June 03 2015

elb2 Busy times as I prepare for a jaunt to IDX next week to see all our friends in exchange traded derivatives, those on the OTC cusp and more. The week after it’s the splendid city of Oslo where I am chairing what looks like a scintillating opening panel at the FESE Convention all about SME financing – a vital element of our financial future across the world and a significant issue for market infrastructure too.

Thanks for the emails, referring to Burgenstock yesterday, it’s good to see a groundswell of support building to support the reconstruction of our old friend, the SFOA. I will be chairing Crossfire, September 23rd, don’t miss the ETD event of the year: Register now.

Exchange Invest Premium:

The first anniversary of my lepidopteral thesis got me thinking about the industry and a lot of what I have seen of late has me worried. This is a time for vigilance as standards appear to be slipping in some areas, while others may have inadvertently been left open to embarrassment. On that front EI Premium is looking at various issues this week which are coalescing in a manner which worries me that we are not taking the probity of markets sufficiently seriously.

New Premium posts:

Casting Hastertians – The former speaker of the house has left CME Group embarrassed.

Football’s FIFA Farce: “Sepp-ticemia” & Finance – It’s not just the bungs, there is more to the whole case of what I call “Sepp-ticemia” and it has some significant ramifications for financial markets – we need to be vigilant…

The Big Flap – One Year On – One Year On From Our Exclusive bubble bursting of NLX’s hubris

Meanwhile, our Premium Briefs keeping you abreast of various industry issues are updated daily when news arises, condensing past stories from our daily bulletins. All topics covered can be found on our dedicated Briefs page via Exchange Invest Premium.

The latest include:

Saudi Arabia Opening Capital Markets – Brief NEW!
China Capital Markets Transformation Brief – Main File
SEBI-FMC Merger Brief

Our Premium service is a unique source of industry analysis – insight in a low latency environment if you like. Can you afford not to be a subscriber? $120 per user/year helps keep Exchange Invest daily Free. Subscribe here or reply to this email and I will invoice you forthwith.

Today in Exchange Invest Daily:

Carsten Kengeter says hello to investors on second day as DB1 CEO, preaches caution and an open approach to the future while confirming EUREX Asia is go in 2016.

A flurry of deals proves that the future of data looks exciting in so many respects (and I still think we are barely scratching the surface) while TMX has a strategic review and announces five key pillars – the devil will be in the details clearly. Lovers of European stereotypes cheered by news Italy’s Monte Titoli may be late for the T2S launch.: Tulletts and Trad-X seek MOU to create ICAP rival swap benchmark…

And lots more pith included, happy scrolling:

Public Markets

CBOE To Acquire Data & Analytics Platforms Of Livevol

CBOE has entered into a definitive agreement to acquire the market data services and trading analytics platforms of Livevol, a leading provider of equity and index options technology and market data services to professional and retail traders. The acquisition is expected to close by June 30, 2015. Financial terms were not disclosed.

Livevol Securities, the company’s broker-dealer unit, is not included in the deal.

Read our Premium Exchange Deals Brief.

Markit To Acquire Information Mosaic

Markit agreed to acquire Information Mosaic, a leading software provider for corporate actions and post trade securities processing. Information Mosaic’s enterprise software will allow Markit to extend its corporate actions service to support the full corporate actions trade lifecycle and enhance Markit’s asset servicing solutions.

DB1 To Open Asia Derivatives Exchange

PLY: Confirming that the date for launch with be Q2 2016, the plan we have long known about is coming to fruition. At the DB1 investor day in London yesterday, new CEO Carsten Kengeter made a presentation, despite it only being his second day in the job. He was of open mind it seems on various fronts including:

DB1 CEO Says Has ‘Open Mind’ On Size Of Takeovers

DB1’s new CEO Carsten Kengeter said he would not rule out either bolt-on or large acquisitions as the exchange operator reviews its business targets and prospects.

