November 25 2013

elb2With Thanksgiving and Hanukkah looming this may not be the biggest week for exchange news on the calendar but various items are afoot.

Meanwhile, one great aspect to being on the road for the past fortnight or so has been the fabulous feedback, once again, to EI. Thanks for introducing your colleagues to EI too as our expansion continues. It’s incredible to report the explosion in support given that we only crossed 6 months of publication the other week.

Today, ASX melts down, CME may review price rises, Helsinki looks at SME bond market alongside all manner of other SME, SEF, IT and commodity developments from all around the world. Happy scrolling:

Public Markets

ASX System Error Forces Chi-X To Delay Start Of Auction Product

PLY: Chi-X Australia Pty has been forced to delay introducing a “market on close” product matching orders with bids at the closing price for each security due to problems with ASX’s IT, prompting regulator ASIC to step in and request a delay to the ‘MOC’ launch.

Chi-X Australia CEO Fildes:

“It’s a complete disaster. ASIC asked everyone involved in this to delay. I will be meeting with ASIC…we don’t want to make a fuss, we’d rather get on with resolving this.”

Naturally there are rumours in Sydney but it appears the ASX problem was genuinely more cock-up than conspiracy. Nevertheless, neither reason is positive for the incumbent monopolist which now also appears to be underweight in technological capability for the first time in more than 25 years. Prior to this oversight, former ASX IT staff have been prized across the globe thanks to the pioneering IT approaches begun under CTO Rory Collins during the 1980’s.

CME Group Hears Complaints, May Tweak Planned Fee Hikes

CME may consider minor modifications to its plan to raise fees for traders in response to complaints from customers.

However, CME will not cancel its first substantial fee increases in five years, said former CBOT Chairman Leslie Rosenthal, a managing member for brokerage Rosenthal Collins Group.

PLY: Good to see Les Rosenthal still in fine form. There are two clear issues here: in terms of increasing fees for executing products, well good luck to CME, they have a right to do so and if they can make such charges stick, they will succeed in turning around the ongoing deflationary fee model for all exchanges.

However, the data distribution arena is a very tricky issue. In seeking to add revenue, there is a dangerous tier of middle management who suffer the same problems as many algo developers – they do not understand the core DNA of the market. These PowerPoint writing apparatchiks within the bowels of the CME have had a remarkable propensity of late to to simply add revenue without appreciating the existing data ecosystem. To that end, it is a really tricky position as there are many with a consulting mind-set now pushing for revenue at all costs in the midst of CME while potentially pushing existing intermediaries into very tricky situations – perhaps out of business.

It is not clear that common sense has yet been applied to the CME data distribution issue (Linear extrapolation via Powerpoint clearly not being common sense).

Finland Priming Junk-Bond Market To Sate Demand: Nordic Credit

Nasdaq OMX Helsinki, which runs the country’s stock exchange, will open a bond marketplace in Finland on the First North platform next quarter, the first venue for trading debt of small and medium-sized enterprises in the country.

Private Markets

Shanghai FE Launches Energy Trading Subsidiary In FTZ

Shanghai Futures Exchange has unveiled the Shanghai International Energy Exchange, or INE, a subsidiary that will handle energy futures trading within Shanghai’s new Free Trade Zone.

The INE will operate the SHFE’s much-touted crude oil futures contract — currently still being developed — as well as existing contracts for 180 CST high sulfur fuel oil and asphalt.

PLY: With the battle for energy markets igniting, the key will be to see how much volume can remain in Brent which is surely the more exposed benchmark now that WTI is once again underpinned by a better delivery mechanism? I happen to think the new benchmarks will be additive in total terms…

6 SEBI Clauses Delaying BSE Listing

It’s been a year since the exchange appointed 14 merchant bankers to make its long-awaited listing IPO happen; but SEBI’s existing Stock Exchange and Clearing Corporation Regulations (SECC) are proving to be a hurdle. In January BSE had asked that SEBI exempt it from some clauses.

