June 25 2014


“Shahdenfreude” reigns supreme as one man is released in NSEL scandal but it isn’t Jignesh. Post Euronext IPO issues as the stock resumes its fall. Bankrupt EU seeks to fund regulatory agencies through user levies on top of FTT, CME looking at Barclays Index bid, teams up with Thomson Reuters for silver fix bid too. Australian clearing discussions alongside transparent MTFs and lots more in another fascinating and ‘uber-scrollworthy’ Exchange Invest…

In Premium today, we spotted a slight omission on the part of Euronext while the stories on Poland (tomorrow is the day the WSE threatens to disappear in an inky void of government nepotism) and endeavouring to understand just what is happening at NLX remain our must read material of the moment…with more to come. Join our top tier, it’s only $120 and keeps this daily newsletter free:

New: Euronext: Separation Anxiety?

New: Poland At the Crossroads
– the poster child of New Europe looks increasingly to be going off the rails worse than Miley Cyrus post Hannah Montana

NLX: Missed Opportunity
– like Spain’s much hyped world cup team, much hyped NLX had an open goal but they still couldn’t score…

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 original hypothesis: The Butterfly (In)Effect

HFT2: 1972 A Historical Perspective
– discussing the world of HFT, more parts to follow in this series…

Public Markets

ICE Raises €1.4bn From Euronext Disposal (subscription)
Philip Stafford – Financial Times

ICE confirmed on Tuesday it would receive about €1.4bn in cash from last week’s disposal of Euronext, the European exchanges operator.

ICE Announces Closing Of Euronext IPO

ICE sold 42,248,881 ordinary shares of Euronext in the IPO at €20 per share, 23,352,000 ordinary shares of Euronext to a group of European institutional investors that will replace ICE as reference shareholders at €19.20 per share and 188,296 ordinary shares of Euronext to eligible Euronext employees at €16 per share (€3.01 mln).

ICE has granted the underwriters an over-allotment option of up to 4,210,823 ordinary shares of Euronext, which can be exercised for 30 days after the first trade date.

Therefore, ICE may continue to hold up to 4,210,823 (6.01%) of the 70,000,000 total issued and outstanding ordinary shares of Euronext if the over-allotment option is not exercised in full. Any shares held by ICE will be subject to a 180-day lockup period.

Upon settlement, ICE will receive approximately €1.4 billion, including net cash from Euronext as part of the separation of the business, excluding the over-allotment option of 4.2 million shares, and net of the share price discounts offered to employees and the reference shareholder group, as well as ICE’s estimated transaction fees.

PLY: So ICE is all but clear of Euronext and indeed may see even its rump 6.01% holding whittled down by the over-allotment option – although then again with the shares diving to 18.28 Euros when we looked this morning, who knows…ICE has of course achieved its H2 2014 separation goal of NYSE, LIFFE and Euronext which (as pretty much usual) a lot of ‘experts’ scoffed at in other media last year… A case perhaps of be careful which consultant you wish for… aka when it comes to implementation never bet against anything which sounds like “ice” (aka ICE or indeed the US options market pioneers ISE).

Interesting aside is the apathy of staff committing their own cash to backing their (generous) employer. If we annualize the last quarterly numbers (themselves significantly reduced) for staff cost, we get a total wage bill of circa 125 million Euros if my abacus is working correctly. In total, staff demonstrated a pretty underwhelming support for the offering, buying little more than 3 million Euros worth of shares. That doesn’t exactly strike me as a huge confidence inducing measure in the staff’s own perception of the business.

EU To Consider Financial Industry Tax To Fund Watchdogs
Huw Jones – Reuters

The EU’s markets, banking and insurance watchdogs could be funded by a levy on the organisations they supervise, in an attempt by the bloc’s executive body to save taxpayers’ money.

PLY: The EU, like all other governmental / NGO / quango bodies having essentially spent the contents of the cookie jar and leveraged the jar itself, are now desperately scrabbling to find new ways to fund their irrational exuberance for regulation. Hence a possible levy to raise funds for the EBA, European Insurance and Occupational Pensions Authority, ESMA and the European Systemic Risk Board.

This is yet another example of the egregious failure of the EU and the governmental blob in general. It will sooner or later be time to deregulate or die for Europe’s markets – the worrying thing is the blob seems to prefer Argentine-style suicide economics. Incidentally, note this levy is on top of the ghastly FTT proposals – the latter is scheduled to pay for bureaucrats outside the financial regulatory apparatus.

TMX’s New Trading Engine Leads To More Disappearing Orders: Study (subscription)
The Globe and Mail

ITG report examines changeover, finds signs of orders being cancelled immediately after being placed.

PLY: Alas a subscription to the Globe & Mail just being one step too far in terms of providing this newsletter for free, making it a case of a headline with a disappearing story here but we report the headline lest our Canadian readers have a sub to the good offices of the Globe & Mail and can read!

