March 18 2016

elb2LIBOR road map is interesting publication of the day as SEC vacillates on an IEX decision.

Meanwhile a backlash has begun against a German buyer of the London Stock Exchange while some feel a bid on the day of the UK budget was an attempt to have the deal crowded out of the public conscious. While not overly convinced LSE-DB1 are playing with a straight bat, it has to be said this week was tricky – between the Ides of March and St Me’s Day, it was fair to presume that Wednesday was a kind of neutral date… At the same time, there is an understandable frustration in open market London that Germany is a rather protectionist state governed by perhaps the most over-rated incompetent corporate Socialist in all Europe. The ‘primus inter pygmies’ Mrs Merkel aside, this merger has a long way to run but I fear it still ends up failing, despite the bluster of the executives breathlessly promoting it.

Thanks for feedback from around the world on my clarifying video: Understanding CCP & the AntiTrust DB1-LSE Merger which manages to delve into the issues in little more than 2 minutes.

In other news, former House Speaker John Boehner was inducted into the FIA Futures Hall of Fame this week – his citation didn’t directly endorse multiple golf rounds with John Damgard but I must admit to struggling to find out what he actually did for the industry beyond appearing on a Friday evening in Boca to dine with the Chicago exchanges…

Public Markets

JPX Notice Of Revision To Earnings & Dividend Forecasts


The consolidated earnings forecast and year-end dividend forecast for the fiscal year ending March 31, 2016 released on September 24, 2015 have been revised as follows.  

Operating revenue: previous forecast yen 108 bln (USD 970 mln), revised forecast yen 114.5 bln (USD 1.02 bln), up 6% (yen 106.1 bln in 2015)

Net income: previous forecast yen 38.7 bln (USD 347.6 mln), revised forecast yen 45 bln (USD 404.2 mln), up 16.3% (yen 34.7 bln in 2015)

Dividend year-end: previous forecast yen 21, revised forecast yen 28


Euronext Looks To Snap Up Assets From Any DB1-LSE Fallout

Sophie Sassard, Freya Berry & Alexandre Boksenbaum-Granier – Reuters

With a market value of about 2.6 billion euros ($2.94 bln), Euronext will be reduced to minnow status among European bourses if the LSE-DB1 deal goes ahead.

BNP Paribas & Rothschild have been hired to advise Euronext on its next move.

PLY: Euronext will deffo get Clearnet at least, they may even be able to make a run at LCH.Clearnet in its entirety – thus defenestrating the ‘compelling rationale’ for the LSE deal. Equally Borsa Italiana or parts thereof might fit too.

Save our Stock Exchange: Fightback Begins To Stop Germans Buying The City’s Crown Jewel

James Slack & Gerri Peev – Daily Mail

Dwarfed Asian Peers Watch & Tread Water

Mayuko Tani – Nikkei – Asian Review

Consolidation among the world’s leading security exchanges in Europe and the U.S. is set to leave Asian exchanges behind in terms of size, but the wave of cross-border acquisitions is still some distance from these shores.

DB1-LSE Merger Brief


IEX Facing Another Regulatory Delay

Kevin Dugan – NY Post

SEC Expected to Delay Decision on Trading Venue IEX Until June (subscription)

Andrew Ackerman & Dave Michaels – Wall Street Journal

SEC is expected to push back a deadline for making a decision until about mid-June, delaying action on the request by as much as three months from the current deadline on Monday…

PLY: #Underwhelming. SEC is abrogating its responsibility through incapacity to make a decision.


EU Asks Regulators To Fine Tune Securities Reform

Huw Jones – Reuters

EU Rejects Mifid II Trading Reforms (subscription)

Philip Stafford – Financial Times

PLY: EU delivers red mark to ESMA homework and demands it rewrite proposed standards…


Market Abuse Rules Go To The Wire (subscription)

James Rundle – Financial News

European lawmakers have written to the EC’s financial services chief, saying that they will extend their scrutiny period for parts of the Market Abuse Regulation to three months rather than one, as the industry prepares for their enactment in July.


