May 22 2013

elb2 For those who see exchanges as an investment outside the confines of mega-bourses, some good news with a couple more exchanges on the IPO ramp. Smaller exchanges have a vast future and yes, I would love to eat a whole one.

The CME wants to reduce its board size from the population of a small Swiss mountain village to something which is actually manageable. With 30 plus the usual phalanx of extra executive attendees, how long does a board meeting have to last just to make sure everybody has a mixer in their drink?

Google has 10 directors while Apple have 8, Microsoft 9 and even JP Morgan has 11. Similarly
Intercontinental Exchange gets by rather nicely on 11 although a little worryingly, that goes to 15 with the NYSE acquisition.

As a result of reader feedback, I have added some comment to each story with my initials (PLY)…here is today’s news:

Public Markets

CME Plans to Cut Board Size (subscription)

Wall Street Journal

The chairman of CME Group Inc. said the exchange operator plans further cuts to a 30-member board that is twice as large as its closest U.S. rivals.
PLY: 30 is large for a kindergarten class. Many Chairmen reckon maintaining order in that kindergarten class may be easier than a similarly large exchange board.

ICE and NYSE file deal with European regulators (subscription)

Financial Times

IntercontinentalExchange and NYSE Euronext have formally filed their planned $10bn deal with antitrust authorities in Europe.

PLY: Watch for a decision by end June, around the time of the FESE Convention in Berlin…

Decision date set for ICE and NYSE merger (subscription)

Futures and Options Intelligence

The European Commission will decide by 24 June whether Intercontinental Exchange (ICE) can move ahead with the completion of its $8.2bn takeover of NYSE Euronext, writes Jonathan Watkins.

ICE & CME Warn of Splits in Global Derivatives Rules

Businessweek

Jeff Sprecher & Terry Duffy testified to the House Agriculture Committee that regulators must take further steps to align Dodd-Frank Act rules with those of foreign counterparts to avoid oversight splits that could harm markets.
PLY: The phrase ham-fisted suicide pact could be applied to oh so many aspects of global regulation right now. Dodd Frank doesn’t match EMIR and can leave the US at a disadvantage. Then again the EU has a suicide pact called the FTT to trump allcomers to destroy investment culture… In the old days it was Mutually Assured Destruction by nuclear superpowers. Now western economies are indulging in a form of regulatory MAD-Repo process…

Sprecher says lack of cross-border derivatives coordination ‘damaging’

MarketWatch (blog)

The failure to harmonize the cross-border application of derivative rules “will be damaging,” according to IntercontinentalExchange Chairman and CEO Jeffrey Sprecher, who testified Tuesday on Capitol Hill at a hearing on the future of the Commodity Futures Trading Commission.

PLY: In the 1960’s US taxes sent Eurodollar trading to London. Half a century later it could be Moscow which picks up the pieces if US/EU regulators push too hard…

WSE gets tough with New Connect (subscription)

Financial Times (blog)

The Warsaw Stock Exchange is tightening the screws on its often-unruly younger sibling, the New Connect alternative market for small companies, by halting trading in 14 companies that failed to file their quarterly reports on time.

PLY: NewConnect remains a great market overall although information flow in English is very poor. A pity as there are some fascinating companies there. Mark problems down to growing pains, NewConnect fundamentally works!

NASDAQ OMX Commodities Launches German Power Initiative

10 liquidity providers, 3 brokers and 1 market maker have signed on, since NASDAQ OMX Commodities invited members to participate in March.

Private Markets

Hong Kong Police Investigate Failed Mercantile Exchange

Businessweek

Police began probing the Hong Kong Mercantile Exchange Ltd., owner of the failed commodities market set up by a member of the city’s cabinet, after the securities regulator found suspected financial irregularities.
The arrest of three men after the May 18 shuttering of the exchange prompted its Chairman Barry Cheung to say he is taking a leave of absence from all public positions. Cheung hasn’t been accused of wrongdoing.
PLY: The omens are not propitious for the exchange run by ex-McKinsey consultant Cheung. Slow burn is the only way to seriously run new exchanges. Alas this market replicated ADX (Oz) & many other ventures in burning big dollars rapidly, it appears… NB None of those arrested are HKMex staff.

European energy exchanges compete for Turkish growth

Reuters

European energy exchanges ICE Endex and EEX are competing for a slice of Turkey’s liberalising power market (exporting $60bln p.a.) as the country prepares to open its first electricity exchange by October.

Jamaica SE to sell 20% in IPO

Jamaica Gleaner

JAMAICA STOCK Exchange (JSE) is planning an initial public offering of 20 per cent of ordinary shares to stock market investors, sometime after the redemption of the 33 million preference shares listed on its own exchange scheduled for month end.

Kenya – Plans for a derivatives market segment

The Star

The Capital Markets Authority hopes to start receiving applications for futures exchanges from August presuming draft regulations are suitably advanced (currently available for public comment)
It has published, for public comment, the first set of draft regulation on licensing requirements. The three draft regulations will be necessary for establishing a derivatives and futures exchange in the country.

Zimbabwe SE Plans IPO

Bloomberg

Zimbabwe’s stock exchange, whose main industrial index has jumped 38 percent this year, plans to sell shares through an initial public offering by the end of 2013, according to the national regulator.

Chief Executive Officer Tafadzwa Chinamo is planning automated traded and believes an IPO may value the ZSE at $15 million to $20 million.

Products

HKEx preparing to launch CES 120 derivative

Global Times

Hong Kong Exchanges and Clearing Limited (HKEx), is working on a new stock index-linked derivative product, CES China 120 Index (CES 120) futures, amid ongoing efforts to enhance financial cooperation between the mainland and Hong Kong.

Moscow Exchange Starts Trading Russian Mortgage Certificates

Today the Moscow Exchange welcomes mortgage-backed participation certificates* “ISU-1” managed by GFT CAPITAL Asset Management Company on its quotation list A1 intended for top securities. The securities represent a new instrument on the Russian financial market. From May 22, 2013 they will be traded on the Moscow Exchange’s Securities market.

Crowdfunding

Viva Italia, Crowdfunding Leader Of The Pack

Forbes

Crowdfunding has been expanding rapidly in Italy since late March Italy’s CONSOB submitted equity crowdfunding for public commenting in Italy as part of the “Decreto Crescita Bis” or the Italian “Growth Act 2.0” bill.

Can We Say Crowdfunding Bubble?

TechCrunch

How many crowdfunding platforms is evidence of a crowdfunding bubble?

PLY: Wrong question but interesting article: fwiw this is the early stages of the peer to peer finance movement (some might say “Capital Market Revolution!”) – the scope for crowdfunding is in early goldrush phase, not a bubble yet and actually there are plenty of opportunities to fill in the space (if you can’t find one, please email me and I’ll help locate several for you according to your investment budget!).

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