McGraw-Hill, CME Said To Weigh Joint Bid For Barclays Index Arm
Matthew Monks – Businessweek

McGraw-Hill Financial and CME are interested in acquiring Barclays’ index business and merging it with S&P Dow Jones Indices — manager of the benchmark S&P 500 Index (SPX) and Dow Jones Industrial Average.

PLY: Further to my comment yesterday, this is an interesting development as previously it had appeared CME were a tad less interested – it would certainly spice up the bidding with at least Markit and MSCI said to be in the running (It was MSCI after all who pushed the assets into sale mode before EI also reported on January 15th that Nasdaq and S&P were eying acquisitions to build their Index businesses.

Barclays Posts Dark Pool LX Form ATS On Website
John D’Antona Jr. – Traders Magazine

Barclays, operator of the LX dark pool, has posted its Form ATS and other previously non-public documents on its website. Other documents now available to the public include monthly volume statistics, a Frequently Asked Questions item and the firm’s electronic order handling procedures.

PLY: Transparency is good for markets. Who knows soon we may even see the market makers of NLX, those oft-mentioned “butterfly Zorros”, unmasked…

LCH.Clearnet’s Australian Ambitions Dealt A Blow (subscription)
Anish Puaar – Financial News

Australian market participants hoping that the country’s incumbent clearer might be about to face some competition have been dealt another blow, after a report published this week suggested there was little need to open up the clearing market because post-trade costs in the country are already in line with global peers.

PLY: Ignore the headline and read the full article. ASX commissioning its own report is like the never ending battle between paper towel companies and hand dryer manufacturers for supremacy in how best to settle the public bathroom experience. Besides, even the mere threat of LCH competition keeps the monopolist ASX on its toes. True, its charges are not bad but they can always be improved – the concept “we’re in the middle of the peloton so we’re all right mate” is a pathetic example of old fashioned mutualist protectionism. Australia needs more competitive markets and the ASX blob is clearly keen to maintain a Dickensian monopolistic hold. LCH must fight on and fight on to win full access and hence provide a better deal for investors.

Exchanges Get Test To Curb Dark Trading In SEC Program
Dave Michaels – Bloomberg

U.S. stock exchanges will be permitted to test a restriction that could shift more trading to their venues as part of a pilot program announced by SEC. The test will prevent trading outside the exchanges unless a competing venue or broker offers a significantly better price or size lot to investors, according to an order posted on the SEC’s website yesterday.

PLY: Reg NMS continues to curse the US cash equity marketplace. I rather like this pilot concept. Price improvement being the prerequisite for a trade outside the established venues is quite logical – it encourages competition but also ought to help demolish egregious systematic internalisation which is a lot more toxic to best execution than, say, HFT. Now why didn’t anybody think of that originally?…well that’s one for the SEC historians clearly.

U.S. House Bill Calls For CFTC To Review Metals Warehouse Oversight
Douwe Miedema – Reuters

The U.S. commodities regulator will have to carry out a review of metals warehousing if a bill before the U.S. House of Representatives is passed, the latest sign of intense U.S. political pressure over the controversy at LME.

PLY: A spot of regulatory protectionism is par for the course in America’s parish pump of federal politics. The warehouse system may not have worked perfectly but then again it was mostly US Banks who skewed the process… The aspirations of extraterritoriality behind this politicking is a cause for concern – for all markets, not merely HKEx shareholders eager to see a return on the LME purchase.

CME Makes Proposal For Silver Pricing Mechanism In Partnership With Thomson Reuters (subscription)
Metal Bulletin

CME is working with Thomson Reuters to provide an alternative to the silver pricing mechanism and has made a proposal to LBMA, for a transaction-based, OTC, electronic auction platform, deploying the CME technology platform and the expertise of Thomson Reuters Benchmark Services.

EI reported on June 16th that ten different groups want to replace the historic London silver fix.

PLY: Another interesting bid as fixes have rather suddenly become a hotbed of competition and innovation…

Expelled From One, Expelled From All: FMC
Business Standard

To bring uniformity in commodity futures market, FMC has directed Indian exchanges to expel members who have been expelled by any commodity exchange.

PLY: Good.

Private Markets

California Lawmakers Pass Bill To Update Currency Law, Aid Bitcoin Users

California lawmakers on Monday approved a measure making it easier to use alternative currencies including Bitcoin, repealing what backers said was an outdated law prohibiting commerce using anything but U.S. currency.

PLY: Very good.

Bitcoin Auction Draws Wall Street, Silicon Valley Bidders
Carter Dougherty & Olga Kharif – Bloomberg

Buyers from Wall Street to Silicon Valley are lining up to bid on a cache of bitcoins worth $17.4 million, with Pantera Capital Management, a San Francisco hedge fund backed by Fortress Investment Group, and SecondMarket, a New York brokerage, among those seeking to buy bitcoins from the U.S. government at an auction scheduled for June 27. A broad swath of interested parties, from individuals to institutional investors, have requested information from the U.S. Marshals Service, which is handling the sale.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX is up 3% and FTIL up nearly 2% as Jignesh Shah’s bail is rejected (again).

