June 02 2014


Before we get to Monday’s Exchange Invest: I spent my weekend on a rather distressingly fruitless pursuit. Emboldened by the wondrous optimism of the NLX media coverage (which continues today) there was clearly a fabulously good news story to be had. So I began delving into the NLX data.

Big mistake.

I have written my interim conclusions up in a lengthy Premium piece today and actually if you only read one thing about NLX, I do not think you can afford to miss this – who knows, hopefully you can discover what I have missed? NB That means a subscription of $120 for the year (and it is please remember a single user licence, no infringing by buying one licence and copying it to a series of colleagues/friends please!) The article is “The Butterfly (In)Effect” and you can subscribe here. If you have any problems email us we’ll send you an invoice you can pay by credit card. (Moreover if somebody wants the world to see the article freely, send us $5000 and we’ll publish it for everybody…). If you need a corporate subscription for multiple users (e.g. if you work in senior management at, well, NASDAQ OMX, or NLX, say) email me we can expedite your credit card payment in bulk.

To give you a flavour, an excerpt from my conclusion is thus:

“…I am left with an impression that NLX, certainly in EURIBOR at least, is a market where daily there appears to be two regular spikes in volume, which remarkably occur at precisely the time when liquidity participants become eligible to fulfill their obligations.

– there is a paucity of evidence that participants want to trade the NLX product in any volume when data is released…at that time LIFFE reigns supreme.

– there is no clear evidence to be found of any meaningful buyside presence. Volume is clustered outside the time frames when they would usually be expected to trade and the concentration of volume in spread trades does not appear to fit either an economically logical trading approach nor does it dovetail with, say, hedging strips or other interest rate exposure which might be commonly applied to STIR products and the buy side in particular.

– the market appears predominantly (perhaps as much as 98%) driven by multi-legged strategies (butterflies) which achieve a volume boost but have, at best, nebulous economic benefit to the participants executing the trade (particularly given the prevailing low interest environment).

This leaves me with the very uncomfortable feeling that the data I have perused suggests that the volume on NLX is merely trading between liquidity participants to fulfill their obligations to the exchange.

– Say it aint so, Joe! Say it ain’t so!

…Am I missing something? If so, where is that data?”

…Perhaps NLX and LCH.Clearnet can move the dialogue forward by providing a daily data flow which breaks down their numbers with, say the daily percentage of butterfly trades and even a demarcation of what percentages they perceive as being from the buy side, as opposed to the liquidity providers?

…right now I have fundamentally failed to come away convinced that I can see in the NLX data what has been recently suggested by NLX advertising and media interviews. This worries me…”

I am really really sorry not to be able to pass on my best birthday wishes to NLX but I just can’t find the tangible evidence of volume distribution to back up the NLX success story…

(…Subscription to our Premium service is a mere $120 dollars per user / year plus we’re confident we’re tax deductible in most jurisdictions! Subscribe Here It all helps fund the free Exchange Invest daily alongside our sponsors! (If Paypal is outside your jurisdiction, email me, we’ll find a way to invoice you!)).

…Back to the rest of the Exchange Invest daily news today, we have brilliant news tinged with sadness, Nandini Sukumar has a new job while NASDAQ re-engineer their Fincloud and LIFFE eyes bond products while there is talk of innovation, MCX results, FTIL lurching into losses and much more…

Public Markets

MCX Q4 Net Profit Declines To Rs 43.75 Crore (USD 7.39 Mln)
Ashish Rukhaiyar – Livemint

MCX posted a decline in net profit for the quarter ended 31 March to Rs 43.75 crore (USD 7.39 mln) against Rs 76.62 crore (USd 13.58 mln) for the corresponding period a year ago. Total income for the quarter fell to Rs 96.98 crore (USD 16.38 mln) from Rs 169.03 crore (USD 29.98 mln) a year ago. Audited results for the financial year ended 31 March showed that MCX, the only listed exchange in India, earned a net profit of Rs 152.75 crore (USD 25.8 mln) for 2013-14 against Rs 298.63 crore (USD 52.9 mln) the previous year. Total income for the full fiscal fell to Rs 439.93 crore (USD 74.3 mln) from Rs 644.69 crore (USD 114.3 mln) a year ago.

