May 08 2014

elb2

People have been asking what are the advantages of Exchange Invest Premium (clearly aside from supporting the free daily Exchange Invest newsletter). Well that advantage was writ large yesterday when news, ahem, ‘broke’ in the dead tree press that Bill Templer was joining the LSE:

…Exchange Invest Premium reported this from the Boca poolside March 12th!

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HFT1: The Market is Not Rigged
– first in a series about HFT and the issues arising…

Gordon Bennett! Low Latency Data At The New York Yacht Club?
– a follow up to HFT: The Early Years

OSOV No Argument
– democracy is an essential antidote to plutocracy –

The ZA Pivot
– Cinnober grabs the clearing advantage in South Africa –

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Today, Jignesh gets arrested, unexpected shake-up at Borsa Istanbul, Steven Maijoor warns about patchwork FTT, Cinnober sparkling on debut at Thai Exchange, Euronext to list for over 2 billion dollars? Lots of questions about Alibaba, amid uncertainty the company is operating in shareholders’ best interests. Hong Kong results slightly up, Iceland headed for T+2, Panama opens Euroclear link, NSE buying another 5% of NCDEX? Saudi Tadawul preparing for listing, Michael Spencer bonus reduced…and more in today’s free Exchange Invest daily…

It’s fair to say that even though the arrest appears only to be for obstruction, there is a lot of ‘Shahdenfreude’ in the air this morning concerning Jignesh spending the night behind bars.

Public Markets

FTIL Chairman Jignesh Shah Arrested In NSEL Fraud
Khushboo Narayan, Ami Shah & Ashish Rukhaiyar – Livemint

Shah’s arrest is the 10th and the most significant in the case since the NSEL crisis began in July. FTIL owns 99.9% of NSEL. It is a new low for an aggressive entrepreneur who set out to build a global empire. Shah and his companies have been declared unfit to run a commodity exchange and also runs the risk of losing control of MCX-SX with the stock market regulator declaring him and his company unfit to run an exchange (he has appealed the order).

Former MCX CEO Shreekant Javalgekar was also arrested on Wednesday, taking the total number of arrests in the case to 11. Shah and Javalgekar will be produced in court on Thursday. MCX is also an affiliate of FTIL.

PLY: Arrest is one thing, with the slow pace of events recently, will the Mumbai Fraud Squad (EOW) manage to bring charges swiftly?

Jignesh Shah, Ambitious Man In Savage Hurry
Mumbai Mirror

It took nine months of investigations for the police to nab the man in the centre of Rs 5,600 cr (USD 933.33 mln) NSEL scam.

PLY: In the end, the arrest was for being evasive during questioning…this has a long way to run yet, they have not it seems directly nailed any charges at Jignesh’s door of substance. That said, a few days in jail may help Jignesh get things in perspective…or make him more evasive than ever in questioning lest he self-incriminate.

FTIL Left Adrift In Sea Of Trouble
Rajesh Bhayani – Business Standard

A meeting on Friday will chart a road map to sell FTIL’s stake in the exchange, in case FTIL isn’t able to do so. The MCX board will discuss a proposal to amend the articles of association of the company to accommodate the new set of norms issued by FMC on Tuesday.

FTIL’s Value Preservation Paramount In MCX Stake Sale
Moneycontrol

How much confidence do FTIL shareholders have in the ability of the board of FTIL to run this company, now that its key man Jignesh Shah is in jail?

PLY: A shareholder putsch is tricky given Shah’s dominant shareholding but he risks a life of lawsuits if he doesn’t… We have already heard voluble complaints and threats of legal action from Blackstone and Sheth family entity Gesco in particular.

FTIL Moves SAT Against SEBI Order On ‘Fit And Proper’ Status
The Economic Times

FTIL has moved the Securities Appellate Tribunal challenging Sebi’s ruling that the company was not fit to hold a stake in any stock exchange.

HKEx Q1 Results
HKEx

Revenue and other income $2,335 mln, up 5%
EBITDA $1,601 mln, up 3%
Profit attributable to shareholders $1,178 mln, up 2%
Basic EPS $1.02, up 1%

PLY: HKEx reports pretty flat numbers as it retains considerable optionality with LME and the A Share train which could be an exciting ride…

Euronext To List On Its Dutch, French & Belgian Exchanges In IPO
Clare Hutchison – Reuters

PLY: The hope and hype is for a 1.5 billion Euro valuation ($2.1 billion) with the listing initially on Amsterdam, Paris and Brussels and subsequently Lisbon too.

Good luck if they can get that, previously I thought $1.5 billion would be a remarkable achievement. Certainly there is a feasible for profit business within this entity although it still looks like a patchwork quilt of dysfunction manipulated by dark regulatory forces than, well, an enterprise. Apparently Euronext London will seek recognised investment exchange (RIE) status from Britain’s FCA following the spin off (as LIFFE takes the existing RIE licence with it to the bosom of ICE).

