June 16 2015

elb2 I am saddened that that we begin today’s daily exchange rundown with news of a parish death. Alan Whiting, Chairman of LIFFE, formerly an executive at LME and much else besides, died at the weekend from a recurrence of prostate cancer. Our condolences to Alan’s family and friends.

Conference News:

I am en route to the EFTA heartlands of Oslo for the FESE Convention. I look forward to chairing the opening panel about the vital topic of SME financing and am delighted to welcome outgoing Chairman Christian Katz to the opening blue riband line up. Tomorrow there will be a new Chairman and another IPO Roundtable focusing on SME funding too.

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Today in Exchange Invest:

Public Markets

DB1 Eyes Possible Bid For FX Platform 360T
Andreas Kroner – Reuters

DB1 is looking at the possibility of buying currency trading platform 360T although it was not yet clear if the group will place a binding bid.

On June 4th EI reported that 360T Group was exploring a sale of the company, in a deal that could fetch more than €600 million ($675 million).

PLY: Given strong Germanic banking links 360T in many senses is a logical fit for DB1 providing added optionality & some OTC reach.

BBY Directors May Be Forced To Repay Funds
Joyce Moullakis – AFR

Board members of failed broking firm BBY, including Glenn and Ken Rosewall, may be forced under civil penalty orders to repay funds as regulators scour through an explosive administrator’s report to ascertain whether charges or penalties should be imposed.

Administrator KPMG issued a damning report to creditors on Friday (reported yesterday) ahead of a meeting on June 22.

PLY: One of the largest areas of mispricing in this market remains board seats. An executive recruiter recently informed me the average for a UK financial platform/exchange was sub 40k GBP (60-ish USD). Ultimately NEDs run considerable risk for poor remuneration but more significantly anybody with the IQ of a chewy sweet will appreciate that the risk in a lot of regulated entity directorships doesn’t match the reward…especially for front line risk taking organisations. Australian authorities are entirely correct to seek sanction from directors not doing the correct job but at the same time we need a more cohesive approach to directors’ terms to ensure executive management get the strong support they need to run great businesses, as opposed to getting – insert your preferred marsupial here – .

Read our Premium BBY Collapse – Brief .

FTIL Stake In Clearing Entity To Be Moved To Escrow Account
Ashish Rukhaiyar – Livemint

MCX-SX Clearing Corporation (MCX-SX CCL) plans to transfer the 23% stake held by FTIL in the clearing entity to an escrow account since the latter has been found unfit by the capital markets regulator to hold a stake in any exchange or a clearing corporation.

Read our Premium FTIL Stakes Sales Brief and NSEL Scandal Brief – Main File.

PLY: Presumably there may be some value in here for FTIL but at the same time, MCX-SX (or whatever it calls itself this month) needs a lot of work to be a successful market.

Outgoing JPX Chief Brushes Off Media Concerns About Earnings Leaks To Nikkei
Japan Times

Publishing companies’ financial results in the local press before they are officially announced isn’t unfair, Atsushi Saito, CEO of JPX, told reporters in Tokyo on Friday. As long as media outlets aren’t trading on the information, it’s difficult to criticize them, he said.

The nation’s largest business daily printed full-year profit numbers for more than 40 companies on the Nikkei 225 stock average in the year ended March 2014, before the results were filed to the exchange, without saying where it got the information. The newspaper’s figures were more accurate than analysts’ estimates and the companies’ own forecasts.

“Personally I don’t think it’s unfair,” he said, adding he didn’t think it was good either.

PLY: Can’t say I disagree with Mr Saito. If the free press can garner information then it has a right to publish it. That is a simple tenet of civilisation and the only regulators who seek to control that basic right tend to be in countries which end up starving their citizens.

Industry Associations Endorse ISDA Data Reporting Principles

A group of 11 industry Associations has published a letter supporting a set of principles developed by ISDA aimed at improving consistency in regulatory reporting standards for derivatives.

Download the letter here.

PLY: Users take the situation into their own hands and given past ISDA documentation et al, do underfunded regulators really have any sound basis to do their own thing?

Markets Urge Regulators To Fix Data Confusion (subscription)
Philip Stafford – Financial Times

In a rare display of unity, banks, futures brokers, hedge funds and asset managers have joined together to urge global regulators to resolve the growing chaos around reporting requirements for trades.

Eleven of the financial industry’s most high-profile trade associations have called on authorities around the world to present them with consistent and harmonised standards for the market to follow.

The letter has been sent to watchdogs around the world, such as ECB and FSB, as global regulators gather in London over the next few days for an annual meeting to discuss common legislative issues.

The letter is notable since it is rare for participants in markets to agree a common position on an issue.

PLY: At least we can therefore say the regulatory chaos by the, ahem, ‘stewards’ has driven a whole new consensus amongst the practitioners as the political-regulatory blob is essentially failing markets.

