June 19 2015

elb2In Warsaw for a startup conference, after another excellent FESE Convention in Oslo. Huge plaudits to outgoing President Christian Katz, new incumbent, Deirdre Somers and particularly the executive under Rainer Riess, with the ace organising team led by Tracey Roberts. Grazie mille Sara Baldi too for making our panel an ecosystem epic.

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Today in Exchange Invest:

Donald Brydon is the new LSE Chairman, Playtech gaining upper hand in Plus 500 merger battle, Happy Birthday AIM, FT highlights repo risks, ESMA delays CSD rule publication, and much much more, happy scrolling:

Public Markets

LSE Appoints Donald Brydon Chairman
Alliance News

As rumored this week, LSE has been looking for a successor to Chris Gibson-Smith since last July.

PLY: An interesting choice, Brydon is a canny operator with exchange experience as Chairman of LME, I wish him every success helping drive the rejuvenated LSE further and further forward. Farewell to Chris Gibson-Smith, we hardly knew you but we always heard you were passionate about pipelines, so maybe not such a big miss there.

Playtech Not Waiting, Buys 9.36% Of Plus500 In Open Market Purchases
Maria Nikolova – LeapRate
Crispin Odey On Back Foot In Battle Over Plus500 (subscription)
Kadhim Shubber – Financial Times

PLY: Playtech now holds 10,756,067 ordinary shares (9.36%), improving chances of success at EGM July 16th, as management/founders hold 35.6% whereas Odey has 25% in opposition against a simple majority vote.

I am still fundamentally perturbed about Plus 500.

Playtech Raising £225 Mln ($350 Mln) To Fund Acquisitions
Maria Nikolova – LeapRate

Playtech will raise circa $350 million placing up to 29,050,000 Ordinary Shares (price TBD) through an accelerated bookbuild, representing approx 9.9% of Playtech’s current issued share capital.

Teddy Sagi will retain his 33% holding in Playtech (via his Brickington holding company), investing over $100 million. Playtech has (as of year-end 2014) £692 million of cash in the bank, and has offered an all cash £460 million for Plus500.

Canaccord Genuity will act as Sponsor and Joint Bookrunner, whereas UBS will be a Joint Bookrunner and Shore Capital will be Lead Manager to the Placing.

Placing proceeds will be used to fund future acquisitions including Plus500 and, potentially, a midsize B2C broker over which TradeFX has an option to purchase.

Plus500 & The Danger With Small Caps
Prabhat Sakya – The Motley Fool

PLY: Read this carefully and better understand the mindset of a private investor.

Read our Premium Plus500 Turmoil & Deal – Brief – Part 1, Part 2 .

FTIL Signs New Sale Agreement To Dilute IEX Stake
Ashish Rukhaiyar – Livemint

The earlier agreement from November has been cancelled, the new agreement will be closed within 60 days. Previously, a consortium led by Chennai-based private equity firm TVS Capital Funds was to buy the nearly FTIL 26% stake in Indian Energy Exchange (IEX) for around Rs.577 crore (USD 93.9 mln), valuing the exchange at nearly Rs.2,300 crore (USD 374.3 mln).

The new agreement, between FTIL and DCB Power Ventures, Kiran Vyapar, Agri Power and Engineering Solutions, Aditya Birla Capital Advisors (for various Birla entities), is for the sale of 16.6% stake for Rs.357.06 crore (USD 56 mln). The deal would value the exchange at around USD 337 mln.

After this deal, FTIL will retain 9.4% of IEX.

See FTIL announcement here.

Read our Premium FTIL Stakes Sales Brief.

Santander Exploring Strategic Options For Broking Unit?
Macarena Munoz Montijano & Manuel Baigorri – Bloomberg

Banco Santander is exploring strategic options that may lead to the sale of part or all of the equities brokerage division. Kepler Cheuvreux SA, is considering a deal with Santander.

LSE Studying Stock-Connect Scheme With Shanghai
Reuters

“We are working on it and trying to understand what might be involved,” said Nicolas Bertrand, head of equity and derivative markets at LSE,

PLY: Interesting, probably a long shot but always worth trying. All the best to Nicolas Bertrand and his team endeavouring to pull off what would be a coup for London and a great move for China, albeit at a potentially huge cost for HKEx.

