June 11 2014


IDX continues and from the media coverage, somewhat harshly, it is almost impossible to spot much evidence that other exchanges were present on the panel with Jeff Sprecher yesterday. Meanwhile FTIL auditors resign, much ado about Euronext IPO, ICAP embroiled in Yen fix issues as LME promotes cure for London precious metals fixes. Anthony Belchambers to chair trade body working group on MIIFID II. EUREX Ags go to EEX, FTIL could become a quantum litigant, as we all wonder is Jignesh Shah going anywhere?

With IDX ongoing, apologies for a relative lack of pith but it’s another frantic day – a huge thank you to everybody who has said such complimentary things about Exchange Invest already this week, on behalf of the team, I really appreciate it… Oh and really, NLX are nice people, some of them even do speak to me, and not always through gritted teeth either.

Recent posts include:

New: NLX: Big Data: Easy to Find?
– given the quality of their surveillance system and data tools, I ponder why we don’t have more evidence to disprove my hypothesis in: The Butterfly (In)Effect

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

…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

Euronext’s Early Appeal May Fade (subscription)
Paul J. Davies – Wall Street Journal
Euronext Forecasts Return To Sales Growth After IPO
Blaise Robinson – Reuters
Euronext’s I.P.O. Will Be A Tough Sell
Swaha Pattanaik – New York Times

It helps to leave something on the table for the other side. ICE has taken this adage to heart in its listing of Euronext, which values the owner of exchanges in Paris, Amsterdam and Brussels at up to €1.75 billion ($2.4 billion).

PLY: There is huge opportunity in Euronext but alas the French government, amongst others, will probably stifle it to render the investment an annuity utility I fear.

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

Betfair Post Record Profits And Raises Dividend 56pc
Nathalie Thomas – Daily Telegraph

The group, which is best known for its online betting exchange but which has been trying to attract more mass market customers through a traditional sportsbook, reported annual pre-tax profit of £61.1m, a major turnaround from losses of £49.4m last year. Group revenue rose 2pc for the year to April 30 to £393.6m. The group said sustainable revenues now account for 78pc of the total after increasing 9pc in the last year.

PLY: A huge profit jump as Betfair controlled costs through cutbacks…now for the next stage of organic growth we hope…or maybe a little spot of M&A as they are sitting on a cash pile of GBP 209.8 million (300+ million US).

Trade Bodies Unite For Mifid II Response (subscription)
Tim Cave & Anish Puaar – Financial News

Fourteen trade bodies have joined forces to provide feedback on a revised version of MiFID, as concerns mount over the timeframe the industry has been given to consult on the new rulebook.

The group, called the Joint Trade Association Group and described as an “informal committee” of lobby groups, is being chaired by Anthony Belchambers, a former CEO of FIA, according to a document seen by Financial News.

PLY: Anthony Belchambers is now a special adviser to the FIA’s successor organisation, FIA Europe and indeed a non-executive director of NLX. Presumably in this era of mass butterfly accusations we can say his post-FOA career is taking wings? Anthony is an ideal choice for this role.

IDX14: Sprecher Warns On Mifid II Open Access Clearing Rules (subscription)
Luke Jeffs – FOW

Jeffrey Sprecher, CEO of ICE, has slammed European plans to open up clearing houses to competition, arguing they will actually hinder new entrants and help the incumbents.

PLY: Yip.

(Europe preaches democracy but ignores dissent, likewise it preaches open markets but promotes social corporatism which protects incumbents and impoverishes the continent).

ICE’s Sprecher Sees Risk Amid VIX Lows
Helen Bartholomew – IFR

Historically low volatility could be lulling investors into a false sense of security…

PLY: Yip. Indeed during this one hour IDX panel session, I think the average London apartment increased by about 10,000 dollars…but don’t mention the “bubble” word…

EU-US Split Here To Stay, Exchange Heads Fear (subscription)
Tom Osborn – Risk

Regulatory divide between US and Europe will remain “for years to come”, says Eurex’s Preuss – and is already making it harder to compete.

PLY: Andreas Preuss majestically peppered NLX with criticism yesterday from the exchange leaders platform.

Interesting to note that of course Jeff Sprecher is gaining the most recognition but it is harsh on particularly Phupinder Gill of CME and Garry Jones of LME who both put in spirited performances during this session. Bob Greifeld was also on the panel and despite having just arrived on the red eye, was on top of his brief.

