November 19 2013

Patrick-l-young-mergermania

A big day. ICE has trumped the pack with another canny purchase, as we scooped in early October. Meanwhile good results for 9 months by Moscow while media speculation on Euronext sale has begun. BATS begins listings, another SEF, various share shuffles, management changes and indeed so much news that there is nothing more to do except get scrolling!

Meanwhile, it’s a busy day in Brussels: the European Issuers Association and FESE have a fascinating SME roundtable this afternoon which will be followed this evening with an excellent innovation, the first SME awards for small cap stock – a brilliant initiative by the FESE team and I am privileged to have been invited. More on that tomorrow, for now you need to get scrolling as I have multiple comments on top of today’s headlines:

Public Markets

Moscow Exchange Announces Q3 2013 Results

Operating income rose 11.2% YoY to RUB 6.28 bln (USD 192.93 mln).
EBITDA climbed 8.7% YoY to RUB 3.99 bln (USD 122.5 mln); EBITDA margin 64.0% versus 65.0% in 3Q12.
Net profit increased 29.8% YoY to RUB 2.85 bln (USD 87.55 mln).

Press release here.

PLY: Moscow powers on as it realises the vast potential of Russia’s markets.

FTIL To Sell SMX To ICE
dealcurry.com

Press release here.

PLY: As rumoured on these pages as long ago as October 3rd, ICE has scooped the industry again, bagging a fully fledged Asian clearing house with an exchange attached (media reports perceive the deal the wrong way round). Current volume is irrelevant (as was for instance NYBOT before – wonder if the dinosaurs who snorted derisively at Sprecher’s purchase then are feeling quite so cocky now?).

A brilliant deal making ICE the first CCP provider (since ICCH was disbanded) in North America, Europe and simultaneously, Asia. The consideration is as irrelevant in the long-term schema of things as that purchase cost of NYBOT was way back then – ICE just morphed its structure (again!) while the legacy department stores are still considering how to make an Asian move. “I’m an opportunist” Jeff has often noted. Brave too. Great news for customers, markets and shareholders.

Moreover this marks the first sale in the FTIL empire as Jignesh Shah battles for survival (and liberty) post NSEL crisis. Anecdotal evidence of senior executive flight patterns in recent days leads me to believe deals are close for other FTIL stake sales – DGCX amongst them.

Euronext Attracts Potential Buyers (subscription)
The Wall Street Journal

PLY: Amongst the more sparky dialogue of my lunch with Peter Lenardos at RBC last week was our core fissure of disagreement. He reckons IPO, I remain firmly in the trade sale camp (no matter how many times the good folk of Euronext have politely tried to convince me otherwise). WSJ has fired the starting gun and I believe a sale could happen swiftly, as soon as anybody tables a bid (q.v. the LIFFE sales race of 2001).

So far those browsing the wares are the legacy department stores who will always kick the tyres anyway in order to be seen doing something. Doubtless some might even be serious (NASDAQ has allegedly been out shopping OMX to any willing Scandinavian bidders) while others not mentioned so far include the Peter Randall consortium. Various exchange staffers are keen to suggest SwX are eyeing a bid too (although that may just be a smokescreen by disingenuous bourses trying to cover their own tracks).

If nobody has hired bankers, then it means everybody is at the Powerpoint stage of sale where the C-suite dreams of acquisition and some internal strategists are trying to discern the parameters for bidding. As the WSJ story sagely notes “It is possible the potential suitors won’t move forward at all, given other priorities and challenges.”

The starting gun hasn’t fired but pit lane is open for warm up laps ahead of a “Gentlemen start your bidding” free for all. Or, as Peter Lenardos reckons, it may just be an IPO. He could be right, nobody has hired bankers after all.

Moscow Exchange Finds Buyer For RTS Settlement Chamber
interfax.com

The Federal Anti-Monopoly Service has approved CJSC Inter RAO Capital’s application to buy 100% of voting shares in RTS Settlement Chamber.

