November 17 2015

elb2PLY: Eagle-eyed viewers will have spotted the graphic advertising the “Download centre” in recent days. This is a new feature to enable myself, the Exchange Invest team (and indeed all readers) to contribute interesting white papers / speeches / presentations and so forth to create an easily accessible reference site for materials which help people better understand exchanges, from all perspectives. Feel free to send us a paper, but first up why not have a read at the special Download centre Inaugural Paper: my discussion of the required move to Zero Hour vigilance: “Towards A Real Time World Market.

On the web site today, we have a third splendidly pithy insight from industry eminence grise, Jake Pugh, reflecting his ‘must read’ views on recent industry events.”ICAP Moves Centre Stage.

There are more deals to come (perhaps BM&FBovespa/Cetip is one – albeit there are many many MANY more cooking right now large and small) but the surprise of the day is that PE didn’t get Trayport (I heard CME had pulled out of the bidding some time back – even though ICE scooping it up may be still a rather bitter blow).

Public Markets

ICE To Acquire Trayport From BGC Partners & GFI For $650 Mln In Stock

BUSINESS WIRE

ICE Beats CME With Deal For Trayport (subscription)

Philip Stafford – Financial Times

ICE has won out over CME and bolstered its position in European energy trading markets by agreeing to buy Trayport from BGC Partners for about $650m in shares, taking control of an asset in the interim stewardship of BGC for just seven months when it bought Trayport’s parent company GFI for $750m.

Howard Lutnick, chief executive of BGC Partners, said its pursuit of GFI was in part because of the likely price it could receive from the sale of Trayport.

“While in many ways we would have loved to continue owning Trayport, the proposed transaction is ultimately the best way for us to unlock value for our shareholders,” Howard Lutnick, CEO of BGC Partners said. “This translates into BGC paying approximately $100m for $640m of GFI’s remaining revenues, or a multiple of just 0.16 times sales.”

ICE’s purchase means Chicago’s CME has been beaten to an asset the latter first tried to buy 16 months ago by purchasing GFI. It then got into a bidding war with BGC and was unable to garner sufficient shareholder backing to complete the deal.

QV Premium: BGC – CME – GFI Brief, BGC / GFI: Post Merger Disposals Brief.

FAO: CME held talks with BGC about buying GFI’s trading-software units, Trayport and Fenics – valued at more than $600 million.

PLY: An unfortunate day for CME although I believe they were out of the bidding rather earlier than the media suggest. Yes, ICE bought it but the final rounds apparently had some PE companies while CME appeared lukewarm after their failure to secure a deal during the Mickey Gooch stand against Howard Lutnick’s insurgents. From a financial perspective that looks to have ended a bit closer to the Alamo end of the curve, with Howard demonstrating an ability to end up with a load of assets for a bit north of $100 million. Brilliant deal for BGC while ICE adds another neat piece of connectivity in the battle for energy domination. It will be Interesting to see whether ICE retain the software systems sales arm at Trayport.

 

BM&FBovespa Takeover Seen Requiring Higher Offer Price

Denyse Godoy – Bloomberg

BM&FBovespa may have to spend more than the 10 billion reais ($2.7 billion) it offered to take over fixed-income clearing house Cetip, according to analysts from Bradesco BBI & Credit Suisse.

QV EI Premium: BMF&Bovespa Monopoly – Brief and Exchange Deals Brief.

 

IEX Rebuts Rivals Over Bourse Plans (subscription)

Philip Stafford & Nicole Bullock – Financial Times

Responding to criticisms from some high-frequency traders, IEX said it had demonstrated it was a credible choice for investors, brokers and market makers “who do not need to pay for privileged access”.

A letter, filed with regulators last week and published by SEC on Monday, added that many of the issues raised by rivals and other markets participants in the application process were “worthy of serious review and consideration, but resolving them cannot be a condition for approving the application”.

FAO: Last week Citadel blasted IEX’s exchange plan, while Virtu Financial expressed its support to regulators for IEX (reported here). Here is the opinion of our publisher, Patrick L Young, about IEX’s plan.

