March 04 2015

elb2

I have invited a new phrase today: a ‘paradismal shift’ – it’s what happens when at first you think “Wow that really changed the world!” then your consciousness kicks in and goes “hold on a minute, what change?” Elsewhere appallingly protectionist ECB edict is rebuffed by EU court – London has freedom to clear Euros (well for as long as the Euro lasts, presumably). Is there a CEO Boon for SGX? Meanwhile former SGX & TMX CEO Tom Kloet joins the NASDAQ board. Tullett plans to use court windfall for diversification while BIST announces IPO intention with no word on the recent (ongoing?) pre-IPO round.

Lots happening, let’s get scrolling:

Meanwhile, in our Premium service, a new (must read) post discusses LCH.Clearnet: A Paradismal Shift? while yesterday I added The GIFT Horse? considers the Indian budget ramifications for market structure while new Premium Briefs will keep you abreast of various issues in the industry (updated daily) when news arises. All briefs can be found on our dedicated Briefs page via Exchange Invest Premium.

Latest briefs include:

Rise of Africa – Part 1, Part 2
The Bond Platforms Rush – Part 1, Part 2
ICE – NYSE Euronext Deal – Part 1, Part 2, Part 3
MILA Exchanges
SEE Link Project
Greater Mekong Subregion Exchanges Project
ASEAN Exchanges Project

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Public Markets

Tullett Prebon Preliminary Results 2014
Tullett Prebon

Highlights

Underlying, before exceptional and acquisition related items (including PVM since acquisition on 26 November 2014)

Revenue £703.5m (2013: £803.7m)
Operating profit £100.7m (2013: £115.4m)
Operating margin 14.3% (2013: 14.4%)
Profit before tax £86.6m (2013: £99.6m)
Basic EPS 32.3p (2013: 36.0p)

Tullett To Use Windfall For Acquisitions (subscription)
Philip Stafford – Financial Times

Tullett Prebon’s new CEO plans to use the near $130m windfall the UK interdealer broker received from a legal settlement to invest in new ventures, rather than return it to shareholders.

John Phizackerley said he would look at other companies and assets but also defended the colourful brokers who trade by telephone, as regulation and accusations of market rigging encourage more investors to explore using electronic venues.

BIST To Go Public In Bid To Jump-Start Equity Market
Ece Toksabay & David Dolan – Reuters

Borsa Istanbul (BIST) said on Tuesday it plans to go public, in Ankara’s latest move to bolster its $220 billion equity market which has punched below its weight for years.

The exchange plans to list up to 43% of its capital through the sale of most of the shares now held by the national Treasury. The Treasury owns 49% of the exchange, with 36.6% owned by the bourse itself. Nasdaq OMX owns 5%, while the Turkish Capital Markets Association owns 1.3%.

PLY: QV our Premium brief: BIST IPO Brief. No mention of the pre-IPO round which ought to have been concluded at or about now…

LCH.Clearnet To Launch Interest Rate Portfolio Margining Capability
LCH.Clearnet

Margin offsets to be available for listed and OTC interest rate derivatives portfolios. Members and their clients offered significant opportunity for portfolio margin optimisation. Service will be provided on an open access basis via regulated venues that list suitable interest rate derivatives.

PLY: Wow! My brain whizzed! Finally that breakthrough few thinkers considered short-term feasible…that’s really a paradigm shift. Then my conscious kicked in and I read the small print. Here, ladies and gentlemen is a perfect example of what I am christening a “Paradismal Shift.” If you want to understand why – then log in to our Premium Content, it’s only $120 US dollars a year and apart from this discussion there is lots more to help burnish your reputation as a thinker in markets…

Exchanges In Asia Seek To Counter China Stock Tie-Up (subscription)
Gregor Stuart Hunter – Wall Street Journal

The start of the Shanghai-Hong Kong Stock Connect link in November resulted in JPX losing its position as Asia’s biggest by market capitalization. Aided by a 53% rally in the Shanghai Composite last year, the combined stock market has a larger market capitalization than any in Asia, according to data from WFE..

China’s leaders have backed adding Shenzhen Stock Exchange to the link, in a step that would further consolidate China’s position as the biggest capital market in the Asia-Pacific region.

PLY: Through train is a special beast as otherwise you cannot buy A shares… The ASEAN venture is a co-operative linkage which historically have never been worth the frequent flyer miles generated in their creation (and as ASX-SGX for instance proved all those years ago).

