June 08 2015

elb2Good Morning from a sunny London where I will be attending the FIA IDX amongst other events this week.

Interesting weekend. The Turkish political scene has opened a public rupture as President Erdogan lost his Parliamentary majority. In Frankfurt I remain minded to indulge in a paraphrase of Oscar Wilde:

“To lose one CEO looks like misfortune, to lose two looks like carelessness.”

Elsewhere it strikes me OPEC has crossed a remarkable tipping point of their own making as I discuss in my latest RT Op-Edge column: Oil: OPEC’s Lengthy Suicide Note.

The Turkish election shock where the President’s AKP lost their Parliamentary majority has ramifications for markets while we salute American Pharaoh on winning the Triple Crown in the US. Last one was in 1978 – or to put that in market perspective, Dow was circa 850 (stock index futures were still 4 years away) while indeed the big moves in markets were being animated by Richard Sandor promoting his Treasury Bond futures product which was barely 6 months old, adding a long end of the curve to the 2 year old 90 day T Bill contracts…

Today in Exchange Invest:

Time for Trading Technology to Grow Up Argues Veronica Augustsson as the FIQA initiative gets under way. Clear up looming for rigged markets in Britain? Commodities to trade ex-EU? Banks selling Markit in secondary offering as lock-up ends. Remarkably no news on Plus 500 for once…but there is a lot more, with added pith, happy scrolling:

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? – …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… venues do not appear to have grasped the interconnectivity of the roll of fuse wire to large kegs of dynamite…

Casting Hastertians – Former House speaker leaves CME Group embarrassed.

FIFA Farce: “Sepp-ticemia” & Finance – “Sepp-ticemia” has ramifications for financial markets…

The Big Flap – One Year On – One year after our exclusive 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:

BBY Collapse – Brief New!
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.

Public Markets

Banks Prepare To Sell Down Stakes In Data Provider Markit (subscription)
Philip Stafford – Financial Times

Many of the large banks that were early investors in Markit are using the end of a lock-up period following the UK data provider’s stock market listing to sell down large portions of their shareholdings.

Markit announced the pricing of its secondary public offering last week.

PLY: Again, the core rule here to remember: “Transparent markets always provide lucrative offers that banks cannot afford to ignore.”

Britain To Unveil Plans To Clean Up Markets Hit By Rigging Scandals
Huw Jones & David Milliken – Reuters

Britain’s regulators, BoE, Treasury and FCA will unveil plans on Wednesday to clean up financial market behaviour where banks have been fined billions of pounds for trying to rig currencies and interest rate benchmarks.

PLY: In trading terms, this could be an exciting moment of progress OCO another vague scapegoating with a lot of whitewash.

CME Bars Grain Traders For Years Over Wash Trades, Spoofing
Reuters

CME barred a grain trader from its markets for three years for executing noncompetitive transactions and suspended another for two years for market manipulation.

The traders, Aleksey Vsemirnov and Stephen Duggan, could not immediately be reached for comment.

PLY: A good thing to deliver clear punishment against guilt. There are more skeletons which need to be removed from the cupboard and discarded in this manner.

Read our Premium: Flash Crash & Hound of Hounslow – Brief.

Betfair Slips After Numis ‘Unicorn’ Doubts (subscription)
Bryce Elder – Financial Times

Betfair slumped 5.1% to £25.09 after Numis Securities argued that the bookmaker does not merit the “unicorn status” implied by its high valuation.

“A horse with a stick on its nose is not a unicorn,” analyst Ivor Jones told clients. “We believe this is an excellent business but that the share price has got ahead of itself.”

PLY: 30X earnings does look challenging in a competitive marketplace while Betfair is less of an exchange in many respects nowadays anyway.

New Toys For Flash Boys In China’s Fledgling Derivatives Market
Samuel Shen & Pete Sweeney – Reuters

PLY: “The rapid liberalisation of Chinese derivatives markets” has attracted pointy headed maths dudes like the rest of the world.

