March 21 2016

elb2Call me old fashioned but I am having a dose of scruple worry. Yip, I am in danger of being on the same page as the folks at SEBI or similar who never trust the management of exchanges. However, I am worried about the state of the parish and its leadership in some quarters. True, today Elmer Funke-Kupper, not so much a CEO, more a sort of ‘sledging’ machine in a suit, has ‘resigned’ as CEO.

(“sledging” being the coarse art of shouting to put your opponents off in the once genteel game of cricket).

Then we read of a pathetic parochial scaremongering from what could easily pass for the Donald Trump of Frankfurt – who is, hyper-embarrassingly Carsten Kengeter…

On a cheerier note, thanks for the overwhelmingly positive response to Understanding CCP & the AntiTrust DB1-LSE Merger. Hmmm, perhaps having defenestrated the “compelling logic” issue in the face of the utterly misleading tosh (see, more parish management concerns) about which side of the Twix represents OTC/ETD CCP, it’s no wonder the DB1 boss was on the defensive at the weekend appealing to the worst of petty mindsets.

We could do with an outbreak of management in the parish to reflect the regulatory burdens and the commercial pressures. It seems various folk see one side and not the other currently – that does not bode well for the industry because, like aircraft manufacture, shonky fabrication will cause people to stop using the product.

Public Markets

ASX CEO Elmer Funke Kupper Quits In Face Of Investigation

Nick McKenzie, Richard Baker, Michael Bachelard & Dan Quinlan – SMH

The $3.5 million a year ASX head, Elmer Funke Kupper, has quit over allegations that he knew of a $200,000 payment to the family of Cambodian strongman Hun Sen.

PLY: The Australian dialectic approach to English often provides some wondrously insightful phrases. “Boofhead” is one. However, who was to know from the perspective of this hemisphere that Elmer’s statement reported last Wednesday that he was “not going anywhere” actually meant “I’ll be off Monday!”

Note that the ASX’s actual leader (Elmer was broadly regarded as just a hapless front man – somewhere between corporate bully and broadly misinformed spokesman)  Rick Holliday-Smith has now been elevated to Executive Chairman. Elmer’s ledger has been distributed towards a spell dealing with the legal system. Given that it was long thought the headhunters had been searching high and low for EFK’s replacement for a year or so anyway, it’s interesting that a whole new hunt will be launched – insofar as clearly no suitable candidates are in the pipeline? Bad news for Peter Hiom, the one who many felt held the organisation together while EFK bully-pranced his way across the exchange stage. Robert Elstone might have been a dull monoglot cost saver but at least he didn’t potentially bring the market operator into disrepute. Equally good that ASX have acted quickly, after that fiasco where they had board members sanctioned by SEC in 2013 for some quixotic dealings.

I have added a post in Premium: A Tribute to ASX CEO EFK outlining the achievements I could readily discern from his time in the exchange parish.


IHS Inverts to Acquire Markit


PLY: Just in as we raced to pixel. Fascinating deal to benefit presumably from tax inversion ex-US but also a blow to all the major exchanges as they missed acquiring Markit before it became part of a larger analytics but not so financially focused, entity in IHS. A deal XavRoll ought to have done and which I believe Jeff Sprecher somewhat coveted has now gone elsewhere. Interesting, as I thought the Singaporean SWF might be a factor waiting for a better price before doing a deal., Instead there is an anemic sub 6% premium to Friday’s close…. Anyway, while pursuing antitrust problems in their own backyards, the exchanges have missed a fascinating deal here.


DB1 CEO: Europe’s Markets At Mercy Of The US If LSE Merger Fails

Marion Dakers & Ben Marlow – Daily Telegraph

“If this merger does not take place, the European capital market architecture will probably soon be in American hands. And one does not need to be the CEO of DB1 to shudder at that thought,” he told the German media. “The clock is ticking in Europe, not just for the LSE but also for us. If we do not strengthen ourselves quickly, then the company will eventually be so weak that it can no longer act, but only react.”

PLY: If Donald Trump said this with the nations reversed, the world would be appalled. Instead it’s perfectly fair to suggest panic, protectionism & blind jingoism are the way forward for Europe. (Ironically that’s the thing the European blob always accuses the Brexiteers of, n’est-ce pas?).

How come a supposedly intelligent career-minded executive like Carsten Kengeter has fallen so far, so fast? We know he ought to be capable of much more – can he raise his game and sell the deal on value alone, not a panicked shotgun to the head of antitrust?

LSE Shareholders Said to Seek More Money in Exchange Takeover

John Detrixhe & Manuel Baigorri – Bloomberg

PLY: Of course they are – a zero premium merger looks oh so last fortnight and with no breakup clauses the heavily incentivised LSE management have multiple options to play for. It strikes me XavRol was playing a blinder up to the point where he got himself moved to running the tea trolley by Donald Bryden when they started carving up the positions for the merger which won’t happen anyway – well not on these terms. So: next step, lots more bidding until the price reaches kamikaze levels for assets which, let’s face it, XavRol has not truly integrated or managed with aplomb, just shuffled together and hyped stupendously.

