June 30 2014


Summer shows few signs of disturbing the Exchange Invest news flow this week! Commissioner Barnier endeavours to create global derivatives agreement as opposed to Trans Atlantic silo Balkanisation. Perhaps 10 bidders for SIP feed with NASDAQ back in the hunt, FMC gains regulatory powers in India as Jignesh appeals custody (again). Various reflections on LSE while Barclays is back in the spotlight thanks to NY AG action. China looking at domestic gold fixing while vendor STT unveils system at Dar Es Salaam bourse. LSE future pondered post Russell as Millennium client Aequitas files Canadian regulatory application while LSE Group loses bond and repo market legend from the MTS team.

Meanwhile if you like the free stuff and want to support us building out the industry platform for markets, please join our top tier, it’s only $120 and keeps this daily newsletter free. Recent stories include:

Euronext: Separation Anxiety?
– as we race to pixel, Euronext shares

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

Public Markets

EU Throws Down Gauntlet To U.S. Over Derivatives
Huw Jones – Reuters
Europe Calls On US To Recognise Overseas Clearing Rules (subscription)
Philip Stafford – Financial Times
Statement By European Commissioner Barnier On Global Derivatives Regulation

The EU will help build a seamless global market in financial derivatives by accepting rules used in five countries, adding the US would get the green light too if it showed flexibility.

PLY: That brilliant tome of logic puzzles by Raymond Smullyan “What is the Name of this Book?” includes the classic “what happens when an irresistible cannon ball hits an immovable post?” The EU is right to seek a broad multinational solution while the US is in danger of resembling a rather narrow interest protectionist enterprise against which Europeans are building a simmering resentment at US authorities apparently suing foreigners (and citing out of state folk) first… Incidentally, the Exchange Invest mailbox is simmering with resentment right now over treatment of BNP Paribas and indeed amidst 50 odd US venues, it does seem a remarkable coincidence that one owned by a foreign bank with a major counterparty in Kansas, would be the first to attract the unsealed ire of the NY AG…

NYSE, Nasdaq Join Bidding To Operate Data Feed (subscription)
Bradley Hope – Wall Street Journal

NYSE and Nasdaq are among the roughly 10 companies bidding to operate the Securities Information Processor for Nasdaq-listed stocks. Other bidders to run the Nasdaq SIP include Thesys Technologies LLC, which is the infrastructure arm of the HFT firm Tradeworx, and S&P Capital IQ with bids due by the close of business Friday.

LSE Deal Heralds Indexing Overhaul (subscription)
Chris Flood – Financial Times

Rapid changes are sweeping across the indexing industry, with ownership of some of the most important companies changing hands.

PLY: The latest wave since CME began the exchange consolidation of index providers which continued with deals like the FTSE being concentrated in LSE hands.

What LSE Could Buy After Russell (subscription)
Tim Cave – Financial News

PLY: Excellent piece by Tim Cave reflecting last week’s announcement of a $2.7 billion deal to acquire Frank Russell.

ICE Offers New Rebate & Fee Cut On Liffe (subscription)
Luke Jeffs – FOW

ICE has introduced a rebate and cut fees on Liffe in a bid to boost trading in slower months, promising clients £0.25 for each lot traded in specific months across Euribor, Sterling and Euroswiss futures.

PLY: There has been a lot of fascinating, apparently gentle, movement in the LIFFE tariff base which has significant ramifications for the future of ICE and markets.

Dark Pool Spotlight Falls On Tradebot (subscription)
Philip Stafford & Arash Massoudi – Financial Times

When the NY AG sued Barclays last week, for allegedly misleading investors who use its anonymous “dark pool” trading venue, some of the world’s largest banks withdrew their business. But at the centre of the lawsuit was a small and little-known US algorithmic trading business, called Tradebot Systems.

From its offices in Kansas City – far from the financial hub of New York – Tradebot wears its outsider status proudly.

PLY: The visionary Dave Cummings and his remarkable inventions Tradebot (and that “Better Alternative Trading System” – wonder what happened to them? …I’ve heard on the low latency bush telegraph that they are doing rather well…) have had significant impacts on markets.

Share Trades: Murky Pools (subscription)
Michael MacKenzie, Kara Scannell & Nicole Bullock – Financial Times

Inside Barclays’ US headquarters in Times Square, it was known as “The Franchise”.

PLY: Excellent pacy investigative writing by the FT today, outlining the story of Barclays’ dark pool. So far no direct mention of Bob Diamond but presumably as this story unfolds the fourth estate will be seeking his direct involvement or oversight of what promises to be another unfortunate moment in the history of Barclays, a bank which from my experiences of years gone by, ought to have stuck to their core incompetencies as opposed to expanding into the leveraged world of high finance…

Barclays’ Slowly Improving Reputation May Disappear In These Murky Waters
The Guardian

Little wonder that Antony Jenkins, the boss of Barclays, declared his “deep disappointment” and “frustration” at the latest allegations of wrongdoing facing the troubled bank.

PLY: Perhaps the most shocking issue to me is that Barclays had any reputation to start with. As a retail and small business customer in the UK years ago, I experienced an institution which consistently found simple core banking practice, er, challenging.

