November 11 2013

elb2

A busy week in view with the biggest news being the impending closure of ICE’s purchase of NYSE on Wednesday. Doubtless it will be a hot topic at the MondoVisione Exchange Forum where I look forward to chairing the emerging markets panel. Turquoise CEO Robert Barnes will be chairing the day with typical aplomb! Elsewhere, I am looking forward to participating in a fascinating lunch tomorrow with various investors at RBC in London hosted by RBC’s ace analyst Peter Lenardos.

Happy Veterans Day to those in the US and elsewhere commemorating 11th hour of the 11th day of the 11th month and a very Happy Independence Day to Poland, a great nation reborn from the Peace of the Great War.

Meanwhile, despite those august holidays, we have news from every corner of the globe today from OTC via CCP to ETD and pretty much every other acronym you can think of, happy scrolling!

Public Markets

ICE, NYSE Expect To Close Deal Wednesday
The Wall Street Journal

ICE has received the necessary regulatory approvals to close their $9.4 billion acquisition of NYSE.

The stock of both companies will cease trading at the end of trading Tuesday, and the new company, called IntercontinentalExchange Group Inc., will trade under the symbol “ICE” on NYSE starting Wednesday.

ICE press release here.
NYSE Euronext press release here.

Tullett Falls As Revenue Drops Amid ‘Challenging’ Conditions
Bloomberg

Tullett Prebon tumbled the most in four months in London trading after the inter-dealer broker reported a drop in sales, citing a “challenging” market.

Revenue fell 9% to 252 mln pounds ($406 mln) in the four months to October and 5% this year as activity in the financial markets “remained subdued.” The shares fell as much as 7.8 percent Friday.

PLY: Clearly the uncertainty of Dodd-EMIR-Frank’s implementation has caused problems here. Now the challenge is how well TNT can pick up on the business going forward in the brave new “D-E-F” world.

MCX Q2 & Half Yearly Results For FY2013-14
MCX

Stand-alone revenue fell by 30.8% sequentially and by 36% year-on-year to Rs.88 crore (USD 13.9 mln) in the three months ended 30 September 2013 compared to 127.27 crore (USD 21.37 mln) in June 30 2013 and 137.6 crore (USD 25.9 mln) in September 30 2012.

Net profit down 40% to 87.16 crore (USD 13.79 mln) September 30 2013 compared to 146.14 crore (USD 27.5 mln) in September 30 2012

Market share remained steady at 89% for H1FY 2013-14

Bucharest SE 1.2 mln Lei (USD 0.36 Mln) Q3 Profit
The Diplomat

BSE published its latest report on financial performance registered in Q3 of 2013 with a profit of 1.2 mln lei (USD 0.33 mln), on revenues of 4.7 mln lei (USD 1.41 mln), 18% up compared with the same period of last year.

Press release here.

PLY: A modest but useful improvement from BvB in the first quarter under the stewardship of former Warsaw CEO Ludwik Sobolewski

Bank Of Spain Sells Remaining BME Stake (subscription)
Financial Times

The Spanish central bank has netted €122m by offloading its remaining 5.4 per cent stake in BME

PLY: Unlike, say, the imbecilic sale of Britain’s gold reserves by the incompetent Gordon Brown as UK Treasury Minister, this strikes me as a good central bank deal. With BME stock rallying 60% in 3 months and at its highest level in 5 years, there are good arguments for selling the stake, especially as there has not been any clear improvement in the approach of BME to dealing with the future. With Bank Caixa now the biggest holder at around 5%, could BME end up in play? It’s a fascinating asset and could yet be an interesting play with progressive management.

ECB Rate Cut May Hit Exchange Revenues (subscription)
Financial News

The surprise ECB interest rate cut to a record low could impact exchange group revenues, particularly those of Deutsche Börse, analysts have warned.

PLY: Good comments here from Peter Lenardos who is hosting an investor lunch with yours truly speaking alongside him tomorrow at RBC in London. That said, DB looks a tad damned whatever the trend in interest rates methinks: if rates go down, they lose income, if rates go up significantly that could put pressure on their credit rating and will raise costs on their clearing house-related debt.

