May 05 2015

elb2 I am asking a question this week, thanks for the very interesting responses so far:

If you could have a level playing field where everybody got data and trade access at the same latency…would you prefer that market?

…answers by email are welcome (in confidence) from markets and participants alike.

Worries about ETD spoofing, value in ‘through train’ for ETFs, and / or Taiwan, SEBI-FMC merger details emerging, Saudi market ready to open for big institutions, TMX trimming fees and rebates, John Nixon joins Virtu board…and more, happy scrolling:

…Today’s Exchange Invest is being completed in the elegant surrounding of Berlin cafe / coworking space St Oberholz where I am soaking up the atmosphere at the regular monthly Silicon Allee breakfast meetup.

Conference News:

SAVE THE DATE: My focussed event about the Future of Finance, Young Markets will take place in Warsaw, Poland, on September 17th. More details to follow…

Anniversary News:

Our 500th Anniversary issue and 2nd birthday are looming in the middle of May and I am subsidising your daily ‘must read’ newsletter on exchanges – I feel it is only fair for that to change. Please Email me and let’s have a dialogue on the way you and your business can support Exchange Invest to give you more pith and insights going forward.

Premium News:

Meanwhile, 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:

China Capital Markets Transformation – Exchanges & Markets, ETPs and Exchange Infrastructure – Brief Part 1 NEW!
SEBI-FMC Merger Brief
CEESEG Stakes Sales Brief
HKMEx Fate Brief
Pakistan Exchanges Merger Brief
Flash Crash & Hound of Hounslow – Brief
Taiwan SE Cross Trading Links Brief
India – GIFT Exchanges Brief
A Taste Of HFT Scandal Brief – Part 1, Part 2, Part 3, Part 4, Part 5, Part 6
Vietnam Exchanges Merger Brief
CVC Betfair Bid Brief
India – NSE Sales Brief
EU CMU Brief
EU FTT Brief Part 1, Part 2
NSEL Scandal Brief – Main File

Exchange Invest Premium is a unique source of industry analysis – insight in a low latency environment if you like. Can you afford not to be a subscriber? $120 per user/year helps keep Exchange Invest daily Free. Subscribe here or reply to this email and I will invoice you forthwith.

Public Markets

ASX Earnings Update For Nine Months To 31 March 2015

Operating revenues AUD 516.8 mln (USD 406 mln), up 5.8%
EBITDA AUD 396.6 (USD 312 mln), up 6.2%
Underlying profit after tax AUD 299.8 mln (USD 235 mln), up 4.5%

PLY: So many possibilities, so many operations, so little improvement in profit despite being gifted all manner of monopoly opportunities.

Exchanges Urged To Do More To Oust Tricksters (subscription)
Philip Stafford & Gregory Meyer – Financial Times

The arrest of UK trader Navinder Singh Sarao for four years of alleged market manipulation of equity futures has shone a fierce spotlight on the dubious trading practices known as spoofing and layering, and done little to improve the reputation of markets.

Read our Premium Flash Crash & Hound of Hounslow – Brief

PLY: A curious issue which arises here is how closet anti-market socialist media such as the daily pinko remain quick to suggest that the futures industry is having to prove it can regulate itself…whereas it’s tricky to assert the FCA would do better given how it has yet to do anything publicly about the butterfly phenomenon at NLX which remains the area 51 of curious market goings on…yet the FCA has done nothing public. Nor has it been seen to coherently act on any of the longstanding spoofing complaints as discussed above.

Exchanges do need to up their game in the spoofing wars but the idea that there is a better government alternative, is not readily apparent.

Of course at the same time, the logical expedient suggests the crackdown may soon kill all birds with a volley of stones?

Which brings me back to the question of the week:

If you could have a level playing field where everybody got data and trade access at the same latency…would you prefer that market?

…answers by email are welcome (in confidence) from markets and participants alike.

TMX To Trim Fees, Rebates
Euan Rocha – Reuters

TMX will gradually reduce its rebate and fee structure to address concerns about its incentives model and to tackle competitive threats.

TMX press release here.

PLY: Canadian regulators are apparently uncomfortable about “maker taker” which remains a lovely idea but I am still uncertain it really adds value across competitive platforms without inducing a distortion of sorts. However it is a smaller ripple than what strikes me as the egregious practice of buying orders from the gullible, er, I mean, retail.

HKEx Eyes ETF Trading Under Stock Connect
Derek Au – Asia Asset Management

Romnesh Lamba, co-head of global markets at HKEx, discusses the benefits of adding ETFs to the “through train.”

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

India – Commodity Brokers To Get 3 Months For Registration
Shishir Sinha – The Hindu Business Line

Commodity derivative brokers will get three months to register with SEBI after its merger with FMC. The Finance Ministry has also proposed giving discretionary power to SEBI to grant approval for new activities to be undertaken by commodity exchanges.

