November 11 2015

elb2A Very Very busy day, let’s get to the pith…

(and I hope to see you tomorrow at the MondoVsione Exchange Forum…).

Public Markets

ICAP H1 2015 Results


vs. H1 2014: revenue GBP 595 mln, down 4%, profit before tax GBP 83 mln, up 131%, EPS (basic) 12.0P, up 167%.

PLY: Flat results but nobody cares, what the markets are all talking about is:

ICAP To Combine Its Voice & Hybrid broking & information business with Tullett Prebon


The Board of ICAP has agreed terms with Tullett Prebon for the disposal by ICAP of its global hybrid voice broking and information business to Tullett Prebon, including ICAP’s associated technology and broking platforms (including iSwap and Fusion) and certain of ICAP’s joint ventures and associates.

Tullett Prebon intends to acquire all of ICAP’s Global Broking Business (IGBB) in return for the issue of new shares in Tullett Prebon to a new holding company of the ICAP group (ICAP NewCo) and to ICAP’s shareholders, representing in aggregate 56%. of the Enlarged Tullett Prebon issued share capital as at completion of the Transaction. Following completion, 36.1% of the Enlarged Tullett Prebon share capital would be issued to ICAP shareholders and 19.9% to ICAP NewCo. Existing Tullett Prebon shareholders would continue to own 44% of the Enlarged Tullett Prebon issued share capital.

The Transaction provides a unique opportunity to combine the complementary strengths of two leading global hybrid voice broking franchises to create the largest player in the industry, which will achieve significant cost synergies of at least £60 million. The Post Trade, Risk and Information and Electronic Markets divisions of ICAP will operate under a new group holding company ICAP NewCo which will be positioned as a leader in the financial technology space, ready to capitalise on the many opportunities it sees in these markets.

ICAP NewCo’s businesses will include:

– ICAP’s exchange-like electronic platforms, EBS and BrokerTec;

– the post trade risk mitigation businesses, TriOptima and Reset;

– the transaction processing business, Traiana;

– the financial technology incubator, Euclid; and

– ICAP Information Services as it relates to ICAP’s electronic platforms.

PLY: This clearly causes a need for a revaluation of ICAP with its remaining business which makes it a de facto digital market infrastructure powerhouse but at circa 3 billion Pounds (sub $5 billion) market cap, it could also be prey.

Will LSE & Icap Finally Seal The Deal?

Nick Goodway – Evening Standard

Icap founder Michael Spencer has talked several times about a deal between his business and the LSE. In 2006, he had to go so far as to issue a statement saying that three months of talks between the two had been terminated. At that time, Icap had a market capitalisation of £3.3 billion and the LSE was worth £2.7 billion.

Five years later, in 2011, Spencer responded to growing speculation that the deal was on the cards again by saying: “It’s not on our agenda now.” He went further and said that he could not see that two plus two equalled five. At that stage their respective values were not that different, with Icap being worth £3.2 billion and the LSE £2.5 billion.

PLY: One problem is that LSE will be stretched to afford the price that a bidding war will generate for ICAP but it is also one of the few meaty morsels Xavier’s deal machine may be able to stretch to… (QV Premium: LSE NASDAQ & The Middle Oasis)


HKEx 9 Months 2015 Results


vs. 9 months 2014: revenue HK$ 10.6 bln (USD 1.36 bln), up 49%, EBITDA HK$ 8.13 bln (USD 1.04 bln), up 66%, basic EPS HK $5.44, up 73%.

PLY: Through trains generate profits, even in volatile times.


Markit Q3 2015 Results


vs. Q3 2014: revenue $277.3 mln, up 2.8%, adjusted EBITDA $123.5 mln, down 2.6%, profit for the period $6.5 mln, down 91%.

PLY: Disappointing slowdown at Markit.


FTIL Sells 0.37% In IEX


FTIL entered into a share purchase deal with Madison India Opportunities III to sell the last 0.37% stake in Indian Energy Exchange (IEX) for 79 million rupees (USD 1.19 mln). QV Premium: FTIL Stakes Sales Brief.

PLY: & they’re out…IEX stake all sold by FTIL after a multi tranche offloading to meet regulatory edicts when FTIL lost its fit and proper status as a result of the NSEL fiasco.


