November 20 2015


ICE prices notes at rather stunning interest rates…at this cost of funding, they are surely unbeatable? Nimble, focussed, delivering results & doing deals. 2.75% for 5 year notes is a reminder to the competition that they are all in danger of falling off the top of the exchange pyramid, even if ICE maintains a tenth of this tempo in 2016 and beyond…

Elsewhere, Square lists and promptly the pricing power of bankers is called into question (again!) – when do we get an IPO revolution? The status quo won’t do (“Dear Regulators, Can we have a market-based, exchange-centric solution to costly Victorian intermediation…?”). EU lurching towards some coherence on making bond issuance easier which is at least a minor positive to what is an ongoing torrid year for the union of managed decline.

It’s been a busy few weeks and the year is accelerating – deal frenzy is everywhere and we’re seeing some fascinating flow currently. The great game is afoot, at every level… Have a great weekend.

Public Markets

ICE Prices $2.5 Bln In Senior Notes

The senior notes comprise $1.25 billion in aggregate principal amount of 2.75% Senior Notes due 2020 and $1.25 billion in aggregate principal amount of 3.75% Senior Notes due 2025. Offering under a shelf registration statement, expected to close November 24, 2015.

PLY: ICE will use net proceeds to completely fund the cash portion of the IDC takeover price (deal announced October 26. The effortless funding at – even by QE standards, a fairly eye popping rate (well for old blokes with 30 years yield curve experience like me), demonstrates the heft at the top of the pyramid. So, ICE have bought IDC, AND Trayport, and they  barely appear to have broken sweat. That is just awesome.

FTIL Wraps Up IEX Stake Sale
The Economic Times

FTIL has concluded the sale of balance 5% equity stake in IEX on a fully diluted basis. With the conclusion of the transaction, the company has completed sale of its entire 25.64% stake in IEX. During the transaction, the company sold 3.02% stake to Siguler GUFF NJDM Investment Holdings, 1.61% to SG BRIC III Trading LLC and 0.37% to Madison India Opportunities III.

PLY: Thus endeth the Jignesh power exchange of India. Indeed, I make it in a haste to pixel off the top of my head calculation, he now owns just stakes in Delhi and Vadodara which are not trading as bourses currently.

QV Premium: FTIL Stakes Sales Brief, IEX India Sale.

PSE To Seal Pacts To Buy More PDS Shares
James Loyola – Manila Bulletin

Philippine SE (PSE) is targeting to sign more Share Purchase Agreements (SPA) in the coming weeks to increase its stake in the Philippine Dealing Systems (PDS).

QV Premium: PSE – PDEx Merger Brief.

Nasdaq Injects Further Millions Into NLX
James Rundle – Financial News

Nasdaq has poured a further £6 mln (USD 9.2 mln) into its European derivatives venue NLX, bringing its total share capital investment in the troubled initiative to £62 mln (USD 95 mln).

PLY: Nothing significant (unless you are a NASDAQ shareholder…that said another nearly 10 million dollars is group petty cash on the macro). For me, as you all know, NLX is internal corporate dead horse flogging. The maths are simple. Nowadays, the leaner NLX (a huge cost cut from giddy highs by CEO Charlotte Crosswell) burns something like a million dollars a month, so the parent company is buying another chunk of life for an arm which they clearly believe has possibility.  For the history, QV Premium: NLX Brief.

Shanghai-Hong Kong Stock Connect Records Safe, Sound Operation In 1st Year

As HK-Shanghai Connect Scheme Stutters, Doubts Grow On Exchange Links
Michelle Price & Saikat Chatterjee – Reuters

Charles Li, CEO of HKEx, told the Reuters Global Investment Outlook Summit that making Stock Connect wholly successful will take time and depend on ensuring the HKEx meets Chinese investors’ needs. “The biggest pool of capital today is in China’s banking system. Over the next 20 years, a huge portion of that will have to be globally deployed,” he said, adding that the trading link will attempt to capture a bigger chunk of this money by expanding its product offerings for Chinese investors. “All we need to do is bring international products to Hong Kong,” Li said.

QV Premium: HKEx – SSE – Stock Connect Brief Part 4.

