March 07 2014


First up thanks to those who added their names to the Subscription Roster yesterday – we had a great launch and it was very encouraging to have so many of our friends and colleagues join our inner circle.

More New content has been added overnight, so just to give you a flavour, these are the stories you can access already with a modest payment of $120 US dollars for the year:

This Week’s Posts on Exchange Invest Premium:

NEW: A Bond Market Dilemma

NEW: Rome Wasn’t Burnt in A Day

Antipodean Monopoly Woes

Subscriber Welcome

Warsaw’s Great Leap Backwards

Deutsche Boerse’s Asian Experiment

The Direction of Deutsche Boerse

Coming Soon: Reflections on Satoshi… (and much more…).

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Today we lead with the tragic news that Bob Ray, a highly respected CBOT executive who made the move seamlessly to prosper within CME Group has died after a long illness. On behalf of myself and all the team at DV Advisors and Exchange Invest we express our sympathies to his family and colleagues at this very sad time. Bob added value when he came to Europe (to the industry, not just CME) just as he had when in Chicago. Our industry is diminished by his premature loss.

Nandini Sukumar’s story quotes Erika Olson noting about Bob: “He could have been actor Bill Murray’s better-looking, higher spirited brother. Bob was always the life of the party — his sharp suit couldn’t hide the fact that he emanated energy.”

A delightful description of a good man. RIP Bob Ray, we’ll miss you.

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Elsewhere in today’s Free Exchange Invest newsletter, Betfair issues Interim Statement as LSE Buys JPX updates, Asian clearing still in vogue, new regulator has to make do with roughly 18 times average salary (guess where!), incoming CFTC Chairman gives “Game of Thrones” testimony, more clearing, collateral and CCP news as banks protest FCA research proposals while FCA is under fire for regressive crowdfunding approach placing Britain behind France. APX debuts 2 Chinese listings while Newsweek relaunches with the identity of Bitcoin creator Satoshi!

Public Markets

Robert Ray, London-Based CME Executive From Chicago, Dies At 60
Nandini Sukumar – Bloomberg

Robert Ray, the CEO of CME’s proposed European exchange, has died, according to the company. He was 60. Ray, a native of Chicago, moved to London in 2009 and was working to open a futures market called CME Europe prior to his death.

PLY: Bob had been ill for some time, he was an original, we’ll miss him.

Betfair Interim Management Statement For Q3 FY14

Revenue up 5%, Underlying EBITDA up 28% to £20.2 million (Q3 FY13: £15.8 million), Mobile revenue up 68% and now represents 60% of Sportsbook revenue. Expect underlying EBITDA to be towards the upper end of previously guided range of between £82 million and £87 million.

PLY: Betfair seems to be gradually improving albeit having arguably lost a lot of the core exchange business to become more of a sportsbook with widgets on top.

MTS To Acquire Group Inc.

PLY: MTS, part of LSEG, will acquire Group (“Bonds”) (BDCG.), a U.S. based platform for the electronic trading of U.S. corporate and emerging market bonds (subject to usual ‘blah blah’). The all-cash acquisition (price undisclosed) will see MTS Markets International Inc., a wholly-owned U.S. subsidiary of MTS, acquire 100 per cent of Bonds’ outstanding shares.

This is a very interesting deal and to provide a bit of perspective, I have written a Premium Post about it which subscribers can find here: A Bond Market Dilemma

Split Reaction To International Firms’ Asia Clearing Plans (subscription)
Aaron Woolner – Risk

ICE, CME and Eurex have all staked a claim on the Asian clearing markets via a range of methods including buyouts, tie-ups and new ventures – but it’s not clear if their moves will be successful

Clearing houses in Asia have been a hive of activity in recent weeks. ICE’s acquisition of SMX last November was rapidly followed by the announcement that Eurex is planning to set up a clearing house in Singapore. In between these two announcements news leaked of a proposed tie-up between ASX and CME to set up a mutual offset arrangement between the two exchanges which would allow clients to hold their collateral onshore or in the US.

PLY: Novation versus shared collateral raises its head here in an interesting article by Aaron Woolner as it becomes more apparent that DB1 and ICE have coherent plans while ASX looks increasingly like it is flailing in some desperation to catch the tide of the brave new world (I discussed the macro picture for ASX in a Premium Post yesterday: Antipodean Monopoly Woes.

