May 20 2014

elb2PLY: After the leaks of last week, LSE are in exclusive talks to buy Russell, apparently lock, stock and barrel, as NASDAQ launches a 10 year senior note at a slightly higher refunding coupon. Jignesh Shah further remanded by Mumbai court, just as Modi arriving in power might provide the welcome dose of liberalisation Indian markets, investors and workers so desperately require to gain the modern Modi deregulated upgrade of the Hindu rate of growth.

Thai civil unrest a worry as ASX-SGX co-operation news takes us a back a decade or so. Warsaw SE might as well have forgotten the rest of Poland as candidates are warmed up to replace CEO: direct government minister to CEO ‘coup’ appears likely result. Lots to discuss today, news from all over the globe and across pretty much all market types, seriously worth a scroll…

Meanwhile, recent Premium posts include:

New: India: What Will Modi Do?

HFT1: The Market is Not Rigged

Gordon Bennett! Low Latency Data At The New York Yacht Club?
– a follow up to HFT: The Early Years

OSOV No Argument
– democracy is an essential antidote to plutocracy –

The ZA Pivot
– Cinnober grabs the clearing advantage in South Africa –

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Public Markets

LSE Nears $3bn Russell Deal (subscription)
Arash Massoudi & Ed Hammond – Financial Times

LSE has entered exclusive talks to buy Russell Investments, with a prospective deal which would be the biggest in the LSE’s 213-year history and mark its boldest push into the US where Russell is best known for its equity benchmarks such as the Russell 2000.

PLY: Exciting times for LSE, although I am still scratching my head about what it intends to do with the asset management business – presumably last week’s “leak” was to encourage more PE companies to seek to buy this asset from LSE? Unclear whether long-time LSE/FTSE man Mark Makepeace will prevail over Len Brennan who is Russell CEO although given the latter has long wanted to run a unified Russell, he may well be left to run the AM company as I suggested last week.

LSE Statement Regarding Frank Russell Company

LSEG confirms that, further to the announcement on 13 May 2014, it has now entered into exclusive discussions with The Northwestern Mutual Life Insurance Company. Discussions remain on-going and there can be no certainty that a transaction will be forthcoming.

EU Elections Could Help Left To Renew Push On Regulation (subscription)
Anish Puaar & Tim Cave – Financial News

Although anti-EU parties such as Britain’s Ukip are expected to fare well in this week’s elections, polls predict stronger gains for parties in the European United Left/Nordic Green Left grouping, which has taken a hard line on banking and markets.

PLY: I am always impressed that anybody can tell the difference between Europhile political parties – they all advocate more regulation and scoff at free markets. The spin here is of course that voting for Eurosceptic parties is bad as they may be quasi-abstentionist – in other words, a clear message to vote Europhile hidden with a regulatory threat wrapper.

Modi’s Victory To Open India’s Equity Capital Markets (subscription)
James Crabtree – Financial Times

PLY: Our focus here is on capital markets and as such the election campaign boiled down to an exhausted Congress party which had descended into a morass of corruption and populism, simply no longer looked fit to govern in any form of coalition, hence the “fresh” Modi campaign with a great back story of ‘Gujarat growth through deregulation’ has won the day. I briefly discuss specific Indian market structure issues in this Premium post: India: What Will Modi Do? – and can only say that I sincerely hope Mr Modi will take an axe to the creaking market structures of Indian regulation at the very first opportunity.

Jignesh Shah Gets Judicial Remand, Says Faces Threat From Accused In Case
Financial Express

A sessions court today remanded MCX promoter Jignesh Shah and former MD and CEO of the commodity exchange Shreekant Javalgekar in judicial custody till May 31 in connection with the alleged NSEL scam. The duo were arrested in the alleged fraud case on May 7 (reported here) and a bail hearing is likely on May 22nd.

