June 19 2014

elb2 Greetings from the FESE Convention where yesterday’s IPO Roundtable on the future of fundraising was such a success that clearly no actual spherical table was large enough to accommodate all the participants! With several hundred people packing the room, FESE, European Issuers and EVCA are to be applauded for pursuing this vital agenda with clarity and passion. The theme has continued apace this morning with a brilliant opening address espousing free trade by States Secretary at the Swiss Federal Department of Finance Jacques de Watteville followed by an equally rousing call to arms to raise capital in Europe and throughout the world by IOSCO Secretary General, the consistently brilliant David Wright.

Last evening the gala dinner was a splendid event in the magnificently refurbished Grand Dolder Hotel and after being the speaker last year, I was delighted to see that slot filled by Ben Bernanke adding insights from the world of central banking. My panel on innovation is at the end of the afternoon with a star studded line-up in what is once again an all-star FESE meeting.

Today in Exchange Invest, the ICE bandwagon is rolling forward with the sale of Wombat beginning the disembodiment of that instrument of broad corporate folly, NYSE Technologies. Meanwhile the Euronext IPO has been fully subscribed. Jignesh gets at least a few more days in jail while MCX further disembodies FTIL influence. Markit IPO prices mid-range but issues more shares than anticipated. Hong Kong seeks to ignore shareholder democracy in wake of losing Alibaba IPO. NASDAQ OMX reverses decision and now wants to keep running its SIP while LIFFE suffers a second day of outages at the open. A very crunchy day with added pith today, happy scrolling:

This just in from the FESE Convention, Andreas Preuss of DB1/EUREX:

“it is incredible to me how above average intelligent people can believe a financial transaction tax can be the best means to make people foot the bill for a problem they have already caused without realising the damage to the real economy is massive.”

As ever uber-pithy and a brilliant mind but perhaps not destined to be the next CEO of the group as Reto Francioni will not stay beyond 2016:

Public Markets

Exchange Chief Francioni Goes By 2016 (german version)
Manager Magazin

PLY: Reto will not stay beyond 2016, headhunters are looking for a replacement and there are suggestions Andreas Preuss may not have the full support of the Supervisory Board to be immediately appointed, contrary to the market perception that the “Crown Prince” would be elevated to the top spot once Reto stands down…

ICE Kicks Off Sale Of Technology Assets (subscription)
Anish Puaar – Financial News
ICE Agrees To Sell Wombat Financial Software To SR Labs
ICE

ICE has started to offload the technology business it acquired as part of its acquisition of NYSE Euronext with the sale of the Wombat Financial Software to SR Labs.

PLY: Terms not yet disclosed although NYSE Euronext paid $200 million in January 2008. The deal is expected to close during Q3. ICE remains focussed on providing exchanges and not technology. It will be interesting to see how SR Labs runs the Wombat business, doubtless there are many concerned folk in Titanic Quarter, Belfast where Wombat’s HQ had a shiny NYSE sign hanging over the doors of their HQ in the Northern Ireland Technology Park. Good luck to the buyer, Wombat has value, it just didn’t fit into ICE’s plans…

Euronext IPO Is Fully Subscribed
Blaise Robinson – Reuters

European financial markets operator Euronext’s IPO is fully subscribed with good demand. Euronext unveiled plans last week to raise up to 1.16 billion euros in an IPO valuing the firm at 1.75 billion euros ($2.38 billion).

PLY: Pricing between 19 and 25 Euros is looming ahead of a planned trading start Friday while it looks as if ICE will be out of the Euronext position in record quick time, and indeed at a much higher valuation than even optimistic onlookers (e.g. me) suggested last year.

The Euronext IPO is much discussed here. See also our Premium post: Euronext: Sale of the Century

Markit Raises $1.3 Billion In Expanded IPO (subscription)
Telis Demos, Matt Jarzemsky & Katy Burne – Wall Street Journal

Owners of Markit Ltd., the Wall Street financial-data provider, raised $1.3 billion in a larger-than-expected IPO of shares. The offering priced at $24 per share, in the middle of the expected $23- to $25-a-share range but the size of the deal was increased to 53.5 million shares from an expected 45.7 million shares.

