March 03 2016

elb2Welcome to Exchange Invest Issue 701 (how automotively appropriate – it is March after all!)

Another bumper day for news and indeed bumper days for misinformation too. The agitprop of DB1-LSE continues to seep through the parish’s correspondents but some are gradually turning to ‘the force’ and withstanding the Empire. If you want some lighter relief than the usual drab talking heads on that merger threeway, I was on Money Matters for TRT News Channel the other day.

More insight you cannot afford to be without in Premium as we continue to see a relative paucity of media coverage (NB worthwhile article from FOW highlighted below). Overnight, what CME ought to be thinking is considered (with Instagram equivalent of the Machiavelli filter switched on) CME: Turning the Other Cheek while I think folks may not have noticed the influence of the ancien regime which will collide with Xavier’s dream used car sales shuffle: LCH.Clearnet – A Footnote of Vital Importance.

Only $300 separates ignorance from (individual) insight. (Email for payment options). (Standard 100K GBP fee with free public shame for infringing individual licensing applies as always). Discounts for bulk subs available.

Lots of other good nuggets below from Swiss Repos to Blockchain, CP, Cetip opening door to takeover & much more, happy scrolling through the free bits:

Public Markets

MOEX 2015 Results


vs 2014: net income RUB 27.9 bln ($377 mln), up 74.1%; operating income RUB 46.0 bln ($622 mln), up 51.3%; EBITDA RUB 36.52 bln ($494 mln), up 68.9%.

PLY: US just imposed more sanctions, MOEX showed what management can do. Brilliant results – utterly shaming various entities in more stable western climes…


Cetip’s Board Rejects Second Takeover Attempt From BM&FBovespa

Ney Hayashi Cruz – Bloomberg

BM&FBovespa said on Feb. 19 it was offering to pay 41 reais per share in cash and stock (first offer of 39 reais rejected last year). In a regulatory filing Wednesday, Cetip said that though it rejected the proposal as presented, it authorized its financial advisers to start discussing the deal.

QV EI Premium: BMF&Bovespa Monopoly – Brief.

PLY: Cetip plays hard to get but opens the kimono. Sweeter bid to win the day now highly plausible.


HKEx Peers  At LSE-DB1 Merger Talks (subscription)

Gregor Stuart Hunter & Joanne Chiu – Wall Street Journal

HKEx CEO Charles Li declined to comment on whether HKEx would consider lobbing a potential competing bid.

PLY: LME makes sense as HKEx has a gateway to Chinese metals trade of 100% grade excellence. Buying LSE is just a gateway to some rather eccentric Chinese listings which I think everybody would rather not talk about. Through trains matter more than LSE to HKEx. There might be a bid but realistically blocking out the other possible railways best enables HKEx to truly leverage its longstanding China gateway play.

Presentation by HKEX CEO Charles Li & Group CFO Paul Kennedy on 2015 Final Results Announcement – reported yesterday.

Why CME Would Want To Buy LSE

Lynne Marek – Crain’s Chicago Business

If reports of CME mulling a bid are true…

PLY: “…then I hope they begin the day by reading “CME: Turning the Other Cheek.” At $300 per user/year, much cheaper than investment bankers, even for a whole company subscription.

LSE, DB1 Eye French Spin-Off As Part Of Deal (subscription)

Philip Stafford – Financial Times

PLY: Very last week news. Typical LSE agitprop regurgitated as breathless insight. LSE don’t want Clearnet, Xavier, back when he was in charge, thought he could drop it out and merger salvation would be his. (This is what happens when you spend too much time surrounded by “Yes men”). If you want to avoid ignorance & gain insight, you need this Premium Post: LCH.Clearnet – A Footnote of Vital Importance – worth $300 in its own right methinks, as there are missing bits to this jigsaw in the mainstream media.

Clearing Must Be Looked At Ahead Of Any LSE Deal (subscription)

Financial Times

EU’s commitment to competition in services must not be stymied.

PLY: When Ben Wright said it yesterday in the Daily Telegraph that was good journalism. When the Brussels Bugle says it a day later, read this as a clear sign from the EC blob via its house newspaper. I’m still unconvinced the antitrust brigade will let anybody buy LCH.Clearnet right now (QV Premium posts for explanation), nor that the bankers et al will roll over and play dead.

Merkel’s Govt Said To Support DB1-LSE Merger

Birgit Jennen & Rainer Buergin – Bloomberg

DB1 CEO Touts Benefits Of LSE Merger, Berlin Cool

Andreas Kroner & Matthias Sobolewski – Reuters

Rival news agencies see distinctly different sides of the same road accident, apparently.

