March 19 2015


PLY: LME sells LCH stake, BIST the buyer, Clearstream-ICE collateral agreement, Korea pondering endorsing competitive exchanges.

A granular day with some useful nuggets, happy scrolling:

N.B. Recent “must read” Premium Posts include:

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 8 NEW!
Rise of Africa – Part 1Part 2Part 3Part 4Part 5
The Bond Platforms Rush – Part 1Part 2
ICE – NYSE Euronext Deal – Part 1Part 2Part 3

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Public Markets

LME Sells LCH.Clearnet 2% Stake To BIST

LME is selling its entire stake of about 2% in clearing house LCH.Clearnet to Borsa İstanbul (BIST) and will work with the Turkish stock exchange to develop products for the steel market. No financial details of the deal were given.

LME press release here.

LME Ends Ties With LCH.Clearnet (subscription)
Henry Sanderson & Philip Stafford – Financial Times

The move will further strengthen BIST’s links with London as it looks to become a regional financial hub and increase its attractiveness to international investors ahead of an IPO later this year. In January it signed a deal with LSE to allow trading of its blue-chip index on the London market. Futures and options contracts based on Turkey’s blue-chip BIST 30 Index will be cleared by LCH.Clearnet, which is controlled by the LSE.

PLY: LME had no reason to hold any stake in LCH.Clearnet given their establishment of a real-time CCP powered by Cinnober technology.

QV our Daily Updated Premium briefs: Exchange Deals Brief and BIST IPO Brief.

Clearstream & ICE Clear Europe Launch Collaboration On Triparty Margin Collateral Management Service

The London-based CCP ICE Clear Europe and the international CSD Clearstream Banking S.A. have launched a new collateral management partnership which enables clearing members to use their assets held at Clearstream to manage their margin requirements.

ICE Clear Europe offers its clearing members a triparty collateral management service by providing direct connectivity into Clearstream’s integrated collateral management engine, the Global Liquidity Hub. This link to the triparty collateral management solution of Clearstream enables ICE Clear Europe members to deposit and use securities as collateral to cover their risk exposures within a highly automated and efficient collateral environment.

PLY: Good move which further underlines what I believe is a market mispricing – DB1 is unloved as management has been perceived to be going nowhere (apart perhaps from backwards with the NYSE merger litigation) yet the Clearstream business has got to be at the epicentre of a newly collateral intensive world…

Taiwan Stock Connect Link With Singapore May Be Ready Near Year End

Plans to link stock trading between Taiwan and Singapore will likely be completed toward the end of the year, rather than around July as previously estimated.

Topic previously discussed here and here.

Private Markets

Financial Watchdog Begins Restructuring Bourse System
Jung Yeon-jin – Business Korea

In order to establish a capital market-centered financial structure, the Financial Services Commission (FSC) will begin restructuring a bourse system that allows the KOSPI, KOSDAQ, and KONEX markets to compete and advance with their own characteristics. This measure has come up from a critical discussion of whether or not it is desirable for all organizations with different characteristics, including the KOSPI, KOSDAQ, KONEX, Derivative Market, and Market Oversight, to be under one organization, KRX.

FSC is also planning to innovative the regulations on the establishment, management, and sales of private equity funds and ease obstacles, including the adjustment of unreasonable risk weight on venture capital investment.

The KONEX operation method will also be reformed. The market expects that the deposit limit of individual investors in the KONEX market will drop to 100 million won (US$88,754) from the current level of 300 million won (US$266,264).

PLY: Interesting that a discussion is taking place whether KRX ought to be a single market operator and competitive segments with different operators are to be encouraged.

CSE Demutualization Process Stuck With Ministry
Lanka Business Online

Sri Lanka’s Colombo SE (CSE) CEO says the legal draft demutualization bill of stock exchange has been handed over to Finance Ministry but is yet to submit to the Parliament.

Alternative Betting Exchange Spiffx To Launch IPO
Andrew McCarron – SBC News

Start-up betting exchange Spiffx is to launch its IPO on the Nordic Nasdaq OMX next month as it aims to establish itself as the main alternative exchange, used by both high value bettors and sportsbooks.

Spiffx has developed a system as yet unseen in the betting industry by using tools normally found in the financial markets, providing punters with a mixture of sports betting, spread betting and exchange betting.

