May 01 2014


Welcome to May 1st – a curious pan-European day of indolence to celebrating the great successes of socialism in murdering people and impoverishing the ones it hasn’t starved to death or otherwise disposed of. Naturally we’re working.

Pyrrhic victories appear pertinent on a day oxymoronically celebrating socialism, so the EU strikes one and the NY AG has another. European derivatives reporting problems continue. TMR numbers beat estimates, although Bloomberg beats them to Bitcoin reporting. NZX growing solidly. FTIL under duress, missing deadline to sell MCX stakes as (new) MCX CEO quits citing ill health. Buy side encouraged to join the CCP solution to avoid the worst of waterfalls. Fidelity, ScotTrade clinging to elixir of payment for order flow as clients demand IEX solution. Elsewhere we await CME results and support Warren Mosler in his campaign to be elected Lieutenant General of the US Virgin Islands…

Thanks to all those who have been corresponding on HFT and other issues and once again thanks to our subscribers and sponsors, you help keep the Exchange Invest daily rolling along! We have a hectic schedule of commercialisation at present to reduce the burden of cost on yours truly, all input will be welcome as it is exactly 14 days to our first birthday.

Meanwhile, the latest five posts on Premium (more coming later) are:

New: HFT1: The Market is Not Rigged
– first in a series about HFT and the issues arising…

Gordon Bennett! Low Latency Data At The New York Yacht Club?
– a follow up to HFT: The Early Years

OSOV No Argument
– democracy is an essential antidote to plutocracy –

The ZA Pivot
– Cinnober grabs the clearing advantage in South Africa –

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Public Markets

NZX Q1 2014 Revenues & Operating Metrics

NZX’s Q1 2014 revenue report released today shows total group revenue for Q1 2014 of $15.1 million, up 6.6% compared to the same period last year. Growth was driven by continued strength in the capital markets business, as well as a strong rebound in rural advertising and increased volumes in NZX’s soft commodities businesses.

Thomson Reuters Profit Beats On Cost-Cutting
Jennifer Saba – Reuters

Thomson Reuters Corp reported higher-than- expected quarterly earnings on Wednesday,
bolstered by cost-cutting. Revenue rose just 1% in Q1, mainly because of acquisitions.

Thomson Reuters Q1 2014 Results
Thomson Reuters

Revenues from ongoing businesses grew 1% before currency to $3.1 billion. Adjusted EBITDA increased 8% to $820 million with a margin of 26.2%, up from 24.4% in the prior-year period. Underlying operating profit increased 14% to $528 million with a margin of 16.9%, up from 14.9% in the prior-year period. Adjusted EPS were $0.46 versus $0.38 in the prior-year period, up 21%. $1.1 billion returned to shareholders through share repurchases and dividends since $1 billion share repurchase program announced in the fourth-quarter of 2013

Europe’s Top Court Rejects UK Challenge On FTT
John O’Donnell & Huw Jones – Reuters
Court Of Justice Of The EU Dismisses UK Action Against Decision Authorising 11 Member States To Establish Enhanced Cooperation In FTT

Britain’s legal challenge to a FTT was rejected by Europe’s highest court, dealing another blow to attempts to shield London’s financial centre from the influence of Brussels. Wednesday’s ruling throws out the legal action intended to prevent a group of 11 countries, including Germany and France, from introducing a trading tax, and was seized on by critics as evidence of the British government’s impotence in fighting its corner in Europe.

PLY: Much hyped but really just a procedural shot across the bows. The UK is quite correct to throw everything at stopping this toxic tax. This process sets up a proper battle with the 11 reactionaries seeking to gum up global markets and impoverish investors. Every man and his dog made a comment to this effect in London last evening – but for the sake of brevity we’re leaving out the statements of AFME, CityUK et al. Naturally, the FT manages a find a way to batter markets and support the EU:

Robin Hood Tax Has Roots In 17th Century (subscription)
Alex Barker – Financial Times

For all the political fuss over the eurozone’s planned financial transaction tax, it is likely to resemble a levy Britain has imposed for more than 300 years: stamp duty. The so-called Robin Hood tax as first outlined by the European Commission was expected to generate €35bn a year, ensnaring financial trades from London to Hong Kong.

