November 10 2014

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ICE wins London Gold fix mandate. Hong Kong “through train” date set. Major restructuring at FTIL with aim of becoming Hindu-Baidu or Indo-Amazon or indeed Mumbai-Alibaba – in any language that’s a degree of chutzpah methinks. TR suspends exchange market share service, LME consults on warehouses, EU encircles US in CCP recognition as Chinese OTC equity platform quadruples in a year, raising some $1.8 billion! …and lots more…

Happy scrolling, welcome to this morning’s free Exchange Invest:

On a housekeeping note, I have been nursing some lurgy for the past week so if you are feeling ignored somewhere in my inbox, apologies, I kept adding pith throughout the week to Exchange Invest but other tasks may have slipped! However, I will be match fit to chair the MondoVisione Exchange Forum on Wednesday in London: see you there!).

Finally some very sad news for the LIFFE floor parish. FTSE traders of the late Royal Exchange / early Cannonbridge era may recall the enigmatic Bernard “Bernie” Horn who has sadly passed away in Los Angeles. My sincerest condolences to his amazing wife Shirley, daughter Rachel and the rest of his family. I have lost a friend and mentor.

Public Markets

Shanghai-HK Connect To Launch On November 17
Ansuya Harjani – CNBC

Shanghai-HK stock connect initial launch date was October 27th. HKEx press releases here and here.

ICE Unit To Manage New Daily Gold Price (subscription)
Matthew Cowley – Wall Street Journal

LBMA on Friday said it has selected ICE Benchmark Administration (IBA), to manage a new electronic daily gold price that will replace the system that has been in operation since 1919.

The choice means that three different companies are now setting the daily prices for London’s three main precious metals markets. In October, LME won a bid to manage the platinum and palladium fixes and earlier this year, CME with Thomson Reuters won the right to manage an electronic silver price.

PLY: LME winning one from three will be a disappointment while CME/TR must also regret missing the chance to add gold to silver while ICE will end 2014 with a pair of the world’s most widely used benchmarks, in London Gold and LIBOR.

FTIL Exit Bourse Africa Soon?
Rajesh Bhayani & Joydeep Ghosh – Business Standard

After exiting SMX, MCX and IEX, FTIL is expected to exit the Bourse Africa. A year ago, the Mauritius-based Global Board of Trade was merged with the Bourse Africa. A consortium led by a leading African private equity investor is said to be among the frontrunners.

PLY: Bourse Africa has been the Virgin Galactic of African exchanges, always promising to deliver but invariably some way from being a tangible business. The African exchange market has changed beyond all comparison from the early days of the race between Bourse Africa and the Pan African Exchange to deliver a transcontinental market (and neither did). For now, I suspect the opportunity has passed on. Certainly it is hard to see what value lies in this FTIL holding.

FTIL Expands Board; To Carve Out New Firm For Flagship Product
The Economic Times
FTIL Hires Investment Bankers For Restructuring
Ashish Rukhaiyar – Livemint

The FTIL flagship software product, ODIN, is being spun out into a “separate subsidiary to attract majority strategic partner/investor”.

It also announced appointment of two new NEDs – Berjis Desai and Anil Singhvi – and one executive director, Prashant Desai to strengthen the company’s board for further growth.

The company will also appoint an ‘Industry Advisory Board’ and a consulting firm to help it plan and execute the next level of growth ”Vision of Digital India at 2025′ to “build and power India’s own equivalent of Amazon, Google, Alibaba and Baidu et al over next 10 years”.

PLY: At least nobody can disparage the scope of Jignesh’s ambitions. However his reputation has taken a hammering, although in India it looks as if the blob has finally managed to slow the likelihood of a resolution to a trickle, apart from the ill-conceived shotgun merger which will merely enrich lawyers, not creditors even if it is allowed to make a mockery of the concept of corporate governance.

Big Bourses Take On Dark Pool Competitors (subscription)
Jonathan Guthrie – Financial Times

PLY: Examining the move to take on the exchange competition through the provision of hybrid models in multiple areas of equity trading and whether NYSE may follow the path of LSE.

Thomson Reuters To Suspend Tracking Of Exchanges’ Market Share (subscription)
Tim Cave – Financial News

Thomson Reuters is to suspend a closely-watched data tool that tracks equities trading on exchanges and other venues globally, after issues with the accuracy of the product emerged last month.

PLY: To re-emerge bigger and better next month, the issue remains a fundamental problem of potential double counting in OTC Markets. TR clearly want to avoid reputational damage. It will be interesting to see how their new product looks in Q1 next year.

LME Launches Consultations On Metals Warehousing Rules (subscription)
Matthew Cowley – Wall Street Journal

LME on Friday said it has launched a new round of market consultations over its plans to modernize rules governing how metals are stored and shipped from approved warehouses.

JSE Successfully Implements Phase 2 Of T+3 Project
MondoVisione

PLY: Soon JSE will be T+3…

EU Set To Recognise More Overseas Clearing Regimes (subscription)
Jeremy Grant – Financial Times

PLY: The EU has now genuinely circled the wagons. By adding Mexico and Canada, there is a big space in the middle of the map the good folks of Brussels might like to consider embracing – it’s somewhat important for functioning global markets.

ESMA Publishes Responses Received To Third Consultation Paper On Clearing Obligation
MondoVisione

To view the responses, please see the consultation page.

