March 17 2015

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First up, I wish you all, no matter how much or little direct Irish bloodline you may possess: a Very Happy St Me’s Day.

Today, ICE increasing Default Funds as one LSE open clearing scheme hits snags, while Phillyfin name their nominee slate for NEDs to the ITG board. Happy scrolling:

Meanwhile, Recent “must read” Premium Posts include:

Did Duncan Do Due Diligence?
Duncan Niederauer Fund Manager – An Essential Due Diligence Resource
LCH.Clearnet: A Paradismal Shift? (to be read alongside the classic: Homer Simpson maxim of CCP)

Premium Briefs keeping you abreast of various industry issues are updated daily when news arises. All topics covered can be found on our dedicated Briefs page via Exchange Invest Premium. The latest include:

BGC / GFI: Post Merger Disposals
NSEL Scandal Brief – Part 1Part 2Part 3Part 4Part 5, Part 6
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 reply to this email and I will invoice you forthwith.

Public Markets

Hellenic Exchanges-Athens SE 2014 Financial Results
Hellenic Exchanges-Athens SE

The consolidated net after tax profits of the group amounted to EUR 21m vs. EUR 32.3m in 2013, down 35%. The net after tax profits per share in 2014, amounted to EUR 0.32 vs. EUR 0.49 in 2013. The turnover of the group amounted to EUR 47.3m in 2014 vs. EUR8 1.5m in 2013, while after subtracting the Hellenic Capital Market Commission fee, total consolidated revenue amounted to EUR 45.1m vs. EUR 79.9m. Excluding the abovementioned non-recurring revenue, the turnover of the Group in 2013 amounted to EUR 39.1m, and EBIT amounted to EUR 16.7m compared to EUR 24m in 2014.

PLY: The Greek meltdown hit Helex largely due, perhaps somewhat counterintuitively to a lack of pure restructuring where the exchange generally profits. Pure chaotic stasis (as it were) does not help the group per se.

MCX Sells MCX-SX Warrants Worth ₹7.63 crore (USD 1.21 mln) To IL&FS
Suresh P Iyengar – The Hindu Business Line

MCX has sold 3.05 crore (USD 30.5 mln) warrants of MCX-SX to Infrastructure Leasing and Finance Services (IL&FS) for ₹7.63 crore (USD 1.21 mln). The warrants were converted into a similar number of equity shares of ₹1 each.

With the present deal, IL&FS will enhance its holding in the stock exchange back to 5% from 2.88% and will own 58.4 mln equity shares, said sources. IL&FS’s stake holding in the exchange was diluted due to fresh capital infusion.

The price of ₹2.50 (USD 0.04) a warrant paid by IL&FS was higher compared with ₹1.50/warrant shelled out by ace investors including Rakesh Jhunjhunwala and 11 others in a similar deal with FTIL last November.

Post the IL&FS deal, MCX would hold 582.6 mln warrants and 4.10% equity stake in MCX-SX. If the remaining warrants owned by MCX are converted into equity shares it will be left with 33% holding in MCX-SX.

The commodity exchange has to convert the warrants before June and was, being an entity governed by the Forward Contracts Regulation Act, directed by SEBI to cap its holding at 5% after conversion.

Last week MCX has written to Sebi to be allowed to raise its stake in MCX-SX to 15%.

Read our Premium brief: FTIL Stakes Sales Brief

CFTC Orders ICE Futures To Pay $3 Million Over Reporting Errors (subscription)
Chelsey Dulaney – Wall Street Journal

CFTC has ordered ICE Futures U.S. Inc. to pay $3 million to settle charges that it submitted reports with thousands of inaccuracies over at least a 20-month period.

CFTC said that from October 2012 through May 2014, ICE Futures submitted reports with incorrect clearing member reports, permanent record data and transaction-level data to the CFTC, with the total number of inaccuracies reaching into the thousands.

CFTC press release here.

ICE To Boost Default Funds
Mike Kentz – Reuters

ICE plans to infuse several of the default management funds within its derivatives clearing houses with more of the firm’s own cash this year in an effort to improve its risk mitigation capabilities and provide client clearing members with cost savings.

The controversial decision comes as industry debate as to how much capital a clearing house should contribute to the management of a major bank failure in derivatives markets intensifies to fever pitch.

