March 11 2015

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The biggest story overnight doesn’t come from Boca Raton but is exclusively raised in our Premium pages:

Did Duncan Do Due Diligence?

That’s a question pertaining to last week’s Duncan Niederauer Fund Manager – An Essential Due Diligence Resource (a must read in conjunction with many briefs such as: Duncan Niederauer – A Brief Review)

Not being subscribed to Premium = willful ignorance of the industry. Don’t say I didn’t warn you!

Meanwhile Boca is under way. We endeavour to prune stories we regard as puff justifying expenses on either side of the conventional media / corporate PR chain. Tangible news from the rat’s mouth will of course be reported here. Reluctantly we are including letters of intent and other intangibles just for the record even though our longstanding belief they are not worth the air miles predicated in their construction, remains valid.

…Today, in Exchange Invest – well give it a scroll and see what’s been happening…

Public Markets

SGX In Early Talks For Regional Rubber Bourse
A. Ananthalakshmi – Reuters

SGX is in preliminary talks to be part of a regional rubber exchange that would bring together the top three producing nations, after holding a meeting late last month with the International Tripartite Rubber Council (ITRC), an industry body comprising Thailand, Indonesia and Malaysia, which together produce 70% of the world’s rubber.

PLY: In November ITRC decided to create an exchange which is to be operational in 18 months and logically, given the SICOM heritage, SGX is logically keen to be in the epicentre of this development.

The Future Of ASEAN’s Stock Exchanges
Stanley Lim – The Motley Fool

Today, no less than seven exchanges are an official part of the ASEAN Exchanges, a collaboration to help improve investors’ access to the seven markets.

Read also our Premium brief: ASEAN Exchanges Project Brief.

NYSE/ICE Yanks Day ISO ALO Order Type After Short Stint
John D’Antona Jr. – Traders Magazine

According to trader notice sent from the exchange to clients on February 26 at 4:07pm, NYSE/ICE temporarily deactivated the Add Liquidity Only (ALO) and ALO Day ISO modifiers order types.

Currently, the exchange offers 20 order types as posted on its website.

PLY: A curious amount of snark accompanies this change whereas I would applaud any exchange which rapidly realises an order type isn’t working – and NYSE has been pragmatically pruning its long list to something which considerably reduces how many PHds are required to understand it.

Outsourcing: Trading Places (subscription)
Gregory Meyer – Financial Times

PLY: The world’s low latency traders have been using offshore brainpower and technology since the beginnings of digital markets and the FT takes a look.

Robo-Advisor Cat Fight Breaks Out
Mark Melin – ValueWalk

Two of the largest computer-driven “robo-advisors,” programmed to operate in a non-emotional, logical environment, are in fact engaging in a somewhat emotional, illogical catfight, ushering in a new era of the fighting robot stock broker.

PLY: #Meow

Lew Says Regulators Undecided On HFT
Matthew Boesler – Bloomberg

U.S. Treasury Secretary Jacob J. Lew on HFT regulation in answer to a question in NY:

“I don’t want to jump to a conclusion that there is a need for a regulatory response, we first have to understand whether there is a problem that traditionally rises to the level of regulatory concern.”

HKEx Publishes Its Annual Fact Book
HKEx

TriOptima’s triResolve Service Expands In APAC Adding Taiwan’s Taipei Fubon Commercial Bank
ICAP

TriOptima announced that Taipei Fubon Commercial Bank (Fubon) is the first Taiwanese financial institution to join its triResolve portfolio reconciliation service. triResolve has grown 350% in Asia Pacific since 2012; and the service continues to add subscribers in the region. Currently 1,300 firms use triResolve globally.

PLY: TriOptima remains an exquisite product making markets better.

CFTC Solicits Public Comment In Response To the U.S. District Court Order Regarding Cross-Border Litigation
CFTC

CME & TAIFEX Sign Letter of Intent For Greater Collaboration
PRNewswire

Private Markets

Vietnam – Coffee And Goods Exchange Opens In Central Highlands
Vietnamnet

The Buon Ma Thuot coffee and commodity exchange company (BCCE) opened for business on March 10. Forty-two percent of the BCCE is owned by the authorities of Dak Lak province. BCCE is linked with major commodity exchanges in the world, including CME. Along with Robusta beans, BCCE will trade black pepper and rubber.