It was reported last month that Euronext was working on a group of eight “anchor” investors to take a 25-30 % stake in the group which was updated with new names more recently.

EU Watchdog Sounds Warning Over Patchwork Transaction Tax
Huw Jones – Reuters

“As a European regulator, obviously I prefer to do something either with all 28 states or nothing,” Steven Maijoor, chairman of ESMA told a conference organized by AFME, a European banking lobby.

PLY: The idea that there can be fringe groups launching projects away from the collective body because it suits a few trying to demonstrate their anti-capitalist credentials, does not provide confidence for the longevity of the EU.

NASDAQ OMX Iceland To Implement T+2 Settlement
NASDAQ OMX

NASDAQ OMX Iceland has decided, following a consultation among market participants, to change the settlement cycle for all securities traded on its Main Market and First North Iceland to two days (T+2). The settlement cycle for equities will, thus, be shortened by one day (is currently T+3) but the settlement cycle for fixed-income instruments will be lengthened by one day (is currently T+1). The new settlement cycle will be implemented on 6 October 2014. As previously announced (here and here), the other NASDAQ OMX Nordic and Baltic exchanges will also implement T+2 settlement on that day (Iceland is not an EU member hence not mandated to make the change).

Investors Say Alibaba IPO Filing Leaves Many Questions Unanswered (subscription)
Paul Mozur & Mia Lamar – Wall Street Journal

As Alibaba Group Holding Ltd. prepares for what might be one of the biggest initial public offerings in history, it faces the challenge of convincing investors it will be a good buy.

A number of investors and analysts said Wednesday that the more than 2,000 pages the Chinese e-commerce giant filed Tuesday leave many important questions unanswered.

PLY: Is anybody surprised?

At China’s Alibaba, Chairman Ma’s Dealings Raise Red Flags
Gerry Shih, Matthew Miller & Paul Carsten – Reuters

Part-way through Alibaba Group Holding Ltd’s long-awaited IPO prospectus was a subtle, but striking, warning: investors should know that lead founder and executive chairman Jack Ma might work against the company’s best interests.

The acknowledgement, on page 42 of a 300-plus-page filing, highlighted longstanding questions about the Chinese e-commerce giant’s complex corporate structure and potential conflicts of interests surrounding Ma, who started Alibaba in his one-room apartment in 1999 and has since branched out into markets as diverse as e-payments and financial investment.

To be sure, such warnings of potential conflicts were included in the prospectuses of many founder-controlled tech companies, including Facebook Inc and LinkedIn Corp. But Alibaba’s warning stands out given Ma’s numerous investments in third-party firms that partner with his company.

One hot-button issue is Ma’s control of Alipay, the PayPal-like affiliate established by Alibaba in 2004, which continues to provide the lions’ share of payment services for the company’s retail marketplaces.

PLY: Remember Mr Ma has proposed a structure which allows him and a cohort of insiders to name the majority of the board despite holding a minority stake barely in double figures. As I won’t tire of saying, this IPO could prove a poisoned chalice for whichever listing venue accepts it between NASDAQ and NYSE…

ASX Launches New Managed Funds Settlement Service
MondoVisione

ASX has today officially launched its new managed funds settlement service – mFund.

TriOptima Completes Largest triReduce Energy Compression Cycle Eliminating €8.4 Billion In Notional Outstanding
TriOptima

TriOptima, provider of OTC derivative post trade services, announces that it has completed the largest triReduce energy portfolio compression cycle to date, eliminating 5000 transactions with a notional
outstanding value of €8.4 billion.

PLY: I love TriOptima, a product which has done more to improve money markets (and now commodities too!) than all the thousands of hours spent on Dodd-EMIR-Frank. Proof how the private sector solves while government…

Private Markets

NSE To Buy 5% stake In NCDEX From Shree Renuka Sugars
Varinder Bansal – Moneycontrol

PLY: NSE is likely to buy a 5% stake in NCDEX from Shree Renuka Sugars, raising its stake to the maximum 15% permitted under new FMC rules. The total deal size is anywhere between Rs 900 crore and Rs 1,000 crore.

Saudi Tadawul To Hire Banks For IPO Of Biggest Arab Bourse
Matthew Martin, Deema Almashabi & Sarmad Khan – Bloomberg

Saudi Arabia’s stock exchange plans to sell shares in an IPO as the Arab world’s largest bourse seeks to gradually open up to foreigners and boost institutional investment.

Tadawul, will hire advisers soon for the share sale, CEO Adel Al Ghamdi said at a conference in Riyadh, making it the second market in the Gulf Cooperation Council region to go public after DFM in Dubai.

