March 27 2014

elb2

The bids are in with CME & DB1 amongst the bidders for FTIL’s 24% of MCX. Interesting times. More swaps ramifications as banks complain ahead of the ISDA conference. Helicopter money in Iceland alongside a vast Nordic pipeline of IPOs, NASDAQ OMX clearly hoping to replicate London’s +91% on money raising… London in key Yuan development, oil markets moving east with CME bolstering volume while physical gold trade is growing throughout S-E Asia, SGX the latest, one more for the freeport revolution? Happy scrolling!

In Premium overnight most people are still digesting thoughts on CME B reforms while the FTIL sell-off is developing (we will update once EI goes to pixel) with more to follow on boards and suchlike. NYFIX raised a few questions in Ei daily so the latest post is a short history lesson. More new material later today. Meanwhile, thanks to our new subscribers (interesting interim statistic: exemplifying the fact that the world is moving east – Asia is currently vying with North America as our biggest subscriber zone…). The latest five posts on Premium are::

New: Reflections On NYFIX: An Offer You Can’t Refuse?

CME Board: B Grade Reforms

The FTIL Sell-Off Results Table

China Liberalises

(Updated 3/26/14 – more later:) Neither Fit Nor Proper: The FTIL Fire Sale

More coming soon 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).

(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

Global, Local Bidders Bet On FTIL’s Purchase In MCX
Ram Sahgal & Rajesh Mascarenhas – The Economic Times

CME, Deutsche Borse, R-ADA Group, BSE and Kotak have lined up to purchase FTIL’s stake in commodity bourse MCX.

PLY: So we hear 10 bidders of which four are public (and frankly wearing my DV Advisors hat I am surprised that neither CME nor DB1 have approached us for our advice on this issue…anyway, an intriguing line-up of buyers ahead of what looks to be a fairly good valuation for MCX.

FTIL, ever the thinking man’s spiv when it comes to wheeler dealing, is hoping to get close to the MCX IPO price of Rp 1,032 compared to today’s price circa 487 Rp. The stock has been as low as 238 Rp post NSEL incdentally! I think the one flaw in FTIL’s approach is that the good old days when you could rely on NYSE Euronext to buy anything at an outlandish price have been squashed by the arrival of ICE management. However 10 bidders and the Macchiavelian guile of the quasi-irrepressibly Jignesh Shah ought to offer a future study in game theory for MBAs students everywhere…

Sale Of FTIL’s Stake In Bourses To Yield Rs 70 Cr (USD 11.6 Mln)
Business Standard

PLY: Update on the minor, less liquid stakes, I will compare this to the Neither Fit Nor Proper: The FTIL Fire Sale Premium document once we have put the daily to bed today.

China Agrees To London Renminbi Clearing Bank (subscription)
Philip Stafford & Delphine Strauss – Financial Times

UK has stepped up its efforts to attract Chinese investment by agreeing with Beijing to the creation of a renminbi clearing bank in London.

The Bank of England and the People’s Bank of China (PBoC) are to sign an agreement on renminbi clearing and settlement in the UK capital on Monday. A designated clearing bank will be named “soon”, the UK Treasury said on Wednesday.

PLY: Very significant news indeed. China is a mega-story and the opportunity is off the scale for all parties concerned. This is a good move for London which further enforces its reputation as the single truly global financial mega-centre.

LSE Sees 91 % Leap In Capital Raised
Reuters

LSE said on Thursday that money raised on its markets soared by 91 percent in the 11 months to the end of February and that there was a good pipeline ahead. LSEG Pre-Close Period Update For The Eleven Months Ended 28 February 2014 – press release here.

Nasdaq Sees Strong Pipeline For Nordic IPOs As Deals Get Larger
Omar R. Valdimarsson – Businessweek

“The pipeline is really, really strong” when it comes to potential IPOs in the Nordics and Baltics, Hans-Ole Jochumsen, Nasdaq’s head of global market services, said in an interview in Reykjavik yesterday. “And what we see this year is that the size of the IPOs are bigger.”

PLY: Hans-Ole was in Reykjavik as the citizen financiers of Iceland were seeing genuine helicopter money (of the virtual kind): AuroraCoin being dropped from the sky. More on this to follow…

Taiwan To Relax Rules On Intra-Day Short Selling Of Stocks
Focus Taiwan

Tseng Ming-chung, chairman of Taiwan’s Financial Supervisory Commission (FSC), said Wednesday that trading rules will be further relaxed to allow short selling of stocks on the same day on Taiwan’s markets. The new measure, which follows the introduction of day trading in early January, is expected to take effect at the end of June, Tseng said at a news conference.

