May 05 2016

elb2“The disappointing level of engagement of the LSE ultimately did not allow us to make a complete determination of the integration benefits and their related risks that ICE would require to support a bid.” –

– Jeffrey Sprecher

Wednesday was fascinating. As fast as LSE were rumoured to be twisting the wires enclosing the champagne corks, the share price took a veritable battering and suddenly DB1 stock appeared popular – perhaps the first time that has happened in a decade. “Pricing in line” may be the new “elastic mile” for this deal – after recent management statements where alas they couldn’t get their feet into their mouths fast enough to stop their somewhat non-compliant utterances, management have been exposed as less than the brilliant icons their PRs had portrayed them as. Cracks are apparent from the pricing ‘parity’ (which will perhaps sink the deal even before the antitrust ‘Nyet’) to the emptiness of the word “compelling” and the ongoing mystery of cross-collateralisation which LSE-DB1 may be claiming to have solved, or may not… (Clarity is in the shape of a Twix but entirely contrary to apparent party claims).

I added a New Premium post right after the ICE statement was published: ICE Withdraws, LSE Exposed – First Reaction and hot off the wordpresses this morning comes “No Bid – The Day After.”

There is still some way to go in the DB1-LSE tale but this isn’t Hollywood and the happy ending of a unified Anglo-Germanic blob with a bit on the side in Milan isn’t going to result.

Meanwhile in Big World, the pundits (who, by the by, wonder why people are switching off mainstream media), are broadly unanimous that Donald Trump cannot win the US Presidency, because he couldn’t win the nomination and indeed he could never survive the Iowa caucus let alone the New Hampshire primary & er, er… In other words the clueless punditocracy are significantly below broken clock accuracy but now they are confident of one thing: Trump cannot win, just like he, er…  “Past performance is no predictor of future returns” and related buyside messaging springs to mind.

Public Markets

ICE Q1 2016 Results


ICE Q1 2016 Results Earnings Call Transcript


vs Q1 2015: total revenues, less transaction-based expenses $1.15b, up 35%,  adjusted net income $441m and adjusted diluted EPS $3.68, up 20%.

PLY: The results were very good: ICE paid a dividend more than equal to the value of the Bucharest Exchange & repaid more debt than the value of Warsaw SE… In a single quarter. Clarifies elegantly why the big guys cannot fathom what is happening at the bottom of the pyramid – and rightly so, their focus is at a much higher degree.

In terms of focus, this call was a masterclass in the art of exchanges. All parties were lively, engaging & had a passion for their Powerpoints. From the Chair, Jeff Sprecher was brilliant, outlining multiple major and minor trends in the exchange world without breaking sweat and concentrating at all times on his business.

Calls are usually about hanging in for a blooper while playing sellside bingo to see which analyst had his towel over the phone since breakfast to bag pole position in the Q-line. ICE calls are market education – and the key takeaway is that few other markets are even close to understanding the way ICE thinks, regardless of whether or not they have the power to execute.

A lot of people struggle to understand the ICE advantage. In case you missed it yesterday, it can be surmised in one word: Rocco.*

*If you don’t follow this, you need to at least be reading Exchange Invest Premium.

ICE Statement Regarding No Intention To Make An Offer For LSEG


LSEG Statement Regarding ICE Withdrawal


DB1: Statement Of intention By ICE Not To Make An Offer For LSEG


ICE Drops Potential LSE Bid, Saying Executives Shunned Talks

John Detrixhe – Bloomberg

PLY: Given the way XavRol ran around the media doing the verbal equivalent of battering planks across the doors akin to a Looney Tunes character trying to keep a menacing presence outside the barn, I think it is not unreasonable for a touch of ICE aggravation that LSE was not more welcoming.

Or as Alex Brummer puts it in the Daily Mail:

There is a limit to what one organisation is willing to share with another, for commercial reasons. The reality in the case of the LSE is that it is already in bed with Deutsche Boerse and doesn’t want a third party to come between them.

It is time shareholders questioned a deal that is too cosy for comfort.”

ICE Attacks LSE Over Shelved Bid (subscription)

Gregory Meyer, Philip Stafford & Arash Massoudi – Financial Times

Jeffrey Sprecher has lashed out at the leadership of LSE, blaming a lack of cooperation by the UK group for ICE’s decision to walk away from a potential takeover bid.

PLY: Did LSE really shun ICE? Well, to paraphrase, ‘careless talk costs reputations’ and with his unacceptable (and still not fully explained or justified) outbursts, XavRol has absolutely enabled ICE to look the winner here. End of.

Once again – apologies for the repetition but it has to be said: that makes for a simple disgrace in the parish – even as EVP of beverage services or whatever, post defenestration at not being made made ‘unified’ CEO of the dream which will never become reality – I still firmly believe Xaverian utterances have brought SRO marketplaces into a degree of disrepute. From the tea trolley, LSE management have handed ICE the moral high ground on a silver salver.

LSE’s Long Cold Summer

Chris Hughes – Bloomberg

PLY: It’s not just the re-emergence of the ICE, oops sorry, ice, buckets in the C-suite which is cooling temperatures at LSE now. Even the least self-aware of managers (no names, use your intuition) must realise that when the deal premium goes to a discount in a day then the runes predict you need a change of druid priest, or better still, a new strategy.

QV Premium: DB1-LSE Merger Brief.


LSE Connection Helps EuroCCP Profits Surge (subscription)

Tim Cave – Financial News

Europe’s largest cash equities clearing house saw its profits jump by more than a quarter in 2015, a year in which it also hit a record for the most trades processed in a single day.