Former CFTC General Counsel: US Swaps Reform A Mixed Bag Of Outcomes (subscription)
Timothy Bourgaize Murray – waters technology

Terry Arbit, former deputy general counsel for legislative and intergovernmental affairs at CFTC and now partner at Norton Rose Fulbright, discusses Dodd Frank.

EU Accuses ICAP Of Helping Banks Manipulate Yen Libor (subscription)
Tom Fairless & Rory Gallivan – Wall Street Journal
ICAP Denies Has Breached EU Law Over Libor

EU regulators on Tuesday accused interdealer broker ICAP of helping banks manipulate the yen Libor benchmark interest rate, three weeks after filing similar allegations against three banks.

The allegations are the latest stage of a two-year investigation by EU antitrust authorities, one in a series of probes into alleged market abuse by financial institutions.

…”ICAP does not believe that it has breached any applicable EU competition law, and will defend itself against these allegations vigorously,” it said in a statement.

PLY: Rumours abound that a vast round of staff cuts is looming, alongside a semi-permanent staff pruning of late.

Gold Price Benchmark Open To Manipulation: LME CEO
Eric Onstad – Reuters

The global gold price setting benchmark or “fix” is open to manipulation, said the head of LME, which is competing to offer an alternative to the silver fix when the system is disbanded in August.

PLY: …Garry Jones sets out the LME stall to rescue the fix process.

Eurex Clearing Launches Cross-Margining Functionality

First CCP in Europe to offer margin offsetting within asset classes and across OTC and listed derivatives.
Entire euro-denominated yield curve covered for the first time in a portfolio margining approach.

PLY: This is remarkable as I always thought there was a certain regulatory concern about too much offsetting across the curve, particularly at central bank level? Very interesting and doubtless competitors will be rushing to find their own approaches. The difficulty here is that the ugly duckling of rate competition “me too” NLX looks more exposed than ever – if it doesn’t have tangible volume and buy side interest (current evidence for this proposition: nil – despite repeated searches) and it lacks any coherent cross margining approach that really gives it impetus to grow…

FTIL Drags FMC To Court Over Amended Shareholding Norms
Ram Sahgal – The Economic Times

FTIL has dragged FMC to court, questioning the power of the commodity futures markets regulator to amend shareholding norms for commodity exchanges.

PLY: As I have always said, FTIL will use every available avenue of the law to defend their position (as their original MCX-SX regulatory approval battle showed).

Deloitte Resigns As Statutory Auditor Of FTIL
Ashish Rukhaiyar – Livemint

PLY: Another moderately seismic moment in the downfall of Jignesh Shah. Right now, I am deeply concerned as to how FTIL will sustain itself going forward, momentum is draining away and shareholders must be restive at the position retained by Jignesh Shah.

Jignesh Shah’s Bail Plea Hearing To Continue Wednesday
Zee News

The hearing on the bail plea of Jignesh Shah, chairman of FTIL, and former MCX CEO Shrikant Jawalgekar, arrested in connection with the repayment issue at NSEL, was adjourned to tomorrow by a local court today.

PLY: The proceedings are truly dragging on while Jignesh remains on the wrong side of the liberty repo trade.

CBI To Take Final Call In MCX PE Soon
Business Standard

CBI will soon take a final call on the preliminary enquiry (PE) against former SEBI Chairman C B Bhave and ex-member K M Abraham in connection with alleged irregularities in granting sanction to MCX-SX by the market regulator and subsequent renewal.

ISDA Research Study: Central Clearing In The Equity Derivatives Market

The approval of the first CCPs under EMIR has focused attention on how a clearing determination will be applied across the EU. This paper outlines the composition of the equity derivatives market and the extent of central clearing today, as well as the criteria that should be assessed when determining whether a clearing mandate should apply in the EU.

Private Markets

Bahrain Bourse Sets Margin Trading, Market Maker Rules

Bahrain Bourse has approved regulations allowing margin trading and set up a framework for market makers in an effort to boost liquidity.

Dividend News

Betfair’s board has recommended a final dividend of 14p a share, to be paid on October 3, resulting in a full-year dividend of 20p a share, up 54pc.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX and FTIL ar flat.

NSEL E-series: Investors Redeem 85.5kg Gold, Rs 140cr Cash (USD 23.6 Mln)

FMC said some of the e-series gold investors at crisis-hit NSEL have recovered 85.5 kg of physical gold and about Rs 140 crore (USD 23.6 mln) in cash from the troubled bourse.


Moscow Exchange: Main Market Trading Interrupted

Please be advised that trading on the Main Market (Stock market) was interrupted at 11:35 MSK. The cause is being investigated, and trading will resume at a time to be announced.