QV our Premium briefs:

HKEx – SSE – Stock Connect Brief – Part 1, Part 2, Part 3
HKEx – SZSE Stock Connect Brief

Victory For UK Over Eurozone Clearing Houses (subscription)
Alex Barker & Philip Stafford – Financial Times

Britain has won a landmark legal battle over the place of the City of London in Europe’s single market, forcing the ECB to scrap a policy requiring big clearing houses to decamp to the eurozone.
The suit over the ECB’s so-called “location policy” was a test of whether Britain could remain Europe’s top financial centre and enjoy the full benefits of the EU’s common market while remaining outside the euro.

In a ruling on Wednesday, the EU general court sided with the UK and annulled an ECB policy that suggested clearing houses, for prudential reasons, should be eurozone based if handling significant euro-denominated business.

PLY: ECB protectionism is spurned by a pragmatic court judgement against a ridiculous piece of protectionism proposed by a central bank draining credibility. Oh sorry I mean determined to do “whatever it takes” to, er, remind me what is it supposed to be doing again?

(In other news, the Carinthia region in Austria looks liable to go bust – its economics apparently compare unfavourably with Greece incidentally…yip, that bad).

Private Markets

BSE Revises Annual Listing Fee Of Companies For FY16
Livemint

BSE has revised its annual listing fees for companies listed on its platform for the next fiscal beginning 1 April. The exchange has also made changes to various slabs of companies for the payment of listing fees.

Dividend News

Tullett Prebon BoD is recommending an unchanged final dividend of 11.25p per share, making the total dividend for the year 16.85p per share, unchanged from that paid for 2013. The final dividend will be payable on 14 May 2015 to shareholders on the register at close of business on 24 April 2015.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX and FTIL are both off around 1% as we await news from the Mumbai High Court while FTIL is in effect asked to withhold all but essential payments:

Mumbai HC To Hear Govt’s Case Against FTIL Board On Wednesday
Ram Sahgal – The Economic Times

The Bombay High Court (HC) has said it would on Wednesday hear the government’s arguments to a motion filed by FTIL against the ministry of corporate affairs moving the Company Law Board (CLB) to supersede its board. In the interim, the government will have to hold back submission on its petition to CLB until after the Bombay HC hears the matter on Wednesday.

Read our Premium brief: NSEL-FTIL Merger Brief.

FTIL Refrained From Using Company Funds By EOW
Moneycontrol

The Economic Offences Wing (EOW) has directed FTIL to refrain from using the company’s funds. It has been asked to use funds only to pay statutory dues and wages. The EOW has also told FTIL not to make third party rights on the company’s assets, without first taking its permission. FTIL will also have to earmark Rs 84 crore (USD 13.5 mln) on account of royalty fee received from NSEL.

Mumbai EOW Arrests Three Brokers In NSEL Case
Mateen Hafeez – Times of India

The economic offences wing (EOW) of the Mumbai police, which is probing the Rs 5,600 crore cheating case involving NSEL, on Tuesday arrested three brokers: Amit Rathi of Anand Rathi Commodities Ltd., CP Krishnan of Geojit Comtrade Ltd. and Chintan Modi of India Infoline Commodities Ltd.

Technology

LME Mulls Expanding Electronic Sword System After Qingdao Fraud
Josephine Mason & Luc Cohen – Reuters

LME is considering whether its electronic LMESword system could be used to oversee metal stored outside the exchange, an executive said on Tuesday, the latest sign that a financing fraud in China was still roiling banks and trading.

LME has received requests from several banks that finance big tonnages of metal to look into expanding LMESword, which proves the origin and title to LME-warranted metal, beyond exchange stock.

PLY: THe fabulously funky world of forward metals trading has long had a Chinese twist tied into all manner of RMB swaps and shuffles. Actually not having the metal in the warehouses as claimed was a classic old fashioned fraud wrapped up in this enigmatic process. LME are quite sensible in extending the protection of the Sword as far as possible.

Products

MOEX Launches USD/CAD & USD/TRL Futures
MondoVisione

From 3 March, MOEX has started trading in futures contracts on U.S. Dollar-Canadian Dollar and U.S. Dollar-Turkish Lira currency pairs.

Special Rural Development Tax To Be Exempted From Imported Gold Traded In The KRX Gold Market
MondoVisione

KRX announced that the special tax for rural development that had been imposed on the imported gold to be traded in the KRX gold market (a gold spot market operated by the KRX) will be exempted with effect from March.

Career Paths

Nasdaq announced that Thomas A. Kloet, former CEO of TMX, was elected to Nasdaq’s BoD as a NED. Mr Kloet was CEO of TMX from 2008 until his retirement in October 2014.