Last month the new CEO declared DB1 aims to offer trading, clearing and other services across the Asian time zone under its new brand Eurex Asia.

Read our Premium posts Deutsche Boerse’s Asian Experiment and The Direction of Deutsche Boerse

PLY: It’s sort of cheering for the status quo to see the frontal lobes of the financial media only responds to the somewhat Pavlovian stimulus “merger” in their approach to reporting exchanges still.

Playtech Makes £460m Bid For Plus500: Boss Mor Weizer Calls Deal “Immediately Revenue Enhancing”
Plus500 For 400p Equals A Gamble
Investors Chronicle

Previous comments re. Plus500 deal here and here.

Read our Premium Exchange Deals Brief.

TMX Announced Strategic Realignment

PLY: With five strategic pillars, the TMX is looking to enhance the existing department store and clearly get the better of the competition. Nothing very radical in the published document, which is mostly logical cant but at least ‘new’ CEO Lou Eccleston is seeking to push the organisation forward under his stewardship.

Italy Mulls Delay To European Settlement Project Entry (subscription)
James Rundle – Financial News

Monte Titoli may miss deadline set for three weeks’ time for first wave of T2S.

PLY: D’oh!

Tullett & Trad-X In Talks For Swap Reference JV
David Wigan – Reuters

Tullett Prebon and Trad-X are in talks about collaborating in the production of mid-swap reference prices, used daily by syndicate desks to benchmark yields on new bonds.

The firms are discussing pooling liquidity in Europe in a bid to dislodge ICAP’s grip on mid-swap reference pages, and are set to sign a MoU in the coming weeks.

PLY: An interesting situation although dealers may yet prefer to mark their books on the basis of one homogeneous price as opposed to a synthesis? After all MOUs, IDBs and general levels of trust have been proven to be lacking all the way to most High Courts in most financial centres for many years…

Dealers & Clients Still Scrambling To Assess BBY Fallout (subscription)
Joyce Moullakis – AFR

Firms that were using BBY to clear trades have expressed discontent at ASX’s actions over the failed stockbroker and the way the unwinding of equities and options trades was managed.

More about the BBY collapse here and here.

PLY: Nobody ever emerges from such fraught situations with their praises being sung but at the same time, it does appear odd from this distance that ASX were so eager to enforce some shorter settlement times on stricken clients give both the nature of the problem and indeed the clear issue that as the monopoly backbone in settling all the trades, ASX must have had more foresight than anybody else of what was happening?

Lawmaker’s Love Fest With CFTC Chief Dissolves In Split On Bill
Silla Brush – Bloomberg

The honeymoon is over for the top U.S. derivatives regulator. Timothy Massad, the head of CFTC, was showered with praise for the past year by Representative K. Michael Conaway, the Texas Republican who leads the House committee overseeing the agency. Conaway said he was “tickled” by Massad, who was “doing a great job” as the new “sheriff” of the $700 trillion swaps market.

In recent weeks, the relationship hit a snag, with Conaway sending a flurry of private letters to Massad demanding information and documents about the agency’s work, according to people with knowledge of the matter. They say the letters sound like a congressional probe into the regulator, a far cry from Conaway’s past compliments.

PLY: Chairman Massad is not his predecessor which clearly caused a huge sigh of relief amongst those who believe markets aren’t just something you profit handsomely from at Goldman Sachs and then try to throttle for every future generation. However, Rep Conaway is quite right in endeavouring to get a grip on extra-territoriality from his side of the Atlantic (and hopefully the EU will reciprocate at its end) while the idea of every regulator firmly assessing the market impact of all new (and preferably existing) regulations is absolutely vital. Regulators need to remember they serve the public interest and that is NOT about making the regulators more important. The regulatory tipping point is close (if the moment has not been passed) and the traffic soon needs to be back towards the valley of reality away from the crazy peaks of current protectionist anti-innovation fiat.

