May 09 2014

elb2Time for an off site today as part of my Liquidnet Europe board duties so we’re racing to pixel early… More pith Monday but for now: ICE beats estimates (as befits a poster child for modern markets), targets Q2 2014 to offload as much of Euronext as is humanly possibly in IPO. Numbers too from LME, Euronext, BvB, BM&F Bovespa and Sungard. Jignesh jailed to 15 May at least, lots of Indian stories circulating, Chary now chairman of FTIL as Shah unavoidably detained elsewhere.

Barclays still suffering from flaw of keeping banking interests and selling ETF business, while Charles Li reflects on the A Share journey ahead…

Next week, we’re going to be one… thanks to all our supporters, it will be an emotional week.

Meanwhile, recent Premium posts include:

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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Public Markets

ICE Q1 Earnings Beat Estimates

ICE on Thursday reported stronger-than-expected Q1 earnings due to income from new businesses. Net income rose to $262 million, or $2.27 a share, from $135 million a year ago, or $1.85 a share. Excluding $60 million in costs related to the acquisition and integration of NYSE Euronext, adjusted earnings were $2.60 a share, beating analysts’ expectations for $2.58, according to Thomson Reuters I/B/E/S. Revenue increased to $932 million from $352 million a year ago, above expectations for $922.9 million. Financial results were driven by the addition of new businesses, growth in ICE’s global agriculture complex and a record quarter for clearing of credit default swaps.

ICE full results here.

ICE Targets 2Q-2014 For Euronext IPO

ICE announced that Euronext would likely IPO in Q2 2014.

Euronext Reports Q1 Profit Of $36 Mln Ahead Of IPO
Clare Hutchison – Reuters

Euronext, which is planning a stock market listing next month, earned net income of $36 million in the first three months of the year, a regulatory filing showed on Thursday. Total revenues at the group, which operates bourses in London, Paris, Brussels, Amsterdam and Lisbon, were $139 million, its parent ICE said in its Q1 earnings release. Q1 figures show cash equities making up the bulk of Euronext’s business, accounting for $63 million in sales in Q1. Revenue from equity derivatives, futures and options was $17 million, while turnover from market data and listing fees was $30 million and $9 million, respectively. Year-on-year comparisons were not available because Euronext was previously part of a combined business with NYSE.

PLY: Euronext in many respects demonstrate the robustness of the exchange model. Despite being largely unloved and somewhat manipulated behind the scenes by government officialdom, still they can turn a profit…

BM&FBOVESPA Q1 2014 Financial Results

Total revenue reached R$546.1 mln (USD 246 mln), a 5.9% decrease compared with Q1 2013 and a 4.2% climb in the QoQ comparison.

BVB’s Profit Down 10% In Q1
Irina Popescu – Romania Insider

Bucharest SE (BVB) ended Q1 with a net profit of RON 1.38 million (EUR 310,000), down some 10 % YoY. The net profit per share was of RON 0.18, down from 0.20 per share in Q1 2013. Its turnover was of RON 4.64 million in Q1 (EUR 1.45 million), up 14.5 % compared to the same period the year before, due to an improvement in the trading activity. The operating profit was of RON 1.20 million (EUR 269,000), almost double against the first three months of 2013, on higher revenues, while the operating expenses went slightly up.

Full report here.

PLY: Nothing too exciting from BvB, the market still needs an enormous amount of work to be a real business.

Legal Fees Eat Into LME Q1 Earnings

LME posted a drop in Q1 underlying earnings, as income from higher volumes was eroded by legal fees and other costs. HKEx said earnings before interest, tax, depreciation and amortisation at LME dropped 12 % on the year to $161 million. Revenues rose 7 % to $315 million as average daily trading volumes increased. But operating expenses rose by $42 million, partly due to legal fees for U.S. class action lawsuits and a judicial review in Britain.

ICE Stock Sinks On Outlook For Rising Expenses

ICE shares sank on Thursday on a higher cost outlook overshadowing the exchange and clearing house operator.

NYSE To Curtail Order Types Amid Debate Over Their Fairness
Sam Mamudi & Matthew Leising – Businessweek

NYSE staff have identified more than a dozen to abolish, pending regulatory approval, ICE CEO Jeffrey Sprecher said yesterday. Shares of Atlanta-based ICE, which bought NYSE last year, fell the most since 2011 yesterday after the company released quarterly results.

