November 25 2014


An interesting rustling in the bourse weeds emerged late last week. The NASDAQ futures exchange CFTC licence, suspended since January was reinstated as a contract market. Will the butterfly effect be spreading its wings from NLX? Or does the US arm of NASDAQ intend to create markets which appear more economically beneficial? Certainly we cannot see any reason to perpetuate the shareholder value destroying London MTF which has been beloved of the selected market makers it enriches and apparently few others.

Meanwhile the CFTC has extended relief on post OTC markets in most major economies ex-US which I imagine has been greeted with, er, relief, all round. Hopefully we can repair what has been a certain fracturing of post OTC markets in terms of continental geography, fragmenting what previously was a de facto global pool.

Elsewhere European regulatory perspectives on CCP probity loom large. Tokyo keeps its exchange hours while LME is talking to outside market makers. Media still trying to make drama and crisis out of the perfectly orderly ‘through train.’ Likewise the zero drama ICE team effortlessly migrate more LIFFE products. CME may have to rethink its recent austerity moves as CFTC raps its knuckles for surveillance discrepancies.

Question of the day: Can Neptune control the oceans of bond liquidity and defeat the multiplicity of competitor electronic platforms in, or arriving in, the market?

Public Markets

ICE Completes Liffe Transition; Liffe Equity Derivatives Complex Now Trading On The ICE Platform Alongside U.S. MSCI & Russell Equity Indices

…joining STIRS and softs…

BoE Mulls Tougher Capital Rules For Clearing Houses
Huw Jones – Reuters
BoE’s Perspective On CCP Risk Management, Recovery And Resolution Arrangements – Speech Given By David Bailey, Director, Financial Market Infrastructure

Financial institutions that settle trillions of dollars of derivative contracts a day may need to hold more capital to stop them requiring a government bailout if they fail according to David Bailey, a BoE official responsible for financial market infrastructure.

PLY: Logical. I continue to wonder just when CCPs will finally be more creative about how they intend to deal with life when the waterfall gets blocked or otherwise runs dry – ‘rehypothecating’ the same souls who will themselves likely be under financial duress does not strike me as a coherent solution… It’s not just a question of core capital but also the places the CCPs will find alternative sources of funding in the event of a crisis.

Central Counterparty Recovery & Resolution – Keynote Speech By Benoît Cœuré, Member Of The Executive Board Of The ECB, At Exchange Of Ideas #2 “Central Clearing – Guarantee Of Stability Or New Moral Hazard?”

CME Market Surveillance Found Lacking
Nick Baker & Sam Mamudi – Bloomberg

Although CME generally meets its surveillance obligations, shortcomings include taking too long to finish probes, having insufficient investigators and imposing penalties that are too small, CFTC said. Two of CME’s markets, Nymex and Comex, need to keep developing ways of detecting ”spoofing.”

PLY: Not a wondrous report – perhaps the CME’s current austerity policies are impacting on core market quality.

Meanwhile, useful phone numbers to detect spoofing would be NASDAQ in Stockholm (ask for Mr Jessup) or for an independent vendor, call Cinnober in Stockholm / London and Mr Axman will be amongst those team members delighted to assist (provided CME can afford it of course in their budget straitened times).

SGX Fights Back Against Thin Volumes (subscription)
Jeremy Grant – Financial Times

PLY: More shock and d’oh! ‘analysis’ as Magnus Bocker looks to the future while myopic media cannot see further than a couple of carriages on the ‘through train.’

Interactive Brokers Now Offers Stock Trading Via Shanghai-HK Connect
Andrew Saks-McLeod – Leap Rate

PLY: IBKR in the vanguard but not surprising given the longstanding strength of their Hong Kong operations which grew from the Timber Hill offices.

LME Approaches Electronic Market-Makers From FX (subscription)
Metal Bulletin

LME is approaching electronic trading firms from the FX markets to do business on the LME in return for some form of fee rebate. The discussions centre on the requirements LME has before it will incentivise the entrance of such market-makers to the forwards market.

After Hours Trading Accounts For A Quarter Of HKEx’s Total Trading Activity
Adil Siddiqui – Forex Magnates

TSE: Results Of Discussion On Extension Of Trading Hours

Tokyo SE (TSE) has decided not to extend its trading hours.

CFTC Staff Issues Time-Limited Extension Of Swap Data Reporting Relief For Certain Swap Dealers And Major Swap Participants Established Under The Laws Of Australia, Canada, The EU, Japan & Switzerland

CFTC DMO Issues Rule Enforcement Reviews Of CBOT, CME, Commodity Exchange, Inc. And NYMEX

KDPW As A Numbering Agency Has Started To Assign FISN Codes

Tick Size Change At MOEX Equity Market As Of 1st Of December

From 1 December, MOEX is setting price ticks for ten most liquid equities, mutual funds, mortgage-backed participation certificates and ETFs.