Roundtable: What OTC Reform Means For End-Users (subscription)
Duncan Wood – Risk

Swaps reforms and new prudential rules for banks could hurt end-users, by fragmenting the market, driving up costs and reducing liquidity – that’s the view of end-users themselves, polled by ISDA on the eve of its 29th annual meeting, and of three ISDA board members, who joined Risk for a video roundtable. The participants’ hope is that current stresses are a passing phase.

PLY: I worry about the definition of “end user” here as it seems the only people speaking on the panel are bankers. True we are talking about swaps but even so… The conclusions are pretty obvious, regulatory confusion, scepticism about the benefits of the reform (well if they were all bank respondents, not exactly shock news) etc.

BAML Seeks To Boost European Block Trading (subscription)
Anish Puaar – Financial News

Bank of America Merrill Lynch is in discussions with clients about launching a new European anonymous block trading service, as the industry grapples with new rules around so-called dark pools. The new dark pool service, called Instinct Natural, is already available to US clients, and uses a method of trading that seeks to encourage larger trades. The bank is now gauging client interest for launching a similar service in Europe. The order type lets institutional investors leave a large-sized order resting in an internal BAML network in the hope of finding a match, while simultaneously trading the same order via smaller trades, using algorithms and sales traders.

If a match for the block order is found through BAML’s sales trading, electronic, exchange-traded fund and equity derivatives desks, the smaller trades are cancelled and the block trade is automatically completed.

PLY: Another interesting development as the sell side attempts to reinvigorate their equity brokerage franchises by focussing on the block trade market to compete more with ITG and Liquidnet et al. However, is the multilateral digital world really best served by another mono-bank internalisation engine?

Danish Central Bank Signals Opposition To Proprietary Trade Ban
Peter Levring – Businessweek

The ban on proprietary trading proposed by EU officials needs revision since it will add to systemic risk by cutting the amount of liquid assets that banks can hold, Denmark’s central bank said.

PLY: Split retail and investment banking, reduce bank leverage by all means (please!) but to simply blanket ban prop trading will end up with everybody claiming they were just making a market and ‘didn’t inhale’ to the prop book…

Ex-Sentinel CEO Eric Bloom Guilty In Fraud Case
Kim Janssen – Chicago Sun-Times

A federal jury took less than three hours on Tuesday to decide Eric Bloom was guilty of 19 counts of fraud connected to the $500 million bankruptcy of Sentinel Management Group.

PLY: A big fine and a long jail spell is looming for Mr Bloom whose acts tend towards the egregious end of the scale (although actually as he leveraged customer money and punted it badly, one has to wonder why they didn’t lock up the Principals of Fannie/Freddie or multiple banks on the same basis? …but I digress). It doesn’t help the Sentinel clients but hopefully the sentence (expected to be a decade or two) will help deter future fraudsters.

Private Markets

US OTC Trading Tightens Reporting, Other Standards
Reuters

OTC Markets, the operator of three U.S. OTC equity markets, is rolling out tighter reporting standards and eligibility requirements for its venture-stage market to crack down on stock scams and bolster transparency.

PLY: A more transparent shade of pink could soon be upon us.

Bitcoin Could Be An ‘Everyday’ Item 20 Years From Now
Peter Foster – Daily Telegraph

PLY: Interview with Jeremy Allaire, the founder of Circle.com while announcing $17m (£10m) in second-round funding for the Boston-based start-up.

Irish Banks ‘Refuse To Let Bitcoin Firm Open Account’
Irish Independent

Irish banks may be taking a hard line on firms operating in the virtual currency Bitcoin, according to a prominent Bitcoin company that says it has been refused a bank account here. Bitvendo, which provides Bitcoin ATMs, said that representatives of both Bank of Ireland and AIB have said that it may not open bank accounts at the bank because of the nature of their business.

PLY: Both banks fall heavily under the suzerainty of the Irish Central Bank following the aftermath of the Irish property crash. This is the thin end of a much broader trading wedge. Ask those who export or deal with “faraway places of which we know little” and bankers are fabulously oblique, narrow-minded, ignorant and risk averse. The west’s economy is being undone by rubbish banks refusing to permit trade with many foreign countries, particularly in the UK and Ireland which is hugely undermining the future of world trade, let alone the economic impact of the west being left behind by eastern growth.

