June 04 2014

elb2

Greetings from Berlin where the ICMA conference gets under way later today. Hearty congratulations to NASDAQ OMX on winning the Markit IPO – NASDAQ VP Bruce Aust was rightly delighted on CNBC Europe this morning. Congratulations too to Timothy Massad, confirmed as the new Chairman of the CFTC and new Commissioners Chris Giancarlo and Sharon Bowen.

Elsewhere, ICE takes an axe to NYSE equity order types – Three cheers for common sense and indeed an outbreak of management at the Big Board! Meanwhile, LSE MillenniumIT will power the Aequitas TMX competitor platform in Canada while Apple takes a step towards Bitcion (and much more news below!!).

Incidentally, it was the DB1 investor day yesterday, in London for the first time (previously Frankfurt). One aside to emerge was CEO Reto Francioni apparently dozing off during the afternoon sessions. We didn’t think the presentations were that dull but true Mr Francioni had clearly heard it before. Conspiracy theorists may speculate Andreas Preuss was happy to dominate the discussions as a result but we couldn’t possibly comment…

Thank you for all the feedback on the NLX issues Exchange Invest has unilaterally raised this week. In summary, the consensus is not sympathetic, although many praise Charlotte Crosswell in getting this far with a bland copycat proposition. In fact precisely zerobody has endeavoured to coherently defend NLX while everybody else appears to suggest there is insufficient evidence to corroborate NLX’s breathless claims that they apparently have cohesive buy side trade and that their market share is therefore driven by trades other than merely intra-market maker butterflies early am and pm. Our inbox seems to suggest the exchange will be lucky to last more than another year before parent NASDAQ pulls the plug. If you haven’t read my analysis, trust me you cannot afford to miss it, sign up for our Premium service Here. Oh and if anybody can repudiate its points, I would be delighted to hear. So far the silence has been a tad deafening and I really wish I could find the data which backs up management contentions about the exchange’s success.

Recent Premium Posts:

Euronext: Sale of the Century

Must Read: The Butterfly (In)Effect
– investigating the First Birthday Hype of NLX which reveals alarming anomalies between PR hype & data

CME Election Results
– a brief look at the voting patterns on the board and B-share vote

Creating A Chain of Value
– how will exchanges incorporate innovation?

India: What Will Modi Do?

…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!).

Public Markets

Markit To Raise Up To $1.3Bn In US IPO (subscription)
Nicole Bullock & Eric Platt – Financial Times

Markit Group is seeking to raise as much as $1.3bn in an IPO this year with the Canadian Pension Plan Investment Board expressing interest in buying up to a third of the offering ($460 million of stock). The financial data company, said it planned to sell 45.7m shares at between $23 and $25 each. Underwriters of the offering will have the opportunity to purchase an additional 6.9m shares.

Using a basic share count, the IPO range would value the company at up to $4.47bn, or less than the $5bn Markit was valued at after Temasek, the Singaporean sovereign wealth fund, took a stake last year. However that count excludes options and restricted shares, which could lift the equity value beyond the $5bn.

PLY: Clearly Temasek are not looking at a massive profit on day one and perhaps a book write-down for a while when marked to market on an exchange quotation but then again I would presume they are long-term holders. The listing has since been confirmed as headed to NASDAQ – well done!

Senate Confirms Massad As CFTC Chairman
Emily Stephenson – Reuters
Massad Heads To Swaps Agency As Wall Street Seeks Rollback
Silla Brush – Bloomberg

The U.S. Senate on Tuesday confirmed Timothy Massad as the new chairman of CFTC and approved two others as commissioners, filling a leadership gap at the nation’s derivatives regulator. The Senate confirmed Massad and industry veteran Chris Giancarlo by voice vote. Earlier on Tuesday, it voted 48-46 to approve New York lawyer Sharon Bowen.

PLY: A tight vote on Sharon Bowen, perhaps also demonstrating a degree of lawyer fatigue with US regulatory agencies on the back of the first year in office by SEC Chairman Mary Jo White?

