June 25 2015

elb2Today in Exchange Invest:

LBMA comes out opaquely against open markets, SGX chided over IT failures, ICE Singapore gains first clearing members, Stockholm stakes its claim to Euro-leadership after London in fintech as NASDAQ announces linkage with Chain for first blockchain programme. Repo reform delays in New York and much more, happy scrolling…

Meanwhile, when you think about the Greek crisis, do you end up wondering why there isn’t a proper rule book for the EU? I mean no exchange could waste this much time and have such elastic interpretation of deadlines, could it? (Not even the soggiest of old line mutuals methinks). Which deadline really matters? (I suspect the one where summiteers drain the Brussels Berlaymont wine cellar but apparently they have some low latency order management software to avoid such a presidential catastrophe).

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Public Markets

LSE Pre-Close Period Trading Update
LSE

…& good progress continues to be made on the Russell Investment Management divestment process.

MCX Sells A Part Of Its Warrants Of MSEI
Ashish Rukhaiyar – Livemint

MCX managed to sell a part of the convertible warrants it holds in Metropolitan Stock Exchange of India (MSEI) (former MCX-SX) before its expiry on 19 June. It could not be immediately confirmed whether the remaining warrants have expired.

MCX sold nearly 148.28 million warrants convertible into shares.

In March, MCX had sold 9.02 million warrants…Last week sold 182.5 mln warrants…

Post these transactions, MCX still held 400 mln equity share warrants in MSEI, as well as 4.14% of its equity capital. Assuming conversion, that would make its stake considerably above 5%…

Read our Premium Exchange Deals Brief.

MAS Reprimands SGX For Market Outages
MondoVisione
Findings & recommendations Of The SGX Board Committee Of Inquiry Into The breakdown On 5 Nov 2014
MondoVisione

SGX Reveals Cause Of Trading Outage (subscription)
Jake Maxwell Watts – Wall Street Journal
SGX To Invest $15 Mln In Tech Systems After Outages, Halts Fee Hikes
Anshuman Daga – Reuters

SGX will invest S$20 million ($15 million) to improve IT after suffering trading disruptions late last year (reported November & December), will not raise trading fees for the time being and will pay S$1 million ($743,000) into an education fund after two trading disruptions earned a reprimand from the city-state’s regulator and a bar on raising fees until fixes are cleared.

Read our Premium Magnus Bocker – SGX Reflections.

PLY: Essentially the infrastructure may not have been perfect but the edited reports seem to suggest it was all the fault of the machines. The ‘noises off’ emanating from the city state have all pointed in one direction: management failure in the face of a tech problem. The story goes, 2 top tech managers were away (one rather seriously ill – now happily well on the mend) and when the problems started, IT staff were apparently paralysed with fear. The human side of technology issues are usually the trickiest to deal with and in the case of SGX that seems to have contributed to the gravity of the problem from some unfortunate initial events.

ASX Raising The Bar On Executive Pay
Shaun Drummond – SMH

ASX CEO Elmer Funke Kupper will have the chance to earn more than a $1 million extra in bonuses under a new pay structure that experts say has set a new benchmark for all companies. 60% of his pay will be at risk, compared to 57% now, when the changes announced on Wednesday evening are introduced on July 1. But more than 70% of bonuses will be in shares that vest in between two and four years. It includes a new “target” short-term incentive of $1.75 million on top of his fixed pay, which is unchanged at $1.75 million. But EFK can earn up to a maximum of 150 per of this target, or about $2.6 million. This compares to a maximum bonus of $1.5 million now. But all of that is paid in cash, whereas 60% of the new bonus will be in shares – 30% available after two years and 30% after four years.

Read in Premium ASX Monopoly – Brief – Part 1, Part 2, Part 3.

PLY: Good to see some creative thinking has gone into some element of the ASX, pity it wasn’t more focussed on developing the business. Indeed as a monopolist, surely it would be more reasonable to pay Elmer in line with, say, the Australian civil service a similarly stodgy provider of monopoly services arguably blithely regardless of modern customers.

US Futures Regulator In Call To Tackle Industry ‘Culture Problem’ (subscription)
Gregory Meyer – Financial Times

CFTC commissioner Sharon Bowen has advocated taking a page from the UK and passing a new rule tightening governance of derivatives marketplaces to cure what she called a “culture problem” pervading finance.

