May 21 2014

elb2

The best news of the day concerns Professor Leszek Balcerowicz, the man who more than any other, created the modern Polish economy. His reforms were so strong that indeed the past decade has seen a rallentando by quasi-populist governments without a reformist spirit yet thanks to Balcerowicz’s legendary reforms, Poland continues to enjoy economic growth. Professor Balcerowicz receives the Cato Institute Milton Friedman Prize for Advancing Liberty in New York City. It is a great day and Poland’s greatest living economist deserves every plaudit, as his impact on liberty has been a great deal more than all the other Finance Ministers of the post Communist nation put together.

Meanwhile in Exchange Invest today, discussion of the possible LSE-Russell deal while EuroCCP will become third clearer of LSE equities. Healthy results at First Derivatives while CME awaits news of board shrinkage at AGM vote. New US dark pool rules, NASDAQ hunting Alibaba, EC launches massive salvo against banks for fixing interest rates… and much more, scroll on:

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Public Markets

First Derivatives Results For The Year Ended 28 February 2014
First Derivatives

Turnover £69.9m (2013: £56.5m) +24%
Pre-tax profit £7.9m (2013: £6.2m) +29%
EBITDA £12.2m (2013: £10.2m) +19%
Normalised EBITDA £12.5m (2013: £11.6 million) +8%
Basic EPS 34.4p (2013: 30.2p) +14%
Final dividend of 9.0p per share (2014: 8.4p) +7%, giving a full year dividend of 12.2p +6%
Net Debt £11.2m (2013: £22.2m)

CME Faces Battle In Bid To Shrink Board
Tom Polansek – Reuters

CME aims to win shareholder approval on Wednesday to halve the number of board members who represent CME users.

PLY: I still tend to think the reform ought to be holistic of the board as opposed to focussing on slicing and dicing B shareholders first without a clear coherent plan for further board reform.

EI discussions on the matter on March 20th.
Check the EI Premium post: CME Board: B Grade Reforms.

EuroCCP (Finally) Lands LSE Link (subscription)
Anish Puaar & Tim Cave – Financial News

Amsterdam-based EuroCCP, Europe’s largest cash equities clearing house, is to launch a long-anticipated clearing service for trades conducted on LSE in one of its first contract wins with a major European bourse by Q3 2014.

PLY: An excellent range of choice is available for LSE clients in cash equities between EuroCCP, LCH.Clearnet or Swiss operator Six x-Clear.

LSE’s Rationale For Buying Russell (subscription)
Philip Stafford – Financial Times

Deal would create third-largest provider of indices to ETFs.

Analysts Back LSE Deal But Warn On Execution Risk (subscription)
Ben Wright – Financial News

Analysts have welcomed news that LSE has entered exclusive talks to buy Russell Investment, the Seattle-based stock index and asset management business, but warned that the deal faces significant “execution risk”.

PLY: That “execution risk” is being saddled with a vast asset management company which LSE neither needs nor in all reality, wants – hence the smoke signals emanating from Paternoster Square to suggest that it would be great to have a bidder lined up jointly, or soon after closing…what I like to call the “Russell hustle” as LSE seeks to offload the Asset management arm asap.

Nasdaq Hunting Alibaba After ‘Hundreds’ Of Smooth IPOs
Nick Baker – Businessweek

Nasdaq OMX’s recent successes with IPOs should allay any concerns spurred by the exchange’s mishandling of Facebook’s debut in 2012, CFO Lee Shavel said.

ICE Endex Appointed Balancing Market Operator For The Netherlands
Business Wire

ICE Endex has been appointed as the market operator for the Dutch natural gas balancing market from June 3, 2014. The Dutch gas transmission system operator Gasunie Transport Services (GTS) will perform the balancing for the within day market operated by ICE Endex.

Eurex/TAIFEX Link Successfully Launched
Deutsche Borse

The Eurex/TAIFEX Link saw a successful launch on 15 May. More than 2,100 contracts were traded and cleared in the first days of trading. The new link allows Eurex members to trade and clear TAIEX futures and options as daily expiring futures on the Eurex Exchange.

