June 01 2015

elb2 Monday dawns with the surprise news that Plus500 has suddenly sold itself to a provider of gaming (as in gambling) Technology at a premium to Friday’s close. Will regulators allow this deal?

News from the dead zone, NLX appoints new market makers while the debate on dark pool nomenclature rumbles on…

I’m having another spiky pith day (Sunny Reaganite optimism may return later in the week), best to get scrolling…enjoy!

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Public Markets

UK’s Playtech To Buy Plus500 For $700 Mln
Reuters

Israeli billionaire Teddy Sagi’s Playtech agreed to buy retail forex trading company Plus500 for about 460 million pounds ($703.52 million) in cash to strengthen its position in the online trading platform business.

Playtech said it would pay 400 pence per share, an 8.1% premium to Plus500’s Friday close. The deal is expected to add to earnings immediately and expects the acquisition to be completed by the September-end, subject to regulatory approval.

Read our Premium Exchange Deals Brief

PLY/FAO: Playtech shares are down 3% early this am on LSE but with a market cap of circa 3 billion dollars, the company can absorb the upfront cost of Plus500 without extreme dilution. Israeli entrepreneur Teddy Sagi owns 33.6% of Playtech, which he founded in 1999 and has been floated on LSE since 2006.

PLY: A remarkable deal and the news that Mr Sagi was involved in a legal spat when formerly investing in pornography will probably titillate some media once they catch up. Anyway, it is up to Playtech shareholders and management how they wish to invest their money and presumably Israeli connections helped create this deal given Plus 500’s domicile. Will the UK’s seemingly rather limp regulators let the deal go through? It strikes me that Plus 500 is going to be a legal battlefield for class action suits for some time to come as well as being a likely haven for regulatory action in the future – albeit, that the company appeared confident last week the FCA was not considering fining it for the fundamental breaches of AML within its offices.

Clarification: Plus500 Not Forcing Clients To Move To Cyprus
LeapRate

Further to our earlier article entitled Plus500 transfers London clients to Cyprus (reported Friday), which was based on a letter sent to a client by Plus500, we have been able to clarify the situation a little better.

It seems as though Plus500 is not automatically transferring any Plus500 UK clients to Plus500 CY (both regulated subsidiaries). Instead, Plus500 has been approaching its non-UK clients which have zero balance in their accounts, letting them know that they can continue trading with the company by opening a (new) account with Plus500 CY, regulated by CySEC. New-client documentation will be required as usual at Plus500 CY, which is operating normally.

PLY: Hmmm. A very big fat hmmmm.

Cable Car Capital Blog Updates on Plus500
Part 11: Unanswered Questions
Part 12: Legal Consequences

PLY: Reading this report on Plus 500’s somewhat arbitrary definitions of scalping (and prohibition thereof), one could argue Odey were ‘scalping” with their purchases last week…. Plus500 appears more like Kafka does leverage by the day and I can only my discomfort continues to rise. On the Han Solo “I’ve got a bad feeling about this” scale I could envisage trading at new highs.

Previous comment and mentions about Plus 500 here, here, here & here.

Previous Cable Car Capital blog posts (all worth reading):

Part 1: Short Plus500
Part 2: Bucket Shop
Part 3: Customer Lifetime Value
Part 4: Companies House Inconsistencies
Part 5: Audit Opinions
Part 6: Unlicensed Activity
Part 7: Whois Plus500?
Part 8: Scalping
Part 9: Worldwide Web
Part 10: Competition

EU Targets April For Interest-Rate Derivatives Rules
Ben Moshinsky – Bloomberg

The EU may implement clearing rules for OTC interest-rate derivatives as early as April next year…

First Steps In The Review Of EMIR, 29 May 2015, Commissioner Jonathan Hill, Public Hearing, Brussels
MondoVisione

Watchdog Suggests EU Take Less Rigid View Of Foreign Derivatives Rules
Huw Jones – Reuters

The EU may need to be less rigid in its approach to dealing with financial rules from outside the bloc to avoid disputes with other countries, the EU’s top markets regulator said on Friday.

