May 06 2015

elb2Great numbers from ICE, Euronext and Lending Club get Exchange Invest daily going with a bang. Plato vendor choice: one in, one out? Bill Brodsky targets SEC flash crash failings as CFTC’s Tim Massad proffers collecting tin to Congress. Sungard preparing for IPO, as SIFMA backs BATS plan for US equities..and much more.

First up, thanks for the many responses: I am asking a question this 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.

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:

Next week we mark our 500th Anniversary issue and 2nd birthday…and yes most everybody feels it has been much longer! Having filled a much needed niche to provide the daily insight into exchanges and market platforms, Exchange Invest needs more commercial support. 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, Part 2 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

ICE Q1 2015 Financial Results

Total revenues, less transaction-based expenses $850 mln, up 6.65%
Total operating expenses $388 mln, down 4.43%
Operating income $ 462 mln, up 18%
Net income $323 mln, up 17.9%
Diluted EPS $2.8, up from $2.27
Dividend per share $0.65

PLY: Once again excellent numbers from ICE as they continue to make pace integrating LIFFE and turning NYSE around.

ENX Q1 2015 Financial Results

EBITDA margin increased strongly in Q1 2015 to 52.2% compared to 42.5% in Q1 2014 adjusted and to 45.9% reported.

Quarterly operating profit before exceptional items was €63.3 million; up 38.4% compared to last year on an adjusted basis (€45.7 million) and 33.4% compared to Q1 2014 reported (€47.4 million).

Third party quarterly revenue up 9.6% on an adjusted basis to €130.0 million (Q1 2014 adjusted: €118.7m) or 22.4% on a reported basis (Q1 2014 reported: €106.2 million)

The net profit for Q1 2015 amounted to €48.0 million, compared to €7.6 million in Q1 2014, representing an EPS of €0.69 (basic) and of €0.68 (diluted), compared to €0.11 in Q1 2014, both basic and diluted.

As of 31 March 2015 the Company had cash and cash equivalents excluding financial investments of €162 million, and total debt of €107.5 million, as a result of its €140 million debt repayment on 23 March 2015.

PLY: The biggest turnaround story since Exchange Invest began continues apace. The once soggy European arm of the then misguided NYSE franchise has turned from being a tightening noose on the future of markets to becoming a dynamic, well managed enterprise. Hopefully current management shuffles will not reduce the passionate focus which continues to deliver cost reductions ahead of schedule and delivers a healthy boost to cash on the bottom line. After the Velvet divorce, it is good to see both ICE and Euronext thriving in their separate ways.

BVB Q1 2015 Financial Results

Net sales Lei 4.06 mln ($1.03 mln), down 13%
Net profit Lei 1.62 mln ($0.41 mln), up 17%
EPS Lei 0.21, up from 0.18

PLY: Operating profits slumped 79% and results were saved by currency factors it seems.

LendingClub Q1 2015 Financial Results

Originations $1,635.1 mln, up 107%
Operating Revenue $81 mln, up 109%
Adjusted EBITDA $10.6, up 458%
Net Loss (GAAP) $6.4 mln , compared to a net loss of $7.3 mln Q1 2014

PLY: P2P lending (even if the first “P’ is increasingly “B”) is a hotbed of activity and yet barely scratching the surface of possibility…

SunGard Prepares IPO, Aims To Raise Around $750 Million (subscription)
Gillian Tan & Telis Demos – Wall Street Journal

SunGard Data Systems is preparing for an IPO, nearly a decade after a group of private-equity firms acquired it in an $11 billion deal that helped usher in a wave of megabuyouts before the financial crisis.

The developer of software for banks, schools and governments tapped J.P. Morgan Chase and Goldman Sachs to lead an IPO later this year, with Deutsche Bank, Barclays and Credit Suisse also working on the deal. It aims to raise around $750 million in the IPO with a market cap of circa $7 billion.

PLY: Clearly a very interesting IPO ahead (albeit trade sale offers may be entertained in the meanwhile…) and Sungard has much to offer in terms of client roster and breadth of product base.

