May 27 2014

elb2Euronext IPO looming, ICE will thus have dismembered much of Duncan Niederauer’s empire even before he get aggressively into his gardening leave. Multiple board appointments today, while MOEX announces good results. LCH gains EMIR status as expected while brokers worry about UK clearing house loss issues. ASX embracing some competition, it seems, while Kotak and a remarkable CME-LME-PE coalition appear to be bidding for FTIL stakes in MCX. Various stakes sold in multiple exchanges and related businesses while IEX are on the money raising stakes, with a mooted $200 million valuation. Elsewhere, we hear multiple stake sales are looming while NYSE Tech businesses are edging closer to sale…

Might the LSE empire expand to include Russell asset management too? LME embroiled in another lawsuit over warehousing while we learn Bob Greifeld and Duncan Niederauer were in HK pleading with Alibaba for their listing.

Thanks for the lively correspondence concerning my epitaph to the widespread failure of the Duncan Niederauer NYSE era. There were a couple of voices raised in protest – although as both ‘critics’ reckoned I was being unduly fair on Mr Niederauer and not harsh enough, I feel there is a certain unanimity of opinion that his passing as CEO will not be mourned by the exchange community.

Despite a bumper post long weekend special today, if you run out of things to read, then try subscribing to our Premium service:

New: Creating A Chain of Value
– how will exchanges incorporate innovation?

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 –

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Public Markets

MOEX Announces Q1 2014 Results
MondoVisione

MOEX today announces its financial results for Q1 2014 according to IFRS. Strong earnings growth was driven by fees and commissions generated by increased trading volumes across markets, particularly the Equity and FX Markets, as well as growth in the depository and settlement businesses.

Total operating income rose 18.0% YoY to RUB 6.51 bln (USD 190 mln).
EBITDA grew 14.6% YoY to RUB 4.43 bln (USD 129.5 mln); the EBITDA margin was 68.0% versus 70.0% in Q1 2013.
Net profit increased 23.72% YoY to RUB 3.17 bln (USD 92.6 mln); EPS increased 23.8% YoY to RUB 1.45 (USD 0.04).

ICE Plans Euronext IPO (subscription)
Inti Landauro – Wall Street Journal

ICE said Tuesday it will spin off its European stock market operator Euronext through an IPO in the coming weeks.

ICE To Sell Up To 33% In Euronext To Investor Group Before IPO
Maud van Gaal and Nandini Sukumar – Bloomberg

ICE plans to sell as much as 33% of Euronext NV to a group of investors before the IPO, selling stakes to companies including Banco Espirito Santo SA, BNP Paribas SA, ABN Amro Group NV, Societe Generale SA and Euroclear SA/NV who will hold their stakes for at least 3 years.

FAO: It was reported last month that Euronext was working on a group of eight “anchor” investors to take a 25-30% stake in the group which was updated with new names more recently.

Kotak Mahindra Bank Submits Binding Offer To Buy MCX Stake
Malvika Joshi, Ami Shah & Ashish Rukhaiyar – Livemint

Kotak Mahindra Bank has submitted a binding offer to buy a stake in MCX from FTIL, with MCX holding a board meeting May 24.

PLY: Apparently alongside Kotak, a second binding bid has been received from a consortium including CME, Tata Capital, Warburg Pincus and LME…a remarkable mix.

MCX India – Outcome Of Board Meeting
Moneycontrol

– in Career Paths below…

FTIL Board Meets On May 30 To Review MCX Stake Sale
The Hindu Business Line

The restructuring committee of the board of FTIL will meet on May 30 to review the divestment process in MCX.

PwC Audit Of MCX Details Questionable Transactions
Ami Shah & Anirudh Laskar- Livemint

MCX on Monday released the full report on a special audit conducted by PwC into its operations, after potential bidders for a stake in the exchange sought price-sensitive information that may be contained in the report. The audit report details questionable transactions entered into between the exchange and various related and unrelated parties, including donations given to charitable trusts whose existence could not be established by the auditors.