PLY: At least Jignesh got the right to a separate cell…

NASDAQ OMX Announces Proposed Senior Notes Offering
NASDAQ OMX Prices $500 Million Senior Notes Offering

NASDAQ OMX plans to commence a public offering of U.S. dollar denominated senior notes due 2024 to use the aggregate net proceeds from the offering, along with cash on hand, to refinance its 4.00% Senior Notes due 2015 and to repay a portion of the term loan under its senior credit facility.

The exact terms and timing of the offering will depend upon market conditions and other factors.

J.P. Morgan Securities LLC and Wells Fargo Securities, LLC will act as Joint Book-Running Managers for the offering.

PLY: Interesting that NASDAQ OMX are having to pay 4.25% versus the 4.00% on the notes expiring 2015 but at the same time, they are wise to use this opportunity to refinance when the bond bubble risks are so significant that they could end up paying a lot more by next year…

As we closed for pixel the full details of the note were published. With a Moody Baa3 / S&P BBB rating, the note is fully callable at any time for 10 years, trade date May 19th with T+7 settlement (May 29th) maturing June 1, 2024. Coupon payments June 1 and December 1, first is December 2014. 4.25% coupon, priced at 99.653% making YTM 4.293%.

Tradition Agrees Polish Power Exchange Cooperation
Automated Trader

Tradition announced a signature cooperation agreement with Izba Rozliczeniowa Giełd Towarowych (IRGiT), the clearing provider for the Polish Power Exchange (POLPX), to help provide cleared physical power products in Poland. Tradition will assist IRGiT, also known as the Warsaw Commodity Clearing House (WCCH), in offering clearing in OTC power and electricity products, enabling derivatives participants to clear their OTC business portfolios and reduce their credit and guarantee costs.

PLY: Interesting move by Trads and can only presumably be good for POLPX.

India – Extend Trading Hours For Commodities Market: Govt Panel
The Economic Times

A government panel has recommended extending trading hours at commodity bourses mainly to overlap with Asian and Australian markets and enhance global competitiveness.

FINRA Probing 170 Instances Of Possible Algorithmic Abuses
Suzanne Barlyn – Reuters

FINRA is cracking down on abusive trades made on the basis of mathematical algorithms and currently has some 170 ongoing investigations into the subject.

FINRA May Release Rules On Data Collection Plan This Summer
Suzanne Barlyn – Reuters

The Comprehensive Automated Risk Data System, or CARDS, would require firms to submit vast quantities of data to FINRA in an ongoing stream. FINRA could then use that data to analyze everything from securities transactions and asset movements to customers’ risk tolerances and time lines.

FINRA Trade-Surveillance System Will Be Redesigned, Ketchum Says
Dave Michaels – Businessweek

FINRA is changing the design of a trading-surveillance system that has drawn opposition from brokers, CEO Rick Ketchum said in a speech at the FINRA conference. Smaller brokers that don’t use clearing firms will have more flexibility to send trade and commission data to FINRA directly or use a contractor.

Dow Jones Wins Injunction Against Ransquawk Over ‘Hot News’
Dow Jones Wins Questionable Case Over “Hot News”
Tech Dirt

Dow Jones & Co has won a court order to stop the London-based service Ransquawk from broadcasting its news content within seconds of publication, without permission, to traders and other subscribers.

PLY: A fascinating can of worms opened as a result of RAN not defending itself in US court and hence DJ seeking a default judgement. Part latency case (now where have we heard that before?), part oddity of an archaic NY state law (5 states in US apparently maintain this statute) and ultimately not a judgement based on the issues – an interesting primer on that can be found here (amongst many online): Matthew Ingram GigaOm article.

Thai Bourse Opens Securities Trading Today, May 20, As Usual

The Stock Exchange of Thailand (SET), Market for Alternative Investment (mai), Thailand Futures Exchange (TFEX) and Bond Electronic Exchange (BEX) open for securities trading today (May 20, 2014) as usual. However, due to transportation inconvenience that may occur, all the activities previously scheduled to be held at the SET building on Rachadapisek Road will be postponed until further notice.