I will be happy to discuss with clients more about this interesting transaction at your convenience.

BM&FBovespa Boosts Stake In Santiago Exchange Amid Expansion
Julia Leite – Bloomberg

BM&FBovespa paid 6.6 billion pesos ($10.8 mln) for an additional 6% share in Santiago’s exchange, according to a regulatory filing Tuesday, pushing its stake to 8%.

The move comes about a month after the Sao Paulo-based bourse paid 2 billion pesos ($3.2 mln) for a 2% stake in Chile’s Bolsa de Comercio, as it tries to expand its presence in the region. BM&FBovespa said last year it was seeking to buy as much as 15% each in the exchanges of Mexico, Colombia, Chile, Peru and Argentina.

Read our Premium MILA Exchanges Brief and Exchange Deals Brief.

Euronext CEO Hastens Departure; Dijsselhof Named Interim CEO
Nick Baker – Bloomberg

Euronext NV’s CEO resigned effective immediately, accelerating a departure that was supposed to take place in two months (reported here).

Dominique Cerutti, the CEO, was replaced on an interim basis by COO Jos Dijsselhof, according to a statement Tuesday. Cerutti left the exchange operator to join consultant Altran Technologies SA as CEO & Chairman.

PLY: I was amused by the earlier statement that Mr Cerutti would leave July 15th, thus enjoying Bastille Day as his last er, ‘working’ day. I look forward to meeting Jos Dijsselhof during his spell in (currently interim) office and hope he maintains the excellent impetus within Euronext.

LSE Enters Contest To Build European Dark Pool Called Plato
John Detrixhe & Will Hadfield – Bloomberg

LSE has entered the competition to build a not-for-profit European dark pool backed by a consortium of banks and asset managers.

LSE’s Turquoise division now appears on Plato Partnership’s website of the firms vying to supply the dark pool’s technology. It will compete against companies including Bats, Aquis Exchange and Nasdaq.

Previous comment on Plato here and here.

PLY: Despite apparently endorsing an open vote format, the Plato process already appears to be a tad murky with late entrants emerging and perhaps original process participant Cinnober already out of said process (if true a tad ironic that their pure independent status didn’t appeal?). Having “Turquoise” tender as opposed to the vendor Millennium surely raises a multitude of questions, and not just about how the LSE’s ‘pure’ vendor play fits in but also whether Plato really just wants to white label a market like Turquoise and tweak some rules?

Bulgaria’s Security Agency To Be Consulted On Privatization Of Central Depository

Emil Karanikolov, head of the Privatization and Post-Privatization Control Agency, said that the State Agency for National Security (DANS) will be consulted on the privatization of the Central Depository AD.

According to Karanikolov, the Privatization Agency hopes to attract large-scale investors in the procedure, which dispels worries about the impact of the measure on the financial system.

PLY: The regulators are concerned about one step privatisation while the national security agency will evaluate the threat to the Bulgarian financial market. All the while, alas, the nature of the privatisation in favour of a large international exchange group, looks increasingly forlorn whether it is the exchange alone or the exchange and its CSD together.

Read our Premium Bulgarian SE Sale Brief

BGC Partners Buys Real Estate Consulting Firm
Michael J. de la Merced – NY Times

In a move to bolster its real estate arm, BGC Partners has purchased Computerized Facility Integration, a consulting and technology service provider that helps real estate owners manage their assets.

BGC Partners press release here.

SEC Flubs The ‘Flash Crash’ Test (subscription)
William J. Brodsky (Chairman CBOE) – Wall Street Journal

PLY: A polite but firm takedown of SEC failings. Their inability to sort out problems has, in recent years been matched only by their eagerness to fine for transgressions. The state of the flash crash five years on is a low latency scapegoat (who ought to have been identified, well, 5 years ago), a clearly incoherent approach to managing data and a lot of plans which are…well still plans.

Bill concludes his Op-Ed:

“If the agencies are unable or unwilling to work together toward a solution, then the U.S. Congress, which has allowed the bifurcated regulatory structure to persist for more than three decades, will have only itself to blame when it calls a hearing after the next major market disruption.”