Don’t Say Europe’s Biggest Exchange Takeover Is Too Big to Fail

Silla Brush & John Detrixhe – Bloomberg

The companies took pains in their announcement on last week to emphasize that the combined firm, holding some $170 billion in collateral from their customers, would help reduce risk in the multi-trillion dollar derivatives market. They also stressed the union wouldn’t hurt competition or potentially destabilize the wider financial system.

PLY: The deal documents display a certain gilded brilliance of flowing illogic. The syllogisms are all wrong, and a core part of the strategy is simply nonsense qv Understanding CCP & the AntiTrust DB1-LSE Merger which delivers elucidation on one core point in barely 2 minutes.

DB1 Bid For LSE: Naked Nationalism On Display

Tim Worstall – Forbes

One of the more ridiculous sights in the financial markets is when people start dragging naked and archaic nationalism into their arguments. Such and such must remain British, or European, or, well, you know, we just mustn’t let Johnny Foreigner get their hands on it. …it doesn’t really matter very much who owns something.

PLY: Thank goodness for Tim Worstall in a sea of gibberish… “Come on, we’re talking capitalism here, why shouldn’t we concentrate upon the money?”

DB1: German Takeover Of LSE Is God’s Will

James Salmon – Daily Mail

PLY: Yip the Mail is blindly out for Britain in a narrow sense BUT for somebody who just recently was much hyped for learning from past deal mistakes, it is obvious nobody is delivering coherent advice to CarKen and he is clearly incapable of thinking for himself in the heat of this highly political spectacle of future antitrust failure masquerading as a deal. Nobody who was at Boca all those years ago can ever forget Jorg Franke’s fabulously misjudged attempt at humour during one of those FIA-Fest EUREX-travangazas where DB1 quantitatively eased cash to Motown’s greatest (not that clearly it ever trickled down to Detroit – pity the Central bankers weren’t there!). Anyway, how on earth the DB1 team have not passed on a big fat note saying “NO IRONY!” In corporate speeches escapes me. For the record, Jorg’s mistimed humour was described at the time as the “Ein Volk, Ein Reich, Ein Franke” speech – not without some accuracy to its soaring ambition. Ah those were the days of course when EUREX was the future…

Carsten Kengeter Plans German ‘Aim’ Market (subscription)

Patrick Jenkins & Philip Stafford – Financial Times

PLY: Which, like other DB1 SME initiatives will be swiftly closed when one Granny in Gottingen or a housewife in Hamburg loses 5 Euros…as has invariably been the case with gutless management at DB1 (qv NeuerMarkt for one). When it comes to crisis versus career management, even onlookers can see the executive directors’ options packages flashing in front of their eyes.

(Incidentally, the word on the street is that internally some – unbelievably welcome – reform is happening at DB1 thanks to CarKen’s domestic management but then again, that is difficult to equate to the hysterical protectionist rantings of CarKen in other media channels).

QV Premium: DB1-LSE Merger Brief.


SEC To Take Up PDS Takeover By PSE

Krista A. M. Montealegre – Business World

SEC could issue this week its verdict on the much-delayed merger of the country’s equities and fixed-income exchange.

QV Premium: PSE – PDEx Merger Brief.


SEC Opens Door To Approving IEX As An Exchange (subscription)

Dave Michaels – Wall Street Journal

SEC on Friday opened the door to approving IEX Group’s bid to become a stock exchange and said it would take as much as three more months to rule on the upstart market’s application.

PLY: Yes means yes, errrr means you are dealing with a government agency.


LSE Intra-Day Auction To Go Live Today


PLY: Not for the group holding company you understand.


LME Plans Rules Overhaul To Cover ‘Nature & Purpose’ Of Holding (subscription)

Henry Sanderson, Neil Hume & David Sheppard – Financial Times

The move toward a new reporting regime at the world’s oldest metal exchange comes as JPMorgan snapped up more than half of the aluminium on the LME, a $2bn-plus position that has rattled rival traders and been blamed for pushing up the price of near-term contracts.


Sebi & EOW of Mumbai Police Perform Joint Raids On Brokers In Kolkata, Mumbai

Ram Sahgal & Reena Zachariah – The Economic Times

Capital markets regulator Sebi and Economic Offences Wing (EOW) of the Mumbai police have conducted joint raids on a few brokers spread across Kolkata and Mumbai for illegally running trades between domestic and foreign commodity exchanges.


