March 25 2015


As the stock soars and that outbreak of management looks like it has taken hold, Euronext is ahead of schedule repaying its debt. LSE stokes global ambitions just as nobody else is truly global either (but a ‘home’ audience loved the table thumping address). Lots of regulatory discussions, including ESMA plans, CME Euro wheat delayed while it’s a day full of points to ponder, let’s get scrolling…

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BGC / GFI: Post Merger Disposals
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Public Markets

Euronext Announces Debt Repayment

ENX announced that on 23 March 2015 Euronext NV repaid €140 million as an early repayment of the €250 million Term Loan drawn on 19 June 2014. Simultaneously, Euronext NV increased the undrawn Revolving Credit Facility to €390 million. The term of both instruments is three years starting on 23 March 2015, with two one year extension possibilities. The related terms and conditions remain unchanged.

PLY: The rebirth of an exchange can be achieved: perhaps that will be music to the ears of various becalmed bourses out there… Euronext has vast challenges ahead but the direction of travel is sound, the management is demonstrating coherence and I am delighted they have enabled me to reverse my previous scepticism at their independence.

PSE Sticks To Timetable For PDS Buyout
Business World Online

Philippine SE (PSE) President & CEO Hans B. Sicat said the local bourse is sticking to its timetable of making a final offer to buy out the shareholders of Philippine Dealing System Holdings Corp. (PDS) before it holds an annual stockholders’ meeting in May.

FAO: Read our seemingly never-ending Premium brief: PSE – PDEx Merger Brief.

Hong Kong Regulator Feels Heat Over Decision On Dual-Class Shares (subscription)
Jennifer Hughes – Financial Times

Asia’s most vibrant stock market is poised to look again at investor rights — namely whether Hong Kong could, or should, allow US-style dual-class shares.

Last week the city’s top regulator unexpectedly, and very publicly, emphasised his neutrality on the issue while the Hong Kong exchange is due to publish responses imminently to a paper published last year.

PLY: Bad bad bad for Hong Kong – the key issue now is will Singapore hold its nerve and thus ride out what amounts to the share ownership equivalent of cordite attached to TNT, awaiting a lit match.

LSE Presses To Ensure U.K. Is Home To A Global Exchange
John Detrixhe – Bloomberg

There’s room for only a handful of firms to provide trading venues, clearing and related services around the globe, and the U.K. must ensure one of its companies is among them, according to LSE’s CEO.

“We believe there is room for four, maybe five, global infrastructure companies,” LSE’s CEO, Xavier Rolet, said Tuesday at the City Week conference in London. “It’s very, very important in the context of the connectivity between the Americas, China as we’ve heard, and Europe, and of course London” that one of these global companies is based in the U.K.

LSE, which at more than $13 billion of market capitalization is the fifth-biggest exchange owner in the world, intends to carry out that role. The company has diversified beyond its roots in equities trading, which now accounts for less than 10% of its business

PLY: Here we hit that fascinating patch of opacity which is “global financial markets.” How many global exchanges have we currently? Well, if you benchmark against consumer behemoths like Daimler or Samsung, the answer is in fact a big fat zero. Hence, we have this odd argument (exacerbated by celebratory blob-corporate gatherings where truisms trip off the tongue and speech analysis is parked alongside the calorie counting of the nibbles).

I get what Xavier means – he wants to be a serious player but exchanges and markets remain far from being global…I would contend the micro end of the structure is still hugely unsupported and hence the idea that LSE might have operations in, I don’t know, Ruthenia, is not feasible as the P&L of the big entities won’t scale to managing in the micro (although of course some may argue that some large exchange groups are headed by micromanagers, but let’s not go there right now).

However, the interesting point is that after his frenetic dealmaking, Xavier is indeed right that LSE now stands as an intriguing hybrid (admittedly still derivatives light ex-Italy and likely to remain so) and is clearly a player – even though I am not sure it is yet at the super heavyweight level with a circa 6 billion USD market cap but in the top five with international spread, yes indeed.

Stock Exchanges Begin To Take Bitcoin Seriously
Olga Kharif – Bloomberg

The biggest U.S. stock exchange operators are taking steps to embrace bitcoin:

Nasdaq revealed Tuesday that Noble Markets, a platform for trading bitcoin, has agreed to license Nasdaq’s X-stream technology. Noble is adopting the same software used by securities exchanges around the world, and a related system runs the Nasdaq Stock Market. The news follows the NYSE’s January agreement to invest in Coinbase, another platform for trading the digital currency.

PLY: Scratching the surface only, so far. This, ladies and gentlemen, will be big – but then I mentioned e-money all the way back in “Capital Market Revolution!” and my view remains unchanged from last millennium way back before anybody had the bright idea of the Blockchain or the seriously less bright idea of QE.

