June 30 2016

elb2Thanks to Cinnober for hosting a splendid TradEcho launch last evening in London hosted by Jamie Khurshid and Ulf Axman. It’s a great project for both them and LSE, which I am sure will deliver a “win win.” Overall, it’s a busy day for news. Bob Greifeld exudes common sense (a quality singularly lacking the world over, post Brexit), while IEX adds simply the perfect name as Chairman. And there’s a lot more, including a potentially seismic data ruling, happy scrolling:

In the parish, the ICDA CyberRisk conference in London, July 20th is an interesting upcoming event, secure a place at GBP 295 with the Exchange Invest code YOUNG295.

Meanwhile, you can now access my Brexit files in Premium through this contents directory: Brexit – Main File. Contrary to the rubbish in the mainstream media, London is not burning, nor is it on strike (that’s Paris & Brussels). A few stubborn folks are struggling to get their heads around the concept that democracy amounts to more than what your Facebook friends agree on. However, the mood is growing in line with my optimism as Britain moves forward as the world’s 5th largest economy ought, to a bright future and world markets improve in the purest sense.

Public Markets

CME May Pick Up Stake In MCX

The Economic Times

CME is keen on picking a 15% stake in MCX. It can buy shares straight from the market if the limits, toting up to 49%, are made fungible but may have to negotiate direct with existing shareholders. Kotak Mahindra Bank, with 15%, is the single-largest shareholder, while FPIs like Blackstone, Goldman Sachs and Smallcap World Fund together hold 15.29%.

 

Brexit Won’t Deter DB1 From LSE Merger (subscription)

Friedrich Geiger – Wall Street Journal

DB1 To “Devote All Efforts” To Making LSE Merger Work

William Turvill – CITY A.M.

Chairman Joachim Faber: “it is more important than ever to maintain a stable financial link” to the UK and said the merger can play a “key role”.

Faber made no mention of the location of the merged company’s HQ.

PLY: As noted previously, a core weakness of DB1 is the profoundly inflexible management structure which has clearly not been helped by the added stubbornness apparent from the investment bankers added to the mix from CarCrash down. This farago ends without a deal. The parish knows that, the only people who seem unable to grasp that crisp English term, realpolitik, are DB1 & LSE. All the festering flaws of DB1 are writ large with little, if any, action being taken to ameliorate the situation. Frankly it’s sad to see. I won’t be happy when this deal finally falls apart but shareholders in both names ought to be furious. I mean even the FT thinks so now:

LSE-DB1 Dealmakers Were Wrong To Ignore Brexit Risk (subscription)

Sarah Gordon – Financial Times

Anyone who believes that the DB1-LSE merger is going ahead must have their head buried in the sand. Just like the people who designed the deal.

PLY: The Brussels Bugle has, it seems, caught up with Exchange Invest.

ISE Sale Clears One Hurdle For LSEG, DB1 Deal

Reuters

The recommended all-share merger between LSE and DB1 is subject to certain Conditions, including one that relates to ISE. ISE disposal is subject to customary closing conditions which will be satisfied shortly and, accordingly, completion of ISE disposal is expected to take place on or around 30 June 2016.

PLY: All parties are clearly pushing to complete the deal and I am sure we will hear news imminently.

QV Premium: DB1-LSE Merger Brief.

 

The Overblown Brexit Market Panic (subscription)

Robert Greifeld – Wall Street Journal

Stocks are already settling down. Maybe people realize that Britain could become a free-trade model.

PLY: Spot on commentary from Bob Greifeld which echos my own long-held views. My latest radio interview with Sputnik can be heard here on the topic.

 

Paris, Frankfurt Are Already Jockeying for City’s Brexit Spoils

John Detrixhe, Birgit Jennen & Helene Fouquet – Bloomberg

The British seat at the EU summit had been empty for less than 24 hours before leaders from France and Germany were haggling over one of the U.K. economy’s crown jewels: the business that facilitates trading in euro-denominated derivatives.

PLY: Dreams and delusion are still big amidst the Euro Crisis zone it seems. I have a client conference call on the topic this afternoon London time and will be available to discuss this next week one to one with any clients interested.

Hollande Takes Aim at City of London in Euro Clearing Threat

Helene Fouquet & John Detrixhe – Bloomberg

The City of London is facing the first direct threat to its role as Europe’s dominant financial center as French President Francois Hollande takes aim at a key pillar of the U.K. industry.

PLY: I can only imagine bankers excited beyond belief at heading to a strike torn, borderline dysfunctional, high tax, utterly immobile command economy where the government controls 57% of economic action… American banks are doubtless first in line, oh sorry, “the queue,” as the TransAtlantic erudite President Obama once remarked.

Why The EU’s Euro Clearing Brexit Threat May Never Happen (subscription)

Philip Stafford – Financial Times

PLY: Paris: “We’re open for business and expect Euro clearing to happen in our city” translates as “we will use any protectionist lever to try to cling to our untenable economic model as our incoherent economic position assiduously endeavours to deliver an economy worse than a bad day in 1970’s South America.”

