May 29 2014


Various stories about Euronext, NASDAQ upgrades eSpeed tech, Dar Es Salaam SE looking to do likewise (vendor unknown). A damning drip feed of audit reports concerning FTIL/MCX. TMX CEO Tom Kloet encourages crowdfunding and other market mechanisms to raise SME funds while south of the border, SEC still haven’t given the US rules to do so. ASX CEO insouciant, IEX come close to doing “God’s work” – perhaps appropriate for Ascension Day…

Elsewhere in Europe, it looks as if the knives are out for Jean-Claude Juncker, who is claiming a sort of divine right grasp on an EU Presidency by dint of leading the first placed party in the Euro-elections (that they actually lost seats is an afterthought). His European superstate leanings seem to have done his chances in, as opposed to his sheer inability to manage anything. This, after all, was a man forced from office as Prime Minister because the Luxembourg secret service (total headcount 60) ran amok.

…The great thing about the EU is that there is no need to make these stories up, fact is much whackier than fiction once Brussels gets involved it seems.

Meanwhile, if perchance you run out of things to read, then subscribe to our Premium service. Recent highlights include:

New: CME Election Results
– a brief look at the voting patterns on the board and B-share vote

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

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

Euronext: Trading Places (subscription)
Financial Times

How it resolves investors’ conflicts of interest is key to float.

PLY: Lex spots one issue but misses the (government) elephant in the room. There is indeed a conflict of interest in the bank holdings amongst the consortium who bought in pre-IPO. However, the French state has rampant paranoia about losing control of ParisBourse to NYSE: that must never be repeated. Hence we have a bourse being floated which is to all intents and purposes being shadow controlled by French government puppeteers. True, the Dutch and the Belgians get to play those rounds of golf often hosted by Portuguese regulators but ultimately France is manipulating the business. As the French economy builds momentum towards third world status whether under active Socialist mismanagement, passive UMP mismanagement or indeed the apocalyptic protectionism of the National Front…well let’s just say Euronext faces issues.

JPX: The 13th Annual General Shareholders Meeting

Notice of the 13th Annual General Shareholders Meeting.

PwC Says SEBI-Banned Bansal Did Rs 479 Bln (USD 8.13 Bln) Futures Trade On MCX
Free Press Journal

PwC, in its special audit report on MCX’s operations, noted that Pradeep Bansal, a member related to an entity banned by the capital market regulator, had executed 478.63 bln rupees (USD 8.13 bln) worth futures trade on MCX.

PLY: The drip drip of accusations surrounding MCX requires a major pushback from management, with the new CEO (whoever that may be) coming in fast to dissolve the accusations and rebuild what can be an incredible business once again (and much more than even its FTIL era operations).

PwC Questions Sale Of Warehousing Company By MCX At Book Value
Free Press Journal

PwC, in its special audit report on MCX’s operations, has raised questions on the sale of its warehousing arm, National Bulk Handling Corp (NBHC), to FTIL in 2005 at book value of just 500,000 rupees (USD 11.5k).

EI reported on April 28th that FTIL completed the sale of NBHC to VF Trustee Company for Rs 241.74 crore (USD 39.8 mln).

PLY: A big smoking gun here: “The PwC report also noted that MCX was neither able to provide any agreement between MCX and Financial Technologies for sale of the warehousing arm nor could it provide the minutes of the board meeting mentioning the reasons for the sale.”

– That ought to be enough to keep Jignesh cooling his heels in a cell for another week or so methinks.

TMX CEO Addresses The Economic Club
Canada Small Businesses Need More Funding Options – TMX’s Kloet

Departing TMX CEO Tom Kloet called on Tuesday for more access to capital for Canada’s million-plus small, private companies.

“What they need to succeed is capital, which is the lifeblood of a growing company,” Kloet said in remarks prepared for delivery to the Economic Club of Canada.

PLY: Tom espouses all avenues including crowdfunding et al in a wise speech which respects the entrepreneurial culture of Canada and also provides an avenue so we can find not just the next great energy and resources companies but let’s face it, the next Tim Horton too.

ASX CEO Not Concerned About HFT
Georgia Wilkins – Sydney Morning Herald

ASX chief executive Elmer Funke Kupper has played down the threat of high frequency trading in Australia and called again for the government to review its 15 per cent ownership restrictions on the local bourse. Speaking at a stockbrokers’ conference in Melbourne, Mr Funke Kupper said while Michael Lewis’ new book, Flash Boys, was “all true”, high frequency trading did not exist in Australia “on the same scale or with the same impact” as it does in the US.