PLY: Evidence writ large of the highly prescriptive nature of SEBI’s regulatory oversight and the ongoing hangover from the misjudgements of the Jalan Committee which now are being rejuvenated with the post NSEL dust up which threatens to send India’s capital market structure backwards. In the meantime it is slowing the development of BSE.

Karachi SE To Have Separate Platform For SMEs

Pakistan’s capital market will have a separate platform for SMEs in the next 12 months.

India – SEBI Team Suggests Voluntary Closure Of Vadodara SE
The Economic Times

A three-member SEBI team today met the members of the troubled Vadodara SE and suggested a voluntary closure of the bourse, Vishnu Patel, President, Vadodara SE Brokers Forum said.

However, Vadodara SE Brokers’ Forum and others strongly opposed the Sebi’s suggestion.

The Sebi also asked them to submit a road-map of how they plan to reach the Rs 100 crore net worth, “which is mandatory for stock exchanges” but the forum say they had already submitted a road map for survival to SEBI in February.

AFEX Delivers On Receipts Systems

A technical walkthrough has taken place for electronic warehouse receipts by Africa Exchange Holdings (AFEX), which enables Nigerian farmers, cooperatives and traders to safely store their produce at accredited warehouses and access financing.

AFEX is the pan-African commodity exchange company founded by Tony O. Elumelu, Chairman of Heirs Holdings, Nicolas Berggruen, Chairman of Berggruen Holdings, and Jendayi Frazer, President of 50 Ventures, which was started to establish commodity exchanges across Africa.

Bitcoin Mania In Three Charts
Market Watch

That “bitcoin-friendly” environment of two recent Senate hearings in a GUI-friendly format.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX is essentially flat while FTIL has gained 2.5% on the day as we await an FTIL board meeting at the end of the week.

FTIL Board To Meet On November 29

The FTIL board will meet on November 29 to approve Q2 results as well as the revised audit report for fiscal year 2012-13 (FY13).

FTIL Likely To Put Its Warehousing Arm NBHC On The Block
The Economic Times

FTIL may sell its warehousing and collateral management arm National Bulk Handling Corp (NBHC) and has appointed investment bank Avendus Capital Advisors to look for financial or strategic buyers as it seeks to raise money by disposing of assets.

PLY: Talks with Jaipur-based Staragri Warehousing and Collateral Management and two global PE funds have apparently stumbled over price. However many warehouses FTIL actually have (and clearly Due Diligence will be key here) they could attract a considerable price.

MCX-SX Is Well Ring-Fenced From NSEL Crisis: SEBI

SEBI Chairman U.K. Sinha, allayed fears of crisis at FTIL spilling over to MCX-SX, saying that the troubled FTIL-promoted stock exchange is ring-fenced from other group firms.

“I would like to clarify that the promoters of these companies (MCX and the crisis-hit spot exchange NSEL) are also promoters of a stock exchange (MCX-SX) that we regulate. But I would like to assure you that we are very conscious that the entity we regulate is thoroughly ring-fenced.”

Sinha also pointed to the change of management at the bourse saying: “I would like to point out that there was a complete change of management at MCX-SX with two public interest directors being nominated by SEBI.

We Are At Arm’s Length From FTIL: GK Pillai, MCX-SX Chairman
The Economic Times

Nearly two-and-a half years after he retired as India’s home secretary, GK Pillai took over, in October, as the chairman of India’s third and newest exchange MCX-SX, promoted by FTIL.

One of his main tasks will be to win back the confidence and trust of investors and trim the exchange’s losses.

PLY: The search continues for the new MCX-SX CEO.

EOW Questions Adani Wilmar Official

The economic offences wing (EOW) of Mumbai police on Friday said it questioned the CFO of Adani Wilmar Ltd in connection with the payment crisis at NSEL.