PLY: Rumours that every time you lobby the Berlin government you get to take home a six pack of Syrian migrants could not be confirmed at the time we raced to pixel… Usual ‘phoney war’ noises aka ‘return with something beefy and we can talk’ is probably the message from Berlin, couched in blob-speak with a typical fall guy Europhile politician spouting German protectionist nonsense as Euro-triumphalism.

It’s All About the End of SwapClear

William Mitting – FOW

PLY: Just came in as we raced to pixel. Worth reading, certainly shows an application of thought absent in broader media.

QV Premium: DB1 – LSE Merger Brief.


HKEx CEO Says Plans Primary Equity Connect & Third Board


Primary Equity Connet would allow mainland investors to participate in Hong Kong IPOs and vice versa using the “through train.” QV Premium: HKEx – SSE – Stock Connect Brief Part 4.

PLY: #Brilliant – but might unnerve Chinese authorities at least short term if they see Hong Kong IPOs sucking up Chinese liquidity but then again right the mainland’s listing ship and watch the flow go from SAR to the big smoke…quite an incentive for the Communist Party to further brush up on capitalism.


‘Flash Boys’ Exchange: IR Should Join The Fight

Neil Stewart – IR Magazine

An interview with John Ramsay, chief market policy officer, IEX Group.

PLY: It has to be said IR looks a tad like a leaden-footed ‘profession’ in the midst of all the ways that surveillance & compliance are being automated right now. The investment in communicating with investors (e.g. the significant number of active buy side folks reading Exchange Invest daily) cannot be underestimated methinks but it is often a casualty of short-termist, miserabilist, management. (From my perspective there are great IR folks at The ICE & NASDAQ…Euronext & Warsaw deserve honourable mentions but thereafter I find a bit of a chasm with few signs on the radar anybody else is playing a genuinely coherent, adult game in the parish…).


What Will Be The Golden Ruling On London’s Bullion Market?

Ben Kilbey – Platts

The London bullion market is currently in a state of transition. To what, exactly, is anyone’s guess. OTC to exchange, maybe, if LME can get its hands on it. LBMA ‘request for proposal’ rattles on. Most have little time to give to the process, as they have businesses to run.

LBMA said last month that 5 made the cut in the RFP, they are widely believed to be CME, LME, ICE, Autilla/Cinnober & Markit/ABS.

PLY: Cutting remarks from Ben Kilbey but there has been a certain element of entitlement wrapped in opacity with LBMA’s approach which has not exactly enamoured some focussed market folks.


Exchange Competition (subscription)

Andreas Hippin – Boersen Zeitung

PLY: Quotes one Patrick L Young to the effect of:

“”ICE potentially bidding doesn’t solve the core problem of an LSE acquisition. Either winning bidder will be subject to at least 50 shades of antitrust bondage & prolonged corporate masochism. However it deeply complicates DB1’s tactical ineptitude with this ill-considered deal. Albeit, the dowry is rising at the risk of LSE being left at the altar when the high priests of EU merger wisdom disallow the truly valuable components. Camels will now be lining up for their shot at squeezing through the eye of the needle, particularly as DB1 has a double dose of difficulty – no deal works without Frankfurt losing (at least!) some prestige, rendering local regulators profoundly intractable. “

Private Markets

Aquis Doubles Market Share After Predatory HFT Ban

The Trade

Alasdair Haynes says the response to eradicating predatory behaviour has been overwhelming. On the day the change was introduced, a month ago, Aquis had a market share of just 0.47%, but has seen this steadily rise over the past fortnight to over 1% today.

PLY: I am delighted to hear that Aquis has made this progress. 1% is always a good milestone on the path to sustainability.


KRX: Implementation Of Single Price Auction For Super Low Liquidity Issues During Regular Session



Liquidnet Reveals First Fixed Income Numbers (subscription)

Anna Irrera – Financial News

Liquidnet’s nascent fixed income trading platform for the buyside has boosted its member base by nearly a quarter to 150 since its launch less than six months ago and is targeting 200 members in the coming months.

PLY: Good progress in users signed up which hopefully will presage useful volumes. Plaudits to LNE NED Adrian Fitzpatrick who had the foresight to initially push the notion of Liquidnet for bonds.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX flat. FTIL slightly off.


Tradeweb Markets Acquires CodeStreet


Tradeweb Markets acquired CodeStreet, a leader in data-driven trade identification and workflow management software development.

PLY: Useful modest incremental acquisition.