Chairman Massad has a job to finish but he may first wish to pause at least briefly to reassess just what it is he needs to finish before he goes about dealing with the how, let alone the when and where. It’s a tough job as the direction has been largely set but many have questioned implementation aspects and more. Given budget constraints and the inter-agency rivalry on the whole Dodd-Frank agenda (as well as other initiatives) it will certainly be an interesting time for Chairman Massad.

ICE To Cut At Least 15 Order Types From NYSE
John McCrank – Reuters

ICE plans to eliminate at least 15 order types from NYSE in order to help simplify the structure of the market.

PLY: What a line: “There are well over 50 order types, possibly 100, that brokers can use to place orders on the NYSE, said Charles Vice, president and COO of ICE. ICE’s futures market has less than 10 order types, he said.” Thank goodness for the cool rational approach to ICE as an outbreak of management starts to pump its way through the NYSE DNA.

Discussion on this matter was previously reported on May 9th.

Incidentally, no danger of Jeff Sprecher falling asleep at an Investor Day, as ICE has yet to hold one. Good move really, not because the boss would fall asleep* but rather because ICE wake up thinking about shareholder value in the core of their DNA.

*I have probably opened a line of reader feedback today pondering: “Does Jeff Sprecher sleep? Doesn’t he have one of those amazing oxygen masks like they had in that James Bond movie?”

Warsaw Aims To Become A Regional Financial Hub (subscription)
Liam Nolan – Financial Times

In late 1989, Poland’s new finance minister Leszek Balcerowicz and his team of young economists faced the gargantuan task of privatising the economy and re-establishing an entire capital markets infrastructure.

PLY: (As always all hail Professor Balcerowicz and GPW founder Wieslaw Rozlucki for their brave pioneering brilliance). This is more a financial centre discussion but touches upon WSE which has overall been a vast powerful force for good in Poland and the region, even if currently it does appear slightly becalmed, with the perception of political manipulation behind the scenes potentially damaging credibility. The Warsaw issue/problem is that it is trying to build a new financial centre on the old bank-centric model. Currently Warsaw is a regional leader but amongst, at best, adolescents: nothing is fixed and everything is still to play for in the “New Europe” and a lot more economic reform is urgently required in Poland and environs.

Eurex Clearing Publishes Client Clearing Documentation For Use With FIA Europe & ISDA Standard Agreements – Important Milestone To Facilitate Client On-Boarding Under The New EMIR Segregation Rules
MondoVisione

Eurex Clearing has extended its client clearing documentation by market standard annexes to the FOA Client Clearing Module and the ISDA/FOA Client Clearing Addendum.These standards can be used with immediate effect to on-board with Eurex Clearing’s EMIR compliant omnibus and individual segregation models.

HKEx – After-Hours Futures Trading’s Close To Be Extended to 11:45 pm From 3 November
HKEx

HKEx will extend the close of its After-hours Futures Trading (AHFT) from 11 pm to 11:45 pm from 3 November 2014, increasing AHFT’s overlap with business hours in key European and North American markets.

Indian Commodity Markets Regulator Seeks More Position Disclosures
Siddesh Mayenkar – Reuters

India’s commodity markets regulator has launched a fresh attempt to rebuild volume on domestic commodities exchanges, after their credibility was dented by last year’s failure of NSEL. The regulator said it had asked its capital market counterpart to require companies to disclose their commodity trading positions on domestic futures markets, seeing this as a way of boosting the credibility of those markets, in turn boosting activity.

FMC Set To Withdraw One-Day Forward Facility
Business Standard

The facility, extended in 2007 to promote spot exchanges, was widely used only by NSEL. NCDEX never used it and the third spot exchange, NMCE, never started operations.

Private Markets

Markit To Acquire Compliance Technologies International
Automated Trader

Markit has agreed to acquire Compliance Technologies International (CTI), a provider of tax compliance and reporting services.

World’s Biggest Wealth Fund Escapes Flash Boys In IEX Dark Pool
Saleha Mohsin – Businessweek

Norway’s $880 billion sovereign wealth fund, the world’s largest, holding $521.2 billion in equities currently, is throwing its support behind Brad Katsuyama’s new exchange. “IEX is a trading venue where all players participate on the same terms,” oil fund spokesman Thomas Sevang said in an e-mailed response to questions. “We support this.”

