March 26 2014


PLY: Well orderly markets in swaps seem to have become an after thought as regulators struggle to implement new rules, are challenged with resources (told you so) and are incapable of reading a map to define territorial borders as they all seek to expand their influence. End result is a modicum of user chaos and confusion, not to mention cost and concern at being fined. (Presumably the western nations will resolve their differences by seeking more sanctions against Russia). Hmmm, not the finest hour of the west’s political-regulatory complex and the pain continues. The good news is trueEx are successfully bunching swaps just as regulators are, alas fragmenting in pretty much every sense.

Elsewhere we have all the news from Amman to Uzbekistan via Nigeria (new whistleblowers hotline launched by NSE), so it’s a typically global issue with forays into Bitcoin and the virtual world. Muscat system outage (NSC) as Paris MOUs with Algiers. TTIP looms large as northern Europe and US want broad deal, including finance but Mediterranean protectionists as ever push back on free trade. Sungard looking to deleverage before share split, TMX goes private (share trading), Bitcoin not a currency but IRS will tax it so that’s legal enough to meet wider approval. Broader central bank disintermediation remains on target…

Meanwhile, the latest posts on Exchange Invest Premium ($120 p.a) include something you really must read if you have the remotest interest in CME (especially equity therein!). I have considered the B share issue and in my opinion, it is a flawed attempt to avoid the tough task of meaningful board reform while removing the influence of those who actually make the exchange happen: I cannot stress enough, you need to read this and indeed if you are an investor, you must vote against this erroneous proposal. CME cannot afford this “Conscious Uncoupling” with its core constituency:

New: CME Board: B Grade Reforms

New: The FTIL Sell-Off Results Table

China Liberalises

Updated: 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 NYFIX by Wall Street open at Exchange Invest Premium. Incidentally, we have a new feature to Premium content – if you want to sponsor an article, it’s $1500 to ‘liberate’ any Premium feature and allow open access to anybody across the internet (we’ll use the money to create 2 new articles for existing Premium subscribers – an elegant Hydra-like approach we feel).

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Public Markets

Swaps Uncertainty Reigns Despite Revised CFTC Deadline (subscription)
Anish Puaar – Financial News

European derivatives trading platforms are still unclear about how to meet strict US rules that will allow them to continue accepting business from US firms, despite CFTC giving them more time to demonstrate compliance.

Fines For Traders Reveal Swaps Tensions (subscription)
Gregory Meyer – Financial Times

The proper way to execute  “exchanges for related positions”, is facing scrutiny.

Exchange operator CME has begun fining market participants over alleged violations. As reported this week, the CFTC has warned that civil lawsuits may follow. EFRPs are a specialised but vast portion of the derivatives market, used most often in energy and metals.

CFTC And Treasury Share Swaps Resources (subscription)
Philip Stafford – Financial Times

The main US derivatives regulator is set to share resources with the US Treasury as it struggles to get a firmer oversight on the mushrooming volumes of swaps data, and spot market participants’ risk exposures in global derivatives markets.

CFTC has been working on taking staff expertise from the Treasury’s Office of Financial Research, Commissioner Scott O’Malia confirmed on Tuesday. The two bodies have been working on a memorandum of understanding.

PLY: Rumours that MOU may read: “we felt pity when we met Commissioner O’Malia rattling his collection tin in the corridors of the Capitol so we offered to lend him a few interns free…” may be only a little wide of the mark…

Market Operators Hinder CFTC As It Seeks To Monitor Swaps
Douwe Miedema – Reuters

Market operators’ failure to cooperate to provide CFTC with adequate data is preventing the regulator from effectively monitoring the global swaps market, according to sources familiar with the matter.

BAP Eyes Merger Of PSE And PDEx
Kathleen A. Martin – The Philippine Star

The Bankers Association of the Philippines said it is eyeing a deal in the first half that could finally pave the way for the merger of the country’s stock and bonds exchanges. BAP president Lorenzo V. Tan told reporters that an agreement may be finally reached even before June.

PSE is set to acquire the shares of SGX and the Bankers’ Association of the Philippines (BAP) in Philippine Dealing System Holding Corp. (PDS Group), which is the holding firm of the Philippine Dealing and Exchange Corp. (PDEx) — the country’s fixed-income trading platform. BAP, SGX and PSE hold 25%, 20% and 20%, respectively, of the PDS Group. The rest is owned by minority shareholders.

EI reported on December 3rd that the PSE-PDEx merger saga is set to continue in 2014 after the Nov 30 deadline was missed.