She said in written remarks prepared for delivery late on Wednesday that a proposed measure on governance and conflicts had languished too long at the agency, while large organisations had continued to violate market rules.

PLY: A lengthy series of declarations of war on markets – the one on retail forex having to go on exchange is certainly to be applauded. The idea of SRO/commercial operations overlap remains somewhat of a canard in many respects although exchanges have left themselves wide open to a full frontal attack by not reining in the ‘Hound’ and many other egregious manipulators.

NY Fed Says Last Pieces Of Repo Reforms May Take Longer Than Expected (subscription)
Katy Burne – Wall Street Journal

The NY Fed BNY Mellon and J.P. Morgan Chase, amongst other market participants would likely need more time to complete remaining overhauls in a corner of financial markets that contributed to the 2007-2009 crisis.

Previous discussions re. the repo market here and here.

Sebi To Register Commodity Brokers From August
Dilip Kumar Jha – Business Standard

This will coincide with completion of the guidelines for merging FMC with itself. Sebi is preparing its own regulations for commodities derivatives, to be ready by end-August, and to be ready for regulating comexes by September.

Read our Premium SEBI-FMC Merger Brief.

ICE Clear Singapore Announces First Three Clearing Members
ICE

Osaka Exchange: New Products & Trading Rule Revisions With Launch Of Next Generation Derivatives Trading System
MondoVisione

Private Markets

The Initial Approval On Converting The Amman SE To Shareholding Company
MondoVisione

The Council of Ministers approved in its session dated June 17, 2015, in-principle, on converting the Amman SE (ASE) to a public shareholding company.

PLY: Hooray, another marketplace joins the for profit universe.

DigaTrade Bitcoin Exchange Launching In Vancouver
Stephen Hui – Straight

Bit-X Financial Corp. aims to compete with Bitstamp. Brad Moynes says he wants to build the E-Trade of cryptocurrency.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX and FTIL off 1 percent or so.

NSEL Investors Pin Hopes On SEBI
The Hindu Business Line

SEBI’s intention to complete the merger of FMC by September-end has given fresh hopes to NSEL investors, who are fighting a prolonged legal battle to recover their investment.

Read our Premium

NSEL Scandal Brief – Part 16
SEBI-FMC Merger Brief

PLY: The latest (forlorn?) escapade in the ongoing saga where NSEL creditors pin the tail on a donkey they hope will help resolve the problem.

Technology

New Report Confirms Stockholm As Europe’s No. 2 FinTech City
Cinnober

Over the past five years, companies in Stockholm received 18 percent of venture capital inflows to European FinTech companies, according to a fresh report from the Stockholm School of Economics (SSE), establishing Stockholm as Europe’s No. 2 FinTech city, after London.

Summary of the report: Stockholm – Europe’s No.2 FinTech city

The full report: Stockholm FinTech – An overview of the FinTech sector in the greater Stockholm Region.

PLY: The British chest beating urge is eager to assert London’s leadership in fintech although I would argue it is not, that, spectacular, merely feeding the existing financial frenzy. Stockholm has the best claim to building a real ecosystem – after all a multiplicity of businesses have emerged from the OM empire over the years which has made Stockholm a truly global fintech centre…and of course that’s before we consider its growing satellite centres such as Umea.

It is also unsurprising that from Stockholm, via the good offices of Cinnober, has emerged the idea of FIQA, not merely ‘coffee and cake’ but a sensible initiative to create better software protocols. Hopefully a united Swedish fintech sector will soon be driving this forward, alongside the rest of the world.

Nasdaq Migrates Disaster Recovery To Equinix’s Chicago Data Center
GLOBE NEWSWIRE

Nasdaq Selects Bitcoin Startup Chain To Run Pilot In Private Market Arm
Laura Shin – Forbes

Nasdaq OMX has named San Francisco-based startup Chain as its partner for a pilot (announced in May) to test Bitcoin technology for the trading of shares in private companies.

Nasdaq press release here.

