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May 14 2015 – Exchange Invest

May 14 2015

elb2Half Way to A Big Figure Change:

Welcome to Issue 500. Yip, it’s been an amazing run to date and Exchange Invest has gone from filling a niche most folks hadn’t spotted (or even believed existed) to a daily benchmark for the industry. Profound thanks to Florin and all those who have worked on EI over the past 2 years as well as a huge word of thanks to each and every sponsor and subscriber who reduces the cost of my producing your pithy industry daily. (Vacancies still exist for subscribers and sponsors – get in now before the price goes up Monday… Subscriptions are $120 each with discounts for bulk orders. Sponsorship is amazingly reasonable too if you want to reach the world of market structure management and executives. Please Email me and let’s have a dialogue on the way you and your business can support Exchange Invest to give you more pith and insights going forward. Or you can subscribe direct to Premium: Subscribe Here.

Today In Exchange Invest Daily:

Euronext wisely bows out of Plato vendor deal. Brilliant MOEX results, new DB1 CEO warm to Asia pivot as ICAP enhances RMB services. Banks to sell Markit stakes as “Hound of Hounslow” is funded by British taxpayers in his extradition case. Chicago SE encouraging micro-auctions, Kay Swinburne encouraging global CCP regulations, Canada worried Volcker rule breaks NAFTA agreement…and much more, a fittingly fascinating day for our 500th issue. Thanks to all those who already sent us kind wishes. Happy scrolling:

On Crossfire & Other Conference Appearances

Thank you ladies & gentlemen for all the kind words yesterday – an overwhelming vote of confidence in the new direction under SFOA management and indeed my own return to the conference to chair a new Crossfire! series.

Meanwhile, for those who want the hard core financial innovation angle, don’t forget 17th September in Warsaw for Young Markets while my next major event is the FESE Convention which looks to be the event for understanding means to raise capital in the EU this year.

More SFOA Burgenstock Information
More FESE Convention Information

Exchange Invest Premium:

New Premium posts:

The Post Floor Moral Breakdown
Barking At the Moon: The Hound of Hounslow & other follies
third part tomorrow in this series as I look at the rather absurd state of affairs concerning the “Flash Crash” investigation and its aftermath…

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 – Commodities Trading & Warehousing Brief Part 1, Part 2, Part 3
Exchange Infrastructure – Brief Part 1, Part 2, Part 3, Part 4, Part 5 
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

Our Premium service 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 (price going up to $150 Monday).

Public Markets

MOEX Q1 2015 Financial Results

Operating income up 82.4% YoY to RUB 11.87 bln (USD 238 mln).
EBITDA up 115.9% YoY to RUB 9.41 bln (USD 189 mln); the EBITDA margin was 79.3% vs. 66.9% in Q1 2014.
Net income up 127.2% YoY to RUB 7.20 bln (USD 144 mln);
Basic EPS up to RUB 3.25 from RUB 1.45.

PLY: For those not paying attention, once again MOEX demonstrates its powerhouse business despite a tricky prevailing Russian economic situation. Spectacular numbers from a focussed, well run business.

DB1 AGM 2015
DB1 Incoming CEO Banks On Asia

DB1’s incoming CEO is banking on Asia boosting the financial market operator’s business in the coming years.

“The Asian-Pacific markets offer interesting opportunities,” Carsten Kengeter, who worked in China for several years, told shareholders.

DB1 aims to offer trading, clearing and other services across the Asian time zone under its new brand Eurex Asia. Lack of growth in its European business has forced the company to seek business opportunities abroad.

Among other moves it is setting up a new clearing house in Singapore and has sought cooperation with the Shanghai SE (SSE).

DB1 in October named Kengeter, a former head of investment banking at Swiss bank UBS, as its new CEO from June 1, replacing Swiss national Reto Francioni.

PLY: Incoming CEO Carsten Kengeter needs to work hard to reinvigorate the DB1 group mojo. There is a lot of value in the business but it is not being remotely valued by the stock market currently.

