June 05 2015

elb2 Conference News:

SAVE THE DATE: My focussed event about the Future of Finance, Young Markets, will take place in Warsaw, Poland, on September 17th. More details to follow…

June 18: FESE Convention -I am looking forward to chairing the opening panel about the vital topic of SME financing
September 23rd: SFOA Burgenstock: Conference looking good, I will be chairing the return of Crossfire: Register now.

Exchange Invest Premium, is on a roll discussing market failures, oversights and ugly stuff this week which I expect will roll into next week too:

New! NLX: The Last Flap? – Hopefully the last time we have to comment on this sad waste of time and money which has ended in far too much bad blood as practitioners count the cost of reputational damage to the industry from this sorry affair. However, wash markets cannot be condoned, nor can immature hype and irresponsible accusations against genuine exchanges be permitted (even if regulators appear reluctant to act publicly).

New! On Feds Hounds and Floors – Watch Out This Ends Badly… – with a capacity akin to seeing only the next frame of a Tom & Jerry cartoon, markets do not appear to have grasped the interconnectivity of the roll of fuse wire to large kegs of dynamite…

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

FIFA Farce: “Sepp-ticemia” & Finance – It’s not just the bungs, there is more to the whole case of what I call “Sepp-ticemia” with ramifications for financial markets…

The Big Flap – One Year On – One year on from our exclusive bubble bursting of NLX’s hubris, plus ca change?

Meanwhile, Premium Briefs keep you abreast of various industry issues, updated daily, 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 
China Capital Markets Transformation Brief – Main File
SEBI-FMC Merger Brief

Our Premium service is a unique source of industry 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:
One foot (still) in the grave: NLX pays off founders, will there be one foot in the courtroom anytime soon for their market practice violations? Odey unhappy with Plus500 valuation in sudden sale…as JPM increases Plus 500 stake. Swaps reprieve in EU: 6 months for banks, 2 years institutions (so the buy side will still be OTC exposed when the next crash happens then …just saying!). Cash equity clearing developments for the common good, as Jeff Sprecher and Brad Katsuyama are in lucid form at the Sandler O’Neill conference in New York. Sungard IPO and Markit follow-on announced, Multiple interesting power exchange news and much more, happy scrolling:

Public Markets

Nasdaq NLX Pays Off Founding Members (subscription)
Luke Jeffs – FOW

Nasdaq NLX has paid off all of its founding members and scrapped their founding member agreements in a bid to reposition the European exchange for growth after a period of slow trading.

Read our Premium post NLX: The Last Flap? and NLX Brief, amongst others…

PLY: One year on and the hangover of those grandiose advertisements alone continue to haunt the whole NLX project. Building liquidity is always a challenge but NLX managed to not build liquidity in a manner which discredited the platform (largely thanks to its own hype), leaving it little more than a ticking time bomb of regulatory action risk which alas has left questions hanging about the regulatory system too. Not the finest hour for markets, particularly markets in London for that matter.

I sincerely hope this can be my last commentary on this sad and expensive tale of hubris, incompetence and dubious practice. However I do appreciate there are many readers out there, like me, who actually still hold values of market integrity and honesty as being vital to markets themselves and hence appreciate why we cannot simply let NLX lie. “The Last Flap” in Premium asks the questions which any future investor in NLX will have to be comfortable with, lest they are unaware of the ‘WAMU-risk’ embedded in NLX’s DNA…

Odey Scoffs At Playtech’s £460m Bid For Plus500
The Times

Crispin Odey waded into the proposed takeover of Plus500 by declaring that Playtech’s recommended £460 million takeover “materially undervalues” the CFD broker.

The hedge fund billionaire, whose Odey Asset Management has built a stake of 25.5 % in the company, partly through CFDs, said that Playtech’s 400p-a-share offer was “an opportunistic bid exploiting current regulatory issues and risks” and that he would not be voting in favour of the cash deal.

PLY: I have always deemed Crispin Odey a brilliant investor but I just do not know what he sees in Plus 500…

JPMorgan Buys More Plus500 Shares, Takes Stake To 8.49%
Maria Nikolova – LeapRate

In an announcement dated June 3, 2015, JPMorgan Chase notified of a purchase of 3,661,026 ordinary shares in Plus500, thus taking its stake in the retail FX and CFD broker to 8.49%.

Previous comments re. Plus500 deal yesterday and here, here and here.

Read our Premium Exchange Deals Brief.

PLY: Whereas given the ability of JPM in recent years to invest in things which end up being a costly regulatory farago…

Markit Prices Secondary Offering Of Common Shares
Business Wire

Markit announced the pricing of its secondary public offering of 25,746,604 common shares at $25.75 per share. This represents a 1,160,581 share increase over the previously announced offering size. In connection with the offering, the selling shareholders have granted the underwriters a 30-day option to purchase up to 1,754,667 additional common shares. The company itself is not selling any shares and will not receive any proceeds from the offering. The offering is expected to close on or about June 10 2015, subject to customary closing conditions.

