March 25 2014


Tera debuts Bitcoin swaps, SIX produce great results, NYFIX founders seek comeback, Hans-Ole Jochumsen promoted to run mega trading division at NASDAQ OMX, ASX seek ‘level playing field’ that favours their monopoly. GMEX are expanding their footprint to Uganda while FTIL sells IEX stake (no not that IEX, I mean the IEX…). Hmmm, maybe it’s time for exchange LEIs to avoid mnemonic confusion…

All this and more in today’s fascinating, pithy Exchange Invest daily…

Meanwhile, the latest posts on Exchange Invest Premium include:

China Liberalises

Neither Fit Nor Proper: The FTIL Fire Sale

FESE’s Alleged Fractious Factions…

2014 – A Year Of Unprecedented Executive Change?

The Dark Side Of EMIR Regulation

More to follow later with a post about the CME B Share board debacle online by Wall Street open at Exchange Invest Premium

(If you want to join the Exchange Invest Inner Circle and glean more detail than we can fit into this free daily Exchange Invest then please Subscribe Here, it’s only $120 per user/annum).

Public Markets

SIX Achieves Strong Result Amid Broad-Based Growth

Group net profit of CHF 210.2 million (USD 239 mln) was up 45.5%, excluding the sales proceeds from the Eurex holding in the previous year.

Operating income up 8.9% in the 2013 financial year to CHF 1,582.7 SIX million (USD 1,800 mln). All business areas contributed to this growth, particularly international transactions in the Payment Services business area. Adjusted for the proceeds from the sale of the Eurex holding in the previous year, EBIT increased by 38.4% to CHF 244.6 million (USD 278 mln). The EBIT margin was 15.5%.

PLY: Good results from SiX as it continues to expand on multiple frontiers.

NYFIX Founders Look To Enhance Bid For Certain NYSE Assets

The press has reported that ICE recently hired investment bank Evercore Partners Inc. to sell assets operated by NYSE Technologies.

PLY: Comeback time for the NYFIX founders and management team that grew and operated the business for 15 years ending in 2006, looking to team with one of the bidders for these assets. Dare we presume they didn’t manage to raise the money for themselves then? Bidders looking to partner may find it worthwhile to do due diligence on this option.

FTIL Plans To Sell Part Of IEX Stake For Rs.72.89 Cr (USD 12 Mln)
Sunil B.S. – Livemint

FTIL plans to sell a part of its stake in Indian Energy Exchange (IEX) for Rs.72.89 crore (USD 12 mln).
Golden Oak (Mauritius) Ltd will buy 1.36 million shares, or 5%, of lEX, FTIL said in its filing with the stock exchanges. FTIL’s shareholding in IEX will be at 28.49%, and on a fully diluted basis at 25.64%, after the transaction is completed, the sale being driven by India’s power sector regulator Central Electricity Regulatory Commission (CERC) asking the company to cut its stake in IEX to 25%.

PLY: I will update the Premium Post Neither Fit Nor Proper: The FTIL Fire Sale once EI goes to pixel, ought to be complete by Wall Street open today…

NASDAQ OMX Announces Formation Of Global Market Services Business

NASDAQ OMX announced the formation of Global Market Services, a new entity comprising NASDAQ OMX transactions, clearing and settlement services in the U.S. and Europe.

PLY: Hans-Ole Jochumsen is an ideal choice to head up this side of the business, good luck to him in his elevated new role which will doubtless make up for his tenure as FESE President expiring at the end of 2013. More details on this reorganisation in “Career Paths” below.

MCX Given An April-End Limit On FTIL Order
Sharleen D’souza & Rajesh Bhayani – Business Standard

FMC has given a deadline of April 30 for MCX to ensure FTIL divests as directed in December. The regulator has warned it won’t approve any new contracts before FTIL divests its holding in the exchange. Indeed, no contracts on the MCX in the past two months have got regulatory approval.

ASX Chief Seeks Level Playing Field In Derivatives Clearing (subscription)
Stephen Bartholomeusz – The Australian

Two years ago, the Australian Council of Financial Regulators decided to leave it to the market to determine where OTCr derivatives transactions should be cleared.

ASX CEO Elmer Funke Kupper, however, is still arguing the case for mandating domestic clearing while investing heavily in developing its own platform. In a speech delivered in Sydney yesterday, Funke Kupper outlined the thrust of the submission ASX will make to the financial system inquiry.

