May 08 2015

elb2 Overnight the people of Britain have spoken. The good news for economists is that opinion pollsters have clearly grasped the mantle of “dismal scientists.” Outright victory for the Conservatives confounds the wishes of Brussels and suggests some arguments to come and a likely Brexit referendum too. Labour, despite offering to spend a sum even the Clinton Foundation might discern as sufficiently material to disclose, has been hammered. The Scots have presented a near clean sweep north of the border which may have huge ramifications for the UK’s fund management industry, camped as so many institutions are, in Edinburgh. Interesting times ahead for the EU’s financial markets.

Elsewhere in today’s Exchange Invest, it’s all here from BATS SIPs, Lima MILA Millennium, various LME pointers as ‘through train’ branch line to Shenzhen comes closer. CRYEX a new forex market and, alas, EU & US still cannot agree derivatives rules. Happy scrolling:

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.

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…

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, Part 4 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.

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 welcome (in confidence).

All feedback welcome from markets and participants alike.

Public Markets

China’s State Council Said To Approve Hong Kong-Shenzhen Link
Business Times

China’s State Council has signed off on a stock-trading link between Shenzhen and Hong Kong as global money managers prepare for the next phase in opening up the US$7.3 trillion mainland market.

The programme, expected to mimic the Shanghai connect that began in November, will start this year.

PLY: HKEx is locking up the ‘gateway to China’ play which has long underpinned its valuation.

Read our Premium HKEx – SZSE Stock Connect Brief

Europe & US Fail To Agree On Derivatives Rules (subscription)
Philip Stafford – Financial Times
Joint Statement Of CFTC Chairman Timothy Massad And European Commissioner Jonathan Hill
MondoVisione

Talks in Brussels between Jonathan Hill, the European Commissioner for financial stability, and Timothy Massad, Chairman of CFTC, concluded on Thursday, with no agreement reached over the recognition of each region’s rules on clearing houses.

EU Lawmaker Urges Global Approach To Avoid Clearing ‘Armageddon’ (subscription)
Tim Cave – Financial News

A senior European lawmaker has said a global framework for how clearing houses should react in times of market stress is the “only viable option” in the push to prevent what she described as the next “financial Armageddon”.

PLY: So somebody recognises the risk on one level but will they actually do more than grandstand, or indeed fail to provide a sensible clearing landscape?

LME Doesn’t Plan Fee Rise On 2015 Scale Next Year
Melanie Burton & Eric Onstad – Reuters

LME has no plans to hike trading fees in 2016 as much as it did this year when it raised transaction fees by over 30% this year, as owner HKEx sought to offset the costs of buying the world’s biggest industrial metals market.

Odds Not In Favour Of UK Trader Winning US Extradition Fight (subscription)
Lindsay Fortado – Financial Times

Legal experts say he does not stand much chance of staying on British soil and the recent cases of Britons challenging US extradition requests have met with little success.

Read our Premium Flash Crash & Hound of Hounslow – Brief

CFTC Requests Public Comment On An Application By Nodal Clear For Registration As A DCO
MondoVisione

HKEx: Partial Cancellation Of Bonds Due To Conversion
MondoVisione

Following the latest bond conversions from last month resulting in the issuance of 5,580,188 shares (reported here) and of 8,257,715 shares (reported here) and this month’s issuance of 10,764,556 shares (reported here), an additional bond conversion and issuance of 12,731,550 Shares, representing approximately 1.08% of the total Shares in issue as at 30 April 2015 (1,179,074,192 Shares), have been issued and credited as fully paid.

Private Markets

SunGard Q1 2015 Financial Results
Business Wire

Revenue $671 million, up 3% YoY (up 6% adjusting for currency)
Operating income $115 million and the operating income margin was 17.1%, compared to an operating loss of $289 million in Q1 2014. (Q1 2014 included a $339 million non-cash trade name impairment charge related to the split-off of the Availability Services business. Excluding this charge, operating income increased 129% YoY and the operating income margin increased 9.4 points YoY, driven by the increase in revenue, and an 8% decrease in total costs and expenses).
Adjusted EBITDA was $175 million, up 21% YoY, and the adjusted EBITDA margin was 26.1%, up 3.9 points YoY.

PLY: Interesting numbers as Sungard approaches the IPO block apparently…

ECX Mulls Adding Stock, Bond Trading
William Davison – Bloomberg

Ethiopia Commodity Exchange (ECX) plans to broaden the range of crops it trades and wants to introduce stocks and bonds under a five-year expansion plan, CEO Ermias Eshetu said.