PLY: Successive British governments must hang their heads in shame at maintaining this dismal tax on trade – naturally the left-wing Europhile media like the, ahem, Financial Times, are happy to exploit any loophole to support Brussels. Meanwhile, I always wonder if “we live in Financial Times” why do they support socialism at state and supranational level in particular with such passion?

FTIL’s Stake Sale In MCX Expired; Action To Be Reviewed On May 6 FMC Meet
Financial Express

FMC will meet on May 6 to decide the next course of action against MCX as the deadline for complying with its order to ensure that erstwhile promoter FTIL reduces its stake in the bourse expired yesterday.

PLY: There is this thing called the stock market, FTIL even opened one…yet they continue to play all manner of games in avoiding the liquid market to trade down any part of their stake (even via a block facility) in MCX with a game of increasingly frustrating due diligence charades. FMC are entirely justified in coming down hard on FTIL next week, as FTIL management maintain an arrogant disregard for the law while proclaiming their own victimhood through a contorted process of hypothecation. That FTIL runs the risk of being sued by shareholders for losing value through their recalcitrance to close a sale, is a problem for FTIL to deal with in due course.

PwC Report To Not Derail Stake Sale Process

FTIL chief Jignesh Shah on Wednesday said his company’s plan to reduce stake in MCX to 2% from 26% will not be impacted due to the PwC report on related parties’ transactions at the commodity exchange.

PLY: MCX needs to move fast: the possible action of FMC swings the pendulum back to the advantage of the bidders.

Manoj Vaish Quits As MD & CEO Of MCX
Ashish Rukhaiyar – Livemint

Manoj Vaish, who assumed charge as MD and CEO of MCX on 1 February, has resigned.

PLY: No official announcement but clearly when it comes to a hot seat, heading MCX was shades of red, if not white. I sincerely hope Mr Vaish will recover rapidly from his health issues. Probably not a big deal killer for potential investors who will anyway be interested in reshaping management going forward.

I Have Survived The Tsunami Of Bad News: Jignesh Shah
Rajesh Bhayani – Business Standard

A day after PwC’s special audit report alleged several inconsistencies and gaps in the way MCX functioned, Jignesh Shah, chairman & group CEO of FTIL, tells Rajesh Bhayani why he thinks the report is one-sided and makes frivolous charges. Exuding confidence the report will have no impact on FTIL’s divestment of stake in MCX, Shah says he will completely exit all exchange-related businesses and concentrate on something new.

PLY: A man for whom chutzpah is clearly a way of life. Like him or loathe him you have to admire how he continues to pop up in the media. Just like Duncan Niederauer’s stirring defence of HFT at NYSE. Oh, hold on a moment…

Kotak Mahindra Bank Eyeing MCX Stake?

Uday Kotak, Executive Vice Chairman & MD, Kotak Mahindra Bank said today that they have not ruled out the possibility of his firm buying FTIL ‘ stake in MCX. Speaking after Kotak Mahindra Bank released its fourth quarter numbers, Kotak said they are open to new ideas. Speculation has been rife that Kotak is one among the interested players to invest in MCX.

ICE Completes Successful Transition Of ICE Endex Dutch & Belgian Spot Markets To ICE Trading Platform

ICE announced that it has completed the transition of the ICE Endex Dutch and Belgian natural gas spot markets and the Dutch gas storage market to the ICE trading platform. The transition for the ICE Endex Dutch Title Transfer Facility (TTF) and Belgian Zeebrugge Trading Point (ZTP) spot markets was successfully completed on April 29th, 2014 and involved 50 trading members. The clearing, settlement and nominations services will continue to be provided by APX Group.