ESMA Launches New Strategy & Publishes 2014 Annual Report

ESMA has published its strategy for 2016-2020. As ESMA is moving from its formative years to the next phase, a strategic review was conducted to set the new direction and priorities of ESMA within this changing environment. This strategic review also took into account various external evaluations.

PLY: The difficulty with all crumbling empires is how they cannot of course come to challenge the empire itself. Thus the castles are collapsing, the good folks of Athens are on the verge of rioting and yet the ESMA strategy refers to a fragile marketplace…without noting it is because EU civilisation itself is at a rather tricky crossroads – and the progress versus collapse binary trade is not as far off as many seem to think.

Oslo Børs To Open A New Marketplace, Merkur Market

Oslo Børs is to open a new marketplace, Merkur Market, which will offer listing and electronic trading of shares and equity certificates for both small and large companies as a supplement to the regulated Oslo Børs marketplaces. The new marketplace will open in January 2016.

PLY: Splendid news as I am coincidentally travelling to Oslo!

SGX Says Errors In 195 CDP Statements, Corrected Account Information Sent
Straits Times

SGX mailed out 195 corrected Central Depository (CDP) account statements for May 2015 on Monday, after apologising for sending erroneous statements (reported here) to some customers.

SGX announcement here.

GPW & KDPW_CCP Promote Listed SMEs

Warsaw SE & KDPW_CCP waive market maker transaction fees and clearing fees charged on trade in all stocks other than WIG20 stocks from 1 July to 31 December 2015.

NZX Ready To Launch NXT Market
John Anthony – Stuff

NXT market: tailored for small businesses worth between $10 million and $100m with simpler structures to larger listings.

CFTC’s Division of Market Oversight Extends Time-Limited, No-Action Relief for Swap Dealers & Major Swap Participants from Compliance with Reporting Obligations

HKEx: Delisting Of Convertible Bonds

Read our Premium HKEx – Bonds Redemption Brief.

FCA Fines Firms Over £1.47 Billion In 2014

PLY: Average penalties 2.5 times larger than before, 1800% larger than 2009. Am I supposed to feel that markets are now better and safer? Or just inclined to think that a desperate government is shaking us down?

This report makes for terrifying reading. I am all for strong punishment of those who do wrong but given that cases are largely made in an emotive manner, is saying ‘we got more money than ever’ actually a sound marker? I always thought regulators were supposed to make the money men more karmic…here it seems the regulators have turned into short term greedy money men.

JPX: Notice Of Resolutions Of The 14th Shareholders AGM

Private Markets

Saudi Arabian Stocks Drop As Arab World’s Biggest Bourse Opens
Samuel Potter & Daria Solovieva – Bloomberg
Saudi Arabia Targets 2017 MSCI Emerging Markets Inclusion
Zahra Hankir – Bloomberg

Read our Premium Saudi Arabia Opening Capital Markets – Brief

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX off 1%, FTIL slightly less, no resolution…


MOEX Admits Derivatives Data Glitch (subscription)
Max Bowie – Waters Technology

On June 15 some FORTS derivatives reference data was found to be incorrect after the end of intraday clearing.

MOEX announcements here and here.

GFI Bows CME–LCH Cleared Spreads Data (subscription)
Waters Technology

GFI will this week release a new market data product based on streaming liquidity from its GFI Swaps Exchange SEF that will provide data on the spreads between swaps cleared by CME and LCH.Clearnet.

Opening Cross: Everybody Wins When the Customer Is Always Right… Right?
Max Bowie – Waters Technology

PLY: The good offices of Max Bowie discuss OpenMAMA, perhaps at last a step towards an open source discussion framework.

US vs. China: The 20 MB Miner War That Could Destroy Bitcoin
Evander Smart – Cointelegraph

The world’s two largest economies; two of the three most populated countries on earth; much more importantly: the world’s two largest Bitcoin mining communities locking horns in a struggle for power and control over the Bitcoin blockchain.

PLY: A fascinating issue the Blockchain suffers growing pains and the ongoing issue that (ironically just when various hedge funds jumped in), mining was never so profitable thereafter…

Banks Could Save $20bn A Year Through Blockchain And Similar Tech (subscription)
Anna Irrera – Financial News

Santander Innoventures, the venture arm of Spanish lender Santander, in a report released on Monday in conjunction with fintech investment firm Anthemis and research firm Oliver Wyman, argues that it is only “a matter of time before distributed ledgers become a trusted alternative for managing large volumes of data”.

PLY: What frightens me is that the good folks of Anthemis have to partner with others to bring this message to the broader fintech community which falls into the blatantly obvious category and has done for some years…(and of course the good folks of Anthemis knew that too).


ICE Benchmark Administration Announces Bank of China as a Direct Participant to the Gold Auction

Bank of China has been approved by ICE Benchmark Administration (IBA) to participate in the gold auction which is used to determine the LBMA Gold Price.

