May 11 2016

elb2Wow, Issue 747 – jumbo time…

You may not know John McPartland but he is the kind of person who has a much stronger claim on being a counterparty to God’s work than, well, any of those bankers for starters. Have a scroll and you can read his eloquent demolition of a lot of the cant uttered in the parish of late amongst those oversharing their manifest lack of CCP comprehension. The article is simply compelling, in the same way a lot of recent merger guff, smacks of failure to grasp the simplicity of the Twix principal et al.

Elsewhere the DoJ has begun investigating a couple of players (at least) in the payment for order flow tango which blights US equity trading… Why bother picking on some parties…”Mr President tear down this wall” I say.

Euronext gets a better (if still ludicrously complex) capital deal from Holland (there was me thinking they believed in free markets but clearly they have lost it – at least Euronext have regained their mojo in recent years post NYSE liberation).

New event alert: ICDA are doing a CyberRisk conference in London, more details to follow. However, booking now are: Finance Malta May 25/26, FESE Convention, Malta, 15/16th June. Also on the CMU theme, save the date for September 15th, InterContinental Hotel, Warsaw. First CEE CMU Capital Markets Summit, chaired by me, Patrick L Young, with the 2nd CEE Capital Markets Awards that evening.

Meanwhile, here’s a video with me discussing the Mystery of TTIP, which looks increasingly a tad doomed – mixing the free markets of America with the precautionary risk model nanny state of Europe was always a challenge…

Public Markets

HKEX Q1 2016 Results


vs Q1 2015: Revenue & other income HKD 2.75 bln (USD 355m), down 2%, EBITDA 1.89 bln (USD 244m), down 9%, profit HKD 1.42 bln (USD 184m), down 9%.

PLY: HKEX reflects the China cycle.


Markit Q1 2016 Results


vs Q1 2015: revenue $287.8m, up 6%, operating profit 46.2m, down 43%, profit $24.7m, down 55%.  

PLY: I am giving this a qualified yeuk according to our unique ratings methodology, as it takes some digging to get to what looks like some hyper-average numbers from Markit plastered over with agitprop Meanwhile, remember Markit has agreed to merge in a deal with IHS which I struggle to see as shareholder value maximising.


ITG Agrees to Sell ITG Investment Research To Leucadia


ITG signed a definitive agreement to sell ITG Investment Research to Leucadia National Corporation, for $12 million in cash, expected to close at the end of May 2016. ITG Investment Research will thereafter operate as M Science.

ITG expects to generate a net increase in cash of more than $5 million. ITG does not expect to book a material gain or loss from this transaction after related costs and taxes and the write-down of the remaining intangibles associated with ITG Investment Research.

QV Premium: Exchange Deals Brief.

PLY: The ITG revamp continues and focus appears to be emerging.


City Of London Police Seize $22M From Suspected Russian Crime Gang – Suspicious Trading On ICE


Russian Gang Suspected Of Scam In ICE Market (subscription)

Caroline Binham – Financial Times

PLY: Plaudits to ICE and all parties whose surveillance clearly worked here. There can be no time for such activities in organised markets and indeed even allowing for the fastest of access/exit times for cash transfer, it ought to be feasible to eliminate money laundering on markets. Surprising that some broker business prevention officers presumably allowed such accounts in the first place given the hoops they make us honest folks go through.


Citadel Said in Talks to Buy Citigroup Electronic Trading Unit

Annie Massa & Dakin Campbell – Bloomberg

Citadel Securities is in talks to buy Citigroup’s electronic market-making unit Automated Trading Desk. Negotiations are still in flux and a deal could fall apart. Citigroup purchased Automated Trading Desk for about $680 million in 2007.


Exclusive: U.S. Investigates Market-Making Operations Of Citadel, KCG

Charles Levinson – Reuters

The Justice Department has subpoenaed information from Citadel and KCG related to the firms’ execution of stock trades on behalf of clients.

PLY: Payment for Order Flow is a simply egregious practice which brings disgrace upon markets. Investigating some folks in the middle is an odd approach to what requires wholesale reform but the DoJ is apparently moving where the SEC appears to have abrogated responsibility for fear of admitting what a festering mess their Reg NMS fiasco actually is.


CCP Interoperability Drive Poses Margin Challenges

Alexander Campbell – Risk

An EU drive towards interoperability for derivatives CCPs raises insurmountable problems for margin requirements, according to two researchers from the Federal Reserve Bank of Chicago.

In a paper that is forthcoming in the Journal of Financial Market Infrastructures, a Risk Journal, senior policy adviser John McPartland and researcher Rebecca Lewis argue there is no fair and equitable way to govern the posting of concentration margin between CCPs.

“It is either not equitable or doesn’t make any sense at all,” says McPartland, speaking in an interview.

PLY: I look forward to reading the paper but meanwhile it strikes me a lot of somewhat elementary education in the practical mechanics of CCPs would be a compelling use of senior management time in some institutions.


TMX CEO: The Canadian IPO Pipeline is Building (Video)


PLY: The problem is TMX looks becalmed according to everything I hear from Bay Street.


BVB CEO: Bucharest Keen To Join Regional Bourses In SEE Link

Lucy Fitzgeorge-Parker – Emerging Markets

PLY: More to this article than the headline vacillations of Romania who are late to the party. The comments of Jacek Kubas from EBRD are fascinating – he will be speaking at the First CEE CMU Summit Exchange Invest is co-organising in September.

Current members: Croatia, Macedonia, Bulgaria, Serbia, Slovenia, Bosnia, Greece. QV Premium: SEE Link Project Brief.