PLY: We’re probably going to stop running negative stories on the “through train” as the short-term cyclicity of the pessimists has already proved wrong once…

With Shenzhen Link On Back Burner, HKEx Homes In On China’s OTC Market
Don Weinland – SCMP

China’s fixed-income and currency markets are a target for HKEx.

QV Premium: HKEx – SZSE Stock Connect.

Navigating Financial Markets With LSE CEO

LSE CEO Xavier Rolet discusses global mergers and acquisitions and financial regulations.

PLY: First question: ‘the global exchange industry: what’s it going to look like in 5 years time?’ Xavier gives a coherent answer avoiding the clear alternative “well I won’t be here for one thing!” The ongoing belief that there will only be perhaps 5 major exchanges misses out the way many in this industry mistake ‘global’ for being able to fly over vast tracts of land between offices (a point coherently made by the interviewer). It also misunderstands the nature of the industry per se, although clearly concentration at the top of the Pyramid, as defined by a certain Mr Young, will continue…

Rolet also adds: “we’re the only global open access exchange in the world.” To paraphrase, ‘LSE having scintillatingly failed in the foresight stakes until (arguably) very recently, we haven’t got any derivatives trading content hey presto we advocate open access!’ A deft syllogism is a polite way to describe this agitprop. Sorry to see nobody asked how the LCH tech upgrade plan is progressing…

Basel Plays Down Impact Of Trading Rule Changes On Capital
Huw Jones – Reuters

Overall capital requirements for the very biggest banks would rise by 4.7% under planned rules to ensure lenders set aside enough capital to cover the risk of trading book assets turning sour.

LCH.Clearnet Considering Repo Lines To Pension Funds
Frederico Mollet – Risk

LCH.Clearnet is working on plans to offer repo lines to pension funds, as a way to help them source cash collateral to post on cleared derivatives trades. The plans are the most recent step by a CCP towards helping pension funds and other buy-side firms meet heightened collateral demands under the incoming Emir.

PLY: A good idea. I wonder if it needs another IT system to add to the myriad of cabled hardware at LCH HQ?

MCX Permits Change Of Membership Class
Business Standard

The move is aimed at facilitating clearing members to save fees and other expenses.

Square’s IPO A Lesson To Rival Start-Ups
Richard Waters – Financial Times

Square IPO May Prove To Be Turning Point For Technology (subscription)
Telis Demos – Wall Street Journal

Square’s IPO could prove to be a signpost for technology startups that have long been tapping private investors for deals at lofty valuations. Square jumped 45% in its first day of trading, showing that investors in public markets still crave new tech investments—at the right price. On Wednesday, Square slashed its offering price to $9 a share, putting it millions of dollars below expectations and billions below the value the company was given last year by private investors.

PLY: I dealt with the froth in PE valuations showing they can form a smaller but nonetheless deluded crowd on occasions in recent piths but again it is dispiriting to see the mainstream media miss the market structure point here. Two days ago the bankers (on how many basis points…ahem no, it’s an IPO, call that PERCENTAGE points…) priced at 9 bucks and WERE SPECTACULARLY WRONG! With hints of the Royal Mail fiasco (IPO went perfectly, the banks just underpriced the deal – but hey, they got their fees)… IPOs need to be rethought. Perhaps as a simple methodology for starters, why not have the bankers lose 10% of their fee for any 1% move above a 10% stock gain on day one?

As an industry, we pride ourselves on pricing risk and valuing assets – but with IPOs the old-fashioned regulated approaches are not working in a modern digital environment. This is a problem across all markets as the venues are just dumb terminals for the banker/issuers machinations. We need to think this one through – currently I don’t even see a murmur of discontent and that worries me. The problem is not with the exchanges but it is an industry problem we need to address.

TABB Examines ESMA Methodology To Meet European Regulators’ Demand For Pre-Trade Bond Transparency

Private Markets

Securities Commission Decides To Annul Ukrainian Exchange’s License

The National Commission for Securities and the Stock Market of Ukraine has decided to revoke the license of public joint-stock company Ukrainian Exchange for the organization of trading on the stock market. The decision will take effect in 30 calendar days. It can be appealed in the expert board of appeals for licensing issues at the State Regulatory Service of Ukraine and/or in court.