Private Markets

FIR Against Sameer Shah Of NCDEX
Sharleen D’souza – Business Standard

A group of coriander traders in Rajasthan have filed a first information report (FIR) against Sameer Shah, MD & CEO of NCDEX, and two other employees of the exchange alleging a significant difference in the price of coriander on the futures and the spot market of the exchange.

CERC To Soon Review Functioning Of Power Exchanges
Business Standard

Power sector watchdog CERC plans to review regulatory compliance levels and operational efficiencies of the country’s two electricity exchanges (IEX and PXIL) as part of efforts to safeguard the interest of stakeholders.

ICEX Plans To Submit Exchange Revival Plan Next Week
Dilip Kumar Jha & Sharleen D’Souza – Business Standard

With just a week left to meet the deadline, the MMTC – Reliance Capital promoted Indian Commodity Exchange (ICEX) is likely to submit a revival plan to the derivatives market regulator FMC soon.

UP Stock Exchange Starts Winding Up Process
Virendra Singh Rawat – Business Standard

The process of winding up of Kanpur-based defunct Uttar Pradesh SE (UPSE) has now started.

Chinese Startups Flock To OTC Equity Exchange (subscription)
Gabriel Wildau – Financial Times

The number of companies traded on the National Equities Exchange and Quotations has risen from around 350 at the start of the year to 1,271, of which around 80% are high-tech groups. Fundraising totalled Rmb11bn ($1.8bn) as of late October, up from less than Rmb1.1bn in full-year 2013.

Robocoin Policy Change Ignites Fears Over Centralisation
CoinDesk

A vocal minority of operators are taking a stand against major bitcoin ATM manufacturer Robocoin over its decision to cut ties with any business partners that refuse to upgrade to its new proprietary wallet platform.

PLY: Hmmm, looks like a move away from ATMs to direct transactions may be on the cards – as using a moneychanger with cash doesn’t require the same KYC as Robocoin are now requiring. Moreover, the controversy really seems to be about the move to centralisation by Robocoin which does strike me as a dubious landgrab from the customers who purchased (and often waited for) their ATMs to be delivered.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX down 1.5% while FTIL jumps 4% on the back of the restructuring news.

Letters: NSEL Is FTIL’s Problem
Business Standard

This refers to the Q&A with Venkat Chary, chairman and independent NED of FTIL last week. Since NSEL is a 99.9% subsidiary of FTIL, the parent company must own up for the wrongdoings of its subsidiary.

PLY: India’s half century (or more) flirting with different models of socialism will take a long time to get out of the system. Hopefully the corporate governance code can withstand short term attempts to make up for the legal/regulatory systems’ evident shortcomings.

Technology

Board Of Inquiry Set Up To Look Into SGX Outage
Danson Cheong – The Straits Times

A board of inquiry has been set up by SGX to investigate the cause of the power fault that shut down the exchange for hours last Wednesday.

PLY: It hasn’t been the best week for SGX. Alongside the power outage which has upset – well all the obvious parties whose orders/positions were defenestrated in some way, I see the angry brigade are even circulating a petition demanding Magnus Bocker be replaced as CEO (400 signatories). Given one of the comments paints Magnus as inhumane for ending lunchtime closing, it looks as much like a coalition of the disgruntled as a coherent argument against his stewardship of SGX. Besides a chorus of opinion suggested Magnus would be replaced in June and he survived that move. True, the city state’s exchange looks slightly becalmed right now but it retains considerable optionality. More work needs to be done but I retain faith in SGX.

Oh and no, I didn’t sign the petition…

Products

mSXI Tweaks Transaction Charges For Currency Futures Trade
The Economic Times

Faced with falling volumes and growing competition from rival BSE, mSXI (former MCX-SX) has tweaked its transaction charges for futures contracts traded on its currency derivatives platform.

Career Paths

Leap Rate reports that London Capital Group has drafted in a series of new key personnel. The changes take effect immediately with Dr Charles Poncet, Dimitri Goulandris and Julien Cohen assuming their positions as NEDs.

EI reported on October 6th that Gavin Foster, Head of FX & Director at London Capital Group, left the company. Other recent exits include CEO Kevin Ashby and COO John Jones.

PLY: New CEO Henri Sabet seeks to reshape the business under new investors, after Kevin Ashby introduced the new funding and stood down having accomplished his mission.

FTIL announced appointment of two new NEDs – Berjis Desai and Anil Singhvi – and one executive director, Prashant Desai to strengthen the company’s board for further growth.

ESMA: Vacancy Notice – Administrative Assistant (Deadline: 07/12/2014)
MondoVisione

ESMA is looking to establish a reserve list for administrative assistants. For more information and to apply, please see the Vacancy page.

Financial Calendar

This week

LSEG H1 Interim Results
SIBEX Q3 results
Markit Q3 2014 Financial Results
MCX Q2 2014 Financial Results
Tullett Prebon 5.6p interim dividend payment

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

Analyst Notes

Keefe, Bruyette & Woods Set A $245.00 Price Objective On ICE – Outperform Rating

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

Fed Official Urges Greater Scrutiny Of Clearinghouses (subscription)
Andrew Ackerman – Wall Street Journal

Global regulators must take greater steps to ensure clearinghouses—the plumbing seen as a key safety net for the financial system —can withstand another crisis.

FSB Publishes Its Eighth Progress Report On Implementation Of OTC Derivatives Market Reforms
MondoVisione

The Financial Stability Board (FSB) published its eighth progress report on implementation of OTC derivatives market reforms.

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