The investigative agency is going to probe the accounts books of Adani Wilmar’s joint venture with NK Proteins Ltd—AWN Agro Pvt. Ltd.

FIR May Stay Even If NSEL Scam Accused, Investors Strike A Deal
The Economic Times

A settlement between the promoter of or defaulting borrowers on NSEL, on the one hand, and aggrieved investors, on the other, may not lead to charges being withdrawn against the accused.


Moscow Exchange Updated The Terminal Of Derivatives Market

PLY: Multiple new functionality and single screen access to futures and options are amongst the key features now added to the exchange terminal.

NexGen Networks To Provide Connectivity To ISE

ISE has selected NexGen Networks as a premier provider of connectivity into their enterprise data center, allowing their customers to leverage NexGen’s full suite of versatile, ultra-high-speed services.

ASIC Goes Live With New Surveillance System – First Derivatives

First Derivatives announced the successful implementation of its market surveillance system at the Australian regulator ASIC.

NASDAQ OMX Commodities Launch Trade Reporting & Clearing Link From EFETnet To NASDAQ OMX

Traders and brokers on the EFETnet platform can now use EFETnet eXRP to report commodities trades to NASDAQ OMX Commodities for Block Trading and OTC clearing purposes.

The products available today are Nordic Power, German Power, Dutch Power, UK Power, UK Gas, Electricity Certificates and Allowances.

Cinnober Innovation Improves Latency Predictability In Its HST & Clearing System

In a new report, Cinnober now presents an innovation that altogether eliminates application jitter related to Java’s memory management, so-called garbage collection (GC). The result will primarily be better response time predictability by removing the latency tail, but also lower average latency.

The new innovation will be included in the next version of Cinnober’s TRADExpress Platform, and available to current and new customers in the second quarter of 2014.


China To Start Gold Swaps Trading To Further Liberalize Market

China, on track to overtake India as the world’s largest gold consumer this year, will start interbank swaps trading this week in a move to further open up the domestic precious metals market on the Shanghai-based China Foreign Exchange Trade System. The Shanghai Gold Exchange, the country’s biggest spot gold bourse, will handle related settlement and delivery.

JSE Now Offers Quanto Currency Futures For Euro/Dollar Exposure

In a move to encourage more private investors to embrace currency derivatives, the Johannesburg SE is expanding its Quanto derivatives range to include a currency contract based on the Euro/Dollar exchange rate, the world’s most actively traded currency pair.

Quanto derivatives are futures where the underlying product traded follows the movements of a foreign asset, but the instrument itself is settled in another currency. Quanto derivatives traded on the JSE will be settled in Rand.


Borsa Istanbul Develops A Sustainability Index

Borsa Istanbul is developing a sustainability index for which listed companies will be assessed against a set of environmental, social and governance indicators, to launch next year.

Career Paths

NASDAQ Private Market, LLC (NPM) announced two new appointments to its senior leadership team: Carine Schneider will head NPM’s Equity Management Solutions and Cyndi Rodriguez will serve as Chief Legal Officer. Both will be based in San Francisco. NPM will be the new capital market for leading private companies, bringing unprecedented efficiency, transparency and scale to the marketplace.

Ben Carter, director of digital for UK-listed betting operator Betfair, is to leave the business at the end of the year to take up the role of Marketing Director for UK-based ecommerce business

Financial Calendar


Aquis Exchange launch

This week

GFI Group $0.05 Q3 dividend payment
Record date CBOE Q4 $0.18 dividend
Record date Interactive Brokers $0.10 Q3 dividend

CME 2014 Annual Meeting of Shareholders May 21, 2014

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

Share Notes

Interactive Brokers CFO Paul Jonathan Brody sold 8,365 shares Wednesday, November 20th at an average price of $23.77 (bargain $198,836.05).

ICE CEO Jeffrey Sprecher sold 44,029 shares Thursday, November 21st an average price of $214.70 (bargain $9,453,026.30). He now owns 263,278 shares.