Read our Premium SEBI-FMC Merger Brief

Nasdaq: Exchange Place (subscription)
Financial Times

PLY: For those who missed the Greifeld era’s expansionist decade, some brief thoughts on how NASDAQ has changed from arriviste stock exchange to a diversified international group.

Private Markets

Saudi Arabia Issues Rules For Foreign Investing In Stocks (subscription)
Nicolas Parasie – Wall Street Journal

Saudi Arabia laid down final rules on Monday for the long-awaited opening of its $590 billion stock market to foreigners, allowing only large institutions to invest in one of the last major bourses to have remained mostly shut to international investors.

The rules, which take effect on June 1 ahead of the market’s planned opening on June 15, permit only qualified foreign investors such as banks, brokerages, fund managers and insurance companies with at least $5 billion in assets under management to invest in the Middle East’s biggest market.

PLY: A step forward but still on the basis of big institutional activity as is so often the case in the Middle East and there are other restrictions to bear in mind:

Saudi Stock Stampede Seen As Unlikely After Foreigner Rules
Sarmad Khan, Deema Almashabi & Dana El Baltaji – Bloomberg

For all the optimism over the opening of Saudi Arabia’s stock market to foreigners, it will probably be several months before inflows will have an impact, according to the investment manager Ashmore Group Plc.

The Capital Market Authority said Monday that international ownership of a single company is restricted to 49% while only institutional investors with a minimum of 18.75 billion riyals ($5 billion) under management will have direct access to the stock market.

Taiwan Stock Market A Hidden Gem While Hong Kong & Shanghai Shines (subscription)
Toh Han Shih – SCMP

Taiwan’s stocks, caught in the backwash of the sparkling rally which hit Hong Kong and Shanghai, are described by financial services firm Jefferies as a “stealth bull market.”

“Our optimism on Taiwan was not based on any ‘Taiwan-Shanghai’ connect, but it should be pointed out that in 2012 the Taiwanese central bank signed a MoU with the mainland allowing for direct settlement of the Renminbi and New Taiwan Dollar,” said a Jefferies report.

“Investors have overlooked the favourable competitiveness of the (Taiwan) economy, the tight labour markets, sensible fiscal policy and as well as the booming trade surplus. Interestingly, the low stock market turnover to market cap highlights the low level of speculation,” said Jefferies.

This was echoed by an HSBC report.

“Investors looking for North Asia exposure should now consider Taiwan, a market that is unique in Asia in that it is the only one trading at a discount to its five-year history. All other markets trade at a premium,” the lender said.

Amidst news last month that the Taiwan SE is in talks to link up with the bourses of Shanghai and Hong Kong, the market in Taipei has enjoyed a bull run in recent weeks.

Read our Premium HKEx – SSE – Stock Connect Part 1,Part 2,Part 3 and Taiwan SE Cross Trading Links Brief

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX flat, FTIL up 1%. No news.


China Widens Foreign Access To Domestic Bond Market (subscription)
Gabriel Wildau – Financial Times

China has approved HSBC, Morgan Stanley and 30 other foreign institutions to invest in its $5.9tn domestic bond market, a big step towards opening its capital markets to foreign investment.

Read our Premium Post China Liberalises and China Capital Markets Transformation – Exchanges & Markets, ETPs and Exchange Infrastructure – Brief Part 1


BM&FBOVESPA Announces New Portfolio For Ibovespa And Other Indices Valid For May-August 2015

Career Paths

Platts announced it has named Martin Fraenkel, most recently MD & global head of energy at CME, as chief content officer. In this role, Fraenkel will be responsible for managing the global editorial team, as well as for developing strategies for price assessments and analysis, and all publications for the global commodities markets that Platts covers.

Virtu Financial announced that it has appointed John D. Nixon to its BoD effective immediately. Mr. Nixon until recently was the Group Executive Director for Americas at ICAP (US), a position he held since May 2008. He served as a NED of ICAP from 1998 to 2002.

Financial Calendar


ICE Q1 2015 Financial Results
Lending Club Q1 Financial Results
U.S. CFTC Chairman Tim Massad to testify before the U.S. Senate Appropriations Committee’s Financial Services and General Government Subcommittee to review CFTC’s FY 2016 proposed budget request.


Nasdaq OMX AGM – 06 May

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

Analyst Notes

CBOE Price Target Cut By Barclays From $49.00 To $48.00 – “Equal Weight” Rating

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.


Detailed Regulations To Be Issued By China For P2P Lenders Within A Month (subscription)
Don Weinland – SCMP

P2P lending platforms in China are bracing for regulations including new licensing rules as early as the end of this month which could involve being regulated as financial institutions.

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