March 26 2015


A big day as LSE moves a step closer to being in play. Not sure: does Xaver have one of those killer “Duncan clauses” which guarantees a wodge of cash if he sells the business? Elsewhere, FXCM disposes of Japanese business while the FT’s free markets crusader Dan McCrum is back on the case of Plus 500 at full throttle. Terry Duffy wants the nuclear CCP button pressed to wake up the European Commission (gosh, feels like we’re back in the days of BB – and I don’t mean either the Israeli PM nor she of French fragrant acting pedigree). Meanwhile Plato plans a beauty parade of vendors…

Lots happening, a goodly quantity of pith, some of it downright grumpy, frankly you just cannot afford not to scroll today…

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Public Markets

Borse Dubai Sells Its Entire Stake In LSE (subscription)
Nikhil Lohade – WSJ

Borse Dubai, looks to be raising around 1.5 billion pounds ($2.23 billion) selling its remaining 17.4% holding by the biggest single shareholder in LSE will take place via a so-called accelerated book building process, which is apparently already covered.

Borse Dubai, which was not immediately available for comment, is the holding company for Dubai Financial Market (DFM) and Nasdaq Dubai. It was formed in August 2007 to consolidate the government of Dubai’s two stock exchanges as well as its investments in other exchanges such as the LSE.

The Dubai exchange became a major shareholder in Nasdaq in a complex deal in 2007, buying a 28% stake in LSE from the U.S. exchange for 1,414 pence per share.

Borse Dubai has since reduced its LSE stake and in September last year sold around 3.1% of the London exchange. At the time it said it had “no current intention to sell any further shares” and it remained “a long-term supportive shareholder”.

FAO: EI reported on July 10th 2014 that Qatar Holding is to trim its 15% stake in the owner of LSE by a third ahead of a $1.6bn rights issue by the British bourse to fund its acquisition of Russell Investments.

Read our Premium brief: Exchange Deals Brief

PLY: Well that is a rocket boost to the free float and it pushes LSE one step closer to being in play. Remarkably the markets don’t see it that way with Xavier Inc dropping 10% in early trade this am…

The acquisitive era of Rolet has worked wonders for LSE but can it survive independently? I wonder. Certainly the ownership dynamics are now a point to ponder…albeit it is a large morsel to swallow.

FXCM To Sell FXCM Japan To Rakuten Sec For $62 Million

FXCM announced that FXCM Holdings, LLC and FXCM Newco, LLC have signed a definitive agreement to sell FXCM Japan Securities to Rakuten Securities, a top 5 FX broker in Japan, and a subsidiary of Rakuten, Inc., one of the world’s largest Internet services companies, for a purchase price of approximately $62 million.

Rakuten Sec will continue to use the FXCM trading system for legacy FXCM Japan clients and will be notifying clients once the deal is finalized.

The transaction is expected to close on April 1, 2015, subject to customary closing conditions and the final purchase price will be based on FXCM Japan’s March 31, 2015 balance sheet.

Read our Premium brief: FX – CHF Crisis – Brief, FXCM Sales Brief, Exchange Deals Brief

PLY: There is clearly a new found focus at FXCM as it endeavours to please the paymaster of Jefferies and make up for the most costly guaranteed stop in history. That the regulators have not moved to rap them on the knuckles for this daft policy in the first place may be regarded as humane but it hardly helps build a better forex market – where, in the retail segment, evidence continues to suggest that a DNA transplant may be no bad idea. Oh speaking of which:

Customer Cash At Plus500 (subscription)
Dan McCrum – FT Alphaville

Plus500, the London listed Israeli contract for difference provider, has been growing at a breakneck pace. Last year trading revenues and net profits both doubled, to $229m, and $103m respectively, supporting an £800m ($1.2bn) market capitalisation.

We have pondered the sustainability of the business model before, but we were surprised by a line in the recently published annual report. Amid all the growth, the total for customer deposits held in segregated accounts at year end was just $35m, only $2m more than reported for the end of 2013.

Perhaps Plus500 customers withdraw all their funds at Christmas, then return in the New Year.

