March 28 2014

elb2

Patrick Birley toasted his new position subconsciously in a live link-up with Poland last evening while LME went back to the drawing board with their warehouse reforms as RusAl won their court challenge. NASDAQ continues to say much more then NYSE (remember them? They used to be so vocal once upon a time, wonder what’s on their mind now?). Lawyers propose increasing lack of accountability for ASX listings as corporate governance standards come under attack…and all manner of interesting asides with gold aforethought throughout South East Asia.

Meanwhile, due to subscriber demand, I am working on a brief guide to investing in MCX for the perplexed while 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 3/27/14:) Neither Fit Nor Proper: The FTIL Fire Sale

More coming soon 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 – it also helps keeps the wheels running for the free Exchange Invest daily which we encourage you to scroll through forthwith!).

Public Markets

LME Shelves ‘Unfair’ Warehouse Rule After Rusal Wins Lawsuit
Kit Chellel – Bloomberg

LME postponed the implementation of a new warehousing rule after a U.K. judge said its decision was “unfair and unlawful” in a lawsuit brought by United Co. Rusal.

HKEx press release here.

Rusal Derails LME Plan To Cut Warehouse Queues
Eric Onstad & Veronica Brown – Reuters

Russian aluminum producer Rusal dealt a stunning setback to LME plans to cut logjams in warehouses, winning a court decision to halt the reform because consultations had been “unfair and unlawful”.

“The LME is disappointed with the outcome of the judicial review,” said the exchange, the world’s biggest marketplace for industrial metals, adding the new rule would not be implemented as scheduled on April 1.

It said it was taking legal advice on its options, including launching an appeal or restarting the consultation.

The LME oversees warehouses where companies that buy metals such as aluminum or copper on its futures market can take delivery of quality-assured supplies if needed.

PLY: A mess. I sympathise with LME but at the same time, clearly there are huge internal issues with the stakeholders. Garry Jones’ diplomatic skills will be tested to their zenith as he now tries to stitch together an acceptable deal as he walks the tight rope between users of different hues and the political regulatory complex who have been baying for blood over warehousing issues.

LME Ruling Creates ‘Perfect Storm’ For CME’s Aluminum Bid
Josephine Mason – Reuters

A British court ruling that has set back LME’s sweeping warehouse reforms has handed CME an unexpected windfall just weeks before it launches an audacious challenge to the world’s biggest aluminum contract.

TSX And TSX Venture Exchange Support SMEs In Canada With Launch Of New Program
TMX

Toronto SE (TSX) and TSX Venture Exchange (TSXV) launched TSX Ignite – a new initiative designed to support the growth and development of SMEs in Canada.

NASDAQ Stock Market Leads U.S. Exchanges For IPOs In Q1 2014
NASDAQ OMX

NASDAQ OMX announced that to date in the first quarter it welcomed 74 new listings, including 45 IPOs on the NASDAQ Stock Market, more than double the number of IPOs of any other U.S. exchange.

Combined proceeds raised by NASDAQ’s first quarter IPOs totaled approximately $2.6 billion, a 20 percent increase from first quarter figures in 2013. In addition, 98 percent of NASDAQ’s IPOs filed as “emerging growth companies,” the new class of issuer created under the JOBS Act.

Nasdaq Still Pursuing Alibaba
Katie Roof – Fox Business

Although it has been widely speculated that Chinese e-commerce giant Alibaba is leaning towards selecting NYSE, sources tell Fox Business that Alibaba has yet to make an exchange decision for its upcoming IPO.

Nasdaq CEO Bob Greifeld spoke with Maria Bartiromo on FOX Business Thursday, saying “of course we are” still pursuing Alibaba. “We have talked to them as you’d expect that we would. Certainly I think our value proposition is very strong,” he said.

China’s Securities Regulator Says Firms Can Choose Where To List
Reuters

China’s securities regulator said on Thursday that companies can issue an IPO on the Shanghai or Shenzhen stock exchange, as it tries to inject more flexibility into a system that has been prone to speculation and insider trading.

The statement, released on the China Securities Regulatory Commission’s official microblog account, said that where a company lists will no longer be determined by the number of shares it plan to issue.

U.S. HFT Ban Unlikely – Nasdaq
John McCrank – Reuters

U.S. regulators are unlikely to put rules in place that would harm high-frequency trading (HFT) as doing so would make trading more difficult and expensive for all investors, Robert Greifeld, CEO of Nasdaq OMX said on Thursday.

Last week, New York state’s Attorney General Eric Schneiderman said in a speech that U.S. stock exchanges and alternative trading platforms provide HFT firms with unfair technological advantages that give them early access to key data.

SEC’s Gallagher Seeks Reforms To Stop Activist Shareholder Proposals
Sarah N. Lynch – Reuters

U.S. corporate governance rules make it too easy for activist investors to get politically driven shareholder proposals onto public company ballots and should be overhauled, a top SEC official said Thursday.