The market plans to move from coffee and sesame seeds, which account for more than 90% of volumes and are the two biggest generators of foreign exchange in Ethiopia, to sugar and grains such as corn, Ermias, who became CEO in January, said in an interview. Equities, government debt, power and metals may also be added on the bourse, which traded 26.2 billion birr ($1.3 billion) worth of goods last year.

CRYEX Announces New Institutional FX & Digital Currency Marketplace & Clearing House
CRYEX

CRYEX announced the filing of an application with the Swedish Finansinspektionen (SFSA) to become a regulated clearing organization and create a member-only marketplace with clearing and settlement for FX and digital currencies.

Cryex is managed by a highly experienced team of banking and exchange executives with a record across FX and capital markets, technology, regulatory, risk and security management.

CRYEX has received 10 million USD financial funding from key venture capital firms White Star Capital, Northzone and a number of financial industry leaders.

Bitcoin Exchange ItBit Gets A New York State Trust Company Charter After Raising $25 Million
Jonathan Shieber – TechCrunch

ItBit, a bitcoin exchange operating in New York and Singapore, has been approved as New York State Trust company and added a number of heavy hitters to its board of directors on the heels of a $25 million round from new and existing investors.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX and FTIL up 2%.

Technology

BATS Seeks To Change How U.S. Stock Market Data Systems Are Run
John McCrank – Reuters

BATS is seeking changes in the governance of data processors central to the U.S. stock market, in order to give brokers and institutional investors a say in their operation for the first time.

The Securities Information Processors, or SIPs, disseminate stock quotations and last sale prices from all 11 U.S. stock exchanges and around 40 alternative trading venues to brokers and fund managers, which must buy the data to show they obtained the best possible prices for their clients. But the exchanges and an industry regulator make all the decisions on how the SIPs are run and how much the data is worth.

“There’s a governance challenge for the SIPs across the board in how they operate,” Chris Concannon, CEO of BATS said at a SIFMA conference. “Actually having a broker and a buy-side representative sitting at the table voting on plan amendments, I think that’s the appropriate structure,” Concannon said, adding that BATS will prompt the SIP committees to vote on the matter.

PLY: The BATS sell side market endeavours to also champion the buy side. It’s an interesting proposition but then again isn’t part of the problem the way the SIPs are treated as utilities and as can be seen from the stagnant mire of electricity generation, that is not a sound approach?

Lima Exchange Sets Sights On LatAm Expansion With LSE Platform
Elliott Holley – Banking Technology

As Peru rapidly grows its economy, the country’s Bolsa de Valores de Lima exchange hopes to turn itself into a regional hub for international investors. To that end, the exchange has gone live with a new trading platform, built by the LSE’s MillenniumIT subsidiary.

Lima exchange is already a member of Mercado Integrado Latino America (MILA), a joint initiative between the exchanges of Chile, Colombia, Peru and Mexico in which members of each exchange have access to the others’ markets. Peru already has the fastest growing economy in Latin America, having grown at an average of 6.4% over the last decade. Now, the exchange is seeking to revitalise its equities and bond trading through the new Millennium Exchange trading platform and smart order router.

The deal is the first successful go-live for MillenniumIT in Latin America, and as such it took a few adaptations – most notably, creating a Spanish version of the trader workstation.

MillenniumIT press release here.

Read our Premium MILA Exchanges Brief.

Equinix Responds To Possible Offer For TelecityGroup
MondoVisione

Data Integrity & Post-Crisis Regulatory Reform
Banking Technology

The integrity of data in capital markets – be it, for example, price data, trade facts, collateral balances, or other key business information – has long been a fundamental concern of technologists and business stakeholders. But how do we define integrity?

Products

EBS To Launch FX Outrights & Swaps On EBS Direct
ICAP

EBS, ICAP’s market-leading electronic FX business, announced it will beta launch FX Outrights and Swaps on EBS Direct in Q4 2015, subject to regulatory approvals.

Eight major liquidity providers (LPs) have agreed to support the beta launch and EBS has already received significant interest from customers, with a plan for 30 liquidity consumers (LCs) to participate in the beta launch globally, ten LC’s per region.

