June 06 2014

elb2Thunderbirds are Go, interest rates a no, as the ECB tries to stimulate the Eurozone. The problem is the diagnosis: raising the dead is somewhat more difficult. Are we curing the sick? The kitchen-sinking of approaches suggest it’s more like a desperate flurry to raise the dead…

That said, even sub-zero Eurozone rates don’t seem to have palpably moved EURIBOR butterflies. As you may recall, this week’s focus has been on trying to unravel the curious riddle of how NLX does a vast preponderance of its (admittedly modest) volume in two narrow strips, including lunchtime (which is odd as Europeans still regard freedom to practice prandial activities as a fundamental human right). Anyway, with rates sub-zero, any purported imperfections in the permafrost look less plausible by the day. Forget the media hype: we still have no tangible evidence to prove recent advertisements. Rather, the ICE Age is barely beginning.

(Not following the argument? you need to read this Premium Post: The Butterfly (In)Effect).

I am leaving Berlin today after a terrific content-rich ICMA AGM. Thank you for the invitation, particularly to Allan Malvar who I firmly believe is unsurpassed in this industry for his organisational skills.

In a bumper Exchange Invest today, could ISE be sold off by DB1? Former NSEL CEO released, creating a war of words in the media as he fights back against Jignesh Shah’s repeated accusations. French grain growers to buy into Euronext while the bourse apparently identifies 60 million Euros in savings. Lots of comment on US market infrastructure from the Sandler O’Neill conference while CCP brickbats fly across the Atlantic. And there’s more, happy scrolling…

Finally, a historic day today: 70 years since D Day. To the allied heroes of Zero Hour, you will never be forgotten for liberating Europe. Thank you.

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

DB1 Said To Explore Sale Of ISE Options Business
Matthew Monks & Aaron Kirchfeld – Bloomberg

DB1 is exploring a sale of International Securities Exchange (ISE), the U.S. options business it acquired in 2007 for $2.8 billion and which may fetch $1 billion to $1.5 billion in a sale.

PLY: With 12 US exchanges (2 at ISE), could it be competition factors, or is it actually a pivot? Does DB1 see its future in Asia and away from the USA…

See also, the Premium posts: The Direction of Deutsche Boerse and Deutsche Boerse’s Asian Experiment.

French Grain Growers Eye Stake In Euronext
Sybille de la Hamaide – Reuters

French grain growers could take a stake in exchange group Euronext as part of its upcoming IPO in a bid to defend the Paris-based grains derivatives market, the head of the growers’ investment fund Unigrains said on Thursday.

PLY: La France unites to keep out the Anglo-Saxon infidels of capitalism by building a proper free market for protectionism?

Euronext Lays Out €60m Savings Target (subscription)
Tim Cave – Financial News

Euronext is eyeing cost savings of up to €60 million over the next three years as it gears up for life as an independent entity.

PLY: This is clearly a 60 million Euro saving that nobody had previously spotted even before, let alone during the dismal interregnum of NYSE ownership? Oh no hold on, NYSE kept identifying the savings, it was just they never delivered them.

NYSE Parent Says Exchange Structure Still Too Complex
John McCrank – Reuters

NYSE needs to simplify its structure to expand its business and bolster investor confidence in the markets, Jeffrey Sprecher said on Thursday. “I look at it (IEX) and I admire what they’ve done and we’re behind at NYSE,” Sprecher said at the conference, sponsored by Sandler O’Neill + Partners.

ICE CEO: Generating A Lot Of Cash Now (video)
FOX Business

ICE CEO Jeffrey Sprecher on opportunities for growth and the markets.

Dealerweb Launch Shakes Up Treasuries Trading (subscription)
Michael Mackenzie – Financial Times

PLY: Tradeweb releases the Dealerweb platform muscling in on the de facto ICAP BrokerTec & NASDAQ OMX eSpeed duopoly. I have a lot of faith in the abilities of Lee Olesky and his team and wish them every success in adding value to the bond market with this latest initiative.

Tradeweb press release here.

ETF Securities, Platts Declare Interest In Overseeing London Silver Fix (subscription)
Francesca Freeman – Wall Street Journal

ETF Securities and Platts added their names to the list of companies interested in overseeing a new London silver fix.

Recently, CME and LME announced they intention to develop an alternative to London Silver “Fix”. Previous discussions on the topic: May 16th.

