November 07 2014


25 years ago Sunday, the largest event of my life was gaining momentum. The Berlin Wall falling was a televisual spectacular but it was on June 4th 1989 when the Poles, given a free vote, overwhelmingly rejected Communism, that the Soviet bloc really began to fall apart. A quarter century later I am adding a little daily pith to the messages read by the exchange world and two points arise:

1) The pith is being added today from the heart of the former Soviet Bloc, in Torun, Northern Poland.

2) The readership of Exchange Invest stretches across the world including simply dozens of countries in the New Europe and beyond with whose friendship and commercial interaction, through bourses and beyond that most of us would never have expected, we now enjoy a better, richer more globalised world.

Work is far from complete but what we must do is concentrate the story and continue to build trade links, killing off wretched kleptocracies and encouraging freedom and entrepreneurship as opposed to indulging in silly, out-moded cold war rhetoric. Trade is our ally to prosperity and peace. Where the former Soviet Pact has adopted this our colleagues and our industry has flourished (in Moscow and Warsaw in particular). As Margaret Thatcher noted at the 1989 Lord Mayor’s banquet:

“The message is clear, when people are free to choose they choose freedom, they turn their backs on a system which has been discredited—not by Western propaganda but by first-hand experience.”

Sunday also marks Remembrance Sunday in the Commonwealth, leading to Armistice Day on the 11th. Exchange Invest salute all our heroes from armed forces throughout the world who fought for freedom and the sacrifices they made.

Today in Exchange Invest, BvB demonstrates what a little adult supervision can do for the bottom line, even in Romania’s bear pit of a market structure. BGC says: “Do the math GFI…” JPM worried about CCP security: the waterfall needs to be bomb proof. Danish bunker strategy goes horribly awry in Singapore, EU FTT divisions (hooray) as ESMA and CFTC keep sending out desperate smoke signals for money…(actually the trick is to deregulate; watch this space, it’s coming sooner than you think).

Public Markets

TMX Q3 2014 Financial Results

Revenue of $170.2 million in Q3/14, up 3% compared with Q3/13

BVB Q3 2014 Financial Results

Q3 2014

Net profit RON 3.69 mln (USD 1.03 mln), up 102%, EPS 0.48

9 months ended September 30 2014

Net profit RON 9.33 mln (USD 2.6 mln), up 71%, EPS 1.22

PLY: Essentially a perfect demonstration that if you implant a grown-up manager and he can keep the feuding factions which pass for Romania’s capital market structure off his back for long enough, the results can be exponential. Plaudits to Ludwik Sobolewski for managing to put in a row the pieces which previous managers could not, usually due to the politicisation of the structure.

BGC’s All-Cash Tender Clearly Represents Superior Value For GFI Shareholders

PLY: EI reported on November 5th that BGC Partners’ unsolicited tender offer was rejected by GFI Group after CME agreed to buy GFI in July. Entirely unsurprisingly, BGC Partners reckon $5.25 in cash is better than $4.55 in stock. Laid bare, quant mathematicians will struggle for a role in this equation.

JPMorgan Spars With CME Over $375 Million
Matthew Leising – Bloomberg

JPMorgan Chase & Co. is locked in a debate with CME over whether the owner of the world’s biggest futures market is setting aside enough money to safeguard trades.

The dispute, highlighted this week at the FIA conference in Chicago, is over the $375 million of its own money that CME has pledged in case a member defaults. If JPMorgan, one of the largest derivatives dealers in the world, had its way, CME’s “skin in the game” would almost double to $687 million.

PLY: Clearly JPM is not intending to commit suicide but planning for the worst is sensible. The boffins of CME are wise souls and at the clearing house sound minds will doubtless prevail. The end of the waterfall must be accompanied by a large tap that accesses enough water to ensure that when Homer Simpson calls the buffet is not emptied.

IPO Scandal In Denmark Is ‘Poison’ For Stock Market, Nasdaq Says
Peter Levring – Bloomberg

As investors in OW Bunker A/S woke up to a string of horrors yesterday, NASDAQ Copenhagen is still trying to assess the damage after marine fuel supplier OW Bunker, said on Wednesday shortly before midnight that it had lost $275 million through a combination of fraud committed by senior executives at its Singapore office and poor risk management. Its shares have been suspended since Nov. 5 and the company says its equity has been wiped out. Just eight months ago, investors drove OW Bunker’s shares up 21% in their first day of trading, following an IPO that valued it at almost $1 billion.