PLY: Unsurprisingly MCX is suffering as uncertainty hangs over its shareholding structure and the management team.

FTIL Posts Net Loss Of Rs 371.25 Crore (USD 62.76 mln) In Q4
Business Standard

FTIL reported a net loss of Rs 371.25 crore (USD 62.75 mln) in in Q4 FY14, compared to a net profit of Rs 87 crore (USD 15.4 MLN) in the same period last year. During the year the company made a loss of Rs 229 crore (USD 38.7 mln) compared to net profit of Rs 329 crore (USD 58.35 mln).

PLY: A quantum leap backwards, a loss for FTIL underpins the crumbling of the Jignesh Shah empire.

More Trouble For FTIL As MCX Holds Back Payment
Shaji Vikraman & Ram Sahgal – The Economic Times

MCX has held back payments for software services to FTIL, throwing its crisis-hit promoter into deeper trouble.

PLY: Given the extent of the payments being demanded from perhaps the most remarkable IT contract ever signed, this is perhaps not so surprising…

Sharleen D’souza – Business Standard

The Economic Offences Wing of the Mumbai Police has filed a First Information Report (FIR) against 10 former and present employees of MCX arising from the PwC audit.

Cornerstones Clear The Way For ICE Exit
ICE Lines Up European Investors To Buy A Third Of Euronext
Business Recorder

ICE has convinced 11 European financial institutions to take a substantial stake in Euronext, absolving it of a promise to retain a quarter of the company for at least three years.

“The entire deal is tightly bound by political constraints,” said a banker involved in the deal. “ICE had to retain a substantial stake for at least three years or find a stable group of core investors to take its place.”

The investing group comprises Banco Espirito Santo, BNP Paribas, BNP Paribas Fortis, ABN AMRO, ASR Nederland, Caisse des Depots et Consignations, BPI France, Euroclear, Societe Federale de Participations et d’Investissement, Societe Generale, and BPI Vida e Pensoes.

PLY: Way to go, Jeff! He could be clean and clear of Euronext within 9 months of closing the deal! So exciting – I have written a premium post which will appear tomorrow on the topic (there’s enough to read today in Premium).

NYSE Will Keep Its Iconic Trading Floor Under New Ownership
Erin Durkin – New York Daily News

NYSE, packed with 5,000 traders in its heyday two decades ago, is now down to only 1,000 but ICE CEO Jeff Sprecher says closing the floor is not on the cards for NYSE, whose rambunctious if reduced trading floor is part of its iconic appeal.

PLY: Shame.

Nasdaq OMX: The Exchange That Is Out To Grow It Alone (subscription)
Anna Irrera – Financial News

Nasdaq OMX says it is sticking to its recipe. It started its internal innovation programme, Growth Innovation and Forward Thinking – or Gift – in 2010.

PLY: I began discussing this issue as a premium post Creating A Chain of Value – I will be adding more posts on this topic as time permits.

Still Standing: NLX Answers The Critics (subscription)
William Mitting – FOW
NLX Marks 12 Months Trading With Over 15% Market Share In Euribor

NASDAQ OMX NLX (NLX), the London derivatives market for trading a range of both short-term interest rate (STIRs) and long-term interest rate (LTIRs) euro- and sterling-denominated products, reaches its first 12 months of trading, capturing over 15% moving average market share in Euribor, the world’s second largest STIRs futures contract.

PLY: Headline numbers are one thing but my investigations have left me with considerable misgivings that NLX really has made the tangible progress its management perceives. See our Premium Post: “The Butterfly (In)Effect” .

TMX Announces Credit Rating For Commercial Paper Program

TMX announced that it has established a commercial paper program under which it may issue up to $400 million in short term promissory notes (“Notes”), which have been rated R-1 (low) with a Stable trend by DBRS Limited. The Notes will be used by TMX to refinance a portion of its long term debt and for general corporate purposes. In connection with the commercial paper program, TMX has entered into a new credit agreement, replacing its credit agreement dated September 30, 2013, which is available to backstop the commercial paper program and for general corporate purposes.

