May 29 2015

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Today in Exchange Invest Daily:

Dick Fuld is coming back – to run an exchange apparently. If he gets backing from Duncan the Value Destroyer’s fund (wonder how everybody’s due diligence is going on with that one?) then I fear we will have the final clear evidence that actually regulation has failed the investor on all fronts. Or maybe they need to install Jon Corzine as a director just to complete a holy trinity of abject failure – presumably they will meet at a regular chapter meeting of Denialists Anonymous sooner or later?

Mr Fuld’s complete inability to come to terms with his running a vastly leveraged prop shop/hedge fund under a form of banking licence imho entirely renders him ineligible to be the steward of an exchange. We need our markets to be run by the most credible and capable of folk. Dick Fuld is a failure in denial.

Meanwhile Dennis Hastert has been indicted as a result of political shenanigans dating back to being speaker of the House and has promptly resigned from the CME board.

Meanwhile, it is alleged Plus500 are pushing the boundaries on regulatory arbitrage. Instead of papering clients to UK AML standards, they are shuffling the account to Cyprus. Hmmm, what little ‘single market’ there is in Europe does not appear to work as envisaged…

ASX under fire (as usual) for being a blockheaded, anti-commerce, reactionary, inefficient, visionless monopoly – and those are only the good things people say about it. Some are even more critical as my burgeoning email inbox would testify…

This isn’t a good day for the exchange world, frankly. The industry has some serious challenges ahead and I think a lot of reflection is going to be a good thing. Whether we get it is another issue of course…

Public Markets

“EBRD & Borsa Istanbul In Exclusive Talks Over Stake Sale” – Pre-IPO Investment In Stock Exchange Will Support Development Of Turkey’s Capital Markets
Mondovisione

PLY: At last a round begun last year appears to be reaching a conclusion. However an exclusive with EBRD is interesting, presuming that is the entirety of the pre-IPO round as a lot of others were involved in a negotiation where the belief seemed to be that EBRD would buy 2-5% whereas now it looks as if they are taking a 10% pre-IPO stake…

KDPW_CCP Clears First OTC Trades In PLN
Mondovisione

KDPW_CCP has cleared the first inter-bank market (OTC) trades denominated in PLN between Citi Handlowy and mBank.

PLY: I am a customer of Citibank (but not of MBank as they seem broadly lacklustre at taking on new business). Anyway, not my trade but well done KDPW.

Plus500 Transfers London Clients To Cyprus
LeapRate

LeapRate has been provided with a letter to a Plus500 customer, explaining that his trading account which was originally opened and operated by the firm’s London based, FCA regulated operations, has been transferred to Plus500’s CySec regulated operations in Limassol, Cyprus

LeapRate has been informed that Plus500 Ltd (LON:PLUS) has begun a process of transferring clients which were customers of the firm’s FCA regulated London operations to a separate division of the company, namely the firm’s Cyprus division, regulated by CySec.

PLY: I have been raising issues on Plus 500 for some time. Dan McCrum’s excellent research and the the The Cable Car blog have done more work than Exchange Invest. This latest announcement sets my alarm bells to hyper. I remain completely incapable of understanding what Odey Asset Management see in this stock..

Previous comment and mentions about Plus 500 here, here here & here.

LeapRate TV: Plus500 Updates, No More Gambling As FCA Takes On UK Binary Options, & James Brown In FXCM Share Sell Off
LeapRate

Read about James Brown FXCM sell off here.

Asia Pacific Exchange Says ASX Costs, Systems Limit Its Growth
Shaun Drummond – FINANCIAL REVIEW

Asia Pacific Exchange CEO David Lawrence says a lack of investment by Australian sharemarket operator ASX Ltd, and its costs for clearing and settling shares, has “stymied” his company’s growth.

PLY: Essentially the ASX takes its monopoly very seriously. That includes behaving like a ‘proper’ utility – aka my correspondence burgeons with emails deeming it as incapable of organisation, as, say Poland’s surreally chaotic kleptocracy, the electricity company, Energa. (QV the ASX has a data centre foray which I believe may not be going to plan – unless they borrowed the NYSE Technologies plan that is). My many friends and colleagues in Australia appear broadly unanimous that ASX is managed with the same haughty ambivalence for the customer as British Telecom (or, even worse, Polish Telecom – a merger of Marxism and France Telecom’s Orange…making for Marxism squared, really). ASX, my inbox suggests, generally yearns for the regulatory environment of, say, the Ceausescu era Securitate, to preclude that annoying democratic debate bit – as, let’s face it, customers just don’t know what’s good for them… Yip, that sort of utility. Bereft of vision, bereft of desire to actually move markets forward but with a sort of neolithic survival instinct.

