June 16 2014


Lucky 13 for Exchange Invest today (that’s month’s old…soon we’ll be able to talk, maybe even walk…) and we’re bouncing after the lively reception last week at IDX, it’s great to meet so many readers at one event and a delight to hear your overwhelmingly positive feedback, thank you.

Today in Exchange Invest, could Bob Greifeld be leaving as early as next year? Ukraine has the gas cut off (well, have you ever managed to not pay a utility bill for 6 months or more and maintain a service…yeah and that was for 250 bucks, not a handful of billion, right?). Indian court pushes sale of FTIL MCX stake (of which otherwise remarkable silence in recent days). Polish media have meanwhile unearthed tapes suggesting the Polish Central Bank is about as independent as, well, the Warsaw Stock Exchange is en route to being…backdoor oligarchy is creeping in to taint the Polish system. Swap futures no threat to SEFs, says ICAP SEF chief…

As you may know, we also launched a Premium service recently, which for $120 per annum, is not only a source of analysis, it sets the agenda through thinking about market structure. Two articles of late stick out which chronicle a remarkable disparity between what NLX seem to be saying and what the NLX data seems to be saying to me when I look at it. Incidentally NLX haven’t read it yet which probably reduces their ability to comment on it but trust me, you really cannot afford to miss this, it raises a lot of questions and, alas, no matter how I look at it, I just can’t find out where the NLX advertising led claims of conspiracy by other exchanges to hide an NLX breakthrough. The two NLX articles are:

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

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

…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

High Court Declines To Give Relief To FTIL In Stake Sale Directive
Business Standard

PLY: The Bombay High Court has upheld the FMC directives for FTIL to sell its MCX holding. Moreover MCX can now amend its articles to take the stake and sell it on behalf of FTIL. Blunt words from the Judge, Justice Vazifdar while hearing the case: “We must proceed on the basis that the (FMC’s ) order is still valid. The shareholding ought to have been brought down to below 2%.”

This is a significant blow to FTIL, albeit an unsurprising one. Methinks it may push shareholders within FTIL to rethink their position as they hoped to hold the stakes in a vendor without Jignesh and cronies. Even so nothing in this judgement suggests Mr Shah will survive much longer at the head of FTIL – or at least at the head of FTIL as a viable entity, perhaps as boss of a rump vendor but that is likely to bring the major shareholders down on him with gusto…

SAT Questions SEBI Order On FTIL’s Stake In Stock Exchanges
Khushboo Narayan – Livemint

You just want to take credit so you have issued an order,” said Jog Singh, member of SAT.

PLY: Court accuses SEBI or merely jumping on the back of the pre-existing FMC order.

FMC To Review De-Listed MCX Contracts In September
Business Standard

FMC on Saturday said that it will review the contracts delisted from MCX only in September. “We are looking at the contracts and will take a call on whether to give permission for their re-listing only in September,” FMC chairman Ramesh Abhishek told reporters.

PSE, Bond Bourse Revive Merger Talks
Doris C. Dumlao – Philippine Daily Inquirer

Philippine SE (PSE) and other shareholders of Philippine Dealing Systems Holdings Corp. (PDS) have rekindled discussions on the merger of the country’s capital market infrastructure.

Inquirer sources said the PSE has offered to acquire a controlling interest in the PDS group based on an estimated enterprise value of about P2 billion (USD 45.6 mln), subject to the resolution of or protection from a pending lawsuit challenging the operations of PDS’ fixed-income trading platform Philippine Dealing and Exchange Corp. (PDEx) before the Supreme Court.

An offer has been made for the PSE to buy, in cash or in its shares of stocks, the 80% of shares in PDS Group that it did not own yet.

“Negotiations are ongoing but there’s no final agreement yet,” said one capital market source familiar with the discussions.

PLY: The PSE PDS merger negotiations remain a Brazilians soap opera.

Exchanges Line Up To Buy Index Operations As Banks Bail Out (subscription)
Tim Cave, Anish Puaar & Sarah Krouse – Financial News

Exchanges are stepping up their efforts to expand into indices and benchmarks to help them launch new derivatives products and profit from rising demand for passive investment.

PLY: Anything marked index is tricky for banks right now in an atmosphere where they are sitting with their faces away from the blackboard in the corner, awaiting further sanction for, er, ‘co-operating’ on their maths homework. Exchanges remain ideal index purchasers but vendors have a proven appetite here too. The Barclays Index business is fascinating.

Exchanges Turn Multi-Purpose To Build Revenues (subscription)
Tim Cave & Anish Puaar – Financial News

PLY: A “he said, she said” piece from IDX last week discussing how exchanges are so much more than mere primary/secondary markets…

LME, Others Vie To Replace London Silver Fix (subscription)
Francesca Freeman – Wall Street Journal

Ten different groups are vying to replace the historic London silver fix, according to LBMA. LBMA said Friday it will whittle these down in the coming days to a shortlist that will be invited to a meeting in London on June 20 where they will present their plans to the LBMA’s 76 members, which include banks, metals refiners and miners.

