March 12 2015


MOEX results simply stunning against the prevailing macro background while RJO acquires Kyte. NASDAQ enters a whole new realm of copycatting – will their energy play turn out to be wildcat central or another curious butterfly sanctuary? TriOptima making the running in a brisk day of clearing news as GCSA’s excellent insurance product is rightly in the spotlight and Craig Donohue pushes OCC forward and ponders a tech revamp.

Boca has generated some useful headlines but once again we’ve tried to prune the froth out. Good to know too that there is a lot of chat in the resort about our recent Premium coverage such as the ongoing discussion that hubris can outpoint tangible value addition which goes under the name Duncan Niederauer: Did Duncan Do Due Diligence? and Duncan Niederauer Fund Manager – An Essential Due Diligence Resource. Equally my reflections concerning LCH.Clearnet: A Paradismal Shift? and why clearing is a bit more complex than running a buffet but you must never forget the Homer Simpson maxim of CCP (with a dash of size zero supermodel) remains a hot topic that you will barely see mentioned elsewhere.

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 and the latest include:

NSEL Scandal Brief – Part 1, Part 2, Part 3
Rise of Africa – Part 1Part 2Part 3Part 4Part 5
The Bond Platforms Rush – Part 1Part 2
ICE – NYSE Euronext Deal – Part 1Part 2Part 3

Our Premium service is a unique source of industry analysis – insight in a low latency environment if you like. Can you afford not to be a subscriber? $120 per user/year helps keep Exchange Invest daily Free. Subscribe here or email and I will invoice you forthwith (oh and new options will be with us imminently too!).

Public Markets

MOEX 2014 Financial Results

Highlights 2014

Operating income up 23.5% YoY to RUB 30.39 bln (USD 500 mln). EBITDA up 31.9% YoY to RUB 21.62 bln (USD 355.4 mln); the EBITDA margin was 71.1% vs. 66.6% in 2013. Operating expenses up 5.2% YoY to RUB 10.37 bln (USD 170.4 mln). Net income up 38.1% YoY to RUB 15.99 bln (USD 262.8 mln); basic EPS increased to RUB 7.21 from RUB 5.23.

PLY: You can’t keep a good market down – despite sanctions, and all manner of political shenanigans Balkanising the borders of Europe, MOEX has reigned supreme with stunning numbers. Eagle-eyed viewers will have noted emerging markets investor par excellence Mark Mobius on CNBC the other week citing his impatience to return to investing in Russia as soon as sanctions are lifted… Management focus continues to add ongoing value to the business.

R.J. O’Brien To Acquire The Kyte Group From GFI Group – Acquisition Marks Strategic Expansion For RJO In Europe

R.J. O’Brien & Associates (RJO) and GFI Group announced that RJO’s affiliate, R.J. O’Brien Europe Limited (RJO Europe), will acquire GFI’s subsidiary, The Kyte Group Limited (Kyte). Terms of the transaction were not disclosed. FCA has approved the transaction, which is expected to close no later than March 17. After closing of the transaction, Kyte will operate under the name “R.J. O’Brien Limited”.

PLY: A fascinating transaction which reminds us there are assets to be sold from within GFI that have not already been bid for by CME. BGC recoups a bit of cash (terms not disclosed) and RJO get significant heft in the co-lo prop trading department. Sad to see the Kyte name disappearing as it became a core element of the original London derivatives revolution when those with foresight created LIFFE and brought the Royal Exchange alive with the sounds of open outcry.

Nasdaq To Challenge ICE & CME With New Energy Futures Market
John McCrank – Reuters

As rumoured earlier this week, Nasdaq is expanding into energy derivatives with energy futures and options set to trade on the Nasdaq Futures Exchange at less than half the prices charged by incumbents CME and ICE.

The energy futures and options products, collectively called Nasdaq Energy Futures, will be based on oil, natural gas, and U.S. power benchmarks, and are expected to begin trading by mid-year.

Nasdaq has been pitching the new offerings to brokerages and banks for months and has secured support from firms that collectively account for 85% of the volume in market, including ABN AMRO Group, Goldman Sachs, JPMorgan Chase & Co, Morgan Stanley, and Virtu Financial.

The exchange operator hopes to gain a 10% market share within 18 to 24 months of going live, which would make it a $50 million-a-year business, Nasdaq CEO Robert Greifeld told reporters at the FIA conference in Boca Raton, Florida.

