May 13 2014

elb2

Pressure mounts to limit Corzine’s legal bills from MF Global while LSE makes a last minute sweep to buy Russell as the sales process accelerates. Hong Kong right to reject Alibaba IPO says Ontario Teachers pension fund, as LME warehouse debate festers. CME Europe first to gain BoE segregation approval as EUREX signs Formosa bond agreement while Bank of China debuts Schengen Bond at Luxembourg SE. Nairobi bourse set for IPO, dark pool discussions, LIFFE IR franchise growing…

Welcome to Tuesday’s Exchange Invest, I am mid way between sessions at the Euroclear Collateral conference in Brussels, having enjoyed an excellent interactive session with the Treasury Peer group first thing this morning…

Public Markets

LSE Is Late-Stage Bidder In Auction For Russell Investments
Telis Demos, Gillian Tan & Dana Cimilluca – Wall Street Journal
LSE:Speculation Regarding Frank Russell Company
MondoVisione

London SE (LSE) has emerged as a contender for Russell Investments, the stock-index and asset-management business that is on the auction block. LSE, whose interest in Russell hasn’t previously been reported, is competing for the company against MSCI and CIBC.

PLY: Clearly the big question here is how Russell will work going forward. CEO Len Brennan has been keen to keep the asset manager and index business together – this finally may be changing given bidder interest. I would imagine that long-time LSE person (in and outside FTSE), index boss Mark Makepeace would run the index group thus leaving Len to run the asset management business (under separate ownership). Presumably neither MSCI nor LSE have their eyes primarily on the asset management franchise and are either not bidding or would seek to spin it off while concentrating on the index business. Interesting to see stories suggesting no PE houses made it to the final round of bidding while LSE say they would part fund through equity raising…

Taiwan Trading Platform To Sign Yuan-Exchange Deal With Eurex By Year-End
Reuters

Taiwan’s Gre Tai Securities Market will by the end of this year sign a deal with the Eurex Exchange to provide cross-border exchange services in Chinese yuan-denominated bonds. The deal will allow European and Taiwan firms to offer bonds denominated in Chinese yuan on the other’s territory and trade such financial products between the two regions.

PLY: Formosa bonds remain a niche Yuan segment but clearly all are valuable as EUREX spearheads attempts by Frankfurt to take a more active role in trading the Yuan and RMB instruments…or, inbeed a cynic might see it as another aspect to the ongoing potential for an Asian pivot by DB1/EUREX away from increasingly stringent regulation in Europe. (See also Premium Posts: The Direction of Deutsche Boerse and Deutsche Boerse’s Asian Experiment).

ICE Sees Meaning Of Liffe (subscription)
Tim Cave – Financial News

Liffe turned a 1% volume increase into a 12% surge in revenues to nearly £300 million last year as a result of strong growth in its core interest rate products. Liffe Administration and Management, Liffe’s holding company, reported a 12% increase in revenues to £296 million during 2013, new filings with Companies House show. The group’s post-tax profit increased 40% to £101 million.

Liffe traded a total of 794 million contracts last year, up 1% on the previous year: volumes in its short-term interest rate products, such as euribor, increased 29% during 2013, while volumes in long-term interest rate products increased 12%.

PLY: Presumably the interest rate volume leap was driven by the greater usage of ETDs as a proxy for OTC products ahead of the SEF-volution.

CME Clearing Europe First To Receive Regulatory Approval For New Full Segregation Client Protection Model
MondoVisione

CME Clearing Europe is the first central CCP globally to receive Bank of England approval of the full segregation client protection model with enhanced protection for all bankruptcy scenarios. This new client protection model fully segregates collateral with an external custodian at the client level. The enhanced protection it offers for all bankruptcy scenarios is expected to result in favourable capital treatment.

PLY: A sensible treatment and plaudits to CME for being first to implement it.

CME’s Duffy To Appear Before U.S. Senate Committee On Agriculture
MondoVisione

CME Executive Chairman and President Terry Duffy will appear before the U.S. Senate Committee on Agriculture, Nutrition & Forestry, Tuesday, May 13, to discuss HFT in the futures markets.

HKEx Challenged On Metal Warehousing (subscription)
Enda Curran – Wall Street Journal

HKEx faces a fresh legal challenge to a planned overhaul of its metals-warehousing system.

At the center of the dispute was a proposal by HKEx that, from April 1, its roughly 700 affiliated warehouses would be required to ship more metal out than they took in if wait times for deliveries exceeded 50 days which was halted by a challenge from Rusal.

In the latest challenge, HKEx on Tuesday said it has been served with a summons by the United States District Court for the Southern District of New York. The company was named as a co-defendant

“HKEx management’s initial assessment is that the lawsuit is without merit and HKEx will contest it vigorously,” the exchange said in a release.

HKEx press release here.