TMX To Expand Into Trading Of Private Market Securities
Canada’s Flagship Exchange Operator TMX Plans Private-Share Market
Ben Dummett – Wall Street Journal

TMX said on Tuesday it plans to launch a new business to allow capital raising and the trading of securities of privately owned entities. Toronto-based TMX said the new business dubbed TSX Private Markets will serve companies throughout their evolution from the start-up stage, and further down the road.

TMX already dominates new issue and trading activity in Canada’s bigger-capitalized public companies through the Toronto SE, and in more junior issuers through the TSX Venture Exchange. The strategy helps ensure the Toronto-based exchange operator doesn’t lose out on fees when Canadian companies first seek to go public and then graduate to a bigger exchange as they grow.

The effort comes as Aequitas Innovations Inc. prepares to introduce a new Canadian stock exchange in 2015, as well as a platform for trading private securities.

TMX is part of a growing group of established exchange operators in North America targeting private companies. Earlier this month, New York’s Nasdaq OMX launched Nasdaq Private Market LLC in a joint venture with SharesPost Inc. Last year, NYSE Euronext partnered with ACE Group Inc., a start-up formed to help private companies sell shares.

PLY: The private share space is becoming crowded yet the market itself is remarkably small. In some sense the culture of trading all manner of er, off-beat, listings in Canada (and I don’t mean TMX’s core bourse!) may make this an appealing venture for TMX which is going head to head with Jos Schmidt’s Aequitas on this product too; another exciting challenge for Tom Kloet’s successor at TMX…

JPX Plans To Grow In Derivatives Market
Sachio Nikaido & Yomiuri Shimbun – Japan News

JPX must clear various hurdles to compete with overseas rivals in the global derivatives market. On Monday, JPX completed the integration of the derivatives markets of the Tokyo SE and the Osaka Securities Exchange into the Osaka Exchange, which specializes in derivatives trading.

Bright Future For Unified Futures?
Kosaku Narioka – Wall Street Journal

Japan’s main stock exchange enjoyed a trouble-free integration of its Tokyo and Osaka derivatives operations on Monday as it looks to improve its competitiveness and become Asia’s “chosen” bourse.

Betfair Working To Fix User Withdrawal Issue
Andrew Dietz – Racing Post

Betfair hope to restore normal service as soon as possible after they stopped customers from withdrawing funds from their accounts over the weekend.

Tabb Group Sees A “Plateau” In Dark Pool Growth
Mark Melin – ValueWalk

The dramatic rise in dark pool trading for stocks may plateau, according to Tabb Group, as they delivered their monthly report on equity trading, which showed a slight decline in dark pool trading in February.

SEC Probes Risk Of Hackers Hitting Wall Street As Threats Mount
Dave Michaels – Businessweek

SEC will examine the exposure of stock exchanges, brokerages and other Wall Street firms to cyber-attacks that have been called a threat to financial stability at a roundtable today.

Euronext Paris & Algiers SE Sign MoU

Euronext Paris and Société de la Gestion de la Bourse des Valeurs (SGBV) are pleased to announce the signature of a MoU with a view to enhancing cooperation between their markets.

PLY: Clearly the Paris-centric (soon to be er, ‘independent’) Euronext group is making great strides to enhance Francophone ties as per their technology sales agreement March 19th with Amman, Beirut, Tunis and Muscat (the latter having suffered an NSC outage today, see below).

Alibaba’s U.S. Listing Is Evolution, Not Revolution, For Corporate China
Francesco Guerrera – Wall Street Journal

“What a joy to have friends coming from afar!” Confucius’ famous expression of elation sums up Wall Street’s feelings about the landmark listing of Alibaba in New York.

PLY: “Timeo danaos et dona ferentes” as a bloke somewhere to the north of Confucius once remarked.

NYSE Continues Hot Streak For Nabbing Tech IPOs
Chris Dieterich – Wall Street Journal

NYSE’s scored its latest tech-listings win on Monday with Box Inc., which unveiled its plans to raise up to $250 million in an IPO.

PLY: Bob-daq has lost traction in the IPO market currently. Not that I actually think Alibaba (see EI passim) is a big loss but it’s challenging to see where that big remuneration package came from when the ghost of Facebook’s past is clearly haunting NASDAQ.

Treasury Big Obstacle To Financial Sector’s Inclusion In TTIP (subscription)
Brian Beary – Europolitics

Industry agrees with the Commission that the TTIP should cover banking and insurance.

