July 28 2014

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DB1 says not selling ISE. Helex launch SME minibonds, NASDAQ OMX sells tech to JPX, launches new ITCH functionality on eSpeed. MCX-SX looking at PE investment and major changes, Jamaica reduces losses, EU suggests more powers for its regulators (quelle surprise!) as Dominique Cerrutti notes French economy is unwell. LavaFlow cops a fine over information leakage issues, new government puppet Warsaw CEO selects management board with clear aim to destroy shareholder value in suicidal Vienna merger deal. All this and more in Monday’s 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

Public Markets

DB1 Says Not In ISE-Disposal Talks With Banks
Namitha Jagadeesh – Businessweek

DB1 said it hasn’t held talks for the sale of International Securities Exchange (ISE), the U.S. options business it acquired in 2007. “All of this is just speculation and rumors,” CFO Gregor Pottmeyer said in an analyst call: “We did not open up a selling process or a concrete process with any bank.”

DB1 had been studying the disposal of ISE internally for several months, people familiar with the matter said in June. ISE, which the company bought for $2.8 billion, may fetch $1 billion to $1.5 billion in a sale, one of the people said at the time.

See also, the Premium posts: The Direction of Deutsche Boerse and Deutsche Boerse’s Asian Experiment.

PLY: Not exactly a ringing endorsement, more a denial that a sale process is about to get under way. Perhaps not quite the transparent clarification that was intended?

JSE Reports Small Loss
ic insider

Jamaica SE reports a small profit before tax of $77,000 for the June quarter this year, compared with an $8 million loss in the 2013 quarter, and a loss of $201,000 versus $642,000 for the six months to June.

EU Takes A Close Look At Its Own Regulators (subscription)
Anish Puaar & Tim Cave – Financial News

The work of three continent-wide agencies launched in 2011 is being scrutinised by the European Commission. A draft Commission report, reviewed by Financial News, has been circulating the industry since late June and it could be finalised as early as late July, describing the agencies as “well-functioning organisations aimed at contributing to restoring confidence in the financial sector”.

PLY: Least shocking news of the week: the Brussels blob sees room for regulators to expand their remit… Given their low budgets the agencies have coped pretty well overall with their initial remits but the cash is not there to run their existing remits let alone expand them and frankly more taxes on the industry will be counterproductive.

New Study Pegs Dark Pool Volume At 43.6%
Mark Melin – ValueWalk

A new report reviewed by ValueWalk to be released on Monday shows dark pools account for 43.6% of overall stock trading volume while single dealer platforms comprise 17.6% of volume.

Citigroup Unit To Pay $5 Million To Settle U.S. SEC Charges
Sarah N. Lynch & John McCrank – Reuters
SEC: Citigroup Business Unit Charged With Failing To Protect Confidential Subscriber Data While Operating ATS
MondoVisione
Citi Wasn’t So Clear On What ‘Hidden Orders’ Meant
Matt Levine – Bloomberg View

Private trading venue LavaFlow Inc. owned by Citigroup will pay a $5 million penalty to settle charges that it failed to put adequate safeguards and procedures in place to protect its subscribers’ confidential trading information from March 2008 through March 2011.

Shanghai Stock Market Unlikely To Follow Hong Kong Trading Hours (subscription)
Daniel Ren – South China Morning Post

Shanghai is unlikely to stretch stock exchange trading hours to match Hong Kong’s, despite growing calls for combined action when the through train trading scheme takes off in October. The decision could dent regulators’ attempts to create an effective arbitrage system in the event of any disparity between A and H shares.

Euronext Chief Cerutti Cites France As Weak Spot To EU Recovery (subscription)
Philip Stafford & Peggy Hollinger – Financial Times

Euronext CEO Dominique Cerutti, is confident that Europe was on the road to a “slow but sure” recovery after the financial crisis. However, “the weak spot in Europe, given the size of the economy, is France, where we still have a lot of progress to do.”

PLY: It’s a challenge working out which of the basket case economies that make up much of the Eurozone is really the worst but France has many reasons to define itself as the one which sucks most on various benchmarks as Dominique Cerutti correctly note. Meanwhile Euronext shares are Eur 18.19 (-0.11%) and actually I can’t say I share the optimism about the general European recovery.

TSE: Implementation Of Legal Entity Identifier (LEI)
MondoVisione

Tokyo SE will start allocating LEI as LOU (Local Operation Unit) from 1st August 2014 in order to establish LEI allocation system in Japan under the amended Financial Instruments and Exchange Act.

ASIC Releases ASX Assessment Report
MondoVisione

ASIC released its annual assessment report of the ASX licensees.

Private Markets

MCX-SX Eyes Funds, New Name In Break With Past
Anirudh Laskar – Livemint

MCX-SX is working to raise private equity (PE) capital, change its name and expand its employee base as part of a revival strategy.

