March 09 2016

elb2Sound argument from London Evening Standard against DB1-LSE adopting their Tinder-esque approach to market structure merger. Panic seems to be ensuing from the latter counterparties, as they hurry to get a deal out there. The “merger of equal desperation” thus may be public by next week. That this merely enables the crack ICE sniper team more time to pick it off at their leisure again seems missing from the ongoing DB1-LSE miscalculations inelegantly building a textbook case study in how not to do a deal. After all this ‘hurry at the beginning,’ you can probably still plan a family and return from maternity leave by the time EU antitrust have got around to saying no to DB1’s latest masochistic fetish to spend too much time in Brussels.

Elsewhere, FOW notes LME is talking to other markets about using its state of the art clearinghouse powered by Cinnober. Former TMX’er Kevan Cowan joins NASADAQ Chi-X Canada while former UBS’er Tom Hayes remains guilty of conspiracy without a counterparty.

Two New Premium posts overnight: Life in Limbo & CostCutting Dreams – add more alpha enhancement to your free Exchange Invest daily with a $300 individual subscription to the Exchange Invest Premium service. (Ignorance may be bliss but it doesn’t advance your career – well unless…

No, agreed, let’s just get scrolling:).

Public Markets

DB1-LSE Eye Savings From Merger Move

Andreas Kroner, Arno Schuetze & Anjuli Davies – Reuters

DB1 & LSE are targeting cost savings of more than 300 million euros ($331 million), once a merger of the two exchanges is completed, with an expected to officially merger agreement announcement next week, well ahead of a March 22 deadline.

PLY: #PureDesperationAlert. When the merger partners are already showing the likely savings ahead of the bid, you just know things are in trouble…(further comment in Premium) CostCutting Dreams.

DB1 Races To Seal LSE Deal Before US Rivals Bid (subscription)

Martin Waller – The Times

PLY: In other words, both parties are stuck in quicksand and inclined to give it a wiggle.

LSE & DB1 To Pledge Up To $7bn Of Capital Savings (subscription)

Patrick Jenkins, Philip Stafford & Arash Massoudi – Financial Times

Banks and investors will be promised up to $7bn in efficiency savings on trading when DB1 & LSE outline synergies and seek investor support for their planned merger.

PLY: If antitrust plays ball, this might happen. Again, equally a porcine supercavitation concept may be the submarine of the future. Meanwhile, these proclamations of wondrous cash sums has all the serenity of a cheesy celebrity telethon. Should we be watching out for the next ‘street sweep’ in this ‘merger of equal desperation,’ to line up Kanye West to advise DB1-LSE on cash management? (In other news, ‘more choice than ever’ says Kanye of forthcoming Rita-Curve launch while Kim Kardashian produces a selfie proclaiming “NLX is my preferred cross margining venue”).

A LSE Takeover By DB1 Could Be A Disaster

Nick Goodway – Evening Standard

Any day now, DB1 will launch its takeover of — sorry, merger of equals with — LSE. Yet we have heard barely a whimper from our politicians about what could prove to be a devastating blow to London.

PLY: Yip, Yip and thrice yip, Nick Goodway, the only good part of this deal is how it has exposed the sheer incapacity of the CEOs to manage their business (micromanaging is not the same…).  However the twist to Mr Goodway’s impeccable argument here is that London is potentially sacrificing clearing to Frankfurt for the pursuit of a short-term deal. I have to agree, a particularly perilous move given the likelihood the EU won’t last anywhere like as long as some of the products already novated to SwapClear.

QV Premium: DB1-LSE Merger Brief.

 

LME Clear In Talks With Non-LME Exchanges (subscription)

FOW

PLY: Unsurprising & entirely sensible approach by Trevor Spanner. We heard in January that LME was talking with new members outside the metals industry and let’s face it, with a shiny new CCP powered by the state of the art Cinnober CCP system why wouldn’t you be pursuing every option on the path towards a real-time world market?

 

Dark Pool Settlements Spark Calls for Greater Transparency

Jess Delaney – Institutional Investor

 

Buyside Reluctant To Join The Clearing Party (subscription)

James Rundle – Financial News

Private Markets

Bats Revenues Top $100m In Europe (subscription)

Tim Cave – Financial News

Bats Drops $350k To Drop ‘Chi-X’

James Rundle – Financial News

In February, Bats Global Markets announced it would be dropping the “Chi-X” part of its European equity market’s name. On March 7, it revealed it was dropping $350,000 to make it happen.

PLY: A remarkable spend from a normally super-parsimonious enterprise.

 

Axioma Acquires The Regulatory-Reporting & Risk-Reporting Units Of ConceptONE

MondoVisione

 

Turkmen President Criticizes State Commodity & Raw Materials Exchange’s Activity

Trend

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX off nearly 3%, FTIL slightly lower.

Products

CME – Launch of Interest Rate Swaption Clearing

CME

CME will begin clearing Interest Rate Swaptions on April 11 (discussed yesterday).

 

ESAs Publish Final Draft Technical Standards On Margin Requirements For Non-Centrally Cleared Derivatives

MondoVisione

 

Bursa Malaysia Plans To Boost Palm Oil Options Trading

Reuters

 

JPMorgan Said To Offer Asset-Backed Bonds Tied To LendingClub

Matt Scully – Bloomberg

JPMorgan is marketing a package of bonds tied to unsecured consumer loans that were originated by LendingClub.