PLY: More little nuggets flow to the ICE core bottom line. No news this week on the sale of the dross and other unrequited business units.

NASDAQ OMX Enhances Clearing Offering Following EMIR Approval

NASDAQ OMX Clearing AB announced today that following the EMIR approval and the relating streamlining of processes, lower clearing fees will be implemented and the collateral list will be extended to include additional assets.

NASDAQ OMX Clearing AB is able introduce two new fee and rebate models for client clearing of SEK Fixed Income products. The new models will supplement the existing client fee and rebate model and will be available from January 1, 2015.

PLY: Good to see NASDAQ pushing ahead in the vertical silo element of their business, as opposed to the bit where they all witter on about open access being the way forward. Who’d have thought the Scandinavians would be the progressive capitalists compared with the trans-Atlantic nexus?

European Derivatives Reporting Continues To Cause Headaches (subscription)
James Rundle – waters technology

With an unsteady launch, complaints about tough regulatory deadlines, and varying quality in the data reported, buy-side and sell-side firms continue to experience issues with compliance, while in the US, regulators admit they cannot even analyze the information they receive.

PLY: That sentence elegantly encapsulates everything that can go wrong when the government thinks it knows best.

CFTC Urged To “Slow Down” On Packaged Trades (subscription)
Kris Devasabai – Risk

CFTC should “slow down” in its efforts to bring packaged trades consisting of multiple legs onto SEFs according to Lisa Cavallari, director of fixed income derivatives trading at Russell Investments.

SGX Struggles To Grow As Rivals Thrive
Shoaib-ur-Rehman Siddiqui – Business Recorder

A dearth of big-name share listings of overseas firms and a multi-billion-dollar penny-stock crash have hampered the growth ambitions of SGX as Asian rivals flourish, analysts say.

PLY: SGX increasingly is in the right place. The city state booms as a financial centre alongside Asia’s boom and a western exodus driven by over-regulation. However nobody seems to understand what role SGX can profitably fill in the market. It has danced brilliantly for over 2 decades to be at the centre of one opportunity or another but now the lustre is fading and the music is reaching a critical refrain. The opportunity remains enormous, how will SGX capture it?

Fidelity, Scottrade Deny Clients HFT Antidote

The popular brokerage firms Fidelity Investments and Scottrade have sent letters to clients declining to route stock trades through IEX, the new trading platform featured in Michael Lewis’ book “Flash Boys” as the antidote to high-speed trading, according to documents reviewed by CNBC.

PLY: Interesting (and good news for IEX) to have clients requesting routing through IEX. This is a big issue for not just retail clients but funds too albeit in different ways around the best execution issues! Naturally the big brokers are petrified their sale of order flow will be endangered but in the long run they have no choice methinks. That racket needs to end.

New York AG Eric T. Schneiderman Shuts PR Newswire HFT Feed – claims dramatic victory (with verbose headline, so we rewrote it)

PR Newswire, has agreed to require its direct data feed recipients to certify that they will not engage in HFT when using direct feeds of the information PR Newswire distributes on behalf of its clients. This follows similar agreements with Business Wire and Marketwired.

PLY: Amongst the egregious faults in the HFT universe, I am struggling to be convinced this one is the worst (or at least remotely enforceable) so I think i’s an utterly pyrrhic victory for the AG. It is a short-term fix and nothing more, which will encourage US equities to match ex-USA as that is where people will develop ULL feeds. Meanwhile for historical perspective try these Premium Posts: Gordon Bennett! Low Latency Data At the New York Yacht Club? and HFT: The Early Years. The NY AG has added a chicane but it will allow a new level of intermediation where vendors can pick up public domain info and pass it on…

The second part of the agreement is logical and something I have advocated already:

“PR Newswire also agreed to counsel its customers that wish to release information upon the close of the markets to do so after 4:00:00 p.m., to ensure that high-frequency traders do not have the ability to trade on the news in the milliseconds after the closing bell. “

– To be more precise I think they ought to release at least 1 minute after the close as there are various issues where news bang on close can cause a last millisecond distortion. I would release it at 1630 as that would also give everybody a chance to focus on the news after they have ingested the day’s market close.