Wall Street’s biggest banks are the major beneficiaries of the deal, with 12 of them expected to sell portions of their stakes in Markit. The London company has become one of Wall Street’s most important data providers for the credit, derivatives, bonds, loans and foreign-exchange markets, generating $947.9 million in revenue and $147 million in profit last year.

The banks raised a total of $1.2 billion, increasing the number of shares they sold to 49 million from 41 million, people familiar with the deal said. BAML, Citigroup, Deutsche Bank, and Goldman Sachs were among the banks expected to sell shares, along with smaller sellers such as hedge fund Eton Park Capital Management LP and several current and former employees.

PLY: “At the IPO price, the company’s market value is around $4.3 billion, based on the number of shares outstanding after the deal” which is hardly music to the ears of Singapore’s SwF which I believe holds at a higher level (circa 5 billion) but a transparent share price also gives Markit optionality to do deals going forward as well as adding a wondrous new piece of content to our investor universe in the world of financial markets infrastructure.

MCX’s Shareholders Move To Extinguish FTIL’s Voting Rights
Ashish Rukhaiyar – Livemint

Shareholders of MCX voted on Wednesday to transfer the 26% stake of its promoter, Jignesh Shah’s FTIL, to an escrow account prior to its sale and extinguish its voting rights in the exchange with immediate effect.

MCX Gets Shareholder Okay To Sell FTIL Stake
Business Standard

MCX has got shareholder approval to transfer the 26% stake of its anchor investor, FTIL, in an escrow account and to dispose those shares. MCX has convened a board meet on June 27 to discuss the next move.

PLY: Bidders are presumably about to get a better deal although what power FTIL has to challenge this is not clear. The likelihood of internecine civil war between FTIL shareholders and FTIL management is now increasingly feasible given the likely claims on all parts of value destruction. That said any ‘victory’ in legal action by Jignesh Shah and co increasingly appears to be pyrrhic.

FTIL Gets Time To Pare Holdings
Business Standard

The Securities Appellate Tribunal (SAT), which hears appeals against decisions by SEBI, has extended a deadline to FTIL to divest its stake in key stock market entities. Earlier, SEBI had asked FTIL to divest its stake in these market institutions, after declaring it not “fit and proper” to be a stakeholder in such entities.

FTIL has investments in MCX-SX, MCX-SX Clearing Corporation and National Stock Exchange (NSE), as well as in non-operational bourses such as the Delhi SE and the Vadodara SE. Of the four, FTIL’s stake is the highest in MCX-SX.

FTIL vs. SEBI Timeline:

Dec 17, ’13 FMC declares FTIL not ‘fit & proper’
Dec 20, ’13 Sebi showcause notice on ‘fit and proper’ to FTIL related to its stake in MCX-SX, other market-sensitive entities
Dec 21 & 26, ’13 and Feb 10, ’14 FTIL files its replies to Sebi
Jan 7 & 13, Feb 11 and Mar 6 FTIL appears before Sebi for personal hearing
Mar 6 FTIL counsel seeks time till March 18 to file written submissions. Says in replies & submissions the FMC order, on which the Sebi notice is based, is under challenge before the Bombay HC. So, Sebi should defer order till the court’s decision
Mar 19 Sebi declares FTIL not ‘fit & proper’, asks it to divest its holding in MCX-SX, MCX-SX Clearing Corp, Delhi SE, Vadodara SE and National SE
June 13 SAT hears appeal against Sebi decision; hearing adjourned till June 26
June 18 FTIL asks SAT to extend deadline for divesting stake;
SAT grants extension till June 26

PLY: The move by MCX (under FMC regulation remember, not SEBI) to defenestrate the FTIL cornerstone shareholding appears to accelerate that sale at least…

Rules Push On Clearing Houses Poses Risk To Banks (subscription)
Philip Stafford – Financial Times

The global regulatory push to force banks to use centralised clearing houses to process their derivatives trades may result in a rapid rise in short-term calls on traders to post sufficient margin to back their trades. A research paper from the London School of Economics found the daily changes in the valuation of margin, which traders are required to post, may rise tenfold by using central clearing houses. That compared to banks being allowed to clear the same deals between themselves.