PLY: I am all for NASDAQ seeking to add value and compete in markets BUT: Two big worries: First up is that NASDAQ still has a firm belief merely copycatting other products will work and second this was launched in Boca by Bob Greifeld who has achieved many things as Group head of NASDAQ but remains a cash market person and as I will never tire of pointing out, the two dimensionalists rarely make the quantum leap to the derivatives universe.

Sorry to say I don’t understand why NASDAQ have done this, it looks like another NLX-style drain on resources to me. Hopefully they have learnt from the daft hubris / misleading advertising and horrible open risk of future litigation due to apparent wash trading which is the legacy (alongside that 0.05 cents per quarter cash drain) of NLX.

Nasdaq press release here.

Clearing Houses Get Insurance Policy (subscription)
Philip Stafford – Financial Times

A consortium of 20 top-rated global insurance companies are underwriting a policy for clearing houses that would limit losses for users of derivatives and possibly taxpayers in the event of market turbulence.

PLY: The excellent GCSA concept under the watchful eye of David Hardy can inject useful means to improve the safety of the waterfall – which as we can see from even LSE/LCH Swapclear’s odd announcement of last week which effectively weaponised clearing under the misnomer of making it more open. QV Premium must read: LCH.Clearnet: A Paradismal Shift? – is not truly widely understood in terms of delivering safer and better markets. GCSA is an excellent concept and I hope it is adopted by CCPs asap.

Keynote Address Of CFTC Chairman Timothy G. Massad Before FIA Boca Conference
CFTC Chief Sees Progress In Resolving Clearinghouse Dispute With Europe (subscription)
Andrew Ackerman – Wall Street Journal
Hopes Quashed Of Two-Year Delay For New Swaps Rules (subscription)
Philip Stafford – Financial Times

Story A> U.S. and European policymakers have made “great progress” in resolving a protracted cross-border dispute over derivatives regulation, CFTC Chairman Timothy Massad said on Tuesday, at FIA Boca Raton.

Mr. Massad said the CFTC had agreed to a European request to make some of its rules more “harmonized” with those in Europe. He declined to identify which rules but said they are already broadly similar to those in Europe.

Story B> The world’s largest swap dealers may have only a few extra months to comply with new rules for swaps that cannot be processed through clearing houses, disappointing banks’ hopes of a two year delay.

PLY: Media message ‘disharmony’ from the poolside clearly demonstrates the chasm which faces the Trans-Atlantic regulatory situation in the wake of the simply inadequate, overly combative management approaches taken by Messrs Gensler and that suave French bloke whose name escapes me – sort of movie star looks with equivalent leveraged ego but bereft of the charm of Charlie McCreevy (no need to email it will come back in due course…).

TriOptima To Offer Multilateral Compression For CME Group Cleared Trades

TriOptima entered into arrangements with CME to enable TriOptima to offer triReduce risk-constrained multilateral compression for IRS to house accounts of CME IRS clearing members.

PLY: While Trans-Atlantic regulators continue to slowly clear up the mess left behind by their predecessors’ inability to keep toys within the confines of an infant perambulation device, the wondrous ICAP subsidiary TriOptima offer a means to help compress risk at CME for IRS and thus make a better market. This release makes Boca worthwhile as an event – even if I still cannot justify the tab on Exchange Invest’s budget.

Hong Kong’s Forgotten Nasdaq Link (subscription)
Gregor Stuart Hunter – Wall Street Journal

PLY: Not sure I agree with the first line: “Hong Kong’s foray into connecting its stock market with Shanghai has underwhelmed with tepid demand” anyway but the story goes on to make a mismatched parallel with a NASDAQ cooperation agreement. One significant comprehension chasm: By 1999 it was easy to trade NASDAQ via the likes of IBKR who already had a very active Hong Kong office and the interweb thingie was catching on by the turn of the millennium. On the other hand, “Through train” is the only way to reach the Chinese home market at present…albeit some folks are a bit cool on jumping in just as a great deleveraging is taking places. Cycles, fundamentals, economics, all of which the Hong Kong media continue to rather willfully ignore, alas, while trying to blame the train itself as being somewhat flawed.

Read our Premium briefs: HKEx – SSE – Stock Connect Brief Part 1,Part 2, Part 3.