Dalian Commodity Exchange Rounds Off 1st Full-market Night Trading Test

To effectively make technical preparations for night trading, from the evening of June 7 to the afternoon of June 8, Dalian Commodity Exchange (DCE) successfully carried out the first full-market networking test for night trading.

S&P Cap IQ Joins Markit Collaboration Services Network (subscription)
Faye Kilburn – waters technology

McGraw Hill Financial-owned S&P Capital IQ has become the latest vendor to join Markit Collaboration Services, the open messaging network initiative that allows financial professionals to communicate and share information across communication platforms.

SunGard launches Front Arena Cross-Asset Risk
Automated Trader

SunGard has launched Front Arena Cross-Asset Risk to provide brokers and FCMs with real-time consolidated risk, exposure and margin calculations across multiple asset classes and markets.


Eurex Group Concentrates Commodity Trading On One Platform – Trading In Agricultural Products To Be Launched On EEX In 2015

European Energy Exchange (EEX) and Eurex have jointly decided to concentrate trading in agricultural derivatives within EEX, in which Eurex holds a majority interest of 62,57%. The move will give customers access to a large and standardised offering of commodity derivatives contracts via one platform.

PLY: As you will recall the EUREX ag products were a legacy of the Hannover TB (which I once tried to buy before it closed), placing them with EEX which with ClearTrade is already a more diversified commodities platform than pure “E” is a sensible move in scale terms for EUREX.

Swap Futures Could Be Heading To Canada (subscription)
Jonathan Watkins – FOW

Montreal Exchange has become the latest exchange to commit itself to launching a swap futures contract.

PLY: There is an episode of the brilliant British period comedy Blackadder where one (nice but dim) protagnist heads in search of alchemy and instead of delivering gold, he produces a slimy ooze rightly named “green.” Right now I feel somewhat the same thing is going on in the swap futurisation space – and no I’m not having a go at MX, I am indeed having a go at everybody in the space searching for what is clearly a big revenue holy grail for the Indiana Jones of product developers who can nail it.

Career Paths

Automated Trader reports that LMAX Exchange, the FCA regulated MTF for FX, has appointed former global head of FX at ABN Amro, Patrick Bartle, to the newly created position of global head of FX Strategy. Patrick will be responsible for driving the global expansion of LMAX Exchange and will be based in North America, where over 25% of all FX trading takes place.

Object Trading, an independent provider of global direct market access (DMA), announced the appointment of Des Peck as New Business Sales Executive in Europe. Mr. Peck will be responsible for leading Object Trading’s sales and business development initiatives. He will join Object Trading’s London office and report to Gerry Turner, Executive Director of Object Trading.

CFTC Chairman Timothy Massad named Aitan Goelman as the agency’s Director of the Division of Enforcement. Mr. Goelman is a former federal prosecutor with more than 20 years of experience litigating both criminal and civil matters.

ESMA: Call For Candidates For The Commodity Derivatives Consultative Working Group

ESMA is looking to newly constitute a Consultative Working Group (CWG) for the ESMA Commodity Derivatives Task Force (CDTF) as the two-year-term of the existing CWG has recently expired. ESMA is therefore calling for expressions of interest from stakeholders to become a member of the CWG by 06 July 2014.

Financial Calendar

This week

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

ICE “Overweight” Rating Reaffirmed By JPMorgan Chase – $224.00 Price Target
JPMorgan Chase Cut Their Price Objective On CME From $69.50 To $67.50
CBOE “Neutral” Rating Reaffirmed By JPMorgan Chase – $49.00 Price Target
ITG “Overweight” Rating Reaffirmed By JPMorgan Chase – $23.00 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.


Crowdcube Targets Bigger Deals With Mini-Bond Launch
Ian Wallis – startups

Crowdcube.com has today launched a Mini-Bond product for more established businesses to raise money from customers and the crowd. The alternative finance company is targeting a market traditionally served by corporate finance houses and claims it will dramatically reduce the cost and complexity of selling retail bonds, which are unsecured loans, to customers.

PLY: Excellent move, this is where a lot of funding needs to be targeted.

Other stories

FCA Finalises Rules To Improve The Protection Of Client Money And Custody Assets
FCA has finalised changes to the client money and custody assets (client assets) rules. These changes affect approximately 1,500 FCA regulated firms that carry out investment business, from the largest investment banks to the smallest investment advisor, who collectively hold over £100bn of client money and £10tn of custody assets.

The Technology Challenge – Speech By Martin Wheatley, CEO, FCA, At Lansons, London.

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