HC Upholds SEBI Decision
Times of India

Gujarat high court on Wednesday upheld the notification issued by SEBI with regard to net worth and turnover criteria for regional stock exchanges (RSEs). The court has confirmed the SEBI’s decision of derecognizing the Ahmedabad SE (ASE) and the Vadodara SE (VSE) as their net worth is below Rs 100 crore (USD 16.6 mln) and the turnover was less than Rs 1,000 crore USD 166.6 mln). The stock brokers of these two bourses had questioned the SEBI criteria communicated in 2012.

Panama Opens Up Stock Market To 46 Countries
Newsroom Panama

As announced on April 3rd, Panama has opened its stock market to 46 Countries with stage one allowing transactions of government bonds and state owned institutions, to be followed by corporate bonds facilitated by its link-up with Euroclear.

CFTC’s Division Of Clearing And Risk Issues No-Action Letter For OTC Clearing Hong Kong Limited
MondoVisione

CFTC’s Division of Clearing and Risk (DCR) today issued a time-limited no-action letter stating that DCR will not recommend that the Commission take enforcement action against OTC Clearing Hong Kong Limited (OTC Clear) for failing to register as a derivatives clearing organization (DCO) pursuant to Section 5b(a) of the Commodity Exchange Act (CEA) or (2) U.S. clearing participants of OTC Clear for failure to clear certain interest rate swaps and certain non-deliverable forwards through a registered DCO pursuant to Section 2(h)(1)(A) of the CEA and the implementing regulations thereunder.

Special Section: FTI, NSEL, India at the Crossroads

PLY: Unsurprisingly the fact that Jignesh Shah is finally behind bars (at least temporarily) has sent MCX and FTIL shares down between 4.5% and (limit) 5% respectively.

Was Leaked Anjani Sinha’s Statement Against Jignesh Shah The Last Straw?
N Sundaresha Subramanian – Business Standard

Last week, Jignesh Shah declared he had survived a tsunami of bad news. In hindsight, he declared it one wave too soon.

PLY: Deliciously drole one liner there from Mr Subramanian…I write, suppressing any sense of “Shahdenfreude” which I know is considerable today amongst many western market operators.

Jignesh Shah Arrest: Will NSEL Investors Get Back Their Money?
Mahesh Nayak – business today

“Yes the arrest of Jignesh Shah comes as a surprise at this stage,” says P.H. Ravikumar, ex-managing director and CEO of NCDEX. “Unless they (EOW) have fresh evidence against Jignesh on his involvement they would not have arrested him. There is something more than what is in the public domain.”

PLY: Yet the reason given simply suggests police exasperation over continuing answer evasion…

Court Freezes Rs 126 Crore (USD 21 Mln) Assets Of NSEL Defaulting Firm
Zeenews

A special anti-money laundering court here has ordered attachment of Rs 126 crore (USD 21 mln) assets of major defaulter Mohan India Private Ltd, involved in the multi-crore NSEL scam. Mohan India Pvt India had an initial liability of Rs 922 crore (USD 153.6 mln) and according to latest data it owes Rs 600.08 crore (USD 100 mln), of which it has paid Rs 52.85 crore (USD 8.8 mln) to the exchange.

BJP Will Bring Back Money Stashed Abroad By Jignesh Shah: Kirit Somaiya
The Economic Times

Leading BJP member Kirit Somaiya said today that a BJP-led government expected to assume power at the Centre, would bring back money allegedly transferred to foreign countries, by Jignesh Shah, who has been arrested for his alleged involvement in the NSEL scam.

PLY: Interesting development, suggesting a change of government (as appears likely, domestic selfie-issues notwithstanding) will not save Jignesh Shah.

Technology

Exceptionally Successful First Day Of Trading At TFEX With New System
Cinnober

As announced yesterday, The Stock Exchange of Thailand (SET) and its derivative arm TFEX have successfully replaced their entire technology platform for derivatives trading and experienced their second-highest daily number of contracts traded ever, on the very first day of trading. This comes on the heels of a similar technology replacement for equities trading, which led to volume increases, leading low latency and state-of-the-art functionality. The Stock Exchange of Thailand selected Cinnober Financial Technology as its partner in this comprehensive replacement of trading infrastructure.

PLY: Great to see SET still making so much progress against a challenging domestic political environment while Cinnober continue to make a mark as the world’s leading independent exchange vendor.

Nasdaq Nordic Bows Tiered EOD Data Fees (subscription)
Giulia Lasagni – waters technology

Nasdaq OMX has introduced a new set of fees for data vendors who redistribute end-of-day data from its Nordic Exchange, succeeding a previous policy that allowed vendors to distribute end-of-day data to unlimited numbers of third-party recipients for a flat fee.