“Activist investors and corporate gadflies have used these loose rules to hijack the shareholder proposal system,” said SEC Republican Commissioner Daniel Gallagher, in prepared remarks for a conference at Tulane University Law School in New Orleans.

ASX Needs A Non-Voting Ordinary Share Class To Avoid Becoming A Dinosaur Exchange
Russell Philip, Hedley Roost & James Addison – mondaq

ASX’s prohibition on issuing non-voting ordinary shares is out of touch with what is permissible on foreign exchanges and has the potential to place ASX-listed companies at a distinct competitive disadvantage. Allowing non-voting ordinary shares would provide investors with greater choice and issuers with greater capital raising flexibility.

PLY: The perfect recipe for improving an already opaque monopolistic marketplace run by the reactionary ASX: create non-voting shares so that companies can be listed which are utterly unaccountable to corporate governance. If other markets want to turn their back on shareholder accountability that is their choice but Australia is supposed to be not merely on the side of the individual (the ‘battler’) but it’s also supposed to provide a level playing field. Corporate lawyers in remote air conditioned office blocks need to get out and smell the coffee, this is an insane proposal which will lead to corporate scandal, catastrophe and investors turning their back on Australia. This week’s zinger of a moronic article (and for once, I note, not in the Opinion pages of the Financial Times, so at least that’s progress).

Is M&A The Next Road Ahead For MCX-SX?
Moneycontrol

There are reports floating around about that GOSE (Grand Old Stock Exchange) or BSE looking to acquire United SE. Though this report seems to be un-substantiated it still opens up the debate whether India is ready for M&A in Stock Exchanges.

SEBI recently came out with Exit Guidelines for regional stock exchanges. And ever since there have been few exits as well. But, there seems to be some lacunae in terms of regulations for M&A in Stock Exchanges.

PLY: Remarkably there are no clear directives on exchange merger in India – clearly SEBI won’t let that last for long, so expect some suitably prescriptive and narrowly considered rules to appear soon, perhaps via a committee of aloof, remote, grandees.

MCX Board To Meet On April 3; Consider Changes In MoA, AoA
The Economic Times

MCX today said the company’s board will meet on April 3, to consider changes in main object clause of memorandum of association (MoA) and articles of the association (AoA).

Industry Seeks Urgent Clarification On Frontloading
Paloma Migone – The Trade

Market participants are seeking answers from regulators on a frontloading obligation for OTC derivatives after it was recently triggered by the approval of the first central counterparty (CCP). In a joint letter to the European Securities and Markets Authority (ESMA) last week, ISDA and the FIA Europe called for “swift action” on guidance for the industry on frontloading.

Nasdaq OMX Clearing last week became the first clearing house to get the green light by regulators under EMIR, sparking a countdown to mandatory clearing of OTC derivative trades, now expected to take effect in 2015.

PLY: and of course with a single CCP enabled the clock ticks but there is no choice of clearing venue, which is yet another ill-considered side effect of this incompetently handled EU process (which we remind you is entirely separate from the incompetently handled US process aimed at similar reforms).

DB Launches Eurex Order By Order
Mark Kitchen – hedgeweek

Deutsche Börse Market Data + Services has launched Eurex Order by Order, a new information product that makes available the entire Eurex order book for benchmark futures for the first time.

DB press release here.

CFTC Staff Issues Extension Of Time-Limited No-Action Relief To LCH.Clearnet
MondoVisione

CFTC Division of Clearing and Risk (DCR) issued an extension of time-limited no-action relief to LCH.Clearnet Limited (LCH), a derivatives clearing organization (DCO) registered under Section 5b of the Commodity Exchange Act.

CFTC Staff Issues An Extension Of Time-Limited No-Action Relief To LCH & Nodal
MondoVisione

CFTC Division of Clearing and Risk (DCR) and Division of Market Oversight (DMO) issued an extension of time-limited no-action relief to LCH.Clearnet Limited (LCH), a derivatives clearing organization (DCO) registered under Section 5b of the Commodity Exchange Act (CEA), and Nodal Exchange LLC (Nodal), a designated contract market (DCM) under Section 5 of the CEA.

Private Markets

ED Files Chargesheet In Rs 28 Cr (USD 4.66 Mln) NMCE Fraud Case
Times of India

The enforcement directorate (ED) has filed a chargesheet against former chairman of National Multi-Commodity Exchange of India Ltd (NMCE), Kailash Gupta, and three of his family members in the Rs 28 crore (USD 4.66 mln) money laundering case. The agency has charged Gupta, his wife Anjana Gupta, daughter Poonam Gupta and son Amit Gupta with siphoning off Rs 28 crore (USD 4.66 mln) from NMCE.

