June 17 2014


FESE leads the agenda on capital raising on the eve of their IPO Roundtable in Zurich tomorrow. Meanwhile LME brief on their proposals for Silver fixing while the consternation continues about CCP regulations and the lack of Trans-Atlantic agreement. Meanwhile CFTC position limit arguments fester as Thomas Farley and Brad Katusyama head the bill at today’s Senate hearing on HFT. Oh and for those who email every so often out of curiosity and a clear sense of “Shahdenfreude”, yes, Jignesh is still in jail. Scroll all the way today as always, to keep you ahead of the agenda…

Meanwhile, our recent premium 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

…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

Quick View: Clearing Up Differences (subscription)
Philip Stafford – Financial Times

Eleven months on and last summer’s accord between the EU and US over jointly overseeing the derivatives market across the north Atlantic is being severely tested. The heads of both CFTC and the European Commission have both regularly committed to last July’s “Common Path Forward”.

PLY: Phillip Stafford provides a good summary while treading delicately through the growing clearing chasm where his use of the phrase “Balkanised” is arguably diplomatic.

Various delegates felt the IDX remarks of Ananda Radhakrishnan, CFTC director of the clearing & risk, were akin to an unfolding crash involving not merely trains but probably multiple road, rail and air vehicles combined. I happen to applaud him for at least identifying the elephant in the room. What’s more the elephant had no clothes either (at least the emperor was of more modest dimensions before their wardrobe malfunction was called out). I am not sure about Mr Radhakrishnan’s proposed solutions but he certainly hit the target identifying where the problems lie. Right now, the interpretation of the G20 Principles has ended up with an inglorious turf war fought out by regulators on both sides of the Atlantic. Is either side entirely right? Well, I cannot see it. However, I do see massive problems ahead for banks as rules are being proposed which will amount to de facto capital and currency controls, constraining lending activity and general commerce. Surely if the UK and US only learnt one lesson from the 1970s on, it was that free markets thrive on free exchange of currency and other instruments? This ugly turf war driven by various forms of power ideology is merely helping feed eastern growth away from the west.

LME Aims For Test In Two Weeks Of New Silver Benchmark
Agnieszka Troszkiewicz & Nicholas Larkin – Bloomberg

LME is pursuing three platforms, including electronic trading, as an alternative to the benchmark used by miners to central banks, Matthew Chamberlain, head of business development, said at a briefing in London. It’s also looking at using the exchange’s ring and a telephone system, and would use whichever option the market prefers, he said, with testing potentially available within a fortnight, as it competes to offer an alternative to the silver fix when the system is disbanded in August.

PLY: LME are pushing hard here and certainly there are arguments it could be a natural home for another metal fixing given its massive experience through the ring which remains that rather unique specimen: a viable floor.

High-Speed Trading Incentives Will Face U.S. Senate Scrutiny
Silla Brush & Cheyenne Hopkins – Bloomberg

Executives from ICE, BATS Global Markets and TD Ameritrade, among others, will be questioned by the Permanent Subcommittee on Investigations about rebate fees and payments for order flow, Senator Carl Levin, a Michigan Democrat and chairman of the panel, said in a statement.

ICE press release here.

PLY: Clearly Brad Katsuyama of IEX will be a major draw for this session while BATS are fielding Joe Ratterman, presumably to lower the temperature a bit after that Lewis/Katsuyama CNBC interview with Bill O’Brien. However, the man to watch imho, is the new boss of NYSE, Thomas W Farley.

CFTC Moves To Curb Speculators Face Revision (subscription)
Gregory Meyer – Financial Times

A long-running effort to constrain speculation in commodities markets could face another round of revision. Almost five years after its first hearings on the issue, CFTC has made the rare move of reopening public comment on position limits, or caps on the number of commodity trading contracts speculators may control.

PLY: I have to admit that I really am not much convinced by the wishy washy arguments for position limits – period. Certainly not in massive globalised commodities. The one thing the Hunt brothers surely proved was just how big global markets really are and hence corners are impossible to achieve. There may be those who can occasionally lift a nickel here and there with a bit of boxcar shuffling. GPS is reducing those old oil tanker ‘is it in mid ocean or in the next cove’ shenanigans. However, in terms of actually palpably manipulating the price of big commodities? That’s a daft left-wing NGO canard which helps feed an unhealthy blamestorming on commodity prices when, for instance, food inflation is influenced more by the sheer incapacity of infrastructure to deliver more produce from the fields to the foodstores. It’s odd how the major power blocs of the US and EU are so keen to add more restrictions on position limits just when actually it is the reduction in the power of (cash-strapped) governments to subsidise wasteful agriculture which is driving greater efficiency and more transparent markets.

Brazil Fin Min Announces Tax Cuts On IPOs, Debentures, FI ETFs
Daniel Horch – mni news

Brazil Finance Minister Guido Mantega announced Monday a series of tax cuts to facilitate the growth of the country’s capital markets. The main measures, announced at the BM&F Bovespa securities exchange in Sao Paulo, are tax relief for investments in small company IPOs, infrastructure debentures, and fixed-income ETFs.