In that case I wish to apologise as I have fielded dozens of complaints recently that I may have inadvertently not been remotely sanguine enough on the ASX – there is a clear case that the Australian bourse is about seven sigma away from meeting the needs of Australia’s innovative capital markets proponents.

The ‘non-economic’ component of creating a competitor to ASX clearing is a moot point to me but clearly the clearing and settlement function needs new governance as the ASX does not wish to help the market, only its own narrowly-defined, and ill-conceived, Dickensian self-interest. There is indeed a good argument to be made that the ASX has failed the local capital market and ought to be broken up to enable a more dynamic marketplace which can help Australia service its domestic market and the region.

Incidentally, there was once somebody who wrote in and said I was being harsh on ASX but that was only when I compared Elmer to Clara Furse…which I actually thought was a compliment. At least Clara got things done both turning round Rouse and in buying Borsa Italiana for LSE.

NYSE Looks To Ease Late-Day Pileup (subscription)
Wall Street Journal

Exchange plans midday auction for thinly traded shares

Chinese Tech Firms Aim To Stay Home (subscription)
Wall Street Journal

The booming stock market in China and more-favorable domestic regulations are driving a wave of tech companies based there to list shares at home instead of going public in the U.S.

PLY: Not good news for NASDAQ or NYSE but given some IPOs in recent years…

See also: China Capital Markets Transformation – Exchanges & Markets, ETPs & Exchange Infrastructure – Part 1, Part 2, Part 3, Part 4, Part 5

PSE Seeking Syndicated Loan Of P1.1 Billion ($25.7 mln)To Acquire PD
Business Mirror

THE Philippine Stock Exchange (PSE) Inc. said it will raise an initial P1.15 billion ($25.7 mln) from a number of local lenders to finance its proposed P2.25-billion acquisition of the Philippine Dealing System Holdings Corp. (PDS) on a 5 year, as needed, basis.

Why A Chinese Invasion Of The ASX Could Be Imminent
Daily Reckoning – Australian Edition

China is on the cusp of expanding its stake in Australian stocks. First came the wave of Chinese investors buying into Australian real estate. They’re partly responsible for pushing up national house prices by 7% in the past year. Now a new influx of Chinese capital could be about to hit the ASX.

The reason for this is simple. The Chinese government is readying itself to relax restrictions on foreign stock purchases. They’re dubbing it the ‘Qualified Domestic Individual Investor’ program. When it launches on 1 July, it will open up Aussie markets to vast sums of untapped capital.

PLY: Clearly therefore logic dictates that if the Australian government (allegedly capitalist) refuses to create a better market at home then somebody suggest they outsource clearing of equities to the Chinese to make it cheaper and more customer responsive? Yes, I get the concern…one is a massive slow moving totalitarian dictatorship deaf to the demands of investors…and the other is China: which is quite a long way away but the Australian clearing mess clearly needs a radical solution.

Make no mistake: Any variation on the status quo won’t do.

Foreigners Pile Into Waning China Stocks (subscription)
Financial Times

More than $4bn flows into equity funds over past week.

PLY: So is China on a sell China, buy Australia trade? I always worry when the foreigners flood in – it’s usually the last throes of the bull market anywhere.

CBOE: Notice of Filing & Immediate Effectiveness of a Proposed Rule Change
4-traders

Private Markets

FXCM To Sell Another Unit To Rakuten for $36 Million
Chelsey Dulaney -Wall Street Journal

FXCM Inc. has agreed to sell its Hong Kong business to Rakuten Inc. for $36 million, the second business FXCM has unloaded to the e-commerce giant as it sells off assets to repay debt.

Rakuten’s securities division, one of the biggest foreign exchange brokers in Japan, will continue to use FXCM’s trading system. The deal is expected to close in the third quarter.FXCM, a New York-based foreign-exchange broker, agreed in March to sell its Japan business to Rakuten Securities for $62 million. The company has also agreed to sell Faros Trading LLC to Jefferies Group.

PLY: The dismemberment of FXCM continues. Shareholders have not exactly done well out of the management’s inability to understand the risk of their core forex products. To put it mildly.

Ex-Lehman Boss To Launch Stock Exchange This Summer
USA TODAY

Former Lehman Bros. chief Dick Fuld spoke publicly for the first time on Thursday in part to pave the way for this summer’s relaunch of the National Stock Exchange, which Fuld part owns.

PLY: I Know we have covered Fuld’s investment in NSE previously but as noted here, at that time Fuld’s involvement was through his advisory company and it was not being trumpeted that he would take a front line role. The growth of failed traders and managers becoming activist exchange investors is a very very worrying trend for the exchange industry.