PLY: A big issue: Mediterranean nations are largely determined to wallow in their economic woes as opposed to seeking growth which is a pity but hardly surprising given the hyper-average nature of the politicians. It makes sense to add various financial issues to TTIP, q.v. the abject mess we have right now because the lumbering bulk of the EU regulatory complex is running head on into the clunking fist of the USA equivalent (or vice versa, as you prefer…fwiw I think both have assiduously crafted a ‘lose lose’ scenario for their reputations based upon what was originally a logical – but difficult to execute – premise).

HFT: A Regulators’ Burden
Becca Lipman – Wall Street & Technology

Over the last few weeks HFT debate has hit the headlines with renewed force, inspiring hard-hitting comments from Attorney General Eric T. Schneiderman and Goldman’s Gary Cohen. Each party debating HFT’s benefit or lack thereof to the marketplace and questioning the need for tighter controls.

PLY: As I am not tiring of noting, it’s time for regulators to do less with more – that also means more thinking to craft better regulations as opposed to knee jerks which spawn vast ranges of carpet bumps akin to the Appalachian mountains.

Madoff Trustee Sees Victims’ Payout Nearing $6 Billion
Jonathan Stempel – Reuters

Former Madoff customers will have recouped nearly $6 billion of their money if a federal bankruptcy judge approves the latest payout request. Trustee, Irving Picard, on Tuesday said he is seeking approval to pay out $349 million to fraud victims with 1,080 accounts, with payments ranging from $496 to $77.3 million.

MF Global Trustee May Sue Corzine, Others Over Collapse
Jonathan Stempel – Reuters

U.S. District Judge Victor Marrero in Manhattan said on Monday the trustee may pursue damages over claims that former MF Global CEO Corzine, former COO Bradley Abelow and former CFO Henri Steenkamp breached their duties of care and loyalty to the company.

PLY: Despite his assiduous efforts, Governor / Senator / CEO Corzine has so far failed in his attempt at “Conscious Uncoupling” from his MF Global phase.

Private Markets

SunGard Unit Plans Bond Offering to Pay Down Debt Before Split
Jessica Summers – Businessweek

A SunGard Data Systems Inc. unit being spun off from the computer software and services provider is selling as much as $450 million of bonds to pay down borrowings at its parent. The SunGard Availability Services Capital Inc. unit, which runs the company’s data protection and recovery business, intends to offer eight-year, senior notes that may yield between 8.5 percent and 8.75 percent as soon as tomorrow. The notes will be rated Caa1 by Moody’s Investors Service.

EI reported on March 12th that SunGard Availability Services was preparing a $1.275 billion credit in connection with its spinoff from SunGard Data Systems. Previously, EI reported on January 27th Sungard’s announcement to split off its availability services business and on January 29th, that Sungard prepares to launch an amendment to $4.24 billion in loans to back the spinoff of SunGard’s availability services business.

MSM Suspended Trading
Times of Oman

Stock trading on the Muscat Securities Market (MSM) was suspended due to a technical problem on Monday. MSM reported the problem to NYSE Euronext, which managed to solve the fault at 1:30pm. This is the first time MSM encountered this type of default since the installation of this electronic trading platform in 2006, United Securities said in a statement.

EI reported on March 19th that Euronext successfully signed agreements with four exchanges in MENA region for the implementation of its new UTP solution, UTP-Hybrid (Amman, Beirut, Tunis and indeed Muscat).

TrueEx Introduces Bunched Swap Orders (subscription)
Timothy Bourgaize Murray – waters technology
trueEX Processes Over $100bn Of Bunched Order Allocations
Digital Journal

The DCM can now process bunched-order swap allocations in concert with Credit Suisse’s FCM arm and LCH.Clearnet’s SwapClear service with two other FCMs testing the system.

Bunched order functionality, which two additional FCMs are in the final stages of testing with trueEx, allows firms to conduct post-trade allocation processes similar to equities and futures, and enables them to trade in their top-level, or suspense, account that is handled by their standby clearing firm. A handful of SEFs and DCMs are offering the option as a way to relieve middle-office pressure on buy-side clients.

NSE Launches X-Whistle Portal

Nigerian SE (NSE) has launched a secure whistleblowing portal – X-Whistle – with the aims of curtailing fraud and making the exchange a global market.

Tinu Awe, general manager of the Legal and Regulation Division and head of surveillance at the NSE, said the X-Whistle portal will ensure proper protection of investors’ interests in the market. According to her, the whistle surveillance will ensure market integrity, transparency and confidence for people to invest.