FAO: EFK wasn’t concerned on May 7th either, when he delivered a similar speech at the Macquarie Australia Conference.

PLY: The insouciant Mr Kupper defies the ongoing rumours that he is close to being fired. At the same time “Flash Boys” “is all true” demonstrates that this is another brief which Mr Kupper doesn’t understand, just like competition, or indeed capitalism it seems. Australia, we worry about you.

Exchanges Can Ruin HFT Benefits: Study
Jonathan Morgan – Businessweek

Exchanges risk making it harder for investors to get the best price by facilitating ever-faster trading, according to academics who examined Nasdaq OMX venues.

PLY: Essentially a study showing that bid-offer spreads widened when HFT was introduced.

Private Markets

IEX & The Re-Mutualization Of Market Infrastructure (subscription)
Karl Antle – Wall Street & Technology

Whether success or failure, devil or savior, IEX exists because enough members of the buy-side community wanted it to.

…In this [“Flash Boys”] context, I am less fascinated by the actions of high frequency traders than by the motives of the team who founded the new exchange. Many of those involved could have made more money on the sell side or by operating a more classic dark pool or exchange. So why did they launch this endeavor?

For the good of the market.

PLY: Which reminds me of an entrepreneur and exchange/market infrastructure expert who probably could make a lot more money if he didn’t launch newsletters like Exchange Invest “For the good of the market.” Do please feel free to show your appreciation with a Premium Subscription or some sponsorship!

Bitcoin Grabs Dutch Fancy As Bankers Mull New Technolgy
Carter Dougherty & Maud van Gaal – Bloomberg

While big banks in China and the U.S. are reluctant to do business with ventures focused on virtual currency, Dutch banks are embracing them as potential customers. National regulators aren’t cracking down as they are in other nations and major bitcoin startups are setting up shop in Amsterdam.

PLY: Naturally the Bitcoin critics are chirruping Tulipmania here whereas I see a classic streak of Dutch mercantile pragmatism at work while more protectionist linear thinking nations around the Netherlands are less capable of believing there can be money without the burden of central bankers.

Special Section: FTI, NSEL, India at the Crossroads

PLY: Shares are largely unchanged as the drip drip of audit revelations does nothing to improve the management reputations of Jignesh Shah and the FTIL team. MCX is flat while FTIL is off 2%.

NSEL E-Gold Investors Start Getting Refunds
Rajalakhmi Nirmal – The Hindu Business Line

Good news for the beleaguered e-gold investors of NSEL. The exchange has disbursed around Rs 140 crore (USD 23.7 mln) so far towards settlement of e-gold units.

PLY: Encouraging, now just when can we expect to see the Mumbai Fraud squad liquidate encumbered assets to raise cash for the creditors?


Euronext IPO Will See Operations Move From Inhouse To Colo
Penny Jones – DatacenterDynamics

Euronext is planning an IPO on its own exchanges which could see the London-based derivatives group migrate its current IT platform inside ICE’s London data center over to a co-location arrangement.

PLY: Much ado about no actual movement, other than at the corporate agreement level.

However, I cannot avoid noting a comment from the outrageously over-remunerated Dominique Cerrutti, who, as CEO of Euronext seems to emerge straight out of the Duncan Niederauer mould of value destructive incompetence. Anyway the article notes:

“Dominique Cerutti, Euronext CEO, said three “converging trends” have driven Euronext’s separation from its parent group and the US. “An increased desire for transparency, a new level of demand for diverse sources of capital and the emerging economic recovery in Europe are driving more activity onto regulated exchanges and position Euronext well,” Cerutti said.”

Well that’s the view not so much from above the glass ceiling but clearly planet Zog imho. To help Mr Cerrutti with, how might one put it, as yes, that lovely non-French word, realpolitik, here are the three reasons Euronext is being sold:

1) French obstructionism / protectionism and government paranoia that in their crypto-Marxist world view, they must be able to ‘control’ capitalism and therefore the exchange;
2) …and the EU thought selling a good idea to avoid a monopoly in Europe on exchanges;
3) Anybody with the IQ of a polo mint (and that clearly includes the management team at ICE) clearly realise life is too short to be caught up in the soap opera of sex, sub-texts and indeed other s-words which has been the recent history of Euronext. As a soap opera “Rue Cambon” may yet be a classic in the genre – “Mad Men” with sexual equality.