NYSE Seeks To Change User Fees

John D’Antona – Markets Media

NYSE has filed a proposed rule change with SEC seeking to establish new fees relating to end users of multicast and unicast services.


Why HKEX’s Qianhai Metal Plan Won’t Fly Without Physical Delivery (subscription)

Enoch Yiu – SCMP

HKEX’s plan to set up a metal trading platform in Qianhai is considered a breakthrough for the local bourse to expand into commodities trading but brokers and metal manufacturers say such a plan would be successful only if it can arrange physical delivery.

HKEX last week announced it will set up a metal trading platform in Qianhai SEZ near Shenzhen.


ESMA Proposes To Amend Draft MiFIR Standard On Transaction Reporting


Private Markets

Goldman, HSBC Said Among Banks on Tadawul IPO Shortlist

Ruth David, Dinesh Nair & Matthew Martin – Bloomberg

JPMorgan Chase, Morgan Stanley, Gulf International Bank BSC, National Commercial Bank, Samba Financial Group and Saudi Fransi Capital are also being considered for the Tadawul IPO. The IPO could raise more than $500 million for a 30% stake in the company.


Sebi To NSE: Self-Listing Not Allowed Under Current Norms

The Economic Times

As it gears up to get listed, leading bourse NSE has been told by the markets regulator Sebi that the present regulations do not provide for ‘self-listing’ of a stock exchange.

National SE (NSE) has been pitching hard for either self-listing or direct supervision by Sebi, and not by a rival exchange, in case of cross-listing.


World’s First Diamond Trading Exchange Going Live

Rajesh Bhayani – Business Standard

Temasek Unit Backs Startup Diamond Exchange as Trade Begins

Jasmine Ng – Bloomberg

The Singapore Diamond Investment Exchange (SDiX), the world’s first and only commodity exchange trading in physically settled diamonds, is going live from Thursday. This could change the way diamonds are traded.

PLY: Interesting business all round with backing from Temasek Holdings venture-capital unit Vertex Venture Holdings and Jim Rogers (who also holds a stake in MOEX) as well as the former head of SGX, Hsieh Fu Hua (now Chairman of UOB). Good technology platform, interesting dynamics, a fascinating market ripe for exchange disruption. It has taken about 4 years to get fruition and along the way raised raised $4m, on a valuation of $13.5m pre-money – low compared to recent deal flow but then again SDiX had to burn for a long time to get to market and may take a long time to reach maturity. It’s an exciting development, I wish it every success.

Dividend News

ICE announced a $0.85 dividend for Q2 2016, payable on June 30, 2016, record date June 16, 2016.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX up 3%, FTIL up around half that, no clear news.


French Regulators To Launch Fintech Division (subscription)

Anna Irrera – Financial News

The French banking supervisory authority and the country’s securities regulator are teaming up in a bid to support innovation in France’s nascent fintech sector.


Industry Groups Recommend New U.S. Rate Benchmark


The Risk Management Association and SIFMA recommended the change. ICAP planned to cease publication of its federal fund rate index on July 27, and the new benchmark is aimed to meet the standards recommended by IOSCO in 2013 in the wake of the Libor rigging affair.


Bloomberg’s OTC Electronic Trading Services Offer Direct Connectivity To Eurex Clearing


Eurex Clearing has connected Bloomberg as an approved trade source for EurexOTC Clear, the IRS Clearing offering of DB1.


CME To Launch Market-By-Order / Level 3 Data Solution

Automated Trader

CME will introduce a market data feed featuring all individual orders, also known as “Level 3 Data”, on its CME Globex electronic markets platform in Q4 2016. CME will gradually add the feed to its existing market data channels.


China Plans To Streamline Procedures For Cross-Border Gold Trade


China, the largest gold producer and consumer, is simplifying procedures for cross-border trade, a move that may speed up imports.

Career Paths

R.J. O’Brien & Associates (RJO) announced that its London-based affiliate R.J. O’Brien Europe has hired Peter Jerrom and John Burt as Senior VPs, Listed FX Brokers. Jerrom and Burt both previously served as Co-Head of Exchange-Traded FX at Sigma Broking LTD in London since September 2014.

GreenKey appointed Richard L. Garnier to the new position of Chief Revenue Officer, effective immediately.

Convergex hired Leila Mayet and Jeanine Cerligione as VPs based in London, and will report to John Holl, Head of International Sales & Trading. Philip Gough is CEO of Convergex London.

Prior to joining Convergex, Leila Mayet was a Sales & CRM executive at Aquis Exchange. Jeanine Cerligione previously worked for Macquarie Capital USA and for EdgeTrade.

Nasdaq CEO Bob Greifeld: Slow & Steady

Dan DeFrancesco – Waters Technology

Bob Greifeld discusses his career, HFT and blockchain with Dan DeFrancesco.

Financial Calendar

05.05 – Bats Q1 2016 Results

05.05 – ITG Q1 2016 Results 

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

Other stories

Tom Hayes Taps Crowdfunding to Raise $218,000 for Appeal

Suzi Ring & Liam Vaughan – Bloomberg

Jailed Libor Trader Tom Hayes Plans Fresh Appeal (subscription)

Caroline Binham – Financial Times

Lawyer who acted for Asperger syndrome hacker hired for challenge based on ‘fresh evidence’.


TABB Group Research Explores Shortcomings Of SEC’s Proposed Dark Pool Transparency Rule



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