Tran Thanh Hai, BCCE general director, said, last year Vietnam exported 1.6 million tons of coffee, earning a turnover of over $3.5 billion only, far less than other coffee-growing countries, especially Robusta-growing nations.

Hai said international Robusta growers obtained about $10 billion per year. Vietnam, accounted for nearly 50% of the world’s Robusta coffee exports, earning $3 billion.

PLY: As an investor in a Polish tech cafe/informal coworking space, I have a significant vested interest in more transparent pricing of coffee beans.

Edoh Kossi Amenounve To Lead The Integration Of The West African Financial Markets
Medafrica

The Togolese born Edoh kossi Amenouve will lead the integration of the three financial markets of West Africa, Nigeria, Ivory Coast and Ghana and the three steps to achieve integration of these markets should be completed at the end of the first quarter 2016.

Read our Premium briefs: Rise of Africa – Part 1, Part 2, Part 3, Part 4, Part 5.

Big Names Put Cash In Bitcoin Startup 21 Inc. (subscription)
Michael J. Casey – Wall Street Journal

A Silicon Valley startup has persuaded some of the biggest names in venture capital to put $116 million (the largest yet for a BTC startup) behind its plan to turn the technology behind bitcoin into a mass-marketed phenomenon.

80% Of Bitcoin Is Exchanged For Chinese Yuan
Quartz

In a report out from Goldman Sachs about the future of money, the bank points out that 80% of bitcoin volume is now exchanged into and out of Chinese yuan. The second-highest trading currency is the US dollar, followed by smaller denominations in yen and euros.

The Winklevoss Twins Tell Us Why They Believe Bitcoin Will Come To Dominate Global Finance
Rob Price – Business Insider

Here’s the Isle of Man’s Plan To Become A Bitcoin Paradise
Joshua Barrie – Business Insider

The Isle of Man, a tiny, Celtic island between the west coast of England and Northern Ireland, is soon to pass legislation that its government hopes will help it become a true paradise for digital currencies. The island will be the first place in the world to pass a “regulatory framework” for the alternative payment method.

PLY: Having worked with them for many years, I applaud the Isle of Man for their perceptive foresight in pursuing the cryptocurrency regulatory framework which deserves to succeed.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX off 1%, FTIL down 2.5%, allegations of bribery pertaining to NSEL leads me to ponder the police chief’s famed remarks in Casablanca once again: “I’m shocked, shocked to find that gambling is going on in here!” And there’s more:

RS 20 Crore (USD 3.18 Mln) Bribe Passed Off As Oil Sale?
Bipin Kumar Singh – Mumbai Mirror

Economic Offences Wing (EOW) investigators probing the NSEL scam suspect that Anand Rathi Commodities Limited (ARCL) received kickbacks from an an NSEL defaulter, and it was accounted for as a sale of washed cottonseed oil.

“We have strong doubts about the authenticity of this transaction,” said Rajvardhan Sinha, additional commissioner of police, EOW. According to an EOW document, NK Protein, a firm that defaulted on the NSEL, bought washed cottonseed oil worth more than Rs 20 crores (USD 3.18 mln) from the ARCL. The EOW suspects this was paid as kickback to launch the firm on NSEL. The firm later defaulted.

Police Look At NSEL Trades Of Little-Known Property Developer
The Economic Times

The Economic Offences Wing of the Mumbai police, probing the NSEL scam, has trained its sights over the past few months on an investor who pulled out its funds just before the bourse went bust in July 2013. While this fact in itself might not raise eyebrows, the police probe has so far revealed that La-Fin Financial Services, owned by Jignesh Shah, the alleged brain behind the scam, previously owned a stake in one of the 26 companies belonging to Raval group, and that NSEL’s auditor and Jignesh’s relative Mukesh Shah audited the group companies’ books.

Read our Premium briefs: NSEL Scandal BriefPart 1, Part 2

FTIL’s Majority Shareholders Object To Govt’s Amalgamation Plan
daijiworld

FTIL said on Tuesday that 99.55% of its shareholders have objected to the government’s move to amalgamate the company with NSEL.

Read our daily updated Premium brief: NSEL-FTIL Merger Brief

Technology

BSE To Use DB1 Network To Connect With Investors
Finextra

As of Q2 2015, participants of BSE will be able to use DB1’s resilient and low latency N7 network services to connect to BSE back-ends in India via the respective DB1 Access Points (data centers) in the two major financial centers Hong Kong and Singapore. Currently, the two Access Points are mainly used by Eurex members.