In a “first step toward making our markets less complex, we will voluntarily reduce the number of order types at our U.S. equity exchanges,” Sprecher said during a conference call with analysts. “We will continue to evaluate our other order types to identify those that may not be providing the market with true utility.”

PLY: Good start: I make it 28 order types at NYSE. As we race to pixel, I would contend that this is anywhere up to about 26 order types too many for the exchange to require.

Arrests Got Nothing To Do With PwC Audit Findings: EOW

As reported yesterday, Mumbai Police arrested FTIL promoters Jignesh Shah and Shreekant Javalgekar in NSEL case after hours of questioning. Addressing the media, Raj Vardhan Sinha, Additional Commissioner of the Economic Offences Wing (EOW), said that the EOW has found that Shah approved all contracts, adding that Javalgekar was arrested as he controlled IBMA finances. IBMA is a subsidiary of MCX ’s sister firm NSEL, which was involved in a payments fraud.

Shah, Javalgekar To Be In Police Custody Till May 15
Business Standard

FTIL promoter Jignesh Shah and former MCX MD & CEO Shreekhant Javalgekar will remain in police custody till May 15, the Maharashtra Protection of Interest of Depositors (MPID) court has decided. The two were on Wednesday arrested by the Economic Offences Wing (EOW) of the Mumbai Police for their alleged role in the payment fraud at NSEL.

PLY: That will undoubtedly help Jignesh on his quest to be portrayed as a victim of everything…oh hold on:

Jignesh Shah Told Investigators He Is A ‘Victim’

Jignesh Shah, told police that he had tried to recover money from defaulters and that he too is a “victim”, though he could not substantiate his claim.

“I am also one of the victims in this entire crisis. I tried my best to recover money from defaulters,” FTIL and MCX promoter Jignesh Shah said soon after his arrest yesterday.

PLY: Alas I fear the adjective ‘pathetic’ is the only one applicable to this sycophantic messiah-complex delusion. Sympathy with Mr Shah’s plight is calibrated around zero in our offices and many across the world I have no doubt.

No Evidence Of Money Being Siphoned Off Abroad, Says EOW

Speaking on the NSEL fiasco and consequent arrest of FTIL promoter Jignesh Shah, additional commissioner of the Mumbai Economic Offences Wing (EOW) Rajvardhan Sinha said FTIL was interested in increased trade volumes of NSEL.

Sinha, however, denied rumors of investor money being siphoned off abroad, adding that investigations are still underway.

FTIL Board Appoints Venkat Chary As Chairman
Times of India

The board of directors of the troubled FTIL on Thursday evening appointed Venkat Chary, one of its independent members, as its chairman after the arrest of Jignesh Shah, the founder-chairman of the company.

PLY: Mr Chary used to chair the comex regulator FMC during a long career in government.

MCX Board May Decide To Replace Statutory Auditor
Ashish Rukhaiyar – Livemint

Deloitte, Haskins and Sells LLP is likely to be replaced as the statutory auditor of MCX after the commodity market regulator asked MCX to assess whether Deloitte had failed to raise a red flag over issues like related-party transactions that emerged from a special audit conducted by PwC.

PLY: Hardly surprising that after so much upheaval and concern about exchange management that there would be a change in auditor going forward.

SEC: With The Program (subscription)
Kara Scannell – Financial Times

The US regulator has invested in high-tech tools to police Wall Street. As Wall Street pours billions into high-speed trading platforms – along with big salaries for top software developers – the question is whether regulators can keep up. Mary Jo White, SEC chairman, insists it can.

PLY: I am not sure the SEC really has the resource it needs nor actually the management it requires to achieve what it needs.

BNP Paribas Securities Services And Euroclear Extend Partnership On Euroclear’s Collateral Highway To Four New Markets

BNP Paribas Securities Services and Euroclear Bank announced that their joint triparty collateral management service, which was introduced in Italy and Spain last year, has been extended to four new capital markets:

ESMA Informs European Commission Of Its Intention To Ease Certain Frontloading Requirements Under EMIR

ESMA has sent a letter to the European Commission advancing its intention to ease certain frontloading requirement under EMIR. Frontloading is a term that refers to the clearing obligation under EMIR, which will oblige counterparties to centrally clear certain derivative trades through CCPs.