PLY: Clearly the collateral requirement is increasing by a vast multiple as most OTC deals had no margin and infrequent exchanges of principal / mark to market whereas CCPs have that daily 0930 watershed in local time the world over where you need to be fully margined.

Reform Or Die: Gold Price Fix Under Pressure (subscription)
Xan Rice – Financial Times

The 117-year-old London Silver Fix is nearly dead. Is its younger but more illustrious sister going the same way?

That was the question being asked in the gold sector on Wednesday. In a move that caught some off guard – not least LBMA, whose members oversee the benchmark price – the World Gold Council said it had convened a forum to discuss the future of the 95-year-old gold fix. The meeting, which is expected to involve everyone from mining companies to exchange traded funds, will explore “modernisation” of the benchmark, which was “imperative to maintain trust across the industry”, the WGC said.

PLY: With every administrator terrified about the probity of their fixes, it is unsurprising that the WGC will be investigating the future of the gold fix…plus there are other core commercial opportunities for growth too and here WGC tends to be more savvy about exploring value add than many industry bodies.

US Disclosure Rules Shed Light On Dark Pool Trading Volumes (subscription)
Anish Puaar – Financial News

New rules have compelled US dark pools to disclose the volumes they trade for the first time ever, revealing that the anonymous markets account for around 15% of overall US equity trading. The FINRA data — analysed by Credit Suisse — covers the week beginning May 12 and shows that 15.4% of US equity trading was done in dark pools, the vast majority of which are operated by investment banks and brokers.

By comparison, NASDAQ had a market share of 17.3% that week, while the two stock exchanges operated by ICE — NYSE and NYSE Arca — had a combined share of 21.6%.

PLY: As I said previously the FINRA data is the new perfect parlour game data source for equity market nerds the world over.

Tullett Prebon Launches Aggregated Swap Data Feed
Automated Trader

Tullett Prebon Information has announced the launch of its aggregated SDR data feed for the IRS market. The service aims to increase price transparency, in accordance with the Dodd-Frank Act, by making pre- and post-trade data available together in an easy-to-consume and consistent format.

Athens Exchange Transition Of Settlement Cycle To T+2
MondoVisione

Athens Exchange (Athex) announces that from Monday 6 October 2014 the settlement cycle of the trades executed on listed securities on its regulated securities market and alternative market will be changed to T+2.

Hong Kong Panel Proposes Changes To IPO Rules After Alibaba Loss
Fox Hu – Bloomberg

Hong Kong should accommodate new shareholding and management structures to allow companies in different legal forms to conduct IPOs in the city, a government advisory panel proposed.

The city should reconsider the “one share, one vote” concept and open up its IPO market to “quality companies from all corners of the world,” the Financial Services Development Council said in a report. The government should “keep reviewing some of the fundamental underpinnings of the market,” it said.

PLY: Disappointing but not unexpected: concentrated plutocracy is the ally of opacity and never transparent, non-free markets. A very very bad move by Hong Kong, following the unacceptable position of the US markets.

Private Markets

Shanghai Gold Exchange Free-Trade Zone Plan Approved by PBOC
Businessweek

Shanghai Gold Exchange’s international bullion trading platform will be included in the banking system for the city’s free trade zone, China’s central bank said.

Previous discussions on the topic in Exchange Invest can be found on May 28th and March 17th.

TASE Becomes An Affiliate Member Of FESE
MondoVisione

On 18th June 2014, the General Assembly of FESE unanimously approved the application of Tel-Aviv Stock Exchange (TASE) to become an Affiliate Member from 1st July 2014.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX is 1% off, FTIL flat as the share sale ramifications of the MCX cornerstone stake roll on while Jignesh is still in jail:

Jignesh Shah’s Bail Plea Order Reserved
Business Standard

A sessions court on Wednesday reserved the bail pleas of FTIL Chairman Jignesh Shah, and Shreekant Javalgekar, former MD and CEO of MCX, till June 21.

Technology

ICE Suffers Second Day Of Trading Glitches On Liffe Derivatives
Reuters

ICE was plagued by a second day of technical glitches on its Liffe derivatives markets on Wednesday, having to suspend trading in some money market contracts. Trading in Euribor (Euro Interbank Offered Rate) and Eonia (Euro Overnight Index Average) futures and options contracts was halted between 0443 GMT (0543 BST) and 0612 GMT (0712 BST) on Wednesday.