MSCI Could Catch Global Investors Off Guard If It Adds China
Michelle Price – Reuters

U.S. index provider MSCI could catch many global investors unprepared if it decides next week to add Chinese-listed yuan-denominated shares to one of its key benchmarks.

Read our Premium China Capital Markets Transformation Brief – Main File

CFTC Issued No-Action Relief From IB & CTA Registration To Persons Located ex-USA Engaged In Activities On Behalf Of Customers That Are International Financial Institutions
CFTC

Private Markets

MSEI Eyes Rs 118 Crore (USD 18.4 mln) Via Rights Issue
dna

Metropolitan Stock Exchange of India (MSEI) (former mSXI and MCX-SX) is firming up plans to raise a little over Rs 118 crore (USD 18.4 mln) through a rights issue – sale of shares to existing shareholders.

The move comes after the company’s earlier plan of raising Rs 200 crore through a rights issue fizzled out (it could rase just Rs 6.85 crore in 2014). Metropolitan Stock Exchange said it would issue 118,33,88,166 equity shares of face value of Re 1 each aggregating up to Rs 118.34 crore (USD 18.4 mln). The issue is scheduled to open on June 9 and close on July 8.

Metropolitan SE’s Warrants Likely To Expire By Itself On June 19 Due To Lack Of Buyers
Palak Shah – The Economic Times

The warrants that MCX holds in the Metropolitan SE (MSEI) will die a natural death on June 19 due to the lack of buyers. MCX has been holding on to the Rs 60-crore warrants since mid-2010. At that time, roughly 30% equity shares of FTIL and MCX in MCX SX, was converted into warrants to meet Sebi’s norm. According to the norms, shareholders other than certain institutions cannot hold more than 5% stake in an exchange.

Saudi Stock Market Plan Gets Vote Of Confidence From IMF (subscription)
Nicolas Parasie – Wall Street Journal

Saudi Arabia’s plan to open the Middle East’s biggest economy to foreign investors has found an important supporter: the IMF.

Read our Premium Saudi Arabia Opening Capital Markets – Brief 

Will Calcutta SE Be Able To Sell Land For Its Revival?
The Hindu Business Line

The survival of Calcutta SE (CSE) now hinges on the disposal of a three-acre piece of land situated at Eastern Metropolitan bypass in Kolkata. Of the 21 regional stock exchanges, 20 have been either closed down or are in the process of winding up. On May 26, 2014, CSE received SEBI nod for the sale, and shareholders approval on June 20, 2014. The sale proceeds (about ₹300 crore – USD 47 mln) will help the exchange invest in a clearing corporation (CC) in accordance with SEBI norms.

Previously discussed in April.

IFC Backs EM Bond Platform (subscription)
Tim Cave – Financial News

An emerging markets bond platform based in London’s Level39 accelerator has received backing from the World Bank’s private sector investment arm, the International Finance Corporation.

Read our Premium post On Bonds & SEFs and Premium brief The Bond Platforms Rush Part 1, Part 2.

PLY: EMbonds is in an interesting segment to the miasma of bond market platforms…

DGCX Group Receives ‘Recognised Body’ Status By DFSA
Zawya

Recognition allows DIFC registered entities access to DGCX to trade and clear wide ranging products.

DME Aims To Be Multi Services Platform For Investors In Long Run
Siddes Suresh – Gulf News

Dubai Mercantile Exchange aims to become a multi serviced platform and plans to launch more financial and energy products, as well as agricultural commodities and metals even as it’s current priority is to strengthen the physical spot oil contract.

Kraken Bitcoin Exchange Launches Margin Trading
Finextra

Kraken is now one of the few exchanges allowing clients to trade bitcoins on margin. Within the next few weeks, Kraken will be offering up to 20x leverage.

Overstock Will Issue A Private Bond Powered By Bitcoin Tech
Cade Metz – Wired

Overstock is preparing to offer a $25 million private bond using the blockchain, the distributed online ledger that underpins the bitcoin digital currency.

FAO: Last month EI reported that Overstock is eyeing bitcoin-like stock and bought a 25% stake in a regulated trading company PRO Securities (an ATS), last autumn.