Bitcoin Exchange Leaders Look To Rebuild Trust In Aftermath Of Mt. Gox
Daniel Cawrey – CoinDesk

The spectacular failure of Tokyo-based bitcoin exchange Mt. Gox was the inflection point for a discussion on bitcoin exchanges yesterday at CoinSummit San Francisco.

CoinDesk Launches Chinese Yuan Bitcoin Price Index
CoinDesk

CoinDesk has created a new Bitcoin Price Index (BPI) based on the price and volume of bitcoins exchanged for Chinese yuan (CNY).

The new Chinese yuan BPI is separate from the existing and widely referenced CoinDesk USD index, which CoinDesk will continue to maintain.

If Bitcoin Isn’t A Currency, Can You Use It Like One?
Paul Vigna – Wall Street Journal

IRS’s decision to treat bitcoin like property rather than currency clears up a few questions, and certainly will help some investors who need to finish their taxes by the April 15 deadline. But it leaves other questions up in the air, none bigger than than this: If bitcoin is not a currency, can it be used as one?

PLY: Essentially government agencies are leading us to a path where money may be viewed as a good thing but the word “currency” or “legal tender” may become associated with old fashioned government statism and inaccurate information…

Icelanders Can Now Each Claim $400 Worth Of Auroracoin, The Country’s New Digital Currency
Adrianne Jeffries – The Verge

On March 25th in Iceland, digital currency fell from the sky. The developer behind Auroracoin, a digital currency designed exclusively for Iceland, has made $125 million worth of coins redeemable by Iceland’s 330,000-or so citizens. That’s about 31.8 Auroracoins, or roughly $380 per person, according to the price established by markets for digital currencies before the free distribution (the value has since dropped).

Icelanders can redeem the coins by logging into Facebook through a gateway and providing their Icelandic ID number, or by sending an SMS which can be matched with their national ID. So far more than 1 percent of coins have been claimed, according to the Auroracoin Twitter account, but the site itself is unavailable, perhaps due to high traffic.

PLY: My next RT.com Op-Edge column will deal with this topic, probably as soon as tomorrow.

Dividend News

HKEx: Forfeiture Of Unclaimed Final Dividend For 2007
MondoVisione

Pursuant to the Articles of Association of HKEx, the unclaimed final dividend for 2007 will be forfeited and will revert to HKEx on 9 May 2014.

Special Section: FTI, NSEL, India at the Crossroads

PLY: FTIL is up 2% while MCX is up 1% as the market digests the news that there are multiple bidders for MCX.

Technology

CFTC Unable To Perform “Basic” Analysis Of Swap Data (subscription)
James Rundle – waters technology

Most of us struggle to keep our bills and bank statements in any semblance of order, but for US regulators, trying to sift through millions of swap transaction reports is a task of Herculean proportions. A task, one senior official says, that CFTC is simply unable to accomplish, as a result of the quality of the data it receives and its woefully inadequate technology.

PLY: I think to be fair that is the wrong way around: regulators don’t have the technology nor the skills sets to keep up with the big data revolution via swaps et al they have unleashed. That’s a billion gigabyte bump in the carpet currently obscuring the Commissioners’ views of their personal bathrooms.

O’Malia Outlines How CFTC Can Tackle Its Data Difficulties (subscription)
Nicholas Hamilton – waters technology

CFTC’s Scott O’Malia says regulator must improve swaps data quality, and develop automated surveillance and risk analytics tools.

CFTC must improve swaps data quality and develop automated surveillance and risk analytics tools, if it is to tackle ongoing challenges it faces understanding data reported by market participants, according to Scott O’Malia, a commissioner at the regulatory body.

The full text of O’Malia’s speech can be found here. PLY: Er, I hate to be repetitive but any sign of the cash to pay for this solution? Interesting to note Commissioner O’Malia was speaking at a SWIFT forum – akin to addressing a dinosaur’s forum about the risks of meteorites.

Products

SGX Said To Plan Starting Physical Gold Trade
Chanyaporn Chanjaroen – Businessweek

SGX is considering starting physical gold trading including bullion deliveries into and out of the city state, joining South Korea and China in offering physical bullion trading.

EI reported on March 24th that KRX started offering physical gold trades, as the government seeks to curb as much as $3 billion of black-market transactions. Also EI reported on March 17th that Shanghai Gold Exchange is launching a gold trading platform in the city’s free-trade zone open to foreign investors.