PLY: It may be spring time in the northern hemisphere but pantomime season is in full swing down under as Elmer’s “oh no it isn’t” routine continues to attack progress. Emulating the former chip shop owner turned nationalist protectionist politician Pauline Hanson, EFK has another rant at competition which threatens his ability to run a costly monopoly. ASX clearly believes foreign capital to be inherently inferior to Australian monopoly. ASX are so desperate to maintain their monopoly they are playing a cheap racist card to try to maintain their unsustainable position as national counterparty. Shareholders beware: after years of visionless cost control, the ASX is on the cusp of being ripped asunder by competitors giving the Ozzie battler a fair deal in markets. While we know ASX loathe spending money, they need a new dictionary: “level playing field” does not mean regulatory skew towards the narrow interests of the monopoly exchange.

Hong Kong Needs To Show It Has Liquidity To Attract Big Listings (subscription)
South China Morning Post ‎

PLY: A stirring call to arms by the highly influential and illuminating South China Morning Post.

CFTC Seeks Public Comment On ICE Swap Trade, LLC’s Self-Certification Of Package Trade Rule

BNP Paribas To Set Up Standalone Clearing Unit (subscription)
Financial Times

BNP Paribas is to create a standalone derivatives clearing business, aiming to grab market share and boost earnings.

Five Former Bernie Madoff Aides Found Guilty Of Concealing Ponzi Scheme
Dominic Rushe – The Guardian

PLY: Is anybody shocked that Bernie didn’t do it all alone?

Thomson Reuters Tightens Forex Trading Platform Rules (subscription)
Daniel Schäfer & Philip Stafford – Financial Times

Thomson Reuters is set to tighten the rules of engagement for its forex trading platform to discourage attempts at market manipulation.

U.S. CFTC May Have Broken Law By Suspending Outside Research: Watchdog
Sarah N. Lynch – Reuters

CFTC may have broken the law when it suspended its outside academic research program in response to a 2012 complaint filed by the CME Group futures exchange, the agency’s internal watchdog determined. The agency suspended publication of outside research in December 2012 after CME Group alleged that the CFTC’s outside researchers were illegally accessing sensitive market data to publish academic papers on high-frequency trading.

Private Markets

Myanmar’s Yangon SE (YSE) On Track For 2015 Launch
Sophie Song – International Business Times

Myanmar’s first stock exchange in more than 50 years, the Yangon Stock Exchange (YSE), is mostly on track for the planned October 2015 launch, despite a few major obstacles. Japan’s Tokyo SE (TSE) and Daiwa Securities Group, are tasked with establishing the nation’s first equities bourse since military regime took power in 1962.

Amongst other items, EI reported on June 24 2013 that Daiwa Institute of Research Ltd. is helping with the construction of a data center to power the stock exchange.

ALTX Africa Group To Launch First Exchange In Partnership With GMEX – ALTX Africa Group (ALTX) Gains First License Approval In Uganda – GMEX Provides Technology And Business Expertise

PLY: GMEX continue to make big progress – almost as big as their press release headlines in fact. ALT Xchange Ltd (ALTX Uganda) announced its intention to operate a securities and derivatives market, initially in Uganda, to service the East African region while ALTX is also planning the set-up of a Pan-African clearinghouse and settlement infrastructure in conjunction with local and international partners.

Exciting times and Hirander Misra and James Davies are leading the GMEX team forward across the world. Meanwhile another exchange is always welcome, good luck one and all…

Shenzhen SE To Clamp Down On ‘VIP Channels’ For HFTs

PLY: China opens a battle of wills between those immersed in the fine art of stifling Chinese Communist bureaucracy and the HFT community. I reckon the bureaucrats there have a much better chance of victory than, say, the Attorney General of New York in his local crusade against HFT.

Tera Exchange Announces First Bitcoin Derivative
Douwe Miedema – Reuters
New Derivative Guards Against Bitcoin’s Price Swings (subscription)
Katy Burne – Wall Street Journal

TeraExchange has constructed a Bitcoin-denominated swap. The contract, created on behalf of two clients, was a 25 day bilateral (“non deliverable forward”) swap privately negotiated between them. The company said it had shown the contract to CFTC, which regulates swaps and futures. The parties to the swap agreed to use an average price taken from multiple bitcoin exchanges to determine how they’ll settle up. If transacted by the counterparties, the contract would need to be reported to the agency.