Barclays Enlists Outside Help In Dark Pools Probe
Steve Slater – Reuters

PLY: Really Barclays only made one mistake aka keeping all the banking operations when they sold off the ETF business – I maintain they ought to have done the opposite…

Dark Pools Here To Stay Says Broker Conflict Researcher
Doni Bloomfield & Sam Mamudi – Bloomberg

“Dark pools have existed forever,” notes Robert Battalio of the University of Notre Dame. “You can shut down these dark pools and just new forms will arise somewhere else.”

Network Proposal Could Relieve Liquidity Drought (subscription)
Anna Irrera – Financial News

PLY: A bit of a “he says she says” discussing possible ways to improve bond market liquidity. Clearly the bond market is on the cusp of many great things (and possibly a rather “great” crash too…).

NZX Conflicts Of Interest Addressed
Daily Mail

The Financial Markets Authority has given NZX a pass mark for compliance with regulatory obligations, while raising concerns about perceived conflicts of interest at the stock exchange operator.

New Zealand’s Financial Markets Authority Publishes Annual Review Of NZX Regulatory Obligations; 11 Agreed Actions

Private Markets

The Aequitas Neo Exchange Applies For Formal Approval With The Canadian Securities Administrators – OSC Staff Requests Comments On Aequitas Exchange Application

Aequitas Innovations is pleased to announce that a formal exchange application for its new marketplace – the Aequitas Neo Exchange – has been filed with the Ontario Securities Commission and the other securities regulators in Canada. In response to the application, the OSC has published a copy of the application for information and comments by all industry stakeholders. The deadline for comments to the OSC is Tuesday, August 26, 2014.

Aequitas Pledges ‘Speed Bump’ To Slow High-Frequency Traders
CBC News

Aequitas Exchange, a proposed new Canadian stock market backed by the country’s largest bank and several large financial firms, plans to launch four trading books, including one that will include a “speed bump” and large fees to deter HFT strategies.

EI reported on June 4th that Aequitas selected MillenniumIT to power the market.

PLY: I wish Jos Schmidt and his team every success with their latest venture.

Bloomberg SEF Success Leads To Fee Criticism (subscription)
Peter Madigan – Risk

Bloomberg is not exactly a new face in the swaps market, but post-crisis reforms have allowed it to dramatically expand its influence. While its customers will welcome this, detractors claim the company’s terminals business allows it to undercut competitors, and creates an incentive for it to obstruct third-party service providers.

PLY: New entrants must make the most of the advantages and the weak spots of entrenched vendors. Bloomberg lived by that mantra when they first burst onto the scene in the 1980’s and now they have the position of an oligopolist in trader connections which means their ability to pivot must be significant too as they face the threat from upstart competition.

NSE To Set Up Service Centre In Lucknow
Jayanta Deka – Times of India

In a circular released on Friday, NSE said that from Monday onwards investor service centres will be opened at Vadodra, Patna and Lucknow.

‘SEBI Will Not Interfere In Regional Stock Exchange, Clearing Corporation Deals’
Jayanta Mallick – The Hindu Business Line

SEBI Executive Director Murlalidhar Rao said on Saturday that the regulator would not come in the way of an arrangement between a regional stock exchange and a clearing corporation, provided the deal followed the existing regulations.

PLY: Good. It is a sign of the over-regulation of the Indian marketplace that SEBI even says such a thing but at least the answer is the right one from every angle!

India – FMC May Get Search And Seizure Powers
Shishir Sinha – The Hindu Business Line

The Government is considering empowering commodity market regulator FMC, with search and seizure powers, similar to that of SEBI. This will be part of proposed Forward Contract Regulation Act (FCRA) Amendment Bill.

PLY: Given such powers already rest with SEBI and given how many warehouses within the NSEL scheme appeared to push the envelope of being er, “virtual” search and seizure powers would be useful if used judiciously.

China Eyes Gold Market Clout With New Exchange
Business Recorder

China must have a bigger influence on the global gold market being the top consumer of the precious metal, the head of state-backed Shanghai Gold Exchange (SGE) said, as the country targets establishing its own pricing benchmark. “We should have gold fixing, pricing done in China itself,” SGE chairman Xu Luode told an industry conference in Singapore on Wednesday.

PLY: Just as London regroups the silver fix and the future of the gold fix comes under scrutiny as to its future, as have Chinese officials wondering what they don’t have a domestic fix… London needs to be careful it maintains core aspects to its financial centre influence…

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX is up 1.5% with FTIL flat, are deals perhaps in the offing at last for that 24% FTIL stake?

After another weekend bathing in “Shahdenfreude” readers of an anti-Jignesh persuasion ought to note:

Jignesh Shah Files Fresh Bail Plea In Bombay High Court

Jignesh Shah has filed a petition in the Bombay High Court challenging an order of a special court refusing to grant him bail.