Buy-Side Urged To Share Risk Of CCP Collapse (subscription)
Joe Rennison – Risk

BlackRock and Citadel say buy-side firms should accept some degree of exposure in the event of losses overwhelming a CCP, in order to ensure all participants have an incentive to behave responsibly. That could include having their variation margin payments cut – one of a range of measures now being considered by regulators and CCPs as a way of recovering a clearing house if its other financial resources are wiped out.

PLY: In the rush to pixel, not enough time to comment fully here but clearly the whole market needs to consider the risks to CCP in this brave new world. At the same time any ‘buy-in’ by the buy side must be acknowledged by the sell side in providing a more level playing field for the institutional users at the end of the food chain. The capital markets insurance products of GCSA, chaired by legendary clearinghouse figure David Hardy is clearly an apposite solution for CCPs in these exciting but challenging times of transition.

ESMA Chair Calls For Funding Revamp (subscription)
Anish Puaar – Financial News

The chairman of ESMA has called for an overhaul to the watchdog’s “twisted and inappropriate funding system”, including greater use of market-based fees and less reliance on contributions from national regulators.

PLY: In other words, having totally failed to raise the money for the EU’s ambitions of market micromanagement internally from the EU’s vast budgets, now users are going to be further taxed for the purpose of having layers of inefficient regulation. A worrying but unsurprising event as the EU continues to de facto wage war against markets.

Private Markets

Intrade Co-Founder Opens Fantasy Sports Site
William Alden – New York Times

PLY: Good luck to the original Intrade CEO Ron Bernstein who has taken the guts of Intrade and turned it into a fantasy sports site.

“His new site,, which licenses Intrade’s technology, announced its public testing period on Wednesday. By styling itself as a fantasy sports site, the company hopes to avoid the kind of regulatory trouble that hastened Intrade’s demise.” The company is based in New York for US customers only and relies on an exemption for fantasy sports in a 2006 law that cracked down on online gambling. Tradesports qualifies because it is offering games of “skill,” as opposed to luck.

Regulation Greatest Barrier To African Derivatives Exchanges (subscription)
Luke Clancy – Risk

Initiatives to establish derivatives exchanges are underway in several African countries including in Kenya, Nigeria and Zambia but hurdles include technology, regulatory and knowledge gaps.

OKTE, HUPX, OPCOM And EPEX SPOT To Implement The PCR Solution In The 4M MC Project

The Slovak, Hungarian and Romanian market operators / power exchanges together with the Czech market operator are currently implementing a coupling solution for their day-ahead electricity markets (4M MC project) relying on the Price Coupling of Regions (PCR) solution, which has been operating the NWE and SWE regions since 4 February 2014.

Bloomberg To List Bitcoin Prices, Offering Key Stamp Of Approval (subscription)
Michael J. Casey – Bloomberg

Bloomberg LP plans to list bitcoin prices on its financial data terminals, a move that could give the volatile digital currency a stamp of respectability and spark interest in U.S.-based trading platforms.

Bitcoin terminals will now list bitcoin prices from Kraken and Coinbase, both of San Francisco. Kraken bills itself as a bitcoin exchange while Coinbase, which provides payment processing for merchants and digital wallets for individuals, functions more as a broker-dealer.

PLY: Good progress. Bloomberg leads Thomson Reuters who appear asleep at the wheel when it comes to cryptocurrency so far it seems. Then again most corporate entities are clueless about cryptocurrency and blithely attempting to ignore the future.