Do stock analysts rate shares “woof?” If not, I propose starting a trend. In this case we would add that all important supplementary analytical qualifier “with fleas.” Doubtless the investment banking pack will now work hard to explain that, just like “underweight” or even “sell” “woof with fleas” is actually a positive mark for Euronext.

I actually love Euronext by the way, I mean it appears so dysfunctional yet still makes money – a perversely perfect example of just why the exchange model is so exciting for investors.

NASDAQ OMX eSpeed Migrates To NASDAQ OMX Tech/Data Center

US Treasury platform eSpeed, has successfully completed performance engineering enhancements and migration to the NASDAQ OMX Data Center. The updated platform and data center environment will provide customers with improved cost efficiencies, trading opportunities across multiple asset classes, and access to leading-edge services for market participants.

PLY: Gosh, how breathless can you feel after an IT upgrade? NASDAQ quantitatively ease superlatives into another fundamental increment of benefit to markets. Beneath the hype, there is clear progress in the integration and development of eSpeed which I still think was a canny purchase by NASDAQ OMX.

Instinet Adds Global Connectivity To Nomura’s Electronic Futures Trading Platform

Instinet announced the global availability of Nomura’s advanced electronic futures trading platform via the Newport® Execution Management System (EMS).

BT Radianz Helps KOSCOM Attract Global Investors To Korea

BT today announced that it is working with leading Korean financial IT provider KOSCOM to build a ‘liquidity hub’ in Hong Kong, making it easier for global investors based in the city to trade on Korean financial markets with a scheduled launch date of July 2014.

Tanzania: Dar Bourse To Upgrade System

Dar es Salaam SE (DSE) is in the process of changing the Automatic Trading System (ATS) and Central Securities Depository (CSD) engine into a more robust and cost efficient system in order to make the bourse more vibrant and competitive.

PLY: No news on what systems are under consideration / or have been chosen.

Horizon Partners With Azul To Offer Zing With Its Trading Platform

Front end vendor Horizon Software will offer Zing, Azul’s high-performance Java runtime, as part of its portfolio to deliver increased application productivity and business efficiencies.

MarketAxess And BlackRock Partner To Provide iShares Fixed Income ETF Information And Electronic Basket Trading Technology For ETF Market Makers

MarketAxess and BlackRock announced the launch of iShares fixed income ETF information and basket trading technology on MarketAxess enabling ETF market makers to efficiently trade baskets of iShares ETF constituent bonds using MarketAxess’ patented list trading functionality.

PLY: Interesting. As you may recall, iShares was once Barclays ETF business but some foolish person sold that and kept the bank/ibank which I still believe was fundamentally the wrong decision for shareholders. Elsewhere I hear bids are being solicited for Barclays’ Index business.

Next-Generation E-Communications Surveillance Starts Now (subscription)
Julio Gomez – Wall Street & Technology

Monitoring every single email, voice call, text, or chat for compliance is a daunting challenge, but analytics technology is improving.

You have to read every single policy. You have to read every single email that comes in and goes out of your business. You have to follow every single chat session that every single employee opens. And you have to correlate them all to find patterns that indicate risks and violations.

Now, that’s a regulatory burden for you. Oh, and the new rules go into effect December 1.

PLY: Crisp, clear, with a hint of understatement, the big brother, er, big data, surveillance of trading is upon us – prepare for a run of false positives I imagine (especially given the haste of required implementation).


New FTSE ASEAN Index Series Provides Comprehensive Suite Of Indices Benchmarking The ASEAN Region

FTSE and the ASEAN Exchanges have announced an expansion to the FTSE ASEAN Index Series including a comprehensive suite of indices broadly covering the growing ASEAN equity market. With the inclusion of Vietnamese stocks listed on the Hanoi Stock Exchange and the Ho Chi Minh Stock Exchange, the new FTSE ASEAN Index Series benchmark will represent approximately 90-95% of the investable market capitalization in the region.