LME Will Delay Start To Position Reports Until August
Agnieszka Troszkiewicz – Bloomberg

LME delayed starting commitment of traders reports until August to allow more time for members to classify positions.

The reports will be published weekly starting Aug. 5, it said in a notice to members today. The first report was initially scheduled for July 1 after ending a one-month market consultation on May 23. The extension will enable members enough time to submit information on positions.

LSE Joins Disclosure Initiative (subscription)
Sophia Grene – Financial Times

The LSE is the 10th exchange to join the UN Sustainable Stock Exchange initiative, in which listing authorities commit to promoting debate around how companies should let investors know about important environmental, social or governance issues affecting them.

Fears Raised Over Hong Kong Dark Pool Rules (subscription)
Michelle Price – Financial News

London-headquartered ICI Global — which represents funds managing more than $1.4 trillion — has urged the Hong Kong Securities and Futures Commission to “proceed cautiously” with a proposal, published in February, to bar retail investors from accessing so-called dark pools.

CFTC’s Wetjen Hits Back At Europe’s MTFs (subscription)
Joe Parsons – FOW

Mark Wetjen, acting chairman of CFTC, has hit back at criticism from Europe’s swaps trading venues blaming them for failing to register for qualified status. Under Dodd-Frank, in order for Europe’s swap trading venues to trade with US persons, they were required to register with the CFTC as a qualified multilateral trading facility (QMTF) by May 15. No MTFs had registered by the deadline with many citing uncertainty surrounding the cross-border rules as the reason behind that.

CFTC Policy Chief Defends US Regulator’s Extraterritorial Rules (subscription)
Viren Vaghela – Risk

The failure of other financial regulators to establish a framework for swap execution facilities leaves US no option but to enforce its own standards globally, says Ananda Radhakrishnan.

CFTC Grants Recordkeeping Relief For Certain SEF And DCMs Members
National Law Review

Private Markets

Alpine SMEs Plotting New Stock Exchange (subscription)
Financial News

A group of 18 small and medium-sized companies in Europe’s Alpine region have grouped together and are planning to form a so-called Alpine SE, with a target of listing some 260 companies in four years.

PLY: An update on news from Kurt Muller’s brainchild the Alpine SE which has been working to raise 15 million Euros for the past year or so.

BSE To Cut Holding In CDSL In Line With SEBI’s Ownership Rules
Sneha Shah & Rajesh Mascarenhas – The Economic Times

Bombay SE (BSE) plans to sell a part of its stake in Central Depository Services (India) Ltd through an IPO as the exchange has to bring down its holding to comply with SEBI’s norms on ownership in market infrastructure institutions. The IPO will value the company at around Rs 700-750 crore (USD 118 – 127 mln).
BSE holds 54.2% in CDSL and needs to trim it to below 24% to comply with SEBI’s norms on ownership and governance of market infrastructure institutions.

Its younger rival NSE Ltd holds a 25% stake in National Securities Depository Ltd after it bought around 9% stake from SUUTI in 2010.

CSE To Seek Shareholders Nod To Sell Land To Raise Cash
The Hindu Business Line

Calcutta SE (CSE) will seek shareholders’ approval on June 20 to sell land at EM Bypass to raise resources to meet the regulators norms and avoid de—recognition.

SET Pressing For Capital Market Tax Amendments, New Chairman Says
Erich Parpart – The Nation

Stock Exchange of Thailand (SET) has proposed revisions in the capital market’s tax structure and regulations as part of a long-term development plan and preparation for the Asean Economic Community.

The Asean Exchanges comprise seven stock markets from six countries: the SET, Bursa Malaysia (BM), SGX, Hanoi SE (HNX), Hochiminh SE (HOSE), Indonesia SE (IDX), and the Philippine SE (PSE).

EI reported on April 1st that SET joined the Asean Exchanges project.