Read in Premium

China Liberalises
China Capital Markets Transformation Brief – Main File
HKEx – SSE – Stock Connect Brief Part 4

HKEx Board Approves Closing-Auction System, Price Control Reforms (subscription)
Enoch Yiu – SCMP
Targeted Govt Intervention Will Keep Markets Free (subscription)
Richard Harris – SCMP

Also, HKEx CEO Charles Li Xiaojia scotched rumours of a delay (reported this week) in launching the proposed Shenzhen-Hong Kong stock connect, which is on track for H2 2015.

FAO: Previous discussions on HKEx measures to curb volatility here and here.

Also read Premium HKEx – SZSE Stock Connect Brief.

SFC Sees Dozens Of Cases Every Year Of Suspicious Price Moves
EJInsight

Hong Kong’s markets watchdog has received inquiries on dozens of cases of suspicious price movements in stocks during rights issues or private placement deals in the past few years.

PLY: I suspect this story could have first been published just after Britain seized Hong Kong during the opium wars and pretty much anytime since…

Sarao To Claim He Is ‘Scapegoat’ In US Extradition Fight (subscription)
Jane Croft – Financial Times

PLY: He is a scapegoat but the Blair/Brown government were so materially inept, he will be extradited anyway as there is no process to keep him away from the land of the free / orange jumpsuit (delete as appropriate).

Sarao May Use Mental-Health Defense In U.S. Extradition Fight
Jeremy Hodges & Suzi Ring – Bloomberg

PLY: Again, even if he pleads ‘woof’ it will be difficult to avoid extradition…

Read in Premium

The Kennel – Premium discussion of the “Hound of Hounslow”

Tracking The Money Men On LME
Andy Home – Reuters

PLY: Adding greater access to the Select electronic dealing system is only sensible if LME wants to thrive and expand in a competitive market environment.

KCG Rebrands & Relaunches Dark Pool MatchIt
John D’Antona Jr. – Traders Magazine

Repo Market Faces Structural Challenge (subscription)
Joe Rennison & Philip Stafford – Financial Times

PLY: Useful story, the key is that if the Brussels Bugle actually understood finance, they would have placed Phillip’s story on page one and carried that theme throughout the paper…

Previous Repo discussion this week: here.

Euronext Paris Moves To La Défense Business District
Euronext

Euronext Paris announced today that it has successfully completed its move to the Praetorium building in La Défense, just west of the French capital.

PLY: Presumably the meeting rooms are more private for lunchtime assignations, and who knows what way the waste bins are being organised…

ESMA Asks Commission To Delay CSDR Technical Standards
MondoVisione

PLY: As good a demonstration as any that ESMA simply cannot cope with their minuscule budget. Very disappointing that the EU’s zest to regulate everything will not have greater transparency across summer in the CSD arena.

Private Markets

BIST Seeks To Raise Stake In SASE
Maja Garaca – SeeNews

BIST plans to increase its stake in Sarajevo SE (SASE), through an offer to purchase at an auction, June 29, of 500 shares at a maximum price of 320 marka ($184.4/163.6 euro) apiece. SASE’s capital is divided into 6,149 shares. BIST is its biggest shareholder with a stake of 9.89%. The following nine biggest shareholders with stakes of 5.2% each are local brokerage houses and banks.

PLY: With the Austro-Hungarian empire CEESEG shrinking as a result of giddy 19th century vision failing to be executed in a coherently profitable fashion, now the BIST is expanding the Ottoman Empire to a resounding chorus of “why?” from anybody actually doing the economics…or au fait with the leaden-footed risk averse ways of the Istanbul bourse’s management.

Read our Premium BIST IPO Brief and Exchange Deals Brief.

HFT Powerhouse Amsterdam Glimpsed Through Speed-Trader IPO
John Detrixhe, David De Jong & Ruth David – Bloomberg
Flow Traders To IPO
MondoVisione

Flow Traders intend to list on Euronext Amsterdam, expected to comprise a secondary sale of approximately 40% of Flow Traders’ shares held by Summit Partners, Stichting Administratiekantoor Flow Traders, Avalon Holding BV and Javak Investments BV.

FAO: Cannot open the announcement from Flow Traders website – Access Denied – see here.

PLY: Clearly old habits die hard when it comes to market maker transparency then. At least the good thing is this is one piece of prop trading business which Euronext Amsterdam can’t lose to TOM…

Korea – Financial Tax Rules To Be Altered To Lure Investment
Kim Jae-won – Korea Times

The Financial Services Commission (FSC) will push for a redesign of tax rules to reflect changing circumstances, such as low interest rates and sluggish economic growth, with separation of the tech-heavy KOSDAQ from KRX for the development and independence of the secondary market, despite exchange opposition.