PLY: Hmmm, there is a lot of latency math to be debated, let alone the philosophy. The thing is…if IEX just located to a data centre they owned up a long winding, say, circa 35km, laneway in the middle of nowhere (e.g. western Alaska), it would apparently be fine. Whereas, having that cable coiled on the ground in plain sight somewhere in New Jersey…well, you catch my drift…. POP in NJ, racked in Alaska – sounds like it may be a plan if the SEC vacillates on permitting IEX? More meaty analysis of the issue to follow but this just occurred to me as we race to pixel in our own low latency manner.

 

CEO Carsten Kengeter – DB1 Eyes Further Fintech Takeovers

Reuters

DB1 expects to acquire further fintech companies and to play an active role in the consolidation of the exchange sector.

 

Two Directors To Resign From ITG Board

Dow Jones Business News

Chairman Maureen O’Hara will step down from the board as of Jan. 15, while board member Chris Dodds will end his tenure at the end of December (announcement here). Last week Philadelphia Financial Management and Voce Capital Management increased the combined stake in ITG to 8.6%. The companies pushed for changes to the board of ITG, including the ouster of its Chairman, Maureen O’Hara. In August ITG paid a $20.3 million fine to settle ‘secret trading desk’ claims with SEC.

PLY: A clear victory for Justin Hughes and his Phillyfin colleagues as the CEO has gone and now the leading non-execs have resigned as well.

 

Statement On Departure From The SEC, Commissioner Luis A. Aguilar

MondoVisione

SEC Commissioner Aguilar Says Will Leave In December

Suzanne Barlyn – Reuters

SEC Commissioner Luis Aguilar plans to leave the agency in December, he said in a statement on Monday. Aguilar, a Democrat whose career began as a staff attorney at SEC more than 30 years ago, notified President Barack Obama of his upcoming departure in a letter. Obama selected Democrat Lisa Fairfax on Oct. 20 to replace Aguilar, whose term has expired. The appointment of Fairfax, a law professor at George Washington University, must be confirmed by the Senate before she can start serving her term.

 

TMX To Introduce New Mutual Funds Trading Platform

Reuters

TMX is expanding its offerings (read announcement here) to service the mutual fund industry, in the move that comes close on the heels of a similar announcement from rival Aequitas Innovations.

The plan, first reported earlier this month, will see the new TSX NAVex system racing to compete against Aequitas’ new PTF Connect platform, which is set to begin operating in Q1 2016.

 

Users Seek Justification For LSE Fee Hikes (subscription)

Waters Technology

LSE is introducing an average 4.8% fee increase for its UK and International Level 1 and Level 2 market data products, which officials say reflects continued enhancement of its “content delivery and scope,” but data consumers say the exchange is simply raising fees to combat falling data revenues.

 

China Investors Go Missing From Hong Kong Stock-Trading Link

Bloomberg

Since a flurry of buying by mainland investors in April spurred the biggest monthly rally in six years for the Hang Seng Composite Index, average daily purchases of the city’s stocks via an exchange link with Shanghai have tumbled 89%. Four of the five most popular targets through the connect are down more than 40% from April peaks, while the valuation discount on Hong Kong shares relative to Shanghai is even wider.

PLY: The possible reappearance of a bull phase in Chinese equities will soon clear this up methinks…

 

India – Commodity Bourses To Set Up Grievance Redressal System

The Economic Times

Sebi asked commodity exchanges to set up investor service centers and put in place arbitration mechanism for faster resolution of grievances.

 

Angel Exchanges To Help Plug Financing Gap

Sungula Nkabinde – Moneyweb

According to Paul Calvey, the associate partner of market infrastructure at firm Oliver Wyman, the future will see stock exchanges playing a more prominent role in the SME space.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX rockets up nearly 6% as FTIL is up 1%, no other public news that we can see…

Technology

Resumption Of Trading On UBS MTF

MondoVisione

Trading on UBS MTF was suspended as of 08:39:50 on Monday, Nov. 16th, due to a technical problem. Trading resumed at 14:00:00.

 

ECX Launches Electronic Tagging System

Kevin Mwanza – AFK Insider

Ethiopia Commodity Exchange (ECX) has launched a national traceability system that will make it possible for international buyers to track the footprint of Ethiopian coffee in granular detail. The new electronic tagging system worth $4.5 million — powered by IBM and Frequenz IRIS technology — encompass over five million smallholder farmers engaged in producing multiple commodities traded at the ECX.

PLY: Tracking coffee in “granular detail” – a splendidly elegant pun as well as a good idea rendered into practice.

