July 25 2014

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DB1 on target as JPX endures bruising quarter. ICE capitalising benchmark business while IOSCO study social media. Nigeria SE suffers IT glitch, as Barclays fights back over NY AG lawsuit. Confirmation appears to emerge from the top that apparently NLX doesn’t have buyside volume after all…

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New: FTIL: The Divestment of MCX

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

Public Markets

Deutsche Börse Q2/2014 Financial Results
Deutsche Börse

DB1 net revenue €488.4 million (Q2/2013: €497.1 million), a slight decrease of 1.75% YoY. Operating costs adjusted for exceptional items increased as planned and amounted to €249.3 million (Q2/2013: €234.1 million), a 6.5% increase. Adjusted EBIT amounted to €240.6 million (Q2/2013: €266.0 million), a 9.54% decrease. As a result, the Group recorded adjusted basic EPS of €0.90 (Q2/2013: €0.97).

In H1 2014, the Group generated net revenue of €1,002.6 million, a slight increase of 2.16% YoY (H1/2013: €981.4 million). The Group’s adjusted operating costs amounted to €492.7 million (H1/2013: €463.6 million), a 6.27% increase. The adjusted EBIT amounted to €512.2 million (H1/2013: €523.8 million) down 2.2%, and adjusted EPS increased slightly to €1.90 (H1/2013: €1.89).

PLY: All pretty much in line with expectations overall.

JPX & Consolidated Subsidiaries Consolidated Financial Results For Three Months Ended June 30, 2014
JPX

Operating revenue 24,763 mln Yen (USD 243.15 mln), down 31.4%
Operating income 10,848 mln Yen (USD 106.5 mln), down 39.5%
Net income 7,068 mln Yen (USD 69.4 mln), down 36.9%
Net income per share 25.75 Yen (USD 0.25), down from 40.83 Yen

PLY: Clearly disappointing.

WSE Ordinary General Meeting
WSE

The resumption of WSE’s Ordinary General Meeting is scheduled for 11:00 CET on Friday, 25 July 2014. A webcast with simultaneous translation will be available Here.

PLY: The sad slide of the Polish government back to needless micromanaging and central planning continues after a government promoted adjournment following their imposition of a puppet CEO straight from ministerial office.

ICE Pumps $15 Million Into Benchmark Business (subscription)
Anish Puaar – Financial News

ICE has invested $15.7 million in its benchmark business since the start of 2013, as the exchange group forges ahead with reforms to the Libor benchmark it inherited as part of its takeover of NYSE Euronext. According to company filings, ICE Benchmark Administration received $13.5 million in funding from parent company ICE in 2013 and has received an additional $2.2 million so far this year. A spokeswoman for ICE said the “capital injections related to regulatory financial resource requirements to support IBA as an independent subsidiary of ICE”.

The role of benchmark administrators is coming under the glare of regulators for the first time following the manipulation of rates, including Libor and Euribor, in addition to a number of FX and commodities benchmarks.

EI reported on April 30th that IBA was appointed as the new administrator of ISDAFIX.

Nasdaq NLX Looks To Court Buy-Side Flow (subscription)
Joe Parsons – FOW

Nasdaq OMX CEO has said NLX will target the buy-side in an attempt to boost the liquidity on the nascent exchange. Speaking on an earnings call Bob Greifeld said the exchange will continue to find ways to develop and on-board a broader range of customers.

PLY: Those with a touch of perspective may recall that it appeared a few weeks back NLX already claimed a significant buyside breakthrough as part of their breathless megaphone of hype. After repeated detailing of the lack of evidence for this hypothesis, it now seems head office is suggesting the NLX hype was indeed, wrong. That leaves the smoking gun of just why advertising was propagated for weeks which laid assertions at the door of CME, EUREX and ICE/LIFFE which has not yet been substantiated with adequate proof?

Despite reservations from NASDAQ investors about the waste of cash which has been the NLX experiment, it appears there remains a New York impetus to keep funding the MTF platform even though it has apparently failed to even convince it own parent that it has made the buyside breakthrough it previously appeared to claim.

…Anyway, good to see transparency reigning supreme as that always helps create confidence in markets.

Read our Premium posts:The Butterfly (In)Effect, NLX: Big Data: Easy to Find?, NLX: Missed Opportunity.

Statement From BGC Partners Regarding Recent Stock Transactions
MondoVisione

PLY: BGC clarifying that it was buying shares as a body corporate but Howard Lutnick personally was not involved.

Barclays Attempts To Have ‘Dark Pool’ Fraud Lawsuit Thrown Out Of Court
James Quinn – Daily Telegraph
Barclays Responds To Complaint From NY AG
MondoVisione
Statement From The Office Of NY AG On Lawsuit Against Barclays
MondoVisione
Barclays is attempting to have fraud allegations surrounding its so-called ‘dark pool’ trading platform thrown out of court.

The British bank has filed a motion to have the major lawsuit, from Eric Schneiderman, NY AG, dismissed.

PLY: A very robust response from Barclays to a suit whose phraseology certainly raises eyebrows.

SGX Sets Sights On US With New York Office (subscription)
Luke Jeffs – FOW

SGX plans to open an office in New York, marking the Asian group’s first US base and its latest new regional centre as the firm moves into new regions. The exchange is apparently currently seeking staff for the venture.