PLY: Interestingly, the Nigerian Central Bank chief Lamido Sanusi has recently been ousted after, well, whistleblowing on corruption at the national oil company which, apparently, President, Goodluck Jonathan didn’t take kindly to. That Mr Jonathan’s regime has been dogged by corruption allegations since he took power in 2010 makes me wonder how successful the excellent intentions of Nigeria SE will prove to be?

Sri Lanka Bourse Safer & More Robust After ISO Certification
Lanka Business Online

Colombo SE has been certified by ISO.

LMAX Exchange & FP Markets Announce Partnership
Automated Trader

LMAX Exchange, the first FCA regulated MTF for FX trading, has announced a partnership with FP Markets, the Australian online brokerage to offer access through FP Markets.

Mt. Gox Says Working With Police In Missing Bitcoin Probe
Sophie Knight – Reuters

In the first confirmation of a criminal investigation at Mt. Gox, the failed Tokyo-based bitcoin exchange said on Wednesday it was working with the police “with regard to the disappearance” of bitcoins worth some $490 million at current prices.

IRS: Bitcoin Is Not Currency
USA Today

The federal government will tax digital money such as Bitcoin like property, not currency, the IRS said Tuesday in its first significant guidance on the virtual coin. Although Bitcoin may operate like coin and paper currency and can be used to pay for goods and services, no country accepts it as “legal tender,” the IRS said in its notice.

PLY: Given that turkeys won’t vote for Christmas, there is little danger of the Fed voting for its disintermediation, hence being recognised as legal tender will have to wait for, well some small nation with an axe to grind against their use of somebody else’s currency – there are lots of possible runners and riders here.

Payward Raises $5M From Hummingbird To Fund Kraken Bitcoin Exchange
Kim-Mai Cutler – TechCrunch

Payward, which runs the alt-coin exchange Kraken, said it just raised a $5 million Series A round. Hummingbird Ventures, which is based out of Europe, led the round. Other angels included Trace Meyer and SecondMarket founder Barry Silbert. Kraken serves bitcoin along with a number of other currencies like Litecoin, Namecoin, Ven and Ripple and is one of the top 10 Bitcoin exchanges by volume.

Cyber Black Market Has Robust Infrastructure: Report
Shishir Behera – Business Standard

Cyber black markets are a mature and growing multi-billion-dollar economy with “a robust infrastructure and social organisation”, says a report by RAND Corporation. It adds similar to the global economy that runs on demand and supply, a parallel underground economy is also subject to the same pulls and pushes.

Venture Capitalists: We’re Looking For Bitcoin’s Killer App

There hasn’t been a so-called killer application of bitcoin yet, but remarks from three venture capitalists suggested that funding would be readily available for such an application.

Hemant Taneja of General Catalyst Partners, Jeremy Liew of Lightspeed Venture Partners, and Micky Malka of Ribbit Capital spoke Tuesday at the CoinSummit conference.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX and FTIL off 1% while it seems CBI have reached a conclusion on their case opened against Bhave and Abraham. The problem now is that with CBI having been placed under such duress by the accused, I am not sure that either gentleman has had their reputation cleared. Rather it looks like another political stitch up and given that the cases appeared tenuous, it may well prove to be more undermining to their credibility than if they had stayed silent for a week? An unfortunate situation and one where there may not be today’s phrase du jour: “Conscious uncoupling.”

CBI May Close Case Against Bhave, Abraham
Neeraj Chauhan – Times of India

CBI is likely to close the controversial preliminary enquiry it launched against former SEBI chief C B Bhave, former Sebi member K M Abraham and others in a case related to grant of licence to MCX-SX in 2008.


KRX To Complete IT System For Uzbek Stock Market By 2015

KRX said Wednesday it has signed a supplementary deal to complete a stock market IT system for Uzbekistan’s bourse by 2015. In 2011, KRX inked a deal with State Property Committee of Uzbekistan to provide and assist the Uzbek stock market with the operating system that covers trading, payment and brokering, with the aim of completing the system by 2013. But the process has been delayed due to procedural matters and differences over terms of the deal. KRX is entitled to a stake in the Uzbek stock market operator, but did not provide more details.

KRX has been ramping up efforts to make inroads into overseas markets in a bid to boost its global presence. It has already started to undertake similar projects in Laos, the Philippines and Malaysia.

PLY: The men from Busan/Seoul are quietly expanding their influence across the region…

Nasdaq OMX Blazed Datacenter Hosting Trail 10 Years Ago
Greg MacSweeney – Wall Street & Technology

Ten years ago Nasdaq OMX moved its matching engines and corporate technology to a Verizon datacenter. The decision turned heads in the financial services world. Today, the practice of utilizing third-party datacenter services is becoming commonplace.