Dividend News

BME agreed to pay a supplementary dividend of €0.65 per share on 9 May, 8% higher than the one paid for the same concept over the last four years. The total ordinary dividend payment to its shareholders, of a gross €1.65 per share, will represent a 3% increase on last year’s.

Special Section: FTI, NSEL, India at the Crossroads

Markets closed

Court Summons Commodity Market Regulator Chief To Decide On Assets Sale

Bombay High Court on Wednesday asked heads of FMC and the Enforcement Directorate to appear before it on May 7, so that it can take decision about the liquidation of assets of NSEL.


Faulty Technology Triggered CME Trading Outage: Chairman
Nadia Damouni & Tom Polansek – Reuters

The trading outage on the world’s most important agricultural markets was triggered when sophisticated technology tripped over a trading halt in a single market, the executive chairman of exchange operator CME told Reuters. The April 8 outage stopped electronic trading in 31 agricultural markets.

smartTrade Technologies & FXSpotStream Join Forces To Create The 4X|Box – A Combination Of smartTrade’s LiquidityFX Trading Tools & FXSpotStream’s Multibank FX Price Aggregation Service

PLY: Please could PRs restrict their headline writing excess, we have no space to comment.

Stock Exchange of Thailand Reduces Costs, Ensures Compliance Adherence with CommVault Information Management Software
PR Newswire

Stock Exchange of Thailand (SET) has deployed CommVault Simpana software to improve its information governance through integrated archive, backup, recovery, and search operations.


ICE To Extend Gasoil Futures Beyond Jan 2015, Change Spec

ICE confirmed it will extend the gasoil futures contract beyond January 2015 and will switch its specification to low sulphur, starting February. The contracts will be available for trading from May 30.

MCX Discontinues Gold, Silver Contracts Expiring In 2015

MCX on Wednesday said it discontinued six futures trading contracts in gold and silver expiring in 2015, effective April 29, due to procedural problems.


Euronext Launches World’s First Index Based Exchange For Physicals
NYSE Euronext

Euronext announced that it will be the world’s first regulated market to launch a complete centrally cleared solution to facilitate the trading of Exchange for Physicals (EFP) on index futures. The service will be available in a first instance on CAC 40 and AEX-Index Futures and is expected to be fully operational in Q1 2015.

Eurex To Launch Index Futures Contracts Based On TASE’s Main Index In June – New Contracts Available As Of 9 June 2014

Tel-Aviv SE (TASE) and Eurex Exchange announced that Eurex Exchange will list index futures based on the TA-25, Israel’s blue chip index, as of 9 June 2014, denominated in US dollars.

Career Paths

BME has appointed the Vizcaya-born lawyer Manuel Ardanza as CEO & GM of Bilbao SE, replacing José Luis Damborenea, who has headed the exchange since 1991 and now steps down for retirement.

BME has appointed Vicente Olmos as new Executive Chairman of the Valencia SE, replacing the previous Chairman, Ángel Torre, who, along with Manuel Escámez, until now Vice Chairman and CEO, leave their posts on account of their retirement.

Arantza Telleria, until now CFO of the Bilbao SE, has been appointed Head of Internal Audit at BME, replacing Vicente Olmos, who leaves this position to become Chairman of the Valencia stock exchange.

U.S. Virgin Islands Gubernatorial candidate Soraya Diase Coffelt has selected Warren Mosler as her running mate for the position of Lieutenant Governor. Mosler, a renowned financial professional and 11 year resident of St. Croix, is also an independent and has previously run for Delegate to Congress.

PLY: Great news that the beautiful mind of swaps, markets, economics and automotive pursuits Warren Mosler is on the ticket in the USVI. If elected it could make for a fascinating experiment in economics. Warren has previously run in various mainland campaigns. I wish him every success.

Financial Calendar


CME Q1 results
BGC’s Q1 2014 financial results
ITG Q1 2014 financial results


Record date TD Ameritrade $0.12 quarterly cash dividend

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