PLY: Gosh Mr McCrum, I salute you. All those things I say about the leftist Brussels bugle losing its mojo – they clearly don’t apply to your good offices. What is the truth of Plus 500? Curiously, the company appears tight lipped despite multiple articles from Mr McCrum of late. Elsewhere in forex land, investigations continue into another entity who have even suffered the ignominy of being dumped by the football team they were sponsoring (okay so it was Russia’s finest team: Chelsea, and allegedly they are good at these things – football I mean, not fraud).

Read our Premium brief: FX – CHF Crisis – Brief

IFCI May Exit MCX By Month End, Likely To Sell Stake In Open Market
The Economic Times

IFCI, which held 4.79% in the country’s only listed exchange MCX at the end of December 2014, proposes to offload its entire stake in the bourse in the open market by the end of the current financial year, two persons aware of the development told ET.

The state-owned financial institution’s proposed sale comes at a time CME is reportedly keen on picking up 5% in MCX.

Read our Premium brief: Exchange Deals Brief

House Panel Focuses On International Market Issues In Reauthorizing CFTC
Sarah Gonzalez – Agri Pulse

“Among the most critical issues facing the Commission today is the potential for the US to be denied status as a country whose regulations are equivalent to Europe’s,” said Terrence Duffy, president of CME.

Duffy said the European Commission’s “discriminatory approach to US access to EU markets is creating significant competitive disadvantages for US markets and the participants that use those markets” and without an EU recognition of equivalence, US clearinghouses will not be able to clear EU-mandated derivatives.

He said this equivalency issue is causing disruptions to US futures markets because, without equivalence, the cost of clearing futures on US markets will increase significantly on June 15, 2015. Under EU laws, non-EU clearinghouses must be recognized as “qualified central counterparties” by this date. The European Commission must determine that the clearing regulations in the applicable non-EU country are “equivalent” to EU regulation.

Duffy further said that the CFTC “has many tools at its disposal” to combat EU exclusion and deny access to US markets.

PLY: Terry Duffy rattles the sabre in a manner which is clearly driven by frustration but at the same time the need for a few lamp posts to be removed from folks’ eyes before they clear their swaps through eyes of needles may be useful. Yip, the EU is behaving with profound swaggering arrogance but was Gary G a renaissance man of calm negotiated agreement? Let’s say, my random straw poll of the C-suite suggests this is not a widely held view.

There needs to be agreement, there needs to be common sense* but taking us back to the bonkers Balkanised baffling protectionism of the Born CFTC is not going to help markets… I share the Duffy frustration but priming the weapons of mass market destruction is premature and disturbing talk I fear.

*Yes, I see your point – “common sense” “EU” and “American regulators” all in one sentence – I apologise for the oxymoron.

China To Open Up Futures Market To Foreign Investors Via Free Trade Zones: CSRC
The Economic Times

China plans to gradually open up its futures market to overseas investors through free trade zones (FTZ), but no decision has been made yet on allowing LME to set up a warehouse in the country, a regulatory official said.

China on Tuesday approved the formation of three FTZ, which will copy the model of the Shanghai FTZ established in 2013 as a testing ground for looser rules governing currency conversions and foreign direct investment.

PLY: Free Trade Zones but no copycat products presumably. Some might say creating a truly unique variation on some aspects of Chinese commercial activity?

China Regulator Open To State Firms Trading Overseas Futures

China’s futures regulator is open to allowing all state-owned companies to trade on overseas futures markets, though it no longer has a full say over the issue, Zhou Lichao, a director of the regulator’s department of futures supervision, said.

Read our Premium post: China Liberalises

HFT Firms Face Tougher Oversight (subscription)
Philip Stafford, Nicole Bullock & Barney Jopson – Financial Times
SEC Proposes Rule To Require Broker-Dealers Active In Off-Exchange Market To Become Members Of National Securities Association

US regulators have moved to close a loophole that allows some HFT firms that trade equities away from regulated exchanges to operate with light supervision.

SEC on Wednesday proposed requiring proprietary traders to become members of FINRA.