BofA Merrill Lynch, Barclays, Citigroup, Credit Suisse, Deutsche Bank Securities, Goldman Sachs, HSBC, J.P. Morgan, Morgan Stanley, RBC Capital Markets, UBS Investment Bank, BNP PARIBAS, Jefferies, RBS and TD Securities are acting as joint book-running managers for the offering.

As part of the offering, Markit intends to purchase from the underwriters 14,048,820 common shares at the price to be paid to the selling shareholders by the underwriters, which is approximately $24.91 per common share. Markit intends to fund the repurchase through a combination of cash and a drawdown of its revolving credit facility.

PLY: Banks shuffle their books as life gets ever more capital constrained…

Nasdaq To Provide Clearing Choice In Nordic Cash Equity Markets
Nasdaq

Nasdaq will provide a choice of CCP providers in Nordic cash equities for its members on Nasdaq exchanges in Stockholm, Helsinki and Copenhagen.

Nasdaq and SIX Swiss Exchange have agreed to introduce additional CCPs to their local markets. In addition to SIX x-clear AG, Nasdaq will introduce LCH.Clearnet Ltd as a cash equity CCP provider. Both SIX x-clear AG and LCH.Clearnet Ltd will become interoperable with the existing clearing partner of Nasdaq in the Nordics, EuroCCP.

PLY: Good move by NASDAQ.

SIX To Add EuroCCP As Clearing Counterparty & Expand Into Nordics
Finextra

SIX will admit EuroCCP to the Swiss market to become the third CCP on SIX Swiss Exchange. EuroCCP will become interoperable with SIX x-clear and LCH.Clearnet in equity and ETF products. At the same time, Nasdaq has agreed to admit SIX x-clear to the Nordic markets to become interoperable with EuroCCP and LCH.Clearnet.

PLY: Further interesting expansion for the SIX clearing model.

ICE CEO: Doing Quite Well From Earnings Standpoint (Video)
CNBC

CNBC’s Bob Pisano sits down with Jeff Sprecher, for an exclusive interview.

FAO: JS’s remarks on blockchain technology are interesting.

European Pension Funds Win 2-year Derivatives Exemption (subscription)
Philip Stafford – Financial Times

Pension funds in Europe will be granted a further two-year exemption from the mandatory clearing of derivatives until August 2017.

European Commission Extends Transitional Period For Capital Requirements For Banks’ Exposures To CCPs
MondoVisione
EU Gives Banks, Pension Funds More Breathing Space Over Derivatives
Huw Jones & Toby Sterling – Reuters

The European Commission will give banks in the EU another six-month exemption until December from having to hold extra capital to cover transactions at clearinghouses that don’t meet the bloc’s standards.

PLY: A welcome breather but making policy on the hoof 6 months at a time is not conducive to long-term planning (which after all is what the political regulatory blob always like to beat bankers up for…).

Germany’s Debt Office Set For Derivatives Clearing (subscription)
Joe Rennison – Financial Times

The Finanzagentur, Germany’s debt management office, are set to follow the call from global regulators for stronger derivatives standards and use CCPs.

FMC To Complete All Probes Ahead Of Sebi Merger
Jayshree P Upadhyay – Business Standard

FMC will have to complete all pending investigations before its merger with Sebi.

This is one of the key conditions put by Sebi, working to ensure a smooth transition from being a stock market regulator to one for commodities, too.

Read our Premium SEBI-FMC Merger Brief

PLY: Interesting, logical but remember NSEL did not fall under FMC’s direct purview so we didn’t just make any definitive progress to clearing that mess up with this announcement.

EEX & EPEX SPOT Approved As Pre-Registered RRM – EEX Group To Offer REMIT Data Reporting Services
MondoVisione

Private Markets

SunGard Files Registration Statement For Proposed IPO
BUSINESS WIRE

SunGard filed a registration statement on Form S-1 with SEC relating to a proposed IPO of its common stock. The number of shares to be offered, the price range and the stock exchange listing for the proposed offering have not yet been determined.

Fresh Off Filing For IPO, SunGard Has Possible Suitors (subscription)
Gillian Tan – Wall Street Journal

SS&C Technologies, Fidelity National Information Services and others have expressed interest in acquiring financial-technology firm SunGard.

SunGard, filed to go public on Thursday, almost a decade after a group of private-equity firms acquired it for roughly $11 billion in one of the signature deals of the buyout boom that preceded the financial crisis. The Wayne, Pa., company tapped underwriters for an IPO with a target valuation of about $7 billion. SunGard would also consider takeover offers.

PLY: Strikes me Sungard expect a likely brisk discussion on trade sales, and if nothing arises, an IPO…

IEX: Hopefully Launch Exchange 2015 (Video)
CNBC

Brad Katsuyama, IEX Group President & CEO, discusses the process of becoming an exchange, and simplifying the pricing structure in the markets.

