May 19 2014


A quiet weekend for market news, so I will begin by passing on my condolences at the passing of the great Sir Jack Brabham, Australia’s triple Formula One world champion, the only man to win a championship in his own car. A pioneer in moving racing cars from front to rear engined, he was a great man, an innovator and a real life hero.

Back in the world of markets, ICE’s general meeting shareholder vote is just slightly below Crimean secession levels of support for Jeff Sprecher’s ongoing excellence, Markit confirms NASDAQ listing while CME sees coal as a key profit driver at European exchange. States joining to regulate Bitcoin while India begins to come to terms with the Modi landslide. ASIC trumpets dark pool success, SGX clears a very encouraging 3 billion dollars in Ringgit and Baht swaps while Europeans are, at best, peripherally engaged ahead of European Elections this week.

Question of the day: Was anybody really going to clear swaps with the post-bust RBS anyway?

Public Markets

ICE Announces 2014 Annual Meeting Results

PLY: Frankly the main question to ponder is what on earth can have been going through the minds of the circa 11% who didn’t vote for everything proposed. Had they lost their pencils when the ballot papers were collected? Seriously, this is an excellent result for ICE but only to be expected given its proven ability to manage exchange businesses.

Markit Lists On NASDAQ
Automated Trader

PLY: Confirmation Markit is heading for a NASDAQ listing which will be a sweet victory for Bob Greifeld and team but a bitter blow to both NYSE (you may remember them, nowadays, er, ‘led’ by the reclusive, Duncan Niederauer) and very clearly LSE who failed to score a massive fintech IPO in their own back yard.

BoE Urges More Transparency In Clearing (subscription)
Philip Stafford – Financial Times

The Bank of England has urged clearing houses and large broker-dealers to publish their derivatives risk calculations, warning that more transparency was necessary to avoid future potential systemic risks. The central bank, which monitors one of the world’s largest derivatives markets, sounded its warning in a white paper published on Friday that examined the impact of margin calls on stressed markets.

PLY: The Bank of England is gently asserting its importance here, noting how many CCPs it has and the volume of business…all part of a jockeying for position by the Fed and indeed ECB, ESMA et al in the brave new world of OTC CCP.

ASIC Says Dark Pool Rules Are Working
Georgia Wilkins – Sydney Morning Herald

Australian Securities and Investment Commission (ASIC) said rule changes introduced last year, had succeeded in reducing the amount of smaller trades made through dark pools, and prevented dark pool traders from getting an advantage over other traders.

ASIC Commissioner Cathie Armour said no further change to the rules were necessary but that it would ”continue to monitor market developments”.

ASIC report on dark liquidity rules here.

PLY: ASIC hit the spot with their logical, simple rules encouraging large block trades for Institutional Liquidity Pools at a mid price while driving nebulous internalisation to help bankers away from the murky end of the dark pool business. The EU ought to be watching as their complex solution is a typically overly bureaucratic piece of European ‘exceptionalism’ when the simple approach works, as Australia is already clearly proving.

RBS To Wind Down Swaps Clearing Unit (subscription)
Philip Stafford – Financial Times

Royal Bank of Scotland is to wind down its interest-rate trading operations as rising regulatory costs squeeze the unit’s profitability.

PLY: RBS, a bank which even by the standards of 2008 hubris was going some, remains in political post-bailout limbo in that travesty of incompetence which masked the proper Schumpeterian effects of capitalism which ought to have been allowed, had it not been for a generation of panicked political interventionist imbeciles. Sorry to see job losses but frankly could anybody trust the name here? Bailouts or no, despite their ongoing political clout, as a general rule, investment banks remain an endangered species, clinging to their political security blanket.

About a decade ago, RBS were providing banking facilities to some CCPs and actively marketing to others around the world…while of course history buffs will note this marks the almost total decline of what was once a powerhouse London ETD business: NatWest Futures, although some of its DNA remains in the prime brokerage which is still open at RBS.

Private Markets

China Relaxes Rules For IPOs, Share Issues On Nasdaq-Style Stock Board

China has relaxed rules for firms to list or issue shares on its Nasdaq-style board in Shenzhen, which will support the growth of cash-short smaller companies and the continued outperformance of the so-called ChiNext market over blue chip stocks. New regulations announced by the China Securities Regulatory Commission (CSRC) on Friday lower the financial requirements for firms to issue shares in the market and simplifies procedures, although rules were tightened for information disclosure.

PLY: This continues the drive to liberalize as discussed on our Premium pages recently: China Liberalises.