Thai Bourse’s New President To Strengthen Thai Capital Market Towards International Level
MondoVisione

The Stock Exchange of Thailand (SET)’s new president, Kesara Manchusree, gears up to enhance investment products, diversify to new businesses, including commodities and bonds, build long-term quality investor base, with more cooperation among other exchanges in the region, underlining the Thai bourse’s role as a regional leading exchange.

PLY: SET endeavours to power ahead, whether there is a democratic Prime Minister or indeed the current military coup-derived government. Amazing.

SEC Charges Bitcoin Entrepreneur With Offering Unregistered Securities
MondoVisione

An SEC investigation found that Erik T. Voorhees published prospectuses on the Internet and actively solicited investors to buy shares in SatoshiDICE and FeedZeBirds. But he failed to register the offerings with the SEC as required under the federal securities laws. Investors paid for their shares using Bitcoin, a virtual currency that can be used to purchase real-world goods and services and exchanged for fiat currencies on certain online exchanges. The profits ultimately earned by Voorhees through the unregistered offerings totaled more than $15,000.

Voorhees agreed to settle the SEC’s charges by paying full disgorgement of the $15,843.98 in profits plus a $35,000 penalty for a total of more than $50,000.

PLY: Multiple venues have been offering forms of Bitcoin investment offerings across the world, Mr Voorhees was just one such participant.

Apple Takes A Cautious Step Towards Bitcoin
Time

As part of its ongoing developer conference this week, Apple has added a section to its developer guidelines regarding apps for virtual currencies, including, possibly, Bitcoin.

PLY: Very interesting I fully expect Apple will endeavour to create their own money going forward.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX and FTIL flat to small up today.

Finance Ministry Sends Show-Cause Notice To NSEL
Ashish Rukhaiyar – Livemint

The finance ministry has issued a show-cause notice to NSEL, asking why the exemption granted to the spot exchange in 2007 should not be revoked.

Technology

Aequitas Selects MillenniumIT Technology To Power Canada’s Newest Exchange
MondoVisione

Suite of MillenniumIT products selected to power new exchange, Further strengthening MillenniumIT’s position in Canada.

PLY: A fascinating development. LSE may have missed buying the TMX but now will power a key competitor in the Canadian marketplace.

Markit Debuts ‘Enhanced’ iNAV Service (subscription)
Faye Kilburn – waters technology

Markit has launched an intraday net asset value (iNAV) service for exchange-traded products that combines securities pricing data from global exchanges with the vendor’s proprietary fixed income evaluated prices, which it calculates for more than 2.3 million instruments using dealer contributions and its fair value pricing service, which calculates the fair value of an ETF outside active trading hours.

KCG Holdings Suspects Its Trading Code Was Stolen (subscription)
Scott Patterson, Jenny Strasburg & Michael Rothfeld – Wall Street Journal

Lawyers for the New Jersey-based trading firm, KCG Holdings (created from the merger of Knight Capital and Getco) told Manhattan prosecutors they suspected KCG’s intellectual property was improperly being used elsewhere, prompting the investigation.

A former technology executive at Knight, Raymond Ross, is a focus of the early stage investigation. In an interview, Mr. Ross, CTO of New York-based Clearpool Group, called any suggestion that he or any of his colleagues stole code or any Knight property “outrageous.”

Internet Breakdowns Between Cairo & Alexandria Affect The Daily Trading Value At EGX
MondoVisione

Due to in Internet service breakdowns between Alexandria and Cairo and the subsequent delay in data transmission, EGX believes a decline in average daily trading of 33.23% has resulted.

InfoTech Signs Deal With Zimbabwe SE
The Nation

InfoTech Group has recently signed an agreement with Zimbabwe SE for a turnkey deployment of Automated Trading System that will ultimately improve the efficiency of Zimbabwe SE during trading operations.

Instinet Introduces ‘Last Hour’ VWAP Crossing Session
Automated Trader

Instinet has announced that its Instinet US brokerage subsidiary has enhanced the intra-day VWAP Crossing session in its Crossing ATS.