Not So Fast, François: EU Clearing Land Grab Is Complex

Philip Alexander – Risk

ECB cannot (yet) make post-Brexit demand for euro clearing to leave London.

 

London’s Trade Warehouses Face Brexit Disruption (subscription)

Tim Cave & Anna Irrera – Financial News

The Brexit vote could force European trade repositories, a key part of the plumbing of financial markets, to move more of their operations out of the UK and into the eurozone because of their direct supervision by EU authorities.

PLY: “Could” indeed.

 

City To Be Sidelined By CMU Plan (subscription)

Financial Times

European officials say UK’s departure removes hurdle to centralising oversight of trading and clearing.

QV Premium: EU CMU Brief.

PLY: The Brussels Bugle is simply not a reliable source of unbiased operation, being little more than the lapdog of the EU, alas. Parish Kremlinologists will however be interested to see it as the kite flying journal of the Euro-blob as is the case here. On a broader scale, the biggest, clearest casualty of the past week has been the pretence of a free thinking media in much of the Anglosphere, led by Britain. The FT, alongside the BBC, have been in the forefront of hideously inaccurate reportage. Not it has to be said that any US organ has distinguished itself either. The “caveat emptor” phrase has never been more pertinent than in the Brexit scenario where most everything written is of dubious reliability when it comes within a few standard deviations of hot type and a dead tree.

 

Singapore’s Bid For Baltic Exchange Underlines Diversity Concerns (subscription)

Jeevan Vasagar – Financial Times

The decision by SGX to bid for London’s Baltic Exchange seems natural given Singapore’s historic roots as a trade and shipping hub. But it also highlights the pressure SGX’s new CEO, Loh Boon Chye, is under to diversify, following a woeful year for new equities listings on the bourse and competition from regional centres.

 

London-Shanghai Stock Link Talks Continue Despite Brexit

Michelle Price – Reuters

Talks continue between LSE & SSE over a potential stock link, though Brexit could affect implementation.

LSE Oficial: Role Of LSE As Fundraising Platform For China Won’t Change After Brexit (subscription)

Enoch Yiu – SCMP

Brian Schwieger: LSE will continue to be an international fundraising platform for the Chinese government and private companies despite Britain’s vote to leave the EU last week.

 

Judge Rules for Exchanges in Fight With Brokers Over Market-Data Fees (subscription)

Dave Michaels – Wall Street Journal

Decision is expected to be appealed to full, three-member SEC.

PLY: This has significant ramifications in the US and may also impact the market on the other side of the Atlantic as a judge has upheld the exchange side of the argument against previous fee increases.. Good news for markets profiting from data and indeed somewhat seismic when you take a few minutes to consider the ruling.

 

CFTC Releases Rule Enforcement Review Of The CBOE Futures Exchange, LLC

MondoVisione

Private Markets

BSE Secures Shareholders’ Nod To Launch IPO Through Offer For Sale

Jayshree P. Upadhyay – Livemint

BSE counts foreign stock exchanges, such as the DB1 and SGX, among its shareholders. They hold 5% each. The total foreign holding in BSE is at 31%. Domestic shareholders include Life Insurance Corp. of India (LIC) and State Bank of India (SBI), holding 4.84% each.

BSE first approached Sebi with a listing plan in January 2013. BSE is seeking a valuation of Rs.400 (USD 5.91) per share, which would value the exchange at Rs.4,367.05 crore (USD 646m). The exchange has a market share of less than 10% in the mainstay cash equities business.

Larger rival NSE is also looking to file share sale documents for an IPO by January and a foreign listing by April. (NSE valuation USD 2.65-2.8B).

 

Israel Moves to Make TASE For-Profit

Haaretz

Finance Minister Moshe Kahlon will submit a bill to change the structure of the Tel Aviv SE (TASE) to a for-profit entity to cabinet ministers on Sunday.

TASE’s members approved a demutualization plan last year for Israel’s stock market, which is struggling with falling trading volumes and a declining number of listed companies.

 

MSEI May Seek Rs 800-cr (USD 118m) Compensation From NSE

Shrimi Choudhary – Business Standard

The Metropolitan SE (earlier MCX-SX) plans to seek compensation of over Rs 800 crore (USD 118m) from the National SE (NSE) on account of losses it made due to zero-pricing strategy adopted by the former in the currency derivatives segment.

 

Vietnam SE To HQ In HCMC

Saigon GP Daily

Prime Minister Nguyen Xuan Phuc has approved Ho Chi Minh City’s proposal to headquarter Vietnam Stock Exchange in Ho Chi Minh City. The Vietnam SE will be established after a merge between Ho Chi Minh City SE (Hose) and Hanoi SE (HNX). Hose or HXS is the first bourse established in Vietnam in 2000. Its capitalization value accounts for over 88% of the country’s securities market.

The Ministry of Finance and HCMC has invested VND800 billion (US$36 million) in building a modern IT system and VND400 billion (US$18 million) in the headquarters in preparations for the establishment of the Vietnam SE.

QV Premium: Vietnam Exchanges Merger Brief.