HKEx To Explore Cross-Listing Of Chinese Commodities (subscription)
Joe Parsons – FOW Intelligence

HKEx CEO Charles Li says the group is looking to expand its commodities offerings through cross-listing products with exchanges from mainland China.

CME Sees Push Into Europe, Asia Energy Markets As Gaining Momentum
Geoff King – Platts

Recent strength in the NYMEX Brent and DME Oman futures contracts volumes show that efforts by CME to crack the European and Asian markets are starting to reap rewards. NYMEX Light Sweet Crude Oil (WTI) futures contract, the world’s most actively traded energy product.

“In January and February 2014 CME Group’s daily share of the Brent futures market was 8-10%,” said CME energy products executive director Alan Bannister. “Both our Brent and Oman contracts are growing rapidly.”

Despite this growth, ICE remains the dominant exchange for the global benchmark Brent contract, averaging more than 500,000 contracts/day in February.

PLY: Before we get obsessed about a CME-ICE story, surely the key factor here is that (fracking or not) the primary long-term factor is the shift in energy trading (qv gold above) as the world moves east. For those in north America who only watch CNN/Fox, the east is the big place that starts just after Germany and includes all those bits currently in the news pertaining to Russia before we reach the key powerhouse China and multiple very exciting points beyond…). Everybody needs a chunk of that action, don’t say I didn’t warn you, my dear exchanges…

Indexes

Launch Of The Solactive MLP Bond Index – First Index To Offer Exposure To Master Limited Partnerships Via Their Bonds
MondoVisione

Solactive AG has launched the Solactive MLP Bond Index, first in the market to give access to this type of US companies which has been raising attention recently, due to their interesting payout potential combined with relative safety compared to other corners of the energy world.

Career Paths

FINMA BoD has unanimously appointed Mark Branson to the post of CEO of the Swiss Financial Market Supervisory Authority FINMA. His appointment has been approved today by the Federal Council. Mark Branson, who has been acting as interim CEO since 1 February 2014, will take up the post as of 1 April 2014. There will also be changes in FINMA’s organisation and the composition of its Executive Board.

Romanian PM Victor Ponta proposed Misu Negritoiu to be appointed as President of the Romanian FSA. Misu Negritoiu is currently Chairman of the BoD ING Bank Romania.

EI reported on March 5th that the president of Romania’s ASF, Dan Radu Rusanu, was sent to jail for 30 days in a corruption case. and Daniel Daianu, a vice-president of ASF, took over as interim president.

PLY: Good luck to Mr Negritoiu. Interesting that an insider was not promoted to the top spot.

Financial Calendar

Today

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

Friday

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 CEO Edward Tilly unloaded 6,250 shares Friday, March 21st at an average price of $56.81 (bargain $355,062.50). He now owns 162,553 shares.

ICE Director Judith A. Sprieser sold 1,500 shares Tuesday, March 25th at an average price of $204.22 (bargain $306,330.00). She now owns 4,875 shares.

All ICE Insider stock transactions are chronicled here.

Analyst Notes

Goldman Sachs Upped Their Price Objective On Betfair From GBX 1,260 to GBX 1,290 – “Buy” Rating
Nomura Hoisted Their Target Price On Charles Schwab From $24.00 To $26.00

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.

Crowdfunding

Europe Turns To Crowdfunding But Still Obstacles To Surmount (subscription)
Christopher Lawton & Tom Fairless – Wall Street Journal

When Javier Latorre wanted to invest outside Spain, he turned to a crowdfunding platform based in Sweden. A month later, Mr. Latorre had invested 4,000 Swedish krona ($625) in four shares of Eggs Inc., a new chain of health-oriented fast-food restaurants.

“I am looking for investments in other countries to split my risk, and these guys know what they are doing,” the 36-year old Spanish entrepreneur said of his first investment in a startup outside his home country.

Mr. Latorre’s relatively modest outlay represents a new avenue of financing for small and midsize European companies that bypasses the region’s banking sector and offers a tantalizing glimpse of a single European market for investment that would integrate the economies of the EU.

Other stories

Opening Statement At SEC Roundtable On Cybersecurity By SEC Chair Mary Jo White
MondoVisione

PLY: “This is a global threat” Chairman White noted, in her introductory script…does that mean we can expect the SEC to seek supranational jurisdiction?

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