Silver Market Favors Broad-Based E-Replacement For Price Benchmark, LBMA Says
Jan Harvey & Clara Denina – Reuters

Silver market players are in favor of an electronic, auction-based system for setting a benchmark price with a broader base of contributors when the ‘fix’ ceases in August, the London Bullion Market Association (LBMA) said on Thursday.

High-Speed Trading Rules Coming From SEC, White Says
Dave Michaels – Bloomberg
Mary Jo White Gets High-Frequency Embrace With SEC Plan
Sam Mamudi & Nick Baker – Bloomberg

Proprietary traders who use computers to buy and sell stocks in milliseconds would have to register with the SEC under recommendations made public yesterday by White in New York.

PLY: In the haste to pixel this morning too much to really analyse in the free daily but the proof of the pudding will clearly be in what is actually agreed and how it improves markets, as opposed to merely adding to the regulatory blob.

Stock Exchange Leaders React to SEC Rule Proposals (subscription)
Bradley Hope – Wall Street Journal

CEOs of the leading U.S. stock exchanges offered differing reactions to proposals unveiled by the head of SEC to address market stability, high-speed trading and dark pools.

PLY: The Sprecher clarity and simplicity mantra gently contrasts with the incumbents it seems.

The Wall Street Buyers Club (subscription)
David Weidner – Wall Street Journal

Dark pools are not mysterious, but they do raise serious questions about the line between private and public business.

SIFMA Statement On SEC Chair White’s Market Structure Comments

SIFMA today issued the following statement from Kenneth E. Bentsen, Jr., SIFMA president and CEO, in response to SEC Chair Mary Jo White’s speech, “Enhancing Our Equity Market Structure,” given at the Sandler O’Neill & Partners Global Exchange and Brokerage Conference

Newedge Shutters Grains Desk On CBOT Open-Outcry Floor

Commodities brokerage Newedge is closing its grains desk on the floor of CBOT, a company spokeswoman said, the latest firm to depart the once-bustling open-outcry pits as the industry increasingly shifts to electronic screen trading.

Societe Generale took full ownership of Newedge in May, buying out a 50% stake held by Credit Agricole, highlighting at the time Newedge’s prime brokerage and clearing services as a key to its acquisition.

Buy Side Hits Out At CFTC’s Foreign CCP Proposals (subscription)
Lukas Becker – Risk

BlackRock, Citadel and Eaton Vance criticise CFTC proposals that would prevent them using some foreign clearing houses, while CME attacks the EU’s approach to the same issue.

PLY: Neither side is really demonstrating much business sense as the unseemly rush for territorial dominance makes for worse markets…which ironically helps business pivot east and thus reduce the budgets for regulators in the US and EU. In this sense the stand-off is a very slow moving tourniquet throttling incumbent developed markets as Asia flourishes.

U.S. Futures Regulator NFA Cuts Fees As Market Grows
Douwe Miedema – Reuters

U.S. National Futures Association said on Thursday it would cut its fees because increased trading volume and a broader revenue base had swelled the coffers of the agency that self-regulates the futures and swaps industry.

PLY: NFA, perhaps unique amongst all regulatory entities, has enough money…a surplus even.

Private Markets

Afternoon Auction For German 15-Minute Contracts To Launch This Year – Satisfactory Pan-European Power Market Progress

The Exchange Council of EPEX SPOT, at its latest meeting in Leipzig, expressed its support for a new market segment and discussed the current perspectives in the integration process of European power markets.

Bitcoin Key To Future Of Online Payments: EBay CEO
Matthew J. Belvedere – CNBC

EBay chief John Donahoe says he sees bitcoin and other digital currencies playing an “important role” in PayPal, the e-commerce giant’s Internet payment platform.

PLY: EBay edges a step back towards its libertarian roots.

Bitcoin Isn’t the Only Way You Can Mine A Digital Fortune
Robert McMillan – Wired

Jeremy Martinez is a modern day coin collector. He collects bitcoin and litecoin and luckycoin and zeitcoin and leafcoin and infinitecoin.

Special Section: FTI, NSEL, India at the Crossroads

PLY: Mr Sinha gets bail and immediately strikes back against his key accuser Jignesh Shah. MCX shares are flat and FTIL is up 1%.

Every Document Related To NSEL Was Shared With FTIL & Its Top Management: Anjani Sinha

Jignesh Shah Had Meetings With Defaulters: Anjani Sinha
Zee News

Following his being released on bail, former NSEL CEO Anjani Sinha clarified that the promoter Jignesh Shah was well aware of the NSEL fallout.