Creating Japan’s Largest Derivatives Exchange –Osaka Exchange Profile (subscription)

PLY: A useful discussion of the Osaka – Tokyo merger and its progress so far in an interview with OSE President Hiromi Yamaji.

EU Banks Fear Capital Hit From CCP Approval Delays (subscription)
Lukas Becker – Risk

For banks to apply a 2% risk-weight, non-EU CCPs must be approved by ESMA and their home-country rules by the EC. That process has to be complete by June 15 but banks now fear that will not happen in some cases. European banks fear delays to Europe’s approval regime for CCPs could lead to big jumps in capital for trades cleared at a number of non-EU venues.

Massad To Push For “Strong Enforcement” Of CFTC Rules (subscription)
Scott Patterson – Wall Street Journal

President Barack Obama’s nominee to head CFTC will pledge to aggressively enforce rules against misconduct and beef up oversight of derivatives markets in a Senate hearing Thursday.

PLY: Hmmm. The breast beating “Game of Thrones” meets “Conan the Regulator” speech airs its head once again as populism is in danger of trumping pragmatism. Given the prevailing concept that Mr Massad is supposed to be a more diplomatic soul than Gary Gensler this appears a disappointing testimony.

AFME Airs Competition Fears Over Commission Overhaul (subscription)
Tim Cave & Anish Puaar – Financial News

Europe’s leading banking trade body AFME has added its voice to fears that UK asset managers could be left at a disadvantage globally following FCA’s planned overhaul of the country’s research practices.

FCA is attempting to tighten the rules on how managers purchase research and advisory services. One of the most contentious elements is the regulator’s stance on corporate access: it believes the provision of access to a company’s management by brokers does not amount to research and is something that should be paid for by the asset manager, rather than with client money.

PLY: This one will run and run. It is difficult to amend a series of long-standing practices in one edict but the FCA are clearly on a mission to do so in short order.

MCX-SX Distances Itself From Promoters, Plans Rebranding
Suresh P Iyengar – The Hindu Business Line

After reclassifying MCX and FTIL as non-promoters, MCX-SX is firming up plans for a name change and move out its head office from Jignesh Shah-owned Exchange Square at Andheri.

PLY: So MCX will not subscribe to the rights issue, must anyway reduce their stake and soon MCX-SE will be a different named brand but still searching for a real niche to profit from. Interesting times, I hope they can find a suitable model to survive and thrive.

Clearstream To Roll Out Bilateral Collateral Management Service OTC Collateral
Deutsche Borse

Clearstream is rolling out OTC Collateral, a bilateral collateral management service which will significantly strengthen the OTC processing capabilities of the Global Liquidity Hub, the company’s integrated risk and liquidity management solution.

Consolidation Of Ukrainian Stock Market Brings New Opportunities To Investors
Evan Ostryzhniuk – Kyiv Post

The merger of Ukraine’s two main stock trading platforms, Ukrainian Exchange and PFTS, should provide an impetus for the nation’s vastly underdeveloped capital market. Having a combined turnover last year of nearly $15.5 billion, investment bankers told the Kyiv Post that the merger should boost and concentrate liquidity in one place, while improving efficiency and reducing overhead costs.

MOEX is the principal shareholder of the two exchanges, owning a 50 percent plus 1 share of PFTS and 43 percent of Ukrainian Exchange.

PLY: Which reminds me, I do believe MOEX made a lowball bid for the minority shares in PFTS the other week but the story never made it out of the Ukrainian press. At the same time, it has to be said that merging the exchanges right now may not be quite enough to help Ukraine during these challenging times?

Interim President Of Romanian Regulator: My Salary Will Be Cut By A Third But I Will Not Resign
Irina Popescu – Romania Insider

Daniel Daianu, appointed interim president of Romania’s Financial Surveillance Association ASF after Dan Rusanu’s resignation, has said his salary will be reduced, but that he will not resign. “Dan Radu Rusanu presented his resignation. As for me, I have great issues in accepting to lead the ASF, in case I receive this proposal. Starting today, my EUR 12,800 salary will be cut by 30 percent. I thought about a resignation of honor, but as much as this would be honorable, I can’t resign.”

Earlier this week, the president of Romania’s ASF, Dan Radu Rusanu, was sent to jail for 30 days in a corruption case. Daianu, a vice-president of ASF, took over as interim president.

PLY: Romanian regulator considers “honourable resignation.” Well it has been quite a week for the board, losing one chief then nearly another who now has to survive on just less than 9,000 Euros per month compared to the sub 500 Euros pcm gross of the average Romanian citizen. The sacrifices of working for the government, eh?

