May 12 2014

elb2Monday dawns with TMX results, MTS completing the acquisition of and most interestingly the prodigal return of Adena Friedman to NASDAQ where she is immediately installed as favourite to replace Bob Greifeld. Interesting CME Europe CCP collateral deal with SIX and lots of ramifications as India festers on multiple fronts. Intriguingly, NYSE Euronext correctly recognised risks of skewed contracts at MCX but still bought a stake and lost circa 40 million…

Public Markets

TMX Q1 2014 Financial Results

Revenue of $182.1 million, up 6% from Q1/13
Diluted EPS of 86 cents, up 23% from 70 cents in Q1/13
Adjusted diluted EPS of $1.05, up 35% from 78 cents per share in Q1/13
Adjusted diluted EPS of $1.05 excludes:
14 cents per share of amortization of intangibles related to acquisitions
5 cents per share charge related to Maple Transaction and integration costs

PLY: TMX demonstrates encouraging earnings on its first quarter as revenue increases modestly.

MTS Completes Acquisition Of BONDS.COM

MTS Markets International Inc., a wholly-owned U.S. subsidiary of MTS, has completed its acquisition, acquiring 100 % of Bonds’ outstanding shares, as previously announced on 6 March 2014.

Tullett Prebon Targets £20m Savings As It Eyes PVM Purchase (subscription)
John Aglionby, Philip Stafford & Neil Hume – Financial Times

Tullett Prebon is to buy oil broker PVM and look to make £20m of savings through cutting jobs and other fixed costs as it seeks to counter “difficult market conditions”. Tullett will buy PVM Oil Associates for up to $160m and boost its crude oil and petroleum broking operations.

PLY: IDBs remain in flux, threatened on all sides but with a vast 360 degree opportunity surrounding them too…

MCX Sets In Motion Process To Strip FTIL Of Voting Rights
Financial Express

The board of MCX decided on Friday to change its Articles of Association to incorporate latest guidelines on shareholdings, among others, issued by the commodity market regulator.

FTIL Board To Take Decision Regarding MCX Stake Divestment On 24 May
Ashish Rukhaiyar – Livemint
FTIL – Outcome of Board Meeting
FTIL Board Meeting Outcome – Response To Arrest Of FTIL CMD, Jignesh Shah By Mumbai Police

The board of FTIL said on Saturday that it will reconvene on 24 May to finalize the decision regarding divestment of its stake in MCX.

MCX India – Outcome of Board Meeting
MCX Initiates Action Against Employees After PwC Audit
Ashish Rukhaiyar – Livemint

MCX has initiated action against certain employees based on issues highlighted in a special audit report prepared by PwC.

PwC’s Special Audit Of MCX Identifies RiddiSiddhi Bullions, Edelcap Securities & Others Involved In Non-Genuine Trades
Sugata Ghosh & Ram Sahgal – The Economic Times

India’s largest bullion house, a leading financial services group, a few brokerages and some related entities have been named in the PwC special audit of MCX.

Ban On Fresh MCX Contracts Worries Brokers
Devangi Gandhi – Financial Express

On Thursday night, MCX directed the contract launch calendar for 2015 “be kept in abeyance”, though contracts approved in the 2014 calendar will be available for trading.

PLY: The regulatory pressure is piling up on MCX. FTIL needs to sell the stakes soon to avoid thorough value destruction at the Mumbai commodity exchange.

NYSE Euronext Red-Flagged Pacts Between MCX & FTIL In 2007
Banikinkar Pattanayak – Financial Express

According to a special audit on MCX by PwC, in an email to FTIL’s Devendra Agrawal on November 14, 2007, Nayan Mehta, then a SVP at MCX, said: “A draft agreement has been prepared. Last time, the NYSE due diligence team had mentioned that FT-MCX agreements are very one-sided and we had promised they would be rectified on renewal. Accordingly, if any change is required to be made for the above and any other reason, please let me know.”

PLY: NYSE Euronext sold its entire of around 5% stake in MCX for about Rs 100 crore (USD 16.25 mln) during Q4 2013, losing a cool $40 million or thereabouts. Given the egregious nature of the contracts, it is a remarkable testimony to the curious management of the formerly independent NYSE group that their DD didn’t actually cause them to walk away. A salutary lesson here for western buyers circulating around the FTIL stake for sale…

CME Clearing Europe To Offer Collateral System With SIX
Nandini Sukumar – Bloomberg

CME’s European clearinghouse and SIX Group’s central-securities depository have agreed to offer an integrated collateral-management service to insurance companies operating in Switzerland.