Products

ICE Singapore Gold Contract Faces Sceptical Marketplace

Ian Walker – The Bullion Desk

ICE is this week set to roll out its gold futures contract in Singapore, a country where contracts of this nature have traditionally struggled.

 

Myth Of The Endangered Market Maker

Lisa Abramowicz – Bloomberg Gadfly

There’s a popular idea circulating on Wall Street that trading desks no longer have any money to help clients trade and that’s why it’s becoming more difficult to maneuver in the $8 trillion U.S. corporate-bond market.

PLY: Gadfly, a new pith-machine from Bloomberg, offers a sound first analysis for consideration in this parish…

 

High Time Currency Market Trading Hours Are Extended

Mobis Philipose – Livemint

Currently, users, including those based in India, have to trade in overseas markets after markets close in India.

 

CFTC Charges ‘IB Capital FX’ For Soliciting $50M+ For Forex Trading Without Any License

Mike Fox – LeapRate

CFTC announcement here.

PLY: Of all the forex scams out there, usually they work their ways, ahem, ‘creatively’ around the licences. In this case there has to be a modicum of sneaking regard for the folks who just didn’t bother with a licence at all… Quite surreal, even by the low standards of the fx segment.

Career Paths

ITG’s Chairman Maureen O’Hara will step down from the board as of Jan. 15, while board member Chris Dodds will end his tenure at the end of December.

SEC Commissioner Luis Aguilar plans to leave the agency in December. President Obama selected Democrat Lisa Fairfax on Oct. 20 to replace Aguilar, whose term has expired. The appointment of Fairfax, a law professor at George Washington University, must be confirmed by the Senate before she can start serving her term.

ICAP’s EBS BrokerTec appointed Tim Cartledge as Chief Strategy Officer. Tim will report to Gil Mandelzis, CEO and join both the EBS BrokerTec Executive Management Team and the ICAP Global Executive Management Group. Tim will be based in London. Tim was formerly at Barclays Bank where he was Head of Global Fixed Income Currencies and Commodities (FICC) Electronic Trading from 2014 until May 2015.

The Supervisory Board of Clearstream Banking has appointed Berthold Kracke (49) as new CEO, effective 16 November 2015. He succeeds Stefan Lepp, who has decided, for personal reasons, to leave the company. The Executive Board of Clearstream Banking  now consists of Berthold Kracke, Martina Gruber and Mathias Papenfuß.

PLY: The stealth management clear out continues. Stefan Lepp, this week at Clearstream, Marcus Zickwolff, last week at EUREX, Carsten Kengeter is reshaping the DB1 team. Expect, well about 30, I think, folks to opt to spend more time with families, friends & other pursuits in the near future…

Bloomberg reports that Spot Trading’s chief investment officer, Carlos Saez, resigned from the company.

SEC named Sanket J. Bulsara as the Deputy General Counsel for Appellate Litigation and Adjudication.  He succeeds Michael A. Conley who has been appointed as SEC Solicitor.  Former Solicitor Jacob H. Stillman will remain as senior advisor to the Solicitor.

Financial Calendar

This week

17.11 – ICE Singapore Launch

18.11 – MarketAxess $0.20 quarterly cash dividend payment

19.11 – SEC annual Government-Business Forum on Small Business Capital Formation

19.11 – Record date Thomson Reuters $0.335 quarterly dividend

20.11 – Record date TMX $0.40 dividend

20.11 – Record date BGC Partners $0.14 dividend

20.11 – Record date ITG $0.07 quarterly dividend

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

Share Notes

Euronext Share Repurchase

Euronext

Euronext repurchased 33,250 shares as part of the second phase of its repurchase program announced on 5 October 2015 (reported here). Euronext aims to repurchase 133,084 shares as part of this second tranche of its share repurchase program to cover the LTI plan for 2015. This program has been implemented by an independent agent who will repurchase a total of 133,084 ordinary shares of capital during the period commencing on 9 November 2015 and ending on 4 December 2015.

Other stories

FINRA Fines Scottrade $2.6 Million For Significant Failures In Required Electronic Records & Email Retention

MondoVisione

 

Remarks Of CFTC Chairman Timothy Massad Before CME Global Financial Leadership Conference

MondoVisione

 

 

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