May 29 2013

elb2 HKMEX is rumbling on, with post mortems and a turf battle over who gets to investigate what… Elsewhere, LCH has shiny new capital while the competitive landscape in China/HK is shaping up.

Meanwhile CDS market news, a new Indian investor and much more…

Public Markets

Completion Of LCH.Clearnet’s €320 Million Capital Raise

London Stock Exchange Group plc (“LSEG”) is pleased to confirm that LCH.Clearnet Group Limited (“LCH.Clearnet”) has today announced that the Capital Raise of €320 million which was launched on 1 May 2013, in order to meet increased regulatory capital requirements, has been successfully completed.

PLY: Short, sweet and solvent goes the news, LCH is ready to meet new regulatory requirements. Various other CCPs are looking for investment or for sale outright we believe…

Harsh Trading Lessons Are Legacy Of HKMEx Saga (subscription)

Financial Times

The last straw was the purchase by Hong Kong Exchanges & Clearing, Hong Kong’s dominant exchange, of the London Metal Exchange, creating an unmatchable rival in HKMEx’s backyard. But the HKMEx venture was not entirely a bad idea.

PLY: Jeremy Grant comments in this article: “The first lesson from this saga is that it is all but impossible to launch an exchange with products that are similar to another’s – as HKMEx did.” Hmmm, I wonder what NASDAQ’s new European derivatives exchange NLX make of that analysis?

Ultimately, 100 staff, huge ambition, mega budgets and alas, the way to start exchanges is surely with much, much smaller teams and a longer burn rate… Meanwhile, exchange opportunities in Asia are just as huge as every other region (if not greater!). However, HkMex could have learnt a lot from the playbooks of say, Australian Derivatives Exchange and other failures in the region.

HKEx Eyeing Joint Listings With Bourses In China (subscription)

Hong Kong Exchanges and Clearing (HKEx) is looking to develop joint listings of commodities products with exchanges in mainland China to take advantage of its takeover of the London Metal Exchange, according to ceo Charles Li.

PLY: Doubtless HKex stymied a lot of the HKMex business plan but the bid for LME was pretty obvious months before it even happened, why did HKMex not have a back-up plan?

Shanghai Futures Exchange Plans To Expand Warehouse Network In Competition With LME


The Shanghai Futures Exchange said it will open its delivery warehouse network to overseas investors while adding depots at home and abroad as competition with the London Metal Exchange intensifies.

PLY: Fascinating, clearly an effort to go head to head with HKex’s LME which has for a long time been a remarkable cash cow monopoly in its metals.

Cleartrade Exchange Launches Reporting Service For OTC Derivatives

Cleartrade Exchange (CLTX) has launched a third-party reporting service, through an electronic connection to the swap data repository (SDR) owned by the Depository Trust & Clearing Corporation (DTCC).

Derivatives contracts traded through CLTX can now be automatically reported to the DTCC in real-time, allowing members of the exchange to comply with CFTC trade reporting requirements.

JSE Cuts Fees For Interest Rate And Currency Derivatives

In a bid to increase liquidity and boost trading volumes, the JSE will reduce fees for both interest rate and currency derivatives effective 1 July 2013.

PLY: Interesting that JSE is cutting fees despite 29% growth in number of contracts traded. Total saving to clients is roughly R3 million (USD 300K)

Private Markets

Mongolia Exchange Seeks Deeper Ties With LSE (subscription)

Financial Times

CEO Altai Khangai, hoping to use the incoming dual listing law to promote co-listing with LSE.

India – Universal Commodity Exchange May Sell 5% Stake To Bullion Trader

Economic Times

Universal Commodity Exchange (UCX), the futures exchange which launched last month, is reportedly in talks with Dubai-based bullion trader Harish Pawani to sell his company a 5% stake in the exchange…

Burgundy Completes Dress Rehearsal For Millennium Exchange Switch


On Saturday 25 May the second and final dress rehearsal (DR2) for Millennium Exchange on the Burgundy markets was conducted successfully..