Barclays Bets On Blockchain & Startups To Re-Invent Finance
Finextra

Barclays’ fintech accelerator programme is beginning to bear fruit, with the bank forging working relationships with several startup alumni involved in areas such as cybersecurity and the blockchain. Of the 10 firms to take part in Barclays’ 13 week programme in London seven are now “exploring opportunities” with the bank. Safello has signed a proof of concept to explore how blockchain technologies could be harnessed in the financial sector; Post Quantum has inked a contract to implement its cyber security tech at the bank; and Stockfuse is in advanced talks to launch a Global Market Insight Game later this year, which would form part of the bank’s graduate recruitment campaign.

Products

LBMA To Start Reporting OTC Gold Trade Soon; Exchange Model Seen As Costly
A. Ananthalakshmi – Reuters

LBMA could soon take steps to report trades of the OTC gold market, but the prospect of higher costs makes an exchange-traded model unattractive to participants for now

LBMA had commissioned consultancy EY (reported earlier this year) to review the London gold market and recommend further developments including the possibility of creating an exchange for gold trading in the city.

PLY: Hmmm, this report appears to raise more questions than it answers. CCP ‘adding cost’ is a curious conundrum as the evidence elsewhere suggests precisely the opposite for every product which has been unleashed on a liquid, transparent marketplace.

Perhaps the LBMA can demonstrate a commitment to transparency and publish the results of the EY study to aid market comprehension? LBMA is, after all, in a delicate position as a broad church trade organisation with a variety of commercial and lobbying interests.

China To Launch Yuan-Denominated Gold Fix This Year
Reuters

Shanghai Gold Exchange will launch a yuan-denominated gold fix by the end of the year, aimed at giving China more influence over the pricing of the precious metal.

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

LSE To Waive Admission Fees For Retail Charity Bonds
LSE

…that list on its Order book for Retail Bonds (ORB).

Twenty Years Of Evolution & Innovation For JSE’s Commodity Derivatives
MondoVisione

JSE is celebrating the 20th anniversary of its Commodity Derivatives Market.

PLY: Plaudits all round, to current boss Chris Sturgess and those who shaped the market in its early days, from SAFEX CEO Stuart Rees (who sadly passed away last year) to his successor Patrick Birley and of course the indefatigable Rod Gravelet-Blondin whose approach to meeting the market to educate them about grain trading was a legendary marathon ‘meet the market’ effort, a hefty six figure drive throughout the vast, spectacular countryside… Happy Birthday JSE/SAFEX/Commodity Derivatives Market, you have transferred much risk with cost effective aplomb.

Indexes

JPX To Launch Mothers Index Futures In Mid-2016
Reuters

The Mothers Index tracks startup stocks on the Tokyo SE.

Career Paths

Warsaw SE received the resignation of Mr. Piotr Piłat from the position of member of the Exchange Supervisory Board as of 24 June 2015 ahead of the AGM.

ESMA Annouces Two Vacancies For SNEs – Markets & CCPs
MondoVisione

The vacancies are for SNE posts, one with market profile and one to work on CCP stress tests. For further information and to apply, please see the Vacancies page.

Financial Calendar

This week

CME $0.50 Q2 2015 dividend payment – June 25
Nasdaq $0.25 quarterly dividend payment – June 26

New announcements

CFTC Division of Market Oversight public roundtable on July 15, 2015, to discuss the Commodity Exchange Act’s trade execution requirement and the process of making MAT determinations (announcement here).
Thomson Reuters Q2 2015 Financial Results – Wednesday, July 29, 2015 (announcement here)
CBOE Q2 Financial Results – Friday, July 31, 2015

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

Crowdfunding

New Montana Crowdfunding Securities Laws Take Effect July 1
abc FOX Montana

Other stories

Optiver Pays $17m To Settle Oil Manipulation Suit
Financial Times

Optiver has finalised a $16.75m settlement with a group of investors over allegations it was part of an unlawful scheme to manipulate energy futures 8 years ago.

Keynote Speech Of CFTC Commissioner Sharon Y. Bowen Before The Quadrilateral Meeting At The ECB (Frankfurt, Germany)
MondoVisione

SIFMA President & CEO Kenneth E. Bentsen, Jr. Remarks For The ASIFMA/SIFMA China Summit
MondoVisione

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