Visual Trader Launches A New Trading Strategy Generation System Into Its Platform
MondoVisione

Visual Trader, a BME subsidiary that develops and operates order routing and market access systems, has reached an agreement with the Spanish innovating start-up Qubitia to integrate its trading model generation system into the Visual Trader platform.

Products

CME Looks To The Futures In Europe (subscription)
FOW

CME believes its newly launched derivatives exchange in London will answer a growing demand for FX futures as regulation increases the costs of using the OTC FX market.

PLY: Clearly it will be interesting to see how CME can develop tangible volume / open interest in their European platform. The cross volume opportunity drive from the base of the dollar denominated forex sector in the US to the Euro/Swiss/GBP based contracts in Europe gives them an instant opportunity, alongside clearly the ability to trade the futures against spot forex.

Japan’s Osaka Exchange Looking To Expand Into Commodity Markets
Agnieszka Troszkiewicz – Businessweek

JPX is considering expanding into commodities and currencies, as HKEx and SGX have lead the expansion for legacy exchanges in the region…

PLY: Interesting statistic here that Japan, the world’s third largest economy (amazingly still 3rd after all those years of stasis!) had a record for imports in LNG last year in the wake of the Fukushima nuclear accident.

China Mulls Offshore Yuan Gold Trade In FTZ
Bloomberg

China, the world’s largest bullion consumer and producer, is considering allowing the use of offshore yuan in gold trading in the Shanghai ftz. Shanghai Gold Exchange, the country’s biggest physical bourse for the metal, is proposing to let holders of offshore yuan accounts trade the three contracts it will offer, including bullion of 99.99% purity, stipulating that gold may be physically delivered into a warehouse in the zone.

PLY: Clearly somebody is studying what happened to create the offshore dollar market and endeavouring to ensure those RMB can continue to be somehow economically beneficial to the Chinese mainland no matter where they may be deposited. Interesting.

Brazil Exchange To Move Some Fixed-Income Trading
Reuters

BM&FBovespa will migrate secondary market fixed-income trading to its PUMA Trading System platform on July 14.

Career Paths

Ahead of its looming IPO, Euronext announced the appointment of Jos Dijsselhof as COO of Euronext with effect from 1st July 2014, pending regulatory approvals. His role will be to ensure seamless and orderly operations across Euronext’s pan-European markets.

Mr. Dijsselhof has more than 20 years’ experience in the financial industry, previously General Manager, Group Hubs at ANZ based in Singapore. He replaces Lisa Dallmer, who left the operator earlier this year.

The US Senate voted to confirm Timothy Massad as CFTC Chairman and Sharon Bowen and Christopher Giancarlo as CFTC Commissioners.

Tullett Prebon CEO Plans to Leave As Soon As This Month (subscription)
Jenny Strasburg – Wall Street Journal

As discussed yesterday, Terry Smith, CEO of Tullett Prebon, plans to leave the London-based brokerage firm as soon as this month and turn to working full time at the privately owned asset-management firm he started in 2010.

KCG hired ex-Credit Suisse MD, Phil Mackintosh, for a new research unit.

eFront, a software provider of financial solutions for managing alternative investments, has appointed Bret Bolin as a NED of the eFront BoD and John Ellsworth as VP of Product Management.

Financial Calendar

This week

TMX $0.40 quarterly dividend payment

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

Share Notes

CME CEO Phupinder Gill sold 49,000 shares Monday, June 2nd at an average price of $71.66 (bargain $3,511,340.00). He now owns 117,101 shares.

Analyst Notes

CBOE “Underperform” Rating Restated By Credit Suisse – $49.00 Price Objective
Betfair “Add” Rating Restated By Numis Securities – GBX 1,150 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

ESMA Announces Three Open Hearings On MiFID II
MondoVisione
ESMA has today opened registrations for the three open hearings on MiFID II/MiFIR.

SEC Awards $875,000 To Two Whistleblowers Who Aided Agency Investigation
MondoVisione

SEC announced a whistleblower award of more than $875,000 to be split evenly between two individuals who provided tips and assistance to help the agency bring an enforcement action.

Opening Statement Of CFTC Commissioner Scott D. O’Malia, 12th Meeting Of The Technology Advisory Committee, Washington, DC
MondoVisione

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