Can A New Owner Revive MCX’s Fortunes?
Mobis Philipose – Livemint

Will a change in ownership at MCX revive its fortunes? Investors certainly seem to think so.

PLY: We must hope so and certainly the opportunity is vast…

Might Xavier Rolet Hold On To Russell’s Fund Management Arm? (subscription)
Ben Wright – Financial News

Last week, LSE entered exclusive talks to buy Russell Investments, the Seattle-based stock index and asset management business. Most people assume that Xavier Rolet wants to get his hands on Russell’s US indices and will, if the deal goes through, flip the asset manager on to another buyer. That would certainly be the most logical outcome.

PLY: A fascinating development and some useful insights from Ben Wright. I like the concept of extending the LSE model – although many national regulators have apoplexy at such innovation.

LSE’s Russell Buy To Boost International Index Appeal; Analysts Wary Of Data Cost Impact (subscription)
Giulia Lasagni – waters technology

LSE’s proposed acquisition of US-based index provider and asset manager Russell Investments from the Northwestern Mutual Insurance Company will allow the exchange to diversify its revenue streams and expand its outreach into the US market, though some fear that the benefits deriving from a more diverse offering could be outweighed for buy-side index clients by higher fees resulting from increased market concentration.

LSE confirmed last week that it is in exclusive talks to buy Russell, which it would likely combine with its existing index business, FTSE.

Nasdaq Still In The Running For Alibaba IPO
Charlie Gasparino – Fox Business

Top officials at both NYSE and Nasdaq met last week with executives from Alibaba in a final attempt to win the coveted listing rights as the big Chinese Internet company prepares for its IPO.

Nasdaq CEO Robert Greifeld and outgoing NYSE CEO Duncan Niederauer met in Hong Kong with top officials from Alibaba on Tuesday. The attempt to win the Alibaba listing will be Niederauer’s last official business assignment as CEO of the NYSE. Alibaba is expected to select an exchange to list on in about a month — later than initially indicated by the company.

PLY: Who will grasp this poisoned chalice of an IPO? Last week it sounded like NASDAQ’s to lose.

Goldman, JPMorgan Sued Over Zinc Prices
Andrew Longstreth – Reuters

A lawsuit filed on Friday alleges that Goldman Sachs Group, JPMorgan, LME and metal warehouse operators have conspired since 2010 to manipulate the price of zinc in the US. The lawsuit, filed in the Southern District of New York, also names as defendants the mining and commodities trading group Glencore Xstrata and its Pacorini Metals USA LLC unit. Metro International Trade Services, the metal warehousing of Goldman Sachs, is also named a defendant.

HKEx Vows To Fight New Metals Lawsuit (subscription)
Josh Noble – Financial Times

HKEx owner of LME, has vowed to fight a fresh legal challenge over its warehouses, this time related to the impact long queues have had on zinc prices. US-based Duncan Galvanizing Corp filed a lawsuit in New York on Friday alleging that LME – along with metals warehouse operators such as Goldman Sachs and JPMorgan – has engaged anti-competitive behaviour that has distorted the price of zinc, a metal used to coat steel.

HKEx press release here.

Clearing House Rule Changes Rile Brokers (subscription)
Anish Puaar – Financial News

Banks and brokers are becoming increasingly concerned at Bank of England-led changes to UK clearing rules that could see them bear the brunt of losses from clearing house investments.

The concerns, raised by FIA, specifically relate to recent rule changes by UK-based clearing houses LCH.Clearnet and Ice Clear Europe and come as new regulations force market participants to process a wider range of derivatives trades through clearing houses.