SIBEX Litigation Update

PLY: The ramifications continue from the putsch by the disgraced Christian Sima as the founder-Chairman Teodor Ancuta wins some redress over the manner of his ousting, in this case from the Romanian Clearing House. Elsewhere at least one more broker has abandoned the sadly becalmed regional bourse. Incidentally one of the victims of Mr Sima’s dubious investment management collapse was one Daniel Daianu…who is now acting boss of the regulatory authority as noted above.

Private Markets

Australian Exchange Appeals To Queue-Weary Chinese Companies (subscription)
Jamie Smyth – Financial Times
Successful Start To Trading On APX

Asia Pacific Stock Exchange (APX) successfully commenced trading as a new Australian stock exchange at 11 am today with trading commencing in the initial listings Australia Samly Holdings Limited and ZhongHuanYun Holdings Group Limited.

PLY: With HKEX venting frustration this week at the restrictions on listing Chinese companies, APX has kicked off with a pair of modest listings raising A$8m for two mainland companies.

The Face Behind Bitcoin
Leah McGrath Goodman – Newsweek
Man Called Bitcoin’s Father Denies Any Ties, Wrangles Free Lunch
Pretty Much Everything About The Real Identity Of Bitcoin’s Mysterious Creator Will Surprise You
Bitcoin Foundation’s Andresen On Working With Satoshi Nakamoto (subscription)
Paul Vigna – Wall Street Journal

PLY: The relaunch of Newsweek has quite a scoop, they appear to have unmasked Satoshi, the mysterious figure behind Bitcoin. I will be adding a Premium post about this, if not later today, over the weekend. Meanwhile the hype over the ‘car chase’ across LA for me lost its lustre when I heard they were in a Prius! Has it come to this? San Francisco was home to the legendary Steve McQueen Ford Mustang Bullitt chase…while a little over 3 decades later LA is famous for trundling Ford Broncos and a Prius escaping the scene of Satoshi’s sushi soiree regulating its internal charge south of the speed limit? Well I suppose health & safety approved.

Third Cryptocurrency Exchange Becomes Hacking Victim, Loses Bitcoin
Charlie Osborne – ZDNet

Poloniex has lost 12.3 percent of the Bitcoin stored in hot wallets on the website. However, in stark contrast to how Mt. Gox CEO Mark Karpeles handled his company’s Bitcoin losses, the owner of Poloniex, Tristan D’Agosta — a.k.a. Busoni — admitted to the loss and asked users how they would like to be compensated.

Japan Says Bitcoin Not Currency Amid Calls For Regulation
Monami Yui & Takahiko Hyuga – Bloomberg

Japan’s government said Bitcoin isn’t a currency amid calls for its regulation a week after the bankruptcy of Mt. Gox, the Tokyo-based exchange that was once the world’s biggest.

Bitstamp Audit Proves It Was Behind $147m Mystery Bitcoin Wallet
Pete Rizzo – Coindesk

Bitstamp, the UK-based bitcoin exchange that is now one of the largest by volume, released the results of a financial audit on 6th March conducted in November and December of 2013.

Special Section: FTI, NSEL, India at the Crossroads

PLY: Fit & Proper rumbles on as MCX Is down nearly 4% and FTIL is up 4% marking a neat contrast to end the week!

Fit & Proper Case: SEBI Wants FTIL To Reply In 10 Days
Business Standard
FMC Files Caveat In SC To Ensure No Ex-Parte Order In FTIL Case
Sunil B.S. & Khushboo Narayan – Livemint

SEBI asked FTIL to give a written reply before March 16 on the show cause notice issued to it in December.

FMC has filed a caveat in the Supreme Court, anticipating that FTIL may approach the apex court for an interim stay on the regulator’s December order declaring the company unfit to run any exchange in the country. Last week, the Bombay high court rejected FTIL’s plea against the FMC’s order, which came in the wake of a payments crisis at NSEL that surfaced on 31 July. FTIL denied any plans to approach the apex court.

Power Regulator May Censure Jignesh Shah’s Appointment To IEX Board
Utpal Bhaskar – Livemint

India’s apex power sector regulator plans to put in place a new regulation that would result in an effective censure of the appointment of Jignesh Shah, founder of FTIL, on the board of Indian Energy Exchange (IEX).

PLY: The noose tightens as Jignesh is no longer welcome by the regulators on the board of his power exchange either.