BSE markets have already been operating on T7 since 2013.

Products

China Turns Up The Heat On ICE (subscription)
Jeremy Grant – Financial Times

Now Beijing has turned to the global futures industry (previous comments yesterday) and said: “You know these copycat contracts you’re so fond of launching for time to time? Don’t even think about doing that — anywhere, never mind in China.”

Let’s back up a bit. ICE was due to launch two commodity futures contracts on its new Singapore exchange this month — one on cotton, and the other on sugar, They were based on similar contracts already offered by the Zhengzhou Commodity Exchange (ZCE).

It was a cheeky move, especially since I understand that ICE did not ask ZCE to negotiate a commercial agreement to do this — presumably because there was a high probability that the Chinese exchange would refuse.

QV our Premium post:China Liberalises and our Premium brief: ICE – SMX Deal Brief

PLY: Without genuine IP, the idea of stalling contract development in generic issues is a worrying one – presumably China hopes to do the same in single stock derivatives too? This is a very worrying protectionist precedent albeit one which I believe may yet prove difficult for China to square with its policy moves towards a fully convertible RMB.

Euronext Sticks By New Wheat Contract After Stalled Start
Valerie Parent & Gus Trompiz – Reuters

Euronext plans to drop its established wheat futures before the 2018 harvest in favour of a just-launched premium wheat contract.

After a promising debut on March 2 (launch previously announced here), activity in the new contract has [so far] dried up. Open interest has decreased and some sessions have seen no trades, leaving market participants doubtful about its short-term prospects.

FAO: CME plans to launch an EU wheat contract by the end of April, as reported here. Previous comments on the topic here.

WSE Mulls Taking On Polish Bond-Market Goliath
Konrad Krasuski & Piotr Bujnicki – Bloomberg

Warsaw SE (WSE) may refinance its floating-rate note due in January 2017 with fixed-rate debt to push the Polish market for such securities. While 98% of company bonds sold last year were so-called floaters, they are harder to price than notes offering a steady coupon.

Poland may be ripe for an increase in fixed-coupon bond issuance amid record-low interest rates that would allow companies to lock in low borrowing costs. The nation’s investment funds have traditionally favored flexible-return notes as they protect against rising interest rates. This has fostered a buy-and-hold approach in the market, hampering debt trading, including on the bourse’s Catalyst platform.

PLY: Interest rates in Poland have now reached the level of a few percentage points i.e. around where the current generation of USD/GBP traders will probably perceive it’s a melt-down when their rates get up to 2.5% or so. Poland’s debt market is maturing and GPW would be wise to lead the market into more fixed income through its own platform to demonstrate the resilience and potential of Catalyst.

SGX Expands FX Footprint With New Asian Currency Futures
MondoVisione

Shanghai Futures Exchange Plans To Launch Nickel Contract On Mar 27 (subscription)
Metal Bulletin

Career Paths

Lahore SE announced the appointment of Khalid A. Mirza as the New Chairman of the LSE Board of Directors.

BATS Global Markets announced the hiring of Kapil Rathi as VP, Options Business Strategy. Mr. Rathi joined BATS on February 23rd after 10 years in key roles at the International Securities Exchange (ISE) and is working closely with Jeromee Johnson, VP, Options Business Strategy, as a senior member of the BATS Options team. Both Mr. Rathi and Mr. Johnson report to Bryan Harkins, EVP, Head of U.S. Markets.

FIA Elects Directors And Officers
MondoVisione

The following directors were elected as officers by the new board:

Gerald Corcoran, Chairman & CEO, R.J. O’Brien & Associates LLC, was re-elected as Chairman
Emily Portney, Global Head of Agency Clearing, Collateral Management and Execution, J.P. Morgan Securities LLC, was re-elected as Secretary
M. Clark Hutchison, MD, Head of North American Listed Derivatives, Deutsche Bank Securities Inc., was re-elected as Treasurer

The following individuals were re-elected as public directors by the new board:

Michael R. Schaefer
Alice P. White

Eight directors were elected for two-year terms in the regular member category:

Craig Abruzzo, MD, Morgan Stanley
Jan Bart de Boer, CCO, ABN AMRO Clearing Bank N.V.
Maureen Downs, President, Rosenthal Collins Group LLC
Jeffrey Jennings, MD, Global Head of Prime Derivatives Services, Credit Suisse Securities (USA) LLC
Thomas Kadlec, President, ADM Investor Services
Jerome Kemp, Global Head of ETD Sales and Clearing, Citigroup Global Markets Limited
Emily Portney, Global Head of Agency Clearing, Collateral Management and Execution, J.P. Morgan Securities LLC
George Simonetti, Head of Markets Clearing and Futures Execution, Wells Fargo Securities, LLC

Three directors were elected for two-year terms in the associate member category:

Clive Christison, CEO, Global Oil Americas, BP Products North America
Thomas J. Erickson, VP, Director of Legal Affairs, Bunge Product Lines
Christopher Hehmeyer, Managing Member, HTG Capital Partners LLC

The new board also appointed the directors of FIA Technology Services, a subsidiary of the FIA that supports electronic execution of give-up agreements and execution brokerage payments. The directors are:

Antoine Babule, MD Head of Prime Services, SG Americas Securities, LLC
Rebecca Crowe, Director, Deutsche Bank Securities Inc.
Michael Dawley, MD, Global Co-Head of Futures and Derivatives Clearing Services, Goldman, Sachs & Co.
Maureen Downs, President, Rosenthal Collins Group LLC
Chris Mitchell, Global Head, Derivatives Clearing Operations-Change, J.P. Morgan
Tom Neville, Executive Director, Morgan Stanley

FIA’s board of directors holds elections each year at the annual meeting in March, with terms staggered so that approximately half of the directors are elected each year. In addition to Walt Lukken, President & CEO of FIA, who serves on the board ex officio, the continuing board directors are:

Antoine Babule, MD, Head of Prime Services, SG Americas Securities, LLC
Patrice Blanc, MD, Global Head of Futures, Jefferies LLC
Gerald Corcoran, Chairman & CEO, R.J. O’Brien & Associates LLC
Robert Creamer, President, Geneva Trading
Michael Dawley, MD, Global Co-Head of Futures and Derivatives Clearing Services, Goldman, Sachs & Co.
Richard Gorelick, CEO, RGM Advisors LLC
Arthur Hahn, Partner, Katten Muchin Rosenman LLP
M. Clark Hutchison, MD, Head of North American Listed Derivatives, Deutsche Bank Securities Inc.
Raymond Kahn, Global Head of Futures and Head of Agency Derivatives Services Americas, Barclays
Najib Lamhaouar, Global Head of ETD and OTC Clearing, HSBC Securities (USA) Inc.
Edward Pla, Global Head of Clearing and Execution, UBS Investment Bank
Kenneth Raisler, Partner, Sullivan & Cromwell LLP

FT reports that Blythe Masters, the former JPMorgan executive who helped pioneer credit derivatives in the 1990s, has re-emerged as CEO of cryptocurrency start-up Digital Asset Holdings.

Financial Calendar

Friday

Record date Nasdaq $0.15 quarterly dividend
Record date NZX 6 cents fy 2014 dividend
Interactive Brokers $0.10 quarterly dividend payment

Tuesday-Friday

FIA Boca 2015

New announcements

Amman SE (ASE) will hold its Sixteenth General Assembly Meeting on Thursday, March 26, 2015

CFTC has rescheduled the public roundtable to discuss issues related to the recovery and orderly wind-down of Derivatives Clearing Organizations (DCOs) for March 19, 2015, from 9:00 a.m. to 5:00 p.m. – Press release here.

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

Share Notes

Charles Schwab EVP Jay L. Allen sold 11,402 shares Monday, March 9th at an average price of $30.82 (bargain $351,409.64).

Analyst Notes

ICE “Neutral” Rating Reaffirmed by Zacks – $246.00 Price Objective
LSE “Neutral” Rating Reiterated By HSBC – GBX 2,570 Target Price
Scotiabank Increased Their Price Objective On TMX From C$51.00 To C$56.00 – “Sector Perform” Rating

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

A Beer Or A Milkshake? Crowdfunding Can Bring Delicious Dividends
Leah Milner – The Guardian

Investors who are willing to back risky startups on crowdfunding websites could be rewarded with freebies such as beer or bespoke shoes as well as the potential for returns.

Other stories

ESMA Publishes Responses Received To Consultation On MiFID II/MiFIR
MondoVisione

To view the responses, please see the consultation page.

Nairobi Securities Exchange Joins United Nations Sustainable Stock Exchanges Initiative
UNCTAD

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