June 10 2014

elb2

The Royal Exchange shimmered with the exchange derivatives establishment last evening. IDX has a record 1400 delegates this week. The opening reception was generously sponsored by ICE in the home of the original LIFFE exchange floor. Great to see so many denizens of the industry, I will name but two who epitomise the London end of the global business: David Setters, has been a consistent presence for over three decades and David Hardy, with whose vision in clearing…the rest of the world is gradually catching up (except of course he has leapt ahead again!). Anyway it’s lovely to visit the ETD parish this week as part of Exchange Invest’s ongoing mission to keep you ahead of the game in the market infrastructure world.

Elsewhere, NLX is a topic on pretty much everybody’s lips. Thanks to one and all for their comments – right now not a single voice has differed from my contention that there is no evidence for the breathy birthday claims that NLX has a tangible buy-side business behind the butterflies. Quite incredibly there are advertisements still running online (not on our platform!) touting NLX with conspiratorially “See the figures they don’t want you to see.” Hmmm. Surely the strapline ought to be “Can we see the figures which prove your assertions?”

I have added a brief post this morning on NLX and data to the Exchange Invest Premium service – hence the most informed folk at IDX and world-wide today will be those in our inner circle (thanks for your support). At only $120 a year you will also get access to the full story on NLX which kills off much of the sidechat on the issue…and much more. Recent posts include:

New: NLX: Big Data: Easy to Find?

HFT2: 1972 A Historical Perspective

Euronext: Sale of the Century

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

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

…Today in Exchange Invest, the Euronext spin-off is a go as LSE moves towards closing the Russell deal and has ambitions to create a full interest rate suite. Expect lots of derivatives news today as the media pack get to lunch with CME and enjoy all manner of panels and interviews at IDX.

Public Markets

ICE Says Euronext IPO Values Exchange At Up To $2.4 Billion
Thomas Mulier – Bloomberg

ICE began the Euronext IPO, selling up to 60.15% between 19 – 25 Euros per share, valuing, the, er, business at as much as 1.75 billion euros ($2.4 billion). Assuming exercise of an over-allotment option, the transaction will raise as much as 1.16 billion euros. Trading is expected to start June 20.

PLY: Last year it felt remarkable lonely to be confidently predicting a $1.5 billion value for Euronext and I see that ICE have now surpassed even that. ICE continues to demonstrate management competence and if they can get rid of Euronext at IPO, at anything like this valuation, by end month it will be a business school case study in takeover. I hear encouraging noises about cost cutting elsewhere too, particularly the flaccid NYSE.

See also our Premium post: Euronext: Sale of the Century.

LSE’s $2.8bn Deal To Buy Russell Nears Agreement (subscription)
Ed Hammond, Neil Hume & Arash Massoudi – Financial Times

LSE is close to buying Russell Investments, the US index compiler and asset manager, in a deal worth about $2.8bn that would substantially increase the UK group’s US operations.

The two sides, in exclusive talks since last month, have reached a tentative agreement on the price and structure of the deal and are planning to announce the agreement later this month, said people familiar with the situation.

PLY: I still like this deal and clearly the future management structure will be interesting. Presumably in the first round of cost cutting, it will be curtains for the clutch of Knightsbridge apartments rumour has it Russell has been leasing for some years…

ICE Completes First Phase Of Liffe Transition To ICE Platform; Liffe US Interest Rates Successfully Transitioned
ICE

ICE provided an update in relation to the transition of the Liffe futures and options contracts to the ICE futures exchanges, trading platform and clearing infrastructure.

FMC Presses MCX To Act
Rajesh Bhayani – Business Standard

FMC told MCX on Monday to ensure a satisfactory contract for technology and software engine services with FTIL was signed by the end of this month, said an FMC official.

PLY: Vendors are getting itchy as they reckon the new MCX CEO will seek to bring in a new solution to replace FTIL…dealing another bitter blow to Jignesh Shah’s crumbling empire.

‘Dark Pools’ Face New SEC Probe (subscription)
Scott Patterson, Jean Eaglesham & Bradley Hope – Wall Street Journal

SEC is investigating a number of big “dark pools” including one operated by Barclays: LX, which was the second largest by trading volume in early May behind Credit Suisse’s dark pool, Crossfinder, according to data compiled by FINRA.

PLY: Once again the “dark pool” moniker is well past its prime, the “Institutional Liquidity Pools” are proving stubborn in staying with the dim name when they need to differentiate their unique benefits from the systematic internalizers which are toxic to market structure.

