May 07 2015

elb2Conference 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 to open 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, Part 3 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.

Today’s News:

It’s UK election day – catch me discussing the story and possibility of Brexit on CCTV at 1700 EST tonight (you may have heard me this am on UK Share Radio discussing Grexit)…meanwhile EI is early today as I am off now to speak at the Polish Young Entrepreneurs Forum where I will endeavour to avoid a speech akin to being perceived as ‘Dad dancing’ for the youthfully self-employed.

Bumper day with a lot of unmissable bond and commodity news, China gearing up in the latter as India appears precariously asleep at the wheel while in bonds BrokerTec Direct sounds exciting while MTS expands too. Chi-X looks to be officially in play as the news finally leaks out about various purchase approaches – will it still be $400 million price tag once bidders gather in eager anticipation? I doubt it.

Lots to read, happy scrolling and if you have not done so already, reply to my question of the week in confidence (to date – outright supporters of HFT have numbered precisely zero I might add…):

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 welcome (in confidence).

All feedback welcome from markets and participants alike. Now, happy scrolling and enjoy the pith…

Public Markets

Virtu Financial Q1 2015 Financial Results
Virtu Financial

GAAP Pre-tax income of $80.2 million, up 60.8%
Adjusted Net Trading Income** of $148.4 million, up 40.2%
Adjusted Net Income** of $87.9 million, up 57.3%
Adjusted EBITDA** of $106.4 million, up 50.2%
70.5% Adjusted EBITDA Margin**, up from 65.4%
Average Daily Adjusted Net Trading Income** of $2.433 million, up 40.2%

** Non-GAAP financial measures

Virtu Financial Aims To Break Into Chinese Market (subscription)
Bradley Hope & Chelsey Dulaney – Wall Street Journal
Five Takeaways From Virtu’s First Earnings Call (subscription)
Tim Cave – Financial News

CEO Douglas Cifu told analysts Wednesday that Singapore’s state investment firm Temasek Holdings, which owns about 10% of Virtu, was providing the trading company with introductions to potential partners in the world’s most populous country. Virtu is also exploring the possibility of trading commodities and currencies in China.

With a longtime aversion to foreign traders playing a bigger role in its markets, China has been seen by many in the proprietary trading world as a hitherto insurmountable challenge.

But China’s exchanges have cautiously been testing the waters for allowing greater involvement in trading from foreign firms. Several including the Shanghai SE have run mock options trading experiments with several HFT firms over the past two years. Options trading hasn’t yet been approved by CSRC, however.

Read our Premium Virtu Financial IPO Brief

Nasdaq AGM results
Nasdaq

Euronext AGM Results
Euronext

Chi-X Said Exploring Sale Valuing Market At $400 Million
Matthew Monks & Sam Mamudi – Bloomberg

Chi-X Global, a stock-market operator owned by Nomura Holdings and other banks, is exploring a sale that could fetch as much as $400 million.

Nomura and its co-investors are working with Moelis & Co. to sell the operator of equity venues in Australia, Canada and Japan.

Chi-X, created by Nomura’s brokerage unit Instinet, competes with TMX in Canada, ASX in Australia and JPX. Chi-X handles about 18% of Canadian stock trading, almost 10% of Australian volume and 1.3 % of trading of Japan’s Nikkei 225 Stock Average.

Nomura is Chi-X’s controlling shareholder. Other investors include JPMorgan, BofA, UBS, and Goldman Sachs, according to company statements. Bats bought Chi-X’s European division in 2011.

PLY: It has been an open secret in the bars around Singapore that Magnus Bocker had a strategy before he announced his departure as CEO, to buy Chi-X and use it as a means to leverage SGX in the region. Now the question is, who will buy Chi-X and take not merely an interesting slice of business in Canada and Japan but take the battle to Australia’s monopoly ASX with the ongoing vigour of Chi-X Oz?

David Rubenstein Was Right About SunGard
Dan Primack – Fortune

As SunGard preps an IPO (reported yesterday), it’s worth remembering a warning about the company from 10 years earlier.

“It’s going to take forever to bleed out” of a deal that size with so many sponsors.

PLY: And how far ahead of the curve is Sungard software after that decade in waiting?

ECB’s T2S Settlement System May Not Launch In June
Huw Jones – Reuters

ECB’s landmark project to unify settlement of securities across the euro zone won’t be launched in June unless the platform is more stable, a senior official said on Wednesday.

Paul Bodart, a member of the ECB’s T2S board, said there were still technical issues to be resolved ahead of the planned June 22 launch.

PLY: Readers in the USA may take heart that government/regulatory run projects are no more efficient on this side of the pond.

ASX CEO Says No Case To End Clearing Monopoly
Michael Smith – AFR

Elmer Funke Kupper: “We think there is absolutely no case to have more than one of these animals in a country the size of Australia,” he told the Macquarie Conference in Sydney. “There is no other single market on the entire planet that has more than one clearing house.”