Once the system gains regulatory approval, financial institutions will be able to put the collateral needed to back trades directly into CME Clearing Europe Ltd.’s account at the Swiss company’s settlement arm. The pair will gradually extend the service to other countries and types of investors.

PLY: A good move by CME Europe. Remember, the Chairman of the CME Europe CCP is former EUREX Deputy CEO & boss of SOFFEX, Otto Naegeli.

LME Keeps Clearinghouse Fees Steady, Introduces Annual Levies (subscription)
Metal Bulletin

LME has set the day-to-day fees for using the soon-to-be-launched LMEClear at the same level as existing LCH.Clearnet tariffs but clearinghouse members will be required to pay new recurring annual charges covering their own membership and the registration of individual and pooled client accounts with LMEClear, which is scheduled to launch in September.

Nasdaq Expects Increase In IPOs From Israeli Firms
Ari Rabinovitch – Reuters

“Last year there were four IPOs and they had on average an 85 percent increase since the IPO. So the Israeli companies do well on Nasdaq,” Meyer Frucher told Reuters during a visit to Tel Aviv.

Nasdaq OMX Data Shines New Light On HFT Activity (subscription)
Tim Cave – Financial News

A clearer picture of HFT in Europe is emerging after Nasdaq OMX has become the first exchange in the region to disclose trading activity by its Nordic members in individual stocks.

PLY: Data which shines some welcome transparency but leaves a lot unanswered. Simply providing a bald number of HFT volume is misleading as it does not take account of what type of trading it is. Transparency is good, thank you NASDAQ OMX, but this is just another step in better understanding HFT.

Goldman, Barclays, Credit Suisse Draw High-Speed Trading Scrutiny (subscription)
Justin Baer & Scott Patterson – Wall Street Journal

New York’s attorney general is scrutinizing the private stock-trading venues run by Goldman Sachs Group, Barclays, Credit Suisse and others as part of a probe into whether HFT firms have enjoyed unfair advantages over other investors.

PLY: Repeating same story of past week with some different names. The NY AG will subpoena everybody, in the modern era of big data investigation.

Clock Is Ticking On European Consolidated Tape Tangle (subscription)
Anish Puaar – Financial News

PLY: The sad ongoing tale of how the industry has failed to create a single tape for EU trades years after MIFID and how frustrated regulators have given them 2 years to sort matters out before the regulators may take control (presuming they can afford to)…

CFTC Issues Notice Of Temporary Registration As A SEF To ICAP Global Derivatives Limited

CFTC approved the application of ICAP Global Derivatives Limited (IGDL) for temporary registration as a SEF. IGDL is a private limited company registered in the UK and is a wholly-owned subsidiary of ICAP Holdings (UK) Limited, a private limited company registered in the United Kingdom.

The Exchange Invest updated SEF page can be found here.

OTC Clear Is Now Able To Offer Its Services To US Clearing Members

HKEx subsidiary, OTC Clearing Hong Kong Limited (OTC Clear), established to clear OTC derivatives transactions, has received no-action relief from CFTC, allowing it to offer its clearing services to eligible US persons or affiliates of US persons (US Clearing Members) without being registered as a DCO, effective immediately until the earlier of 31 December 2014 or the date when the CFTC registers OTC Clear as a DCO or exempts it from registration.

The relief covers clearing of proprietary trading by US Clearing Members that involves IRS, denominated in Hong Kong dollars, renminbi (RMB), US dollars and euros, as well as non-deliverable currency forwards, denominated in RMB, Taiwan dollars, Korean won and Indian rupee.

Interactive Brokers CEO Explains The ‘Magic’ Of His Business
Brendan Mathews – The Motley Fool

Motley Fool Stock Advisor senior analyst Jim Mueller and analyst Brendan Mathews recently traveled north to tony Greenwich, Conn., to interview Thomas Peterffy, CEO and founder of Interactive Brokers, now publishing an interview which was previously reported here.

Private Markets

Cawley Exit Signals SEF Struggles
Mike Kentz – IFR

The long slog of Dodd-Frank reform has claimed its first victim. Start-up SEF Javelin Capital Markets and CEO Jamie Cawley have agreed to part company after shareholders expressed frustration at the platform’s slow pace of growth.

PLY: Javelin is just one of many SEFs in a crowded space where competition is fierce and it may be some time yet before a lot of traders are in a position to trade on the new platforms. That will raise stress across the board for startup platforms and those born from legacy IDBs alike.