The glitch followed two similar problems reported on Tuesday.

Nasdaq Says Making Progress On System That Led To August Outage
John McCrank – Reuters

Nasdaq OMX has made changes to the system that caused a three-hour trading halt in Nasdaq-listed stocks last summer, to make it more robust and to limit possible future outages to 10 minutes, a company executive said on Wednesday. The exchange operator now hopes to continue running the system, called a Securities Information Processor (SIP), reversing direction from November when it said the risks of doing so would outweigh the rewards, said Brian Hyndman, Nasdaq’s head of global information services.

PLY: An intriguing reversal of opinion.

Products

Liffe Takes New Approach To US Dividend Futures (subscription)
Joe Parsons – FOW

Liffe has launched a range of dividend adjusted single stock futures on some of America’s largest corporations, providing an alternative to Eurex’s US dividend contracts.

Indexes

Deutsche Börse Celebrates 15 Years Of SDAX
MondoVisione

ChiNext 50 Index Issued
MondoVisione

Shenzhen Stock Exchange (SZSE) and Shenzhen Securities Information Co., Ltd. recently announced to issue ChiNext 50 Index (Code: 399673, Abbreviation: ChiNext 50) on June 18, 2014. ChiNext 50 Index is designed to depict the operation feature of highly liquid stocks of the ChiNext Board, and further enrich index instrument of the ChiNext Market. ChiNext 50 Index takes May 31, 2010 as the base date and 1000 points as the base value.

Career Paths

FESE General Assembly met on Wednesday 18th June in Zurich and unanimously approved the appointment of Lee Hodgkinson, Head of Markets & Global Sales, and Robin Jezek, VP, Head of Government Affairs, both from Euronext to the FESE Board replacing Roland Bellegarde and Mark MacGann, who recently stepped down from these positions.

In addition, the General Assembly also unanimously approved the appointment of Niels Tomm, Head of Governmental Affairs & Political Communication at DB1 as the new Chairman of the FESE Management Committee and Dr. Nicos Porfiris, Deputy COO at Hellenic Exchanges, as the new Vice Chairman of the FESE Management Committee.

PLY: Welcome appointments all round. Good to see Lee Hodgkinson on the board and Niels and Nicos heading the Management Committee. Elsewhere Judith Hardt is a welcome presence at the FESE Convention after making her shuffle to the ‘dark side’ of the banking heartlands…a case of the FESE Empress strikes back?

SEC announced that Cicely LaMothe has been named as an associate director in the agency’s Division of Corporation Finance.

The Institute of Trading and Portfolio Management has announced a significant addition to their global trading operation by hiring former Hedge Fund Manager and Proprietary trader Jason McDonald as a senior Trading Mentor.

ESMA Launches Call For Expressions Of Interest To Renew Its SMSC CWG
MondoVisione

ESMA is looking to newly constitute a Consultative Working Group (CWG) for the ESMA Secondary Markets Standing Committee (SMSC) 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 13 July 2014.

Financial Calendar

This week

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.

Share Notes

ICE Director Jean Marc Forneri sold 1,000 shares Tuesday, June 17th at an average price of $195.00 (bargain $195,000.00). He now owns 18,697 shares. The ICE Insiders Stock Transactions are chronicled on this specific page.

NASDAQ OMX EVP Bruce Aust sold 20,000 shares Monday, June 16th at an average price of $36.49 (bargain $729,800.00). He now owns 98,101 shares. Mr. Aust’s regular sales are chronicled on this specific page.

Analyst Notes

LSE Receives “Overweight” Rating From Morgan Stanley

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.

Crowdfunding

India – SEBI Floats ‘Crowdfunding’ Rules
The Hindu

SEBI proposed new norms for ‘crowdfunding’ or collection funds through web-based platforms and social networking sites — a move that would help start-up companies raise capital and also check misuse of such avenues.

PLY: SEBI is making the running with crowdfunding – a welcome addition to the Indian market infrastructure where, let’s face it, jobs are vital for ongoing development…just as they are (I add from the FESE Convention) – in Europe (and elsewhere too!).

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