Introduction Of SIX x-clear As A CCP On The Nordic Cash Equity Markets Will Be Delayed

Globe Newswire

Technical implementation of SIX x-clear in INET Nordic Production will be completed as planned by March 29, 2016. However, due to pending necessary regulatory processes in the affected jurisdictions for these two initiatives, Nasdaq Nordic will regrettably need to postpone the target date for launch…


ICE Benchmark Administration Publishes Roadmap for ICE LIBOR


The LIBOR Roadmap follows extensive and wide-ranging consultation with market participants, stakeholders, central banks and regulators across the globe which commenced at the end of 2014. The Roadmap sets out evolutionary reforms to reduce the risk profile of LIBOR and create the conditions for more banks to participate, including:

  • Incorporating transaction data into the LIBOR methodology to the greatest extent possible
  • Publishing a single, clear and comprehensive LIBOR definition
  • Implementing a construct for ensuring the rate can adapt to changing market conditions with appropriate consideration for the interests of all stakeholders, and
  • Conducting a feasibility study on transitioning the calculation of LIBOR to IBA, using transaction data to deliver an even more robust and sustainable rate for the long term


LME Consults On More Transparent Reporting Of Big Positions


Private Markets

DGCX Plans To Set Up Shop At GIFT-IFSC

Business Standard

DGCX is understood to have held a meeting with the GIFT-IFSC authorities and sought more information after the Union Budget.

QV Premium: India – GIFT Exchanges Brief.

PLY: Very interesting given DGCX was born of FTIL initiative and has various Indian-oriented contracts.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX down 1%, FTIL up nearly 1%.

HC Asks FTIL To File Amended Writ In NSEL Merger Case

The Hindu

FTIL-NSEL Merger Stayed Till 22 April

Jayshree P. Upadhyay – Livemint

The stay on the order will continue till 22 April so that the Union of India can study the amended writ petition filed by NSEL and file an appropriate reply.

QV Premium: NSEL Scandal Brief – Part 16 & NSEL-FTIL Merger Brief.


Exchange Heads Discuss The Continued Transition As Technology Companies (subscription)

Anthony Malakian – Waters Technology

At FIA Boca…


ICAP Preps First Smart Contracts

Rob Daly – Markets Media

Smart contracts are one step closer to reality as ICAP plans to rollout its first smart foreign-exchange contracts later this year.


Sebi Allows Commodity Derivatives Trading in Bourses at IFSC


Sebi has allowed trading in commodity derivatives at stock exchanges operating in International Financial Services Centre (IFSC). The move comes after amendment was made under Securities Contracts Regulation Act to include commodity derivatives as securities.

PLY: Park this fact, it has ramifications.


New Chinese Gold Benchmark Auction To Differ From London System

Ian Walker – The Bullion Desk

Shanghai Gold Exchange’s new Chinese gold pricing benchmark – set to launch on April 19 – will aim to attract the interest of foreign participants by allowing foreign price-setting companies and their clients to trade the contract.

Foreign banks’ clients will be able to keep their trading activities anonymous – much like the London benchmark – while domestic companies do not appear to enjoy the same privilege, with each having a client code that will be displayed on the system.

Still, the system will differ from the current London benchmark run by ICE.

QV premium: China Capital Markets Transformation Brief – Main File.

PLY: Hands up who feels more comfortable trading in London or in China? …Thought as much.


CBOE Preps Vest Downside Protected Indexes (subscription)

Waters Technology

CBOE is planning to create new indexes based on strategies generated by options-based investment advisor Vest Financial Group, after acquiring a majority stake in the firm in January.


Taiwan SE Establishes New Subsidiary To Create More Innovative Indices & Services – Taiwan Index Plus Corp.



Tokyo SE To Begin Calculating Tokyo SE REIT Net Total Return Index


Career Paths

FOW reports that ICAP’s ISDX is set to hire former SGX salesman for Europe, Mark Fisher, after he left the exchange last month.

PLY: Another incremental step forward for ISDX, keep watching this space.

FIA Inducts Former House Speaker John Boehner Into The Futures Hall Of Fame


PLY: Hey, he’s not Lucifer but I’m missing his “exceptional contributions to the growth and continued success of the industry.” Apparently he plays golf off a 7.9 index handicap according to golf digest.

Financial Calendar

18.03 – CBOE $0.23 quarterly cash dividend payment

18.03 – ITG $0.07 quarterly dividend payment

15-18.03 – FIA Boca 2016

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

Analyst Notes

Moody’s changes outlook on LSE’s BAA1 rating to positive on DB1 merger announcement.

LSE Stock Rating Reiterated As ‘Outperform’ at Credit Suisse – 3,350 Target Price

A full table of current analysis can be found on our Analyst Ratings page which is updated daily.

Other stories

CFTC & EPA Enter Into a MoU


CFTC Brought in to Police Murky Market for Biofuel Credits

Mario Parker – Bloomberg

The Environmental Protection Agency is enlisting the help of CFTC to help it police the creation and trading of biofuel credits, an opaque $1 billion market that has seen cases of fraud.


‘Godfather Of Smart Beta’ Defends Attack Of Smart Beta (subscription)

Attracta Mooney – Financial Times

Rob Arnott is used to antagonising people. But even he is surprised by the anger he has generated from senior executives and academics in the investment industry.

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