KCG Pricing Of Private Offering Of $500 Million Of 6.875% Senior Secured Notes Due 2020

KCG announced (prior announcement last week) that on March 10, 2015, it priced a private offering of $500 million principal amount of 6.875% senior secured notes due 2020. KCG intends to use the net proceeds from the offering to repay KCG’s maturing convertible notes and redeem KCG’s existing senior secured notes as well as for general corporate purposes, which may include share and warrant repurchases.

Trading Firm’s Lawsuit Takes CME To Task
Lynne Marek – Crain’s Chicago Business

Failing to get any traction in a CME arbitration process, Chicago trading firm HTG Capital Partners filed a federal lawsuit Tuesday against another firm it says manipulated CME’s futures market.

HTG was the victim of “egregious manipulation” for at least 20 months from January 2013 through August 2014, the firm said in its filing with U.S. District Court for Northern Illinois, alleging that the unnamed defendant engaged in “spoofing.” HTG pressed similar claims with CME last year.

PLY: In a lower latency move, next week vendors throughout the world will engage in a round of “poolside/magic bar” spoof where post Boca Raton they seek to have expenses signed off for “essential meeting refreshments with clients and the media” etc which may have actually been numerous rounds of drinks with other vendors…

Private Markets

Canada – Aequitas NEO Exchange Lines Up Two Large Investors (subscription)
Ben Dummett – Wall Street Journal

The rumoured investments from Invesco and B.C. Investment Management Corp. give the upstart Canadian exchange a major source of trading volume and listings to compete with TMX, which already is concerned it has been losing trading activity to U.S. marketplaces.

PLY: Jos Schmidt adds to his momentum from cornerstone RBC. A big dust up is looming to the north of the Great Lakes and Jos’ team have momentum and successful form in this arena.

Canada’s Neo Stock Exchange To Waive Market Data Fees For Some

Aequitas said on Wednesday that its Neo exchange will not charge retail investors for access to real-time displayed market data for securities listed on the primary and venture TSX exchanges. It will waive those fees for professionals trading on the Neo exchange until it reaches 5% market share, and will give away market data for Neo-listed companies.

Aequitas received the green light from Ontario Securities Commission in November.

PLY: A perfectly plausible approach to marketing and gaining market share with reduced / free data as indeed I believe I discussed during the early era of “Capital Market Revolution!”

Neptune Eyes Second Phase (subscription)
James Rundle – Financial News

Project Neptune, the cross-industry trading initiative started last year, is gearing up for its launch in the coming months by bringing technology vendors on board and ironing out its operational details.

A group of 12 banks, including BNP Paribas, Credit Suisse, Goldman Sachs, HSBC, J.P. Morgan, and Société Générale are working on project “Neptune”. Previous comment last year.

PLY: Project Neptune has “15 sellside firms and “at least” 22 buyside firms… committed to Neptune.” with the vendors to build the platform now about to be sought…

New Trading Venue Prepares To Take On Fixed Income Markets
Elliott Holley – Banking Technology

OpenBondX, created by former Lime Brokerage CEO Alistair Brown and former colleagues, is an ‘all to all’ system open to the buy-side and the sell-side.

Read our Premium briefs: The Bond Platforms RushPart 1, Part 2 .

Uganda: ALTX Takes Shape As Market Liquidity Is Questioned

ALTX Uganda, a new alternative multi-asset exchange in the country, has announced its eight-member board (see also Career Paths below) to steer it when it officially starts trading on May 1.

Joseph Kitamirike, CEO and co-founder of ALTX, told reporters that they were looking up to a couple firms to join the platform, although he never disclosed their names. Recently, he announced that Gmex Group had acquired 25% in ALT X.

Dividend News

MOEX proposed dividend of RUB 3.87 per share, representing 55% of 2014 net income.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX and FTIL flat.

NSEL Seeks Disbursement Proof From Brokers For Rs 179 Crore (USD 28.6 Mln) Payout
The Economic Times

Scam-hit NSEL has asked its brokers to submit proof of funds disbursed to their clients within the next two days, suspecting that some members acted as a front to facilitate “benami dealings”.

NSEL made a special payout of Rs 179 crore (USD28.6 mln) in 2013 to member brokers for settling dues of small traders.

Read our Premium briefs: NSEL Scandal Brief – Part 1Part 2Part 3

FTIL Board Supersession: Court Hearing On March 16
The Hindu Business Line

The Bombay High Court posted the next hearing on March 16 in the case relating to the Centre’s move to supersede the board of FTIL. The Government’s petition with CLB will come for hearing on March 19.

FTIL has the provision to contest the CLB order in the High Court, if the verdict goes against it.