PLY: Rearrange a sentence involve dog’s prandial preferences and I think the current TransAtlantic derivatives dispute becomes clearer…

ESMA Fosters Derivatives Market Transparency
MondoVisione

PLY: Some say there was good news from the Soviet on tractor production statistics too.

Appointment Of Designated Market Makers In The NLX – Futures Products
NLX

Pursuant to Market Notice issued on 11th May 2015 (reported here), inviting tenders for Designated Market Maker status in the NLX STIR and LTIR Futures, this Market Memo confirms the appointment of the approved Designated Market Makers, subject to completion of the legal contracts.

Read our Premium NLX Brief

PLY: For those who thought NLX was deceased, it is merely undead. The zombie butterfly haven has just launched another new market making scheme to service the buy side clients it apparently doesn’t have. The new scheme is more complex than the previous cash for nebulous crosses market manipulation fiasco (which had as you recall various refinements over its lifetime but always amounted to being a costly wash out from what we could see).

Meanwhile, those arbiters of market fairness at the FCA have yet to act and it’s the anniversary of our Butterfly Effect this week which blew the lid off the whole thing. Nobody is emerging from this well, although one must wish good luck to the market makers and supposedly reputable media outlets who fell over themselves to take the NLX cash when it was offered…

Rarely has so much money been spent on so few to benefit no investors at all.

Shenzhen-Hong Kong Stock Link Offers Opportunities, & More Volatility (subscription)
Enoch Yiu – SCMP

Investor enthusiasm for the proposed tie-up between the Hong Kong and Shenzhen exchanges is building, but so too are concerns that the local market will become even more volatile with the expansion in cross-border share trading.

PLY: Is the Hong Kong media the new haven for the world’s leading ‘glass half empty’ mentality? Whatever ‘through train’ does, they always find a reason to whinge.

Shenzhen-Hong Kong Stock Connect’s Southbound Track Needs More Appeal (subscription)
Enoch Yiu – SCMP

Beijing will need to spice up the appeal of the southbound track of the Shenzhen-Hong Kong through train scheme, given that mainland investors can already trade the city’s stocks under the trailblazing market tie-up with Shanghai.

PLY: Cyclicality? More Italian designer IPOs? There are a lot of possibilities – I was not aware the success of “through train” would be judged on it being a close to zero sum flow…the population metrics alone suggest the mainland may have a technical advantage to gaining net investment?

Read our Premium HKEx – SZSE Stock Connect Brief

Hong Kong Needs Longer Exclusive Status In Fund Sales Programme (subscription)
Enoch Yiu – SCMP

Hong Kong needs to have exclusive status for the soon-to-be launch cross border fund programme with the mainland or it will fail in its goal to become a centre for the world fund industry in this part of the world. Hong Kong usually has the first mover advantage for any Chinese market reform plans. But exclusive status for the city has never been the case.

PLY: Good article – the HK pivot point is genuinely that, a precarious moment where it tries to garner advantage while being aware it could end up simply bypassed.

HKEx Speeds Up Capacity Expansion For New Investment Channels
EJInsight

HKEx is doubling the handling capacity of its central clearing and settlement system (CCASS/3) by the end of next month.

PLY: Enjoying the fruits of ‘through train’ but how long will this digital Silk Road last?

Read our Premium HKEx – SSE – Stock Connect Part 1,Part 2,Part 3

Is There A Dark Pool Witch Hunt Going On?
David Weisberger – Traders Magazine

As George Carlin once asked, “Is there another word for synonym?”