PLY: As per my presentations and calls over the past couple of years, Tera have begun the creation of an infrastructure which can create a whole new universe for cryptocurrency with a de facto fractional reserve multiplier effect. Very exciting news: plaudits to Tera for this innovation.

Bitcoin Exchange Vircurex Suspends Withdrawals To Battle Insolvency
Megha Kedia – TECHIENEWS

Bitcoin Exchange Vircurex has stopped withdrawals of Bitcoin, Litecoin and other digital currencies after it revealed that the exchange is running into serious financial issues. In a statement published on its website on Sunday, Vircurex announced that all existing user accounts will be freezed starting Monday. The Beijing-based virtual currency exchange suffered significant losses after it faced two hacking attacks last year. The company claimed to have been using its own income to compensate users affected by the security breaches.

Special Section: FTI, NSEL, India at the Crossroads

PLY: FTIL rallies nearly 5% on the unexpected trimming of an IEX stake while MCX is up 2%.

CBI Seeks Time To File Reply To PIL In NSEL Scam
Business Standard

CBI sought one week’s time from the Bombay High Court to give its response to a PIL seeking transfer of probe from Mumbai Police to the investigative agency into the alleged scam involving NSEL.

Venkat Chary Blames Former Employees For NSEL Crisis
The Economic Times

Former bureaucrat Venkat R Chary, who served as non-executive chairman of commodity bourse MCX till August 2013, has put the blame for NSEL crisis at the former CEO and certain other employees of the spot exchange. Chary, who has also served as chairman of commodities market regulator FMC in the past, also said he fears a conspiracy behind his name being talked about by vested interests with regard to the NSEL crisis.

PLY: I make no comment on the specifics of Mr Chary’s position although it has to be said, overall, former bureaucrats who enjoyed generous recompense from Jignesh Shah’s business arms do appear to be deeply panicked by the way NSEL is now threatening to engulf them. There is a difference between non-executive and executive management here and clearly MCX was not related to NSEL in the way that FTIL was.

Arvind Mayaram Panel Review Actions, Seek CBI Presence
The Financial Express

To prepare a more holistic action plan on the NSEL payment crisis, the high level Mayaram panel today sought representation of CBI in the committee. The panel, headed by Economic Affairs Secretary Arvind Mayaram, today took stock of actions taken by various governmental agencies, including the Enforcement Directorate and Economic Offences Wing of the Mumbai police, in the case.

Raids Info Came After MCX-SX Licence Approval: Damodaran
Business Standard

Defending the decision during his tenure to grant licence to MCX-SX, former SEBI chief M Damodaran has said the letter about the “so-called raids” came to the regulator after approval was accorded to the bourse.

SEBI Should Support Competition Despite FTIL Crisis
Mobis Philipose – Livemint

SEBI has finally decided to end its love-hate relationship with FTIL. The capital markets regulator said last week that FTIL is not a ‘fit and proper person’, and directed it to sell all the shares it owns in SEBI-regulated exchanges and clearing corporations in three months.

PLY: Another excellent commentary from Mobis Philipose advocating freedom for free markets: “To start with, it is simply naïve to assume that existing exchanges will always behave in the fairest manner…”


KVH Optimizes Routes To CME
Automated Trader

KVH the Tokyo based information delivery platform has announced the launch of newly optimized low latency routes to CME in Aurora, Illinois from Tokyo and Singapore, delivered over a high bandwidth premium Ethernet service, these routes offer SLA-backed latency below 122 and 188 milliseconds between Tokyo and Aurora and Aurora and Singapore, respectively.

Perseus Launches Hybrid Transatlantic NJ-Frankfurt Route (subscription)
Faye Kilburn – waters technology

New York-based fiber and microwave network provider Perseus Telecom has established a new hybrid transatlantic route between Secaucus, NJ and Frankfurt which combines fiber and wireless hops.

PSE Launches Free Mobile Disclosure App
Krista Angela M. Montealegre – InterAksyon

Philippine SE (PSE) has rolled out a free mobile version of its new disclosure system, allowing traders to access real-time disclosures.


Vienna SE Exits Derivatives Trading (subscription)
Jonathan Watkins – FOW Intelligence

Vienna SE (Wiener Boerse) has de-listed all of its derivatives contracts with regional giant Eurex preparing to fill the void through its own offering of Austrian equity and index products.