Read our Premium posts Deutsche Boerse’s Asian Experiment and The Direction of Deutsche Boerse

Large Banks Ready To Sell Down Markit Stakes (subscription)
Sarah Krouse – Financial News

Goldman Sachs and Deutsche Bank are among those looking to take advantage of the first lockup release period since the firm went public.

PLY: Markit went public at $24 per share last June and is currently around $26…

‘Flash Crash’ Trader Sarao’s Case Heads For High Court (subscription)
Jane Croft – Financial Times
Hound Of Hounslow Granted Legal Aid To Fight His Extradition
Daily Mail

The British trader accused of triggering a £500billion Wall Street crash which netted him £500,000 is getting legal aid to fight his extradition to the US.

PLY: Thanks to the rampant festival of legal incompetence which was the Blair government, Britain has almost no power to refuse any extradition request to the US, no matter how egregious, while the acceptance of the US asset freeze on Sarao globally now means British taxpayers (with a whopping deficit and overall debt) are having to subsidise the court appearances of somebody who can easily pay for his counsel. This is truly the Kafka Algorithm writ large.

See also my Premium posts:

Barking At the Moon: The Hound of Hounslow & other follies
The Post Floor Moral Breakdown

‘Flash Crash’ Trader Sarao Accused Rivals Of Misconduct (subscription)
Aruna Viswanatha, Bradley Hope & Chiara Albanese – Wall Street Journal

Navinder Singh Sarao, the trader arrested last month on U.S. charges he manipulated futures prices and contributed to the May 2010 “flash crash,” leveled claims of similar misconduct against other traders before his arrest.

Mr. Sarao complained to CME, where he traded futures contracts, more than 100 times over the past several years about traders he believed were engaging in manipulative conduct.

PLY: ‘Pot Kettle Black’ Index at new highs as perhaps the sending of 100 complaints could be used as a means to create a case that Mr Sarao has Apsergers or something similar and thus developing a Gary MacKinnon style defence? The words of David Bermingham who was extradited under the UK’s flawed act are chilling. The words of Ray Cahnman, splendidly drole.

Read our Premium posts The Post Floor Moral Breakdown and Barking At the Moon: The Hound of Hounslow & other follies

Read our Premium Flash Crash & Hound of Hounslow – Brief

HKEx Under Pressure To Change Rules To Attract Institutional Investors (subscription)
Enoch Yiu – SCMP

Regulator under pressure to update market closing mechanism, extend trading hours and ease listing rules to draw more institutional investors.

Canadian Minister Says U.S. Volcker Trading Ban Violates NAFTA

The U.S. ban on its banks trading Canadian debt likely violates an international agreement between the nations, Canadian Finance Minister Joe Oliver said on Wednesday, urging American lawmakers to adjust the so-called Volcker Rule.

Kay Swinburne: Why Clearing Houses Need Global Rules (subscription)
James Rundle – Financial News

Everyone seems to agree that clearing houses have become too big to fail, but what needs to be done in case of default? Kay Swinburne, a prominent member of the European Parliament, sets out the case for new global rules to end the “cross-jurisdictional infighting”.

PLY: Wise words from MEP Kay Swinburne in an era where we have trans Atlantic regulators missing the point to feather their own nests instead of making a better market.

CFTC’s Global Markets Advisory Committee Releases Agenda For Upcoming Public Meeting

Private Markets

Bats Intensifies Price War In Currencies To Build Market Share
John Detrixhe – Bloomberg
Hotspot Cuts Trading Fees With “Hot List” Pricing For More Than 30 Currency Pairs

Hotspot announced plans to eliminate liquidity removal fees for customers in more than 30 select currency pairs, beginning 1st June 2015.

All new and existing customers of the platform, irrespective of where they are based, and whether they access the New York or London matching engine, will be able to take advantage of this pricing, which will continue at least until year-end 2015.

Chicago SE’s Big Idea To Slow Down Trading
Lynne Marek – Crain’s Chicago Business

Chicago SE (CHX), the smallest active stock exchange in the USA, is rolling out a big idea to trip up some of the trading speedsters and “spoofers” who have been roiling the stock market by launching mini stock auctions on its exchange. One second auction approval is being sought from the SEC.