FAO: Thailand’s army declared martial law early Tuesday. Previously, EI reported on January 14th that the anti-government activists were preparing to seize the SET HQ. Clearly, the recent dismissal of the government by court action has not exactly stabilised matters in Thailand despite the serene calm of this message and the new CEO Kesara Manchusree.

Private Markets

Japan OTC Exchange Receives Regulatory Permission To Open Market

TOCOM announced that the Japan OTC Exchange Inc. (JOE), the joint venture with Ginga Energy Japan Pte. Ltd was granted permission by the Minister of Economy, Trade and Industry.

15 Regional Stock Exchanges To Shut Operations As SEBI Deadline Approaches
Ashish Rukhaiyar & Anirudh Laskar – Livemint

With the 30 May deadline for stock exchanges to meet new net worth and trading norms looming large, 15 of the 20 stock exchanges in the country have opted to exit the business altogether.

11 regional stock exchanges (RSEs) have already submitted their exit applications to SEBI, while the boards of four other exchanges will be meeting later this month to consider the resolutions related to closure of business. Neither of the two people wished to be identified.

Bombay SE (BSE), United SE (which agreed to merge with BSE), MCX-SX, National SE (NSE) and Calcutta SE will continue in business.

“Madras SE is convening meeting for passing the resolution for an exit. Ahmedabad SE and Delhi SE are also convening the meeting for an exit. MPSE (Madhya Pradesh Stock Exchange Ltd) is also working on an exit.”

PLY: I cannot help but feel the exit will be clogged with closing exchanges just as the new government may yet create an opening for regional markets. India is vast, the regional exchange opportunity in much smaller nations is significant for specialist businesses (just look at Germany qv Berlin and particularly Stuttgart). It is unfortunate that defeatist groupthink and SEBI force is killing an opportunity for expansion.

Stock Exchanges More Profitable Than Most Listed Companies
Sachin P.Mampatta – Business Standard

National SE (NSE) made more money than nine of 10 companies listed on it. Similarly, the BSE’s profits are higher than eight of 10 of its listed firms, according to the numbers available so far for FY14.

PLY: Which brings me back to my point about the rush to the exits by regional exchanges who can’t make money while the biggest markets are hugely profitable?

EU Intraday Power Market Coupling Partners Agree Development Plan

The five European power exchanges and 16 transmission system operators working on intraday electricity market coupling have agreed in principle how to develop the project.

The five exchanges — APX, Belpex, Epex Spot, Nord Pool Spot and OMIE — said in February that they had agreed on a common European approach for continuous cross-border intraday trading and contracted DB1 to build the technical system required.

Bitcoin Exchanges Probed Over Shuttered Drug Market (subscription)
Christopher M. Matthews – Wall Street Journal

U.S. authorities have opened a new front in their investigation into bitcoin exchanges and other businesses that deal in the online currency, examining possible ties between the firms and the online drug bazaar Silk Road.

PLY: A good angle to maintain a banker monopoly on money for a while longer perhaps but then again it only powers the cryptocurrency revolution all the more as faith in government institutions is eroded, encouraging alternative solutions such as, well Bitcoin…

Bitcoin Users Face Legal Uncertainty: ECB’s Mersch
Christopher Lawton – MarketWatch

“The absence of a clear legal framework also leads to considerable legal uncertainty among Bitcoin users,” Yves Mersch, an executive board member with the ECB, said at a Bundesbank conference.

PLY: In other words, trust in central banks and of course your money will be depreciated through inflation or crushed by QE but we’re the establishment whereas doing something on the new frontier is, er, dangerous?

N.B. In the time it took to write the above sentence, somebody bought a coffee in Hanza Cafe, paid with Bitcoin and the money was received over the secure electronic network, cleared by the cafe. How is that Target-2 thing working out for Mr Mersch & co…naturally it’s all real-time, no?