Glencore, Goldman Warehouses Have Longest LME Aluminium Queues
Eric Onstad – Reuters

Wait times to get metal out of warehouse firms owned by trade house Glencore and bank Goldman Sachs stretch up to two years, according to the LME first report detailing backlogs at its global network of depots.

Hong Kong Right To Reject Alibaba – Fund
Enda Curran – Wall Street Journal

Even as investors gear up for Alibaba’s blockbuster listing in the U.S., one of the world’s biggest pension funds is backing Hong Kong’s decision to turn down that IPO.

PLY: HK Inc ought to breathe a sigh of relief at this endorsement of their pragmatic approach to the undemocratic structure of Alibaba as now seeking an IPO in New York.

Dark Pools Are Growing, But Regulations Loom (subscription)
Anthony Malakian – waters technology

Neil Katkov, SVP of Asia for Celent, said that he had originally anticipated the dark pool market would continue to expand through 2020, but recent events – most notably, the firestorm created by Michael Lewis’ book, “Flash Boys” – have muddied the waters.

Dark Pool Operators Face Up To New Regulatory Attention (subscription)
Robert Hartley – Risk

Even dark pools have not escaped the regulatory spotlight – and financial supervisors in the EU and elsewhere are now facing up to the question of whether they provide value to the market as a whole, and how (or if) their activities should be limited.

CBI Examines Ex-SEBI Chairman Bhave In Jignesh Shah’s FTIL, MCX Case
Financial Express

CBI today quizzed former SEBI Chairman C B Bhave in connection with granting sanction to Jignesh Shah-founded FTIL and MCX to function as a full- fledged private stock exchange. C B Bhave was examined in Bangalore by a team of CBI officers two months after the agency registered a Preliminary Enquiry (PE) against him, another former member K M Abraham and FTIL and MCX, among others.

FMC Tightens Audit Norms
Business Standard

Tightening the noose on auditors of commodity exchanges and their members, FMC has said those empanelled with it should have at least 10 years of experience in undertaking audits of banks and financial institutions.

High-Speed Traders Need Oversight, Ex-CFTC Economist Says
Silla Brush – Bloomberg

High-speed trading in U.S. futures markets is being dominated by a small number of firms that should be forced to register with regulators to ensure adequate oversight, CFTC’s former chief economist will tell lawmakers.

Private Markets

Kenya’s Bourse To Sell Up To 38% Stake In IPO
Duncan Miriri – Reuters

Nairobi SE (NSE) will sell up to a 38% stake in an IPO by the end of next month to raise funds for new products and enhance transparency, its CEO said.

Peter Mwangi said the owners of the Kenyan bourse, a mutual company held by brokers, will offer up to 81 million shares of 4 shillings ($0.05) each, amounting to 38% of its total capitalisation, subject to regulatory approval.

However, the actual offer price will be set by the IPO advisers at a later date.

“We want to list through an IPO on the main market. We need to open this listing before the 30th of June,” he told Reuters.

EI reported on April 30th the approval of the IPO by the NSE shareholders.

Bitcoin Processor Raises $30 Million (subscription)
Michael J. Casey – Wall Street Journal

Virgin Group Chairman Richard Branson and Yahoo co-founder Jerry Yang are part of an investor group that plowed $30 million into Bitpay, valuing the bitcoin-payments processor at about $160 million in the biggest venture-capital investment in the digital-currency industry.

Special Section: FTI, NSEL, India at the Crossroads

PLY: A flat day with relative peace through exhaustion on the NSEL crisis front…

Technology

KVH Launches “DCNet” To Connect The Leading 100 Data Centers In Asia – Industry’s First Burstable Ethernet Service Exclusively For Data Center To Data Center Connectivity
MondoVisione

KVH Co. Ltd., Asia’s leading information delivery platform headquartered in Tokyo, Japan, announced it is launching “DCNet,” KVH’s new burstable data center to data center interconnection service that will link 100 data centers across Asia in 2014.

Products

Qatar Bourse To List First ETF
gulfnews

Qatar’s bourse plans to list its first ETFs this year and these will be much larger than ETFs listed elsewhere in the Gulf.

Platts Data Selected As Basis For 12 New ICE Futures Contracts For Crude Oil & Petroleum Products
PRNewswire

Platts’ physical market price assessments for global crude oil and petroleum products have been selected as the basis for clearing 12 new futures contracts launched by ICE.

A First In The Eurozone: Bank Of China To List Its First “Schengen Bond” On The Luxembourg SE
MondoVisione

On 8th May 2014, Bank of China successfully launched its first offshore Renminbi (RMB) “Schengen bond”. This bond, which will be listed on the Euro MTF market of the Luxembourg SE, has enabled Bank of China to be the first Chinese mainland company to issue RMB bonds in the Eurozone.