Among those in contention are LME, ETF provider ETF Securities, and commodities-information firm Platts—all of whom have said they have applied to replace the fix. Financial information company Thomson Reuters has also submitted a proposal while it is not clear if CME formally submitted a proposal.

PLY: Unsurprising that there is so much interest in a fascinating possible product set.

LME New Clearing House Looks At Expanding Collateral To Warrants

LME new clearing house – in the midst of testing ahead of a September launch – is looking into expanding types of allowed collateral to include warehouse warrants.

SEF Trading Hits New Highs (subscription)
Anish Puaar – Financial News

Trading of IRS on new derivatives platforms created under Dodd-Frank hit its highest level since the introduction of new US rules in May, with ICAP’s London-based venue now leading the way in market share.

Swap Futures No Threat To Brokers – ICAP SEF Chief (subscription)
Tom Osborn – Risk

Swap futures are no threat to volumes in the interdealer OTC market, because exchanges are marketing them primarily to end-users as a lighter-margin alternative to the traditional swap product, according to Laurent Paulhac, a senior executive at ICAP.

See also our premium post ICAP Explores A New Galaxy and the excellent guest posts by Jake Pugh here and here.

PLY: Interesting insight from Tom Osborn, as Laurent Paulhac examines the “bespoke” versus “off the peg” issue at the heart of SEFs & futurisation.

Eurex Calls For Capital Relief On Segregated Accounts (subscription)
Cecile Sourbes – Risk

Regulators should provide a capital incentive for the use of segregated accounts in derivatives clearing, because they reduce risk if a member defaults, according to Matthias Graulich, global head of clients and markets at Eurex Clearing. The argument is that segregated collateral can be ported away from a stricken clearing member more easily, shrinking the amount of risk for which the firm is responsible.

Feel The Pressure: BoE Adds To Stress Of Clearing Houses (subscription)
Dan Barnes – Financial News

Procyclicality may not be a word that’s often used in polite conversation – but it is a bad thing. It is a term used by the Bank of England in its review of clearing houses, published in May, and it refers to the tendency of players in a stressed market to behave in ways that make the stress worse.

PLY: “Procyclicality” is essentially central banker management speak for actions which may lead to a reinforcing of the problem aka, the BOE is worried about unleashed waterfalls and headless chickens in particular…

BVB Will Introduce Centralized Dividend Pay For All Local Listed Companies
Andrei Chirileasa – Romania Insider

All Romanian companies listed on the Bucharest SE (BVB) should pay their dividends centralized, through the Central Depository, starting next year, according to market representatives.

FMC Exploring Feasibility Of Common Clearing Corporation For Commodity Futures Market
The Economic Times

India’s decade-old commodity futures market, comprising five national and 10 regional bourses, may get a common clearing corporation that will reduce transaction costs for participants.

PLY: Very interesting – a single CCP being imposed on the market…a very Indian solution but more ancien regime than Modi revolution 2014, surely?

Private Markets

BSE Expects To Complete USE Deal In 9 Months

Leading bourse Bombay SE (BSE) expects to complete the acquisition of United SE (USE) in the next 8-9 months, a time period during which regulatory as well as shareholders’ approvals are likely to be in place. The share-swap deal, which has been approved by boards of both exchanges, would bring in more synergies for BSE.

BATS Sets Integration Test Dates For Direct Edge Clients
Rob Daly – The Trade

To help all Direct Edge members meet their mandated recertification of their preferred order-entry protocols for its EDGA and EDGX exchanges, BATS Global Markets has announced four weekends when firms will be able to test their systems with the new matching engine platforms that power the BZX and BYX exchanges. The dates – 11 October, 15 November, 13 December and 10 January – are in conjunction with the weekday testing opportunities that the exchange operator plans throughout the fourth quarter.

Oslo Bors – Introduction Of Intra-Day Auction To Concentrate And Improve Liquidity
Oslo Bors

Starting on 16 June, there will be an intraday auction for shares listed on Oslo Axess and for some shares listed on Oslo Børs that have limited liquidity. The intraday auctions will concentrate and improve liquidity in these shares. Current practice is for opening and closing auctions to be held for all shares and equity certificates listed on the Oslo Børs and Oslo Axess marketplaces. Starting on 16 June, an additional auction will be carried out at 13:30 for shares listed on Oslo Axess and for shares listed on Oslo Børs that are in the OB Standard liquidity category.

USE Wants Incentives To Grow Market
David Mugabe – NewVision

Uganda Securities Exchange (USE) wants government to offer a series of incentives to grow the capital markets that has somewhat stagnated with the listing of mainly government firms.

Tadawul Becomes An Affiliate Member To IOSCO, Strengthening International Links

Effective May 20th, 2014 Saudi SE (Tadawul) was granted Affiliate Membership with IOSCO.

King’s College Becomes First U.S. School To Accept Bitcoin
Jack Linshi – Time

First accredited U.S. college to accept the digital currency.

