March 07 2016

elb2Today I have given you a catch up in Premium, the key points in: Merger Mania 2016 The Story So Far. Thanks for all the feedback on our  World Exclusive OTC Versus ETD Clearing Clarification – multiple industry leaders clearly felt that clarified a lot of the minutiae.

(Allow your competitors their ignorance while you gain the insights of Exchange Invest Premium – be the king of watercooler wisdom: only $300 for an individual licence) – hit reply and ask for a Sub Invoice).

News reaches us on the market structure parish bush telegraph that Groupon coupons are indeed now larger than the average US stock trade while the dynamic duo of Aesthetic Integration are delivering some interesting thinking to the SEC as it wrestles with American equity market structure foibles.

Amidst the corridors of Paternoster Square, Xavier Rolet appears to have turned into the sort of tea trolley EVP who has more opinions than a London cabbie. At least they’re all optimistic, bless him. Xavier is still eager to promote his “merger of equal desperation” as I am now terming the fallacious DB1-LSE concept. At least one WSJ journalist has started unpicking the hypercomplexity of opacity which is the LSE’s figures while elsewhere there is media confusion over bulk and big. At least some are noting clearing issues are massive if only in passing (I have again pruned DB1-LSE coverage to focus your attention on value additive coverage).

Meanwhile in Bigworld, I am truly saddened by news of the passing of  the 40th first lady of the United States, Nancy Reagan. Compared to the current era of rather crassly incompetent pygmy politicians (and that’s just the UK government), she exemplified a calm, grace and stature, supporting her legendary husband whose achievements alongside Lady Thatcher ending Soviet Communism amidst European continental paralysis, sadly contrasts with the rather pitiful progress of subsequent White House officeholders.

Anyway it’s one of those Mondays where apparently it’s not so much where’s the beef as lots of pork. Happy scrolling amidst the pith:

Public Markets

How LSE’s Strategy Tees Up a Deal (subscription)

Paul J. Davies – Wall Street Journal

Some days on the stock markets it is hard to discern a clear direction. Last year’s results from the London Stock Exchange…were a bit like that.

The figures, reported Friday, were confused by a string of acquisitions, discontinued contracts and coming disposals. Cutting through the fog, what is clear is that…traditional revenues from stock market listings, secondary trading, clearing and settlement, saw little growth last year.

PLY: Improving coverage although still pulling punches. I flagged the somewhat bizarre (and highly counterproductive) opacity of LSE accounts Friday. Hours of reading leave me inclined to note that LSE comes close to apparently lathering a lot of lipstick alongside some juicy slices of gammon in between the streaky bits. Clearing margins (er, the sexy bit of the DB1 deal?) appear under pressure, while ultimately LSE was bigger thanks to expending a billion on Russell…but was it really a better business? Under the bonnet / “hood” it isn’t the worries of Plus 500 in there but as supposedly the most majestic of historic market infrastructures on the planet, it does raise questions. This article opens the door to debate but the minutiae is hardly becoming of an exchange to deliver this breathless hype of vast profit backed by a somewhat opaque narrative history. Cynics would suggest there might be a short termist self-interest by some to do a deal. I wonder what that could be?

Rolet Could Net £16m ($ 22.7m) After DB1 Deal (subscription)

Katherine Griffiths – The Times

Fight Over Sale of LSE Is About to Get Nasty

Matthew Leising, Annie Massa & John Detrixhe – Bloomberg

PLY: An unstinting memory of childhood parties was that after all the hype, the person who actually unwrapped the final paper in “Pass the Parcel” rarely appeared to have gained anything worth all the prior excitement and expenditure of energy.

LSEG CEO Says “Merger Of Equals” Only Way To Describe Potential DB1 Deal


PLY: I would humbly suggest “Merger of Equal Desperation” is most apt but at least it’s good to see Xavier still on message after his summary defenestration, to taking control of the tea trolley at the hands of the brilliant Donald Brydon.

LSE’s Derivatives Market to Launch Despite Talks With Rival

John Detrixhe – Bloomberg

CurveGlobal is on track to start trading later this year, according to Xavier Rolet.

PLY: Widespread relief amongst bartenders at least, that some serial venue creators will have another successful launch on their hands to further burnish their c.v.s… “Trebles all round!”

Rolet: China-UK Stock Exchange Link Could Start In 2017 (subscription)

James Rundle – Financial News

PLY: Apparently flying pigs are so last year. It’s supercavitating submarine porkers the alpha merchants proclaim as the way forward nowadays.

…Clearly Xavier has gone into hype overdrive. Maybe the leftovers on the tea trolley are caffeinating his optimism.

QV Premium: DB1-LSE Merger Brief.


Sicat: Consolidation Of Exchanges Crucial

Doris Dumlao-Abadilla – Inquirer

SEC To Decide On Long Pending PSE-PDEX Merger Before Holy Week

James Loyola – Manila Bulletin

SEC is planning to decide before March 26 whether to allow the merger of Philippine SE (PSE) & PDS Holdings.

PLY: Mr Sicat remains the man with the most patience in the face of utter regulatory intransigence.