White House Issues Veto Threat For CFTC End-User Bill

The White House on Tuesday issued a veto threat for a U.S. House of Representatives bill called the Commodity End-User Relief Act because it said the bill “undermines the efficient functioning” of CFTC.

PLY: This from a White House which has undermined the efficient functioning of America on pretty much every level, qv 56 times as many regulations as were passed by Congress in 2013 were approved by the US government blob. A likely underestimate of annual cost of regulatory compliance across the US economy is put at $6000 per man, woman and child in the USA. (The worrying thing is this is the supposedly free market cradle of the world, it gets much worse elsewhere). However the kettle pot black index rattles to new highs on this typically hubristic White House slapdown.

HKEx – Partial Cancellation Of Bonds Due To Conversion

An additional bond conversion and issuance of 20,601,208 shares, representing approximately 1.73% of the total Shares in issue as at the date of this announcement (1,188,910,844 Shares), have been issued and credited as fully paid.

Read our Premium HKEx – Bonds Redemption Brief

ESMA Updates List Of Authorised Trade Repositories – ICE Trade Vault Europe Adds Forex Derivatives To Its Services

Check our dedicated pages on Market Infrastructure companies – TRs page here.

Private Markets

Private Share Trading Takes Off As Tech Companies Shun IPOs (subscription)
Leslie Hook – Financial Times

The easy availability of investor cash has allowed many technology companies to delay listing on public markets but caused a surge in trading of a different kind: in the private shares of unlisted companies.

PLY: An interesting review of a market which is making progress but still crowded with platforms given the extent of its growth currently, methinks.

Some Saudi Firms To Remain Closed To Foreign Investors As Market Opens (subscription)
Nicolas Parasie – Wall Street Journal
Rules, Limitations Of QFIs In Shares Trading On Tadawul
Saudi Gazette

Shares of five Saudi Arabian companies, most of which have operations in the holy cities of Mecca and Medina, will remain off limits when the kingdom opens its $590 billion market to foreign investors on June 15. Qualified foreign institutions will be allowed to own up to 20% of shares in about 165 listed companies.

Read our Premium Saudi Arabia Opening Capital Markets – Brief.

Dominican Republic Readies Bill To Create Stock Market
Dominican Today

PLY: Hooray, all legitimate new bourses welcome.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX off 2%, FTIL plunges 6% so something is afoot, even if it is just fear over the forced merger of NSEL into FTIL…


CLTX Launches CLTX Trader On DB1’s Trading Architecture

CLTX launched CLTX TRADER, CLTX’s sophisticated new exchange matching and trading platform. CLTX TRADER will go live on DB1’s global trading architecture. Users of CLTX TRADER will benefit from DB1’s “M7” market technology, utilising the derivatives matching engine as well as its integrated front end platform for commodity markets.

DB1’s EEX bought a 52% stake in CLTX in January 2014.

Nasdaq NFX Data Will Be Available On The Bloomberg Professional Service

Nasdaq Futures (NFX) real-time market data will be available via the Bloomberg Professional service and the B-PIPE service, following the official launch of the NFX platform in mid-2015. NFX is the exchange group’s U.S.-based DCM, offering futures and options on key energy benchmarks, which includes oil, natural gas and U.S. power.

Finance Hunts The Lesser-Spotted Blockchain Brain (subscription)
Anna Irrera – Financial News

Finance’s interest in the blockchain has been piqued – with the likes of Nasdaq, UBS and former JP Morgan commodities chief Blythe Masters among the early converts to its potential. But plans to embrace the technology could hit an early snag: almost nobody knows how to use it.

PLY: and indeed the remarkable thing – bubbles may be upon us – is that many of the top level advisors / non-execs and execs rushing into the Blockchain mania are not those who, how might I say this charitably…er, have a longstanding reputation as technological leaders of thought.


ICAP Weighs Treasurys-Trading Controls (subscription)
Katy Burne – Wall Street Journal

ICAP is studying the possibility of temporarily halting Treasury trading following large price moves.