Products

ICE Announces Launch Of 64 New Energy Contracts
Business Wire

ICE announced the introduction of 64 new energy futures and options contracts on May 12, 2014, subject to the completion of necessary regulatory and governance processes.

The new contracts, which will be available for trading at either ICE Futures Europe or ICE Futures U.S. and cleared at ICE Clear Europe, include crude oil, gasoline, middle distillate, fuel oil, power, biofuel, naphtha, natural gas liquid, petrochemical and environmental futures and options contracts.

CME Announces First Trades of North American Physically Delivered Aluminum Futures
CME

CME announced the first North American physically delivered Aluminum futures contracts were traded on Tuesday, May 6, by Macquarie Bank Limited, the executing firm.

Divided On LME, Rusal, MillerCoors Unite On CME Aluminum Contract
Reuters

CME’s upstart aluminum contract has won the support of Russian producer Rusal and major consumer MillerCoors, uniting two industry heavyweights whose views clash over LME’s warehousing crisis.

Career Paths

NASDAQ OMX Shareholders Elect Members To BoD
NASDAQ OMX

Shareholders elected all nominated directors at the AGM.

The following Board members were elected to their positions:

Charlene T. Begley
Börje E. Ekholm
Steven D. Black
Robert Greifeld
Glenn H. Hutchins
Essa Kazim
John D. Markese
Ellyn A. McColgan
Thomas F. O’Neill
Michael R. Splinter
Lars Wedenborn

Subsequent to the Annual Meeting, Börje E. Ekholm was re-elected to serve as Chairman the Board by the BoD.

All will serve one-year terms.

BIST Dismisses Three Senior Staff
Reuters

Borsa Istanbul, Turkey’s state-run stock exchange, has dismissed three senior personnel after a restructuring eliminated their jobs, an official at the exchange told Reuters on Wednesday. The decision to discharge two deputy general managers and the head of research at Borsa Istanbul came at a May 2 board meeting.

“As part of the ongoing organisational restructuring at Borsa Istanbul, deputy general managers Ali Coplu and Mustafa Baltaci were relieved of their duties,” the exchange official said. “Because the research and business-development sections were merged, the research manager Orhan Erdem was also relieved of his duties.”

PLY: The exchange world will be shocked at the sudden departure of Mustafa Baltaci in particular, given his role as a Board Member of FEAS and non-executive director of the Baku, Montenegro and Sarajevo exchanges. We wish Mustafa every success in the future.

FN reports that Markit has hired the Americas head of rival technology provider Charles River, in a signal of its intention to grow its newly-acquired buyside business. Spiros Giannaros resigned from his role as Americas managing director for Charles River Development last week and is expected to join Markit’s thinkFolio business.

CFTC Acting Chairman Mark P. Wetjen announced that Legislative Affairs Director John Riley will depart the agency in May after a 30-year career in Federal service.

The agency also announced the appointment of Ted Serafini to serve as Acting Director of the CFTC’s Office of Legislative Affairs.

ICAP Boss Gets Bonus Despite £55m Libor Fine
sky news

The CEO of ICAP has had his annual bonus slashed in the wake of its £55m fine for its role in the Libor rate-rigging scandal. Michael Spencer, has been awarded a cash-and-shares bonus for last year worth approximately £700,000, a roughly 75% cut on his payout for 2012. Mr Spencer’s bonus will be publicly disclosed alongside ICAP’s full-year results next week.

Financial Calendar

Today

ICE Q1 financial results
Record date MarketAxess $0.16 quarterly cash dividend
SunGard Q1 2014 financial results

Tomorrow

TMX Q1 2014 Financial Results
Record date Charles Schwab $0.06 quarterly dividend

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

Crowdfunding

P2P Lending Service Bondora Is Now Authorised And Regulated By FCA
wiseclerk

Bondora is now authorised and regulated by the UK based FCA. The FCA supervised P2P lending license is the only regime available anywhere in Europe that subjects peer lenders under regulatory oversight, supervising peer lending companies. Bondora is one of the selected few peer lenders which is now operating under a license and probably the first non-UK p2p lending company licensed by FCA.

Hong Kong’s Securities And Futures Commission Outlines Risks Of Crowd-Funding & Potential Regulatory Issues
MondoVisione

The Securities and Futures Commission (SFC) issued a notice reminding parties engaging in crowd-funding activities of the potential application of relevant securities laws and regulations, and reminding the public of potential risks relating to participating in crowd-funding activities in view of the increase in such activities internationally and in Hong Kong.

Other stories

Chicago Stock Exchange Signs Longterm Lease At 440 S. LaSalle
PR Web

Chicago SE signed a long term renewal of approximately 33,000 square feet at 440 S. LaSalle.

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