PLY: Hmmm, but hardly the first seat of learning to do so…

Special Section: FTI, NSEL, India at the Crossroads

PLY: Both MCX and FTIL are off around 2.5% today as the market digests the firm opinion of the Mumbai High Court refusing to delay the sale of FTIL’s MCX stake.

E-series Investors Redeem Rs237 Crore From NSEL

NSEL on Sunday said that investors who traded in e-series contracts in metals such as gold and silver have so far redeemed Rs.237 crore (USD 39.5 mln). “Out of the total Rs.440 crore (USD 73.4 mln), NSEL has disbursed Rs.237 crore (USD 39.5 mln) till date towards settlement of e-series gold and silver units to investors,” Saji Cherian, NSEL’s CEO and MD, told PTI.

PLY: Good progress at last. The repayment of the e-series has been rapid in recent weeks since the repayment green light was given.

NSEL Writes To 6 Chief Ministers To Recover Defaulters’ Dues
The Hindu

NSEL has sought the intervention of state governments as it attempts to recover the amounts owed by 22 defaulters to investors, a top bourse official said on Friday.

Bring All Our Cases Under One Body, NSEL To Tell SC
Dilip Kumar Jha – Business Standard

NSEL is set to approach the Supreme Court and urge it to bring all cases related to it under a designated authority to hasten trials.

LawMin No To MCA Proposal On Taking Control Of FTIL
Amitav Ranjan & Sandeep Kumar Singh – Indian Express

The ministry of law and justice has rejected the ministry of corporate affairs’ proposal to invoke legal provisions to take control of FTIL for ‘deliberate bungling’ in NSEL.


TOCOM To Launch Chicago-Tokyo Low Latency Network Service
Automated Trader

Tokyo Commodity Exchange (TOCOM) has agreed with KVH Co. the information delivery platform, to provide a low latency telecommunication path between CME Group’s data centre in Aurora, Illinois and the KVH Tokyo Data centre 1. The new service is slated to launch on September 15, 2014.

Oslo Børs – Millennium Exchange: Release 8 Goes Live On Monday 16 June 2014

Oslo Børs is pleased to confirm our decision to Go Live with Millennium Exchange Release 8 for the Equities- and Fixed income markets on Oslo Børs, Oslo Axess, Nordic ABM and the Burgundy markets as of start of trading Monday 16 June 2014.

Phillip Futures Selects FlexTrade For White Label FX & Precious Metals Trading – Margin FX Brokerage Arm Of PhillipCapital Group Deploys MaxxTrader, A Complete Turnkey ASP Front-End, For Trading NDFs, Spot Currencies & Precious Metals

FlexTrade Systems, Inc., a global leader in multi-asset execution and order management systems, today announced Phillip Futures, a member of PhillipCapital Group , has deployed MaxxTrader, its full STP, white label FX trading system to process client NDFs, spot currencies and precious metals.


DGCX To Launch Spot Gold, Emerging Equity And Currency Contracts
Babu Das Augustine – Gulf News

DGCX is getting ready to launch a spot gold contract and a number of commodities, equity and currency derivative contracts between now and the end of the year, said Gary Anderson, CEO of DGCX in an interview with Gulf News.


NASDAQ OMX To Disseminate The OMX Helsinki 25 Dividend Point And OMX Helsinki 25 GI Indexes

On June 30, 2014, NASDAQ OMX will begin disseminating two new indexes.

The OMX Helsinki 25 Dividend Point Index (OMXH25DVP) is calculated as the running total of ordinary dividends paid by the constituents of the OMX Helsinki 25 Index, expressed in index points. The index is reset to zero in December every year in connection with the derivatives expiration after market close on the third Friday of that month.

The OMX Helsinki 25 GI Index (OMXH25GI) is a total return equity index that is constituted with the 25 most actively traded stocks on the Helsinki SE.

Career Paths

Friedman Could Become Nasdaq CEO Next Year
John McCrank & Greg Roumeliotis – Reuters

Nasdaq OMX lured back former CFO Adena Friedman as co-president with the understanding that she will succeed CEO Bob Greifeld, possibly as soon as next year, sources familiar with the matter said.

PLY: Unsurprising that Adena Friedman is the heir apparent while the finite date that we’re in the last year of Bob Greifeld’s regime, although slightly longer than I had predicted, is also unsurprising.

Financial Calendar

This week

Record date ICE $0.65 Q2 dividend
IPO Roundtable (Jointly organised by European Issuers, EVCA and FESE)
FESE Convention
CBOE $0.18 quarterly dividend payment
Record date First Derivatives 9.00p final dividend

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

Other stories

ESMA Publishes Its 2013 Annual Report

ESMA has published its Annual Report for 2013.

LSE & Shares Magazine Launch The Stock Market Show

One day education event for private investors on September 13
Opportunity to meet listed companies’ CEOs and management teams
Exhibitors to include corporate brokers, AIM company Nomads and private investor service providers

ASX Considers Joining Sustainability Initiative
blue & green tomorrow

ASX could become the next stock exchange to join a UN initiative promoting sustainability, according to reports. The Sustainable Stock Exchanges (SSE) initiative currently has ten partner exchanges.

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