Back to the cryptocurrency opportunity – it works for any exchange and indeed right now with cryptocurrency worth a few billion in total is probably most scalable for smaller bourses, not necessarily the majors.

Two Sides Of The Sebi-FMC Merger
Rajesh Bhayani – Business Standard

The proposed merger will present more opportunities to the exchanges but could also pose serious challenges for the watchdog.

PLY: “Could” being diplomatic for “will” here. The merger idea is a sound one, the problem is how the Indian blob deals with modernity which tends to be: reluctantly. If the BJP government really is free market reformist, it needs to imbue the regulator with that sense of purpose to be correctly oriented to letting markets deliver the growth a broadly deregulated Indian economy needs.

MOEX Plans Upgrades For Trading & Settlement

MOEX announced a number of upgrades and new product roll-outs planned for the equity, bond, repo and derivative markets in April 2015.

All anonymous trading in Russian federal government bonds (OFZs) will move to T+1 settlement, creating a single order book. Block trading for OFZs will be introduced. Settlement in USD will be allowed for foreign stocks and depository receipts. Discrete auctions for stocks will be upgraded. Additional upgrades include expanded terms for repo with the CCP, new mechanisms for delivering bond futures and exercising options, and new clearing arrangements on the Equity & Bond Market.

PLY: MOEX continue to impress although they must remain frustrated at having to scale back their world leading real-time settlement procedures to help accommodate the steam-powered west and then suffer various sanctions issues through no fault of their corporate body.

FCA Arrives Late To The Dark Pool Party (subscription)
Tim Cave – Financial News

FCA said it would investigate potential “conflicts of interest” in dark pools over the next year. But with the private trading venues already squarely in the spotlight, the UK financial watchdog appears to be acting after the horse has bolted.

PLY: Shocking – could this really be true that the august and much vaunted UK regulator is playing catch-up? That is has been slow watching dark pools and maybe doesn’t follow some strands of lepidoptera on other fronts? Surely not!

At the same time, good to see FCA at least taking a look. I will be happy to add my few pence worth where appropriate.

Sobolewski Needs To Double BVB’s Liquidity To Reach The Budget Figures (Romanian version)
Adina Ardeleanu – Bursa

BVB estimates a daily turnover of Eur 13.4 mln for 2015, but its level is now half of that
The Board proposed the distribution of 94% of 2014 profit
The members of the Board could get 6 monthly salaries as bonuses for 2014, for buying BVB shares
The exchange is to launch a new bonds market and list 8-10 companies on its new ATS AeRo, but sets no clear objectives on listings on the main market segment

BVB – announcement re. AGM – here.

FAO: The average daily turnover at BVB on the regulated market for shares, excluding IPOs, increased by 22% in 2014 compared to 2013, reaching Eur 8.76 mln.

PLY: In essence: BvB is gradually crawling forwards which is great… and the ‘net’ result of a good year is to give all the non-execs a jolly good bonus.

Leaving aside the fact that I can only say I wish Liquidnet Europe had done that as their profits soared during my tenure, there has to be a certain concern that the directors may risk being open to accusations of carpetbagging in what remains the deeply political environment of Romanian ‘markets.’

DTCC Encourages Action Ahead Of Next Phase Of OTC Derivatives Reporting Requirements In Australia – Appoints New Business Manager In Sydney To Support Client Growth

CME Group’s Duffy To Testify on CFTC Reauthorisation

ICE Futures U.S. President Benjamin Jackson To Testify On CFTC Reauthorization

Testimony is today.

Private Markets

BATS Expands Currency Trading Platform To London (subscription)
Roger Blitz & Phil Stafford – Financial Times

BATS will launch its Hotspot matching engine in a campus west of London later this year in order to target European and Asian currency exchange trading.

HOTSPOT press release here.

PLY: A good move by the folks at BATS – I have long argued for the potential of exchange-style forex platforms and in Europe, Hotspot is only one of what I believe may be many (perhaps including repurposed SEFs in due course).

Dividend News

ENX – 2015 yearly gross dividend amounts to 0.84€ per share, subject to shareholder approval at the company’s AGM on 6 May 2015. Payment of the annual dividend would then occur on 13 May 2015.(press release here)

Special Section: FTI, NSEL, India at the Crossroads

PLY: Flat day for MCX and FTIL, no news, no resolution, stasis as usual.


CME Says No Decision Yet On EU Wheat Contract Launch
Sybille de La Hamaide – Reuters

CME said on Tuesday it could not yet confirm whether it would launch a EU wheat contract, as it cannot guarantee sufficient deliverable capacity after failing to seal deals with local companies.

CME had been planning to launch its EU wheat futures by the end of April (as reported here), in a challenge to Euronext’s regional supremacy in wheat, according to a draft document seen by Reuters.