Doc Sandor’s Environmental Financial Products (EFP) & CBOE Announce December 11 Launch of American Financial Exchange (AFX)


Environmental Financial Products EFP and CBOE announced plans to launch the American Financial Exchange (AFX) (previously discussed in September), an electronic marketplace for small and mid-sized banks to lend and borrow short-term funds, on December 11. The interbank loan market’s initial contract will be for an overnight loan.

PLY: A very exciting new market, from the Father of financial futures (and a lot more innovation besides – financial futures was almost Richard’s warm up act!).


Banks May Get Extra Time To Soften Up EU Financial-Market Rules

Julia-Ambra Verlaine – Bloomberg

EU Poised To Delay Landmark Financial Markets Reforms

Huw Jones – Reuters

EU Overhaul Of Financial Market Rules To Be Delayed (subscription)

Jim Brunsden & Philip Stafford – Financial Times

What Is A ‘Mifid’& Why Care About Its Delay? (subscription)

Jim Brunsden & Philip Stafford – Financial Times

The EUn’s major reform of financial market rules faces a delay of a year to January 2018 to give the financial services industry more time to prepare.

The move is a blow for the EU, which has predicted the law will have a transformative effect on markets. That may be so. But it has also proved challenging to implement one of the more sprawling pieces of European financial legislation devised.

Lawmakers warn lobbyists the rules won’t be reopened. Delay would widen gap with U.S. rulemaking.

PLY: #Chaos or as some call it in Brussels, #BusinessAsUsual. MIFID II has little or no merits, just scrap the whole thing as I keep arguing (still to hear a single voice defending it incidentally – that is not a good sign for any regulation, usually somebody wants to say something good, even about the minutiae).


China’s Crackdown On Financial Markets Gets Top-Level Support

Keith Bradsher & Chris Buckley – NY Times

President Xi Jinping of China called for more measures to protect stock market investors after meeting with financial regulators signaling top-level support for a national campaign to crack down on market manipulation and to increase transparency.


UK FCA’s Project Innovate Celebrates First Anniversary With Plans For ‘Regulatory Sandbox’


FCA Lays Out Plans For ‘Regulatory Sandbox’ (subscription)

Anna Irrera – Financial News

Regulator proposes drug-testing style protections for financial services firms trying out products and services on consumers.

PLY: #Interesting albeit drug-testing style protections is a foolish avenue to go down, that, given the risk averse, box ticking mentality of the FCA will only preclude innovation.


SEC’s White Says Short Selling Getting Her ‘Intense Attention’

Ian Katz & Erik Schatzker – Bloomberg


SEF Trading: Challenges & Regulatory Hurdles

Ivy Schmerken (FlexTrade) – Markets Media

Many say the market structure is stuck, citing regulatory ambiguity and separate liquidity pools.

Private Markets

NY AG Orders Daily Fantasy Sports Firms To Shut Down

Bryan Armen Graham – The Guardian

New York’s AG declares daily fantasy sports games illegal. DraftKings, FanDuel contend their games are based on skill and not luck.

PLY: Previous discussion here and here. Not surprising, although it is a concern that regulators focus on this ahead of actually encouraging job growth but, hey, the blob has no business in expanding anything but its own importance…


Bitcoin’s Place In The Long History Of Pyramid Schemes (subscription)

Dan McCrum – Financial Times

The latest incarnation of MacGregor (Poyaisian sovereign bonds), in a tradition that runs from Dutch tulip bulbs through the stamp scheme of Charles Ponzi, is MMM, a “social financial network” run by Sergey Mavrodi, a convicted fraudster and former Russian parliamentarian, powered by YouTube and the cryptocurrency bitcoin. New members must purchase bitcoins to join MMM, and then receive a bonus for online testimonials describing their improbable profits. The fad helped to power an explosion in the bitcoin exchange rate, from less than $200 in September to more than $500 per bitcoin last week.

PLY: Albeit saying Bitcoin is to blame is a bit like blaming the US dollar for drug taking given all the biggest dealers price in greenbacks?