ESMA Proposes Moratorium On Derivatives Deals (subscription)
Philip Stafford – Financial Times

Banks and large swap dealers should be given respite from new European requirements to clear some of their derivatives transactions while the new rules are finalised, the main European markets regulator has proposed. ESMA on Thursday suggested a moratorium on the status of derivatives deals entered into from March 18 until Esma determines which product should face mandatory clearing.

Exchange’s Dark Pool Reflection
Traders Magazine

Exchanges must look to themselves and not to regulators to increase volume.

Asia Dealers Determined To Avoid SEFs – For Now (subscription)
Blake Evans-Pritchard – Risk

PLY: Asian traders have adopted a pragmatic wait and see approach to trading on SEFs, clearly as liquidity grows they are more likely to use the product…

Private Markets

SunGard Q1 2014 Financial Results

Revenue was $653 million, up 2% YoY. Currency had no material impact on reported revenue for the quarter compared to the prior year. For Q1, the Company had an operating loss of $289 million, which included a $339 million non-cash impairment charge of the SunGard trade name as a result of the split-off of the Availability Services business. Excluding this charge, operating income was $50 million and the operating income margin was 7.7%. Adjusted EBITDA was $145 million, up 13% YoY, and the adjusted EBITDA margin was 22.2%, up 2.1 points year over year.

NMCE Ends Promoter’s Voting Rights
Rajesh Bhayani – Business Standard

Ahmedabad-based National Multi Commodities Exchange (NMCE) is to extinguish the voting rights on the shareholding of its promoter, Neptune Overseas. The latter holds 30.18% stake in the exchange. All these 5.77 million shares will now not have voting rights; other benefits will also be withheld by the exchange till the shares are sold. The case is several years old , before both the Supreme Court (SC) and Company Law Board (CLB) after voting rights on 15% shareholding of the promoters was extinguished by FMC a few years earlier. This was after it was found the promoters had raised the holding in the exchange by purchasing shares with the exchange’s money. Now, voting rights on the entire lot have been removed.

Mt. Gox Depositors Win Preliminary Approval On Settlement Plan
Andrew Harris – Businessweek

Mt. Gox Co. creditors won a U.S. judge’s preliminary approval of a plan to settle with two of the bankrupt bitcoin exchange’s executives. The creditors propose to partner with outside investors to revive the exchange and compensate depositors. That deal also must be approved by a Japanese bankruptcy court.

Bitcoin Lacks ‘Credibility & Trust,’ U.S. Says SEC
Jeremy Kirk – PC World

“As a recent invention, Bitcoin does not have an established track record of credibility and trust,” the agency wrote in its advisory.

PLY: Whereas as a longstanding regulatory agency we have grown used to the fact that the SEC is inadequate? “Just because you are old does not make you a benchmark” as Jean-Francois Theodore once stingingly noted in a diferent context.

Bitcoin Is Not the Enemy of the Financial Incumbents (Part 1)
Josh Zerlan – Wired

Over the past few years I have spoken to thousands of people about bitcoin. Lately, I have seen an uptick in interest from the financial incumbents, such as Visa, American Express and various banking institutions. Invariably, they see bitcoin as a threat to their business in one way or another, and that’s just not the case.

PLY: The usual linear restrictions of the incumbents means they must first repudiate innovation until they realise they have to endorse it. “Plus ca change, plus c’est la meme chose” as some other French bloke memorably remarked…

Dividend News

ICE announced today a $0.65 per share dividend for Q2 2014. The dividend is payable on June 30, 2014 to shareholders of record as of June 16, 2014. The ex-dividend date will be June 12, 2014.

BM&FBOVESPA approved R$204.9 mln (USD 92.3 mln) in dividends to be paid on May 30, 2014, based on the shareholders’ position dated May 19, 2014, totaling 80% of GAAP net income in 2014.

Special Section: FTI, NSEL, India at the Crossroads

PLY: FTIL limit down on the back of the Shah incarceration as MCX bounces nearly 2%

NSEL Scam: What Led To The Fall Of Jignesh Shah?
Sugata Ghosh – The Economic Times

On that June morning a year ago, nothing looked amiss as three men gathered around Lala Pundit in a small office in Poddar Court, a congested neighbourhood in central Kolkata. Baheti, a stockbroker who had put money in ‘funny’ financial contracts floated by NSEL, was a worried man. His contact in Rajasthan had passed on scraps of unconfirmed information about vanishing commodities underlying the NSEL contracts.