ASX has proposed sizeable fee cuts for the clearing and settlement of equity trades for institutional broking firms and further investment in infrastructure if its present monopoly is extended by five years.

“Being a monopoly is not a god-given right, it is something you have to earn.”

The ASX proposed cut was labelled as “cynical” by Chi-X.

ICAP Plans New Offensive In US Treasuries Trading (subscription)
Philip Stafford – Financial Times

ICAP is developing a new venue via BrokerTec (“BrokerTec Direct”) for hedge funds and corporations to buy and sell US government bonds, that propels the brokerage into direct competition with rivals such as Bloomberg.

The venue, called BrokerTec Direct, represents a big shift at ICAP, which has historically focused on acting as a middle man in derivative, currency and bond trades between big investment banks and dealers. That focus has allowed its BrokerTec venue to accrue a 60% share of trading in US Treasuries, the world’s largest and most liquid government bond market.

Icap’s initiative also reflects an effort at maintaining its market share amid growing encroachment into the Treasury markets from electronic market makers.

PLY: Entirely logical: Read our Premium post: ICAP Explores A New Galaxy

UK Court Refuses To Reduce ‘Flash Crash’ Trader’s Bail (subscription)
Jane Croft – Financial Times

“I have not done anything wrong apart from being good at my job,” Navinder Singh Sarao shouted from behind a glass wall after his lawyer’s request for looser bail conditions was denied by a British judge.

Navinder Sarao’s ‘Flash Crash’ Case Highlights Problem Of ‘Spoofing’ In Complex Markets (subscription)
Bradley Hope, Chiara Albanese & Aruna Viswanatha – Wall Street Journal

…Mr. Sarao’s assertion cuts to the heart of a debate rumbling through the trading community about what constitutes “spoofing” and how to distinguish between illegal manipulation of markets and deft trading.

His case will play out as exchanges, regulators and law-enforcement officials in the U.S. face rising pressure to crack down on manipulative tactics.

Read our Premium Flash Crash & Hound of Hounslow – Brief

‘SEBI Should Do Gap Analysis Before Going Into Commodity Derivatives’
New Indian Express

In a statement issued on Wednesday, SEBI said its International Advisory Board (IAB) had advised it should conduct a thorough due diligence and gap analysis before articulating the vision for the commodity derivatives segment.

PLY: Given the chasm that is evident within a few seconds (and being actively filled in the likes of Africa), one wonders why another comprehensive navel gaze is required?

Come September, FMC May Have Been Merged With Sebi
Rajesh Bhayani – Business Standard

Read our Premium SEBI-FMC Merger Brief

SEC Approves Plan To Boost Traders’ Interest In Small Stocks
Dave Michaels – Bloomberg

SEC approved a two-year program designed to test ways to boost investors’ interest in smaller stocks.

SEC Approves Pilot to Assess Tick Size Impact For Smaller Companies
SEC

Thomson Reuters Announces Additional $1 Billion Share Buyback Program
MondoVisione

Private Markets

BATS Successfully Completes 18-Month Migration Process With Move Of BZX, BYX Exchanges To NY5 Data Center
Business Wire

BATS reported the successful and complete migration of all of its U.S. markets to the Equinix NY5 data center in Secaucus, N.J., completing an 18-month process related to the acquisition of Direct Edge.

On Monday May 4th, BZX and BYX Equity Exchanges were migrated to NY5 with customer participation at 100% and market share finishing the first two days at a strong 21.6% month-to-date vs 21.2% in April. Earlier this year, the EDGX and EDGA Exchanges moved to NY5 (January 12th) (reported here), followed by BATS Options on April 13th (reported here). The Direct Edge acquisition was announced in August 2013 and closed in February 2014.

Read our Premium BATS – Direct Edge Merger Brief

Saudi Stock Windfall Seen By Tadawul CEO On Real Estate Tax
Deema Almashabi & Ahmed Namatalla – Bloomberg

Tadawul may benefit from funds seeking refuge from a land tax as share sales accelerate:

The government’s plan to charge fees for undeveloped land may “trigger a flight of capital from real estate into the capital market,” CEO of the Saudi SE (Tadawul) Adel Al-Ghamdi said. “We witnessed the beginnings of this only last week with $2.2 billion of prime real estate being sold off over two consecutive days.”

Bitstamp Determined To Extend Global Footprint, Sets Sights On North America
Diana Ngo – Cointelegraph

Bitstamp, one of the leading Bitcoin exchange platforms, has announced a new partnership with Canadian compliance and risk management startup Vogogo. Through the collaboration, Bitstamp is looking to extend its global footprint with a particular focus on the North American market.

The integration will provide Bitstamp with Vogogo’s property compliance, risk management and payment processing platform, the companies said in a release.