Coinbase Seeking To Expand Bitcoin Services To Latin America

Pete Rizzo – CoinDesk

Dividend News

ICAP interim dividend maintained at 6.60p

HKEx – no dividend proposed for Q3 2015

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX flat, FTIL roaring again up nearly 4%…


The Man Accused Of Masterminding The Hacks That Shook Wall Street

Greg Farrell, Patricia Hurtado & Elizabeth Dexheimer – Bloomberg

Scottrade, E*Trade, WSJ Among Victims In U.S. Hacking Case


Gery Shalon, Joshua Samuel Aaron and Ziv Orenstein were charged in a 23-count indictment filed in Manhattan federal court…


CME May See Delay On Inflation Swap Clearing (subscription)

Alice Attwood – FOW

PLY: Alas, regulatory approval may kick the product launch into next year…


MTS BondsPro To Offer US Corporate Bonds To Swiss Market


MTS Markets International announced its authorisation as a recognised foreign exchange in Switzerland, enabling Swiss sell- and buy-side participants to trade US corporate and emerging market debt in an all-to-all electronic trading environment, MTS BondsPro ATS.


ESMA Proposes Central Clearing For Norwegian, Polish & Swedish Interest Rate Swaps


PLY: Good idea, will please the CCP folks at NASDAQ, KDPW and Oslo Bors methinks…


PSE Short-Selling Move Paves Way For Listed Derivatives (subscription)

Blake Evans-Pritchard – Risk

Philippine SE (PSE) waits for tie-up with fixed-income exchange before allowing short-selling. QV Premium: PSE – PDEx Merger Brief.

Career Paths

Re ICAP-Tullet Prebon deal – no changes are anticipated to the BoD of ICAP, each of whom is expected to become a Director of ICAP NewCo. On Completion, Ken Pigaga, currently Group COO of ICAP, will resign from his current position in ICAP and be appointed to the board of Enlarged Tullett Prebon as a director & COO. Additionally, ICAP NewCo will appoint a NED to the board of Enlarged Tullett Prebon. Michael Spencer will have an honorary title of President of Enlarged Tullett Prebon. He will be available to advise the Board of Enlarged Tullett Prebon but will not be a member of the Board.

Marcus Zickwolff, former senior advisor at Eurex Clearing, left DB1 on 31 October 2015 in order to pursue new opportunities. Due to his departure on amicable terms he also chose to resign from his positions as Chairman of EACH, and Chairman of CCP12 (Global Association of CCPs).

PLY: I wish Marcus every success in the future, sorry to hear he is leaving EUREX Clearing and his dedicated input as Chairman of EACH and CCP12 deserves plaudits too.

BoD of SIFMA elected several directors to leadership positions on the Board for 2016.

Chairman: John F. W. Rogers, EVP, Chief of Staff & Secretary to the Board, Goldman Sachs

Chairman-Elect: Timothy C. Scheve, President & CEO, Janney Montgomery Scott

Vice Chairman: Lisa Kidd Hunt, EVP, International Services & Special Business Development, Charles Schwab

Treasurer: Gerard McGraw, President, Fidelity Institutional

The full SIFMA 2016 BoD is available here.

Financial Calendar

12.11 – MondoVisione Exchange Forum – chaired by EI Founder Patrick L Young.

New announcement

December 11th – American Financial Exchange (AFX) Launch

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

Share Notes

NASDAQ OMX EVP Edward S. Knight sold 26,612 shares Friday, November 6th at $58.04 (bargain $1,544,560.48). He now owns 26,780 shares.

Analyst Notes

ITG Upgraded By Zacks From “Sell” To “Hold”

A full table of current analysis can be found on our Analyst Ratings page which is updated daily.

Other stories

ESMA Chairman’s Statement To The ECON Committee Scrutiny Hearing On MiFID II



For Capitalism To Thrive We Must Break Our Debt Addiction (subscription)

Xavier Rolet, LSE CEO – Daily Telegraph

Our punishing tax regime means too many small businesses are funded through lending, rather than investment for return.


European Council Conclusions On The Commission Action Plan On Building A CMU


PLY: Essentially they tick all the boxes but will they match that with actions which enable proper, beneficial, free markets?


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