PLY: It is not unreasonable to subject industrial sized prop traders to some more regulation but the clear issue is what will be the threshold for such status – it needs to be flexible and not stunt possible new entrants to the market.

TMX & ICBC (Canada) Sign MoU

ICBK), a Canadian Subsidiary of ICBC and TMX announced the signing of a MoU to enhance their understanding of each other’s businesses and explore the possibilities of cooperation.

PLY: The chairman of ICBC was a brilliantly effective panellist on the session I chaired at last year’s Moscow Open Innovation Forum. Amongst a myriad of ‘big’ numbers, I particularly liked his remark that of course his bank needed a big technology spend, as he had 180 million customers, of whom some 130 million had made some form of electronic banking transaction. So, his client book is bigger than the population of Russia and his e-commerce clientele roughly twice the population of the UK. #Howsthatforscale?

CFTC Announces Agenda For The Upcoming Public Meeting Of The Market Risk Advisory Committee

The meeting will be held on Thursday, April 2, 2015.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX is off 3%, FTIL down 1%, as NSEL investors are once again understandably voluble about the dysfunctional resolution mechanism which passes for a legal-regulatory nexus in India.

NSEL Investors Demand Speedy Probe In Rs 5,600-cr Scam
Business Standard

NSEL Investors’ Action Group (NIAG) has called for swift and stringent action against conspirators in the Rs 5,600 crore (USD 900 mln) payment default at NSEL.

A letter addressed to Atul Kulkarni, Joint Commissioner of Police (Crime), NIAG alleged Mumbai Police’s shoddy investigation and slow progress in action against perpetrators of the fraud.

Read our New Premium brief: NSEL Scandal Brief – Part 13


FinTech Investment Triples To $12.2bn With Europe Experiencing Biggest Growth
Lynsey Barber – CITY A.M.

Investment in the flourishing global FinTech sector tripled to a staggering $12.2bn (£8.2bn) last year and grew at more than triple the rate of overall VC investment.

Financial technology venture investment in Europe grew by 215% last year to $148bn, according to research by Accenture.

In the UK, increasingly a hub for European FinTech with London at its centre, FinTech investments grew 136%, hitting $623m and accounting for the largest share of investment in the region.

Over in Silicon Valley, which London is increasingly rivalling when it comes to FinTech, investments grew 117% totalling more than $2bn.

PLY: On which note, all folks in Germany, Poland and Central Europe with a fintech startup, my Polish startup club Mission ToRun is partnering to deliver the StartUPBootCamp Fintech pitch day in Warsaw May 19th. Email me for further details, if you are working on a great fintech startup!

Plato Runs ‘Beauty Parade’ For Tech Provider (subscription)
Philip Stafford – Financial Times

A new not-for-profit European share trading venue is underscoring its transparent and mutual ethos by holding a public “beauty parade” to help decide its trading technology provider.

The Plato Partnership, founded by a consortium of big asset managers and investment banks, has put the names of the bidders in most likely contention on its website, together with a 150-word statement from prospective suppliers outlining their qualities. Users are invited to vote and can leave an explanation if they choose.

PLY: Given how many vendors sport beards in these hipster times (yip, guilty as charged) this beauty parade may be more like a rerun of last year’s Eurovision song contest than the catwalks of Milan or Paris.

The runners and riders are:


Happy voting!


Christopher Giancarlo Calls For Swaps Rules Rethink
Aaron Timms – Institutional Investor

Commissioner Giancarlo disagrees with the suggestion that CFTC’s overhaul of the US swaps market is too advanced for there to be meaningful revisions to the rules already passed. And he disagrees with the suggestion that as a new CFTC commissioner recently arrived in Washington after 12 years in the IDB business, his strident calls over the past couple of months for CFTC to revisit its own rules on swaps trading represent the final death rattle of a stricken industry.