Is Cloud Mining Really A Ponzi Scheme?
Walid Dib – CoinTelegraph

Whether Bitcoin mining is profitable is not a simple question to answer. With community discord that’s almost as hot-blooded as the block size debate, one will notice that even after delving into digital currency technicalities for months, there is just no general consensus on the profitability of cloud mining.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX and FTIL off 2% no pertinent resolution news again, alas.

Technology

Comment: Time For Trading Technology To Grow Up (subscription)
Veronica Augustsson (Cinnober CEO) – Financial Times

About 18 months ago I was talking with the head of trading at a large bank in New York.

She mentioned that in 2013, they had recorded 300 separate instances where technology glitches stopped her team from executing trades on one of the dozens of exchanges and venues around the world. They were literally out of business for a few, very expensive minutes. In some cases they were unable to trade for a few hours.

PLY: Veronica builds the bandwagon for her FIQA initiative with Cinnober and other leading industry players gathering in London this week.

Speed, Not Safety, Is The Top Priority For Traders (subscription)
James Rundle & Anna Irrera – Financial News

PLY: Analogy of traders want to go as fast as possible and hang the safety of security – which is regarded as akin to Formula 1 racing. Key pointer not considered in this metaphor: Modern formula one cars are run into concrete bollards at indecent speeds before they are declared safe to race… Markets need to be crash tested first, then let the traders go as fast as they can – as opposed to the wild west potentially unsecure infrastructure the traders seem to advocate…

Products

New EU Rules May Hasten Commodity Liquidity Flight
Pratima Desai – Reuters

Planned EU regulations on position limits in commodities are fuelling intense debate about whether the move could prompt traders to flee to Asian markets, further hurting European liquidity and potentially hurting economic growth.

Restrictions on banks and capital requirements has already subdued enthusiasm for commodity trading.

PLY: Commodities may lead the way – it’s a bit premature to say ‘will the last trader in Europe switch the lights off’ but it is feasible enough to toss into the conversation lest we have an outbreak of that endangered oxymoron: regulatory common sense.

1st Small-sized Publicly Offered Corporate Bond Listed On Shanghai Stock Exchange
MondoVisione

Read our Premium China Capital Markets Transformation Brief – Main File.

PLY: Lessons in scale, number umpteen hundred and something: China ‘small-sized’ corporate bond issue is 700 million RMB, which is over $110 million greenbacks. In other words, small this is not – by any European SME bond measurement!

Career Paths

MCX BoD has noted the cessation of directorship of Mr. Santosh Kumar Mohanty as an Independent Director – FMC Nominated from the Board of MCX in accordance with FMC letter dated May 11, 2015.

SEC named Daniel R. Gregus as the Associate Director for the broker-dealer examination program in its Chicago Regional Office.

FCA appointed two key executive roles, with Mark Steward becoming the new Director of Enforcement and Market Oversight (previously with SFC Hong Kong) and Barbara Frohn (ex-Santander, on secondment to the IIF) the new Director of Risk and Compliance Oversight.

Financial Calendar

Next week

IDX, 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.

Analyst Notes

JPMorgan Chase Dropped Their Price Target On ICE From $264.00 To $252.00 – “Overweight” Rating
JPMorgan Chase Dropped Their Price Objective On CME From $93.00 To $92.00 – “Neutral” Rating
JPMorgan Chase Reduced Their Price Objective On CBOE From $55.00 To $50.00 – “Neutral” Rating
Numis Cut Betfair To “Sell” – GBX 2,100 Price Target

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

Startup Listing Norms Soon; Need To Retain Them In India: Sebi
The Economic Times

Asking technology startups founded by Indians to remain within the country, Sebi Chairman U K Sinha has promised an easier set of regulations for them to get listed and raise funds in the domestic stock market.

ESMA Issues Q1 Risk Dashboard For Securities Markets
MondioVisione

Dubai Financial Services Authority Signs MoU With Kuwaiti Counterpart
MondioVisione

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