PLY: The reasons for continued incarceration laid bare: “if Shah was released on bail, it is likely that he may tamper with evidence or hamper probe.” Mr Shah presumably demurs on the basis that he doesn’t know anything…


DSE Successfully Goes Live With New System From STT

Dar es Salaam Stock Exchange (DSE) have successfully gone live with Securities and Trading Technology (STT)’s integrated trading, clearing and settlement technology.

PLY: The origins of STT lie, as I recall, in the origins of South African gilt trading automation and this exchange is another step forward for an excellent vendor with increasing reach.

Ullink Plans NYFIX Revival Following Purchase From ICE
Elliott Holley – Banking Technology

PLY: Discussing the morph of Ullink now it has acquired NYFIX and Metabit from the nightmare on Wall Street that was the now largely defenestrated NYSE Technologies.

HKEx Launches The Orion Central Gateway

HKEx on Friday announced the successful launch and completion of the stabilisation period of the Orion Central Gateway (OCG), a new centralised access point that enables Stock Exchange Participants (EPs) to connect their order management systems to HKEx’s securities trading system.

Volta Data Centre Welcomes The SPN Alliance As A New Dark Fibre Network Provider – The SPN Alliance To Offer Their Member Networks Dark Fibre Connectivity From Volta’s Great Sutton Street Facility

Markit Eyes Federated Chat Integration Capabilities (subscription)
Faye Kilburn – waters technology

Markit is building out the integration services component of its Collaboration Services initiative, an open messaging network for financial professionals to communicate and share information across any messaging platform.

Quincy Data Announces Major Expansion Of Service – Equity & Energy Futures Sourced At 350 E. Cermak And Cash Treasuries Sourced In Carteret At Lowest Known Latencies

Quincy Data announced a major expansion to its Quincy Extreme Data service, adding select Equity and Energy Futures sourced at 350 E. Cermak and select Cash Treasuries sourced in Carteret and distributed widely at the lowest known latencies. Quincy now distributes data from eight exchanges to major trading centers in Illinois, New Jersey, the UK and Frankfurt.


Euronext Considers Protein Standard For Paris Wheat Futures
Business Recorder

Euronext is consulting the grain sector over whether to add a protein specification to its Paris-based milling wheat futures, in a response to efforts in France to raise wheat quality for export, the exchange operator said on Thursday. The wheat contracts are a price benchmark in Europe and a window for Euronext as it tries to grow in derivatives.

PMEX Plans To Launch New Investment Products
Salman Siddiqui – The News

Pakistan Mercantile Exchange (PMEX) – a web-based demutualised commodity exchange – is planning to launch new investment products.

Career Paths

Gabriele Frediani, the polyglot living legend of the Bond markets, has resigned as Head of Markets at LSE subsidiary MTS. Given his broad experience throughout the bond and repo business, we anticipate exciting news in due course for Gabriele’s highly valued services.

SEC announced that Geoffrey Aronow, the chief counsel and senior policy advisor in the Office of International Affairs, will leave the agency this month. Mr. Aronow joined the Commission in January 2013. Meanwhile, Adam D. Storch, COO and managing executive of the Enforcement Division, is leaving the agency next month.

Financial Calendar


ICE $0.65 Q2 dividend payment

This week

Record date ICAP 15.4p final dividend

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

Analyst Notes

Credit Suisse Upped Their Price Objective On LSE From GBX 2,220 To GBX 2,350 – “Outperform” Rating

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.


Lending Club Has Started Process Of Going Public (subscription)
Telis Demos & Ianthe Jeanne Dugan

Lending Club Corp. has started on its anticipated process for going public, tapping banks including Morgan Stanley and Goldman Sachs to work on an IPO later this year, people familiar with the matter said. The offering could come by the end of the year and could raise more than $500 million. Lending Club was valued at nearly $4 billion in a recent fundraising.

Other stories

CFTC Further Extends The Reopened Comment Period For Its Rulemaking Proposals On Position Limits For Physical Commodity Derivatives & Aggregation

CFTC submitted for publication in the Federal Register a 30-day extension of the comment period for two rulemakings:

A proposed rulemaking to establish speculative position limits for 28 exempt and agricultural commodity futures and options contracts and the physical commodity swaps that are economically equivalent to such contracts (Position Limits Proposal);

A proposed rulemaking to amend existing regulations setting out the Commission’s policy for aggregation under its position limits regime (Aggregation Proposal).

WFE Offers Support To SEC Chairman White
Business Wire

The BoD of WFE, a global trade association of publicly regulated exchanges, announced that it has submitted a letter of support to SEC Chairman Mary Jo White. The letter commends the regulator’s determination to ensure the safety of regulated markets and offers the WFE’s full assistance as SEC continues to develop guidelines on exchange oversight and risk mitigation. The public letter was signed by Andreas Preuss, Chairman of the WFE BoD, and Hüseyin Erkan, WFE CEO.

Establishment Of The Global LEI Foundation

The FSB Plenary, in its capacity as Founder of the Global Legal Entity Identifier Foundation (GLEIF), has approved the necessary documents to create the GLEIF and is filing the papers with the Swiss authorities to establish the GLEIF as a Swiss not for profit Foundation.

PLY: It won’t be as high profile as FIFA but then again we live in hope it won’t be so immersed in scandal either…

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