March 30 2015

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ECB legal defeat turns to agreement to co-operation with UK CCPs. DB1 loading up on BSE new ventures. KRX looking as far west as MENA while Myanmar, Philippines and Vietnam all feature alongside Asian staples Hong Kong and China…

Meanwhile, cryptocurrency remains a fascination for me as it has done all the way back to my original book “Capital Market Revolution!” in 1999. BITT in the Caribbean has announced funding today while I have been interviewed by Niall Maye of the Coin Telegraph.

Our Premium Briefs keeping you abreast of various industry issues are updated daily when news arises. All topics covered can be found on our dedicated Briefs page via Exchange Invest Premium. The latest include:

FXCM Sales Brief NEW!
BGC / GFI: Post Merger Disposals
NSEL Scandal Brief – Part 15 NEW!
Rise of Africa – Part 1Part 2Part 3Part 4Part 5
The Bond Platforms Rush – Part 1Part 2
ICE – NYSE Euronext Deal – Part 1Part 2Part 3

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Public Markets

Oslo Bors 2014 Financial Results
MondoVisione

Operating revenue – external NOK 442 544 000 (USD 55.4 mln), down 14% from NOK 515 571 000
Operating revenue – internal NOK 6 471 000 (USD 809k), up 8.6% from 5 956 000
Operating profit NOK 229 607 000 (USD 28.7 mln), up 19.4% from NOK 192 207 000

PLY: The bottom line grows well in the European bourse many forget as it is outside the EU.

DB1 To Invest In India Stock, Commodity Markets
Will Hadfield – Bloomberg

DB1 will acquire as much as 5% in a planned commodities exchange and take a holding in a new stock-trading venue based in Gujarat state.

PLY: DB1 bought the maximum permitted 5% of BSE in 2007 and in 2013 licensed technology to enable BSE to move its markets to the N7 platform as part of the ongoing long-term programme which has dragged BSE from the sleepy hollow in Indian markets to something much more contemporary.

QV our Premium post: The GIFT Horse?

ECB, BOE To Guard Clearinghouse Stability After EU Ruling
Simon Kennedy – Bloomberg
European Central Bank And Bank Of England Announce Measures To Enhance Financial Stability In Relation To Centrally Cleared Markets In The EU
MondoVisione
UK Government To Withdraw Remaining Legal Challenges To ECB Location Policy
MondoVisione

Following the March 4 ruling of the EU General Court that the ECB lacked the power to dictate where the clearing of such trades can take place, BoE and ECB agreed to exchange more information regarding U.K.-based counterparties. They also broadened the use of a currency swap line to ensure liquidity can be provided more easily if needed.

The pledges, along with the ECB’s decision not to appeal the EU court’s ruling, were enough for the U.K. government to withdraw other legal challenges to the ECB’s location policy.

PLY: A total victory for the UK government has been delivered and it is a liberating one for free markets. The ECB blotted its copybook with a ridiculous protectionist botch up which armed the cannons of those who criticize lofty Euro-institutions. Unlike their wildly expensive Frankfurt office block, the ECB has cut its losses and capitulated. Rumours the good folks of the ECB are now rushing to the 3d printers to recreate an aura of open market advocacy could not be confirmed as we raced to pixel.

Philippine Bourses Merger Set In May
Jenniffer B. Austria – Manila Standard Today

Bankers Association of the Philippines president Lorenzo Tan noted the integration of the Philippine SE & Philippine Dealing System Holdings is being pushed towards a goal of completing the process circa the first week of May.

PLY: Given the litany of delays in this process (QV Read our Premium: PSE – PDEx Merger Brief) readers without a death wish are not advised to hold their breath.

HKEx Closing-Auction Plan Gets Mixed Reaction From Brokers, Fund Managers (subscription)
Enoch Yiu – South China Morning Post

Local brokers have voiced concern over the possible relaunch of the controversial stock exchange closing-auction, fearing it could be open to market manipulation, though the idea has won support from international institutional investors.

HKEx is consulting the market until April 10 before deciding whether to reinstate the ill-fated closing-auction session that it shut down after only 10 months of operation in 2009 following charges of market manipulation.

Hong Kong Must Make Most Of Russian Exchange’s Dual-Listing Proposal (subscription)
Peter Guy – South China Morning Post

Officials from MOEX recently presented a proposal to establish dual-listing capability for Russian companies in Hong Kong. HKEx has not confirmed or denied the meeting, but if dual listings were eventually allowed, it would represent a bold opportunity.

PLY: MOEX retains an acute management focus and HKEx would indeed be well-advised to study any such proposal very closely.