QV our Premium brief: NSEL-FTIL Merger Brief.


OCC To Consider Tech Overhaul (subscription)
Philip Stafford – Financial Times

OCC will examine overhauling its technology in coming months in the next stage of its root-and-branch refresh under CEO Craig Donohue.

The group, which on Wednesday agreed to clear for Nasdaq’s new energy futures trading business, has in recent months concluded long-running talks with shareholders to bolster its corporate capital structure, to meet new rules on clearing.

PLY: After being a sleepy hollow in many respects, OCC is alive again with Craig Donohue in charge. Modernisation is the only option methinks and Craig seems keen to move that forward.

Icap & CME Tap The Beast Apps Group For Market Data And Analytics Tool

Icap Information Services (IIS) and CME have partnered with The Beast Apps Group to create and deliver RapidRV, a real-time market data and analytics tool designed to provide market participants with the capability to analyze relative value opportunities between the OTC and exchange-based futures markets.

PLY: So far a very very cordial Boca for ICAP and CME – good grounds for cooperation.


CBOE To Launch MSCI Index Options On April 21

CBOE announced that it plans to list options on the MSCI Emerging Markets Index (EEM) and the MSCI EAFE Index (EAFE) beginning Tuesday, April 21.

Career Paths

WFE announced the appointment of Nandini Sukumar to the position of CEO. Ms Sukumar has been Acting CEO of the WFE since November last year. Mr.Hüseyin Erkan, the former head of BIST, retired from the position of WFE CEO after last year’s annual congress .

PLY: Delighted to see that Nandini has been confirmed as we long expected into the role leading the WFE at a time when it has great opportunity to progress both the methodology and message: exchanges work best for commerce at all levels throughout the world.

Liquidnet announced that industry veteran Chris Jackson has joined the company as European Head of Liquidnet’s Execution and Quantitative Services (EQS) Group.

FIA announced the induction of 13 members into the FIA Futures Hall of Fame. They join 117 other honorees in the Hall of Fame, which was established in 2005 on the occasion of FIA’s 50th anniversary:

Anthony M. Belchambers
Fernando Centelles
C. Saxby Chambliss
John L. Foyle
Thomas A. Kloet
David Krell
Wayne P. Luthringshausen
Merton H. Miller
Ravi Narain
Robert D. Ray
David R. Setters
Jürg Spillmann
Barbara B. Wierzynski

PLY: Congratulations to all concerned and clearly it is good to see the late Bob Ray honoured. Dave Setters who made FOW a centrepiece publication of the industry for so long and has been a loyal friend to the futures business is rightly honoured too. I am also delighted in particular for John Foyle whose memory of the industry defines encyclopaedic while David Krell, Ravi Narain and Jürg Spillmann, are, like all great revolutionaries, charming, modest, brilliant men of achievement who each in their own way, like John Foyle, led to building an inexorably better industry.

ALTX announced its board members: Edward Mugwanya (Board Chairman), Hirander Misra, Edward Burbidge, Rose Lubwama, Jatin Jivram, Joseph Kitamirike, Felix Okoboi, and Francis Fred Tusubira.

Financial Calendar


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


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.

Analyst Notes

TMX Gets Price Upgrade On ‘Unusually Steep Discount’ To Peers
John Shmuel – Financial Post

TMX is in the midst of a “significant evolution,” even as the stock trades at a steep discount to its peers, says a Scotiabank analyst. TMX is currently conducting a review of its assets to outline a more concrete strategy to grow and diversify its revenue sources.

Phil Hardie, analyst at Scotiabank, said the review looks promising, and upgraded his price target on the stock to $56 from $51. TMX shares were trading at $52.62 as of mid-Wednesday afternoon.

PLY: Although news of Neo (above) may of course dent those perceptions…

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.


StreetShares Secures $200M For Veteran-Owned Small Businesses

StreetShares, the P2P lending marketplace for small business loans, today announced commitments from Direct Lending Investments, Community Investment Management (CIM) and Eagle Bank Corp for more than $200 million in funding to back loans on the StreetShares marketplace, with a focus on funding veteran-owned small businesses.

Other stories

CPMI And IOSCO Begin Review Of CCP Stress Testing

The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) announced that they are undertaking a review of stress testing by CCPs.

ASIC Publishes Ninth Market Supervision Report

ASIC today published its ninth report on the supervision and surveillance of Australian financial markets and market participants.

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