MCX-SX Case: CBI To Quiz SEBI Chief Sinha, Damodaran

CBI will soon quiz SEBI Chairman U K Sinha as well as former head of the regulatory body M Damodaran in connection with a Preliminary Enquiry (PE) to probe granting sanction to Jignesh Shah-founded FTIL and MCX-SX.

U.S. States Take Lead In Writing Bitcoin Rules
Douwe Miedema – Reuters

A task force of U.S. state regulators is working on the first bitcoin rule-book, the head of the group said, hoping to protect users of virtual currency from fraud without smothering the fledgling technology.

PLY: The states take the lead as central government (almost everywhere) fails to appreciate how they can help cryptocurrency flourish, not to mention generate economic activity on the back of it…

Special Section: FTI, NSEL, India at the Crossroads

PLY: We’re back into an interregnum of calm. How will the new government act? Will it act? There are a lot of questions in the new Indian government to be addressed (I will get to that on Premium later) but meanwhile Jignesh is still banged up and there is no news on buyers of any stakes from FTIL. Stocks are calm after the excitement of a broad election rally Friday: MCX 507.00 is a little off while FTIL has slipped 2% as post-election realism seeps back into the challenging outlook for Jignesh Inc.

Shah Of Little Help To EOW In Scam Probe
Abhijit Sathe – Mumbai Mirror

Jignesh Shah is proving a tough nut to crack for the Economic Offences Wing of the Mumbai police, who have custody of him till Monday in connection with the NSEL payment default scam.

PLY: While he may not be talking, the consensus remains that Mr Shah is unlikely to be enjoying his experience as a prisoner.


Grain Group Urges Pit Trade Halt If CME Electronic Platform Crashes
Karl Plume – Reuters

CME should temporarily suspend open-outcry trading if its electronic trading platform crashes and reopen for a brief after-hours session if the system is restored later that day, a grain industry group said.

PLY: Wrong answer to the right question…CME ought to just close all its pits, delivering a clear message that the open outcry era is over and providing a useful cost saving for the business.


Coal To Power CME’s European Engine (subscription)
Anish Puaar – Financial News

CME is expecting to generate almost £17 million in trading revenues from its new London-based exchange next year, with coal products making up the bulk of its projections.

CME Europe, which launched on April 27, has published filings with the UK’s Companies House that outline earnings projections for 2015. These include a 2015 revenue figure of £16.85 million, made up of £7.89 million from FX derivatives and £8.83 million from coal products. The document was written prior to the launch but was only published this week.

PLY: An interesting document: CME are clearly optimistic they can swiftly deliver positive revenue in their European futures exchange. Just like NLX, er, doesn’t. Meanwhile the search for a CME Europe CEO is ongoing – hopefully CME will identify an engaging and interesting candidate with vision to drive the business forward.

SGX Clears Over USD 3 Billion In Non-Deliverable IRS

SGX has cleared more than USD 3 billion notional worth of Malaysian Ringgit (MYR) and Thai Baht (THB) Non-Deliverable Interest Rate Swaps (NDIRS) since its launch a month ago on 7 April 2014.

PLY: That is an encouraging number for SGX as it fights to find a reason to be relevant in this decade. Good progress in taking business that is not in SGD.

Egypt To Launch First Domestic ETF (subscription)
Chris Flood – Financial Times

Egypt is planning to launch its first domestically listed ETF as part of efforts to attract capital into a country that has been battered by political and economic instability after the toppling of Hosni Mubarak as president in February 2011.

Beltone Financial, a Cairo-headquartered financial services group, is expected to launch trading in the new XT-Misr ETF, which will track Egypt’s EGX 30 stock index, in late May or early June, with charges of around 1 per cent.

Career Paths

EBS, ICAP’s market-leading electronic FX business, announced that it has appointed Paul Allmark as Global Head of e-Commerce Solutions. Paul will join the EBS Executive Management team and report to CEO Gil Mandelzis.

As Head of e-Commerce Solutions, Paul will be responsible for growing EBS’s liquidity distribution including its white label and aggregation services.

Financial Calendar

This week

Record date BM&FBOVESPA approved R$204.9 mln (USD 92.3 mln) dividends
CME Annual Meeting of Shareholders
MarketAxess $0.16 quarterly cash dividend payment
Charles Schwab $0.06 quarterly dividend payment
Record date TMX $0.40 quarterly dividend
TMX Group Limited – Annual and Special Meeting for shareholders

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

Analyst Notes

Betfair “Neutral” Rating Reiterated By Credit Suisse – GBX 1,085 Target Price

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

ESMA Publishes The Second 2014 Risk Dashboard

The reporting period of this Report is 01 January 2014 to 31 March 2014, unless indicated otherwise.

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