The Malta-licensed exchange offers players the chance to capitalise on price movement of selections, which is monitored by the Spiffxindex – a weighted, analysed and calculated measure intended to provide a true market price. Players bet on their selections and then predict whether the odds will move up or down. As it is an exchange model, it is also possible to oppose these selections, although liability is greater. Commission is charged at 5% of winnings.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX flat, FTIL up 2% as a proposal is apparently made to resolve the crisis…

NSEL Issue: Cyril Shroff Met Jayant Sinha With Settlement Plan For Small Investors
Ram Sahgal – The Economic Times

A few days ago, top lawyer Cyril Shroff, acting on behalf of FTIL, met Jayant Sinha, minister of state for finance, with a settlement plan to address the claims of small and mid-sized investors on scam-hit NSEL.

The plan, without prejudice to FTIL’s legal rights, subject to board and shareholder approval and acceptance by brokers and investors, envisages FTIL and brokers contributing Rs 500 crore (USD 80 mln) each to completely pay off investors who’ve lost Rs 2 lakh-10 lakh (USD 3.2k-16k) on the bourse and return half the amount to those who’ve invested between Rs 10 lakh (USD 16k) and Rs 1 crore (USD 160k).

PLY: Not sure why after all the previous travails only a 50% solution will work for repayment…

Brokers Yet To Furnish Complete Disbursement Details: NSEL
Ashish Rukhaiyar – Livemint

NSEL, which had sought information from broker members about the disbursement of Rs.179 crore (USD 28.6 mln) to small investors in August 2013, said it has not yet received the details from many members.

Brokers Confirm NSEL Payout Of Only ₹92 Crore (USD 14.7 Mln) In 2013
The Hindu Business Line

In response to the proof of payment sought from brokers, NSEL has received confirmation on payment of ₹92 crore (USD 14.7 mln) against ₹179 crore (USD 28.6 mln) distributed to investors in 2013.

Of the 200 brokers, who were involved in the distribution of money, only 133 responded to the exchange’s call, said S Rajendran, Independent NED, NSEL.

Read our Premium briefs: NSEL Scandal Brief – Part 8 NEW!

FTIL Will File Rejoinder To CLB On MCA’s Petition: Chairman

FTIL is confident that justice will be delivered, said the company’s Chairman Venkat Chary as it fights the government over the proposed merger of FTIL with scam-hit NSEL. Chary termed the government allegations at the Company Law Board as frivolous and baseless.

Read our Premium brief: NSEL-FTIL Merger Brief.


ESMA Sees Increased Convergence In Automated Trading Supervision


New Rules For OTC Derivatives Delayed For 9 Months (subscription)
Philip Stafford – Financial Times

Tougher rules for trading OTC derivatives have been delayed by nine months after regulators acknowledged that an initial timetable was too tight for the industry to comply.

Banks, brokers and big asset managers will have until September 1 2016 to prepare before new rules that force market participants to post margin for privately agreed OTC deals are phased in.

PLY: Banks had hoped for 2 years, instead they have a 9 month reprieve.

CFTC Suspends Deadline On Brokers’ Margin (subscription)
Gregory Meyer – Financial Times

The main US futures regulator has indefinitely suspended a plank of customer protections passed in response to the catastrophic collapse of MF Global, reflecting the agency’s flexibility under a new chairman.

The rule addresses margin, or good-faith money that market participants post to back their positions in futures markets. Futures brokers collect and disburse margin to customers as the value of these positions fluctuates. There is often a delay between the time that brokers demand extra margin and customers are able to deliver it. In the interim, brokers put up their own funds to plug the gap.

Career Paths

CEO of Investec Ireland, Michael Cullen, has been appointed as a NED of the Irish SE (ISE). Cullen is a former director of Gandon Securities, Woodchester Investments plc and Aviva Ireland.

Financial Calendar

This week

CFTC public roundtable on issues related to the recovery and orderly wind-down of DCOs
CBOE $0.21 quarterly cash dividend payment

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

Share Notes

Thomson Reuters Director Linda Walker sold 4,329 shares Friday, March 13th at an average price of C$39.91 (bargain C$172,770.39).

Analyst Notes

NASDAQ OMX Target Price Lifted By Keefe, Bruyette & Woods From $55.00 To $57.00 – “Outperform” 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.

Other stories

FESE European Equity Market Report – February 2015 Figures

The FESE European Equity Market Report for February 2015 is now available, download it here.

ISDA Statement On The Revised Implementation Date For Non-Cleared Derivatives Margin Rules
SIFMA Statement On The Revised Implementation Date for Non-Cleared Derivatives Margin Rules

Derivative Dangers In Financial Markets
Praveen Chakravarty (member of the Sebi Primary Markets Committee) – Business Standard

Book review.

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