Futures Watchdog Can’t Afford Routine Inspections, Massad Says
Dave Michaels & Jesse Westbrook – Bloomberg

The top U.S. derivatives regulator said his agency lacks resources to conduct even routine inspections of the exchanges and other companies it polices.

“We simply can’t get into these entities on a regular basis,” CFTC Chairman Timothy Massad told lawmakers in Washington on Tuesday. “We don’t even get to many of the clearinghouses and exchanges once a year. That is a big problem,” Massad said, as he asked for more money.

PLY: The hypocrisy as the political blob has adopted the G20 principles with additional copper/bronze/silver/gold/titanium plating and then failed to pay for the mess the political classes created by letting the banks amok to keep the party going…is somewhat breathtaking, even by the low standards of contemporary political life.

Memory Of ‘Flash Crash’ Weighs On Markets & Regulators (subscription)
E.S. Browning – Wall Street Journal

Nearly five years after the “flash crash” rocked financial markets, people who have studied it warn that some form of repeat event can’t be ruled out.

PLY: The mot juste comes from the Nanex founder Eric Scott Hunsader:

“This is like not noticing the elephant at your tea party.”

…My concern is how the situation appears Balkanised. In the open outcry of media ‘he says, she says” HFT is perfection (if your salary is linked to HFT) or the devil incarnate (if you aren’t remunerated via HFT). The truth is a great deal more complex and there are clearly problems but then again the fundamental market structure has issues, especially at the US equity market level. Which brings me to remind you of my 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. Given stats of HFT amounting to up to 50% of volume, legacy exchanges are perhaps concerned to address the issue…

‘Flash Crash’ Overhaul Is Snarled In Red Tape (subscription)
Bradley Hope & Andrew Ackerman – Wall Street Journal

A giant data project at the center of the regulatory response to the 2010 “flash crash” that sent the Dow plummeting nearly 1,000 points is years behind schedule and mired in red tape.

PLY: Readers will doubtless be stupefied that any project involving the SEC could ever be “years behind schedule and mired in red tape.” “Say it ain’t so, Joe…”

CFTC Charges UAE Residents Heet Khara & Nasim Salim With Spoofing In The Gold And Silver Futures Markets – Court Issues An Ex Parte Restraining Order Freezing Defendants’ Assets And Preserving Records

Read our Premium Flash Crash & Hound of Hounslow – Brief

Santiago SE & TSX Venture Exchange Launch New Venture Market In Chile
Canada NewsWire via COMTEX

Santiago SE (SSE) announced the launch of Santiago Stock Exchange, Venture (SSEV), a new public venture capital market for small and early-stage companies.

The j.v. project started in March last year.

SIFMA Backs BATS Exchange’s U.S. Market Reform Proposal
John McCrank – Reuters

A Wall Street trade group on Tuesday threw its support behind a proposal for regulatory reform of BATS Global Markets suggested earlier this year, including slashing exchange fees.

PLY: I still think there needs to be more reflection on the topic as opposed to a rush to endorse any single proposal as a holistic outcome is required. BATS have made a decent, commercially motivated push to create an incremental way forward which works in with its bank backers’ aims and thus appeals to a SIFMA membership which sees some lower fees in the shorter term and an attempt to work forward.

However, this is tinkering – the system is broken, it needs root and branch reform… the debate is disappointingly narrow from the sell side just when it needs to be opened up to some clearer thinking as the status quo won’t do and a semi-infinite roll of duct tape isn’t enough.

BAML Joins Dark Pool Transparency Push (subscription)
Tim Cave – Financial News

Bank of America Merrill Lynch is taking steps to become more transparent about the way it completes client trades away from public exchanges.

Private Markets

BATS Files Exclusive Listings Proposal

As discussed last month, BATS Global Markets filed the “BATS Exclusive Listings Proposal” with SEC, seeking to improve investors’ trading experience in thinly-traded securities. Under the proposal, to be implemented at the company’s discretion, the BATS exchanges would no longer offer trading in thinly-traded stocks that maintain a primary listing on other U.S. stock exchanges. The program would apply to issues with ADV of less than 2,500 shares, encompassing about 700 U.S.- listed securities, and would remain in effect for a given security until ADV exceeds 5,000 shares over a rolling 90- day period.