Aquis Exchange – Addition Of Stocks For Trading In 8 Markets
Aquis Exchange

Aquis Exchange is pleased to announce that it will expand its market coverage with the addition of the largest stocks from Belgium, Denmark, Finland, Italy, Norway, Portugal, Sweden and Switzerland.

NSE Set To Launch MF Simplified Platform For Distributors Soon
Ravi Samalad – cafemutual

Distributors can start using National SE’s new platform called ‘MF Simplified’ from mid-June.

This is the second platform being designed especially for IFAs. Its old platform ‘Mutual Fund Service System (MFSS)’ will continue to function. Brokers will also have an option to use MF Simplified platform.

Myanmar To Launch First Stock Exchange In 2015
Business Standard

Myanmar will launch its first stock exchange by October 2015 and its stock exchange will be operated by the Myanmar Economic Bank in partnership with Japan’s Tokyo SE and Daiwa Securities Group, finance minister said Sunday.

EI reported on March 25th that Myanmar’s stock exchange is on track for a 2015 launch.

Amongst other items, EI reported on June 24 2013 that Daiwa Institute of Research Ltd. is helping with the construction of a data center to power the stock exchange.

Vibrant Commodity Exchange Key To Nigeria’s Economic Revival
Altine Shehu Kajiji – This Day Live

National President of the Commodity Brokers’ Association of Nigeria (CBAN), Altine Shehu Kajiji, in this interview with Mohammed Aminu, speaks on the move by the Federal Government to privatise the Abuja Commodities and Securities Exchange, the e-Warehouse Receipt System and other sundry issues.

Coinsetter Releases Streaming Websockets API, Price Alerts and More

Bitcoin’s Futile Quest To Be A Currency (subscription)
Lawrence Parks – Wall Street Journal

Bitcoin is a fascinating and ingenious technology, but most promoters are mindful of neither the monetary nor the tax issues.

Dividend News

The MCX board recommended a final dividend of Rs 3 per equity share for the financial year ended 31 March.

FTIL announced that the BoD recommended a final dividend of Rs 2 per share (i.e. 100%), subject to the approval of Shareholders in the ensuing AGM.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX up 1%, FTIL down 2.5% as news of losses cloud the outlook for the vendor.


Nasdaq Guts FinQloud, Amazon Web Services Gets Clients (subscription)
Max Bowie – waters technology

Nasdaq OMX is scrapping parts of its FinQloud financial services-dedicated cloud computing service, handing off some components to partner Amazon Web Services—which provides the underlying cloud infrastructure—and ending support for other key aspects of the service.

First Derivatives Integrates FX Execution And Surveillance Software
London South East

First Derivatives PLC Friday moved to put together its foreign exchange execution services and surveillance software for regulators and exchanges.

Ahead Of The Curve (subscription)
James Rundle – waters technology

Recent pushes by the sell side toward embracing new technologies are a sign that a more intelligent approach is being taken, both by regulators and by banks.


CFTC Grants Order To ICE Clear Europe Permitting Portfolio Margining Of Futures And Foreign Futures Contracts

CFTC issued an order granting a request from ICE Clear Europe Limited (ICE Clear Europe), a Commission-registered derivatives clearing organization (DCO), for an order pursuant to Section 4d(a) and (b) of the Commodity Exchange Act.

Liffe Planning Suite Of European Government Bond Futures
The Trade

Liffe is preparing to launch a series of European government bond futures as it hits a new record for Long Gilt futures. Liffe confirmed plans to launch a wider range of government bond futures, with German, Swiss, Italian and Spanish products set to be added in the near future.

PLY: A good move as the market moves forward on all fronts towards greater cross currency yield curve integration on a single platform (albeit which single platform(s) will win remains the zillion dollar question…).


Official Launch Of The NL20 Index

The NL20 Index is a new Dutch total return index that reflects the real performance of the 20 largest listed companies in the Netherlands, representing true Dutch entrepreneurship.

SZSE Select Index Issued

Shenzhen SE (SZSE) and Shenzhen Securities Information Co., Ltd. recently announced to issue SZSE Select Index (Code: 399013, Abbreviation: SZSE Select) on May 30, 2014. SZSE Select Index aims at reflecting the operation feature of the leading companies listed in Shenzhen Market, and further enriching SZSE index system. SZSE Select Index takes December 31, 2004 as the base date and 1000 points as the base value.