 

China Opens Guangzhou Clearing Corp Specializing In Commodities

EconoTimes

China set up its first commodities clearing house for business in Guangzhou, Guangdong, linking five commodity exchanges. The commodities clearing house is projected to record total annual transactions of CNY 150 billion (USD 22.6 billion). Guangzhou Clearing was registered in March of last year.

QV Premium: China Capital Markets Transformation Brief – Main File.

 

$22M Worth Of BTC Sold In Australian-First Auction

CCN

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX and FTIL flat to slightly firmer as more attachments loom but still no asset sales:

ED To Widen Probe, File Fresh Attachments

Indian Express

The agency had filed a 20,000-page charge sheet against NSEL and 67 others in a Mumbai court in March last year.

Don’t Look To Us For Action, Sebi Tells NSEL Investors

Shrimi Choudhary – Business Standard

Despite being aware of the several lapses at NSEL, Sebi could not intervene in the matter as the commodity spot market did not come under its jurisdiction, the regulator clarified in a letter to NSEL investors.

QV Premium: NSEL Scandal Brief – Part 16.

Technology

ALTX East Africa Unveils Exchange Platform

Antony Peyton – Banking Technology

GMEX technology powered ALTX East Africa has launched its new exchange – offering the ability to handle 150,000 transactions per second.

ALTX East Africa says prospective investors can get delivery of funds and securities within a day on ALTX. while ALTX is the first exchange to offer settlement in less than three days in East Africa.

Last year, GMEX acquired a 25% stake through its GMEX Technologies (GMEX Tech) subsidiary in the Mauritius-based ALTX Africa Group. ALTX wholly owns ALT-Xchange (ALTX Uganda) and ALT-X Clearing (ALTX Clearing).

PLY: Good to see GMEX-powered ALTX up and running.

 

Clearing Houses Must Be Able To Recover From Hacking In Two Hours

Huw Jones – Reuters

PLY: Interesting and no doubt a topic for conversation at the ICDA CyberRisk conference in London, July 20th (secure a place at GBP 295 with the Exchange Invest code YOUNG295).

 

Regulators Use Silicon Valley’s AI To Catch Rogue Traders (subscription)

Financial Times

Algorithms blamed for contributing to flash crashes can detect market manipulation.

PLY: Ditto.

 

CPMI-IOSCO Release Guidance On Cyber Resilience For Financial Market Infrastructures

MondoVisione

Products

ICE Targets “Point & Click” Traders With Eurodollar (subscription)

Alice Attwood – FOW

ICE has made changes to its Eurodollar contract in a bid to make the struggling product more attractive.

 

Kenya’s Bourse Scales Back Its Derivatives Ambitions

Reuters

Nairobi Securities Exchange will launch trading of derivatives by the end of 2016, after a series of delays, but plans to start with fewer instruments than originally planned.

 

Markit Launches Real-Time Bond Pricing – Markit Expands Its Bond Pricing Offering With Live Prices

MondoVisione

 

Winklevoss Brothers Choose BATS Over Nasdaq For BTC ETF Listing

Gertrude Chavez-Dreyfuss – Reuters

PLY: More traction and publicity for the BATS ETP listing model.

Career Paths

Bloomberg reports that IEX Group added former SEC Chairman William Donaldson to the board of its soon-to-open Investors Exchange.

Donaldson ran the SEC from 2003 to 2005, when it developed a landmark rule called Regulation NMS that reshaped the stock market, fueling the speed-dominated trading environment that IEX is now trying to tame. The 85-year-old also co-founded investment bank Donaldson, Lufkin & Jenrette Inc. and was Chairman & CEO of NYSE in the 1990s.

He’s joining the board along with Jonathan Mariner, the former chief investment officer of Major League Baseball, and Jeff Charney, insurance company Progressive Corp.’s CMO.

They’ll sit on the board of the Investors Exchange, the trading platform set to open in mid-August, not the parent company, IEX Group.

PLY: This is brilliant news. Mr Donaldson is a legend in the securities industry and the embodiment of the all-American hero. I had the great pleasure of spending time with him years back when we both spoke at a conference in Seoul, South Korea, where a younger Donaldson had served as an officer in the US forces. This is a great addition to the IEX team and the wisdom imparted will be part of a fascinating two way dialogue with Brad Katsuyama and the IEX team.

 

SEC announced that Paul Dudek, Chief of the Office of International Corporate Finance in the Division of Corporation Finance, is leaving the agency at the end of the month. Mr. Dudek has headed the Office for more than 22 years.

 

The Chamber of Digital Commerce appointed Mark Wetjen of DTCC to its Board of Advisors. In addition, DTCC has joined the Chamber’s Executive Committee. Mr. Wetjen currently serves as the Head of Global Public Policy at the DTCC.

 

The European Stability Mechanism (ESM) has appointed Pierre-Henri Floquet to the position of Head of Asset & Liability Management (ALM) and Lending. Since 2014, Mr Floquet had been working as Senior Banking Expert at the ESM.

Financial Calendar

30.06 – ICE Q2 $0.85 dividend payment

New! – 27.07 – Nasdaq Q2 2016 Results – press release

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

 

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