Private Markets

Bats Chi-X Europe Fee Changes Favour HFTs (subscription)
Tim Cave – Financial News

Bats Chi-X Europe is to change a tiered pricing model introduced in April in a move likely to further reward its most active traders, such as investment banks and HFT firms.

Korea Exchange & DME Announce Cooperation

MoU to strengthen cooperation promoting the development of commodity futures contracts and in particular crude oil.

Bitcoin Group Still Looking At Listing On ASX Despite Delays
Kye White – Startup Smart

Bitcoin Group’s plans to raise $20 million at 20 cents a share on the ASX are still on track, despite a slight delay. It had been aiming to list in November, but CFO Allan Guo says now a listing is more likely to occur early next year.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX and FTIL both off circa 3% today. No other news…although in an interesting aside PM Modi does seem to have faced down at least initial dissent from the coal unions with his plans to part privatize mining – hopefully this deregulatory mind-set will reach traded markets soon, ideally before the system continues with its credibility stretching pogrom against corporate governance to cover up the increasingly glaring flaws in the judicial-regulatory system itself.


HKFE Announces Margin Rates For London Aluminium, London Copper & London Zinc Mini Futures To Be Introduced 1 December 2014

Protocol Plan To Boost Bond Liquidity (subscription)
Tracy Alloway & Philip Stafford – Financial Times

An ambitious bank and asset management-backed plan to boost falling liquidity in the bond market has reached a key milestone after the 26 institutions behind “Project Neptune” (previous discussions here) finalised the technical building blocks that underpin it.

The network, which includes Goldman Sachs, Morgan Stanley and State Street Global Advisors, has been working under the Project Neptune code name and has been developed by the FIX Trading Community, a London-based standards body.

SEBI Aligns Overseas Derivative Instrument Rules

SEBI said on Monday it is revising the rules for offshore derivative instruments (ODIs) to bring them in line with new foreign investment norms approved earlier this year. ODIs will now have to be consistent with India’s new foreign investment requirements, including that an investor be from a country whose central bank is a member of the Bank for International Settlements.

Zimbabwe Plans To Start Bond Market By June
Godfrey Marawanyika – Bloomberg

As previously announced earlier this month, Zimbabwe plans to start a bond market by the end of June as the southern African nation’s bourse seeks to revive trading amid an economic slump.

Nadex First To Offer Bitcoin Derivatives Trading To US Retail Investors
Victor Golovtchenko – Forex Magnates

IG’s CFTC regulated exchange, the North American Derivatives Exchange (Nadex), proclaimed that subject to a filing with CFTC, it will offer its clients the ability to trade bitcoin derivatives through binary options contracts.

PLY: Very interesting…

Career Paths

Loop News reported that Jamaica SE has advised that Donovan Perkins resigned as a director effective November 20, 2014.

NSE Rejigs Senior Level Executives; Beefs Up Compliance Team
The Economic Times

As stock exchanges’ role as front-line regulators become more important, NSE has made some important changes in senior level positions while beefing up its regulatory and compliance related teams.

While R Sundararaman, a SVP and Chief of New Products at NSE, has left to join Bank of America at a senior position, NSE has made many other changes in its senior level positions, mostly at various VP levels. Sources said that at least 7-8 senior positions have seen changes and some senior executives have been asked to assume more specific roles as part of the reshuffle that took place earlier this month.

Leap Rate reports that LMAX Exchange, the FCA regulated MTF for FX, has appointed former Sales Director of e-FX at Bank of America, Tom Gould, to the newly created position of Head of US Sales.

Financial Calendar


Record date CBOE $0.21 quarterly dividend

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

Analyst Notes

LSE Upgraded By Citigroup To “Buy” – GBX 2,400 Target Price, Up From GBX 1,750

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.


Following Crowdfunding Round, Fruitful Launches New P2P Lending Platform
Samantha Hurst – Crowdfund Insider

Following a successful and rather quick equity crowdfunding raise on Crowdcube last year, Fruitful is launching a peer to peer lending platform for “everyday savers and full term commercial mortgage borrowers”. The crowdfunding campaign had targeted a raise £140,000 for 8% equity. In a note from the company, they clarified that £140,000 was raised in just 2 days on Crowdcube, an amount that was joined by a private investment of £380,000. Previously branded as “Crowd Mortgage”, Fruitful has launched their P2P platform seeking to cash in on the booming lending space as banks are disrupted and investors and borrowers shift to direct lending.

Other stories

Citigroup Fined $15 Million Over Equity Research (subscription)
Christina Rexrode & Alexandra Scaggs – Wall Street Journal

Citigroup agreed to pay $15 million to resolve allegations that it shared information selectively with clients, at times hosting “idea dinners” in which analysts offered opinions on stocks that diverged from their published views.

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