CHX announcement here.

PLY: Interesting announcement. Elsewhere we are working on an alternative means to make a marketplace much fairer to access. There are some interesting ideas in circulation.

Startupbootcamp FinTech Announces New Partnerships

Startupbootcamp FinTech Singapore welcomes PwC Singapore, Pix Vine Capital and Jungle Ventures on board to provide expertise, exposure channels, and access to a network of industry professionals in Singapore and across the wider Asia-Pacific region.

Dividend News

MOEX AGM approved a dividend for 2014 of RUB 8.82 bln, or 55.12% of net profit under IFRS, which equates to RUB 3.87 per ordinary share. Dividends will be paid by 16 June 2015.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX up 1%, FTIL flat as ED actually levies its most serious charges yet:

NSEL Board Assisted Defaulters In Money Laundering, Alleges Enforcement Directorate
Ram Sahgal – The Economic Times

The Enforcement Directorate (ED) has cast serious allegations in its chargesheet against commodity bourse NSEL and its erstwhile board of directors, including promoter-director Jignesh Shah, Joseph Massey, Shreekant Javalgekar, Bhagwat Pawar and chairman Shankarlal Guru for assisting the money laundering activities of the bourse’s defaulting members and its management, including former MD & CEO Anjani Sinha.

PLY: Those are hefty charges. The question is not even whether they will stick but whether the ED will actually make a coherent attempt to make them stick – after all the hoopla of agencies over a year and more, the question of resolution execution remains a very frustrating one.


Euronext Exits Competition To Build Not-for-Profit Dark Pool
John Detrixhe & Will Hadfield – Bloomberg

Euronext has withdrawn from the competition to build a European not-for-profit dark pool.

Caroline Nico, Euronext: “We took a considered decision to withdraw from the technology selection process. We have a full development schedule delivering new business initiatives and committed client projects. We felt it necessary to prioritize the commercial returns from these over uncertain returns from project Plato.”

The website of Plato Partnership, a consortium backed by investment banks and asset managers, still lists seven firms including Euronext and Cinnober. According to people familiar with the matter, Cinnober has already been ruled out.

LSE’s Turquoise entered the competition last week.

Previous comment on Plato here and here.

PLY: The key test of a business recovering its poise after a period of difficulty is when it demonstrates it is learning from past experiences.

Euronext has been on a rebound for some time, leaving the NYSE relationship and quickly gaining a spring in its step. For those who have forgotten: NYSE Technology became a watchword for a kind of private sector Quantitative Easing programme for fintech, masterminded by Duncan Niederauer and Larry Leibowitz. Euronext have clearly come to appreciate the opportunity cost fiascos which involved various MTF/internalisation deals et al which sucked resources and focus. Big cheques were received and promptly ebbed away through client customisation. I firmly applaud the foresight of management removing themselves from this bid to focus on their core business – it is perhaps the clearest sign yet that Euronext have to be reckoned with.

Nasdaq Adds Nanosecond Timestamps To Feeds (subscription)
Waters Technology

Nasdaq will increase the granularity of timestamps on its Last Sale, Last Sale Plus, BX Last Sale and PSX Last Sale datafeeds to reflect nanosecond-level timing increments, effective Oct. 1, as part of the rollout of Versions 2.1 of each feed.

PLY: Brilliant innovation but we’re now approaching some tricky quantum issues in terms of not merely hardware but indeed time measurement itself, no?

…For those who just ran out of fingers in the micro, well the nano… a nanosecond is one billionth of a second. Or in relational terms: one nanosecond is to one second as one second is to 31.71 years.

…Oh & here come Larry’s boys to say:

TABB Group’s Research Conveys Need For Accurate & Reliable Time Measurement Standards In Financial Markets – Time Synchronization, Time Stamping Essential For Data Integrity & Compliance In Algo, HFT


ICAP Launches The CNH Hub To Provide A Consolidated View Of The Market In Offshore Chinese Renminbi -The Hub Pools CNH Data From Across The ICAP Group

PLY: One of the biggest growth areas for ICAP is currently in CNH. Volumes are impressive, growth more impressive still, hundreds of yards of it.