SIX Launches Its New CO:RE Trading Platform – An Advanced System For Repo Transactions


PLY: Anything that makes Repo simply, swifter & more efficient is good for markets, great for banks & ultimately helps the real economy. Excellent stuff.


Baymarkets Takes On Support, Maintenance & Development Of SIX x-clear’s Clara Clearing Solution


PLY: Good deal for Peter Fredriksson & the Baymarkets team.


ASX Considers High-Speed Microwave Data Link To Chi-X

Daniel McDonald – Daily News

ASX is evaluating an investment in a microwave link to its biggest rival, Chi-X Australia.

PLY: As always that lovely benign monopoly ASX is thinking of its broad responsibility at the head of Australia’s markets, by allowing a tiny minority to jump the queue ahead of the Australian retail investor armies and non-weaponised buy side institutions. What better advertisement can there be for competition than watching how the Oz marketplace is materially damaged by this brazen hypocrisy? ACCC / ASIC, Mr Turnbull – tear down these walls!


Big Bank Consortium Latest To Trial Blockchain For Bonds (subscription)

Anna Irrera – Financial News

A group of 40 banks — including Goldman Sachs, JPMorgan and Morgan Stanley — have simulated the issuing, trading and redemption of commercial paper via blockchain technology, in the latest tests aimed at proving the benefits of distributed ledgers.

PLY: CP, interesting angle, lots of possibilities there, albeit that some felt the advantages of selling CP in the old days included certain attractions of physical delivery which even holographic additions to a ledger may struggle to replace.


EC Approves Credit Derivatives Clearing (subscription)

James Rundle – Financial News

The European Commission has adopted long-awaited rules that will require certain kinds of index CDS to be centrally cleared for the first time.


HKEx Plans Spot Commodity Markets In China With Physical Delivery

Business Times

Plans by HKEx to create mainland, physically deliverable spot commodity markets are a way of getting LME’s warehousing expertise into China, HKEx CEO Charles Li said on Wednesday.


IOSCO Says Bond Market Liquidity A Concern

Huw Jones – Reuters

Bond markets may not be able to cope with the stress of many investors trying to cash in at the same time but data remains too patchy to support new rules, a global financial watchdog said on Wednesday.

IOSCO said concerns over secondary bond market liquidity was one of its four top market risks for 2016, the others being cyber threats, misconduct in relation to retail financial products, and risks from use of collateral or cash to back trades.

PLY: Good for IOSCO seeking more data than panicking to over-prescription. It’s a risk short-term but bad rules are invariably worse long-term.


Sebi Bars 16 Commodities Trading Members & Clients From Dealing In The Securities Market

Reena Zachariah – The Economic Times

Sebi has barred 16 commodities trading members & clients from dealing in the securities market for indulging in fraudulent and manipulative activities in the matter of trading in castor seed contracts in NCDEX.


NYSE Launches NYSE U.S. Pure Exposure Index Family


Career Paths

Vendor Green Key Technologies, have appointed London based former GS Principal Strategic Investments Co-Head Paul Christensen as CEO, effective immediately. Green Key Co Founder & CEO Anthony Tassone will become Chief Product Officer.

PLY: Interesting hire.

FN reports that Tony Mackay, a pioneer of electronic trading, has returned to the industry as CEO of Chi-X Global.

PLY: Given that Tony was the key advisor engineering the takeover by JC Flowers recently, this is unsurprising but very welcome all the same! Watch out for some exciting developments methinks…

Torstone Technology appointed Gordon Russell as Head of Sales & Business Development for Asia.

Malawi’s Agricultural Commodity Exchange (ACE) Africa started the recruiting process for Commercial Manager in the Trade Facilitation Department. The manager will be in charge of building the commercial side of ACE and the largest segment will be to develop more trade incentives, trade finance and warehouse receipt finance.

Financial Calendar

04.03 – LSEG prelim results for the period ending 31 December 2015

04.03 – Record date CBOE $0.23 dividend

04.03 – Record date ITG $0.07 quarterly dividend

22.03 – Deadline for DB1 to bid for LSE

24.03 – ICAP – TNT – vote on transaction

29.03 – Deadline for ICE to bid for LSE

New! 13.05 – ICE AGM – press release

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

Other stories

IOSCO Publishes The Securities Markets Risk Outlook 2016



HKEX CEO Charles Li: Latest Charles Li Direct: Putting The Pieces Together For An Ideal Market


PLY: Background on the grand plan, the Third Board & of course the latest ‘through train’ developments too straight from the CEO’s desk.


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