Incidentally, any truth to the rumour Hesse Regulators were seen boarding a Luftwaffe flight from Frankfurt to Manila recently?

QV Premium: PSE – PDEx Merger Brief.


Hong Kong’s ‘Dark Pools’ Start to Dry Up After New Rules Rolled Out (subscription)

Gregor Stuart Hunter – Wall Street Journal

“Volume has decreased, which begs the question of what types of flows were going in there.” – George Molina, director of Asian trading at Franklin Templeton.


New TABB Equity Digest: Industry Trade Size Hits New Low – 15 Dark ATSs Execute 90% Of Total Dark ATS Volume


PLY: It has come to pass, as I have long posited: US stocks now trade in sizes below that of Groupon coupons.


NZX Moves To T+2 Settlement Cycle


PLY: Antipodes now just 170,000 or so seconds short of a Real-Time World Market.

Private Markets

SIX 2015 Results


vs 2014: total operating income CHF 1.8 bln (USD 1.8 bln), up 0.5%, operating profit CHF 279m (USD 279m), up 21.4%, group net profit CHF 713m (USD 713m), up 188 %.

PLY: Hmmm given that SiX has now apparently run out of assets to sell to DB1 (foolishly imho), are these results really hope for the future?


Two Shareholders Flag Concerns About NSE’s Listing Committee

The Economic Times

As pressure continues on NSE to list, at least two minority shareholders, Norwest Venture Partners & Saif II-SE Investments Mauritius, have now accused the top management of misleading them about the contours of the listing committee and arbitrary powers given to the CEO on this matter.

PLY: Clearly tempers are hugely frayed as the normally calm Sohil Chand of NVP (2.11%) has stated: “NSE is not following established norms of corporate governance and there are serious allegations of mismanagement which need to be addressed.”


Dividend News

SIX BoD has recommended to the AGM to distribute an ordinary dividend of CHF 8.25 (2014: CHF 8.00).

Special Section: FTI, NSEL, India at the Crossroads

Markets closed – Mahashivratri.


Intel’s Pentium Bug Fix Is Proposed As Solution For Dark Pools

John Detrixhe – Bloomberg

Rather than only providing pages of text describing their trading systems, dark-pool operators should give regulators mathematical models that show precisely how they work, Aesthetic Integration told SEC in a letter last week. The code could then be examined with formal verification.

PLY: The dynamic duo of Aesthetic Integration fresh from their UBS FinTech prize last year posit interesting suggestions in line with their testing expertise to help the SEC clear up dark pools, MTFs, Institutional Liquidity Pools et al.


CME Expands Base Metals Offering with New Aluminium European Premium Duty-Paid (Metal Bulletin) Futures


Begin trading 21 March, 2016. Pending relevant regulatory review periods, the new contract will be available for trading on CME Globex, for submission for clearing through CME ClearPort, and will be listed with and subject to the rules and regulations of COMEX.


CME & Thomson Reuters Announce China Construction Bank as First Chinese Bank to Join the LBMA Silver Price



Sebi Planning Overhaul Of Commodity Market Norms

Anirudh Laskar & Jayshree P. Upadhyay – Livemint

Move aims to introduce transparency, reduce risks and include new participants like banks, mutual funds and FPIs to improve liquidity.


MOEX Launches ETF On The RTS Index


The first Russian ETF on the RTS Index.  

Career Paths

Nasdaq appointed Lauri Rosendahl as President of Nasdaq Nordic & Nasdaq Stockholm. Rosendahl has been with Nasdaq since 2009 as SVP & President of Nasdaq Helsinki.

Henrik Husman was appointed President of Nasdaq Helsinki. Husman joined Nasdaq in 1997 and currently holds the position of VP Cash Equities Product Management & Deputy MD of Nasdaq Helsinki.

PLY: Congratulations to both Lauri and Henrik on their elevation. Most of all I wish a heartfelt farewell to Magnus Billing who is headed at month’s end to the exciting post of Alecta CEO succeeding Staffan Grefbäck at the helm of the $85 billion Swedish pensions leviathan. Magnus has been an active participant in industry debate from his position at NASDAQ, especially through the FESE channel and I sincerely hope he will use his exciting new position to continue his advocacy for the best of an EU CMU and the better funding of SMEs in Europe and beyond. Good luck to all!

ITG added a new independent member to its BoD, Kevin J. Lynch, a private investor and former portfolio manager at JANA Partners, under the terms of a new cooperation agreement with shareholders Philadelphia Financial Management of San Francisco & Voce Capital Management.

Last year Philadelphia Financial Management & Voce Capital Management increased the combined stake in ITG to 8.6%.

Financial Calendar

10.03 – Record date CME $0.60 Q1 2015 dividend

11.03 – TMX $0.40 dividend payment

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

Other stories

MEPs Draft Mifid II Amendments To Avoid HFT Trap (subscription)

James Rundle – Financial News

Lawmakers have taken advantage of the likely delay to Mifid II to table draft amendments to the overhaul of Europe’s trading rulebook that aim to stave off the prospect of non-finance companies becoming caught up in rules meant to govern HFT.

PLY: If only that were MIFID II’s sole foible.


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