Morgan Stanley Hops On China ‘Through-Train’
Kenneth Rapoza – Forbes

On Sunday, a Morgan Stanley executive said the company was hiring dozens of new equity analysts to help sell China’s A-shares market since it opened to foreigners this year.

Read our Premium briefs: HKEx – SSE – Stock Connect Part 1,Part 2,Part 3

HFT Worries Fading, Convergex Finds
John Detrixhe & Annabelle Ju – Bloomberg

Convergex recently repeated a survey it conducted last year in the aftermath of Michael Lewis’s “Flash Boys.” This time, the proportion of financial professionals who said the market isn’t fair to all was 57%, a drop from 70% almost a year ago. The belief that high-frequency trading is harmful fell to 36% from 51%.

PLY: A traditional cyclical issue – the hype over Flash Boys last year meant there was bound to be a huge upswing in HFT concern. However, 57% reckoning the “market isn’t fair” hardly suggests HFT perceptions are front running their way back to a calm, contented status quo. Over a third of respondents making the blanket assertion that HFT is harmful demonstrates how the pro-HFT lobby is currently only making baby steps towards coherently arguing their corner.

CFTC Grants Order To ICE Clear Europe Permitting Portfolio Margining Of Futures & Foreign Futures Contracts By Non-Clearing Member FCMs
CFTC

Eurex Clearing Publishes Updated Compliance Report With CPSS-IOSCO Principles For Financial Market Infrastructures – External Review By KPMG Confirms Full Compliance – Testament To Highest Operating & Risk Management Standards
MondoVisione

Merger That Came To Aid Of Knight Capital Struggles (subscription)
Bradley Hope – Wall Street Journal

Every Monday morning for the past 20 months, Daniel Coleman has stepped off his private jet from Alabama and straight into a storm. The southerner is chief executive of KCG Holdings, the New Jersey-based company that was formed after a computer-trading glitch forced financial-services firm Knight Capital Group to merge with Getco.

PLY: Halving the headcount has been but one major step on the road to creating a merged entity where clearly there are those who still do not feel part of a single holistic unit.

Private Markets

Aequitas Neo Stock Exchange Launched In Toronto
CBC
Upstart Canadian Exchange Aims For Market Share Of 20% In 4 To 5 Years (subscription)
Rita Trichur – Wall Street Journal

The ceremonial first trade on Canada’s newest stock exchange was made on Friday, as the Aequitas Neo Exchange launched from Toronto’s Design Exchange. The focus of the new exchange is fairness — it aims to eliminate predatory HFT practices, in which technology allows some traders to buy securities faster than others.

“At Aequitas we are on a journey to redefine the role of the stock exchange,” said the exchange’s President & CEO Jos Schmitt, at the launch. “We are making the pie bigger for those that are seeking new opportunities.”

PLY: Clearly that “predatory HFT” falls into the 57% market unfairness zone mentioned previously in the Convergex report.

Vietnam To Merge Stock Exchanges For Increasing Market Competitiveness
Nguyen Thi Bich Ngoc – DealStreetAsia

After executing a spate of M&A in the banking and real estate sectors, Vietnam’s government is now considering the merger of its two independent stock exchanges.

The consolidation of the Hanoi SE (HNX) and the Ho Chi Minh City SE (HOSE), was proposed by the Vietnam Association of Securities Business (VASB). The proposal has been put into the state’s master plan and will see the restructuring of the 15 year old local stock market, after which the merged exchange will be equitised.

Previous reports on the topic – earlier this month.

October 2015 Debut Of Yangon SE Signals Greater Asean Integration
The Establishment Post

Myanmar’s Deputy Finance Minister, Maung Thein, has announced that the OTC Myanmar Securities Exchange Centre (MSEC) will be replaced with the Yangon SE in October 2015. So far, ten companies are expected to meet the criteria for initial listing on the exchange.

The Yangon Stock Exchange Joint Venture Co. is being developed in partnership with two Japanese firms, the Daiwa Institute of Research Ltd, which holds a 30.25% stake, and JPX, with an 18.75% stake.

Read our Premium: ASEAN Exchanges Project Brief.

Citadel Securities Said To Close Apogee Dark Pool
Alexandra Stevenson – NY Times

Citadel Securities is preparing to close its Apogee dark pool as it focuses on another platform, Citadel Connect. Run out of New York, Apogee accounts for less than 1% of Citadel Securities’ business. Trading volumes are not publicly available and a firm closing date has not yet been set.

Zimbabwe Completes Demutualization Of Its Stock Exchange
Spy Ghana

Zimbabwe has demutualized its stock exchange which had operated as a mutual society for more than five decades and plans to list the public company on the local bourse.