ESMA Adds CC&G & LCH.Clearnet SA To List Of Authorised CCPs Under EMIR
ESMA

ESMA has updated its list of CCPs that have been authorised to offer services and activities in the Union in accordance with EMIR. With the authorisation of CC&G (Italy) and LCH.Clearnet SA (France), there are now six CCPs authorised under EMIR. The previously authorized 4 are: NASDAQ OMX Clearing, EuroCCP, KDP CCP and Eurex Clearing.

PLY: Clearly the rules would look empty until LCH.Clearnet were registered!

SEC Set To Spur Exchange Trading (subscription)
Andrew Ackerman & Bradley Hope – Wall Street Journal

Top U.S. securities regulators are embracing a plan designed to shift more stock trading on to exchanges and away from private trading venues operated by banks and other firms.

PLY: In a rush to pixel this morning but if I understand correctly, the idea is widen bid-offer spreads on smaller cap stocks to make trading more efficient and cost effective. Hmmm, in other news, presumably rumours are growing that Kim Jong-Un is in line for an SEC Commissionership if he stands down as leader of North Korea. Oh hold on…

ANMI To Approach New Govt For STT Removal, Reducing Stamp Duty
The Economic Times

Concerned over high transaction costs in the capital market, grouping of trading members Association of National Exchanges Members of India (ANMI) is likely to approach the new government seeking removal of Securities Transaction Tax (STT) and reduction in stamp duty.

PLY: All transaction taxes being evil, we hope this will be an early deregulatory step by the new Modi government as it seeks to ungum the stuck wheels of Indian capital markets.

Private Markets

Renuka Sugars Sells 7.5% Stake In NCDEX For Rs 66.54 Cr (USD 11.3 Mln)
Moneycontrol

Leading sugar firm Shree Renuka Sugars has raised Rs 66.54 crore (USD 11.3 mln) by offloading 7.5% stake in commodity exchange NCDEX to investors including NSE and IFFCO.

Of the 7.5% stake sold by the sugar major, 5% has been acquired by the NCDEX original promoter NSE. Renuka Sugars has sold 1.12% to IFFCO and another 1.38% to Star Agriwarehousing and Collateral Management, sources said. The stake sale in NCDEX is as per Renuka Sugars’ strategy to divest non-core assets and reduce debt.

EI discussions on the topic here.

IEX, A Maverick Trade Venue, Is In Cash Talks (subscription)
Scott Patterson, Bradley Hope & Telis Demos – Wall Street Journal

IEX Group, an upstart trading venue that aspires to be a haven from HFT, wants to become the only stock exchange that isn’t dominated by speedy dealers.

The firm is in talks with potential investors to raise millions of dollars to expand its operations and pay for the increased regulatory costs of becoming a full-fledged exchange, according to people familiar with the talks. At present, IEX is a “dark pool,” a lightly regulated, private trading venue.

PLY: Mooted $200 million valuation – with IEX making big headlines it is wise to raise now when people recognise the name…

CSE Board Tries To Tie Up With Small, Local Bourses In Its Bid To Revive The Exchange
The Economic Times

Calcutta SE (CSE), or a part of it, is sad since the May 21 winding-up directive from SEBI from May 30, 2014. Leading affluent brokers aren’t perturbed because they feel that the exchange had lost all relevance years ago.

PLY: I am sad all the way west in this far flung uber-exurb of Calcutta in Poland this morning.

Last Calls
Business Standard

Calcutta SE submits to multiple illnesses.

PLY: Can I buy the rights to the name before it closes I wonder?

Exit Plan Of Regional Stock Exchanges May Drag On
Ashish Rukhaiyar & Anirudh Laskar – Livemint

The process of shutting defunct regional stock exchanges (RSEs) is expected to drag on for months as brokers affiliated to such exchanges owe nearly Rs.100-120 crore (USD 17 – 20 mln) in unpaid registration and annual fees to the capital markets regulator. An exchange has to pay SEBI in case of a default by a trading member, a rule that many regional stock exchanges are reluctant to accept.

A final approval from SEBI, allowing regional exchanges to shut, will be subject to the payment of all the outstanding dues, they said.