PLY: While a first office, we cannot forget the longstanding commitment of Len Schuman to SIMEX in particular for many years performed as their US rep based in New York…

Private Markets

NCDEX Market Share Increases To 18% From 11 A Year Ago
Sharleen D’Souza – Business Standard

While other commodity exchanges are struggling to keep afloat, NCDEX market share has seen an increase from 11% to 18% in the last one year.

PLY: Admittedly NCDEX is only clawing back some of the share it has lost, largely to MCX – as I recall a few years back NCDEX was at least 25% if not 33% of the Indian commodity exchange market…

CSE To Fund Stake Buyout In Clearing Corp By Selling Land
Namrata Acharya – Business Standard

Calcutta SE (CSE) is planning to sell assets worth nearly Rs 260 crore (USD 43.2 mln), which will enable it to buy a stake in a clearing corporation over the next six months. The exchange has been in touch with Indian Clearing Corporation Limited (ICCL), the Clearing Corporation of BSE, and MCX SX Clearing Corporation to formalise an agreement. CSE needs to either tie-up with a clearing corporation or pick up a stake in it clearing corporation to meet the norms for regional stock exchanges set by the market regulator.

EI reported on June 23rd that CSE shareholders gave their consent to the proposal to sell land.

Don’t Tell Anybody About This Story On HFT Power Jump Trading
Saijel Kishan & Matthew Leising – Bloomberg

Far from Wall Street in a Chicago neighborhood once synonymous with urban blight, two futures industry veterans are using secrecy and speed to mint fortunes via their firm.

PLY: An interesting article about the low profile HFT powerhouse Jump Trading.

Sale Of Mt. Gox-Related Bitcoins.com Halted After Court Order
Tim Hornyak – PC Advisor

The sale of the domain Bitcoins.com, affiliated with Mt. Gox CEO Mark Karpeles, has been halted after a U.S. court order, according to the auction house. “This lot has been withdrawn from this auction. Bids are no longer accepted and previous bids are cancelled,” U.S.-based Heritage Auctions wrote on its website.

Special Section: FTI, NSEL, India at the Crossroads

PLY: A quiet day as the market digests the week’s excitement, MCX is off 1.5% and FTIL up about 1%.

Technology

Technical Glitch Prevents Thursday Trading On NSE
Reuters

A technical glitch prevented trading on the Nigerian SE (NSE) on Thursday, the first such halt since Africa’s biggest economy switched to the Nasdaq X-Stream platform last year, brokers said.

28th July: PLY: Apparently Reuters got their story slightly wrong and the problem was a network error, so no inference ought to be taken that NASDAQ OMX’s systems were at fault here.

Products

ISDA: Revisiting Cross-Border Fragmentation Of Global OTC Derivatives: Mid-Year 2014 Update
MondoVisione

PLY: The evidence of a geographical split is clear but it means we have Balkanised a previously global money market – that is a worrying situation for global financial centres like London and bad for international markets… Would futurisation cure the problem? Maybe but is that alchemy really about to happen? I am just not sure, although there are some interesting ideas around to square that circle.

ASIC Consults On Technical Changes To Trade Reporting Obligations For OTC Derivatives
MondoVisione

ASIC is seeking feedback on proposed revisions to the rules that require the mandatory trade reporting of OTC derivatives such as IRS.

Career Paths

WSE received a decision of the Polish Financial Supervision Authority concerning approval of change on the Management Board of the Exchange consisting in the appointment of Paweł Tamborski as the President of the Company’s Management Board.

WSE press release here.

PLY: Somewhat unsurprising that the government regulator wasn’t about to say anything about the imposition of a minister parachuted straight from government to run the bourse. Perhaps the regulator isn’t concerned about conflicts of interest in Warsaw…or they just know how powerful the increasingly autocratic government can be as it indulges in back door nationalisation. Warsaw is in a precarious situation right now.

FN reports that Nick Forgan, JP Morgan’s co-head of global clearing, relocated from Singapore to London this month. Fellow co-head Dave Olsen is based in the US. Forgan will keep the same title but will also assume daily oversight of the bank’s futures and options business in Europe, the Middle East and Africa. As part of the changes, David Martin, formerly global head of F&O Clearing in London, has switched to Singapore to run derivative clearing in Asia.

In addition, Hester Serafini has been named as sole head of JP Morgan’s OTC clearing business in Emea She was previously global co-head of OTC clearing along with the US-based Andres Choussy. Choussy is to run derivatives clearing business in the Americas.

Financial Calendar

Next week

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
GFI Group Q2 2014 Financial Results – Thursday, July 31, 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 Tuesday, July 22nd at an average price of $22.25 (bargain $40,050.00). He now owns 756,317 shares. Mr. Galik’s regular sales are chronicled on this specific page.

CME CAO Jill A. Harley sold 2,710 shares Wednesday, July 23rd at an average price of $75.00 (bargain $203,250.00). She now owns 10,800 shares.

Analyst Notes

ICE “Overweight” Rating Reaffirmed By JPMorgan Chase – $230.00 Price Target, Down From $233.00

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

IOSCO Surveys Use Of Social Media & Automated Advice By Intermediaries
MondoVisione
The International Organization of Securities Commissions (IOSCO) today published its Report on the IOSCO Social Media and Automation of Advice Tools Surveys. The paper presents the results of four surveys on the use of social media and automated advice tools in capital markets, and how regulators oversee the use of these tools.

PLY: An interesting and useful study.

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