EI reported on April 10th that the two exchanges plan to launch exchange-traded offshore renminbi futures.

EU Commission Charges HSBC, JPMorgan, Credit Agricole With Rigging
Foo Yun Chee – Reuters

EU antitrust regulators charged Europe’s biggest bank HSBC, U.S. peer JPMorgan and France’s Credit Agricole on Tuesday with rigging financial benchmarks linked to the euro, exposing them to potential fines. The European Commission also said it would charge broker ICAP soon for suspected manipulation of the yen Libor financial benchmark.

PLY: Fines of $6 billion have already been levied and now the EC is keen to get more aggressive…

Dark Pools Opening Up Amid Increased Scrutiny
Sam Mamudi – Bloomberg

New rules on Wall Street this month are forcing dark pool operators to report trading details to regulators. KCG Holdings, Liquidnet Holdings and IEX Group plan to share the information with the public. KCG and Liquidnet will also join IEX and ITG in posting dark pool rule filings, known as Form ATS, on their websites.

Goldman Moves To Offload Metals Warehouses (subscription)
Gregory Meyer & Xan Rice – Financial Times

Goldman Sachs has begun a formal sales process for its controversial network of metals warehouses, Metro International Trade Services calling them “not strategic” to its client business.

PLY: Goldmans paid roughly $540 million for the warehouses in 2010.

PSE-PDEx Merger At A Standstill
Business World

The Philippines stock and bond exchange merger continues to drag…

EI reported on December 3rd that the PSE-PDEx merger saga is set to continue in 2014 after the Nov 30 deadline was missed.

Bulgaria, Macedonia, Croatia Set Up Joint Securities Trade Company
Novinite

The stock exchanges of Bulgaria, Macedonia and Croatia have created a joint company to integrate trade in securities in the three countries. Their joint project has received financial support by the European Bank for Reconstruction and Development. The institution will be based in Macedonia’s capital, Skopje, according to a statement by the Bulgarian SE.

PLY: It will be interesting to see how this initiative develops.

Faster Settlement For International Securities – Migration To T+2 For Cash Transactions And To T+1 For Repo Transactions
MondoVisione

PLY: Important news from the plumbers, reads “like eating pea soup with a fork” as a memorable wit described a particularly dire US speaker…but essential important news for markets…

BME: Shortening Of The Settlement Period For Bond Transactions To 2 Business Days (D+2)
MondoVisione

Dividend News

CME declared a Q2 dividend of $0.47 per share, payable June 25, 2014, to shareholders of record as of June 10, 2014.
CME press release here.

First Derivatives Board recommended the payment of a final dividend of 9.00p per share which, together with the interim dividend of 3.20p per share paid on 5 December 2013, gives a total dividend for the year of 12.20p, an increase of 6% over the prior year.

The final dividend, if approved at the AGM, will be paid on 25 July 2014 to those shareholders on the register on 20 June 2014.

Special Section: FTI, NSEL, India at the Crossroads

PLY: Both MCX and FTIL have fallen slightly today, down circa 1.5% and 2% respectively.

Technology

Yieldbroker Implements FD’s Delta Surveillance Package
Finextra

First Derivatives announced the implementation of its Delta Surveillance solution by Yieldbroker Pty Limited (Yieldbroker) in Sydney, Australia.

Thomson Reuters Expands Buy-Side Equity Trading Capabilities In Thomson Reuters Eikon
MondoVisione

Buy-side customers to gain aggregate view of broker liquidity and improved trade execution capabilities through integration of Autex Indications of Interest data and FlexTrade Execution Management System.

Products

ICAP’s New London SEF Targets OTC Derivatives
Elliott Holley – banking technology

The new venue, ICAP Global Derivatives Limited (IGDL), will initially focus on G3 rates, including US dollar, the euro and the pound, for IRS, OIS, FRAs, IROs, swaptions, inflation and exotic swaps and options. All other products and instruments will continue to be serviced on ICAP’s existing US SEF, ICAP SEF (US).