Myanmar’s SEC Needs To Be Set Up Asap
Eleven Myanmar

Myanmar’s Securities Exchange Commission should be formed as soon as possible to prevent fraud or inappropriate selling of shares, JPX has urged the authorities. JPX and Daiwa Securities Group, are tasked with establishing the Myanmar’s first equities bourse since military regime took power in 1962. Daiwa Institute of Research Ltd. is helping with the construction of a data center to power the stock exchange.

Bitcoin Prices Plummet On Reports China To Close Exchange Bank Accounts (subscription)
Michael J. Casey – Wall Street Journal

Bitcoin prices tumbled Thursday on reports China’s central bank has ordered domestic banks to stop doing business with websites that trade in the digital currency.

As of late morning in New York, bitcoin was trading at $534.10, down 7.77% from its Wednesday close, according to an index of prices on three dollar-based exchanges compiled by Coindesk. This followed reports in Chinese media that the People’s Bank of China had sent a document to banks ordering that they close the accounts of 15 online bitcoin trading services by April 15.

PLY: China is in a tenuous position – it wants the Yuan to float and hence is worried about any obstructions – BTC is one of them. Thus not unsurprisingly they (like the Russians a few weeks back) are reducing BTC opportunities in order to underpin a sliding RMB.

Watch Bitcoin Become A Financial Battlefield In These Amazing Charts
Ryan Tate – Wired

When hackers posted 750 megabytes of data pilfered from the bankrupt bitcoin exchange Mt. Gox, many people seized on it as a kind of treasure map, hoping it would help locate the nearly half a billion dollars in digital currency that went missing from the exchange.

But not Kai Chang and Mary Becica: “Both love to geek out on data.”

PLY: Fascinating to see the ways they depict different market players in the BTC exchange market…

Bitcoin Battle: Warren Buffett vs. Marc Andreessen
Kashmir Hill – Forbes

Earlier this month, famed dealmaker Warren Buffett warned investors to stay away from Bitcoin, calling it “a mirage,” saying that, while it may be a better way of transmitting money, the “idea that it has some huge intrinsic value is just a joke.”

While interviewing Bitcoin investor Marc Andreessen at a CoinSummit “fireside chat” (minus the fire) Tuesday, I asked him to respond to Buffett. He supplied the missing flames.

“The historical track record of old white men crapping on new technology they don’t understand is at, I think, 100%,” said venture capitalist (and younger white man) Marc Andreessen. Fellow Andreessen Horowitz partner Balaji Srinivasan quipped that Bitcoin has outperformed Buffett’s “Berkshire Hathaway by a lot in the last year.”

PLY: To look at it another way, the massive derivatives trader of today Warren Buffett is the ‘derivatives are weapons of mass destruction’ sage of Omaha of years ago.

Money From The Gods: Iceland’s Auroracoin & A New Kind Of Independence
Patrick L Young – RT

PLY: We mentioned the Icelandic experiment in Auroracoin yesterday. Here is my latest RT.com Op-Edge column on the topic – a fascinating localisation experiment amidst the disruption to government depreciation units…

Dividend News

NASDAQ OMX declared a regular quarterly dividend of $0.15 per share on the company’s outstanding common stock, an increase of 15% from the prior $0.13 per share quarterly dividend. The dividend is payable on June 27, 2014, to shareowners of record at the close of business on June 13, 2014.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX is down 1%, FTIL slightly less as the CBI defends itself against a backlash following the Bhave ripple and some other minor but pertinent moves overnight…

FMC Permits NSEL To Repay E-Series Investors
Business Standard

Around 33,000 investors of NSEL will now be able to get the commodity back in physical form, being able to sell and encash the money with this permission. FMC has said the auditor agency, Choksy and Choksy, had found no defaults, and stocks of commodities matched those in demat form under the e-series contracts.

CBI Director Slams CB Bhave’s Supporters In MCX-SX Licence Case
business today

With top ministers, businessmen and former bureaucrats coming out strongly in support of former SEBI chairman C.B. Bhave after CBI recently registered a preliminary enquiry (PE) against him, ex-wholetime Sebi director K.M. Abraham and others for alleged irregularities in granting licence to MCX-SX in 2008, the investigative agency broke its silence.

Since the general sentiment was to the effect that a probe against such ‘upright’ public officers would further vitiate decision making, CBI director Ranjit Sinha said: “Thousands of crores of investor money have been swindled by MCX and it was incumbent on the agency to look at the very procedure of registration of MCX.”
Continuing his tirade, Sinha said the time has come for people to understand that the agency is completely independent and conducts its probes transparently.

PLY: Slightly pedantic point, a slip of the tongue accuses MCX itself when clearly NSEL was at the epicentre of the fraud.