Documentation Of Gold Trading Through PMEX Proposed
Sohail Sarfraz – Business Recorder

SEC of Pakistan (SECP) has proposed to the Federal Board of Revenue (FBR) to promote documentation of trading of gold through Pakistan Mercantile Exchange Limited (PMEX).

Indexes

TASE Launches New TA Tech- Elite Index
MondoVisione

The TA Tech-Elite share price index includes the shares of the largest companies in the biomed and technology sectors and is the premium index representing these industries. The launch of the new index is the first step in implementing the recommendations of the Committee for the Promotion of Investments in Public Companies Engaged in R&D, which was convened by the Israel Securities Authority (ISA) and the Tel Aviv SE (TASE) and which submitted a series of recommendations to encourage the listing of high-tech companies.

Tankard Announces The Introduction Of Four New 16:30 Indices For NBP And TTF
MondoVisione

Tankard, a collaboration between ICAP Energy, Marex Spectron and Tullett Prebon, the three leading interdealer brokers in the natural gas market, announced that it is publishing four new 16:30 indices (Tankard 16:30) in addition to its 15:30 indices (Tankard 15:30) for two leading traded natural gas hubs, the UK National Balancing Point (NBP) and Dutch Title Transfer Facility (TTF). The new Tankard 16:30 indices will be published daily at 16:45 and will comprise Day-Ahead and Weekend-Ahead indices for NBP and TTF using electronic trades executed between 16:25:00 and 16:29:59. Tankard 16:30 will be available on www.tankardindex.com and on Bloomberg under the code .

Career Paths

Former FMC Executive Director PK Singhal To Lead MCX Management Team
The Economic Times

Former executive director at FMC PK Singhal has been asked to lead the team that will look into the day-to-day affairs of the troubled bourse MCX. Singhal, a deputy-MD of MCX is on a long leave and has been in US. He was called back by MCX board and has been asked to join office by May 19.

Instinet announced two senior appointments within its US sales and trading business, Instinet, LLC.

Chuck Frederick has been named Head of US Product Sales. In this role he and his team will work across the Sales, Product Strategy and Development groups to help grow the footprints of the firm’s three core electronic trading products: Newport EMS, Execution Experts algorithmic suite and the Instinet Analytics platform. Previously Mr. Frederick served as Global Head of Algo Development in Instinet Incorporated’s Global Trading Research group.

Tom Whelan has been named Head of the US Institutional and Derivatives Sales teams. In this role he and his team will work closely with the Product Sales and Sales Trading groups to coordinate the firm’s US sales strategy. Mr. Whelan has held a variety of senior sales and trading roles over the course of his career at Instinet, most recently leading the New York Product Sales team.

Asset management firm Carlyle Group said that it appointed its Chief Accounting Officer, Curtis Buser, as Interim CFO. Curtis Buser also continues to serve as the company’s Chief Accounting Officer.

Waters reports that New York-based options analytics provider Hanweck Associates has hired Thomas Watson as head of sales. Based out of Chicago, Watson will focus on selling the vendor’s real-time VoleraFeed of implied volatilities for options as well as its hosted historical tick database of options data.

Most recently, Watson was VP of market data and partner products at NYSE Euronext, before which he was product manager at Orc Software, market development manager at Trading Technologies and product manager and vice president at ABN AMRO, responsible for leading technology implementation projects for fixed income and derivatives business lines.

Financial Calendar

This week

DB1 AGM
NZX AGM
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.

Analyst Notes

Citigroup Reissued Their Hold Rating On ICE – $210.00 Target Price
Raymond James Reissued Their “Outperform” Rating On ICE – $225.00 Target Price
CME Price Target Lowered By Jefferies Group From $89.00 To $84.00 – Buy Rating
LSE “Neutral” Rating Reiterated By HSBC – GBX 2,000 Price Objective
RBC Capital Boosted Their Target Price On TMX From C$55.00 To C$58.00 – “Underperform” Rating
National Bank Financial Raised Their Price Objective On TMX From C$56.00 To C$60.00
Tullett Prebon “Hold” Rating Restated By Societe Generale – GBX 305 Price Objective
Tullett Prebon “Neutral” Rating Reaffirmed By Espirito Santo Investment Bank Research – GBX 337 Price Objective
UBS AG Dropped Their Price Target On Tullett Prebon From GBX 290 To GBX 265 “Sell” Rating

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

LSE Moves PR Account From Citigate To Finsbury
PR Week

The agency is understood to have beaten Instinctif Partners and FTI Consulting in a final three-way pitch for the account, which had been handled by Citigate Dewe Rogerson for five years.

MF Global Trustees Seek Tighter Leash On Corzine’s Legal Fees
Nick Brown – Reuters

Lawyers for defunct brokerage MF Global on Monday asked a U.S. bankruptcy judge to impose procedures to limit mounting legal fees incurred by Jon Corzine and other former company insiders in litigation over their role in MF’s 2011 collapse.

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