November 03 2014

elb2

A smokescreen to break up GFI? Warsaw back to domestic growth mantra after a wasted year, as EU prepares next round of FTT suicide note alongside more benchmark regulation. The really juicy bits are further down e.g. that licensing of Trad’s swaps data by GMEX, as is the imminent launch of MAC trading by GFI which really heats up the future of swaps battle. However, before you get too excited, somehow the regulatory blob has just managed to lose the entire main thrust of the original Pittsburgh G20 process and make reduction services like TriOptima more expensive… a spectacular big fat fail for the EU which has at least recognised Asian CCPs but still drags its knuckles/feet over the US equivalent…

Welcome to Mondays Exchange Invest:

Public Markets

WSE Head: No Merger With Vienna
Raymond Johnston – Prague Post

“We have decided to drop for a while a project called Vienna,” WSE CEO and President Paweł Tamborski said at the recent Warsaw Capital Market Summit 2014

PLY: Old news rehashed but worth pondering: just how much WSE has permitted itself to become becalmed. A year of wasted discussions on the nonsensical Vienna merger was only the first step before an unnecessary management reshuffle to leave a government puppet appointee who lacks credibility. After much trumpeting, we’re back to a domestic growth strategy. I was reading elsewhere how the Polish Treasury (which controls WSE) is crafting a strategy to manage national champions. On current evidence I am very worried. For exchange lovers, the problem is that New Europe’s markets all now lack functional government support to develop. Remember where managing national champions got the French…All very perplexing…

PS “Drop for a while” – a worrying statement or just something to keep the CEO’s paymasters at the Treasury happy or a portent of another dumb negotiation to buy the wrong teenage bride in a year or two?

BGC Caught Between A Hostile Bid & A Side Deal
Steven Davidoff Solomon – New York Times

PLY: Drill into this deal and it appears a touch Kafka-esque although at the core is clearly a massive power struggle between Mr Gooch and BGC. Previous discussions here and here.

UBS Cannot Arbitrate Vs Nasdaq Over Facebook IPO
Jonathan Stempel – Reuters

PLY: Misleading headline. UBS are seeking trading losses (how market makers racked up $500 million in losses in Facebook’s unfortunately managed IPO is a point to ponder in itself ) and the exchange does not have liability for trading losses. Despite the chaos of the Facebook IPO, I am with the exchange on this one.

Nasdaq Lures High-Speed Traders In New Nordic Strategy (subscription)
Tim Cave – Financial News

Shanghai Mayor Says Work Underway On Hong Kong Stock-Trading Link
Brenda Goh – Reuters

Shanghai’s Mayor Yang Xiong said “initial preparations” were underway to enable the through train, asking investors to be patient after the trading scheme missed its launch date after Yao Gang, the deputy chairman of China Securities Regulatory Commission (CSRC) said last week that the stock connect scheme is in its final stage.

CBOE May Cut VIX Futures Trading Hours After Glitches
Tom Polansek – Reuters.

Asia-Pac Clearers Given Green Light But EU Stalls On US Approval (subscription)
Tim Cave – Financial News

Benchmark Rules & FTT In Focus As Brussels Cranks Up (subscription)
Walter Hemmens & Tim Cave – Financial News

PLY: With a new Commission starting office, the whole farrago of trying to kill Europe’s capital markets and send the whole edifice crumbling back to standards of living last seen during the Hanseatic League, resume with FTT being pushed by 10 left wing zealots, and another round of benchmark bashing.

Private Markets

Michael Spencer Sells City Index To US Rival For $118m
Ashley Armstrong – Daily Telegraph

Michael Spencer, has sold his online spread betting firm, City Index, to Gain Capital for $118m (£73.9m) from his private vehicle IPGL. The combined Gain-City Index has 235,000 customers in more than 180 countries with annual trading volumes of over $3 trillion.

Gain is paying $20m in cash, $60m in convertible bonds and 5.3m-worth of the US group’s shares for City Index. However, the US group is paying less than the billed price as it will inherit $36m of cash on City Index’s books and the $65m of net operating losses, which Gain Capital can carry forward.

Amercanex Plans Launch Of First Cannabis Commodity Exchange In New York
Juliette Fairley – Main Street

Amercanex is currently a matchmaker between cannabis grows and dispensaries with offices in Colorado, Washington and California.

PLY: So many possible stoner quips but this was inevitable as a piece of traded commodity given that when legalisation takes place (doubtless Colorado etc was only a modest beginning) it is not subject to government subsidy.

Australian Government May Soon Auction $9 Million In Silk Road Bitcoins
Pete Rizzo – CoinDesk

The bitcoin community could soon see another high-profile auction of bitcoins confiscated from users of the now-defunct online black market Silk Road.

Australian law enforcement officials are now in possession of 24,500 bitcoins (worth $9.4m at press time) following the conviction of their original owner, 32-year-old Warrandyte native Richard Pollard.

Tim Draper, co-founder of Silicon Valley investment firm Draper Fisher Jurvetson, won a U.S. government auction in July, buying 29,656 bitcoins, a part of the amount the government seized from a raid of online illegal drug market website Silk Road last year.