PLY: This securitisation trend is fascinating and is going to continue enormously in the next few years, especially as EU CMU hopefully keeps at least a flicker of the free market flame amongst its objectives as it trundles through the blob.

 

ITG Launches ITG Execution Analysis

ITG

…a web-based analytics tool for clients seeking additional insights into their fill-level data and broker-neutral algorithm usage.

 

Office Of Financial Research Update – “Stressed To The Core: Counterparty Concentrations & Systemic Losses In CDS Markets”

MondoVisione

Indexes

Bats, T3 Index To Launch SPYIX Market Volatility Index

Bats

VIX Faces Challenge From Trading Robots Unleashed by Bats

John Detrixhe & Brian Louis – Bloomberg

Bats Launches Volatility Index To Rival CBOE (subscription)

Philip Stafford – Financial Times

Bats Global Markets has launched a new volatility index to compete with CBOE’s popular Vix, aiming to capitalise on cracks in the market plumbing exposed by wild market swings last August.

Bats started trading a new electronic-based options index it is calling “the Spikes”.

PLY: Interesting move from BATS and to think EUREX started the whole process and gave up when Volax was ahead of its time. I sympathise on that point.

Career Paths

DB1 announced that, effective 7 March 2016, Thomas Book, MD at Deutsche Börse Group, has been appointed CEO of the Eurex Frankfurt & Eurex Zürich as part of his new role as Head of Derivatives Markets Trading for Deutsche Börse Group. Michael Peters was appointed new Deputy CEO of Eurex Frankfurt and has been a member of this Executive Board since 2006.

As of 1 July 2016, Erik Müller, MD at Deutsche Börse Group responsible for Group Strategy and M&A, Treasury and IR, will take over as CEO of Eurex Clearing. Effective 7 March, Heike Eckert has been appointed new Deputy CEO of Eurex Clearing; she has been serving as COO since April 2013.

Since January 2016, Eurex trading and clearing has been part of the newly created “Clients, Products & Core Markets” division headed by Jeffrey Tessler, member of the Executive Board of Deutsche Börse. Andreas Preuss, formerly responsible for the Eurex segment, is now in charge of the newly created division “IT & Operations, Data & New Asset Classes”. Preuss is deputy CEO of Deutsche Börse.

Deutsche Börse Group also announced changes in the leadership structure of Market Data + Services (MD+S), which is part of the recently created division “IT & Operations, Data & New Asset Classes”, headed by Deputy Group CEO Andreas Preuss.

MD+S activities will be bundled in four major service lines:

Regulatory Services – headed by Georg Gross

Data Services (formerly known as “Information Services”) –  headed by Hartmut Graf (reported yesterday)

Index Services (responsible for the STOXX & DAX indices) – Matteo Andreetto, who has been Global Head of Sales at STOXX for the past years, has been appointed Head of Index Services & CEO of STOXX (also reported yesterday)

Infrastructure Services (will combine the former service lines Tools & Market Solutions) – Willy Suter, formerly responsible for Market Solutions, will head this department ad interim.

Content Lab – the four new service lines will be supported by this new section, which exclusively focuses on the development of innovative content and intellectual property. This section will be headed by Konrad Sippel, who was previously responsible for product & market development at STOXX.

MD Holger Wohlenberg will continue to lead MD+S.

PLY: I made a comment yesterday about pass the parcel. For some reason it springs to mind here. At least it isn’t deckchairs on Titanic. Rather DB1 has come over all new age karma, they’re embracing the iceberg and squeezing it – tricky that, it may melt away before their eyes of course.

Financial Magnates reports that Muammer Cakir, Borsa Istanbul’s Head of Derivatives Market – VIOP, would be parting ways with the exchange group with immediate effect.

PLY: Sorry to see Mummer leaving, I wish him every success.

Sources: Former TMX Exec Cowan To Advise Nasdaq’s Chi-X Canada

Reuters

Kevan Cowan, a former senior executive at TMX, is joining Nasdaq’s Chi-X Canada as a consultant.

Cowan may advise Chi-X Canada on starting a listings business that would compete with TMX’s Toronto SE.

PLY: That noose of competition is tightening around the neck of TMX and it still looks scarily becalmed. Hopefully there is something of a masterplan around the legacy Canadian marketplace provider.

daijiworld reports that Karntaka’s former Chief Secretary Sudhakar Rao has been appointed as the Chairman of the Bangalore SE (BSE). Rao, who had served as Public Interest Director of BSE, will take over from S Ramadorai, who retired on Monday.

SEC announced the creation of the Office of Risk & Strategy within its Office of Compliance Inspections and Examinations (OCIE). Peter B. Driscoll will lead the office and was named as its first Chief Risk & Strategy Officer. Robert M. Fisher was named Managing Executive of the Office of Compliance Inspections and Examinations (OCIE), succeeding Peter B. Driscoll.

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

Jailed Libor Trader Hayes Denied UK Supreme Court Appeal

Kirstin Ridley – Reuters

PLY: Mr Hayes remains imprisoned in a uniquely Kafka-esque position, convicted of conspiring with, er, nobody…surely the ultimate counterparty failure?

 

 

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