Investigators In Turf War Over HKMEx Investigation

South China Morning Post

Police probing the collapse of HKMEx are concerned that their criminal investigation could be hampered by the Securities and Futures Commission’s (SFC) own inquiry into the failed trading platform.


Markit, ICE Prep List For CDS Index Futures (subscription)

Wall Street Journal

Markit has prepared a workaround for credit-default swap index futures, following some traders’ hesitancy to embrace the product planned by IntercontinentalExchange Inc.

The financial data company, which administers CDS indexes and runs a CDS pricing service, is planning to publish a daily list of index constituents that the ICE futures will be based on.

PLY: Will ICE succeed where pre-crash EUREX failed to gain traction?


Crowdfunding Sites Scoot Around A Regulatory Traffic Jam


In the absence of rules, a small number of crowdfunding sites have partnered with broker-dealers, which can help companies sell equity to accredited investors in transactions called private placements.

PLY: This has been deployed in part in Europe too for some crowdfunding sites. Ultimately regulators need to tread carefully otherwise crowdfunding platforms will just move to more friendly jurisdictions…

Crowdfunding Helps Community Projects Bridge Cash Shortfall

The Guardian

Crowdfunding is not new. In 2006, Fordhall Farm in Shropshire became a community-owned farm when Guardian readers helped to raise the best part of £100,000 after an article urged them to contribute to a fund set up to buy and run one of the first organic farms in England.

But the history of crowdfunding for public projects goes back even further. In 1884, the Statue of Liberty pedestal was built following a campaign by newspaper owner Joseph Pulitzer. Together, 125,000 New Yorkers contributed $100,000 (£65,000) over six months. The majority of donations were $1 or less.

PLY: The Statue of Liverty – testimony to the free will of the people to live, work, spend and invest as they wish. God Bless America and especially those who had the vision to back this icon of freedom..

Can Earthlings Crowdfund A Moon Colony?


With demand and financing for the future of so uncertain, perhaps it’s time for moon-colony advocates to put their energy into a new approach: crowd-funding. Opening up the project to the crowd offers a way to gauge public support and bring in some much-needed revenue. Crowd-funded space projects have already produced results: The space-research and education company Uwingu has raised almost $80,000 through a campaign on the website

PLY As per the above story concerning nation states over-regulating and pushing platforms overseas, it appears the risk of regulatory arbitrage may soon be inter-planetary.

Other stories

Eurex Makes Securities Lending CCP Updates

Securities Lending Times

Eurex Clearing is introducing changes to its central counterparty (CCP) solution for securities lending.

With the new processing solution for voluntary corporate actions, lenders and borrowers will be able to arrange bilaterally for all types of voluntary corporate actions, including the sale or execution of rights, while keeping the loan within the CCP.

PLY: This announcement will appear really boring to people at the front end but it is really worthwhile and can only help investors’s and the DB bottom line.

SET Plans To Eclipse Singapore

Bangkok Post

The Stock Exchange of Thailand seeks to increase market capitalisation to US$700 billion ($500 bln now) by 2016 to overtake the Singaporean bourse as Southeast Asia’s largest market.
PLY: We wish Thailand every success with its development plans but at the same time this target demonstrates the longstanding brilliance of Singapor as much as the failure of its neighbours to develop at the same pace. There are 5.2 million in Singapore, 70 million people live in Thailand. Where SET is excelling is in secondary market trading, worth about 35% more than SGX.

Today’s Events

Dividend News: IBKR, CBOE

Interactive Brokers Group Incorporated (NASD: IBKR) will trade ex-dividend, quarterly dividend $0.10, payable 6/14/13. Ceteris Paribus, IBKR will trade 0.64% lower at the open today.

CBOE Holdings Incorporated (NASD: CBOE) will trade ex-dividend, quarterly dividend $0.15, payable 6/21/13. Ceteris Paribus expect CBOE shares to open down 0.37%.

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