Caribbean Startup Bitt Secures Seed Round USD$1.5 Million In Capital Led By Avatar Capital, To Bring Digital Currency Financial Services To Emerging Markets
Bitt

PLY: Another good deal for AlphaPoint who are the leading vendor to cryptocurrency markets currently while the BITT market itself secures valuable funding to make the Caribbean exchange a reality.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX up 1%, FTIL up 3%, as, “Shock! Horror! Probe!” prosecutions have been launched today:

Enforcement Directorate Starts Prosecution In NSEL
dna

The Enforcement Directorate (ED) is launching prosecution today against 60 former management and key executives of NSEL along with 13 defaulters, under the Prevention of Money Laundering Act, (PMLA) in connection with the scam at the exchange.

According to sources, the key accused who will face prosecution are Anjani Sinha, former CEO, NSEL, Amit Mukherjee, former, VP, NSEL, Jai Bahukhandi, former associate VP, warehouse development, NSEL, Shankarlal Guru, former chairman, NSEL, among others.

Chargesheet Against Two For Posts Against Judge In NSEL Case
Ahmed Ali – Times of India

The city crime branch last week filed a chargesheet against two NSEL investors for pasting and uploading offensive remarks against a Bombay high court judge who had granted bail to the firm’s promoter Jignesh Shah.

PLY: The deeply frustrated NSEL investor lobby can be rough and ready in their remarks when they ought to be more diplomatic on occasion but at the same time there is evident financial pain accruing to them in the face of an overall incoherent resolution effort by the government blob. A judge focussing on slights to his personal reputation tends only to exacerbate the understandable feeling amongst investors that the establishment blob is protecting the defendants.

NSEL: A Merger FTIL Fears
The Economic Times

FTIL says majority of its shareholders are against the government’s proposal to merge NSEL with it.

PLY: A dimly destructive attack on the corporate code remains a likely outcome of the Indian judicial/regulatory nexus’ complete incapacity to deal with the problem using the conventional legal channels.

QV our Premium: NSEL-FTIL Merger Brief and NSEL Scandal Brief – Part 15 

Technology

Technology Drives BSE’s Growing Market Share In FX Derivatives
Adil Siddiqui – Forex Magnates

Since launching FX derivatives in November 2013, BSE has managed to defy the odds. Despite being a latecomer it has turned a four-horse race into a battle between two main participants, the BSE & NSE.

KRX Eyeing Middle East Expansion
Gulf Times

KRX said it has plans to expand further into Southeast Asia and Central Asia and eventually to MENA with its own trading platform and through buying stakes of frontier market stock exchanges.

According to KRX Chairman & CEO Choi Kyung-soo, the exchange wants to “accelerate its growth” by investing into smaller stock exchanges and deliver its technological expertise in electronic trading platforms. KRX is already a stakeholder in the Lao Securities Exchange (49%) and the Cambodia Securities Exchange (45%), seeking to build up capital markets in both countries.

Previous discussions on the topic – earlier this month.

PLY: Fascinating ambitions from the Seoul / Busan bourse. QV our Premium: KRX IPO Brief.

Products

MOEX: Agency Cross Trading To Be Permitted On The Equity & Bond Market
MondoVisione

Beginning 27 April 2015, clients of member firms will be offered agency cross trading option through the CCP. Agency cross will be available for the central order book and non-anonymous trading on the Equity & Bond Market.

Qatar’s Bourse Says Plans Rights Issue Trading
Reuters

Qatar’s stock exchange plans to allow investors to trade rights to share issues, which would let them profit from capital increases even without subscribing to them.

Announcement here.

PEGAS: Successful Launch Of NBP Gas Spot & Futures & PSV Gas Future Contracts
MondoVisione

Career Paths

Russell Investments hired Michele Caronti in the newly created position of director, head of institutional, to lead its institutional business in Italy. Caronti will report to Thomas Schneider, country head for Italy.

Tim Howell: The Accountant Who Became A Collateral Engineer (subscription)
James Rundle – Financial News

In his first week as the CEO of settlement house Euroclear, Tim Howell spoke to around 100 of his new staff. All of them were deeply involved in a multi-year, multi-hundred-million pound technology project, and he asked them all one question: Is this going to work?

Financial Calendar

This week

ICE $0.65 Q1 2015 dividend payment

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

Other stories

Leo Melamed: Time For China To Further Open Market
Li Yan – Ecns

“China imports about 60% of the energy it needs from the world, but it has no voice in the discovery of the price, and it has no voice at all in determining what the price of oil to them will be,” Melamed, chairman emeritus of CME, said while attending a sub-forum at the Boao Forum for Asia on Thursday.

Read our Premium post: China Liberalises.

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