When it comes to the name “Dark Pools,” I wish we had followed our instincts – A pivotal moment for equity market structure occurred during a call of the old Securities Industry Association (SIA) in the early part of last decade. …At the time, I distinctly remember suggesting that we should call them Quiet Pools instead of Dark Pools…Someone else on the call said “What’s in a name? ” and the conversation ended…

PLY: Good article, well worth a read. There can be few worse names than “Dark Pools” as I have long argued. “Institutional Liquidity Pools” for those who process big blocks works for me, “Systematic Internalisers” for those who avoid being a proper central market and so forth but alas letting bankers loose on branding seldom works out well, as can be clearly seen here. There needs to be a recovery from the stubborn addiction to the ‘dark’ which the general public associates with knights in spandex and a Gotham city where everybody gets perennially ripped off.

Can Dark Pool Luminex Unlock Enough Liquidity For Block Trades?
Robert Stowe England – Institutional Investor

PLY: Nope. Not at this stage – 9 institutions is far too few to make a proper market work. Interesting idea though.

Previous comments on Luminex here.

Read our Premium post: Luminex – Crazy Name, Crazy Development?

Liquidnet Targets Hidden Pools Of Liquidity (subscription)
Anna Irrera – Financial News

Liquidnet, which is best known as an operator of buyside equity trading platforms, is building a new tool to help its members access hidden pools of liquidity, as competition for block trades hots up.

PLY: Neat idea if it works. Try to help the private shares market and other little packets of potentially lucrative block trades. It also helps keep Liquidnet ahead of the block trading pack where it faces increasing competition from legacy exchanges and other venues, including the new Luminex and Plato entities on either side of the Atlantic.

The Cure For Stock-Market Fragmentation: More Exchanges (subscription)
Jonathan Macey & David Swensen – Wall Street Journal

PLY: Asking academics often provides interesting answers. It also provides a lot of better understanding why academics don’t make practitioners, even if they are more ‘intelligent’ than the bull-headed ‘linearists’ who often run businesses. This idea is essentially to slice listing into separate individual silos and thus retain liquidity. So, in other words it’s like British trains where there is no vestige of competition and hence British train service is dire and very expensive.

An attempt at a solution but it makes no sense when we place it in the free market context (not that admittedly the government / regulatory blob tends to use that lens either…).

HKEx – Partial Cancellation Of Bonds Due To Conversion
HKEx

Following the latest bond conversions from resulting in the issuance of:

5,580,188 shares reported here
8,257,715 shares reported here
10,764,556 shares reported here
12,731,550 shares – reported here
14,209,709 shares – reported here
16,445,572 shares – reported here
17,933,521 shares – reported here.

An additional bond conversion and issuance of 19,248,082 shares, representing approximately 1.62 per cent of the total Shares in issue as at the date of this announcement (1,187,557,718 Shares), have been issued and credited as fully paid.

Private Markets

NSE Discount In Transaction Fee To Continue Till July 31
NDTV

National SE (NSE) on Friday extended a discount of up to 59% in transaction charges for trading on its currency derivatives platform and in equity options segment till July.

Chi-X Spends Big To Go Beyond Share Trading
Shaun Drummond & Jonathan Shapiro – AFR

Chi-X Australia will make its first foray outside share trading in the next six months with a bid to revive the warrants market, a new trading window after the traditional 4pm market close, and later a move to compete with ASX on new listings.

CEO John Fildes said new products are being offered now in part because the exchange had enough trading volume to take it to the next stage, but also because there are gaps in the market, and doing share trading alone – which accounts for just 5% of ASX’s revenue – will not be a big-enough money spinner.

FAO: Read last week’s APX CEO David Lawrence remarks on ASX.

PLY: As opposed to APX which is a small two listing venue where despite its best efforts, its listings themselves have had some regulatory issues apparently, Chi-X is the real deal competitor, despite the ASX’s efforts to crush it. New products, a broader offering and lots of interesting niches to explore – the CHi-X Oz team have plenty of opportunity to hunt down that ASX cannot, or will not, service.

It’s Not Too Late To Get Into Bitcoin, Insists Bitcoin Jesus
Katie Collins – Wired

There is a myth in certain circles that it is too late to get into Bitcoin — that if you didn’t buy in early then you missed the boat. Not so, says Bitcoin Jesus, Roger Ver.