Dividend News

ENX – dividend of EUR 0.84 per ordinary share approved.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX and FTIL both off 1% or so.

Technology

Ghana’s CSD To Install New Platform
Spy Ghana

In anticipation of the introduction of more capital market products to Ghana’s markets, the CSD is moving to install a new CSD platform from Millennium IT with expanded functionalities by October.

Mr Stephen Tetteh, CEO of the CSD said the new platform would be interfaced with the Automated Trading System of the Ghana SE and the Real Time Gross Settlement System of the Bank of Ghana for straight-through processing of transactions.

Read our Premium briefs: Rise of Africa – Part 1Part 2Part 3Part 4Part 5.

Products

ICE & Gmex Poised To Enter Swap Futures Battle (subscription)
Tim Cave – Financial News

Competition in Europe’s fledgling swap futures market is set to hot up with the launch of two new products as soon as next month that will challenge existing contracts traded by CME and DB1.

MTS BondsPro Platform Enhances Market Access With New Pure Web-Based Trading
LSE

MTS Markets International announced the launch of pure web-based trading on MTS BondsPro, its live trading platform for US Corporate and emerging market debt.

China Lets More Government Firms Trade Commodities Derivatives Overseas
Michelle Chen & Polly Yam – Reuters

China has more than tripled the number of central government owned firms allowed to trade commodities derivatives overseas without regulatory approval to circa 100, in a move that will give China more clout in global markets for metals, energy and agricultural products.

Iron Ore Trade Boom Shows China Bid For Commodities Clout
Jasmine Ng – Bloomberg

China’s bid for greater influence over commodity prices is intensifying as record trade in its iron ore futures dwarfs its nearest rivals.

Derivatives volumes on the Dalian Commodity Exchange more than doubled to 18.6 million contracts last month, or 1.86 billion metric tons, bourse data show. Trading in contracts on SGX totaled 78.2 million tons. UBS forecasts global demand at 2.04 billion tons in 2015.

China Tests Yuan Gold Fix Process Amid Pricing Ambitions
A. Ananthalakshmi – Reuters

China conducted trial runs for the planned launch of a yuan-denominated gold fix last month, three sources familiar with the matter said, in a sign the world’s second-biggest bullion consumer was moving closer to creating a benchmark price.

The state-run Shanghai Gold Exchange (SGE), on whose international platform the fix will be launched, conducted the trial with major Chinese banks and a few foreign banks, the sources said this week.

China Capital Markets Transformation – Exchanges & Markets, ETPs and Exchange Infrastructure – Brief Part 1, Part 2, Part 3

ESMA Releases Final Guidelines Clarifying The Definition Of Commodity Derivatives Under MiFID I
MondoVisione

Career Paths

Euronext AGM results – Ramon Fernandez and Jim Gollan were elected as members of the Supervisory Board, while Maurice van Tilburg was elected as a member of the Managing Board.

Nasdaq AGM results – elected all nominated directors. Board members Charlene T. Begley, Steven D. Black, Börje E. Ekholm, Robert Greifeld, Glenn H. Hutchins, Essa Kazim, Thomas A. Kloet, John D. Markese, Ellyn A. McColgan, Michael R. Splinter, and Lars R. Wedenborn were elected to their positions. Subsequent to the Annual Meeting, Börje E. Ekholm was re-elected to serve as Chairman of the Board by the Board of Directors. All will serve one-year terms.

CME Exec Mark Fields Named CEO Of Wickr
John Pletz – Crain’s Chicago Business

Mark Fields is making the leap from startup investor to CEO.

The CME executive who headed the exchange’s venture capital unit has become CEO of Wickr, one of the companies it backed. The San Francisco-based startup, whose app makes messages self-destruct a la Snapchat, immediately attracted interest from the financial services industry and people in countries where governments monitor communications and target dissenters.

Fields, 52, as MD of CME’s strategic investment group, led its investment in Wickr as part of a $30 million round of funding last year. Among its backers are Silicon Valley heavyweights Jim Breyer of Breyer Capital and Gilman Louie of Alsop Louie.

Nico Sell, CEO and co-founder, decided to split Wickr into a commercial company and a nonprofit, and recruited Fields to lead the for-profit company. He’ll remain based in Chicago, where Wickr plans to open an office.

The End Of Mark Mobius’s Reign As King Of Emerging-Market Stocks
Ye Xie – Bloomberg

The pioneering advocate for small, growing economies suffers a dry spell.

Financial Calendar

New announcements

LME Week Asia 2015 to Kick Off on 19 May – press release here.

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

Remarks Of CFTC Chairman Timothy G. Massad Before The EU Parliament, Committee On Economics, Brussels, Belgium
MondoVisione

SEC – Market Structure Data: Q1 2015 Data Now Available
MondoVisione

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