RTS SC is wholly owned by the Moscow Exchange MICEX-RTS. It was reported earlier that the exchange’s supervisory board will consider the exchange’s divestment of CJSC MICEX-IT and CJSC RTS SC on November 20.

A spokesman for the exchange told Interfax that it is interested in selling its non core assets, such as MICEX-IT, the operator of the government procurements electronic trading platform, and those that duplicate the functions of the group’s core companies, such as RTS SC, if it is offered a satisfactory price.

Management Team Of Bulgarian SE To Change In Jan 2014
novinite.com

The management team of the Bulgarian SE will be changed according to the single agenda point of the general shareholders’ meeting scheduled for January 14, 2014, called by Bulgaria’s Finance Ministry, which holds a 50.05% stake.

The Board of Directors is currently headed by Asen Yagodin, who also headed the Bulgarian Development Bank (BDB) until recently. The Deputy Chairman of the Board of Directors is Vasil Golemanski, Ivan Takev is CEO, and Lyubomir Boyadzhiev and Georgi Balgarski are members of the Board of Directors.

PLY: The Bulgarian government want a strategic exchange shareholder in their exchange. Trouble is they want that to be an exchange and that deal is highly unlikely to fly. Hopefully the highly capable Ivan Takev and his executive team will stay in situ while the government can get to grips with appreciating that there are investors for their business who can help Sofia develop.

Goldman Set To Step Up Warehouse Sale Talks (subscription)
Financial Times

PLY: As government investigators enter through one door, it looks as if Goldman Sachs will exit their warehouse subsidiary through another…

More than a dozen parties have expressed an interest in buying Metro International Trade Services, since the summer including major commodity trading houses, private equity groups and several Chinese buyers, including Ping An, the Chinese insurer, and China Minmetals.

HFTs: Dividing Opinions (subscription)
Financial News

PLY: An interesting range of opinions from the sell and buy side in the debate about HFT.

Federal Court In New York Orders MF Global Inc. To Pay Over $1 Billion In Restitution To Customers Of MF Global Inc.

CFTC obtained a federal court consent Order against Defendant MF Global requiring it to pay $1.212 billion in restitution to customers of MF Global to ensure customers recover their losses sustained when MF Global failed in 2011.

Private Markets

OIJIF Ups Stake In NCDEX, Buys More Shares From Jaypee Capital Services
The Economic Times

The Oman India Joint Investment Fund (OIJIF) has raised its holding in NCDEX (subject to regulatory approval), the country’s second largest commodity bourse, to 10% by buying more shares from Jaypee Capital Services in a deal that values the exchange at Rs 973 crore (USD 156.38 mln).

The fund has paid Rs 192 apiece (USD 3.08) for 26,85,828 shares, valuing the deal at Rs 51.56 crore (USD 8.28 mln), said Gaurav Arora, MD of Delhi-based broker Jaypee Capital. This is more than the Rs 188 (USD 3) a share it paid to acquire a 4.7% stake from Jaypee Capital a month ago.

Once regulator FMC approves the deal, Jaypee Capital’s stake will shrink to 2.38%.

OIJIF was registered in India in 2010 and is an equal joint venture between State Bank of India, India’s largest bank, and State General Reserve Fund, the sovereign wealth fund of Oman.

PLY: We first reported the stake reduction by Jaypee November 6th.

CFTC Issues Notice Of Temporary Registration As A SEF To Lat Am SEF, LLC

CFTC has approved the application of LatAm SEF, LLC (LatAm) for temporary registration as a SEF. LatAm is a Delaware limited liability company.

PLY: Making the current total, 19 approved with 3 pending. We maintain an updated SEF list on the Exchange Invest web site here.