Bitcoin Debit Card For EU Citizens Via BitStamp
Sarah Jenn – newsBTC

BitStamp recently unveiled its newest product: a bitcoin debit card. This will be available for use among EU citizens and will be accepted anywhere major debit and credit cards are accepted.

Switzerland To Establish The First Bitcoin Bank
Siddhant Singh – COINBUZZ

A team of eight members is all set to open up a Bitcoin bank in Switzerland. A Bitcoin bank, where all the usual banking facilities would be available, just without the paper currency. The Bitcoin bank aims to impart various services such such as loans, storage et al.

PLY: Very interesting.

Silk Road’s Ulbricht Sentenced To Life In Prison
Finextra

Ross Ulbricht, the founder of the Silk Road, a dark web bazaar where shoppers bought and sold illegal goods with bitcoin, has been sentenced to life in prison.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX and FTIL flat to small up.

FMC Asks MCX To Increase Shareholder Representation On Board
Rajesh Bhayani – Business Standard

MCX is back on FMC radar. After asking MCX to ensure its founder promoter FTIL exits the exchange following the NSEL crisis, it has now asked MCX to increase shareholder representation on the board.

Technology

PSE Postpones Launch Of New Trading System
Richmond S. Mercurio – Philstar

The NASDAQ sourced PSEtrade XTS originally slated on June 1 will be delayed:

“The exchange has received information from SEC that further testing by SEC will be required prior to approval of the revised go-live date,” PSE said.

Equinix To Buy UK Rival TelecityGroup For £2.35bn
IBT

US data centre company Equinix has agreed to acquire British peer TelecityGroup in a cash and stock offer worth £2.35bn (€3.28bn, $3.59bn).

The deal will create the largest data centre player in Europe.

PLY: Doesn’t immediately impact colocation but an interesting deal nonetheless. Equinix also just opened their latest NY area data centre in recent days.

Products

China May Launch First Stock Index Options In September
Reuters

China Financial Futures Exchange (CFFEX) may launch the country’s first-ever stock index option as early as September…

Read our Premium China Capital Markets Transformation Brief – Exchanges & Markets, ETPs and Exchange Infrastructure – Part 1Part 2Part 3Part 4Part 5

GSE’s New Fixed Income Market To Take Off From June
GhanaWeb

Ghana SE says its new market that will focus on Fixed Income will take off by june ending. A number of key stakeholders in Ghana’s financial market have collaborated to set up the Ghana Fixed Income Market (GFIM).

Career Paths

MarketAxess appointed Scott Eaton as COO for MarketAxess Europe and Trax.

CFTC Chairman Tim Massad announced that the Office of International Affairs (OIA) Director, Sarah E. Josephson, has decided to leave her position as director of OIA to return to her previously held position as Deputy Director in the Division of Clearing and Risk (DCR). Ms. Josephson has served the CFTC for eight years, including the past two years as the agency’s Director of OIA. Chairman Massad also appointed Special Counsel, Jeffrey M. Bandman, the Acting Director of OIA while the agency conducts a search for a new director.

PLY: There are some great figures out there who would be ideal for this position methinks.

SEC appointed Andrew J. “Buddy” Donohue as agency’s chief of staff. Mr. Donohue will replace Lona Nallengara who will leave the agency in June.

In a move which will surprise many, that indefatigable veteran of GL Trade / Sungard Philippe Carré has left the company today. I wish Philippe every future success, he has long added a certain unique panache to the London vendor community…

Financial Calendar

This week

BGC Partners 2015 AGM – June 02
CFTC’s Market Risk Advisory Committee – June 02
ICMA in Amsterdam – June 03-05
Record date ITG $0.07 quarterly dividend – June 05

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

Crowdfunding

Crowdfunding & P2P Lending In Switzerland – Market Overview
P2P Banking

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