PLY: Brilliant news from Brazil. Apparently they have some football tournament going on at the same time which appears to have overshadowed this good move which ought to encourage BM&F Bovespa and its nascent competitors to aid Brazilian prosperity.

BVB Head: Executive Order Removing Capital Market Barriers To Be Adopted In June (subscription)
ACT Media

The Romanian Government will adopt an executive order later this month to remove the barriers hindering the development of the capital market in Romania as pinpointed by a working group, that were unveiled by the Bucharest SE (BVB) management early this year, BVB MD Ludwik Sobolewski announced on Wednesday.”The executive order was worked out by the Financial Supervisory Authority.”

Read the document detailing the eight systemic barriers here (English version starts at page 27).

PLY: Investing in Romania is a dog’s dinner. Whether you are listing or investing, the prevailing standard of corporate governance are frequently feudal. The 8 simple principles proposed here are the kindergarten basics for markets but alas not commonly practised in Romania. Unless and until they are broadly adopted, Romania will sadly remain a relative backwater, a veritable tragedy for a nation with incredible potential, rich in resources, talent and ingenuity. From my experience as CEO of SIBEX I saw the best and worst of Romania: these principles are desperately needed.

ISDA: ‘Granular’ Approach To OTC Clearing Obligations
Michael Ide – Value Walk

ISDA is worried that regulators will over generalize and create clearing obligations for non-standard derivatives, limiting companies’ option and burdening CCPs.

India – Convergence Of Regulators On The Back Burner For Now
Anindita Dey – Business Standard

The new government has decided to keep the idea of convergence of financial and commodities market regulator as recommended by the FSLRC on the back burner for the time being.

PLY: Interesting but not probably worrying as the government is more concerned with finding a way forward for commerce as opposed to tying up the old-line regulators. The government has a healthy lower house majority but the upper house is on a different electoral cycle, under opposition control, so the Modi government has to be careful in governing where major legislation is required.

One key factor is a desire by the new government to revive the Forward Contract Regulations Act (FCRA) Bill which would strengthen FMC as the commodity regulator and indeed allow the creation of commodity options and indices – both products would give the Indian comexes very exciting prospects…

Private Markets

European Trading Venues: The Next Generation
Elliott Holley – banking technology

“National exchanges aren’t trading companies, they are media companies,” says Christopher Gregory, CEO at Squawker, a new trading service that began operations in April 2013. “Their focus is on primary listing, secondary trading and market data. But the sell-side sometimes has difficult orders to execute, orders where you need to find the right person to talk to. Our focus is on what we can do for the sell-side.”

Cambodia SE Has Second Listing, Two Years After The First (subscription)
Chun Han Wong – Wall Street Journal

A second company listed its shares on Cambodia’s fledgling exchange, two years after the first, but the stock’s weak performance could hurt growth in an already-ailing securities market.

Bitcoin Vulnerable After Miner Takes 51% Network Share
Dan Goodin – Wired

For the first time in Bitcoin’s five-year history, a single entity has repeatedly provided more than half of the total computational power required to mine new digital coins, in some cases for sustained periods of time. It’s an event that, if it persists, signals the end of the crypto currency’s decentralised structure.

Researchers from Cornell University say that on multiple occasions, a single mining pool repeatedly contributed more than 51% of Bitcoin’s total cryptographic hashing output for spans as long as 12 hours.

The contributor was GHash, which bills itself as the “#1 Crypto & Bitcoin Mining Pool.” During these periods, the GHash operators had unprecedented powers that circumvented the decentralisation that is often held up as a salient advantage Bitcoin has over traditional currencies. So-called 51 percenters, for instance, have the ability to spend the same coins twice, reject competing miners’ transactions, or extort higher fees from people with large holdings. Even worse, a malicious player with a majority holding could wage a denial-of-service attack against the entire Bitcoin network.

PLY: Very interesting as pools are building power but at the same time, a single monopolist taking control of BTC will either create modified protocols or simply an outpouring to other cryptocurrencies. There was also an interesting story recently about an amazing large scale mining fraud.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX has rallied 2.5% today as the sale order on the FTIL stake remains in focus and is felt to lift some uncertainty on the exchange’s future. Meanwhile FTIL is flat.

NSEL Investors’ Lawyer Says Jignesh Shah Was Aware Of Decisions
Khushboo Narayan – Livemint

Sandeep Karnik, representing the investors in a Mumbai sessions court, submitted a string of emails between Anjani Sinha, former CEO of NSEL, Shah and Javalgekar, which were part of the annexures to a forensic audit report being prepared for the economic offences wing (EOW) of Mumbai Police. The forensic audit report itself has not been submitted to the court or made public by the EOW.