Career Paths

Nandini Sukumar joins WFE as Chief Administrative Officer.

WFE Appoints Nandini Sukumar as New Chief Administrative Officer
Fort Mill Times

World Federation of Exchanges announced the appointment of Ms Nandini Sukumar to the position of Chief Administrative Officer.

Ms Sukumar joins the WFE from Bloomberg News bringing 14-years of experience as a financial journalist specialising in market structure, exchanges and regulation. She will report to Huseyin Erkan, CEO of the WFE.

PLY: We’re delighted for Nandini and indeed her boss Huseyin Erkan but at the same time distraught that the undisputed doyenne of the exchange reporters is leaving us! If you are interested in her post, contact Matthew Leising [mleising@bloomberg.net]. It’s a great move for a wonderful asset and personality in the industry.

Axe Departed LCH.Clearnet With €4m Pay Cheque (subscription)
Tim Cave – Financial News

The former CEO of LCH.Clearnet received nearly €4 million in compensation during 2013, having helped to seal the clearing house’s acquisition by LSE. The highest-paid director at LCH.Clearnet Group Ltd (apparently Ian Axe) received total remuneration of €3.8 million during 2013, up from €2 million in 2012, according to UK Companies House filings this week.

The Monetary Authority of Singapore (MAS) announced that Mr Lim Hng Kiang, Minister for Trade and Industry, has been re-appointed to the MAS Board of Directors, as Deputy Chairman, for a further period of two years with effect from 1 June 2014.

Professor Tan Chorh Chuan, President, National University of Singapore, has also been re-appointed as a member of the MAS Board of Directors, for a further period of two years with effect from 1 June 2014.

The members of the MAS Board of Directors are the following:

Board of Directors of the Monetary Authority of Singapore
(as of 1 June 2014)

Mr Tharman Shanmugaratnam (Chairman), Deputy Prime Minister; Minister for Finance
Mr Lim Hng Kiang (Deputy Chairman), Minister for Trade and Industry
Mr Heng Swee Keat, Minister for Education
Mr Lawrence Wong Shyun Tsai, Minister for Culture, Community and Youth; Second Minister for Communications and Information
Mr Quek See Tiat, Chairman, Building and Construction Authority
Mr Lim Chee Onn, Senior International Advisor, Singbridge Private Limited
Mr Peter Ong Boon Kwee, Permanent Secretary, Ministry of Finance
Professor Tan Chorh Chuan, President, National University of Singapore
Mr Ravi Menon, MD, MAS

Tradeweb Taps JP Morgan Exec To Grow Europe And Asia Business (subscription)
Anish Puaar – Financial News

Tradeweb, an operator of fixed income markets owned by Thomson Reuters, has hired the former head of e-commerce at JP Morgan to develop its European and Asia business in light of a growing shift to electronic bond trading.

California Public Employees’ Retirement System (CalPERS) welcomed Dana Hollinger to the Pension Fund’s Board of Administration.

Financial Calendar

This week

BGC Partners $0.12 quarterly dividend payment
Bulgarian SE AGM
TMX $0.40 quarterly dividend payment

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

Other stories

CFTC Vacates New York Portfolio Clearing, LLC’s Registration As A Derivatives Clearing Organization

At the request of New York Portfolio Clearing, LLC (NYPC), CFTC issued an Order that vacates the registration of NYPC as a derivatives clearing organization, pursuant to Section 7 of the Commodity Exchange Act.

Modi, Markets And The Economic Disorder
Niranjan Rajadhyaksha – Livemint

As Narendra Modi inherits an economic mess, investors need to remember that radical change is rarely a smooth affair.

SEBI-FMC Merger Talks Back At North Block
Indivjal Dhasmana – Business Standard

Officials of the department of economic affairs (DEA), who are to meet Finance Minister Arun Jaitley shortly, are expected to make a case for merger of SEBI and FMC.

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