Charles Schwab CFO Joseph Martinetto unloaded 104,457 shares Thursday, November 21st at an average price of $24.91 (bargain $2,602,023.87). He now owns 82,089 shares.

Analyst Notes

Goldman Sachs Lifted Their Price Target on LSEG From GBX 1,250 To GBX 1,310 – “Sell” 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.


UK Crowdfunding Platform Seedrs To Crowd-Raise £500K As It Expands To Europe

PLY: Seedrs is over-hyping itself in arguing it is the only cross-border platform in the world (see below for instance) which is a shame as otherwise the market appears legitimate. Such elementary oversights will do nothing to enhance confidence in crowdfunding. Leaving the hype and errors aside, it is an interesting expansion with an 8.81% stake for sale, giving the 2009-founded company a pre-money valuation of £5.175 million.

Crowdcube To Launch In Italy

Equity crowdfunding platform Crowdcube has announced plans to launch its latest international operation in Italy, following recent agreements to open in New Zealand and Spain. Crowdcube has now signed seven partnership agreements in seven different countries. The joint venture approach provides a strong local presence and facilitates contact with the local regulator.

The expansion is funded with £1.5 million growth capital raised in just three days earlier this year using their own equity crowdfunding website.

Crowdcube has already established joint venture agreements in Brazil, Sweden, Dubai and Poland, highlighting the interest and demand for alternative sources of funding around the world. Crowdcube Sweden launched earlier in 2013 and operations in Brazil, Poland and Dubai are expected to go live early in 2014.

Other stories

CFTC Opens Door To Agency Swaps Model

Newly issued guidance from the CFTC has given the nod to an agency-style business model for dealers in OTC derivatives that will dramatically alter the way banks interact with clients and profit from swaps trading.

A clarification regarding impartial access to swap execution facilities added momentum behind the shift. Under the new model, dealers will charge clients to access interdealer liquidity rather than reap profits from a principal-based model.

Graham Harper, partner at lobbying firm Delta Strategy Group:

“Market participants can access aggregate SEF liquidity through an intermediary, much like many do in futures and equities, without connecting directly to SEFs.”

SEF operators must provide access to all swaps users, the CFTC ruled, after it emerged that multiple platforms have been imposing limits that kept non-dealer firms out of specific liquidity pools.

CFTC Chairman Gary Gensler confirmed last week that Bloomberg, MarketAxess, and Tradeweb were the main culprits that had been imposing the restrictions.

PLY: Opening up the SEFs is a quantum leap as great as the creation of SEFs from bilateral OTC in the first place. As I said last week, it will be the making of IDBs/SEFs who can run with the rules and amend their business model accordingly.

Fund Manager Discards Warsaw Listing For Romania’s Fondul Proprietatea, Looks At London, NY Instead
Romania Insider

Romanian investment fund Fondul Proprietatea will no longer seek to list its shares on the Warsaw SE, as was initially intended, but instead could start floating on the London or New York stock exchanges. The announcement was made by fund manager Greg Konieczny of Franklin Templeton:

“The nationalization of pension funds in Warsaw made us change our minds. In the first quarter of next year we will announce the proposals,” said the fund manager at the shareholders’ meeting which took place on Friday morning (November 22)

PLY: Well the rich irony of it – Poland proposing to nationalize aka steal private pension funds has not only cost the Finance Minister its job but – irony of ironies – that mecca (sic) of corporate governance, Romania is now edging away from a listing of a major fund there… It’s not too late for Poland to abandon its kleptocratic lurch back to a Communist era mind-set.

Daric, A New P2P Lending Platform, Will Go Live This Week

Daric, a new peer to peer lending platform, will launch next week as a place for individuals and small businesses to obtain loans, and a place for lenders to see up to 9-10% returns on their investments. Individuals will be able to apply for a loan up to $35,000 and small businesses can apply for a loan up to $50,000 on Daric.

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