FAO: In April KRX said it is determined to boost its derivatives market by reaching out to potential investors overseas, alongside the long-term plan to expand its overseas business after it was reprivatized in February after six years of government control.

Read our Premium: KRX IPO Brief.

Silk Road & Mt Gox Linked By Transactions To Major Bitcoin Players Since 2009 ‘Big Bang’
Ian Allison – IBT

PLY Fascinating reading concerning AML, transparency of dealing and obfuscation of ownership amidst a cornucopia of drugs trades and honest citizens rightly asserting their privacy in an era of government intrusion.

Special Section: FTI, NSEL, India at the Crossroads

PLY: FTIL off nearly 2% as clearly the jump the other day was on the rumours of IEX stake sale, while MCX is flat to small off.

Technology

Hungarian Power Exchange Selects DB1’s Trading Platform For Intraday Electricity Market
DB1

Deutsche Börse Market Data + Services and Hungarian Power Exchange Ltd. (HUPX) have signed a cooperation in which HUPX will use Deutsche Börse’s global commodity trading platform M7 to establish a local intraday market for electricity in Hungary.

HUPX is the licensed operator of the organized Hungarian electricity market. The exchange already operates the local day-ahead market that is coupled with Czech, Slovak and Romanian market areas as well as a futures market offering long term physical contracts for trading.

PLY: Another good sale for DB1 in the region, following SIBEX recently amongst others.

Liquidnet will connect To Seven Major OMS Providers – Dark Pool To Centralize Critical Mass Of Corporate Bond Liquidity Currently Unavailable In The Market
MondoVisione

Career Paths

LSE Friday named Donald Brydon as Chairman.

Financial Calendar

CBOE $0.21 quarterly cash dividend payment – June 19

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

Share Notes

ICE CEO Jeffrey C Sprecher sold 40,465 shares on Jun 16, 2015 at an average $234.92 (bargain $9,505,225.00). See all ICE insider stock transactions on a dedicated page on our website here.

CBOE CEO Edward T. Tilly sold 6,250 shares Tuesday, June 16th at an average price of $59.16 (bargain $369,750.00). He now owns 103,099 shares.

Analyst Notes

Fitch Ratings has affirmed ICAP’s and ICAP Group Holdings’s Long- and Short-term Issuer Default Ratings (IDR) at ‘BBB’ and ‘F3’, respectively. The Outlooks on the Long-term IDRs are Stable. The ratings on the senior and subordinated debt issued by ICAP and IGHP have also been affirmed. Fitch Ratings full announcement here.
ICAP “Overweight” Rating Reissued By Barclays – GBX 625 Price Objective
Macquarie Reiterated Their “Neutral” Rating On ICAP – GBX 538 Price Objective

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.

Other stories

Aim — 20 Years Of A Few Winners And Many Losers (subscription)
Clare Barrett – Financial Times

London’s junior market celebrated its 20th birthday this week — but investors have yet to enjoy many happy returns.

PLY: I have to say I find this a typical example of why it confuses me that anybody thinks the FT is on our side. A nasty, narrow-minded risk averse hatchet piece with the usual government funded whimsy from that regular oxymoron, ‘the financial education sector.” All hail AIM, a fascinating and wondrous experiment which has created jobs, allocated capital…and without which our world would be poorer. Well done LSE for sticking the course and of course a huge Happy Birthday to its Dad, Simon Brickles without whom AIM would never have existed.

Let a thousand small cap markets bloom and may the US Venture Exchanges deliver another wondrous solution to capital markets…

Financial Services Industry Announces Proposed Timeline For T+2 Settlement Cycle In The U.S. – Suggested Timeline Will Put U.S. In Sync With Major Markets Across The Globe In 2017
MondoVisione

PLY: Radical! So, by 2017, US and world markets will settle only 2 days longer than it takes my wife’s horeca business to receive payments in Bitcoin for a Hanza Coffee in the middle of Poland. Well here’s to progress and the bleeding edge of world finance. I suppose.

Confidence To Crisis & Back – Martin Wheatley, FCA CEO, IOSCO Conference
MondoVisione

FESE Announces Winner Of The Josseph De La Vega Prize 2015
MondoVisione

Dion Bongaerts and Mark Van Achter from the Rotterdam School of Management, Erasmus University, for their paper “High Frequency Trading and Market Stability”.

PLY: Well done, another fascinating competition curated this year by judging panel Chairman Michel Maquil, formerly CEO of Luxembourg SE.

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