PLY: Last week’s corporate scandal involving the demise of a fund co-owned by Dominique Strauss-Kahn was bad enough but this is an ugly one. Expect typically firm Singaporean justice in due course where any fraud is proven in the city state. Clearly there was a bit of a hype/risk mismatch to put it mildly as equity was less than $275 million and the valuation was a billion or more. Such a loss even against a fairly volatile oil market suggests a magnificence of market incompetence that is up there with the best of them (unless the books were being cooked even before IPO?). The shoulder shrugging of this article however worries me – not from the exchange but from around the company. Risk management clearly wasn’t working at all – and presumably for quite some time, that is a scandal.

Liquidity Alliance Will Provide Worldwide Collateral Access To T2S
Deutsche Borse

PLY: Just confirmation – T2S will be served by the alliance of ASX, Cetip, Clearstream, Iberclear, Strate and associates CDS, SGX and VPS – nobody could doubt they would comply, clearly.

‘Shanghai-H.K. Connect A Disaster For Korea’
Korea Herald

The launch of the Shanghai-Hong Kong stock connect scheme will be a disaster for South Korea’s stock market, according to a local professor specializing in Chinese finance and business.

PLY: Hmmm, I am not convinced it is such a binary option but clearly there are fears that without China you are potentially nothing in South-East Asia…

Nasdaq Dubai Strikes Dual Listings Deal In Egypt
Frank Kane – The National

Nasdaq Dubai, the emirate’s international stock market, has struck a deal with Egyptian financial authorities that could lead to dual listings of companies on both markets.

Press release here.

FMC Plans Tighter Warehousing Norms For Comexes
Sharleen D’Souza – Business Standard

PLY: Pragmatic tightening much needed post NSEL.

EU Nations Remain Divided On FTT (subscription)
Viktoria Dendrinou & Gabriele Steinhauser – Wall Street Journal

PLY: Clearly the good folks of Euronext have taken frequent strolls along the Rue Cambon to the Treasury and central bank and the AMF (albeit in different directions) and berated the bourgeois marxist fruit loops in government as they gradually scale back their FTT and hopefully give up on it eventually. Meanwhile the Viennese, who built an elegant empire but politicked themselves into obscurity from great power status because they couldn’t stomach the industrial revolution, are at it again. Let’s face it Vienna hasn’t much stock market to lose so they can embrace government plans to turn markets into the dark ages.

A year end deadline to reach a deal looms. We can only hope they fail to produce an FTT.

Esma Sharpens Focus On Best Execution (subscription)
Walter Hemmens & Tim Cave – Financial News

Differences between EU members in how they ensure banks and brokers achieve the best trading results for their clients are still too great, the head of the EU’s financial watchdog has said.

PLY: A bit of pith mixed with the usual bureaucrats’ warning phrases. Maijoor’s comment “Without going into details now, the results clearly show that there is still a lot of convergence work ahead” is pretty much as close as Eurocrats get to “Go ahead punk, make my day.” Equally there is a moment of almost unprecedented bravery when he compares national regulatory convergence as akin to “emptying the sea with a teaspoon”, even attributing that remark to a third party suggests an element of gustiness not previously seen from this rather dour technocrat.

CFTC Releases Annual Enforcement Results For Fiscal Year 2014 – Agency Obtained A Record $3.27 Billion In Monetary Sanctions

…but it still hasn’t got any money…

Private Markets

Oslo Børs To Launch New Dark Pool

Oslo Børs will launch a Dark Pool, North Sea, during the first half of 2015. North Sea will allow our members to execute larger orders, at mid-price, in a dark pool, in an exchange regulated environment.

Buttercoin Bids To Take US Business From Global Bitcoin Exchanges
Pete Rizzo – CoinDesk

U.S. Shuts Down Silk Road 2.0 Website, Charges Alleged Owner

U.S. authorities said Thursday they have shut down the successor website to Silk Road, an underground online drug marketplace, and charged its alleged operator with conspiracy to commit drug trafficking, computer hacking, money laundering and other crimes.