Launch Of JPX-Nikkei Index 400 Futures

Considering the needs of investors for hedging, Osaka Exchange, Inc. (OSE) will introduce futures based on JPX-Nikkei Index 400, which is a new index jointly developed by JPX Inc. and Nikkei, Inc.

Nasdaq OMX Index Family Made Available Through Rimes BDS

Nasdaq OMX announced that the Nasdaq Global Index Family, comprised of nearly 9,000 global securities with a combined $41.8 trillion float-adjusted market capitalization, is now available on the award-winning Rimes Benchmark Data Service (Rimes BDS).

Euro STOXX Low Risk Weighted 100 Index Licensed To State Street Global Advisors

STOXX announced that the EURO STOXX Low Risk Weighted 100 Index has been licensed to State Street Global Advisors for an exchange-traded fund (ETF).

Career Paths

Metal Bulletin notes that HKEx’s senior VP Lesley Campbell has resigned and will be leaving the bourse by the end of the month. Campbell will continue to be in Hong Kong, she was on HKEx’s Asia commodities team and led marketing and education strategies of the group.

SEC announced that G. Jeffrey Boujoukos has been named the associate regional director for enforcement in the Philadelphia office.

PLY: We congratulate Olivier de Montety, nowadays a serial entrepreneur and advisor, formerly of FIMAT, founder of FIMATEX (and hence the man who rather led me out of open outcry into electronic trading!) and ZeBank, on his re-election to the council in Boursay, France last Sunday with a fantastic 61.9% mandate.

Financial Calendar


ASX 88.2 cents half-year dividend payment


LSE brief pre-close period update for the eleven months ended 28 February 2014
Amman SE (ASE) General Assembly Meeting


GFI $0.05 quarterly dividend payment
NASDAQ OMX $0.13 quarterly dividend payment

New announcements

CBOE Q1 2014 financial results – Tuesday, May 6, 2014
Sibex – Sibiu SE AGM Monday, April 28th, 2014

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

Share Notes

CBOE Director William J. Brodsky sold 24,345 shares Monday, March 24th at an average price of $55.71 (bargain $1,356,259.95). He now owns 327,313 shares.

Analyst Notes

Crimea-Induced Trading Surge Stokes Moscow Bourse Rally
Ksenia Galouchko & Halia Pavliva – Bloomberg

OAO Moscow Exchange is emerging as one of the winners from the rout sparked by Russia’s worst confrontation with the U.S. since the end of the Cold War.

Shares of the bourse have rallied 18 percent in the past two weeks, since voters in Crimea agreed to rejoin their former Soviet master. The stock is the best performer among the largest Russian companies on the Micex index, which rose 6.1 percent over that period, according to data compiled by Bloomberg. The Moscow Exchange gained 2.7 percent to 58.03 rubles yesterday, the highest level in almost three weeks.

PLY: You can’t keep a good bourse down…

Today’s Post-Market Laggard: CME
The Street

Trade-Ideas LLC identified CME as a post-market laggard candidate.

PLY: NB Once again, if you have any interest in CME, particularly any shareholding, you need to read my latest Premium Post: CME Board: B Grade Reforms The proposed change is a simplistic and misguided attempt to cut the board when reform is needed, resulting in the loss of the key exchange drivers being alienated from the governance system. On due reflection, I can see how dangerous a move this is for shareholder value at CME, it’s a must read if you have even a single CME share.

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.


A Tale of Two Crowdfunding Platforms: Seedrs & Crowdcube
Crowdfund Insider

In the UK equity crowdfunding market two platforms have emerged as the clear leaders. However, they are quite different in both philosophy and operation. Nevertheless, Competition between them is quite fierce.

Crowdcube, the leader, has completed 106 successful campaigns, is rough around the edges and pushes the envelope. Seedrs, thoughtful, cautious and makes sure the “i”s are dotted and the “t”s are crossed.

Other stories

WFE Launches Sustainability Working Group
Business Wire

WFE formed a new sustainability working group at its Working Committee meeting in Mumbai last week, comprised of representatives from a diverse array of global stock exchanges with a mandate to build consensus on the purpose, practicality, and materiality of Environmental, Social, and Governance (ESG) data.

Office Of The Comptroller Of The Currency Bulletin: Volcker Rule – Final Regulations

On December 10, 2013, the Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System (FRB), FDIC, SEC and CFTC issued jointly developed final regulations to implement section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, known as the Volcker Rule. The final regulations were published in the Federal Register on January 31, 2014, and become effective on April 1, 2014.

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