PLY: Congratulations to Tom whose input will doubtless prove very helpful to NASDAQ as it makes progress in so many areas worldwide. Incidentally, Tom used to run SGX and I note that with current CEO Magnus Bocker standing down, an internal note (reported by Reuters) has been circulated by Bank of America Merrill Lynch noting the resignation of Boon Chye Loh, the head of Asia-Pacific global markets. Mr Boon was hotly tipped last week to be one of the leaders in the race to replace Magnus… See also Magnus Bocker – SGX Reflections in our Premium Service.

Back with Tom, on February 18th he was elected a member of the CFTC’s Market Risk Advisory Committee (MRAC) (reported here).

Reuters reports that Scott Cutler, NYSE’s global head of listings, is leaving the exchange after about eight years in the role.

NYSE announced Garvis Toler III will become Global Head of Capital Markets focused on listings transactions. Toler will join the company on March 23, 2015. John Merrell, who has held leadership positions on the NYSE Listings team since 2008, will be responsible for listed company relationships. Both roles will report to NYSE Group President Tom Farley.

CBOE has added five new officers to its management team:

Stephanie Klein, CMO
Jennifer Lamie, Chief Regulatory Advisor
Stephanie Marrin Lara, Deputy Chief Regulatory Officer
Jordan Naylor, VP, Systems Development
Steve Sinclair, VP, Systems Development

Fidessa announced that Peter Holmgren has joined the company to head up new business sales for its sell-side trading systems in Europe. Holmgren is based in Fidessa’s London office and will be responsible for sales across all asset classes to the European broker community.

First Derivatives announced the appointment of Virginia Gambale to the Board of the Company as a NED.

Tullett Prebon Cuts 200 Staff As Profits Fall
Ashley Armstrong – Daily Telegraph

Tullett Prebon said it has made 200 people redundant on the back of difficult market conditions and falling profits.

Financial Calendar

This week

CFTC will hold a public roundtable on March 5, 2015, from 9:00 a.m. to 5:00 p.m., to discuss issues related to recovery and orderly wind-down of Derivatives Clearing Organizations (DCOs).
TMX $0.40 dividend payment

New announcement

CFTC will hold a public roundtable on Cybersecurity and System Safeguards Testing on Wednesday, March 18, 2015, from 9:00 a.m. to 5:00 p.m. at CFTC’s Washington, DC, Headquarters at 1155 21st St. NW
ICE 2015 Annual Meeting of Stockholders – Friday, May 15, 2015 at 8:30am ET at the Four Seasons Atlanta, located at 75 14th Street Northeast, Atlanta, Georgia 30309 (press release here)

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

Share Notes

GFI Group Major Shareholder Bgc Partners, L.P. Acquires 54,558,487 Shares (GFIG)

GFI Group major shareholder Bgc Partners, L.P. purchased 54,558,487 shares of the company’s stock on the open market in a transaction dated Thursday, February 26th. The shares were purchased at an average price of $6.10 per share, with a total value of $332,806,770.70. Following the purchase, the insider now directly owns 71,633,951 shares in the company, valued at approximately $436,967,101.10. The transaction was disclosed in a document filed with SEC, which can be accessed here.

Read our Premium brief: BGC – CME – GFI Brief.

CME insider Derek Sammann sold 4,770 shares Wednesday, February 25th at an average price of $96.54 (bargain $460,495.80). He now owns 21,043 shares.

ICE CFO Scott A. Hill sold 1,019 shares Thursday, February 26th at an average price of $240.00 (bargain $244,560.00). He now owns 20,610 shares. ICE insider stock transactions are chronicled on this specific page.

Analyst Notes

Credit Suisse Restated Their “Underperform” Rating On CBOE – $58.00 Target Price
CBOE Price Target Decreased By Barclays From $54.00 To $53.00 – “Equal Weight” Rating
Numis Reaffirmed Their “Add” Rating On Tullett Prebon – GBX 360 Price Objective
Liberum Capital Restated Their “Sell” Rating On Tullett Prebon – GBX 274 Price Objective

Fitch Ratings has affirmed BGC Partners’ long-term Issuer Default Rating (IDR) rating at ‘BBB-‘ following the successful completion of its tender offer to acquire the majority of GFI Group’s shares. Fitch has also affirmed Cantor Fitzgerald LP’s long-term IDR at ‘BBB-‘, as the two ratings are equalized, reflecting the meaningful ownership of BGC by Cantor, the voting control Cantor maintains over BGC, and the shared management teams and systems. The Rating Outlook for both companies is Stable. (Press release here).

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

SeedInvest To SEC: Please Enact Final, Simple, Crowdfunding Rules
JD Alois – Crowdfund Insider

SeedInvest, a widely respected investment crowdfunding platform that operates under Title II accredited crowdfunding (for now), has just submitted a comment letter to SEC pleading with the agency to “keep Title III crowdfunding simple”.

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