PLY: Here I think BATS have made an endeavour to concentrate volume in smaller stocks in one place and deserve plaudits. They are endeavouring to make a better market.

Dividend News

ICE announced a $0.75 per share dividend for Q2 2015, representing a 15% increase to the company’s past quarterly dividend, which was initiated in December 2013. The dividend will be payable on June 30, 2015 to shareholders of record as of June 16, 2015. The ex-dividend date is June 12, 2015.

Including shares repurchased in April, ICE’s remaining authorization is over $500 million.

HKEx Forfeiture of Unclaimed Final Dividend for 2008

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX off 2.5%, FTIL down 2% as creditor tensions simmer while the blob remains clearly incapable of resolving the situation.


Symphony CEO: ‘We’re Onto Something Much Bigger Than We Thought” (subscription)
Anna Irrera – Financial News

FAO: Last October Goldman and 13 other companies including JPMorgan Chase, Morgan Stanley and BlackRock officially unveiled the new chat platform and company, known as Symphony Communication Services.

The 14 firms bought Perzo, a Palo Alto-based technology start-up founded by former Thomson Reuters executive David Gurle, in order to create Symphony.

In the bigger picture:

TR & Markit – announced here that the directory for the open messaging network powered by Markit’s Collaboration Services has been fully integrated with Eikon Messenger.

ICE agreed to to buy SuperDerivatives – reported here

Cyber security start-up Wickr, is in talks with banks and major financial services companies including Markit to create an alternative to Bloomberg instant messaging; it has raised $30 mln from investors including CME to help develop messaging technology – reported here and here.


Bond Platforms Look To Bury Archaic Phone Trading (subscription)
Robin Wigglesworth – Financial Times

PLY: Focussing mostly on TruMid and Electronifie, the FT runs a “he says she says” which doesn’t really say much.

Read our Premium post On Bonds & SEFs and Premium brief The Bond Platforms Rush Part 1, Part 2.

How LME’s Warehouse Reforms Have Played A Key Role In The Fall Of Global Aluminum Premiums
Greg Smart – Platts

This dramatic fall in global aluminum premia has taken the majority of market participants by surprise. However, there seems to be reluctance among market participants to identify recent LME warehouse reforms as having had much to do with the drop in regional premia.

Career Paths

Euronext appointed Jos Dijsselhof as interim CEO.(press release here)

Robert Grant has joined LSE’s UnaVista as Head of Business Development, Software for Americas. Grant has 25 years of industry experience and, most recently since 2011, served as SVP of sales at Axiom Software Laboratories, where he also led marketing and business development across the Americas. During the previous five years, Grant managed sales at FRSGlobal, the regulatory reporting and risk management arm of Wolters Kluwer Financial Services.(press release here)

FOW reports that TMX has parted company with its head of Asian sales Darren Anthony.

Reuters reports that the global director of market reporting at Platts, Jorge Montepeque, is leaving the company at the end of the year.

FTSE appointed Justin Walsh to lead FTSE’s Australian index business. (press release here)

Betfair has appointed Director of Online Marketing Johnny Devitt as CMO.

Financial Calendar


Nasdaq OMX AGM

New announcement

CBOE will host the 4th Annual CBOE Risk Management Conference (RMC) Europe, September 28 – 30, 2015, in Geneva, Switzerland. – press release here.

CFTC’s Market Risk Advisory Committee – June 2, 2015

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

Other stories

European Supervisory Authorities – Main Risks To EU Financial Market Stability Have Intensified

Testimony Of CFTC Chairman Timothy G. Massad Before The U.S. Senate Committee On Appropriations, Subcommittee On Financial Services And General Government, Washington, DC

Testimony Of CFTC Commissioner Mark Wetjen Before The U.S. House Committee On Agriculture Subcommittee On Commodity Exchanges, Energy, & Credit Subcommittee

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