Need To Improve Management Of Commodity Warehouses
Banikinkar Pattanayak – The Financial Express

Sandeep Sabharwal, the CEO of Sohan Lal Commodity Management Pvt Ltd and a known name in the warehousing sector, says the management of godowns is as important as their establishment, not just to avoid another NSEL-like scam but also to ensure food security for our growing population.

PLY: I think warehouse users would respond with a unanimous big fat yip to that point.


Cinnober Announces TRADExpress Client Clearing System
Automated Trader

Cinnober has launched a system for businesses offering client clearing services, such as investment banks and FCMs. The new system, TRADExpress Client Clearing, addresses the challenges faced by the clearing industry post G20 mandate with Basel III looming.

Cinnober press release here.

MIAX Options Exchange: MIAX Options – Auto Cancel On Disconnect (ACOD) Feature Effective March 10, 2014

MIAX will introduce the Auto Cancel on Disconnect (ACOD) functionality on March 10, 2014.

Options Reduces Latency On New Jersey Fiber (subscription)
Jake Thomases – waters technology

Options, the New York-based private financial cloud provider, has upgraded its route between the NJ2 Savvis facility in Weehawken, New Jersey, and the NY4 Equinix facility in Secaucus, New Jersey.


ICE Plans Additional Guidance On Liffe Coffee, Cocoa Rules

ICE plans to introduce additional guidance on the management of positions on the Liffe cocoa and coffee markets from the September contracts onward, including new procedures for monitoring any premium on a delivery month.

SHFE Mulls New Metal Contracts (subscription)
Metal Bulletin

Shanghai Futures Exchange (SHFE) is mulling new metal and steel contracts, including for hot-rolled coil, nickel, tin, alumina and stainless, according to market sources.


NASDAQ OMX Global Indexes Now Available Through eVestment

NASDAQ OMX announced the following 19 NASDAQ Indexes are now available to clients of eVestment’s suite of Analytic solutions for institutional investors:

On March 9th TASE Launches New Tel Bond-Composite Index
TASE: Tel Bond – Composite Index Constituency

TASE is launching a new bond price index, the Tel Bond-Composite index, which comprises all investment-grade bonds (BBB- or higher) which meet the criteria for index constituency. The index will be launched on 9 March 2014.

Career Paths

On 5 March, MOEXs Supervisory Board approved the shareholders” list of Board candidates. The new Board will be appointed at the exchange’s 2014 AGM.

Instinet, the New York-based agency-only broker arm of Nomura, has appointed Jonathan Kellner as CEO. He replaces Fumiki Kondo, who has been made head of Nomura Asset Management’s overseas client division in Tokyo.

PSE Sets Board Election, Period Of Nomination
Business World

Philippine SE (PSE) will accept nominations for its new board of directors from March 10 until 12 noon of March 19, the bourse said in a March 5 memorandum that was uploaded on its Web site yesterday. Interested parties may check the nomination rules, qualifications of nominees as well as download nomination forms from the PSE Web site at

The Governing Council of ECB has appointed three ECB representatives to the Supervisory Board of the Single Supervisory Mechanism (SSM).

The three members are Sirkka Hämäläinen, Julie Dickson and Ignazio Angeloni. Ms Hämäläinen was a Member of the Executive Board of the ECB from 1998 to 2003. Ms Dickson is currently Superintendent of Financial Institutions at the Office of the Superintendent of Financial Institutions (OSFI), the primary Canadian regulator and supervisor of the financial industry. Mr Angeloni is currently Director General Macro-Prudential Policy and Financial Stability at the ECB.

Financial Calendar


FTIL Rs 2 interim dividend payment
Record date ASX 88.2 cents half-year dividend
Record date NZX $NZ 0.0160 final dividend
TMX $0.4 dividend payment

Next week

Record date CME $0.47 Q1 dividend
BGC Partners $0.12 quarterly dividend payment
Interactive Brokers $0.10 quarterly dividend payment
Record date GFI $0.05 quarterly dividend
Record date NASDAQ OMX quarterly dividend of $0.13

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

Share Notes

Interactive Brokers Group SVP Milan Galik sold 1,800 shares Monday, March 3rd at an average price of $22.15 (bargain $39,870.00). He now owns 808,517 shares. Mr. Galik’s regular sales are chronicled on this specific page.