PLY: If I was an exchange, I would fight SEBI until hopefully the Modi government can be convinced that the closure is a restraint of trade by an overly aggressive regulator.

SEBI A Quasi-Judicial Body, CBI Has No Power To Book Me: Abraham
K P Sai Kiran – Times of India

Senior IAS officer K M Abraham, who is facing a CBI probe in the MCX-SX case, has termed the agency action against him as ultra vires (beyond powers) as his action as SEBI member was quasi-judicial in nature.

PLY: I am above the law he seems to be saying. Hmmm, divine right regulators…anybody who deems themselves above the law worries me.

Bitcoin Rallies As Allegations Of Trading Irregularities Swirl
Alex Wilhelm – TechCrunch

It’s been a torrid few days for bitcoin, the now globally known cryptocurrency. A price rally kicked off that has, over the past week, pushed the value of bitcoin up by around 25%.

PLY: Perhaps it is irregularities but looks like a low volume relief rally at first glance to me, which is likely to see a further downleg in the near future.

Bitcoin Set To Overtake eBay’s PayPal In Transaction Volumes
Jerin Mathew – IBT

Popular digital currency bitcoin is expected to overtake e-commerce giant eBay’s payment processor PayPal in terms of US dollar transactions in the near future.

PLY: Paypal is a necessary evil but ultimately expensive and inefficient. Bitcoin is cheap, real-time and flexible, competition is good for finance, let’s hope they can destroy (or force innovation upon) tired monopolies like Swift soon too.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX is down 3% despite news of firm bids (but so far only two – unless that consortium wants up to 5% each?) while FTIL is flat.

NSEL Commences Remittance Of Payout To Unit-Holders Of E-Gold
Zeenews

As a part of the financial closure of gold e-series contracts, NSEL on friday started making direct payments to over 21,000 unit-holders at the average rate of Rs 2,935.9925 (USD 50) per gram. NSEL had a total of 617.5 kgs of gold eligible for rematerialisation and financial closure. Pursuant to FMC issuing the NOC, the exchange had issued the circular on April 4 for rematerialisation/financial closure of e-series settlement.

Former NSEL Chief Anjani Sinha To Stay In Judicial Custody
Khusboo Narayan – Livemint

A Mumbai sessions court on Monday extended the judicial custody of Anjani Sinha, a former CEO of NSEL, until 9 June after he failed to secure a surety of Rs.5 lakh (USD 8.5k) for bail.

Technology

After RFP, OPRA Renews SIAC SIP Deal (subscription)
Max Bowie – waters technology

The Options Price Reporting Authority has concluded its tender process to find a technology supplier to manage its Securities Information Processor (SIP), and is expected to re-sign with incumbent provider SIAC (the Securities Industry Automation Corp., NYSE Euronext’s technology arm) until the end of 2021, sources tell Inside Market Data.

NYSE Overhauls Non-Display Data Fees (subscription)
Faye Kilburn – waters technology

NYSE Euronext has informed clients of changes to its non-display policy for all real-time US proprietary market data products, which includes price increases of up to 100% for some products, in a move to bring its fees into line with those of its competitors.

Athens SE Chooses Multi-Asset Surveillance Technology From Cinnober
MondoVisione

The Hellenic Exchanges — Athens Stock Exchange Group, has selected Cinnober as technology partner for the implementation of its new surveillance system. The multi-asset solution will strengthen the exchanges’ existing technological infrastructure in order to cope with the new European regulatory environment and requirements.

PLY: More good news from Cinnober as Helex buys their surveillance technology to oversee the Helex system which is an old OM core code system rebuilt from the source by the Greeks.

Volta Data Centres Partners With Venus Business Communications To Offer Enhanced Hybrid Colocation Solutions Via AWS Direct Connect
MondoVisione

Volta, developer and operator of central London’s newest purpose-designed, carrier-neutral data centre, and Venus, London’s leading fibre network provider for the media and business community, today jointly announced enhanced hybrid colocation solutions via Amazon Web Services (AWS) at Volta Great Sutton Street (GSS).