MOEX Takes Global Standards To Russian FX By Joining FIX
Andrew Saks-McLeod – LeapRate

Russian executing venue Moscow Exchange (MOEX) has joined the FIX Trading Community.

PLY: Wonder if they want to buy NYFIX, one of ICE’s various assets for sale as a result of the unwinding of the failed NYSE Technologies strategy? On second thoughts they can replicate it cheaper from Moscow and indeed add OUCH and ITCH where necessary with more flexibility.

Bursa Malaysia Targets New Products And Retail Growth To Stay Ahead As ASEAN’s Multinational Marketplace
MondoVisione

At the 10th Invest Malaysia institutional investor conference organised by Bursa Malaysia, the Exchange unveiled new products and strategies to sustain its unique advantage as ASEAN’s multinational marketplace and drive investment growth.

The Asean Exchanges comprise seven stock markets from six countries: SET, Bursa Malaysia (BM), SGX, Hanoi SE (HNX), Ho Chi Minh SE (HOSE), Indonesia SE (IDX), and Philippine SE (PSE).

TABB Defines Block Trading, Estimates Institutional US Equity Volume Traded As A Block Grew From 11% In 2012 To 12% In 2013
MondoVisione

With demand for block trading rising now that the US equity market is settling down post-credit crisis and equity correlations have declined back to historically normal levels, TABB Group estimates the percentage of institutional volume traded as a block increased from 11% in 2012 to 12% in 2013. Despite this growth, there had been confusion as to what constitutes a block.

Private Markets

CoinLab Agrees To Support Mt. Gox’s U.S. Bankruptcy Efforts (subscription)
Katy Stech – Wall Street Journal

Lawyers for CoinLab said in court papers Friday that they wouldn’t object to Mt. Gox’s formal request for U.S. bankruptcy protection, despite earlier hints that they might challenge that request. Court documents offered no explanation for CoinLab’s decision.

Special Section: FTI, NSEL, India at the Crossroads

PLY: After NLX, the incarceration of Jignesh Shah was much discussed at the IDX reception last evening. MCX and FTIL are essentially flat overnight.

Borosil Files Complaint Against Broker In NSEL Case
Sharleen D’Souza – Business Standard

Economic Offences Wing (EOW) of the Mumbai police has seen the number of complaints increasing against brokers who had traded in a big way on the crisis-ridden NSEL. The latest is by Borosil, a glass maker, against Anand Rathi Commodities, charging the broker had traded in its name on behalf of others.

Technology

NZX Trading Halted On System Glitch
Daily Mail

Trading on the NZX has been halted for 20 minutes due to a system on Monday. The stock market operator advised at 10.55am that trading would halt across all boards and reopen again at 11.15am. On Monday evening the market closed at 5.45pm, 15 minutes later than normal, after a glitch in its trading platform software, X-stream.

Real-Time Data On `Train’
The Standard

HKEx hopes to update in real time data related to the “Shanghai Hong Kong Stock Connect” daily quota, once the scheme is implemented. Trading is capped at a daily quota of 13 billion yuan (HK$16.2 billion) for Shanghai and 10.5 billion yuan for Hong Kong. A trial run is expected in September before the official launch of the “through-train” a month later, said Bryan Chan Ping-keung, co- head of equities, fixed income and currency business at HKEx.

PLY: Real-time data to avoid breaching the quota cap appears logical and ought to be easily deliverable.

Nasdaq OMX Pursues Data And Technology Revolution
Elliott Holley – banking technology

Shifting settlement cycles, the rise of big data, global regulation and increasing demand for post-trade services are creating both challenges and opportunities that global exchanges must grasp if they are to succeed in a changed world, according to Lars Ottersgard, head of market technology and Eva Saidac, head of business development market technology at Nasdaq OMX.

PLY: NASDAQ OMX retains a powerhouse exchange technology business. The core Scandinavian excellence of the product (alongside various Australian diamonds added to the portfolio over the years) makes NASDAQ OMX the consistent core of the exchange technology industry.

Aequitas Exchange To Host At Q9 Datacenters (subscription)
Jake Thomases – waters technology

Aequitas Innovations has selected Toronto-based Q9 Networks to host production, test and disaster recovery infrastructure for its Neo Exchange, which is expected to become operational in early 2015.

Celoxica & Born Technology Team On Low-Latency Access To CME
Finextra

The institutional trading community now has a new option for achieving the fastest access to market data from CME, with today’s announcement of a new collaboration between Celoxica, a leading provider of ultra low-latency market data, order entry and pre-trade risk solutions and Born Technology, a premier provider of high-speed trading networks, managed hosting and sponsored access services.