Bitcoin Rules Divide Wall Street’s Digital Currency Community
International Business Time

Bitcoin is facing a coming-of-age moment. The cybercurrency, beloved by techno-libertarians and notorious for financing the Web’s largest black market, will soon come under the formal purview of New York state financial regulators.

“The reaction has been overwhelmingly negative,” says Steve Wager, head of global operations at digital currency startup itBit, which is headquartered in New York.

PLY: Ultimately some regulation would come to pass. The problem as I have always noted was that Mr Lawsky, now departing the government parish for private practice, was simply incapable of understanding the dynamics of markets and innovation. Thus it is not just the philosophy of regulation which is at issue but also the fact that the NY Bitlicence remains, even after its gentle revisions, simply another example of grim left wing drivel to kill innovation and risk our future prosperity, at the same time handing corporate power to Bitcoin in New York but endangering that city’s claims to being a progressive international financial centre.

SGX, IBF Seek TRading Reps’ Feedback On Stock Market
AsiaOne News

SGX and the Institute of Banking and Finance (IBF) are seeking feedback from trading representatives (TRs) on topics relating to the local stock market, including how TR income has changed over the years, the SGX measures that have succeeded or failed to raise investor interest, and markets in which they and clients are active.

Karachi: Stock Brokers Strongly Oppose Proposed Rise In CGT Rates
The Express Tribune

The brokerage industry seems to be unanimous in its opposition to the proposed hike in rates of capital gains tax (CGT) on the sale of securities in the upcoming federal budget.

The government plans to significantly increase the CGT rates on the sale of shares within two years of their purchase. In addition to this, it is expected to impose the CGT on the trade of shares whose holding period is more than two years.

Fidessa Regulation Matters – ‘MiFID II Data Disaggregation – Be Careful What You Wish For!’
Automated Trader

Fidessa’s regulation expert Anne Plested: Under MiFID II pre- and post-trade data is required to be made available in an unbundled fashion – ultimately the regulator is aiming to drive down data costs. So where trading venues sell their pre- and post-trade data in the same ‘package’ they will be required to also make it available separately at a reasonable cost.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX up around 4%, FTIL flat.

Motilal Oswal’s Involvement In The NSEL Crisis
Beginner’s Guide to Indian Economy – WordPress.com

According to EOW, there are around five to six big brokers who played a vital role in NSEL crisis, along with small brokers. Among them, the two main brokers were Motilal Oswal Commodities Broker Pvt. Ltd. and PhillipCapital (India) Pvt. Ltd. According to EOW Reports, few brokers had lent money to the investors at 10-12% interest and the investors had invested the same in NSEL trading platform expecting 15-16% returns.

Read our Premium NSEL Scandal Brief – Main File and also NSEL-FTIL Merger Brief

Technology

BSE Exceeds 1 Billion Derivatives Contracts On New Deutsche Börse T7 Powered Trading Platform
Indiainfolin

PLY: That aging relic of ancient times, BSE finally has a modern trading system and has managed to complete a billion contracts from migrations which took place between February and April last year.

Products

NCDEX Launches ‘Gold Now’ Platform For Forward Trade
Economic Times

The platform, which has been launched with a focus to reduce dependence on imports, will accept gold recycled in exchange-approved refineries, NCDEX chairman Samir Shah said. NCDEX will also launch forward contracts within six months for gold coins in 5 gm, 10 gm and 50 gm denominations.

China’s first oil futures likely to start trading at year-end (subscription)
Shanghai Daily

China’s first oil futures contract is likely to start trading by the end of this year on the Shanghai Futures Exchange.

LME Nears Deal With Market Makers For Steel Futures, Hurdles Remain
Reuters

LME is close to sealing deals with market makers to guarantee liquidity for its new steel rebar and scrap futures…

EEX Offers New Agricultural Info-Products
ZE DataWatch – ZE PowerGroup

After start of trading of Agricultural Index Futures on EEX on May 11, 2015, the Info-Product Agriculture comprises market data on Agricultural Indexes and financially settled Index Futures for butter, piglets, potatoes, skimmed milk powder, whey powder and hogs.

DGCX To Launch New INR, Plastics Futures
FOW magazine

DGCX is set to launch three new futures contracts and an amended plastics contract on June 5.

Indexes

EGX To Ease Conditions For Listing On Benchmark, Launch Top-50 Index In August
The Cairo Post

Upon the changes, newly enlisted companies could be listed on the benchmark if the level of their liquidity and activity since they commenced trading allows it, and if their stocks have been traded during 75 percent of the actual trading days, the statement explained.

Career Paths

Betfair COO Mark Brooker to be appointed as executive director, according to Reuters.