PLY: The culprit Blake Benthall, 26, was arrested in San Francisco and faces a life sentence…can he be jailed for stupidity? What on earth makes anybody think they can run Silk Road 2 in the USA and escape justice? I don’t condone the market but gast is flabbered at the idiocy of this individual operating a high profile illegal market within the US…

Dividend News

TMX declared a dividend of $0.40 on each common share outstanding, payable on December 5, 2014 to shareholders of record at the close of business on November 21, 2014.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX is flat, FTIL up 2% even as news continues to trickle through concerning core software revenue losses as its exchange influence fades.

FTIL’s Software Revenues Fall As It Exits Bourses
Ashish Rukhaiyar – Livemint

PLY: Interesting to see proprietary solutions coming to the fore in India…expect an interesting flow of vendors to sell into foreign markets in due course.


JPX Boosting Trading Speed To Gain Edge On Competition
Eduard Gismatullin – Bloomberg

JPX is upgrading its trading systems in the biggest overhaul since 2010 to boost transaction speed and win more business.

CFTC Is So Underfunded That It Cannot Evolve To Handle Bitcoin & Modern Electronic Markets Says Chairman Massad
Andrew Saks-McLeod – LeapRate

PLY: Time to deregulate and make government practice some simple core precepts (stopping the politicians let banks leverage wildly would be a simple one to start with but, uh oh, the Central Bankers have already expanded that balance sheet)…


Europe Attracted By US Derivatives Pull (subscription)
Philip Stafford – Financial Times

PLY: If you look at the macroeconomics it isn’t tough to discern: aka QE ends, US dollar may now grow a functional yield curve while growth and Europe is an oxymoron, even overall, let alone relative to the rest of the world where EU perma-decline is increasingly hard-coded into the system. Even the continents full of eskimos and penguins can grow with alacrity, Europe is the isolated continent of stagnation.

Shanghai Stock Exchange Launches Pilot Business Of Private Placement Bonds For M&A, Reorganization

Bloomberg Launches New Interest Rate Swap Trading Tools as SEF Platform Achieves Records
Forex Magnates

$8 trillion traded since launch in October 2013.


CBOE Futures Exchange To Launch CBOE/CBOT 10-Year U.S. Treasury Note Volatility Index Futures

(ticker symbol:VXTYN) coming next week: Thursday, November 13, 2014.

Career Paths

HKEx announced the appointment of Dr Hu Zuliu, Fred as an Independent NED of HKEx effective 10 November 2014.

Options Group, a leading talent acquisition and management consulting firm, announced that Bob Flohr has agreed to become Senior Advisor.

Financial Calendar

Next week

LSEG H1 Interim Results
SIBEX Q3 results
Markit Q3 2014 Financial Results
Tullett Prebon 5.6p interim dividend payment

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

Share Notes

CBOE Director Carole E. Stone sold 2,000 shares Tuesday, November 4th at an average price of $62.00 (bargain $124,000.00). She now owns 11,703 shares.

Interactive Brokers CFO Paul Jonathan Brody sold 5,479 shares Tuesday, November 4th at an average price of $26.17 (bargain $143,385.43). Mr. Brody’s regular sales are chronicled on this specific page.

Analyst Notes

ICE Downgraded At Deutsche Bank To “hold” From “Buy” – Price Target Raised To $230 From $220.

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.

Other stories

EU Finance Chief To Announce Capital Market Plan In 2015
Robin Emmott – Reuters

EU’s new financial services chief will set out his plans for a pan-European capital market by the middle of next year, aiming to reduce companies’ reliance on banks and help revive the bloc’s fragile economy.

European Commission – Speech By Jonathan Hill – EU Commissioner For Financial Stability, Financial Services & Capital Markets Union – Capital Markets Union – Finance Serving The Economy

PLY: The question, given the internal fissures being held together with duct tape and the 19th consecutive annual failure to have the accounts signed off, is whether the EU can survive long enough for Mr Hill’s interesting vision for a capital markets union to come to fruition?

This site is protected by Comment SPAM Wiper.