Products

LSE Set To Launch Full Rates Suite (subscription)
FOW

LSE plans to launch the full suite of rates products in an all-out attack on European rivals Liffe and Eurex when it goes live with its new derivatives trading venture later this year.

PLY: There is of course one element to the secret sauce LSE may deploy. Certainly given the apparent failure of NLX to create a tangible business despite its claims of momentum, the LSE needs an alternative approach to being a me too constantly trumpeting its ‘achievements.’

CME Confirms Cocoa Contract Plan, EU Wheat Ambitions
Gus Trompiz – Reuters

CME publicly confirmed plans to launch a London-based cocoa contract in the coming months in a direct challenge to ICE. As part of a push by CME into Europe, it is also looking at entering the European wheat market either through a partnership with incumbent operator Euronext or with its own contract.

Euroclear Bank’s International ETF Structure Premiers On BATS Chi-X Europe
BATS Global Markets

iCSD Euroclear Bank, in partnership with BATS Chi-X Europe (BATS), announce the first ETF to be listed on BATS with an international securities structure. The iShares MSCI USA Dividend IQ UCITS ETF marks a further step forward in the two firms’ efforts to streamline ETF trade processing and settlement in the European market.

PLY: Interesting. One more for the BATS ‘backdoor’ listing approach…

NGX Launches WECC Physical Future Power Products
TMX

NGX, a wholly-owned subsidiary of TMX Group, announced the launch of physical power products for the Western Electricity Coordinating Council (WECC) market at Mid-C, Palo Verde and Mead. The products began trading this morning through ICE’s WebICE trading platform. The WECC launch follows NGX’s successful expansion into the ERCOT physical power market in August 2013.

PLY: Thanks to TMX for the invitation to some lively sessions yesterday discussing the wonderful nation of Canada and the many great opportunities for investors there. One marvellous nugget was noting how Irish 5 year bonds are now at a lower yield than their Canadian equivalent.

Malaysian Palm Olein Futures Contract To Launch Next Week
Reuters

Malaysia’s derivatives exchange will launch its palm olein futures contract on June 16, though traders said it could face a challenge building up turnover to match the success of its benchmark futures contract.

JSE Lists First Green Bond
MondoVisione

Johannesburg SE (JSE) listed its first green bond. The R1.46 billion ($140 million) bond issued by the City of Johannesburg will be used to fund green initiatives within South Africa’s largest city.

Indexes

CBOE Futures Exchange Set For June 22 Launch Of 24-Hour VIX Futures Trading
MondoVisione

CBOE Futures Exchange confirmed that it will extend trading hours for CBOE Volatility Index (VIX Index) futures to nearly 24 hours a day, five days a week, starting Sunday, June 22. In March, CFE announced June 22 as its planned launch date.

BET Plus Index To Be Launched On BVB On June 23 (subscription)
actmedia

The composite index BET-C of the Bucharest SE (BVB) will no longer be calculated and will cease to exist as of June 23, 2014, the date of launching a new index, BET Plus, according to the Indexes Committee’s decision on June 2, 2014.BET-C is the composite index of the BVB market and reflects the trend of prices of companies listed on the regulated BVB market, Category I and II, except for the SIFs.

Career Paths

Waters reports that open-source risk management and analytics software vendor OpenGamma has made a number of new hires in its London office to support development of the margining platform it launched in November.

OpenGamma will this week announce the hire of Mohamed Ait Si Brahim as VP of engineering to lead the ongoing development of the OpenGamma Platform for Margining

Ait Si Brahim joins from LCH Clearnet, where he served for three years as head of risk technology, prior to which he held engineering and operations roles at front- and middle-office software vendor Odyssey Financial Technologies, Thomson Reuters, and Clearstream.

In addition, OpenGamma has made a number of more junior hires in London from CCPs, who will focus on honing the vendor’s engineering practices for the margining platform, such as developer Paul McLornan, who also joins from LCH Clearnet and – along with the rest of OpenGamma’s research and development team – will report to Ait Si Brahim.

Financial Calendar

This week

Record date CME $0.47 Q2 dividend
Record date BM&F BOVESPA R$145.7 mln (USD 61 mln) dividends
Fidessa 24.5 pence final dividend and 45.0 pence special dividend payment
Interactive Brokers $0.10 quarterly dividend payment
Record date NASDAQ OMX $0.15 quarterly dividend

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

CME Downgraded By Zacks From “Neutral” To “Underperform” – $63.00 Price Objective
Barclays Reissued Their “Overweight” Rating On NASDAQ – $43.00 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.

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