BATS Chi-X Europe Launches European Listings Business
banking technology

PLY: BATS enters the listing business with a degree of inventive cunning through the back door. BATS Chi-X Europe has begun its pan-European listings business with the start of trading in two ETFs. The ETF focus is a sensible one and the iShares brand on the funds largely removes concerns about the exchange brand per se. Good move by Mark Hemsley and his team.

Bitcoin Hits $785 With Help From Bernanke (subscription)
Financial Times

Testimony provides hope that regulation will stem criminality.

PLY: The law enforcement folks are keen to prompt the way Bitcoin has been used in crime at a time when their budgets are clearly under pressure. Naturally rolling news media misses this rather key point. Meanwhile BTC mining which looked like a marginal business only 2 weeks ago is once again potentially hugely profitable.

India – BSE Disaster Recovery Site Will Go Online Next Year
The Hindu Business Line

BSE will commission its Disaster Recovery Site (DRS) in Hyderabad in the first quarter of the next financial year, according to MD Ashiskumar Chauhan.

PLY: Seismic factors at play here as BSE required a disaster-recovery site in a different seismic zone from Mumbai.

Special Section: FTI, NSEL, India at the Crossroads

PLY: Yesterday’s FTIL surge was driven by rumours of the SMX sale to ICE. Expect more deals soon. After all the excitement, MCX has slipped a bit today while FTIL is a further 2% higher.

NSEL-Related Buzz Lifts FTIL, MCX
Business Standard
MCX Shares Rise On NCDEX Stake Sale
The Financial Express

Both of Jignesh Shah’s listed companies soared Monday on rumours of positive news relating to the NSEL crisis.

MCX was up 18.57% to close at Rs.518.85 (USD 8.33). FTIL was up 19.98% to close at Rs.181.05 (USD 2.9).

…MCX surged on reports that a stake sale in rival, NCDEX, took place at a premium to an earlier sale by the same investor about a month ago.

PLY: …It was 4 rp but hey a premium is a premium…

Key NSEL Staff Put Rs 34 Crore (USD 5.46 mln) In Firm Floated By Defaulter Company’s Head
The Economic Times

Three former key employees of NSEL invested Rs 34 crore (USD 5.46 mln) into a real estate company formed by a former finance head of a group company of PD Agroprocessors, a large borrower which owes investors on the bourse Rs 637 crore (USD 102.37 mln).

Two other defaulting borrowers on NSEL, one with a large outstanding, cumulatively invested Rs 14 crore (USD 2.25 mln) into the company.

Police Attach 166 Properties Of Defaulting Borrowers
Livemint

The Economic Offences Wing (EOW) of Mumbai police on Monday said that it has attached at least 166 properties of the defaulting borrowers of NSEL.

In Race For MCX Audit, PwC’s Nose Ahead
Business Standard

PwC is a front runner in the shortlist of auditors to conduct a special audit of MCX.

Technology

Trayport Acquires Contigo

Trayport, a leading provider of energy trading solutions to traders, brokers and exchanges worldwide, has acquired Contigo Ltd, a provider of energy trading risk management (ETRM) services. The transaction closed on 14 November, 2013.

PLY: Trayport have excelled in the energy arena in recent years and the Contigo acquisition adds a new dimension to their services. Interesting deal.

Traiana Harmony’s CFD & Equity Swap Network Expands In Asia
Automated Trader

Post trade solutions provider Traiana has announced that the Harmony network, its product for equities swaps / CFD markets, is now live in the Asia Pacific region.

Indexes

STOXX Launches EURO STOXX 50 Futures Roll Index

The new index measures the return of a hypothetical, rolling portfolio invested into a series of EURO STOXX 50 futures contracts. It is designed to underlie ETFs and other investable products, and to act as a benchmark for actively managed funds.

CBOE Short-term VIX Index Values Now Disseminated Every 15 Seconds
CBOE

The recently created CBOE Short-term Volatility Index (VXS index) values are now generally disseminated every 15 seconds during the trading day versus once a day previously, allowing traders to track intra-day volatility of the index.