Winklevoss Twins: Bitcoin Will Be Bigger Than Facebook
William Channer – The Guardian

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX down 1% while FTIL rallies 3% as investors clearly feel more comfortable with Jignesh having a cell to himself.


ASX & SGX Cooperate To Further Enhance Market Connectivity

ASX announced that customers in the Australian Liquidity Centre (ALC) and on ASX Net in Australia can now connect to the SGX Co-Location Data Centre in Singapore via ASX Net Global, ASX’s international low latency network.

PLY: “Deja vu one more time” as Yogi Berra memorably put it. Outgoing TMX CEO Tom Kloet was in office at SGX with the somewhat trailblazing former civil servant Richard Humphry his opposite number at the ASX last time these bourses were trumpeting their market linkage.

NASDAQ OMX Launches MiQ, A New Business Intelligence Product For Global Capital Market Operators

NASDAQ OMX announced the launch of a new business intelligence solution for capital market operators around the globe, MiQ.

Beirut SE To Launch Electronic Trading System
Daily Star

Beirut SE will launch an advanced electronic trading system in collaboration with NYSE-EURONEXT International.

PLY: Euronext are selling well through the Levant at present: EI reported on March 19th that Euronext signed agreements with four exchanges (Amman SE, Beirut SE, Bourse des valeurs Mobilieres de Tunis and Muscat Securities Market) in the MENA region for the implementation of its new UTP solution, UTP-Hybrid.

DB1 Expands Eurex Market Data Offering With Real-Time Analytics – In-Depth Trading Information Now Available For Key Futures Contracts

DB1 Market Data + Services today announced the introduction of real-time analytics for the most liquid futures contracts traded on Eurex. “Eurex Real-time Analytics” provides market participants with in-depth trade and order information based on the full Eurex order book for the first time.

BATS Global Markets Provides EDGA and EDGX Full Market Depth Data to Bloomberg
BATS Global Markets

The EdgeBook Depth data feed, which provides full depth-of-book order information from Direct Edge’s EDGA and EDGX exchanges, is now available on the Bloomberg Professional service to subscribers of real-time U.S. Level 1 market data. BATS Global Markets’ BZX exchange data is already available to Bloomberg users.

SunGard joins DFM Vendor Registration Program
Isla MacFarlane – CPI Financial

SunGard has joined the Dubai Financial Market (DFM) Vendor Registration Program.

TABB Examines ATS Matching Logic

In new research examining the rise in active Alternative Trading Systems (ATSs) in NMS securities since 2005, TABB Group says ATS registrations have reached a near-term peak and estimates a net decrease of three ATSs in 2014, the industry’s first net decline since the SEC’s approval of Reg ATS.

Metamako Announces Its Eagerly-Anticipated 48-Port Switch

Australian-based Metamako, supplier of ultra-low latency devices to exchanges and the trading community, has now released MetaConnect 48, the 48-port version of its switch. Metamako’s switches are unique in combining ultra-low-latency performance with high levels of functionality, usually only available on much slower devices. In benchmark tests they demonstrated excellent deterministic latency.

Redline Trading Solutions Certifies Azul’s Zing For Jitter-Free Java-Based Custom Trading Strategies For Electronic Markets

Designed for ultra-low latency market data and order execution, the Redline Trading platform now supports Zing for its customers that want to develop trading strategies in Java while ensuring highly consistent, low-latency execution for trading equities, options, futures and FX.


Launch Of The Solactive US Energy Infrastructure MLP Index – First ETF In Europe On Infrastructure MLPs Listed By ETF Securities

Solactive AG has launched the Solactive US Energy Infrastructure MLP Index, which is used as underlying for the US Energy Infrastructure MLP GO UCITS ETF listed yesterday by ETF Securities on LSE and on DB1 (Xetra).

Career Paths

Thomas A. Wittman has been appointed EVP, Global Head of Equities, reporting directly to Hans-Ole Jochumen, President, Global Trading & Market Services, NASDAQ OMX. Mr. Wittman will oversee the global cash equities and equity derivatives businesses.