PLY: An ignominious retreat by Vienna after the anschluss through Xetra by EUREX of the Austrian options market, as previously discussed here and here.


JSE To List MSCI Index Futures

FTSE To Launch CPSS-Iosco Compliant Fixed-Income China Indexes (subscription)
Justin Lee – Risk

Career Paths

Hans–Ole Jochumsen, NASDAQ OMX EVP, has been appointed to lead the newly combined global business : NASDAQ OMX Global Market Services. Hans-Ole was previously EVP Nasdaq Nordic transaction services and global commodities divisions. His new role involves overseeing the European and US market services businesses in cash equities, derivatives, fixed income, currencies and commodities. In other words, US stock and derivatives platforms, eight Nordic and Baltic exchanges; NLX and eSpeed.

PLY: Once again plaudits to Hans-Ole, an excellent choice for the role which combines various responsibilities previously held by Eric Noll who left NASDAQ OMX last year to run ConvergEX. Hans-Ole is the only European amongst the nine members of the NASDAQ OMX executive committee.

FESE has promoted Rosa Armesto as its new head of public and regulatory affairs. Her focus in the coming year will be MIFID II, MAD and the Regulation for Financial Benchmarks.

PLY: Another inspired choice by FESE Director General Judith Hardt promoting the exquisitely accomplished Rosa Armesto to head policy and regulatory affairs.

Traders Magazine notes that IEX Group hired Jay Frasier as head of business development. Frasier, previously sales chief at Deutsche Bank’s Americas electronic-equities unit until November. He previously worked at Citadel LLC and spent 14 years at ITG. He reports to Ronan Ryan, IEX chief strategy officer, and focuses on broadening the firm’s client base.

Michael Beaver joined Trillium Labs, the software unit of broker Trillium, as director of sales. Beaver, will supervise the sale of Trillium’s Surveyor market manipulation detection tool which analyzes the effect of its users’ order activity on market prices. Previously, he was managing director at NASDAQ Execution Services building relationships with top quant firms and broker-dealers across the U.S.

Dennis Shea, a former CIO and global head of Equity has been named to the BoD for Affinity Investment Advisors. Shea has more than 25 years of investment experience serving in both the buy- and sell-side including 23 years at Morgan Stanley, where he most recently served as Chief Investment Officer and Global Head of Equity for Morgan Stanley Investment Management.

Financial Calendar

This week

CME $0.47 Q1 dividend payment
ASX 88.2 cents half-year dividend payment
Amman SE (ASE) General Assembly Meeting
GFI $0.05 quarterly dividend payment
NASDAQ OMX $0.13 quarterly dividend payment

New announcements

LSE will report a brief pre-close period update for the eleven months ended 28 February 2014 on 27 March 2014
SGX Q3 results for FY2014 on 23 April 2014

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

Share Notes

Charles Schwab EVP Carrie Dwyer sold 9,687 shares Wednesday, March 19th at an average price of $27.35 (bargain $264,939.45). Mrs. Dwyer’s regular sales are chronicled on this specific page.

Analyst Notes

JPMorgan Chase Lifted Their Price Target On ICAP From GBX 364 To GBX 379 – “Neutral” 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

Regulatory Changes Coming Amid Vulnerabilities In FX, Swaps Compliance
Jeff Patterson – Forex Magnates

Lingering questions into the proper regulation of swaps and forex transactions have revealed stark vulnerabilities in the oversight of these instruments, leading to speculation that regulatory changes may be on the horizon from organizations such as CFTC.

These feelings were underscored during last week’s release of a detailed questionnaire by the CFTC, seeking clarification on the proper implementation of swap-data reporting under the Dodd-Frank Act rules – the commission hopes to use this feedback to ultimately propose and foster changes for regulators to supervise the swaps market.

OneChicago Market Makers – OCC Clearing Fee

Currently OneChicago absorbs the OCC clearing fee for all OneChicago Market Markers. This process will be discontinued. Beginning April 1, 2014 the OCC clearing fee will be passed along to all OneChicago Market Makers.

CFTC Orders Morgan Stanley Capital Group Inc. To Pay $200,000 Penalty For Violating Soybean Meal Futures Speculative Position

SEC Announces Agenda, Panelists For Cybersecurity Roundtable

PLY: An interesting array of panelists although I expect this will be a roundtable which will generate lots of headlines to inject fear into the media. Hopefully it will be a measured discussion.

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