HKEx To Introduce After-hours Trading Of Mini HSI Futures And Mini HHI Futures
HKEx

HKEx plans to introduce Mini Hang Seng Index (Mini HSI) and Mini H-shares Index (Mini HHI) Futures to its After-Hours Futures Trading (AHFT) session starting on Monday, 6 January 2014.

Mini HSI Futures accounted for about 16 per cent of HKEx’s futures trading volume in the first 10 months of the year and Mini HHI Futures accounted for about 4 per cent.

Products

DGCX To List Plastics Futures Contract

PLY: Interesting news that from February 28, 2014, DGCX will expand its innovation drive with a Futures Contract for Polypropylene Plastic, sized at 5 metric tons, quoted in US dollars and Delivered In-Warehouse at Jebel Ali (JAFZA) and Dubai World Central (DWC) Free Zones.

There are huge opportunities in polymers, plastics and ultimately a full nano product suite going forward as that will power the economy in its next exciting growth wave which will take place once we’ve got over the QE hangover and bank bailout shambles/bubble troubles/ill-constructed multinational currencies etc…

Prague Energy Bourse To Launch Gas Futures Trade On Dec. 9
Reuters

Power Exchange Central Europe will launch Czech gas futures trading on December 9 as the Prague-based bourse seeks to take advantage of growing liquidity in the region, offering futures contracts with physical delivery in partnership with the Vienna-based Central European Gas Hub to tap into growing interest in gas trading in the region.

Career Paths

Gmex Group, the derivatives exchange start up founded by Hirander Misra, has hired Dan Phillips as its head of compliance, risk and finance, only months after he joined buyside-only trading venue Liquidnet in a similar role.

PLY: All the best to Dan while in a personal comment (noting my board position with Liquidnet Europe), I rather wish the likes of Aquis and Gmex could employ their staff from other venues.

Financial Calendar

This week

MarketAxess Q3 $0.13 dividend payment
Record date Thomson Reuters for $0.325 Q3 dividend
Record date MCX Rs. 7 interim dividend
Record date TMX $0.40 dividend

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

Analyst Notes

CME Price Target Upped By BMO Capital Markets – “Outperform” Rating
CME Downgraded By Zacks From “Outperform” To A “Neutral” Rating – $84.00 Price Target
ICE Upgraded By JPMorgan Chase & Co From A “Neutral” To An “Overweight” Rating
ICE Upgraded At BMO Capital Markets To “Outperform”
Charles Schwab Target Price Lifted By Barclays From $18.00 To $19.00 – “Underweight” Rating
Interactive Brokers Group was downgraded At Keefe, Bruyette & Woods From An “Outperform” To A “Market 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

Crowdfunding In China Could Be $50 bln Business By 2025
Quartz

The biggest crowdfunded project in China has drawn 5,533 donors and raised more than $200,000 to support an online cartoon series called “A Hundred Thousand Bad Jokes” on China’s first crowdfunding site, DemoHour. This is paltry sum compared to crowdfunding projects in the US, which have reached upwards of $10 million—but that is about to change.

By 2025, crowdfunding in China could explode to $46 -$50 billion—about half the amount expected to be channeled to startups and businesses throughout the world, according to a new World Bank report (pdf). Globally, crowdfunding investment could reach $96 billion in the next 12 years, or almost twice as much as venture capitalists invested worldwide last year.

Other stories

SEBI’s Move On SE Monitoring May Not Meet Expectations
Moneycontrol

SEBI has tightened its hold on Stock Exchanges to ensure better compliance and monitoring under the Listing Agreements by the exchanges. Companies are required to enter into a listing agreement i.e. a undertaking to adhere to corporate governance and reporting standards.

PLY: Restrictions which may prove to be too prescriptive but then again this is SEBI and their regulatory ‘solutions’ tend invariably towards the over-prescriptive on many fronts, alas.

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