LME Eyes Gold & Silver Trading Launch (subscription)
FOW

OCC Says Listed Options Markets Must Remain Vibrant In The Eyes Of Regulators And Investors – Cites New Survey Results On Importance Of Options Industry Council – To Investors And Financial Advisors
MondoVisione

ISDA Launches UTIPrefix.org To Help Drive Global Data Standards
MondoVisione

Angola To Start Trading Stocks This Year As Banks Plan Listings
Colin McClelland – Bloomberg

Angola, sub-Saharan Africa’s third-largest economy, will trade selected shares and corporate bonds by the end of 2015, meeting an original deadline for an equities market that was pushed out by two years.

Banks Expected To Settle FX Probes For Billions (subscription)
Devlin Barrett, Aruna Viswanatha & Christopher M. Matthews – Wall Street Journal

Citigroup, Barclays, J.P. Morgan Chase and Royal Bank of Scotland Group are expected to plead guilty to rigging foreign-currency exchange rates and pay billions in combined penalties.

Indexes

Upcoming Launch Of MSCI Saudi Arabia Indexes
MondoVisione

Career Paths

LME Clear appointed Priyanka Malhotra as Head of Business Development, including product and relationship management.

The members of CCP12 – The Global Association of CCPs elected a new Executive Committee at its AGM on May 6, 2015.

The members elected Mr Marcus Zickwolff, Eurex Clearing, as new Chairman. He will take over the helm from Siddhartha Roy, CCIL (India) who served as Chairman for the last two years. New elected Vice Chairmen are Glenn Goucher, TMX and Siddhartha Roy.

The following ordinary members of the Executive Committee were also elected:

Erica Brown, NASDAQ OMX
Valentina Cirigliano, LCH.Clearnet
John Fennell, The OCC
Chen Guang, SHCH
Mikio Hinoide, JSCC
Paul Jones, ASX
Agnes Koh, SGX
Dale Michaels, CME
Ketan Patel, HKEx
Luis Jorge Pelayo, Grupo BMV
Thomas Sakaris, DTCC

PLY: Plaudits to Marcus Zickwolff on his elevation to CCP12 Chairman having been a successful founding Chairman of the EACH. I am also delighted to see Glenn Goucher being elected Vice Chairman alongside a slate of interesting office holders.

Euronext Ex-CEO Tells Employees Quick Exit In Company’s Interests
Reuters

Former Euronext CEO Dominique Cerutti sought to calm unease about his early departure from the pan-European exchange operator, telling employees it was in the best interests of the group to ensure its stability.

Cerutti was due to leave the company on July 15 to head Altran Technologies but on Tuesday (reported here) Euronext named COO Jos Dijsselhof as interim CEO.

Some labour union representatives at the operator of bourses in Paris, Amsterdam, Brussels, London and Lisbon had raised questions about Cerutti’s sudden departure.

“It was important to put in place as soon as possible managers who represent Euronext’s future,” Cerutti said in an emailed message to the company’s employees

PLY: Wise words and I think DC has done the right thing. The fact that it is labour unions raising questions, reminds us of the tricky staff underpinnings of the Euronext organisation where after all the hard left (and I mean hard left in French terms!) CGT has traditionally had a significant number of members within Euronext Paris.

Financial Calendar

Next week

11.05 – TMX Q1 Financial Results

12.05 – Record date MOEX RUB 3.87 dividend

13.05 – SEC Equity Market Structure Advisory Committee – focus on Rule 611 of SEC Regulation NMS, known as the “Order Protection Rule” or “Trade-through Rule.”

15.05

ICE AGM
NZX AGM
Record date BGC Partners $0.14 quarterly dividend
Record date ITG $0.07 quarterly dividend

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

IIROC roundtable to discuss alternatives to the proposal in IIROC Notice 15-0023 Re-Publication of Proposed Dark Rules Anti-Avoidance Provision (“Notice”) to address the impact of retail orders being routed to U.S. broker-dealers – June 23, 2015 – press release here.

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

Analyst Notes

LSE “Add” Rating Reaffirmed By AlphaValue – GBX 2,758 Price Objective
ICAP “Neutral” Rating Reissued By JPMorgan Chase – GBX 525 Price Target

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

All Analysts, Banks and Brokers are welcome to contribute to this section.

Other stories

IIROC Study Of The Impact Of The Dark Rule Amendments
MondoVisione

Speech By Andrew J. Kriegler, President And CEO IIROC: Protecting Canadian Investors
MondoVisione

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