May 06 2016

elb2Booked for FESE Convention, Malta, 15/16th June? I’m chairing a panel on CMU-related topics, great location, excellent hosts in Malta SE & a super conference in prospect: Book Here.

Remarkable numbers from BATS, while ITG continues to restructure. No big news but Dar Es Salaam IPO en route, Tadawul chooses HSBC as bankers while (finally) there is a new CEO for MCX…

It’s that time again of the week (‘TGIF’ filter time on Snapchat). Who knows whether we will have a chance to relax this weekend or if the Sunday newspapers will be full of crazed ravings. Perhaps they’ll just be talking about Donald Trump’s nomination victory. Have fun either way, I hope it’s sunny with you, I’m off to consider some 3rd birthday celebrations for Exchange Invest on May 15th…

Public Markets

Bats Q1 2016 Results


vs Q1 2015: net revenue $111.8m, up 35%, adjusted earnings $35.6m, up 77%.

PLY: Excellent numbers just post IPO. Bats has an interesting challenge ahead, to keep its bank backbone happy while enthusing shareholders it is maximising profits. Tricky but feasible. Moreover, these results, given the relatively narrow focus of Bats operations compared to the ‘department stores,’ demonstrates clearly the ability for reasonably managed exchanges to profit considerably.


ITG Q1 2016 Results


vs Q1 2015: GAAP net loss $2.5m compared to GAAP net income $16.7m, revenues $124.7m, down 16.7%.

PLY: The management reshuffle is still bedding down as ITG restructures. There are some good assets in there.


MCX March Quarter Results

MCX March quarter profit to Rs.27.10 crore (USD 4m), down 45% mainly due to a one-time loss related to its investment in Metropolitan Stock Exchange of India (MSEI); total income from operations Rs.55.59 crore (USD 8.34m), up 3.5%.


After ICE Rules Out Bid, Here Are The Next Challenges For The LSE-DB1 Merger
William Turvill – CITY A.M.

QV Premium: DB1-LSE Merger Brief.

PLY: Broadly binary outlines from some analysts – “bids” or “Brexit” in the lexicon as they can’t get much beyond B and indeed they broadly seem to be skipping over antitrust. Maybe it is the journalist’s focus but this article is still barely scratching the surface; albeit the complexities are tricky for more general readers and those I would rate the weltmeisters of complexification and cloudification are at the heart of this deal precluding broader understanding.


Markit’s Weisberger: IEX ‘Speed Bump’ Won’t Solve Latency Arb
John D’Antona – Markets Media

PLY: It’s lovely to see how the parish can become so fixated with minutiae of no real relevance to the big world. A bit like the Brexit argument reduced, the debates of linearists in the field (and let’s face it the lateralists amongst us are few and far between – for appreciably obvious historical reasons) often become tedious. However, this sub second navel gazing is surely irrelevant when the enemy of the equity markets is the lack of best execution focus in the US and the toxic poison which is payment for order flow? (How the latter has escaped a mass round up with orange jumpsuits all round escapes me).

Either way the US equity markets remain the marketplace most self-obsessed in the fashion of the Kardashians of all asset classes.


Sharebroker Rejects Claim NZX Committed $100m To Grain Exchange

NZX director and Forsyth Barr MD Neil Paviour-Smith has rejected Ralec’s claims in the High Court that the stock exchange operator committed $100 million to its 2009 investment in the Clear Grain Exchange.

Witness evidence has begun on the fifth day of the scheduled nine-week court action in which NZX and Ralec, the grain exchange’s previous owner, are suing one another for up to A$37.6 million and A$14 million plus bonuses respectively.


HK Should Develop Itself As A Mainland Bond Trading Hub: Think Tank (subscription)
Enoch Yiu – SCMP

Hong Kong will need to develop a bond connect programme with the mainland and develop more yuan investment products if it is to retain its role as the leading offshore renminbi centre, as new competition emerges from other markets.


Dancing in the Dark: Fraud Shapes Dark Pools (subscription)
Aggelos Andreou – Waters Technology

Dark pools, with their anonymous members and clandestine dealings, have come in for a fair bit of stick in the last few years, especially from regulators on both sides of the Atlantic keen to shine a light on these increasingly popular execution venues.

PLY: Again, I know some are stubbornly committed to their adherence to the dark pool moniker but instead of using the language of SPECTRE, wouldn’t “Institutional Liquidity Pools” be a better idea to separate the dodgy daylight robbery element from the smooth blocks?

Private Markets

Tadawul Hires HSBC’s Saudi Unit for IPO
Dana El Baltaji – Bloomberg

The public offering comes amid a broad Saudi privatization drive that includes plans to list up to 5% in state oil giant Aramco. Earlier this week, the $404 billion Tadawul SE said it will relax restrictions on foreign investors as part of its plan to turn the bourse into a gateway for inflows into the kingdom.