PLY: Encouraging news: a revolution within MCX-SX could yet see it become a profitable entity, it was never going to work as merely another me too stock exchange although it has had some success in forex markets. That said the exchange will need risk appetite to be shared by the board and senior management to move forward.

NCDEX Introduces Hedge Policy For Commodity Markets
The Economic Times

NCDEX said it is introducing a comprehensive hedge policy for the commodity markets.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX and FTIL shares are flat, no news of disposals or resolution steps over the weekend.

A Year On, Investors Await Justice In NSEL Case
Ami Shah & Khushboo Narayan – Livemint

On 21 July, at least 50 disgruntled investors disrupted proceedings in room number 21-A at the Bombay high court. For a moment, the judge who was hearing the bail application of Jignesh Shah, MD of FTIL, the promoter of NSEL, was stunned by the uproar. Investors filled the courtroom shouting slogans against Shah, who is in judicial custody in connection with the fraud, saying he had promised them assured returns.

An angry justice Abhay Thipsay, who was presiding over the case, immediately intervened to bring order back to the courtroom. “Just because you have lost money does not mean you will decide if someone should be punished or not,” the judge said.

Technology

JPX Secures Technology Vendor For Next-Generation Platform
Adil Siddiqui – Forex Magnates

JPX has selected new technology partners to develop its derivatives trading terminal. JPX has appointed NASDAQ OMX and NTT DATA Corporation, the move comes after five months from the initial commencement of the search.

JPX press release here.

PLY: Another excellent sale for NASDAQ OMX…

Meanwhile, Friday it seems Reuters got their story slightly wrong and inferred a problem with NASDAQ OMX technology at the Nigerian SE when apparently the problem was a network error. I am happy to set the record straight and report that the good folks of NASDAQ weren’t responsible for this problem

Nasdaq Targets Q3 For ITCH eSpeed Feed (subscription)
Faye Kilburn – waters technology

Nasdaq OMX is set to release a new market data feed for its eSpeed fixed income platform on Sept. 30, based on its ITCH data protocol, to provide algorithmic and HFT firms with a higher-performance alternative for distributing data on US Treasury bonds from the eSpeed market.

Neonet Algorithmic Trading Suite Now Available With Visual Trader Platform
MondoVisione

Neonet, the independent agency broker and execution specialist has extended the functionality of its interface with Visual Trader, Spain’s leading trading platform, owned by Bolsas Y Mercados Españoles (BME).

Canadian Market Participants Skeptical Of Proposed Exchange Data Fee Regulation (subscription)
Faye Kilburn – waters technology

Proposed regulations in Canada to curb the fees that Canadian trading venues can charge for their real-time market data have received mixed reactions from market participants, who are unconvinced that the new proposals will significantly reduce the cost of market data overall.

Products

Greece Eyes SME Minibonds To Bypass Bank Lending
Christopher Whittall & Anil Mayre – Reuters

The first batch of issuance under a “minibond” programme that Athex has been promoting to finance Greek SMEs is set for launch after the summer break.

Greece’s economic recovery is closely linked with the health of its SMEs, which make up 99.9% of its companies and employ 85% of the workforce compared with an EU-wide average of 66.4%, according to PwC. But these firms have increasingly found themselves starved of financing from the country’s creaking banks. Athex is keeping its project to boost SME lending simple to start with, allowing companies to issue 5m of bonds through the ENA STEP (support the entrepreneur) part of its alternative market listings.

“We are already working with issuers, both listed and non-listed, and expect the first issues in September,” said Nicos Porfiris, deputy COO of Athex.

PLY: A good move from the Hellenic Exchange to bring in more financing to the otherwise stricken Greek SME sector.

SGX Says Cross-Margining Key In Battle For RMB Futures Market (subscription)
Justin Lee – Risk

The ability to cross-margin contracts across asset classes will give SGX a competitive advantage with up to 30% margin savings, according to the exchange, although some market players are doubtful this can be achieved.

US Dealers’ Euro Swap Share Falls As SEFs Kick-In (subscription)
Joe Parsons – FOW

US investment banks’ share of the euro-denominated rates market fell to just 6% in May this year from a quarter in September last year in response to the start of the swap execution facility regime in the US.

ISDA said the proportion of the euro market conducted between a European and US dealer was 25% in September when the SEF mandate was introduced.

Career Paths

WSE Management Board Of A New Term Of Office
MondoVisione

WSE Management Board has been changed to the following five members: Paweł Tamborski (CEO), Mirosław Szczepański (COO), Dariusz Kułakowski (CIO), Grzegorz Zawada (CSO) and Karol Półtorak (CFO), appointed by the Exchange Supervisory Board for a new term office as proposed by WSE CEO Paweł Tamborski.

Two members of the Management Board of the previous term of office have been re-elected. Mirosław Szczepański, previously Management Board Member for Finance, was appointed VP for Operations (COO). Dariusz Kułakowski, previously Management Board Member for Information and Technology, was appointed VP for Information and Technology (CIO).

