November 20 2014

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PLY: SEC Commissioner Dan Gallagher is on the button with his comments about technology regulation as MOEX releases very encouraging results and NYSE intelligently goes for gamification. One wonders what the Hong Kong business media would do for content if they didn’t have the through train to speculate about. Cleartrade challenging Baltic in FFAs as Turkish power platform takes shape. More reports from an excellent MondoVisione Exchange Forum and a pause to ponder is there ever a way to reform forex trading? BATS planning 56 layoffs post Direct Edge merger.

All this and much more delivered free gratis and for nothing below:

Public Markets

MOEX Q3 Financial Results
Leap Rate

8% QoQ rise in Revenues (16% YoY) to RUB 7.3 billion (about $153 million), and a 17% QoQ rise in net income (42% YoY) to RUB 4.1 billion ($85 million).

PLY: Brilliant numbers demonstrates the core strength of the Moscow Exchange despite the political issues inflating geopolitical tensions, as evidenced in between koala strokes at the Brisbane G20 last weekend. MOEX is a fantastic business and sooner or later it will go from a Russian discount to an exchange premium given its excellent management and powerhouse profitability (CCP Repo up 629% y/y is one rather encouraging number).

Watch this space, the Russia the western media perceives is far removed from the Russia which is evolving, largely ignored by an odd desire to perceive one man as a nation and ignore the underlying change to the economy – yes still too energy dependent but things are changing.

NYSE Acquires True Office, Developer Of Interactive Game-Style Training
Tom Groenfeldt – Forbes

Compliance has been called a lot of things, but fun has rarely been one of them.

Then True Office came along and turned compliance training into games, with scoring and record-keeping. The company enables global organizations to educate their workforces more effectively by delivering interactive experiences that make complex policies understandable.

PLY: Gamification has long been broadly overlooked by the industry, I seem to recall blank stares all round when I discussed it at an AFM conference in Istanbul nearly a decade ago (even then I had been banging on about it since before 2000 A.D.). Good move by NYSE.

China Stock Link Goes From Through-Train To Ghost Train As Flows Slump
Kana Nishizawa – Bloomberg
Market Highlights of Shanghai-Hong Kong Stock Connect – For Wednesday
HKEx

The flood of buy orders for Shanghai shares through the Hong Kong exchange link has slowed to a trickle two days after the program’s debut.

Net purchases of mainland equities by global investors totaled 2.6 billion yuan ($425 million) Wednesday, down from about 4.8 billion yuan Tuesday and the maximum 13 billion yuan on Nov. 17.

HKEx To Step Up Pitch For Mainland Interest In Hong Kong Stocks Under Tie-Up (subscription)
Enoch Yiu – South China Morning Post

HKEx’ CEO praises successful through train despite a disproportionate flow of northbound investments that has prompted a vow to step up promotions across the border.

PLY: Of course HKEx must promote their wares to Chinese investors but did anybody seriously think the initial flow would be anything but into China?

Trading Slowdown Leaves ICAP Out Of Key (subscription)
Paul J. Davies – Wall Street Journal

To some extent, ICAP is suffering the same structural malaise as investment banking: the regulatory response to the financial crisis has taken huge volumes of trading out of global markets because banks no longer have either the capital or funding to back the kind of market-making businesses they used to run.

Read our Premium post ICAP Explores A New Galaxy

LME Has Not Given Up On Gold
Perrine Faye – Bullion Desk

LME won the administration of the platinum and palladium price benchmarking in October – it will take over the running of the process from December 1 using its LMEBullion system. The race for the London gold fix was won by ICE earlier this month.

PLY: Perhaps clearing of gold and silver in its shiny new CCP is one option being advanced by CEO Garry Jones.

Baltic Exchange Faces EEX Challenge As Ship Futures Market Heats Up
Jonathan Saul – Reuters

Britain’s Baltic Exchange faces competition from Cleartrade as it tries to revive its loss-making Baltex dry bulk freight derivatives platform.