New Prudential Requirements Deliver Long-Term Certainty For Euronext N.V.


Euronext and the Dutch Ministry of Finance have reached agreement on Euronext’s prudential requirements. The agreed new requirements provide Euronext N.V. with the necessary flexibility to pursue its strategic objectives and remove uncertainty around its financial structure, while not hampering financial stability in the long-term. The improved requirements enable Euronext to pursue acquisitions and investments and to define a prudent and consistent dividend policy and financial structure.

PLY: I still think the Dutch have been enormously over-prescriptive in what ought to be a much simpler formula. However, it is a vast improvement on the previous fiddly framework of control freakery which clipped the wings of Euronext. A freer market ought to drive great opportunities for the exchange to further develop now it has such positive momentum.


ICAP – Voice “Inextricably Woven” Into Trading


PLY: Apparently some people say that in this social media age even some teenagers have been reporded actually speaking to their parents – just shows voice isn’t extinct yet in the digital age, in life or as David Casterton argues here, brokerage.


ITG Canada Shuts Prop Arb Desk

John D’Antona – Markets Media

ITG Canada is closing down its inter-listed proprietary arbitrage trading desk.


Bats’ ‘Client Suspension Rule’ Approved

John D’Antona – Markets Media

Bats is now going to be able to police its own marketplace faster and with less supervision as it deems fit.

Private Markets

Swiss Council To Accept Bitcoin Payments


The trial scheme, in the town of Zug, will begin on 1 July and run until the end of the year, the Swiss Broadcasting Corporation reports. Residents will be able to make payments of up to 200 Swiss francs ($200; £140) using the crypto-currency, in what the broadcaster says is a world first.

PLY: Good for Zug that remarkable beacon of freedom after that somewhat conservative Swiss fashion.

Dividend News

HKEX – It is the Group’s practice to declare a dividend only at the half-year and year-end and no dividend will be proposed for Q1 2016 (Q1 2015: $Nil).

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX flat, FTIL off 2% as somebody opts to just sue for recovery given the failure of the blob to sort the problem out:

NSEL Scam: An Investor Files Recovery Suit Against India Infoline

Business Standard

Vishvanidhi Dalmia has filed a recovery suit on Friday in the Bombay High Court against brokerage India Infoline and its four officials including Chairman Nirmal Jain following delay in recovery of money invested in scam hit NSEL.

QV Premium: NSEL Scandal Brief – Part 16.


IPC Launches Industry Leading FX Hub Solution – Enables Alpha Generation, Liquidity Sourcing & Risk Mitigation In The Global FX Markets


IPC’s FX Hub is centered at the heart of the global foreign exchange markets, specifically Equinix’s International Business Exchange data centers in New York (NY4), London (LD4), Tokyo (TY3), and Singapore (SG2) as well as other major FX centers such as Moscow, Chicago, Frankfurt and Zurich.


Turkish Ministry Of Science, Industry & Technology Has Approved BIST’s “BISTECH Research & Development Center” Application As Of May 6, 2016.



Abu Dhabi Global Market Sets Out Proposal For FinTech Regulatory Framework In The UAE



ISDA – Cross-Border Fragmentation Of Global Interest Rate Derivatives: Second Half 2015 Update


PLY: The Trans Atlantic trade demarcation is still the worrying aspect here methinks – can it be termed the Gensler fissure, or would the parish prefer to blame the EU more? Feedback welcome (in confidence as always).

Career Paths

Re-Appointment Of HKEX Chairman Approved


Mr Chow Chung Kong was re-appointed as Chairman of HKEX BoD with immediate effect until the conclusion of HKEX’s AGM to be held in 2018.

Professor Riccardo Rebonato, a specialist in interest rate risk modelling with applications to bond portfolio management and fixed-income derivatives pricing, has joined EDHEC-Risk Institute on May 2, 2016. He also joined the EDHEC Faculty.

PLY: Good hire for EDHEC.

Financial Calendar

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

RBC Capital Initiated Coverage On ICE – “Sector Perform” Rating, $255.00 Price Target

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


Goldman, Jefferies Put LendingClub Deals on Hold (subscription)

Peter Rudegeair & Justin Baer – Wall Street Journal

UK P2P Lenders Talk Up Regulation After Lending Club Ruckus

Huw Jones – Reuters

Lending Club would be in breach of financial rules had it knowingly sold on loans in Britain that an investor did not want, industry and legal experts said on Tuesday.

PLY: Storm in a teacup for the industry but a dumb deal for a former CEO.


U.S. Treasury Department Issues White Paper On Online Marketplace Lending Industry – “Opportunities & Challenges In Online Marketplace Lending”


Other stories

Fired Citigroup FX Trader Tells Tokyo Court He Was Scapegoat

Takahiko Hyuga – Bloomberg

A former Citigroup trader in Japan who was fired for allegedly trying to manipulate fx rates in violation of internal policy told a Tokyo court he was made a scapegoat and his actions were condoned by his employer.


TriOptima Whitepaper – Interest In Post Trade Risk Mitigation Services Grows In Asia



CFTC Issues Proposed Amendment to the 2013 Final Order Regarding RTOs & ISOs


Statement Of Dissent By CFTC Commissioner J. Christopher Giancarlo On The Proposed Amendment To The RTO-ISO Order



Keynote Address Of CFTC Commissioner J. Christopher Giancarlo Before The Markit Group, 2016 Annual Customer Conference NY, “Blockchain: A Regulatory Use Case”, May 10, 2016



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