PLY: A setback for CME Europe and clearly an early disappointment for new CEO Cees Vermaas, especially given that as a former key member of the team writing the Euronext plan pre-IPO (before his unexpectedly jumping ship to CME), presumably he had insight into the wheat market in Europe. A pity that competition may be stymied, sympathies for CME that they are not able to yet get into the market.

Previous comments on the topic here and here.

EEX Exchange Council Agrees To The Extension Of Power Options To Further Market Areas – Contract Specifications For The Agricultural Index Futures Approved – (STP) At ECC Simplified

PLY: The competition for dire headlines of worthy initiatives has been particularly marked this week.


TASE To Launch Index Of Top Israeli Technology Firms

Tel Aviv SE (TASE), seeking to reverse a decline in trading volumes and company listings, is launching a “Start-Up Nation” index of top Israeli technology companies traded around the world, it said on Tuesday.

The new “TA-BIGITech” index, launched in cooperation with BlueStar Indexes, will comprise 57 Israeli and Israeli-related tech firms traded in New York, London and Tel Aviv, with a total market value of $75 billion.

Press release here.

India – Bourses Push Ahead With Index Launches
Sneha Padiyath – Business Standard

Recently, NSE launched a strategy-based index of 30 stocks, while BSE is set to revamp its entire family of indices, starting April

Career Paths

LSE announced that Robert Webb QC, Senior Independent Director & Chairman of the Remuneration Committee, will step down from the Board following LSE’s AGM on 29 April 2015. He has been a NED of the Group for 14 years. Paul Heiden, NED & Chairman of the Board’s Audit Committee, becomes Senior Independent Director and Sherry Coutu CBE, NED, becomes Chairman of the Group’s Remuneration Committee.

DTCC appointed Oliver Williams in Sydney as DTCC’s GTR Business Manager. Mr. Williams will oversee GTR on-boarding and regulatory collaboration.

Waters Technology reports that Operations executive Richard Robinson, most recently with Wipro Technologies, has joined Bloomberg as manager of its Open Symbology and Financial Instrument Global Identifier (FIGI) team. Previously, Robinson was a domain partner for capital markets at Wipro Technologies. He has more than 20 years’ experience in financial services technology operations, including roles at EMC, Omgeo, Deutsche Bank Securities, Bank of New York.

NZX will hold its 2015 Annual Meeting of shareholders on 21 May 2015. NZX advises that the opening date for nominations for directors is today, 25 March 2015. The closing date for nominations for directors will be 10 April 2015. All nominations must be received by 5 pm on the closing date. Nominations may only be made by a shareholder entitled to attend and vote at the Annual Meeting.

Financial Calendar


Commodity Exchanges, Energy, & Credit Subcommittee—Public Hearing: CFTC Reauthorization

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 announcements

SGX Q3 Results for Financial Year 2015 (FY2015) – 22 April 2015
BVB AGM – 27 April 2015 (Press release here)

NB: FESE Convention – Oslo 17/18 June 2015

ESMA Publishes The 2015 Regulatory Work Programme

ESMA has published its revised Regulatory Work Programme (RWP) for 2015. The RWP provides more detail on ESMA’s single rulebook work as set out in ESMA’s Annual Work Programme for 2015.

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

Share Notes

CBOE CEO Edward T. Tilly sold 6,250 shares Monday, March 23rd at an average price of $59.39 (bargain $371,187.50). He now owns 109,349 shares.


P2P Lenders Can’t Find Enough Borrowers
Shelly Banjo – Quartz

So this is awkward. P2P lending websites are having trouble finding people who want to borrow money.

Companies like Lending Club, Prosper, and Social Finance, which use technology to link borrowers with other individuals who want to lend to them, have been wildly successful. Since Lending Club went public last December, speculation has swirled about IPOs by Prosper and Sofi.

Wall Street bankers and money managers are paying attention. Earlier this year, the world’s largest asset manager BlackRock bought $330 million of consumer debt through Prosper. And firms have flooded the P2P platforms with billions of dollars. The influx of Wall Street money comes as record low interest rates make it increasingly difficult to find higher-yielding investments. The interest rate on a Lending Club loan can range from 7.5% to 25%, much higher than many other investments. (For example, the Barclays US aggregate bond index, a broad gauge of the US bond market, currently yields a bit more than 2%.).

PLY: The mismatch is temporary methinks but the issue still arising is that the places where folks want / need to borrow is outside the US. Yields will be higher but platforms are concomitantly worried about easing access to the likes of, say, Polish consumers and small business where there is huge demand but clearly that is a long way from the heartlands of the USA…

Other stories

ESMA Consults On Complex Debt Instruments & Structured Deposits In MiFID II

ESMA launched a consultation on draft guidelines on complex debt instruments and structured deposits.

PLY: Hopefully this time they have defined the terms of what they mean in the consultation…

Steven Maijoor, Chairman ESMA, At ECON Hearing MIFID/MIFIR CSDR

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