ASX Plans To Become Asian Tech Hub
Paul Smith – BRW

ASX is making moves to position itself as a regional hub for the booming technology sector, seeking to convince entrepreneurs to start in Australia on their journey to global fortune.

PLY: Hmmm, does that mean the ASX embrace technology competition…and they see themselves as a technology company so they are now moving towards embracing exchange competition?

Products

NCDEX Launches Internationally Aligned Sugar Contracts
The Hindu Business Line

NCDEX on Friday launched sugar contract, which will be available for October onwards contracts and is aligned with the global market so that industry can protect itself from volatility in prices.

The new contract has been designed in partnership with apex industry body Indian Sugar Mills Association (ISMA).

India – Ready Forward Deals Set For Debut On Commexes
Rajesh Bhayani – Business Standard

Ready-forward deals, already famous in currency trading, are now coming to commodity exchanges, too. In what might change the country’s commodities landscape, ready forwards, besides other forward products, are set to be introduced on commodity futures platforms.

NCDEX, which is to initially launch ready-forward products for oilseeds, edible oils, cotton, etc, will later offer these for all major agricultural commodities like sugar, maize and chana.

NASDAQ OMX Launches Weekly Options On Swedish Shares
MondoVisione

NASDAQ OMX announces that trading in weekly options on Swedish shares starts on NASDAQ OMX Stockholm on May 26. The introduction of weekly single stock options is an extension of the successful weekly index options offering that NASDAQ OMX launched in 2012, and that today represent around 5% of the total Swedish index options volumes.

Career Paths

MCX has appointed P K Singhal as its interim CEO, he was previously Deputy MD of MCX and also served as its Senior VP and Head of Business Development (North).

Search For New Head Of TMX Underway As CEO Prepares For Retirement
Linda Nguyen – Winnipeg Free Press

PLY: Tom Kloet notes “It’s essential,” that TMX plays an increasing international role.

LSE has appointed Nikhil Rathi as its head of international development and chief of staff.

Rathi joins from the UK Treasury where he held a number of senior roles and was most recently director of the financial services group.

LSE press release here.

TMX announced that the nominees listed in the management proxy circular for the 2014 Annual and Special Meeting of Shareholders were elected as directors of TMX – Luc Bertrand, Denyse Chicoyne, Marie Giguère, George Gosbee, William Hatanaka, Jeffrey Heath, Harry Jaako, Thomas Kloet, Lise Lachapelle, William Linton, Jean Martel, William Royan, Gerri Sinclair, Kevin Sullivan, Anthony Walsh, Eric Wetlaufer, Charles Winograd, Tom Woods.

TMX press release here.

PLY: I am delighted as always to see Luc Bertrand on the board of TMX. With Tom Kloet standing down his perspective will be very beneficial for the future stewardship of the exchange.

LCH.Clearnet announced that Jonathan Eliot will join the BoD of LCH.Clearnet Ltd, the Group’s UK CCP, as a NED effective immediately.

Euronext’s UK Exchange Bolsters Board (subscription)
Tim Cave – Financial News

A former deputy CEO of Renaissance Capital and an ex-chairman at Lyxor Asset Management are among four new board at appointments at Euronext’s London stock exchange market, according to UK Companies House filings.

Andrew Cornthwaite, currently head of international coverage and international global banking in London at Russian bank VTB Capital, has joined the board of Euronext UK Markets.

Ines De Dinechin, who left her role as chairman of Lyxor Asset Management earlier this year, also joined the board.

The two other appointments are Jim Gollan, a former director at derivatives exchange NYSE Liffe and a NED at Merrill Lynch International, and Keith Robinson, a former accountant who previously sat on the board of NYSE-owned trading platform Smartpool.