PLY: Baltex was launched in June 2011 as the first central electronic marketplace for FFAs (cleared via LCH.Clearnet since June) but OTC phone broking remains the prevalent approach to dealmaking. Now Cleartrade is seeking to compete in the market – which has enormous potential for expansion.

Bursa Wants Feedback On ACE Market To Enhance Competitiveness
Wong Wei-Shen – The Star

Mondo Visione Exchange Forum: Industry Debates The Role And Future Of Exchanges
Automated Trader

Scrutiny of exchanges’ business models made for heated debate at last week’s Exchange Forum conference hosted by publisher Mondo Visione and chaired by Patrick L Young, as tempers continue to ignite over the cost of market data in Europe.

PLY: Good coverage of the forum including some pithy remarks by Arnaud Giblat, Peter Lenardos and Nandini Sukumar amongst others. Also mentions the frankly bizarre comments by Philippe Carre suggesting there is too much innovation in the exchange industry – “well clearly not from Sungard” would be a useful opening riposte to puncture that somewhat absurd assumption (which I think stems from the difference between ‘incremental upgrade’ and ‘innovation’ often being mixed up in the minds of linear executives).

Private Markets

Turkey To Establish New Power Trading Platform
Argus

Turkey plans to complete the establishment of its new power trading platform, Epias, at the start of next year.

Turkish energy market regulator EPDK, which is charged with allocating shares in the Epias platform, has identified 109 private-sector companies that have qualified to participate in the 40% stake allocated to the private sector. State transmission company Teias will take 30% of the shares, and BIST the remaining 30%.

The EPDK aims to register the new company in January and is currently working on the final allocation of shares for the private sector.

EI reported on July 3rd Turkey’s Energy Marketing Regulatory Authority (EMRA) setting up an Istanbul-based energy stock exchange.

Canada Classifies KRX As A Designated Stock Exchange
MondoVisione

KRX: Adjustment Of Trading Unit & After-hour Block Trading At KONEX
MondoVisione

Finland Classifies Bitcoin As VAT-Exempt Financial Service
Nermin Hajdarbegovic – CoinDesk

Finnish regulators have classified bitcoin as a financial service, thus granting it VAT-exempt status.

The Finnish Central Board of Taxes (CBT) judged bitcoin to be a financial service in ruling 034/2014, which states that bitcoin purchases qualify as “banking services” under the EU Value Added Tax (VAT) Directive.

PLY: Progress bit by bit for Bitcoin…

Special Section: FTI, NSEL, India at the Crossroads

PLY: Uncertainty over just what may happen to FTIL – whether it is defenestration of the board or just plain corporate defenestration through forced merger, continues to weigh on the stock, down 2% while MCX is flat to small up.

Technology

U.S. SEC Enacts Rules To Protect Exchanges, Dark Pools From Glitches
Sarah N. Lynch – Reuters

As expected yesterday, U.S. regulators adopted a new rule that requires stock exchanges and some larger trading platforms to take steps to protect against market disruptions such as technology glitches or natural disasters.

PLY: A first step in what Chairman White regards as an ongoing process. Certainly there needs to be much greater control on the ‘garbage out’ button which has caused so many problems from counterparties and which, despite the demise of Knight Capital (and myriad other errors from Goldman and others) has been barely touched.

SEC Adopts Rules To Improve Systems Compliance And Integrity – Rules To Strengthen Technology Infrastructure Of Securities Markets
MondoVisione

KCG’s New Algo Catches Liquidity Based On Urgency
John D’Antona Jr. – Traders Magazine

As part of KCG’s continued push into the institutional trading side of the business it has built its first brand new algorithmic trading tool – Catch.

CFTC Launches National Campaign To Protect Consumers From Financial Fraud – CFTC SmartCheck Website Offers Investors Access To Quick, Effective Tools To Check Backgrounds Of Financial Professionals
MondoVisione

Products

MCX Planning To Launch Agri Contracts
Livemint

Perhaps by the end of the fiscal year, MCX anticipates launching contracts in six agri-commodities—crude palm oil, kapasia khalli, kapas, cotton, mentha oil and cardamom.