Jignesh’s Bail Plea Rejected
Business Standard

A Mumbai court here on Tuesday rejected the bail application of MCX promoter Jignesh Shah arrested in connection with the NSEL scam. However, the designated Maharashtra Protection of Interest of Depositors (MPID) Act court judge D P Surana granted bail to Shah’s aide and former CEO of MCX, Shreekant Javalgekar. Shah will file an appeal in the Bombay high court against the rejection of his bail plea.

PLY: That Mr Javelgekar has received bail must have added to at least the short-term blow of Jignesh Shah spending another night in jail…

NSEL Urges Banks Not To Extend Credit To Defaulters
Dilip Kumar Jha – Business Standard

NSEL has urged banks to refrain from extending credit to its defaulters.

PLY: Sensible move – indeed would banks really be that… Okay, let’s just stick to praising NSEL.


NCX To Launch E-Trading System
Daily Times

Nigeria Commodity Exchange NCX) has revealed plans to inaugurate an electronic warehouse receipt system on July 10, 2014.

Volta Announces C4L PoP At Their Great Sutton Street Data Centre – C4L Chooses Volta To Expand Their Private Fibre-Optic 1-100Gb CoreTX Network In Central London

Bloomberg Vault Expands Enterprise Information Management Capabilities To ‘Dark Data’ – New File Analytics Capabilities Enable Firms To Mitigate Risk Exposure & Manage Unstructured Data Across The Enterprise


Physical Gold Contract To Be Launched On SGX In September
Channel NewsAsia

The world’s first exchange-traded, wholesale kilo gold contract will be created for the trade, clearing and physical delivery of the precious metal in Singapore, Minister for Trade and Industry Lim Hng Kiang announced on Wednesday (June 25).

Speaking at the LBMA Market Forum at Marina Bay Sands Convention Centre, Mr Lim said the contract is expected to launch on SGX this September.

Press release here.

PLY: A sensible move by SGX presumably with a clear interest in gaining business throughout the region but especially in China.

Career Paths

Bloomberg reports that A former counselor at the Mongolian Embassy in the U.K. was named acting CEO of the Mongolian SE.

MSE appointed Angar Davaasuren, 36, to take over from acting CEO Bolormaa Damdin immediately. Bolormaa had served since the departure of Altai Khangai in January.

Angar was a financial counselor at the Mongolian Embassy in London from 2011 to 2014 after working for the nation’s ministry of finance from 2002 and 2009. He has degrees in international finance and accounting from the Central University of Arkansas and the University of Liverpool.

Fidessa announced that it has appointed David Polen as Global Head of Electronic Execution reporting to Mark Ames, Global Head of Sell-side Services for Fidessa.

Financial Calendar


CME $0.47 Q2 dividend payment




BM&F BOVESPA R$145.7 mln (USD 61 mln) dividends payment
NASDAQ OMX $0.15 quarterly dividend payment

New announcement

CME results for Q2 2014 – July 31, 2014

CME press release here.

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

Share Notes

ICE CTO Edwin D. Marcial sold 2,000 shares Friday, June 20th at an average price of $195.92 (bargain $391,840.00). He now owns 21,911 shares. All ICE insider stock transactions are chronicled on this specific page.

Analyst Notes

ICE Downgraded By Wells Fargo To “Market Perform”
ITG Downgraded By JPMorgan Chase & Co. To “Neutral” – $19.00 Price Objective
Betfair “Neutral” Rating Restated By Credit Suisse – GBX 1,085 Target Price

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’ Muscles In On The Bond Market (subscription)
Thomas Hale – Financial Times

Crowdfunding is coming for the bond market. Two UK restaurant chains have raised fixed-income debt in the past week through Crowdcube, a crowdfunding platform with 75,000 registered users. Chilango, a Mexican restaurant chain, is looking to raise up to £3m through its crowdfunded retail bond.

PLY: Crowdfunded interest bearing instruments is going to be bigger than crowdfunded equity in the near future…provided the regulators don’t kill it first.

Volpit Equity Crowdfunding Platform Officially Launches
Samantha Hurst – Crowdfund Insider

Volpit, is a new UK startup investment platform.

Other stories

ESMA Publishes Updated EMIR Q&A

ESMA has published an update of its Questions & Answers (Q&A) document regarding the implementation of EMIR. The latest Q&As provide answers to frequently asked questions mostly in relation to the population of specific fields relating to reporting of data on exposures (i.e. collateral and valuations). The reporting start date for such data is 11 August 2014, which means that the first counterparties reports are due no later than the end of 12 August 2014.

Hong Kong’s Securities And Futures Commission Annual Report: Upholding Standards

The Securities and Futures Commission (SFC) Annual Report 2013-14, published today, underlines the SFC’s core mandate to safeguard market quality.

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