Bloomberg Bond Cross Function Launches For European Corporate Bonds

Bloomberg announced the launch of the Bloomberg Bond Cross function (BBX on the Bloomberg Professional service) allowing European buy-side and sell-side participants to access European bond market liquidity with State Street.

Banks Would Get Boost For Overseas Swaps In House CFTC Bill
Silla Brush – Bloomberg

The world’s biggest banks would win curbs on U.S. regulators’ power to restrict overseas derivatives trades under legislation proposed by U.S. lawmakers.

The House Agriculture Committee will meet Thursday to consider a bill that includes a provision forcing CFTC to redo its policy on cross-border trades in the $700 trillion global swaps market. The measure would curtail the agency’s ability to impose Dodd-Frank Act trading rules on deals conducted by employees in the U.S. but held in overseas divisions.

PLY: A sensibly pragmatic move.

Goldman, BofA Among Banks Said To Face Fresh Swaps Scrutiny
Gaspard Sebag & Aoife White – Bloomberg

EU is re-evaluating its antitrust probe into whether 13 of the world’s biggest banks conspired to shut exchanges out of the CDS market after a series of mishaps nearly derailed the four-year-old case.

PLY: Clearly the issue is one of proof of guilt.

Forex Probes Caused By Isolated Traders’ Misbehavior, Task Force Chief Says (subscription)
Chiara Albanese – Wall Street Journal

“The foreign-exchange probe was caused mostly by misbehavior” around a key benchmark, said Guy Debelle, assistant governor of the Reserve Bank of Australia and chairman of a group led by central banks established to devise an international code of conduct for the industry.


Nasdaq Takes Over Dorsey Wright Index Calculation (subscription)
Waters Technology

From Monday, June 1, Nasdaq will become the official calculation and dissemination agent of a variety of indexes run by Dorsey, Wright & Associates, the research and index provider acquired by the exchange in January for $225m. From June, Nasdaq will disseminate data on 28 Dorsey Wright indexes via its Global Index Data Service feed.

Career Paths

The shareholders of Deutsche Börse elected the shareholder representatives on the company’s Supervisory Board at the AGM, due to expiry of the existing terms of office. The number of Supervisory Board members was also reduced from 18 to 12 as resolved at the last AGM.

The new Supervisory Board comprises eight shareholder representatives and four employee representatives. Seven of the eight shareholder representatives on the Supervisory Board were already Supervisory Board members in the previous election period.

Chinese national Amy Yok Tak Yip was elected as a new member of the Supervisory Board. Richard Hayden, David Krell, Friedrich Merz and Thomas Neiße did not stand for re-election.

The members of the Supervisory Board re-elected Dr Joachim Faber as their Chairman and Richard Berliand as his Deputy Chairman directly following the AGM. Due to the strategic importance of risk management to DB1 and its clients, the Supervisory Board also resolved to create a risk committee and elected Richard Berliand as that committee’s Chairman.

The shareholder representatives elected to the Supervisory Board of DB1 are:

Richard Berliand, Management consultant – Executive Director Richard Berliand Limited
Dr Joachim Faber, Chairman of the Supervisory Board of DB1 & Independent management consultant
Karl-Heinz Flöther, Independent management consultant
Craig Heimark, Managing Partner, Hawthorne Group
Dr Monica Mächler, Member of various supervisory bodies, Pfäffikon
Gerhard Roggemann, Senior Advisor, Edmond de Rothschild Private Merchant Banking
Dr Erhard Schipporeit, Independent management consultant
Amy Yok Tak Yip, Managing Partner, RAYS Capital Partners, Hong Kong & Executive Director, Vitagreen, Hong Kong

PLY: There are some very strong minds on the DB1 board, in particular I would note Craig Heimark and Richard Berliand both of whom bring considerable insight and thinking power to the process of DB1.