LSE Clearing Link Hit By Regulatory Delay (subscription)
Philip Stafford – Financial Times

A new link giving investors greater choice for clearing their share trades on LSE has been delayed as regulators reassess its durability in the wake of January’s violent market swings in the Swiss franc.

The service (announced in December) allowing the operations of LCH.Clearnet and EuroCCP, Europe’s largest cash equities clearing house, to interoperate was due to go ahead next Monday but has been postponed.

PLY: So cash equities hit a snag for clearing interoperability and that is pure 2 dimensional stuff, how much realistic chance is there the regulators will fall for the LSE Group’s misguided open access clearing proposal?

Shenzhen Stock Link To Focus On Small-Cap Stocks And ETFs (subscription)
Enoch Yiu & Jeanny Yu – South China Morning Post

Small-cap stocks and ETFs targeting retail investors will be the main features in the Shenzhen-Hong Kong stock connect scheme being launched this year, said Hong Kong’s Secretary for Financial Services and the Treasury Chan Ka-keung. This would complement the institutional focus of the city’s stock link with Shanghai.

Read our Premium brief: HKEx – SZSE Stock Connect Brief

DTCC Opens A New Office In Manila To Support Growth In The Region
MondoVisione

The office is located in PEZA’s Special Economic Zone in Makati City.

Private Markets

China Scales Up Pilot Carbon Trading Markets
Reuters

The Chinese provinces of Gansu and Anhui are among several regions now working to set up carbon exchanges, but it remains unclear how the new CO2 trading platforms will be integrated into a nationwide scheme set to start next year.

China’s seven existing pilot carbon schemes force around 2,000 firms to buy permits to cover their emissions.

CSRC To Boost Tibet’s Capital Market
Ecns

China is to support the capital market in Tibet in the long term, the head of China Securities Regulatory Commission (CSRC) told a meeting on Monday.

Xiao Gang, CSRC chairman, said the commission will help Tibet’s businesses expand through a multi-layer equity market with continued prior handling of IPOs.

Additional support will be targeted on Tibet’s enterprises on a national equity exchange platform for non-listed companies (“New Three Board”), Xiao said.

Bitcoin Users To Approach 5 Million By 2019, Juniper Research Finds – Adoption Likely To Be Limited To Niche Demographics
MondoVisione

PLY: So slightly more than Lithuania, slightly less than Denmark I make it on a rough back of the envelope race to pixel calculation…

Dividend News

Hellenic Exchanges-Athens Stock Exchange decided to propose to the next AGM, which will take place on May 20th 2015, to distribute EUR 0.21 per share as dividend and a special dividend (share capital return) of EUR 0.11.

Special Section: FTI, NSEL, India at the Crossroads

FTIL up 3%, MCX flat.

Delhi Broker Booked For Cheating, Criminal Breach In NSEL Scam
Ram Sahgal – The Economic Times

Big brokers on the NSEL, three of whom the Economic Offences Wing of Mumbai police arrested earlier this month for their alleged role in the scam on the spot bourse, aren’t the only ones facing the music.

Acting on a complaint by one Ashwin Shah, Economic Offences Wing of Delhi police has filed a first information report (FIR) against Delhi-based Integrated Commodity Trades and its four directors for alleged cheating as well as criminal breach of trust, among others. ET has reviewed the copy of the first information report.

The FIR states, among others, that the broker failed to collect warehouse receipts from the bourse and did not verify whether goods existed in the exchange warehouses, which is at the heart of the scam.

Read our Premium briefs: NSEL Scandal Brief – Part 1Part 2Part 3Part 4Part 5Part 6

Technology

Vendor Firms Go On £5bn Tech Shopping Spree (subscription)
James Rundle – Financial News

Technology providers have been the targets of a spending spree in the past three months as trading firms reduce their reliance on in-house development and look elsewhere for the tools they need.

Products

US Swaps Market Resists Futures Model (subscription)
Philip Stafford – Financial Times

The $700tn global swaps market is proving resistant to attempts to remould it in the shape of its listed futures cousin, casting doubt over post-financial crisis reform efforts.

The two derivatives markets have grown hand-in-hand in the past 30 years, as banks typically offset their OTC swaps trades with an interest rate futures contract.