Croatian Power Exchange Deal To Boost Balkan Electricity Links
Maja Zuvela – Reuters

Croatia’s new power exchange CROPEX has signed a deal with European energy exchange Nord Pool Spot to set up a day-ahead market by year end, a move that will give the EU’s newest member access to broader electricity markets.

The Belgrade-based regional spot power exchange, known as SEEPEX, has teamed up with Europe’s EPEX Spot Exchange and is expected to launch in November or December.

Both the Serbian and Croatian exchanges will first start trading day-ahead power, with intraday trading coming later.

PLY: It has been a while coming but logically more efficient electricity trading in the Balkans makes a lot of sense because the countries are relatively small and hence power can be traded across several borders in a diverse region of generation and power suppliers..

Zimbabwe SE Electronic Trading Debut Set For July
Jacaranda FM

Zimbabwe SE’s automated trading platform is set to go live next month.

Inside A Tibetan Bitcoin Mine: The Race For Cheap Energy
Allen Scott – CoinTelegraph

China is a primary driving force in Bitcoin due to its large market share in trading and mining. CoinTelegraph spoke to HaoBTC CMO, Eric Mu, who described what it’s like to work in a newly built bitcoin mine located in the beautiful and rugged mountains of China’s Sichuan region.

PLY: My favourite headline of the week, conjures up images of David Carradine like figures surrounded by incense and servers.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX and FTIL both pretty flat today.

Technology

Euronext Options Hit By “Critical” Tech Issue (subscription)
Alice Attwood – FOW

Trading in AEX options on Euronext’s derivatives market was halted Thursday afternoon, less than a week after the exchange was hit by the latest in a series of technical problems.

Thomson Reuters To Launch Its Industry-Leading Market Data Services In CME Group’s Aurora Data Center
MondoVisione

Products

ICE Endex Collaborates With GME & Snam To Introduce Italian Natural Gas (PSV) Futures Contracts In September 2015
ICE

ICE Endex expects to introduce physically delivered Italian natural gas futures contracts (Punto di Scambio Virtuale – Virtual Trading Point; PSV) in cooperation with Gestore dei Mercati Energetici S.p.A (GME) and Snam S.p.A., and in compliance with Italian law. The contract will launch on September 14, 2015, subject to regulatory approvals.

Single-Name CDS Solutions Lack Consensus, Says Citi (subscription)
Joe Rennison – Financial Times

Industry attempts to increase volumes in a deteriorating part of the credit derivatives market lack a common approach, according to Citigroup.

Career Paths

Ontario Securities Commission Requests Members For Market Structure Advisory Committee
MondoVisione

PLY: Pity I am some distance away, I doubt the government body could afford my expenses…

Financial Calendar

This week

ICMA in Amsterdam – June 03-05
Record date ITG $0.07 quarterly dividend – June 05

Next week

IDX in London – June 09-10
Record date CME $0.50 Q2 2015 dividend – June 10
HKEx second annual RMB fixed income and currency (FIC) conference – June 11
Record date Nasdaq $0.25 quarterly dividend – June 12
TMX $0.40 dividend payment – June 12

New announcement

ICE Q2 2015 Financial Results – Wednesday, August 5, 2015 – press release here.

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

Share Notes

CME insider Kathleen M. Cronin sold 2,000 shares Wednesday, June 3rd at an average price of $95.00 (bargain $190,000.00). She now owns 17,685 shares.

Charles Schwab CEO Walter W. Bettinger sold 100,000 shares Wednesday, June 3rd at an average price of $32.12 (bargain $3,212,000.00). He now owns 411,119 shares.

Analyst Notes

Scotiabank Reissued Their “Sector Perform” Rating On TMX
Tullett Prebon Price Objective Raised By Citigroup From GBX 300 To GBX 390 – “Neutral” Rating

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

Liquidity For Equity Crowdfunding Could Come In New ‘Venture Exchange’ Bill
Chance Barnett – Forbes

There are new signs of life in Washington D.C. for equity crowdfunding with non-accredited investors along with related legislation that seeks to bring capital to startups and small businesses.

One sign is the draft bill put forth two weeks ago by the House Financial Services Committee in what is being called the “Main Street Growth Act” (draft bill).

The proposed bill calls for the creation of what is being called “venture exchanges” – secondary markets where early investors in startups and small businesses could sell their shares, and new investors could buy in and trade these private stocks.

PLY: Another arm to the MicroExchange movement.

Other stories

CMU – A Regulator’s Perspective – Speech By David Lawton, Director Of Markets, Policy And International, At The FCA, Delivered At The Deutsche Borse Group ‘Blueprint For CMU’ Event On 27 May 2015
MondoVisione

Read our Premium EU CMU Brief.

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