DB1 staff elected the following employee representatives to the DB1 Supervisory Board on 23 March 2015:

Hans-Peter Gabe, Employee in HR Compensation, Workforce & Talent Management Section, DB1
Marion Fornoff, Employee in HR Europe & US Section, DB1
Jutta Stuhlfauth Head of Policies & Procedures, DB1
Johannes Witt Employee in Financial Accounting & Controlling Department, DB1

Mark Taylor has joined Liquidnet as a senior member of the fixed income sales team. Mark will work with Constantinos Antoniades, Global Head of Fixed Income, Jonathan Gray, Head of Fixed Income EMEA, and the company’s global sales team to grow Liquidnet’s fixed income platform for buy-side institutions.

Steven Tong will join Startupbootcamp FinTech Singapore as MD. He brings 15 years’ experience of working with technology companies in Singapore and the US. Steven was formerly with Infocomm Investments where he was instrumental in funding several accelerator programs, including JFDI and Startupbootcamp FinTech. Steven will work closely with Markus Gnirck, global COO in Singapore and the global Startupbootcamp FinTech team.

PLY: …Which brings me to a timely last call for fintech startup participants: my Polish StartUp club Mission ToRun is helping Startupbootcamp FinTech London with their Warsaw FastTrack Accelerator Day next week, more info here.

Financial Calendar


BM&FBovespa Q1 2015 Financial Results
CFTC Global Markets Advisory Committee (GMAC) public meeting – agenda here
House Agriculture Committee
CME Chairman Terry Duffy will appear before the U.S. Senate Committee on Agriculture, Nutrition & Forestry to discuss CFTC regulatory issues impacting end-users and market liquidity.


Record date BGC Partners $0.14 quarterly dividend
Record date ITG $0.07 quarterly dividend

New announcement

IOSCO And IFIE To Hold Global Investor Education Event 18-20 May In Kuala Lumpur
BGC Partners 2015 AGM – Tuesday, June 2, 2015
SFOA Burgenstock Meeting Geneva September 22 – 24, 2015. Exchange Invest Founder Patrick L Young will be chairing the blue riband Crossfire panel.

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

Analyst Notes

TMX Downgraded By National Bank Financial From “Sector Perform” To “Underperform” – C$50.00 Price Target, Down From C$56.00

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.


Crowdfunding, NXT Next On List
Christopher Adams – New Zealand Herald

The rapid rise of equity crowdfunding will complement NZX’s business rather than pose a competitive threat, says CEO Tim Bennett…and he says the sharemarket operator could even get in on the action by establishing an exchange for the trading of shares in crowd-funded firms.

Since August last year, more than $7 million has been raised by three equity crowdfunding providers – Snowball Effect, PledgeMe and Equitise.

PLY: Wise words from the NZX CEO.

FCA Warns Users Off Zopa Clone

FCA has issued a warning to consumers about a website cloning Zopa, the popular P2P lender.

Zopa Loans Review is not unauthorized to provide loans in the UK and is unaffiliated with Zopa Limited. Its deliberately similar name is intended to attract unwary consumers or small businesses looking for a crowdfunded loan, but despite protestations to the contrary on their website Zopa Loans Review is not licensed by the FCA.

Other stories

Bank Of England’s Response To EC Green Paper: Building A CMU

Read our Premium EU CMU Brief

Optimizing Our Equity Market Structure, Opening Remarks At The Inaugural Meeting Of The Equity Market Structure Advisory Committee, SEC Chairman Mary Jo White, May 13, 2015

Remarks At The Inaugural SEC Equity Market Structure Advisory Committee Meeting, SEC Commissioner Michael S. Piwowar

HKEx CEO Charles Li Live And Direct – Charles Li Direct – LME A Key Contributor To HKEx Group Family

With LME Week Asia only days away, HKEx CEO Charles Li looks at the metal exchange’s contribution to HKEx’s results and its importance to the Group’s overall strategy in his latest post on Charles Li Direct.

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