…Former CEO of NSEL Anjani Sinha has said that his boss and FTIL promoter Jignesh Shah would be apprised of day-to-day matters at NSEL.

PLY: Entirely unsurprising news all round I feel, after all how could NSEL have had any vestige of corporate governance without informing the board (and the board seeking to be properly informed)?

Audit Trail Can Show Where The Money Went: Ex NSEL CEO Anjani Sinha
Khushboo Narayan – Livemint

Anjani Sinha , former NSEL CEO, was released on Thursday after spending eight months in judicial custody in connection with the payment crisis at the commodity spot exchange. Sinha said the money should be recoverable given that all transactions were electronic and had left an audit trail.

Don’t Believe Sinha Except Where He Takes The Blame: NSEL
Business Standard
NSEL Accuses Former CEO Anjani Sinha Of Trying To Influence Probe
The Economic Times

NSEL has rapped its controversial ex-CEO Anjani Sinha’s recent interviews on how his superiors, including promoter Jignesh Shah, were well aware of the developments which led to the scam.

…Crisis-ridden NSEL today accused its former CEO Anjani Sinha of trying to influence the investigation and judicial proceedings in alleged irregularities in the bourse by giving media statements.

PLY: That NSEL have not endeavoured to comment on their 99% shareholder FTIL’s Jignesh Shah from commenting…is probably in and of itself, hardly surprising. Alas the original “Anjani admits everything it was all him” story has apparently long since unravelled.

FMC Tells NSEL To File Recovery Suits Against Defaulters
Ashish Rukhaiyar – Livemint

FMC has directed the board of NSEL to accelerate the process of recovering money from defaulters who caused the payments crisis at the exchange, and given it two weeks to come up with a plan.


Tokyo SE: Announcement Of The Launch Date Of Arrowhead Renewal

For the purpose of enhancing system capacity, implementing new functions and revising trading rules, TSE plans to renew arrowhead, the cash market trading system…

The Latency Arms Race Is Dead, Long Live Latency Analytics (subscription)
Donal Byrne (CEO of Corvil) – Wall Street & Technology

What has happened in the past five years is the mass adoption of high-speed IT systems for electronic trading. Everybody is fast today. To be more precise, everybody is “fast enough.” The trading mantra has shifted from “I must be fast” to “I can’t be slow.” In essence, the industry has found its desired center of gravity, balancing the cost of achieving latency advantage versus the economic return from improved trading performance.

PLY: Interesting. I first mooted that we were approaching already the end of the pure speed era slightly prematurely perhaps in my Detica Megatrends of Finance paper, gosh back in 2006…

Career Paths

Reuters reports that Roger Jones, the former head of commodities at Barclays, has left Mercuria two years after joining the Swiss trading house.

Risk reports that the details of the future plans of JP Morgan and Mercuria emerged during May, giving a better idea of what the two firms would look like once the planned sale of the bank’s physical commodities unit to the Switzerland-based trading house is complete.

For its part, JP Morgan has appointed two veteran traders – John Anderson and Michael Camacho – to co-head its commodities business after the resignation of New York-based global head of commodities Blythe Masters. Although Masters is expected to stay on until the bank finalises the Mercuria sale, the appointment of Anderson and Camacho is effective immediately.

Financial Calendar


TMX $0.40 quarterly dividend payment

New announcement

ICE Q2 2014 financial results on Thursday, August 7, 2014

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

Analyst Notes

ICE “Overweight” Rating Restated By Barclays – $225.00 Price Target
CBOE “Equal Weight” Rating Restated By Barclays – $46.00 Price Target
Barclays Restated Their “Overweight” Rating On ICAP – GBX 450 Target Price

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

Timothy Massad Sworn In As CFTC Chairman

ESMA Chair,Steven Maijoor, Delivers Keynote Speech At ICMA Annual Conference In Berlin

PLY: Interesting statement from Maijoor, perhaps less gung ho on more regulation than his recent remarks elsewhere. Overall the ICMA conference has been excellent from start to finish, a great tribute to an important organisation.

Remarks At SEC Historical Society 2014 Annual Meeting: On The 80th Anniversary Of The SEC, Commissioner Daniel M. Gallagher, Washington, D.C., June 5, 2014

CFTC & Australian Authorities Sign MOU To Enhance Supervision Of Cross-Border Clearing Organizations

CFTC announced this morning that the CFTC and the Reserve Bank of Australia and ASIC have entered into a MOU regarding cooperation and the exchange of information in the supervision and oversight of clearing organizations that operate on a cross-border basis in the US and in Australia.

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