Two new members of the WSE Management Board also have long-time professional experience in the capital market. Grzegorz Zawada was appointed VP for Strategy and Development (CSO). Karol Półtorak was appointed VP for Finance (CFO).

For Mr Karol Półtorak and Mr Grzegorz Zawada, the decision will enter into force on the date of delivery the approvals of the Polish FSA for the changes on the Exchange Management Board. For Mr Dariusz Kułakowski and Mr Mirosław Szczepański, the Resolution of the Exchange Supervisory Board enters into force on the date of adoption, i.e., 25 July 2014.

The previous Exchange Management Board whose term ended July 1st 2014 was:

Adam Maciejewski
Mirosław Szczepański
Beata Jarosz
Paweł Graniewski
Dariusz Kułakowski

WSE Ordinary General Meeting voted the following members of the Exchange Supervisory Board

Waldemar Markiewicz (NEW)
Marek Słomski
Mariusz Patrowicz (NEW)
Dariusz Kacprzyk
Jacek Lewandowski
Piotr Piłat (NEW)
Wiesław Rozłucki
Marek Wierzbowski

PLY: The whitewash of the WSE is now pretty much complete with the imposition of a new management board who presumably support the government puppet CEO Pawel Tamborski who (after being drafted directly from government) has wasted no time in making it clear he wants to push ahead with the singularly ghastly flawed Vienna merger which will do nothing to help Eastern European markets…

Beata Jarosz, Pawel Graniewski and former CEO Adam Maciejewski are unceremoniously dumped – presumably they will all be removed from the employ of GPW in due course as the new management takes charge on behalf of the government’s industrial micromanagement initiative.

Meanwhile, from the Supervisory Board, Sławomir Krupa and Leszek Pawłowicz have left the board.

Finally, expect some upheaval on subsidiary boards such as Aquis where GPW has a stake as well as FESE where Adam Maciejewski was elected a director at the last AGM. Adam Maciejewski did a sound job as CEO but alas when dealing with the ill-conceived totalitarianism of a government that has gone off the rails, he didn’t stand a chance. I wish him every success in the future and expect to see him return to high office in the near future.

FN reports that LCH.Clearnet has hired a general counsel and head of compliance, as it prepares for a wave of incoming regulations that will affect Europe’s post-trade operators. Diane Bouwmeester joined the clearing house last month and will take on some of the responsibilities previously held by Lisa Rosen, who is group head of compliance and public affairs at LCH.Clearnet, in addition to her role as general counsel. Bouwmeester has also joined the LCH.Clearnet Group executive committee and
will report to LCH.Clearnet Group CEO Suneel Bakhshi, (who joined the firm in early 2014). Bouwmeester was previously a senior associate in the financial service regulatory practice of Freshfields Bruckhaus Deringer.

ESMA Securities & Markets Stakeholder Group Seeks New Member To Represent Users Of Financial Services
MondoVisione

ESMA is seeking a new member to represent the users of financial services in its Securities and Markets Stakeholder Group (SMSG).

Financial Calendar

This 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
BME Q2 Financial Results – Friday, August 1st, 2014
CBOE Q2 2014 Financial Results – Friday, August 1st, 2014
SunGard Q2 Financial Results – Friday, August 1st, 2014

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

Share Notes

CME Insider Hilda Harris Piell sold 2,282 shares Wednesday, July 23rd at an average price of $75.00 (bargain $171,150.00). She now owns 18,853 shares.

Analyst Notes

NASDAQ OMX “Outperform” Rating Restated By Credit Suisse – $45.00 Target Price, Up From $42.00
NASDAQ OMX “Overweight” Rating Restated By Barclays – $44.00 Price Objective, Up From $42.00
NASDAQ OMX “Neutral” Rating Reiterated By Zacks – $44.00 Price Target
NASDAQ OMX “Buy” Rating Reiterated By Citigroup – $50.00 Target Price, Up From $45.00
RBC Capital Markets Downgraded DB1 To “Underperform”

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

UK P2PFA: P2P Lending Goes to Over £1 Billion in 2014
JD Alois – Crowdfund Insider

The Peer to Peer Finance Association (P2PFA) in the UK have just published the data for the first 6 months of 2014. The rate of flow of funds through p2p lending platforms increased from £247.4 million in Q1 to £272.7 million in Q2.

Other Stories

Hong Kong Doesn’t Need Sequels To The GEM Flop (subscription)
Enoch Yiu – South China Morning Post

A top government think tank has suggested that HKEx follow London’s in introducing new boards for companies with different shareholding structures. However, a similar idea has not worked in the past. The experience with the 15-year-old Growth Enterprise Market (GEM) should warn us not to make the same mistake twice.

PLY: A big fat yip to this article from Enoch Yiu…although I believe anybody can trade on London’s AIM, not merely professionals as this article appears to assert?

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