Nasdaq OMX press release here.

SIX Shareholders elected bankers Dr Patrik Gisel, Lorenz von Habsburg Lothringen and Søren Mose to the BoD. They replaced Christoph Gabriel, Dr Pierin Vincenz and Eduardo Leemann, who did not stand for re-election. The BoD also appointed Robert Jeanbart as Division CEO of the Financial Information business area.

SIX press release here.

The public committee charged with appointing external directors to the Tel Aviv SE (TASE) BoD appointed Yoav Chelouche to serve as an external director on the Board.

TABB Group promoted Paul Rowady to principal, and named him head of research for new data & analytics (DnA) IT practice, replacing Adam Sussman.

Neil R. Smith has joined S&P Capital IQ, a business unit of McGraw-Hill Financial. He has joined to lead the new business line – S&P Credit Solutions, a line that enables investors to leverage the combined data, research and analytics capabilities of both Standard & Poor’s Ratings Services and S&P Capital IQ.

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.

Share Notes

NASDAQ OMX EVP Bruce Aust sold 20,000 shares Thursday, May 15th at an average price of $36.33 (bargain $726,600.00). He now owns 98,101 shares. Mr. Aust’s regular sales are chronicled on this specific page.

Charles Schwab EVP George Gill sold 9,500 shares Wednesday, May 14th at an average price of $26.41 (bargain $250,895.00). He now owns 57,615 shares. Mr. Gill’s regular sales are chronicled on this specific page.

Analyst Notes

Argus Cut Their Price Target On ICE From $240.00 To $220.00 – “Buy” 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.


Warsaw The Start-Up City

PLY: A step forward for Warsaw presumably but one is left to wonder about the ongoing bifurcation between the Warsaw Stock Exchange and that country surrounding it: Poland. Central government clearly remains desperate to prop up the Mayor of Warsaw and hence we have all manner of initiatives which induce scepticism amongst the startup community in the rest of the country. GPW is sadly looking more like a propaganda arm of government than a coherent business. The media muttering continues to grow that Deputy Treasury Minister Pawel Tamborski will replace CEO Adam Maciejewski, marking a de facto nationalisation of the vaguely privatised bourse (government holds 40-ish% equity, gets a majority of voting stock). None of this fluff is helping fund business in Poland, perhaps not even in the Warsaw bubble either. Sadly GPW increasingly resembles a market at risk right now. It is now looking at crowdfunding – at a less political entity I would applaud that but the GPW deeply worries me in its current phase of renewed government control.

FCA-Regulated Crowdfunding Platform For Businesses At “All Stages Of The Growth Cycle” Launches
Megan Dunsby – startups

Crowd for Angels to offer debt and equity funding for early-stage start-ups through to AIM-listed.

Crowdfunding Growth Outstrips Moore’s Law By A Factor Of 10

A mass of new data has revealed that global crowdfunding is growing exponentially, doubling every two months, and outstripping Moore’s Law of computing power by a factor of ten.

P2P Lending: The Wisdom Of Crowds (subscription)
Elaine Moore & Tracy Alloway – Financial Times

Julie Robinson does not consider herself to be a financial innovator. But when the 44-year-old secretary from Hertfordshire left her bank and began borrowing money from an online P2P lender she became part of an industry intent on disrupting the future of global banking.

PLY: A typical tale of banks being, at best expensive, ostensibly customer oblivious and arguably incompetent leading to borrowers/lenders profiting through disintermediation.

Other stories

Ex-MF Global Executives Can Tap More Legal Defense Money: Judge
Nick Brown – Reuters

Jon Corzine and other former insiders of collapsed brokerage MF Global can tap another $10 million of insurance funds to defend lawsuits accusing them of hastening the firm’s downfall, a U.S. judge said on Monday.

Remarks To The First Annual Conference On The Regulation Of Financial Markets, SEC Commissioner Michael S. Piwowar, Washington, D.C., May 16, 2014

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