March 23 2015


Amidst a series of fascinating insights front, middle and back in today’s Exchange Invest, one story trumps all: the death of a truly incredible political titan – who leveraged a tiny province at the end of the Malacca Straits into a global powerhouse economy. RIP Lee Kuan Yew, the founding Prime Minister of Singapore, a friend of markets and perhaps the greatest advocate of economic growth during the 20th century, having taken his newly independent city state from behind Caribbean nations to become a world leader in prosperity within little more than a generation.

Besides that news, everything else rather pales into a relative insignificance, despite there being interesting stories to read today as we prepare for the launch of NEO in Canada.

Public Markets

SGX Statement On The Passing Of Mr Lee Kuan Yew, Founding Prime Minister Of Singapore

In an era tragically centred on cowardly political pygmies, it is difficult to underestimate the many achievements of Lee Kuan Yew. Condolences to SGX and the people of Singapore on the passing of a truly great man.

JPX Notice Of Revision To Earnings Forecast & Dividend Forecast

JPX announced that the consolidated earnings forecast for the fiscal year ending March 31, 2015 and year-end dividend forecast for the fiscal year ending March 31, 2015 announced on January 30, 2015 have been revised.

Revised Consolidated Earnings Forecast for the Fiscal Year from April 1, 2014 to March 31, 2015

Operating revenue 105,500 mln yen (USD 880 mln) (previous forecast 101,000 mln yen), up 4.5%
Operating income 49,000 mln yen (USD 408 mln) (previous forecast 42,500 mln yen), up 15.3%
Net income 30,500 mln yen (USD 254 mln) (previous forecast 26,500 mln yen), up 15.1%

*The above earnings forecast is based on the Japanese standards. JPX is scheduled to adopt IFRS from the year-end earnings results for the fiscal year ending March 31, 2015.

Consolidated earnings forecast including the major impact of IFRS adoption for the fiscal year ending March 31, 2015

Operating revenue 105,500 mln yen (previous forecast 101,000 mln yen), up 4.5%
Operating income 52,500 mln yen (previous forecast 46,000 mln yen) , up 14.1%
Net income 34,000 mln yen (previous forecast 30,000 mln yen), up 13.3%

PLY: A second set of revisions following the January revisions at results time…

European IPO Task Force – Unlocking IPOs: Central To Delivering A Capital Markets Union

Following the release of the European Commission’s Green Paper on the Capital Markets Union, Philippe de Backer MEP and Chairman of the European IPO Task Force announced the publication of the EU IPO Report: Rebuilding IPOs in Europe; Creating jobs and growth in European capital markets.

Previous comments on the CMU topic here, here, here, and here.

CME Said To Mull Rule Change As Basel Pressure Hampers Banks
Matthew Leising & Silla Brush – Bloomberg

New rules meant to make banks safer are prompting the world’s largest derivatives exchange to consider changing how it backs trades in one of the biggest shifts since futures were created in 1865.

Under a CME proposal being discussed with CFTC, the cash and securities put up by bank customers to back their derivatives wouldn’t have to be counted as the bank’s own assets, who asked not to be named because the talks are private. As a result, banks wouldn’t have to carry capital to back those assets.

The change centers on CME’s role as a clearinghouse that requires cash or securities to back trades, ensuring losses at one firm don’t harm other users of the futures and swaps markets. Currently, banks collect these funds from their clients on behalf of CME. Basel III rules put in place after the 2008 financial crisis require banks to carry more capital to absorb potential losses on their assets, reducing profitability.

PLY: Would banks then come out of this paying all their potential liabilities up front to the clearinghouse default fund and thus make the waterfall potentially safer from the danger of a post crash risk where a bank cannot pay in other obligations? A proposal that clearly we all must ponder while endeavouring to balance risk with better markets…

Goldman, UBS Join Ex-“Fixing” Banks For New LBMA Gold Price
Jan Harvey – Reuters

The new LBMA Gold Price went live for the first time on Friday, with Goldman Sachs and UBS joining the four members of the now defunct gold “fix” in setting its electronic replacement.

Goldman and UBS joined Barclays, HSBC, Bank of Nova Scotia and Societe Generale to set the new benchmark gold price, administered by ICE Benchmark Administration, at 1030 GMT on March 20.

IBA won the process tender for the gold fix last November.

PLY: Interesting that Goldman didn’t want their name out in the initial tranche but hung off to Friday – clearly the ICE administrator’s CEO Finbarr Hutcheson didn’t forget the name at Thursday’s media briefing given he used to work there… Anyway, first FIX sees to have gone smoothly, well done.

Exchanges & Clearers Miss Out On Market Changes (subscription)
Philip Stafford – Financial Times

The annual Oliver Wyman/Morgan Stanley survey of the wholesale and investment banking industry this week also gave the market infrastructure industry several points to chew on.

The most striking was a profound shift in market share from revenues in securities trading between 2006 and 2014. In that period, revenues at sell side investment banks had fallen 20% to $55bn and turnover among asset managers had soared 45% to $135bn. However, revenues at market infrastructure providers over that period had been flat.

Those numbers masked a near 10% decline by 2010 but the rebound has been led by post-trade data and analytics, and technology.

Volcker Outlines Plan For Overhauling Financial Regulation (subscription)
Ryan Tracy – Wall Street Journal

Mr. Volcker said he and his think tank, the Volcker Alliance, will soon publish a paper calling for consolidating and reorganizing U.S. financial regulators, including creating a single agency to supervise financial institutions while leaving the Federal Reserve the authority to write regulations for them.

PLY: Not convinced. The Volcker legacy is surely already tarnished if not by his thinking, at least by its execution in Dodd Frank…

Merger Process With Commodity Regulator To Be Smooth: Sebi

Sebi on Sunday said the action plan for proposed merger of FMC with itself is under works and expressed hope that the process would be “smooth”.