Regulators Knew Of NSEL Lapses, Had No Jurisdiction To Pursue Case
Sandeep Singh – Indian Express

A communication trail between various financial sector regulators has shown that they were aware of the regulatory gaps at NSEL as early as 2011. However, the lack of clarity on whose jurisdiction the case fell, led to no action on the part of any of the regulators.


Exchange Data Revenues Grow In Q1 (subscription)
Faye Kilburn – waters technology

The world’s major stock exchanges have reported largely positive financial results for Q1 2014, with both the developed and emerging markets seeing healthy increases in market data revenues.

Instinet Adds Electronic Trading Support For The Philippines

Instinet Incorporated today announced the addition of the Philippines to its Direct Market Access (DMA) and Algorithmic Trading platforms.

Charles River Expands Trading Solution for Swaps with Integrated SEF Support
Business Wire

Charles River has enhanced electronic trading support for swap instruments by integrating workflows from leading SEF in the Charles River Investment Management Solution (Charles River IMS). This integration helps clients comply with mandatory Dodd-Frank requirements to trade eligible OTC derivatives on SEFs. Charles River recently completed its first client SEF trade with Tradeweb.

New Multi Commodity Management Platform Expected To ‘Significantly Reduce’ New Commodity Contract Launch Timescales For Exchanges

Kynetix, the leading provider of exchange-based commodity management platforms, today announced the launch of the Inventory Management module of Sentinel, their multi commodity management platform, which they believe will significantly reduce time to market for new commodity contracts.


ICAP Energy Launches Global Iron Ore Electronic Platform
Commodities Now

ICAP announced that it successfully launched its global iron ore electronic platform on 5 May, coinciding with Singapore Iron Ore Week 2014. The new platform fits seamlessly into ICAP’s existing services offering clients the advantage of global access to a wide-range of commodities on a single platform.


Launch Of The Solactive Canadian Select Universe Bond Index

Solactive AG enters the bond space in Canada with the launch of two new indices: the Solactive Canadian Select Universe Bond Index and the Solactive Canadian Select Corporate Bond Index.

Career Paths

FT notes that Ringo Chiu, former COO at Citic Securities International, will join SGX in a newly created job based in Hong Kong that will focus on derivatives, three people familiar with the matter said. SGX has a sales office in Beijing.

Tiefenbrun Takes Board Role At Turquoise (subscription)
Anish Puaar – Financial News

The former CEO of Turquoise, the pan-European market majority-owned by LSE, has joined the firm’s board as a NED after moving to Bank of America Merrill Lynch last year. Natan Tiefenbrun, who joined BAML last summer as a MD in the investment bank’s European execution services division, was added to the Turquoise board last month, according to the Financial Services register. BAML is one of 12 investment banks that own stakes in Turquoise and is therefore entitled to a seat on the board of the pan-European platform. Tiefenbrun replaces Ashok Krishnan, global head of execution at BAML, on the board.

NZX announced the appointment of Jody Taylor as Leader Participant Compliance. Jody oversees and leads the compliance team in its role to monitor the compliance of Market Participants with NZX Rules.

Financial Calendar


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.

Other stories

Barclays Axes 19,000 jobs, Reins In Wall Street Ambitions
Steve Slater – Reuters

Britain’s Barclays reined in its ambitions to be a Wall Street powerhouse on Thursday and signaled a return to its retail roots with a plan to hive off much of its investment bank and axe one in four jobs at the division.

PLY: Barclays only made one mistake – years ago they sold their cracking ETF business when they ought to have disposed of the bank (especially Bob’s iBanking empire) and kept the ETF business.

Presentation By HKEx Co-head Of Equity & FIC Bryan Chan And Chief Administrative Officer Monica Wong At A Media Workshop On Shanghai-Hong Kong Stock Connect

Latest Charles Li Direct: Shanghai-Hong Kong Stock Connect Is A Big Step In A Long Journey

HKEx CEO Charles Li blogs about Shanghai-HK Stock Connect, how it works and what it means to HK and Mainland China.

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