MOEX: Opening Time Of The Evening Trading Session Of The Derivatives Market


Private Markets

Insurer Should Reimburse A Stock Exchange For Broker Defaults

Jehangir B Gai  – Business Standard

Bombay SE (BSE) had obtained a Default Insurance Policy from New India Assurance to indemnify against losses at the time of settlement due to defaults committed by its members. The policy also covered the BSE’s Trade Guarantee Fund (TGF).


NSE Issues Norms For Cos Listed On Non-Operational Bourses

The Economic Times


Govt Withdraws Recognition Of Delhi SE

The Economic Times

The government has formally withdrawn the recognition of Delhi SE, more than a year after Sebi derecognised the bourse citing “serious irregularities” in its functioning.

QV Premium: Indian Exchanges Shutdown – Brief.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX up 3%, FTIL flat.


ASIC Consults On Proposed Guidance About ‘Robo-Advice’


PLY: No, on the day Elmer resigned as CEO I can’t think of anything to add here either…


EC: ‘More Cautious’ Approach Needed For Mifid II Bond Rules (subscription)

Tim Cave – Financial News


NSE Pitches For New Investment Products, Bullish On ETFs

The New Indian Express

Pitching for new products to attract more investors to stock markets, National SE (NSE) has said there is a need for tailor-made instruments for different kinds of people and ‘one vanila’ cannot serve all.

Bullish on different kinds of ETFs, as also on products like REITs, NSE’s MD & CEO Chitra Ramkrishna said that the country has a huge pool of untapped savings and the market needs right investment vehicles to tap the same.

PLY: Yip.


NSE Revises Limits For Acceptance Of Bank Guarantee From April 1


NSE is revising the limits prescribed for acceptance of bank guarantee towards collaterals in segments such as equity derivatives, currency derivatives, among others.


India – Govt Likely To Again Change GMS Rules

Business Standard

The Union finance ministry said on Friday it would make further changes in the Gold Monetisation Scheme (GMS), which hasn’t been able to attract many takers. NCDEX has proposed that GMS be implemented as a parallel to banks within its platform.


Eurex Expands Equity Index Segment With New Quanto Futures – Launch Of USD-Denominated Futures On The Euro STOXX 50 Index As Of 21 March 2016


Career Paths

Today the ASX Board accepted the resignation of Mr Elmer Funke Kupper as MD & CEO of ASX. His resignation is effective immediately. Mr Funke Kupper has been ASX MD & CEO since 6 October 2011.

PLY: At short notice, I endeavoured to gather a list of EFK’s achievements as ASX’s monopolist-barracker in chief in this Premium article:  A Tribute to ASX CEO EFK. Thank you to the hordes of folks across the great Commonwealth of Australia who shared the news with me as soon as it emerged late afternoon Sydney time. So far, the dearth of support for EFK has been as conspicuous as it is unsurprising – albeit in under 5 years and with a fraction of the carpetbagging of Duncan “the value destroyer” it appears EFK has alienated the domestic market rather comprehensively.

HKEX welcomes the Government’s re-appointment of Chow Chung Kong and Timothy Freshwater to its BoDs. Mr Chow is HKEX’s current Chairman. The terms of Mr Chow & Mr Freshwater will begin at the conclusion of HKEX’s AGM on 28 April 2016 and will end at the conclusion of the AGM in 2018.

PLY: Whoops. Public listed capitalist crusader just thanked government for reappointing the Chairman. I know it is the Financial Secretary to HK but expect that mud to stick if HKEx tries to bid for LSE (which I doubt it will anyway, better to concentrate on the China gateway play).

ESMA Vacancy For Seconded National Expert In The Supervision Department


Financial Calendar

24.03 – ICAP – TNT – vote on transaction

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

Share Notes

Oslo Børs VPS Holding ASA has 18 March bought 2,656 own shares at a price of NOK 84. Oslo Børs VPS Holding now holds 8,056 shares.

Thomson Reuters intends to purchase up to 3m shares through private agreements – press release

Other stories

The Tangle That’s Not Fit For Purpose (subscription)

Tim Cave – Financial News


Constant Delays Show Deep Flaws In Europe’s Rulemaking (subscription)

James Rundle – Financial News

Delays, delays and more delays. Too much influence from lobbyists. And when decisions are made, they are often last-minute fixes made in haste. Europe’s system for building financial regulation needs sorting out.

PLY: …but it would mean an outbreak of leadership from the “useless Mrs Merkel” through the multiple ‘primus inter pygmy’ apparatchiks presiding (sic) or just governing (equi-sic) in EU, EC & at national level. QV An excellent John Hulsman column in today’s City AM: Turkey’s Putin has revealed the truth about the EU: It’s dead.


EC: Speech By Commissioner Jonathan Hill At The Seventh Bruges European Business Conference “CMU”


QV Premium: EU CMU Brief.



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