PLY: I am not entirely inclined to believe that the Saudi desperation is a conversion to Thatcherism but one lives in hope.


ISEG Acquires Startup SE (SSX) to Expand Global Presence

The transaction will combine the operations of the European SE (ESE) and the Startup SE (SSX) under ISEG and expand the group’s global presence and listing capabilities.

PLY: ISEG seems to be a portal for crowdfunding, cannot say I have ever heard of the ESE moniker before either. It is certainly not a regulated exchange entity so far as we can see. Anyway, good luck to Ian Haet and the SSX in the future.


Why NSE Chooses To Self-List, Not Cross-List
Ashley Coutinho – Business Standard

NSE feels its own exchange would offer better liquidity for trading its shares compared to rival BSE. Cross-listing would also involve sharing all compliance-related information to BSE. NSE believes it would be more comfortable if regulated or supervised by a regulator rather than by another exchange.
Are there any circumstances under which NSE would be willing to cross-list?
NSE has said that it will consider the option of listing on BSE if all compulsory disclosures are directly sent to either Sebi or another regulator.

PLY: Not permitting self-listing strikes me as dumb but on the other hand SEBI has come a long way just in the last year or so on the issue of commercial exchange operators, so it’s still progress, if still some way from perfection.


Tanzania: Regulator Allows DSE to Raise Sh7.5 Bln (USD 3.4m) for Growth
Alawi Masare – allAfrica

The Dar es Salaam SE (DSE) has been allowed to raise Sh7.5 billion (USD 3.4m) through IPO after successfully completing its demutualisation process. A share will be sold at Sh500 (USD 0.22) during the IPO which is expected to start soon, according to a statement by the Capital Markets and Securities Authority (CMSA), without disclosing the specific date. 15 million ordinary shares will be listed.


NY Governor Cuomo Announces Approval Of First U.S.-Based Ethereum Exchange, Created & Operated In NY

Governor Andrew M. Cuomo announced that the New York State Department of Financial Services has authorized Gemini Trust Company to offer the trading of Ether.

PLY: Very interesting.

Dividend News

Bats declared a regular quarterly cash dividend of $0.08 payable on September 28, 2016, record date September 14, 2016.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX off 4% and FTIL off 1.5%.


China Needs Options
Christopher Langner – Bloomberg

…Sure, there may be a few more equity crashes along the way, but ultimately, the use of derivatives could transform Shanghai and Shenzhen into true investment destinations.

QV Premium: China Capital Markets Transformation Brief – Main File.

PLY: Yip, China needs them: traded options.


Wary Of Illiquidity, Sebi Says No To Any New Comex Futures
The Economic Times

As the NSEL scam continues to rattle investors in the commodities market, regulator Sebi ruled out allowing trading in any new commodity futures unless assured of sufficient liquidity.

PLY: Surely a how long is a piece of string question? If we had adopted this rationale in the western markets, we’d still be ruing the lack of onion price transparency and wondering what to do next…


TriOptima Completes first triReduce Compression Cycle For Cleared Euro IRS In Eurex Clearing


PLY: Always heartening to hear the latest compression news from TriOptima.


Seven Sector Index Futures Contracts To Debut At HKEX On 9 May


Career Paths

Nasdaq stockholders elected all nominated directors at the AGM. Board members Charlene T. Begley, Steven D. Black, Börje E. Ekholm, Robert Greifeld, Glenn H. Hutchins, Essa Kazim, Thomas A. Kloet, Ellyn A. McColgan, Michael R. Splinter, and Lars R. Wedenborn were elected for a one-year term. Börje E. Ekholm was re-elected to serve as Chairman of the Board by the BoD.

Tullett Prebon appointed Andrew Baddeley as CFO with immediate effect. He succeeds Paul Mainwaring who is standing down after nearly ten years as group finance director. Andrew will also join the company’s Board as an executive director with effect from 13 May 2016.

Business Standard reports that Mrugank Paranjape is taking charge as MD & CEO (announced in March) of MCX from Monday. MCX gets a full time MD after two years.

Financial Calendar

09.05 – TMX Q1 2016 Results

09.05 – Lending Club Q1 2016 Results

11.05 – DB1 AGM 2016

12.05 – Euronext AGM 2016 & Q1 2016 Results

12.05 – Oslo Børs VPS Holding ASA AGM

13.05 – ICE AGM 

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

Analyst Notes

Credit Suisse Reiterated ‘Outperform’ On LSE – 2900 Target Price

Numis Reiterated ‘Hold’ On LSE – 2700 Target Price

A full table of current analysis can be found on our Analyst Ratings page which is updated daily.

Other stories

HKEX Calls Out J.P. Morgan (subscription)
Kane Wu – Wall Street Journal

HKEX cast some potentially unwelcome attention on J.P. Morgan Chase after the exchange returned a Chinese company’s application for a spin off.


ISDA Launches Resolution Stay Jurisdictional Modular Protocol


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