Traders May Get Cash-Settled Gold & Silver Futures On MCX
The Economic Times

Domestic punters and hedgers in gold and silver futures might soon be able to play similar contracts that are traded on CME but denominated in rupees on MCX, the country’s largest commodity bourse, subject to regulatory approval.

DGCX Launches 4 New Products

Two new unique Indian contracts – India Gold Quanto Futures and Indian Rupee Quanto Futures.
To introduce Mini Polypropylene Futures contract.
Existing Plastics Futures contract to be upsized.


Shanghai Exchange Announces Four New Indices To Launch June 24
China Economic Review

The China Securities Index Co. and the Shanghai SE announced four new indices to be launched on June 24 on the Shanghai exchange, including one based on the Silk Road-themed transport infrastructure initiatives known as One Belt One Road.

Option Contracts On S&P 500 Futures Start Trading On BM&FBOVESPA

Career Paths

NYSE appointed Stacey Cunningham as COO. She reports to NYSE Group President Tom Farley. Cunningham will manage NYSE’s cash equities markets, relationship management, product management, and NYSE Governance Services.

TMX announced a number of organizational changes. Brenda Hoffman, SVP, Group Head of IT, TMX, has decided to leave the company effective July 31, 2015.

Jean Desgagne, President & CEO of CDS, will assume the newly-created role of Head, Global Enterprise Services. In addition to his CDS mandate, Mr. Desgagne will assume responsibility for the functions accountable for the delivery of operations, technology, transaction services and procurement.

TMX intends to create a new executive role that will focus on its commercial strategy and client experience. The individual in this role will set the course for TMX’s client-facing organizational framework and develop a robust system for best-in-class sales and client management.

SGX hired Mark Fisher (former Deutsche Bank and Barclays), as sales director in London.

Jos Dijsselhof Leads Euronext Into Its Next Act (subscription)
Marina Daras – Waters Technology

Jos Dijsselhof is a technologist with a passion for people. Or perhaps he’s a people person with a passion for technology? Both descriptions are pertinent for the Dutch man who has just been promoted to interim CEO of Euronext, less than a year after joining the firm.

PLY: Execution, Jos, it’s the new plastics for exchanges and you have momentum in Euronext to capitalise on this…

Seed Alpha – a new technology company seeking to revolutionise the way institutional investors use and manage research – appointed Peter Allen as Chairman. Mr Allen, who is also Chairman of The European Association of Independent Research Providers (Euro IRP), is a veteran of the independent research industry. He led Lombard Street Research for a decade.

Financial Calendar

This week

Benjamin M. Lawsky, Superintendent Of Financial Services For The State Of New York To Deliver Remarks On Digital Currency Regulation In Washington, DC – June 03
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.

Share Notes

CME CEO Phupinder Gill sold 5,000 shares on June 2nd at an average price of $94.0 (bargain $470,100).

Analyst Notes

LSE “Outperform” Rating Reiterated By Credit Suisse – GBX 2,900 Price Objective

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

US Senator Elizabeth Warren Accuses SEC Boss Of Weakness (subscription)
Barney Jopson & Gina Chon – Financial Times

Liberal discontent over SEC has burst into the open with Elizabeth Warren, a US senator, launching an attack on the head of the market watchdog, Mary Jo White, and its record.

PLY: Watching liberal on liberal action can be most entertaining, albeit the worry is the stakes are so high. Having pulled SEC further to the left, now La Warren is disparaging this bad move for markets in seeking an even greater regulatory burden in the insanely high stakes game where “fair” actually means biased. #Worrying.

Statement Of CFTC Commissioner J. Christopher Giancarlo For The Market Risk Advisory Committee Meeting

Regulation – Supporting Vibrant Markets – Speech By Martin Wheatley, FCA CEO, @ The Future Of Financial Services Event London.

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