SEBI Sets Norms For International Financial Centres
Shishir Sinha – The Hindu Business Line
What It Takes To Create India’s First Int’l Finance Centre

FAO: Both BSE and NSE plan to set up exchanges in India’s first International Financial Services Centre (IFSC), GIFT as reported here and here.

Read our Premium brief: The GIFT Horse?

Private Markets

Fund Giants Lend Backing To Plato Project (subscription)
Tim Cave – Financial News

Four of the world’s largest money managers have added their support to the Plato Partnership, a new initiative planning to launch a not-for-profit European equity trading venue early next year.

FAO: Members of the consortium include Deutsche Asset and Wealth Management, Norges Bank Investment Management, UBS, Barclays, Citi, Deutsche Bank, Goldman Sachs, JP Morgan and Morgan Stanley.

SSE Aims To Launch New Board For Emerging Industry Companies

Compared with Shenzhen’s Nasdaq-style ChiNext, Shanghai’s planned new board would set a higher threshold for listing candidates, in terms of financial conditions or market capitalization.

Registrar Of Companies (ROC) Approves New Name For MCX-SX – Metropolitan Stock Exchange Of India Ltd (MSXI)

MCX Stock Exchange (MCX-SX) said it will be rechristened as Metropolitan Stock Exchange (MSXI), as the bourse received approval from Registrar of Companies for its new name (approved by SEBI last September).

PLY: MSXI is official. LOL. Perhaps the worst branding ever, closely followed by that structured products market of SwX which was called “Scoach” which apparently meant ‘to steal things with stealth’ in American street slang.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX up 5% while FTIL is flat and Jignesh sees a house attached…

If Everyone Joins, NSEL Crisis Can Be Solved: Prashant Desai
Business Standard

FTIL has proposed a settlement plan (reported last week) for the payments default in 2013 at its subsidiary, NSEL. Prashant Desai, MD & CEO officer of FTIL, explains the details.

NSEL Scam: Brokers Decline Responsibility For Default
Business Standard

In response to the settlement offer made in the NSEL payments default case by its parent entity, FTIL, wherein brokers are supposed to contribute Rs 500 crore (USD 80 mln) to the investors, three broker associations jointly said they declined to go along.

Alok Churiwala, vice-chairman & spokesperson, BSE Brokers Forum, said: “On behalf of Association of National Stock Exchange Members, BSE Brokers Forum and Commodity Participants Association of India, we emphatically state there has never been any discussion on any settlement nor any proposal given by the broker forums of Rs 500 crore (USD 80 mln) or otherwise. It is preposterous to assume so when the defaulting members and NSEL are the sole and principal beneficiaries of the scam. The question of brokers entering into any settlement discussion does not arise.”

Maharashtra Govt Formally Attaches Jignesh Shah’s Residence
Business Standard

The Maharashtra government on Friday formally attached a bungalow belonging to Jignesh Shah, promoter of FTIL, in the NSEL scam. The bungalow, R Square, is located in the upscale Juhu scheme area in western Mumbai.

NSEL Investors Associations Urges MCA To Pass FTIL-NSEL Merger Order
The Economic Times

NSEL Investors Associations asked the government to pass the final order for merger of FTIL and NSEL and quickly supersede the current board of FTIL.

Read our Premium briefs: NSEL Scandal Brief – Part 10 and NSEL-FTIL Merger Brief.

Career Paths

HKEx welcomes the Government’s appointment of Anita Fung Yuen-mei and Rafael Gil-Tienda and the reappointment of John Barrie Harrison and Margaret Leung Ko May-yee to its BoD.

The terms of Ms Fung, Mr Gil-Tienda, Mr Harrison and Mrs Leung will begin at the conclusion of HKEx’s AGM on 29 April 2015 and will end at the conclusion of the AGM in 2017.

Stephen Hui Chiu-chung and Michael Lee Tze-hau will retire from the Board after the conclusion of the AGM on 29 April 2015.

HKEx’s Board consists of 13 Directors, six elected by shareholders, six appointed by the Government, and the CEO of HKEx, who is an ex-officio member. The Government-appointed Directors are appointed by the Financial Secretary pursuant to Section 77 of the Securities and Futures Ordinance.

LCH.Clearnet Group announced that Frank Soussan has been appointed Global Head of CDSClear, effective from 1 July 2015. Based in Paris, Frank will lead the Group’s continued expansion of the service, which is the only EMIR-authorised CCP for the clearing of credit default swaps. Mr Soussan is currently Head of In-Business Risk for CDSClear. He takes on his new role from Gavin Wells who will now focus exclusively on ForexClear.

FOW reports that Tullett Prebon has parted company with its CIO Michael O’Donnell.

Adaderana reports that Lal Nanayakkara and Anton Godfrey have been appointed to the BoD of Colombo SE (CSE) with effect from March 20, 2015. Lal Nanayakkara served as a Board Member of the SEC of Sri Lanka (SEC) from 1998 to 1999.

Financial Calendar

This week

CME $0.50 Q1 2015 dividend payment
Amman SE (ASE) will hold its Sixteenth General Assembly Meeting
Nasdaq $0.15 quarterly dividend payment
NZX 6 cents fy 2014 dividend payment
Aequitas Innovations Inc. is opening the Neo Exchange

New announcement

CBOE Q1 Financial Results – Friday, May 1, 2015

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

Share Notes

ICE General Counsel Johnathan H. Short sold 2,471 shares Wednesday, March 18th at an average price of $231.71 (bargain $572,555.41). He now directly owns 10,646 shares. ICE insider stock transactions are chronicled on this specific page.

Other stories

FIA Releases SEF Tracker Report For January

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