Charles Schwab Corp. EVP Carrie Dwyer sold 28,028 shares Tuesday, March 4th at an average price of $26.49 (bargain $742,461.72). Mrs. Dwyer’s regular sales are chronicled on this specific page.

GFI Group major shareholder Jersey Partners Inc. sold 87,400 shares Wednesday, March 5th at an average price of $4.07 (bargain $355,718.00). The insider now directly owns 46,332,728 shares.

Interfax notes that MOEX deputy CEO Andrei Shemetov reduced his stake in the exchange to 0.002% from 0.105% on March 4, the exchange said in a statement.

Shemetov acquired the 0.105% of shares in the exchange a day earlier, on March 3. Based on the closing price on March 3, 0.105% of shares in Moscow Exchange are worth about 141 million rubles (USD 3.89 mln).

The exchange told Interfax that Shemetov exercised his right to buy the shares under a stock options program for management. He later sold part of the acquired shares on the market.

A spokesman for the exchange recalled that 70 people are eligible to take part on the options program, for which 2.4% or 58 million shares are reserved. Every year an executive has the right to buy a third of the number of shares intended for them under the options program at a price of 46.9 rubles per share. It became possible to implement the program six months after the exchange’s IPO.

Analyst Notes

Jefferies Reiterated A “Buy” And $265 Price Target On ICE
CME “Neutral” Rating Restated By Credit Suisse – $70.00 Price Objective
Betfair Downgraded By Numis Securities To “Add” – GBX 1,300 Price Target
Tullett Prebon “Equal Weight” Rating Reaffirmed By Barclays – GBX 335 Price Objective
Tullett Prebon Downgraded By Numis Securities To “Reduce” – GBX 299 Target Price

Unusual Social Activity Today Around ICE
Scott Olson – The Street

Trade-Ideas identified ICE as an unusual social activity candidate. In addition to specific proprietary factors, Trade-Ideas identified ICE as such a stock due to the following factors:

ICE has 13x the normal benchmarked social activity for this time of the day compared to its average of 1.36 mentions/day.

ICE has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $169.4 million.

Identifying stocks with ‘Unusual Social Activity’ tends to be a valuable process for traders looking to capitalize on the ‘talk of the town’ stocks that are basking in far more attention from the StockTwits financial community than normal. Good press? Bad press? It ultimately doesn’t matter if it’s good or bad if you know how to trade around the sentiment. Certain hedge funds use such data for their proprietary algorithms and it is not uncommon to see shared social sentiment play itself out in a stock’s price trend.

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.


FCA Sets Out P2P Lending & Crowdfunding Rules
The Crowdfunding Centre: FCA’s New Rules For Crowdfunding Met With Anger And Disappointment

With the FCA taking on regulatory oversight of the practice from April, it has now, following consultation, set out rules designed to ensure that potential lenders have access to clear information on the risks that they are taking on and on who is ultimately borrowing their money.

…Today’s announcement from the FCA on new rules for crowdfunding has been met with anger and disappointment by members of the crowdfunding industry.

PLY: The FCA has largely demonstrated that it is in the wrong place in terms of understanding where regulation needs to go and ironically it now looks as if Britain is lagging even Socialist France in terms of investor access to crowdfunding, Barry James notes pithily: “it takes the crowd out of equity crowdfunding,” adding:

“On a day like today one has to wonder whether our FCA is the worst regulator in the western world. The words that spring first to mind are inflexible, stubborn and unimaginative”.

Hmmm, given we have only had the FCA for about a year it’s probably premature for the next shake-up of the same people under a new brand but I think the core problem here is that when Mr James refers to “inflexible, stubborn and unimaginative” I suspect there are many regulators who see those phrases as being their positive aspects.

Barclays Africa Acquires Stake In P2P Lending Service RainFin
Chris Udemans – humanipo

Barclays Africa has acquired 49 per cent of South African peer-to-peer lending service RainFin, following on from a groundbreaking Australian deal yesterday by a Westpac backed fund.

Other stories

Star Witness Against Ex-Madoff Aides A Liar, Lawyers Tell Jury
Joseph Ax – Reuters

The government’s star witness in the criminal trial of five former Bernard Madoff employees is a lifelong liar whose capacity for falsehood rivaled only that of Madoff himself, lawyers for two defendants told a federal jury on Thursday.

Testimony Of Acting Chairman Mark P. Wetjen Before The U.S. House Appropriations Subcommittee On Agriculture, Rural Development, Food And Drug Administration, And Related Agencies

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