In the wake of the financial crisis and the wholesale regulation of the OTC swaps market, those links were expected to blur. But as the FIA’s annual futures industry conference in Florida made clear last week, widespread predictions that significant parts of the OTC market would “futurise”, reveals those forecasts are still some way off.

MOEX Launches Chinese Renminbi Futures
MondoVisione

From 17 March MOEX has started trading in a futures contract on the currency pair Chinese Renminbi — Russian rouble.

NZX Milestone 200k Of Dairy Derivative Trades Shows It’s On Track To Be ‘Global Dairy Hub’
Tina Morrison – NBR

NZX says reaching 200,000 dairy derivative contracts traded across its platform shows the market operator is on track to become the global hub for trading tied to New Zealand’s biggest export commodity.

Indexes

Bucharest SE (BVB) Introduces Its Second Total Return Index, BET-XT-TR
MondoVisione

Career Paths

Coalition For ITG Shareholder Value Responds To Board Announcements
Business Wire

The Coalition for ITG Shareholder Value, a group led by Philadelphia Financial Management of San Francisco and Voce Capital Management, sent a letter to the BoD of ITG, responding to the Board’s recent announcements and the Board’s public disclosure of the Coalition’s director nomination notice.

The Coalition owns 2,194,545 shares of ITG or approximately 6.4% of the shares outstanding, making it ITG’s third-largest shareholder.

The Coalition’s independent nominees for election to ITG’s Board at the 2015 annual meeting are:

Lon Gorman, who previously served as Vice Chairman of Charles Schwab, a member of the BoD of Nasdaq and Chairman of NYFIX

R. Jarrett Lilien, who currently serves as a member of the BoD of Wisdomtree Investments and is the former President & COO, and interim CEO, of E*Trade Financial

James S. Pak, who is currently a consultant to companies in the financial technology sector and is the former MD at Chi-X Global, Tradeweb and Instinet, where he had broad product and business development responsibilities; the former Head of Market Structure Investments at Citigroup Global Markets; and previously a member of the BoD at BATS Trading and Level ATS.

ITG current BoD:

Maureen O’Hara
Robert Gasser
Minder Cheng
Christopher Dodds
Timothy Jones
T. Kelley Millet
Kevin O’Hara
Steven Wood

PLY: An interesting slate from the Phillyfin led coalition who clearly have a considerable executive pedigree.

BGC Partners announced the appointment of Michael Turek as Head of BGC’s Base Metals desk in New York. This appointment complements the Base Metals team in London, which is co-headed by Bradley Marchant and Steven Bingley.

Mr. Turek joins BGC with extensive experience in commodities trading. Most recently, he was a Senior Director at Newedge Group. From 2002 until 2010 Mr. Turek held the position of SVP and Metals Sales Trader at Prudential Financial. Prior to that, Mr. Turek was Head of the Base Metals desk, North America, at Deutsche Bank.

Financial Calendar

This week

Thomson Reuters $0.335 quarterly dividend payment
Record date ICE $0.65 Q1 2015 dividend
CBOE $0.21 quarterly cash dividend payment
CFTC public roundtable on Cybersecurity and System Safeguards Testing
CFTC public roundtable on issues related to the recovery and orderly wind-down of DCOs

New announcement

CFTC Market Risk Advisory Committee (MRAC) will hold a public meeting on April 2, 2015 at CFTC’s headquarters in Washington, D.C.

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

Other stories

Final Thoughts On FIA Boca 2015 (subscription)
Anthony Malakian – Waters Technology

Anthony runs through some of the themes that developed out of his time at the FIA Boca 2015 event.

Swiss Finance Council Discussion Paper: ‘The EU & Its Partners: Defending Open Markets In Challenging Times’
MondoVisione

The Swiss Finance Council has just published a Discussion Paper: ‘The EU & its Partners: Defending Open Markets in Challenging Times’.

Getting To Know Charles Schwab’s New Robo-Pal
Rebecca Sheppard – Benzinga

Schwab Intelligent Portfolios –- Charles Schwab’s new digital investment manager (“robo-advisor”) -– uses “software to create and rebalance customized, diversified portfolios for investors at much lower fees than traditional asset management, life insurance, and wealth management firms charge.”

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