Thanks To Our Measures, Investor Confidence Is Reviving: FMC Chief
Suresh P Iyengar – The Hindu Business Line

Investor confidence is reviving, eight months after it was rattled by the scam in the unregulated NSEL. FMC’s clean-up operation has resulted in many heads rolling at MCX, a group company of NSEL.

Products

Japan Buyers Rush To Snap Up Gold As Tax Rise Looms (subscription)
Ben McLannahan – Financial Times

A landmark increase in Japan’s sales tax has led to a rush for small gold bars as retail investors pile into the precious metal to avoid next week’s rate rise with stores reporting sales of Ingots up by as much as 500% this month ahead of the 3% rise in consumption tax from 5-8% on April 1st.

Meanwhile in the region:

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

Cargill Withdraws From Coal, Europe Power Markets
Andy Hoffman, Rachel Morison & Shruti Date Singh – Bloomberg

Cargill, the largest closely held U.S. company, will stop trading in European power and natural gas and global coal markets after oversupply and slowing demand dragged down prices.

MTS Completes First European Bond Trade For US Clients (subscription)
Timothy Bourgaize Murray – waters technology

The dealer-to-client European centric electronic bond trading venue, has commenced trading in the US on MTS BondVision as the rollout to exploit the LSE acquisition of US-based Bonds.com.

Atlas ATS First to Announce Options On Bitcoin – The Only FIX Protocol Digital Currency Exchange Sophisticates With ATLAS 2.0 On The Perseus Network
MondoVisione

Atlas ATS, the only FIX protocol Wall Street grade exchange platform for digital currencies announced today a new platform, Atlas 2.0, for trading in alt coins, options for digital currency and an array of advanced native order types for FIX API clients. Atlas 2.0 has been launched in Hong Kong and North America where Atlas ATS has established digital currency exchanges. The new platform provides trading for major alternative digital currencies, derivative products, a new multi-signature transaction wallet and a larger selection of advanced order types for clients using the FIX interface. Atlas 2.0 has been deployed on a global, secure, high precision private network exclusively managed under the Digital Currency Initiative (dci), a division of Perseus Telecom.

PLY: An interesting development and good luck to Atlas! Note that AlphaPoint are also close to having full FIX on their platform too (it was scoped to include the interface so it ought to be seamless).

Indexes

SSE Considering Launch Of Carbon Index
Reuters

Shanghai SE has asked China’s securities regulator to make it mandatory for listed companies to report their greenhouse gas emissions to pave the way for new carbon-related financial products. The exchange, wants to set up a new benchmark index from the 1000 companies it lists, based on how much carbon each company emits per yuan it makes.

Career Paths

PLY: The latest of our monthly start-up club (Mission ToRuN!) meetings in Torun, Poland last evening, enjoyed a live link-up with headline speaker Patrick Birley, CEO of Isle of Wight specialist brewer Goddards. During his presentation, news leaked out in London that Patrick is returning to the financial markets saddle… There was a time when it appeared as if Patrick had done the C-suite rounds of all venues he wished to frequent and hence was serious in his desire to devote his time to that noble profession of craft brewing.

Patrick will be CEO of the ICAP subsidiary exchange ISDX (formerly Plus Markets). The former SAFEX CEO who has held senior positions at the likes of, LSE and LCH.Clearnet inherits a fascinating challenge: how to invigorate the somewhat becalmed ISDX in a rich world of opportunity. I wish him every success, it promises to be a very exciting journey.

MetalBulletin notes that CME has hired Liz Milan, former MD of LME Asia, as a consultant within its metals division on a contract basis. 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 week and will be based in Singapore, reporting to Harriet Hunnable, CME metals products MD.

PLY: Hmmm, straight to CME from LME, does this count as a swap? Was a TR involved?

Financial Calendar

Today

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

Latest announcements

CBOE Q1 2014 financial results – Tuesday, May 6, 2014

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

Share Notes

Interactive Brokers Group SVP Milan Galik sold 1,800 shares Tuesday, March 25th at an average price of $21.92 (bargain $39,456.00). He now owns 794,117 shares Mr. Galik’s regular sales are chronicled on this specific page.

Analyst Notes

LSE “Outperform” Rating Restated By RBC Capital

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

NASDAQ OMX Shares Thoughts On European Crowdfunding
Crowdfund Insider

In sifting through the various public comments on the European crowdfunding consultation that was just released it was interesting to see an unsigned comment letter from NASDAQ OMX.

PLY: The mature, measured pro market response of the NASDAQ OMX team in Brussels is in keeping with the zeitgeist of a greater equity and market culture which is essential if the EU is not to continue its atrophy of commerce amidst ongoing horrific recession and debt crisis in much of the Eurozone.

Other stories

CFTC Staff To Host Public Roundtable To Discuss Dodd-Frank End-User Issues
MondoVisione

CFTC announced that CFTC staff will hold a public roundtable on April 3, 2014 to discuss issues concerning end-users and the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank).

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