FAO: MOEX holds 43.08% in Ukrainian Exchange.

GMEX Eyes 2016 For GBP Project Launch
FOW magazine

Hirander Misra said the GBP project will be the next focus for the firm, with plans to go live in H2 2016.

PLY: Who knows, GMEX might even get really lucky and find that a post QE yield curve has broken out in Sterling… Good luck to them with this latest endeavour.

MIAX Regulatory Clarification – Unbundling Of Orders

MIAX Regulatory would like to remind all members that the unbundling of orders for the purpose of achieving small order preference may be considered conduct inconsistent with just and equitable principles of trade and a violation of MIAX Rule 301.

Commodity Exchanges In Africa: Lessons From Ethiopia
Dinfin Mulupi – How We Made It In Africa

Ethiopia Commodity Exchange (ECX) began operations in 2008 bringing together buyers and sellers to trade produce such as coffee and sesame seeds, established with support from the Ethiopian government and donor organisations, including USAID.

ALT Xchange, To Begin Operations After Elections
Neo Khanyile – Bloomberg

ALT Xchange, Uganda’s second exchange, will begin by issuing depository receipts on government debt and then consider introducing an ETF backed by gold, CEO Joseph Kitamarike said. The bourse, owned by Port Louis, Mauritius-based ALTX Africa Group, expects to receive regulatory approval for the depository notes by the end of this year.

FAO: Earlier this year, in February, GMEX acquired a 25% stake through its GMEX Technologies subsidiary in ALTX Africa Group. ALTX wholly owns ALT-Xchange and ALT-X Clearing.

EU Clamps Down On Bitcoin, Anonymous Payments To Curb Terrorism Funding

EU countries plan a crackdown on virtual currencies and anonymous payments made online and via pre-paid cards in a bid to tackle terrorism financing after the Paris attacks.

PLY: Having been born in Belfast at a volatile time in its history, I am all for anti-terrorist clampdowns but pragmatism, like having secure European borders which don’t let people into the Schengen zone when they are off the chart in terms of suspicion, might be a better place to start? Just saying… Besides the idea of total anonymity on Blockchain is somewhat of a canard when the banking system is involved.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX up 1%, FTIL up nearly 3%.


New Platform, Proximity Service To Boost TOCOM’s Market Share
Irina Slav – Finance Magnates

TOCOM is extending its service offering to high-speed traders with a new platform and a new proximity service, both to go live in September of next year. The provider of the proximity service, AT Tokyo, operates some of the largest data centers in the world. TOCOM will utilize the J-Gate derivative system developed by JPX, which is based on Nasdaq’s Genium. For clearing services, TOCOM will use the Japan Securities Clearing Corporation’s system.

GlobalRisk & Interactive Data Collaborate To Support CFTC’s Derivatives Oversight Operations
Automated Trader


SGX Challenges Old Obstacles With New Bond Trading System
Saeed Azhar & Saikat Chatterjee – Reuters

SGX’s new corporate bond trading platform (previously discussed earlier this week) is expected to travel a difficult road…

PLY: & just like the road to Shangri La, the upside is vast if anybody can find the sweet spot of the bond platform market… QV Premium: The Bond Platforms Rush Brief – Part 2.

HKEx Waits For Regulator To Approve Cross-Currency Swaps Clearing
Viren Vaghela – Risk

Race to be the first CCP to launch the clearing “killer app” continues Hong Kong’s OTC Clear is still awaiting regulatory approval for its much-anticipated plan to start clearing cross-currency swaps but the CCP is ready on a technical basis, according to Calvin Tai, head of global clearing at HKEx, which owns the clearing house.

The 37% Arbitrage Trade In Chinese Stocks Is About To Get Easier
Jonathan Burgos – Bloomberg

A plan by HKEx to introduce futures on the price gaps, revealed in an interview on Thursday, would give investors a simple way to place their wagers.