Twitter Gives NYSE Momentum In IPO Battle Versus Nasdaq
Reuters

Twitter’s successful debut on NYSE could help the Big Board win a title it has never held before: the No.1 U.S. listing venue for digital technology companies.

Nasdaq OMX had easily scored the most tech IPOs every year from 1999 until last year, when NYSE Euronext pulled even.

PLY: This is a broader story, not merely the 19 tech listings on NYSE versus 14 on NASDAQ so far this year ($4.6 bln vs $1.9bln) but also the various listings which have switched from NASDAQ to NYSE this year, including 500lb gorilla shift Oracle.

NYSE Proposes One-Year Pilot Program For Larger Stock Trades
Bloomberg

NYSE has asked regulators to approve a plan aimed at luring investors seeking to trade in bulk — lots of 500 shares or more.

PLY: Is this just a variant on BIDs revisited without the j.v.? Either way, clearly NYSE understand the power of block trades and need to be in that market. In Europe, of course Liquidnet have been pioneering partnerships with exchanges for block trading through their state of the art Institutional Liquidity Pool.*

*And yes, I am a NED at Liquidnet’s European subsidiary but speak here as an independent student of markets, not wearing my LNE hat.

Brazil’s BM&FBovespa To Invest Up To 90 Mln (USD 39 Mln) Reais This Quarter
Reuters

BM&FBovespa SA, plans to invest as much as 90 million reais ($39 million) in the fourth quarter.

PLY: Clearly what we need to understand is where the money is being spent. Hopefully it is in updates such as the back end systems etc already under way, and not merely a process of building fortifications to preclude new entrants from competing in the Brazilian market.

Mexico Aims To Allay Swaps Trading Fear (subscription)
Financial Times

The Bolsa Mexicana de Valores is in talks with Mexican banks to use its derivatives exchange for trading swaps, to allow local dealers to comply with tough new US rules but prevent market liquidity draining to its North American neighbour.

The bourse has floated the idea with five local broker-dealers of using the Mercado Mexicano de Derivados (MexDer) as a local version of a US SEF.

PLY: Note that the Mexican Exchange has had a successful j.v. since 2000 A.D. with ICAP in bonds and forex.

Regulators Urged To Probe Metals Markets Abuse (subscription)
Financial Times

The UK’s FCA has not begun a formal probe of metals pricing, though it appeared obliquely critical of LME.

U.S. Sen. Brown: Will Continue To Examine LME Warehousing Practices (subscription)
The Wall Street Journal

U.S. Sen.Sherrod Brown (D., Ohio) on Friday said he will continue to examine metal warehousing practices as LME implements measures designed to address metal consumers’ complaints.

Private Markets

NSE Goes For World-Class Status With Launch Of FMDQ
tribune.com.ng

The Nigerian SE, in its pursuit of a world-class market, has launched the Financial Markets Dealers Quotation (FMDQ), in collaboration with the Central Bank of Nigeria and Financial Markets Dealers Association.

The product is another platform aimed at integrating the money market with the stock market.

Namibia: Plans For New Financial Exchange Intensify
allafrica.com

Plans to establish, the Namibian Financial Exchange (NamFin-X) are going well according to chairman, Helmut Angula.

Intrade Progress
independent.ie

Intrade, an online prediction exchange that halted trading earlier this year after uncovering suspected financial irregularities, said it “successfully resolved” issues with representatives of former CEO John Delaney following his death.

PLY: Having been a co-founder of this market way back in the last millennium, it would be good to see it survive, even though it has endured a difficult existence in the more than a decade since I was actively involved.

Shenzhen SE And Luxembourg SE Signed MoU

A Shenzhen SE (SZSE) delegation recently visited Luxembourg SE (LuxSE) and an MOU was signed between the two exchanges.

Dividend News

MCX Declared an Interim Dividend of Rs. 7 per share (USD 0.11) with a Record Date November 22, 2013 and payment made on and from December 03, 2013.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX is up 1%, FTIL down nearly 2 as we settle in for another week of the NSEL scandal and await the showdown of “show tell” “Fit & Proper” discussions…

MCX India: Outcome Of Board Meeting
Moneycontrol

MCX at its meeting held on November 09, 2013, considered and approved the appointment of Mr. M. A. K. Prabhu, GM (Integrated Treasury Wing) – Canara Bank and Mr. B. V. Chaubal, Deputy MD and Group Executive, SBI as a shareholder Director on the Board of the Exchange, subject to FMC approval.