PLY: An interesting incremental deal for FTSE to add coverage to the recently announced ASEAN bourse projects

Bourse Operator To Launch Index For Venture Bourse KONEX In July

Korea New Exchange (KONEX) debuted last summer in an effort to provide a market for business startups and venture firms, to which the KONEX Index will be added in July, calculated on market capitalization, as per KOSPI and KOSDAQ.

S&P Dow Jones Unveils Colombia Index, Licensed To Horizons ETFs

S&P Dow Jones Indices has unveiled the S&P Colombia Select Index, tracking the performance of the largest and most liquid stocks domiciled in Colombia.

Career Paths

JPX – Based on the decision of the Nomination Committee, 14 Directors have been put forth for election.

Masakazu Hayashi – Director (Chairperson of the Board of Directors) – Re-appointment
Atsushi Saito – Director & Representative Executive Officer, Group CEO – Re-appointment
Michio Yoneda – Director & Representative Executive Officer, Group COO – Re-appointment
Akira Kiyota – Director – Re-appointment
Hiromi Yamaji – Director – Re-appointment
Christina Ahmadjian – New Appointment Independent Director – Candidate for Outside Director
Tsutomu Okuda – Director – Re-appointment Independent Director – Candidate for Outside Director
Hideaki Kubori – Director – Re-appointment Independent Director – Candidate for Outside Director
Michiko Tomonaga – New Appointment Independent Director – Candidate for Outside Director
Masayuki Hirose – Director – Re-appointment
Katsuhiko Honda – Director – Re-appointment Independent Director – Candidate for Outside Director
Kunihiro Matsuo – Director – Re-appointment Independent Director – Candidate for Outside Director
Shigeru Morimoto – Director – Re-appointment Independent Director – Candidate for Outside Director
Charles Ditmars LakeII – Director – Re-appointment Independent Director – Candidate for Outside Director

WSJ reports that Nasdaq Private Market formed a six-member board of advisers and expects to appoint additional members over the next few months.

The six advisers are M&A advisor Luther E. Birdzell III, leading Silicon Valley counsel Steve Bochner; experienced corporate finance / M&A specialist Alan Denenberg; retired PwC executive Donald A. McGovern Jr., early stage investment firm founder Kate Mitchell, and the first attorney of Facebook Stephen Venuto.

Waters reports that Jeff Soule, former head of market data at the International Securities Exchange, has joined Woburn, Mass.-based low-latency feed handler provider Redline Trading Solutions as VP of business development, responsible for bringing new data products to market, leveraging the vendor’s existing portfolio of feed handlers, execution gateways and pre-trade risk tools.

MondoVisione reports that JonesTrading Institutional Services LLC, a leading block trading firm in U.S. and international securities for institutions, hired industry veteran David Lutz to lead an expansion to develop ETF business.

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.


State Equity Crowdfunding Policies Hold Promise
Dane Stangler – Forbes

More than two years after passage of the Jumpstart Our Business Startups (JOBS) Act, SEC is still writing the regulations that will govern equity crowdfunding in America.

PLY: Two years lost to companies who need funding while the US government is spending with reckless abandon. The SEC is already strangling crowdfunding through inaction, let alone whatever regulations finally emerge.

Other stories

Global Derivatives Conference Concludes In Moscow – Key Themes Included Response To Regulation, Moscow’s Emergence As Major Financial Center, And Recovery Of Global Exchange-Traded Derivatives

The 31st annual WFE/IOMA conference, devoted to the global derivatives market, concluded in Moscow, hosted by MOEX.

PLY: Alas some logistical problems precluded me from being able to participate on a panel as I had hoped. I have heard from multiple sources that the conference was a huge success and applaud MOEX and the WFE for their excellent organisation.

ESMA Closed On 29 And 30 May For EU Institutional Holidays

The European Securities and Markets Authority will be closed on Thursday 29 and Friday 30 May for EU Institutional Holidays. It will reopen on Monday 2 June.

PLY: Naturally nobody in France will miss the chance to add a ‘pont’ to, er, ‘ascend’ into the weekend.

CFTC Announces Agenda For The Upcoming Public Meeting Of The Technology Advisory Committee

CFTC announced the full agenda for the upcoming CFTC Technology Advisory Committee (TAC) public meeting to be held on Tuesday, June 3, 2014 at the CFTC’s headquarters in Washington, D.C. from 10:00 a.m. to 5:00 p.m. For more information regarding the meeting, view CFTC Press Release 6928-14.

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