PLY: I have always argued the OTC business needed reform but the idea that it could be axed overnight by a cabal of clueless politicians, creatively reinterpreting the sooth of a retired central banker via the dim oracle of a politically motivated former Goldmans staffer turned apparent anti-markets crusader, always struck me as not quite the right balance to achieve meaningful progress towards a better system. Mixed in with indecent haste and labyrinthine laws being passed, the often ‘made up on the hoof’ recipe has curdled in the kitchen. Giancarlo may be a former GFI broker but that only gives power to his arguments that he knows the matters of which he speaks. The broad Democratic thrust of 2008 that the OTC markets were a bilateral variation of the Soprano’s via voice box was simply not accurate. From there, reform has been on a steep and perhaps, ultimately, Sisyphean path.

NZX Plans To Launch Equity Options Trading On April 24

NZX plans to start offering equity options trading in three stocks as it seeks to develop the nation’s capital markets.

NZX press release here.

PLY: Long in the shadow of an unashamed monopolist across the Tasman (which after all owns the NZ F&O exchange), NZX has carved out not merely a survival niche but a profitable franchise and now they are adding equity options to the mix – good for them.


Shenzhen Stock Exchange SME Innovative Index Launched

Career Paths

Liz Milan, formerly head of Asian commodities for HKEx and of Asian business at LME, has joined Kingdom Futures to help expand its brokerage business.

Milan ran the HKEx’s Asian commodities business after it took over the LME in 2012. EI reported on September 2nd 2013 that Liz Milan stepped down after a run of more than eight years at the LME. She joined CME last year as a consultant within its metals division on a contract basis.

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
Nairobi Securities Exchange (NSE) 2014 Financial Results – Friday March 27, 2015
Aequitas Innovations Inc. is opening the Neo Exchange

New announcement

Euronext AGM – Wednesday 6 May 2015 (press release here)
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

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


SEC Adopts Rules To Facilitate Smaller Companies’ Access To Capital

SEC adopted final rules to facilitate smaller companies’ access to capital. The new rules provide investors with more investment choices.

The new rules update and expand Regulation A, an existing exemption from registration for smaller issuers of securities. The rules are mandated by Title IV of the Jumpstart Our Business Startups (JOBS) Act.

PLY: With a gestation period which surpassed that of an elephant by several generations, the SEC have finally made it with their proposals to enable crowdfunding on some fronts at least…

Other stories

Liquidnet: Sourcing Liquidity Takes Center Stage As Confidence In Equity Inflows Returns, According To Global Survey Of Buy Side Traders – Conflicts Of Interest Among The Top Concerns For Institutional Investors – Trading Venue Consolidation Seen As Inevitable; Confidence In Regulators Globally Remains Low

PLY: Interesting survey although it is interesting to see an apparent belief in imminent venue consolidation…coming in the wake of various buy-side related initiatives (Luminex, Plato to name but two) which have sprung up in recent months alone (arguably right in the middle of Liquidnet’s previously self-deemed quasi-sacrosanct territory too one might add), it has to be said this ‘wisdom of crowds’ thing may work over the long-term…then again confidence in regulators is low, so the survey makes credible points on most levels.

Statement At Open Meeting On Rule 15b9-1 and Reg A+, SEC Chair Mary Jo White, March 25, 2015
Statement At Open Meeting on Rule 15b9-1, SEC Commissioner Michael S. Piwowar, March 25, 2015
Statement At Open Meeting On Rule 15b9-1, SEC Commissioner Kara M. Stein, March 25, 2015
Enhancing Oversight Of Our Equities And Options Markets, SEC Commissioner Luis A. Aguilar, March 25, 2015
Helping Small Businesses And Protecting Investors, SEC Commissioner Luis A. Aguilar, March 25, 2015
Statement At Open Meeting On Rule 15b9-1, SEC Commissioner Daniel M. Gallagher, March 25, 2015
Statement At Open Meeting On Adoption of Regulation A Amendments, SEC Commissioner Michael S. Piwowar, March 25, 2015
Statement At Open Meeting on Reg A+ , SEC Commissioner Daniel M. Gallagher, March 25, 2015
Statement At Open Meeting on Reg A+ , SEC Commissioner Kara M. Stein, March 25, 2015

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