, effective immediately.

Patrick Combes announced in May 2014 that he would step down as director and the chairman of the BoD of LCH.Clearnet SA. Aigrain remains chairman of LCH.Clearnet Group.

b-next, a specialist provider of Market Abuse Surveillance, Insider Dealing and Compliance software solutions, announces the appointment of Christoph Böhmerle as International Projects and Business Development Manager. Mr Böhmerle will supervise all global projects and will work closely with the international sales teams to expand b-next’s footprint.

Allston Holdings LLC, parent of one of the nation’s leading proprietary electronic trading firms, announced the appointment of Jill E. Sommers, former Commissioner of the CFTC, to its Board of Managers. Sommers stepped down from the U.S. derivatives regulatory agency last year.

Neena Prasad will act as Chief Representative of the new SGX Liaison Office in India.

Abacus Group, a leading provider of hosted IT solutions for hedge funds and private equity funds, announced that it has hired Jonathan Bohrer as CFO, effective June 30th 2014. Jonathan will be based in New York and will report to Chris Grandi, CEO of Abacus Group.

Six Questions With NASDAQ OMX’s Deirdre Dastous
IR Magazine

Global head of advisory services discusses her new role and IR industry trends

Financial Calendar


NASDAQ OMX Q2 2014 Financial Results – Thursday, July 24, 2014
DB1 Q2 2014 Financial Results – Thursday, July 24, 2014

This month

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

Charles Schwab EVP John S. Clendening sold 14,000 shares Monday, July 21st at an average price of $27.78 (bargain $388,920.00). He now owns 275 shares.


Crowdcube Self-Crowdfunding Campaign Fully Funds In 16 Minutes
JD Alois – Crowdfund Insider

Equity crowdfunding portal Crowdcube launched their self-crowdfunding campaign seeking to raise an additional £1.2 million. This was on top of a recently announced investment led by well known European VC Group Balderton Capital.

The Venture group had invested £3.8 million in the young company. The total raised in this funding round was around £5 million. The Crowdcube office shared on Twitter that the office was electric as the funding round opened – and then minutes later closed fully funded. The funding round opened to registered investors required a minimum investment of £1000 and a maximum of £25,000.

PLY: Fascinating and a fantastic result for Crowdcube. Coincidentally, I am in Berlin currently and enjoying a fantastic insight into the pulsating tech startup scene here.

Other Stories

ESMA Consults On Counterparty Risk Calculation Methods For UCITS Subject To Central Clearing

ESMA has launched a consultation on the calculation of counterparty risk by Undertakings for Collective Investment in Transferable Securities (UCITS) which enter into OTC derivative transactions which need to be centrally cleared under EMIR.

BVB Launches Its First Guide For Non-Resident Investors

Bucharest SE (BVB) released its first edition of the International Investors’ Guide, part of the InvestingRomania program. The Guide includes relevant information that a foreign investor would like to know about Romania when interested to invest on Romanian capital markets.

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