PLY: Mr Draper paid circa $19 million in July for his BTC haul, and the open market value is now around USD 10 million.

Bitcoin Startups May Get Transitional License In New York
Olga Kharif – Bloomberg

Benjamin Lawsky, New York’s superintendent of financial services, has been developing a BitLicense this year and may now offer a transitional licence…

PLY: Problem is as I understand this flawed process of importing analogue rules on to the digital world, the word “transitional” might as well be replaced by “noose.”

Special Section: FTI, NSEL, India at the Crossroads

PLY: FTIL bounces 4% after recent sales while MCX is flat.

Unified Probe Needed Under A Chief Secretary In NSEL Scam: Ramesh Abhishek, FMC Chairman
Sugata Ghosh & Ram Sahgal – The Economic Times

PLY: Worth reading to understand the process behind the (flawed) notion of a forced FTIL-NSEL merger. The real scandal is how many legal triggers have not been enacted – from cheque bouncing laws to selling the vast assets held under lien by the authorities.

Technology

No Trades Busted Or Adjusted After NYSE Data Processor Incident
Reuters

Following a hardware failure last week.

Acquisition Of Strike Technologies Services’ Microwave Network Business Completed
CNW

TMX Atrium announced completed the acquisition of the microwave network business of Strike Technologies Services LLC, an affiliate of Global Trading Systems LLC.

Infront Connects Terminals To Neonet
MondoVisione

Products

EU Rules Threaten Swaps Compression
IFR

PLY: Another example of either crass stupidity in regulatory circles or another problem of having insufficient budget to bludgeon through too many regulations. TriOptima and CCPs own services to reduce risk (so far a notional $500trn and counting – yeah, trillion!) are now endangered through extra costs thanks to the inability of regulators to remove their services from other OTC rules…which I hasten to add once were intended to reduce OTC risk.

Imbeciles is the politest word to be attached to anybody who let this textbook example of how the blob eventually adds rules completely at odds with the original objective.

MAC Launches Bridge Swaps Gap
IFR

Market-Agreed Coupon or “MAC” swap – traded within a CLOB framework that more closely resembles exchange trading will be introduced imminently by GFI while Javelin are expected to do so by year end…

CFTC Staff Issues Interpretation Regarding Uncleared Swap Transactions
MondoVisione

NCDEX Introduces Hybrid Chilli Teja Contract
Business Standard

NCDEX modified the contract specifications for the chilli Teja futures contract for benefit of major consumers of the commodity with Guntur as the basis centre.

Indexes

Prices From Trad-X Platform Will Facilitate GMEX Exchange USD IRS Futures Launch
MondoVisione

GMEX through subsidiary GDI will use Trad-X prices to calculate a new USD version of GDI’s Constant Maturity Index (CMI) which will underpin the GMEX IRS Constant Maturity Futures (CMF) contracts.

Financial Calendar

This week

TMX Q3 Financial Results
ITG Q3 2014 Financial Results
Record date MarketAxess $0.16 quarterly cash dividend

New announcement

Markit Q3 2014 Financial Results – Wednesday Nov 12th 2014

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

Share Notes

Charles Schwab Corp major shareholder Charles R. Schwab sold 750,000 shares Thursday, October 30th at an average price of $27.63 (bargain $20,722,500.00). He now owns 659,448 shares. Mr. Schwab’s sales are chronicled here.

Analyst Notes

Betfair “Hold” Rating Restated By Deutsche Bank – GBX 1,160 Price Target
Shore Capital Reissued Their “Sell” Rating On Tullett Prebon

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

Seedrs Acquires Junction Investments & Will Expand To The United States
EU Startups

Seedrs has just acquired Junction Investments, a California-based online investment platform, and is going to use this acquisition to expand to the US.

Beehive To Launch First P2P Lending Platform For SMEs In UAE
Zawya

Dubai-based Beehive officially launched the region’s first P2P online lending platform, offering a new funding alternative for SMEs.

Why Equity Crowdfunding Is The Wrong Model For Australia
Adir Shiffman – Australian Financial Review

PLY: Essentially the age old thorny issue that suggests people who can drive cars and vote in elections are not smart enough to decide their own money decisions and hence need a line of expensive corporate intermediaries to do not much better (at best)…Wrong-headed thinking with a whiff of Australian exceptionalism (which is usually spelt ‘i-s-o-l-a-t-e-d m-o-n-o-p-o-l-y’).

Other stories

Stock Exchanges Consider More Than Money (subscription)
Sophia Grene – Financial Times

The phrase “sustainable stock exchange” usually elicits a groan from people in financial services. One expert in sustainable investment was dismissive, saying “companies love to accumulate awards and certifications, some even have whole departments dedicated to collecting them”.

PLY: The idea of a sustainable stock exchange strikes me as an oxymoron….are the old dinosaurs who always keep going despite the telegraph or interweb or whatever, really determined to destroy themselves? I see some sort of point related to SMEs but much of the ‘sustainable’ movement is just dismal left-wing mumbo jumbo, suffused with collectivism. I don’t see the sense for free markets to go that way.

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