More Trouble For Jignesh Shah, As Govt Targets FTIL Over Ownership
The Financial Express

There could be more trouble in store for Jignesh Shah, the promoter and head of FTIL, if the recommendations of a panel headed by economic affairs secretary Arvind Mayaram are accepted.

The Arvind Mayaram panel, which was formed to look into the alleged violation of laws by NSEL and to recommend measures to stem any possible systemic impact, has suggested that ownership and management of FTIL needs to be “segregated” as the listed entity enjoys a “dominant position” in the exchange space.

PLY: The fact that ‘fit & proper’ criteria are only being applied now is a damning indictment of failures within the labyrinthine Indian regulatory system but at the same time the urge to defenestrate FTIL/Jignesh Shah with regard to exchange shareholdings is a delicate task as the regulators already seem to be veering away from free markets and as such need to consider their position carefully as they risk damaging investors’ perception of India.

NSEL: Audit Failure?
thefirm.moneycontrol.com

Our coverage of the NSEL crisis would be incomplete if we didn’t ask – why the statutory auditor did not see the writing on the wall?

Especially since the forensic audit points to violations such as inadequate margins, margin limit exemptions and violations and mis-utilisation of settlement guarantee funds for the Exchange’s private use.

PLY: Good article. Amusing cartoon too.

Commodities Scam
India Today

On any given Saturday, one could spot Jignesh Shah driving down with family from his home in Mumbai’s Juhu to PVR Cinemas in a Mercedes Benz S-Class to watch the latest Hindi movie on offer. A Bollywood buff, Jignesh adored Amitabh Bachchan and Rajesh Khanna as well as Shah Rukh Khan. Though he would pepper his conversation with popular dialogues from their movies, his own life could put a rags-to-riches Bollywood formula to shame.

PLY: A highly readable profile of Jignesh Shah’s rise and subsequent ongoing tricky patch…

Technology

HKEx Preps OMD For Derivs, New Gateways
waters technology

HKEx is preparing to migrate its derivatives market data to its new Orion Market Data platform, which went live last month for equities data, along with the implementation of the Nasdaq OMX Genium Inet platform for its derivatives trading, replacing the legacy OMX Click platform.

Products

China To Let Banks Sell Bonds On Stock Exchange To Boost Capital
Reuters

China will let listed banks issue bonds on domestic stock exchanges, in the latest move to help lenders meet tough new capital requirements and absorb an expected rise in bad loans as the economy slows.

Until now, banks were only permitted to issue bonds on the Shanghai-based interbank market. The new rules add a fundraising channel for the 19 Shanghai-, Shenzhen-, and Hong Kong-listed lenders, as well as banks in the process of applying for listings.

PLY: Another drip as China’s capital markets gain breadth and depth.

Mexico’s Exchange To Launch Platform For Carbon Trading
trust.org

Mexico’s stock exchange will launch an electronic platform, opening a new environmental market in the Americas and looking to profit from new low-carbon legislation in Mexico: MEXICO2.

PLY: The project will offer different types of carbon credits to companies willing to offset emissions traded in OTC market trading CERs, the UN-certified emissions reductions units, as well as credits from the voluntary markets.

Tocom Plans To Offer Oil, LNG Swaps Trading With Ginga Petroleum
Bloomberg

Tokyo Commodity Exchange plans to offer OTC trading in oil and liquefied natural gas swaps in a venture with Ginga Petroleum Inc. by March next year.

Online Trading Of Farm Produce In Andhra To Begin Soon
The New Indian Express

E-market and spot trading of agricultural produce will commence in the state soon. The state government has granted licence to NCDEX.

NCDEX will commence business using their electronic platform when the kharif produce hits the market this year.

Career Paths

SEC announced the appointment of LeeAnn Ghazil Gaunt as chief of the Enforcement Division’s Municipal Securities and Public Pensions Unit.