PLY: A smoking gun trail of emails, with the slow pace of Indian courts presumably similar to previous standards, it looks as if Jignesh Shah will suffer a business death by a thousand writs over the next decade (if not longer).

Investor Claims NSEL Got Bogus Profit Of Rs 6 Crore (USD 995k) From A Defaulter
The Economic Times

An investor told a court here that one of the mails exchanged between former NSEL CEO Anjani Sinha and FTIL Chairman Jignesh Shah, both accused in the payment crisis at NSEL, shows the now-defunct bourse received Rs 6 crore (USD 995k) as “bogus profit” from a borrower firm.

PLY: Given the balance sheet and accounts are in Rupees and a crore has 7 zeroes, how easy is it to miss that line on your balance sheet?


Deutsche Börse Provides Trading Software For Norwegian Exchange NOREXECO – “M7” Technology Has Been Licensed To Renewable Commodities Exchange NOREXECO ASA

NOREXECO has licensed the M7 trading technology for a new regulated exchange for the trading of derivatives on products from the forestry and paper industry. NOREXECO will become a renewable commodities exchange based in Norway.


LME Plans To Launch Steel Rebar And Scrap Contracts

LME said on Monday it plans to launch new steel rebar and scrap contracts and also said it was still committed to its existing steel billet contract.

Bursa Malaysia’s USD Denominated Refined Bleached Deodorised Palm Olein Futures Contract Goes Live


S&P/TSX 60 ESG Index Launched By S&P Dow Jones Indices, RobecoSAM And Toronto SE

A sustainable version of Canada’s premier benchmark: the S&P/TSX 60.
ESG factors of companies analyzed using RobecoSAM’s Corporate Sustainability Assessment (CSA).

CESC To Launch CES China 280 Index On 7July

Building on the successful launch of the first batch of indices in the CES China Cross Border Index Series, China Exchanges Services Company Limited (CESC) today (Monday) announced that it will launch the CES China 280 Index (CES 280) on 7 July.

The CES 280 will add to the China growth story of CESC’s first Cross Border Index, the CES China 120 Index (CES 120), by expanding the CES China Cross Border Index Series’ coverage of Mainland stocks listed in Shanghai, Shenzhen and Hong Kong. The expansion will enlarge the aggregate market value of the Mainland stocks in the series from 50% to 70% of the total value of the universe.

SIX Swiss Exchange Launches SXI Switzerland Sustainability 25 Index

SIX Swiss Exchange announced the launch of the SXI Switzerland Sustainability 25 Index. The new index includes those 25 stocks from the SMI Expanded Index with the best sustainability scores.

Career Paths

Thom Lant, director of marketing and communications at NLX will join CME Europe after three years at Nasdaq OMX’s controversial, high profile London venue. Thom will replace Allan Schoenberg who is returning to the US, to join TIAA-Cref.

PLY: A good move for Thom, I wish him every success at CME, he certainly helped NLX to gain a remarkably high profile.

IEX announced that John Ramsay, until recently the Acting Director of SEC’s Division of Trading and Markets, is joining the company as its Chief Market Policy and Regulatory Officer.

IEX press release here.

PLY: A good hire for IEX, as their team and momentum build with gusto.

Volta, the exciting and perfectly located London data centre has announced a further expansion of its team, with the addition of Adam Bradshaw as Senior Sales Executive. Adam joins Volta from TelecityGroup and will be responsible for new business as well as the management of existing client relationships.

Adam’s appointment comes only weeks after Volta announced a number of new additions to the team: Jonathan Arnold, MD; Yidan Wang, Marketing Manager; and Christopher Burroughs, Sales Executive.

Volta press release here.

Waters reports that market data inventory and cost management software vendor The Roberts Group has hired former Omgeo COO Steve Matthews as CEO, responsible for expanding the company’s client base and furthering its product development function, following the acquisition of a controlling stake of the company by Waltham, Mass.-based venture capital firm Polaris Partners in April (IMD, April 3).

Robert Leitner, co-founder and current CEO of The Roberts Group will become chairman of the vendor’s BoD.

J. Christopher Giancarlo was officially sworn in, after being confirmed by the U.S. Senate on June 3, to serve as a Commissioner of CFTC.

Financial Calendar

This week

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

FESE Blueprint To Boost European Growth

Operators of Europe’s Regulated Markets believe that the new EU policy cycle should focus on economic growth. This will require changes around five main areas. For further information and references, click here.

PLY: Leaving arguably the best to last: this is a brilliant resume, punchy yet richly sourced, produced in FESE’s consistently methodical style, ahead of tomorrow’s IPO Roundtable. It describes the urgent need for more investment, more access to financing and infers the need for key deregulation. This is vital if Europe is not to become, as outgoing European Commission VP Neelie Kroes puts it: “We’ll be known as the place that used to be the future, but instead has become the world’s tourism playground and nursing home.”

…Mot juste, couldn’t put it better myself.

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