PLY: Neat idea although when CME had the foresight to do something similar in forex forwards in the late 1980’s the result was an arb window which closed effortlessly minutes before the Diff futures were launched. Worth trying all the same and let’s face it Hong Kong was the originator of the Single Stock futures revolution which much of Europe dismissed for years (the ranks of western supporters in the mid-1990’s were, as I recall pretty much limited to, Sir Brian Williamson, Dr Richard Sandor and, me)…

EU Eyes Tweaks In Bond Issuance Rules To Improve Market Liquidity
Huw Jones – Reuters

EU rules for companies raising funds on markets will be changed in a bid to increase liquidity in corporate bond markets, a draft EU law seen by Reuters said.

PLY: Good, Good, Good. A “universal registration document’ for frequent issuers enables a shelf-style flexibility as well. The sooner the better we can have somesuch law undiluted and in our investor realm, the better.


Euronext Eyes China Index Collaboration, Broadens Index Consultation (subscription)
Waters Technology

Euronext is setting its sights on the Chinese market and will promote its indexes on the Shenzhen SE in the early part of next year, as well as developing new concepts to support its growing index business.

PLY: Euronext continue a coherent China push. Very interesting.

P2P Lender BitBond Launches ‘Big Mac’ Index For Bitcoin
Leon Pick – Finance Magnates

PLY: Cool idea from a fascinating business, which I also mention in my latest white paper “Towards A Real Time Market.

Career Paths

Bloomberg reports that UBS hired Todd Lopez, a Goldman Sachs MD, as head of electronic trading in the Americas.

Finance Magnates reports that UBS’ Director of FX Options, Louis McCauley has left the bank.

Today reports that SGX’s EVP Bob Caisley, who heads technology operations and technology solutions delivery, is leaving the company. Mr Caisley, who is part of SGX’s executive management and has been with the bourse for nearly eight years, said he was relocating to Europe for both personal and professional reasons.

PLY:  Singapore media quick to recall the infamous SGX tech meltdown where unsurprisingly enough having an indecisive committee in a meeting room didn’t result in a successful solution to the problem! (Quite the opposite). Of course, a large part of the problem that day, as I understand it, was that Bob Caisley was not on site, nor was his deputy – due to entirely unavoidable issues. The resulting panic was expressly not his fault. I wish Bob Caisley every success and indeed welcome his arrival in Europe. Whatever he does, the European end of the industry will be stronger for his presence.

Cinnober’s Chairman, Nils-Robert Persson: “How to Manage a Challenge”

PLY: Nobody can spend more than a moment in the company of the inimitable Nils-Robert Persson and not come away wiser and inspired. The reason our industry must cherish its tech veterans, is that entrepreneurs such as Nils-Robert have never been afraid to express their opinions, make decisions and move forward. All qualities many legacy exchanges could learn from.

Financial Calendar

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

Next week

24.11 – CFTC Open Commission Meeting (more here)

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


Invest Securities Unveils First European Equity Crowdfunding Platform Dedicated To Pre-IPO Investments And Its First Projects

PLY: The oft discussed but rarely seen concept of ‘mezzanine crowdfunding’ comes alive in this platform. I wonder how it will impact those various private share initiatives of which we are hearing comparatively little after such a fanfare at their launch a while back?

Other stories

Banks Charges Over 7% To Transfer Money Internationally

U.S. and UK banks charge on average more than 7% for international money transfers worth $1000, several times the average cost at a new group of web providers, the first detailed study of the market showed on Thursday.

PLY: Then when you buy something on a credit card they charge you another 7% give or take, unless you hit the ‘pay in your own currency button’ at which stage a larcenous bounty is upon both merchant and payment company.

…QV the few basis points of LIBOR / all other fix issues et al – why are these criminals not being jailed for everyday theft of customer money to the tune of up to 700bps per transaction?

Opening Remarks To The Government-Business Forum On Small Business Capital Formation, SEC Chair Mary Jo White, Nov. 19, 2015

Statement By Commissioner Stein (same forum), SEC Commissioner Kara M. Stein, Nov. 19, 2015

The Continuing Work Of Enhancing Small Business Capital Formation Public Statement By SEC Commissioner Luis A. Aguilar On November 19, 2015

Remarks To The Same Forum Formation By Commissioner Michael S. Piwowar

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