ICAP plans to migrate more products to IGDL and has said it will seek opportunities in Asia as well. Meanwhile in the US, the obligation to clear NDFs from the middle of next year is expected to boost SEF liquidity.

See also our premium post ICAP Explores A New Galaxy and the excellent guest posts by Jake Pugh here and here.

China To Launch First Onshore Dry Bulk Commodity Freight Derivative (subscription)
Xiao Wang – Risk

Shanghai Shipping Freight Exchange (SSEFC), China’s first freight derivatives exchange, is looking to expand the range of country-specific commodity products by launching a dry bulk commodity forward freight contract this June, according to Wu Di, the deputy president at the firm.

Career Paths

Broadridge Eyes M&A With New Hire (subscription)
Tim Cave – Financial News

Broadridge Financial Solutions, a provider of outsourced securities services, has hired a senior executive from Nasdaq OMX’s global corporate strategy group as it eyes more acquisitive growth.

Lucien Foster joined Broadridge’s global technology division in strategy and business development this month. He was previously with exchange operator Nasdaq OMX, where he assisted on several of the group’s recent acquisitions, including a 2012 deal for Dutch compliance provider Bwise, its 2010 takeover of surveillance and risk management firm FTEN, and the 2011 provider of machine-readable news provider, Rapid Data.

Volante Technologies, a global leader in the provision of innovative financial data integration, announced the strategic appointment of Neil Clarke as Market Engagement Director – Standards Evolution.

Neil joins Volante with over 15 years’ experience gained from one of the world’s leading payments and messaging specialists, CGI (formerly Logica), where Neil was responsible for CGI’s Financial Messaging and Central Market product portfolios.

Leszek Balcerowicz will receive the prestigious Milton Friedman Prize for Advancing Liberty in New York City on May 21.

PLY: He deserves every cent of that $250,000 prize as I told an audience of students at Nicolas Copernicus’ University’s e-Business conference this morning in Torun, Poland. (Thanks to Professor Michal Polasik for the invitation to address this lively e-commerce forum by the way).

Financial Calendar

Today

CME Annual Meeting of Shareholders

This week

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.

Crowdfunding

China’s Leading Peer-Lending Service Needs To Live Up To Its Name
Eric Mu – Forbes

CreditEase, a Chinese P2P lending service, has been the subject of negative publicity of late. In April, the company was accused of concealing from investors of enormous amount of bad debt, which was subsequently denied by the company.

Other stories

The Options Industry Council Signs Content Sharing Agreement With SSE
MondoVisione

The Options Industry Council (OIC) announced today that it has entered into a content licensing agreement with The Shanghai SE (SSE) to create an educational program for financial professionals and investors in China. The terms of the agreement were finalized in April and mark the first time a content licensing agreement for OIC has been executed with a financial institution in mainland China.

The Central Anticorruption Bureau, Polish Financial Supervision Authority And WSE Launch Cooperation To Protect Market Safety And Credibility
MondoVisione

CBA, PFSA and WSE have launched long-term cooperation to organise training and workshops fostering compliance culture in companies listed on WSE

PLY: A laudable and sensible project from GPW.

Leszek Balcerowicz Transformed Poland Through An Embrace Of Economic Freedom
James Dorn – Forbes

The architect of Poland’s transition from Soviet-style central planning to a market economy will receive the prestigious Milton Friedman Prize for Advancing Liberty in New York City on May 21. The biennial $250,000 prize awarded by the Cato Institute since 2002 recognizes individuals who have made outstanding contributions to the spread of economic and personal freedom.

PLY: A wonderful award for a truly great man. It is thanks to Leszek Balcerowicz, Poland remains on a path to lasting prosperity and indeed despite a rather dismal quality of populist government for the past decade, Poland remains a wonderful opportunity thanks to the brave reforms he brought in the challenging days after the evils of communism were repulsed in Poland, leading to the collapse of the Warsaw Pact. This is a great award, for a great man, honouring the name of another truly great figure in economics.

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