According to Reuters, Former U.S. House of Representatives Speaker Dennis Hastert resigned from the board of exchange-operator CME Group Inc on Thursday, the company said.Hastert’s resignation, which is effective immediately, comes on the same day he was indicted on federal charges, including making false statements to the FBI

Jamie Dimon Is Sick & Tired Of ‘Lazy’ Shareholders Voting Against Him
Fortune

About one-third of JPMorgan JPM -0.80% shareholder’s took the proxy firms’ advice and voted against Dimon’s dual role as CEO and Chairman of the Board, as well as his pay package.

Jamie Dimon has had enough of the “lazy” shareholders who are critical of JPMorgan Chase’s leadership—at least that’s what he let slip at an investor meeting this week.

PLY: Words fail me but if we start looking for mega top of market signals on many fronts, the blithe arrogance of so many individuals in management positions: rentiers without an entrepreneurial bone in their bodies, is a damning indictment of the current corporate socialist state of the world.

Financial Calendar

This week:

28 May

Interactive Brokers Group, Inc. (IBKR) Ex-Dividend Date

29 May

Record date CBOE $0.21 quarterly cash dividend
Record date TMX $0.40 dividend
Oslo Bors NOK 8.20 dividend payment
BGC Partners $0.14 quarterly dividend payment

Next month:

Euronext Announces Third Pan-European Days In New York & Boston from 1- 4 June.

CBOE Holding announced CBOE Holdings’ Chief Executive Officer Edward T. Tilly will present at the Sandler O’Neill 2015 Global Exchange and Brokerage Conference in New York on Thursday, June 4, at 2:30 p.m. ET.

Interactive Brokers Group, Inc. to Issue Quarterly Dividend of $0.10 on June 12th
CBOE Holdings, Inc to Issue Quarterly Dividend of $0.21 on June 19th.

Ordinary General Meeting of the Warsaw Stock Exchange set for 25 June.

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

Share Notes

Kevin Kometer, Sr MD CIO of CME sold 4,500 shares at an average $94 for a total bargain of $423,090 US Dollars.

Analyst Notes

NASDAQ OMX Group Given “Hold” Rating at Jefferies Group
ICAP plc Downgraded to “Sell” at Numis Securities Ltd

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

Kitstarter: All Aboard Hornby’s New Airfix Crowdfunding Project
CITY AM

Who said model planes were old fashioned? Hornby, the company behind Airfix, has launched its own crowdfunding project – called, naturally, “Kitstarter”.

The idea behind the scheme is that if an Airfix model no longer in production gets enough backing, it will bring it back. Model fans will be able to pre-order it via Hornby’s website – once one has enough support, Hornby, which bought Airfix in 2006, will start manufacturing it again.

PLY: Briliant idea, even if my days of Airfix kits are behind me…although if they are thinking of that Porsche Carrera 6/ Ferrari 250 LM pairing being re-released, I might reconsider… Elsewhere Lego have a fascinating vote syndication process to decide on the new products which users send in.

Assetz Capital CEO Stuart Law Talks Record £3M+ Seedrs, Competitive Loans, Interests Rates & Fintech’s Future
Crowdfund Insider

Two year old Assetz Capital, a British peer-to-peer lending platform exceeded its fundraising target of £2 million by raising funds from 731 investors through investment crowdfunding platform Seedrs.

The firm, which specializes in providing loans to SMEs and property developers in the UK, raised a total of £3,179,750 through Seedrs, which now boasts more than £4.5 million raised for various crowdfunding and peer-to-peer platforms.

CircleUp Targets Businesses Ignored By Other VC Firms
McCoPro.com

“There’s enormous rent-taking from intermediaries today that stand between institutional investors and entrepreneurs,” says Rory Eakin, co-founder and COO of San Francisco’s CircleUp, an online investing platform.

Complete Guide To Crowdfunding
Interactive Investor

Nowadays, everything is about the power of the crowd – whether that’s booking holiday accommodation through Airbnb or finding out the latest news on Twitter. It’s tipped over into investment too, and now anyone can invest in a start-up venture through crowdfunding.

Other stories

P2P Lenders Just Online Debentures, Says Bendigo Bank Chief
The Australian

Bendigo and Adelaide Bank chief Mike Hirst has taken a swipe at peer-to-peer lenders, saying they are nothing more than “online debenture companies”, lacking capital to support credit risk that is assessed by data collection engines rather than actually looking borrowers in the eye.

PLY: That would be ‘looking customers in the eye’ which costs both parties up to a thousand basis points – how decidedly analogue. There is nothing uglier than an outmoded regulatory monopoly. Australian banks, like their stock exchange need to face a major day of reckoning…

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