Newedge appointed David Escoffieras CEO, replacing outgoing CEO Nicholas Breteau.

PLY: Newedge has now more explicitly become a pure bank derivatives clearing arm with its absorption into Soc Gen and the sudden exit of Nicholas Breteau, thus reducing the number of independent global clearing agents in the market. An interesting situation on various fronts, as not only are the world’s industry bodies gradually coming under control of different arms of banks but surely there are huge opportunities to be had for a well capitalised GCM or three independent of the banks at this time of key OTC to CCP transition?

Financial Calendar

This week

ICAP Half Year Results
LSEG Interim Half Year results
Moscow Exchange EGM
Sibex Sibiu SE Q3 Results
Record date GFI $0.05 Q3 dividend

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

Share Notes

Following his sales of:
2,000 shares Tuesday, August 6th at an average price of $16.64, (bargain $33,280.00) reported August 12th
2,000 shares at an average price of $16.78 (bargain: $33,560.00)reported August 13th
2,000 shares Monday, August 12th at an average price of $17.02, (bargain $34,040.00) reported August 16th
2,000 shares Friday, August 16th at an average price of $17.16 (bargain $34,320.00) reported August 21
2,000 shares Tuesday, August 20th at an average price of $17.15 (bargain $34,300.00) reported August 23
2,000 shares Thursday, August 22nd at an average price of $17.10, (bargain $34,200.00) reported August 27
2,000 shares Monday, August 26th at an average price of $17.26 (bargain $34,520.00) reported August 29
2,000 shares Friday, September 13th at an average price of $17.57 (bargain $35,140.00) reported September 18
2,000 shares Tuesday, September 17th at an average price of $17.89 (bargain $35,780.00) reported September 19
2,000 shares Wednesday, September 25th at an average price of $18.67 (bargain $37,340.00) reported September 30th
2,000 shares Friday, October 11th at an average price of $19.28 (bargain $38,560.00) reported October 17th

Interactive Brokers SVP Milan Galik sold another 2,000 shares Wednesday, November 6th at an average price of $21.50 (bargain $43,000.00). He now owns 759,604 shares.

Following his sale of 566,973 shares on Wednesday, October 23rd at an average price of $23.43 (bargain $13,284,177.39) reported October 25th 2013 Charles Schwab major shareholder Charles Schwab unloaded 314,670 shares of the stock on the open market in a transaction dated Thursday, November 7th at an average price of $23.09 (bargain $7,265,730.30). He now owns 1,400,822 shares.

Analyst Notes

HSBC Initiated Coverage On Betfair – “Overweight” Rating And GBX 1,245 Price Target
CIBC Hoisted Their Target Price On Shares Of TMX From C$46.00 To C$48.00 “Sector Perform” 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.

Crowdfunding

Ontario Crowdfunding Rules Still In The Works
cbc.ca

The Ontario Securities Commission is continuing to work on regulating the popular phenomenon of online crowdsourcing for businesses…but there’s still no timeline for any proposed legislation.

Crowdfunding Platform Prefundia Leaves Beta Phase
vcpost.com

According to a report by tech news site Techcrunch, crowdfunding platform Prefundia is opening its doors to the public after three months in beta.

Other stories

KRX CEO To Push Privatization, Bolster Competitiveness
globalpost.com

Choi Kyung-soo, the chief of KRX will continue to make efforts to privatize the institution in a bid to bolster its competitiveness and provide services in line with global peers:

“South Korea’s bourse operator focuses too much on public interests, unlike those of other countries…The stock market is an industry that should be led by the private sector.

“If the KRX wants to compete with other bourse operators, it is vital to make it a private-managed system,” Choi said, adding South Korea is the only country with a public-led bourse operator among the world’s top 15 stock markets.

The remark came as the KRX was designated as a public organization by the government in 2009, citing its dominant position in the market.

PLY: Well said! KRX has huge opportunity and has achieved much but it needs to be in the vanguard of the next phase where the Chaebol phase gives way to more dynamic capitalism in pulsating Korea, led by the highly capable Korean Exchange team.

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