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

PLY: A fascinating development for the LBMA Gold price. BoC joins the London fix panel as interest rises about a separate Chinese fix. ICE/LBMA have done well to add a big Chinese name to the “London” fix and make it more international than ever.

LME’s New Aluminum Premium Contracts: Too Late?
Pratima Desai – Reuters

Tumbling aluminum premiums on global physical markets mean new contracts aimed at mitigating the impact of higher costs, due to be launched by LME in November, may be too late to serve their purpose.

LME conceived the idea of a premium contract when the premiums were high and rising, queues for aluminum at LME warehouses were long and metal was tied up in financing deals.

PLY: Late for one cycle, perhaps but early for the upturn…not the first product launch to have to ride this issue out…

Career Paths

JPX – A resolution was reached to adopt the following management structure at the BoD meeting held following the annual general shareholders meeting.


Hiroki Tsuda*, Chairman of the Board of Director
Akira Kiyota, Director & Representative Executive Officer, Group CEO; Chairman Nomination Committee; Member Compensation Committee
Koichiro Miyahara
Hiromi Yamaji
Christina Ahmadjian*, Member Audit Committee
Tsutomu Okuda*, Member Nomination Committee; Chairman Compensation Committee
Hideaki Kubori*, Member Nomination Committee
Shigetaka Sato*, Member Compensation Committee
Michiko Tomonaga*, Chairman Audit Committee
Masayuki Hirose, Member Audit Committee
Katsuhiko Honda*, Member Nomination Committee
Tsuyoshi Yoneda*, Member Audit Committee
Charles Ditmars Lake II*, Member Compensation Committee

*External directors

Executive Officers

Akira Kiyota, Director & Representative Executive Officer, Group CE
Hiroyuki Shibuya, Senior Executive Officer & CIO (IT Planning)
Yoshinori Karino, Senior Executive Officer (IT Planning)
Moriyuki Iwanaga, Senior Executive Officer & CFO (Treasury & Investor Relations)
Isao Hasegawa, Executive Officer (General Administration)
Satoshi Futagi, Executive Officer (Human Resources & Corporate Communications)
Takeshi Hirano, Executive Officer (Corporate Strategy)

FOW reports that Ron Levi, COO at BGC Partners’ recent acquisition, bought GFI Group, has left the company.

ESMA Vacancy Notice – Administrative Assistant (Deadline: 28 July 2015)

Deadline: 28 July 2015. Please refer to the vacancy page for the details on this position (Ref. 2015/VAC12/FGIII) and how to apply.

Financial Calendar

This week

Record date ICE $0.75 Q2 2015 dividend – June 16
MOEX RUB 3.87 dividend payment – June 16
CBOE $0.21 quarterly cash dividend payment – June 19
FESE Convention – Oslo – June 17-18

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

Share Notes

CME insider Kathleen M. Cronin sold 6,500 shares Friday, June 12th at an average price of $98.44 (bargain $639,860.00). She now owns 17,685 shares.

Analyst Notes

TMX Upgraded To “Buy” From “Hold” By TD Securities – Price Target To $62 From $57

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.


China’s Beijing Kunlun Backs UK P2P Lender LendInvest (subscription)
Emma Dunkley – Financial Times

Beijing Kunlun, a Chinese-listed technology company, has struck a deal to back British P2P platform LendInvest with a £22m investment.

Goldman Joins Online Lenders’ Club (subscription)
Ben McLannahan – Financial Times

Six months ago Goldman Sachs was a lead underwriter on the IPO of Lending Club, the biggest and brashest of a new breed of online lenders. Now the Wall Street titan is looking to disrupt the disrupters, launching its own web-based business offering loans to consumers and small businesses.

Other stories

Steven Maijoor Chairman ESMA Delivers Opening Remarks To ECON Hearing On MiFID II

Maijoor: “Let me start by reiterating that MIFID2/MIFIR is the most significant and voluminous piece of Level 2 regulation that ESMA has ever undertaken.”

PLY: Read that statement again: a good reminder that for the blob volume is good, actually solving problems or making markets better, are increasingly irrelevant. Look busy regulators, productivity is clearly only for the private sector appears to be the message as they spend taxpayers’ money.

IIROC Proposes Amendments To Market Integrity Rules To Align With CSA Changes

The Investment Industry Organization of Canada (IIROC) on 12 June issued for comment proposed amendments to the Universal Market Integrity Rules (UMIR) to align with a proposal by Canadian Securities Administrators (CSA) which clarifies the interpretation of a protected order.

FEAS: Frontier Markets Newsletter Is Released – Bulgarian SE

Frontier Newsletter makes a debut with Bulgarian financial markets. From now on, FEAS will publish and circulate Frontier with a country focus…

PLY: Good to see FEAS making progress…

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