Resumption Of Single Stock Options Trading At KRX
MondoVisione

KRX recorded 2,142 contracts resuming trading after a gap of 3 years and 4 months since July 2011.

CLTX Provides Access To Exchange Risk Management Tool For Clearing Members
MondoVisione

Clearing members of any of CLTX’s clearing house partners will now be able to access its Trade Depository tool without charge and without the requirement to become a direct member of the exchange.

PLY: Cool.

Increased Operational Risk & Costs Due To Fragmentation Of OTC – Derivatives Processing Is A Major Concern For Financial Institutions
MondoVisione

PLY: Attention grabbing headline turns to rather self-serving sales message. Not that there aren’t problems here, just that PRs need to have a better way to engage than scaremongering sales techniques: clients and indeed Exchange Invest are increasingly immune.

Self-Regulation Could Remain The Status Quo For FX (subscription)
Joel Clark – Financial News

As six banks get out their chequebooks to pay $4.3 billion in fines for rigging foreign exchange markets, one key question is: what’s the best way of regulating this huge market?

PLY: …and indeed it is fair to say that the forex business has issues with fairness and transparency at every level. Indeed, Transferwise have a petition to that effect for the simplest retail money changes – Sign Here. Frankly the forex business is rather rotten to the core in so many respects it needs a ground up rethink on every level – including those horrific clearing / settlement monopolies and messaging systems which are bottlenecks to progress in a multipolar world.

Indexes

Osaka Exchange: JPX-Nikkei Index 400 Futures To Be Launched Tuesday November 25
MondoVisione

…seven designated market makers already signed up.

Career Paths

Board of Governors of Thailand Futures Exchange pcl (TFEX), under Stock Exchange of Thailand (SET), has appointed Rinjai Chakornpipat as MD of TFEX, effective November 20, 2014. Rinjai has wide-ranging and in-depth experiences and expertise in the future’s exchange and the Thai capital market. Earlier this year Chakornpipat was appointed SVP and head of product business development within SET.

WSJ reports that BATS Global Markets is planning to lay off 56 employees early next year, according to a filing with the state of New Jersey. BATS, which has 275 employees, merged with New Jersey-based Direct Edge Holdings LLC, another exchange operator, earlier this year.

Financial Calendar

Today

Record date Thomson Reuters $0.33 quarterly dividend
MarketAxess $0.16 quarterly cash dividend payment

Tomorrow

Record date TMX $0.40 Q4 dividend

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

Other stories

CFTC Chief Massad: Futures Industry Is Healthy & I’m Keeping It That Way
Bret Kenwell – The Street

…consolidation in the industry isn’t solely due to his agency’s regulations, and CFTC will continue looking for ways to reduce the burden on smaller futures firms.

Statement At Open Meeting On Regulation SCI, SEC Chair Mary Jo White
MondoVisione
Statement By SEC Commissioner Michael S. Piwowar At Open Meeting Regarding Regulation SCI
MondoVisione
Protecting The Technological Infrastructure Of Our Capital Markets: Statement At Open Meeting On Regulation SCI, SEC Commissioner Luis A. Aguilar
MondoVisione
Regulation Systems Compliance & Integrity (SCI), SEC Commissioner Kara M. Stein
MondoVisione
Statement At Open Meeting On Regulation SCI, SEC Commissioner Daniel M. Gallagher
MondoVisione

“The original version of the Reg SCI proposing release, however, was a classic example of regulatory overreach. It is an unfortunate sign of the times that the simple project of codifying the ARP program morphed into something so unwieldy and overly burdensome. …

…We must be cautious as we increasingly regulate the operations and information technology of our registrants — we do not want fear of personal liability in the securities industry to leave us with the B- and C-team technologists and operations professionals. We are already treading on that slippery slope and I hope the Commission will monitor this issue carefully. I certainly will.

Our system of regulation works best when we encourage personnel at regulated entities to proactively serve as the proverbial first line of defense, and I believe that the safe harbor will serve as such encouragement.”

With that typical mot juste from Dan Gallagher, we end today’s free Exchange Invest daily.

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