PLY: Good to see JIm Gollan back on another board.

Thomson Reuters announced the election of three new members to the company’s BoD at the company’s annual meeting of shareholders held in Toronto.

Sheila C. Bair (60) is a Senior Advisor to the Pew Charitable Trusts, and currently serves as a member of the boards of Host Hotels & Resorts and Banco Santander. Ms. Bair previously served as the Chair of the Federal Deposit Insurance Corporation and has held senior positions at NYSE, CFTC and the U.S. Department of the Treasury.

Michael E. Daniels (59) is currently a member of the boards of SS&C Technologies Holdings and Tyco International, as well as a trustee of Holy Cross College. Mr. Daniels previously spent 36 years with IBM where he held senior roles in sales and technology.

P. Thomas Jenkins (54) is Chairman of OpenText Corporation and has served as a member of its board since 1994. Mr. Jenkins served as President and CEO of OpenText from 1994 to 2005. Mr. Jenkins previously served in several managerial and technical capacities at various technology companies.

Iosco Seeks Securities Regulators For Emerging Markets (subscription)
Sarah Krouse – Financial News

Do you have experience in the regulation of securities markets? Fed up with the same old grind in London, New York or Frankfurt? Fancy spending a year or two in a more exotic location?

Financial Calendar

This week

BM&FBOVESPA approved R$204.9 mln (USD 92.3 mln) dividends payment
GFI Group $0.05 quarterly dividend payment
Record date CBOE $0.18 quarterly dividend
Record date Interactive Brokers $0.10 quarterly dividend

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

Share Notes

TMX CEO Plans To Exercise Options & Sell Common Shares
Canada NewsWire via COMTEX

TMX announced that Tom Kloet, CEO, intends to exercise stock options and sell the underlying common shares subject to market conditions. As reported in TMX’s management information circular dated April 11, 2014, Mr. Kloet has a share ownership requirement of three times his base salary, which he will continue to exceed following any sales.

Analyst Notes

LSE “Sell” Rating Reaffirmed By Goldman Sachs – GBX 1,990 Target Price
Tullett Prebon “Neutral” Rating Reiterated By Goldman Sachs – GBX 360 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.

Crowdfunding

Richard Branson: I Would Have Turned To Crowdfunding
Rebecca Burn-Callander – Daily Telegraph

Sir Richard Branson has said he would have used crowdfunding to start his Virgin empire if it had existed in the 1960s after last week investing in Indiegogo.

P2P Trust To Launch (subscription)
Jonathan Eley – Financial Times

A new investment trust specialising in peer-to-peer lending and other forms of finance is to be launched this month, promising investors hefty headline dividend yields, in a further sign of growing institutional interest in alternative lending.

P2P Investment Trust is looking to raise £197m net of expenses via a share issue at £10 per share, with the first dealings set for May 30. It is promising to invest in loans and other assets generating an overall return of between 5% and 15%, and providing returns to investors of “at least 6-8%” of the issue price.

YouTube Plans To Add Built-In Crowdfunding Capability
Devin Coldewey – NBC News

A few changes are on the way for YouTube’s power users, and perhaps the most exciting feature is a way for video creators to raise money from their fans directly on the site.

People who make money from YouTube do so mainly in two ways: advertising, which of course happens on YouTube itself, and getting money from supporters — which happens elsewhere. Whether it’s Kickstarter, Indiegogo or just a PayPal donation link, it means leaving the site.

If people can put a few bucks in the virtual tip jar without visiting another website, that could be more convenient.

Other stories

Thai Bourse And Cambodia Securities Exchange Signed MoU
MondoVisione

The Stock Exchange of Thailand (SET) signed a MOU with Cambodia Securities Exchange (CSX) to promote development of capital market in Cambodia and Thailand. Among others, the MOU encompasses human resource training, professional training, information sharing and promoting capital market business opportunities between the two exchanges.

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