Abraham Goes On The Offensive Against CBI Over Preliminary Enquiry
Raghuvir Srinivasan – The Hindu

Former Whole Time Member of SEBI, K. M. Abraham, against whom the Central Bureau of Investigation (CBI) has registered a Preliminary Enquiry (PE) over alleged irregularities in giving sanction to MCX – SX in 2008, has questioned the authority of the investigating agency to enquire into the decision-making process in SEBI which is a regulatory and quasi-judicial body.

Winklevoss Twins To List Bitcoin Fund On Nasdaq
The Irish Times

Cameron and Tyler Winklevoss, the brothers most widely known for their legal battles with Facebook’s co-founder, Mark Zuckerberg, disclosed in a regulatory filing that they had chosen to list their bitcoin exchange-traded fund, the Winklevoss Bitcoin Trust, on Nasdaq.

Dividend News

TMX declared a dividend of $0.40 on each common share outstanding, payable on June 6, 2014 to shareholders on record on May 23, 2014.

Forfeiture Of Unclaimed Final Dividend For 2007

Special Section: FTI, NSEL, India at the Crossroads

PLY: FTIL slips another 1% while MCX bounces slightly. The outlook remains confused and volatile in the aftermath of NSEL from most every angle.

Former NSEL CEO Anjani Sinha Gets Bail
Khushboo Narayan & Ami Shah – Livemint

The Bombay high court on Friday granted bail to Anjani Sinha, former CEO of NSEL, and two others in connection with the payment crisis at the commodity bourse.

Jignesh Shah To Be Quizzed On Spike In NSEL Transactions
Indian Express

The Economic Offences Wing (EOW) of the Mumbai Police Crime Branch is set to question FTIL promoter Jignesh Shah and Shreekant Javalgekar:

“We will be questioning them about the conspiracy and also about why the volume of trades was jacked up. We will also probe why so many exchanges were set up across the globe by them,” said Additional Commissioner of Police (EOW) Rajvardhan Sinha.


BM&FBovespa To Sell More Fixed-Income OTC Products durng H2

BM&FBovespa SA, Brazil’s sole listed financial bourse, plans to launch more products for the OTC local fixed-income markets during the second half.

PSE Bets On New Products

New trading products, better corporate governance and improved tax rules will help alter the perception that the Philippines SE is a small, illiquid choice among South-East Asia’s markets, its president Hans Sicat said.

Career Paths

Nasdaq Hires Friedman As Co-President, Likely Front-Runner To Be Next CEO (subscription)
Bradley Hope – Wall Street Journal

Nasdaq OMX has hired Adena Friedman as co-president as part of a broad restructuring of the company that positions the former exchange executive as the most likely to succeed Robert Greifeld in the top job. Ms. Friedman, 44 years old, will become president of the company’s information services, technology solutions and corporate client group businesses, when she starts on June 12.

In addition, Hans-Ole Jochumsen, currently EVP, has been elevated to President of Global Trading & Market Services, and will continue to report to Mr. Greifeld.

Nasdaq OMX press release here.

PLY: After a three-year stint as CFO at Carlyle Group LP Ms Friedman makes a prodigal return from a private equity stint similar to that of NLX chief Charlotte Crosswell a few years back. Good to see Hans-Ole elevated once again within weeks of his EVP appointment as the head of exchanges.

MCX Board Okays Manoj Vaish Resignation; To Look For New Chief
Business Standard

MCX’s board Friday accepted the resignation of its MD and CEO Manoj Vaish and decided to set up a search committee to look for new chief.

PLY: MCX need to be radical going forward to re-establish their business and trust therein.

Financial Calendar

This week

SIBEX Q1 financial results
TD Ameritrade $0.12 quarterly cash dividend payment
Record date BGC Partners $0.12 quarterly dividend
Record date GFI $0.05 quarterly dividend
Record date Fidessa 24.5 pence final dividend

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

Share Notes

Charles Schwab Director Stephen Mclin sold 5,244 shares Thursday, May 8th at an average price of $26.43 (bargain $138,598.92). He now owns 11,976 shares.

Other stories

CFTC’s Global Markets Advisory Committee To Meet May 21, 2014 – Agenda Items Include Foreign-Based Swaps, Clearinghouses And SEFs

CFTC Acting Chairman Mark P. Wetjen announced today that he will convene a meeting of the CFTC Global Markets Advisory Committee (GMAC) on Wednesday, May 21, 2014 to discuss issues related to the CFTC’s coordination with foreign regulators on the oversight of foreign-based swap clearinghouses and foreign SEFs.

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