November 26 2015

elb2PLY: The year’s delay camp appears to be winning for MIFID II implementation, while FTT is still not dead (if America being closed gives you a spare moment, use that time to sharpen a stake to put through the heart of FTT lest you happen to bump into it in an elevator some time).. Elsewhere, Neil Crammond is on flying form deconstructing the spoofing crisis in today’s must read article (Warning: contents may deliver indigestion to some turkey eaters).

While many of our US readers will be enjoying their turkey oblivious to market machinations elsewhere, I and the team at Exchange Invest wish all those celebrating today, a very very Happy Thanksgiving. This is an ideal moment to consider & celebrate the great achievements of the United States and how it has had an incredible impact to the enormous economic benefit of the rest of the world.

Happy Thanksgiving one and all, Exchange Invest salutes the United States of America and your myriad achievements.

Nevertheless, those who haven’t had a judicious scroll today will be at a disadvantage whether in future conference calls & water cooler moments, there’s a lot pertinent today from all over the world:

Public Markets

Europe’s Mifid Markets Rules Set For Year’s Delay (subscription)

Philip Stafford – Financial Times

EC Favours Delay To Full Mifid II Package (subscription)

Tim Cave – Financial News

The European Commission has hinted it favours a one-year delay to the EU’s new trading rulebook in its entirety, given the complex task of only postponing problem areas of the new legislation.

 

EU FTT Falters As Austria-Imposed Deadline Nears

Rebecca Christie – Bloomberg

The EU FTT is foundering as 11 participating nations try to meet a December deadline set earlier this month by Austrian Finance Minister Hans Joerg Schelling, who leads the negotiations. Nations still haven’t decided what trades to tax, how to calculate levies or how to treat pension funds and government bond-related transactions, according to a document prepared for technical talks Wednesday in Brussels. QV Premium: EU FTT Brief Part 2.

PLY: Without a stake through its heart this disaster for free markets is still a danger. Besides, with the EU in near freefall due to the Eurocrisis, economic migrant issues and a dose of Islamic extremist terrorism, the need for funding is huge. The bloodied beast of Brussels is desperate for cash for duct tape to bind together the Schengen & Euro-zones amongst other failing precepts.

 

War Of Words Over IEX Goes Up A Notch (subscription)

Philip Stafford – Financial Times

The latest IEX response to incumbent criticism took the total number of comment letters received by the SEC to 25…

PLY: As discussed yesterday, the FT delivers a sort of post match review without added insight. The difficulty it strikes me is that the incumbent multitude (dealers and platforms) are eager to support their existing business practices while the IEX has been thinking holistically about a, frankly rotten centrally planned mess. In this sense, the foresight of SEC Commissioner Paul Atkins ought to have been listened to (amongst others) all those years ago – but the blob knew better.

 

Action Replays Should Take Seconds Not Years

Neil Crammond – LinkedinPulse

Recent court cases involving Navinder Sarao and Mike Coscia – along with Barclays $150 million spoofing fine – are very clear examples of a system refusing to react to manipulations even when they have the tools available to do so.

QV Premium: The Kennel – Premium discussion of the “Hound of Hounslow”.

PLY: Neil Crammond is the man who has done more to bring spoofing and related malpractice to public attention and here his passionate angst is pithily deconstructing some exchange defences… Today’s must read.

 

Wall Street Poised For Swaps Collateral Victory At CFTC

Silla Brush & Jesse Hamilton – Bloomberg

Wall Street banks may be close to winning one of their biggest lobbying fights this year: CFTC is considering a parallel version of a rule approved by banking regulators last month that governs how much collateral must be posted between divisions of the same bank. The banking regulators softened the requirements from an earlier proposal leaving Wall Street looking to the CFTC to endorse that move.

CFTC’s current draft, which could still change before a final vote slated for next month, wouldn’t require that a swap-dealer division collect collateral from an affiliated unit such as a U.S.-insured bank. That shift would cement the industry’s win last month when the Federal Reserve, Federal Deposit Insurance Corp. and other regulators said U.S.-insured banks don’t have to post collateral to their affiliates.

PLY: Hmmm. Security of the system is paramount but at the same time, the world of statutory bank capital going forward looks as stable as squishy things in a blender. This may be a win for Wall Street but it also strikes me as being good for common sense in a world where much has changed very rapidly.

 

China’s ‘National Team’ Owns 6% Of Stock Market (subscription)

Gabriel Wildau – Financial Times

China’s “national team” owns at least 6% of the mainland stock market following the summer rescue to prop up prices, putting even more of the $4.2tn bourses into state hands. Government rescue funds were corralled into buying shares when the equity markets went into meltdown over summer. The intervention succeeded in propping up prices: the Shanghai Composite index has since recovered by 28% from its late August low point.

 

Citic Cited For Misreporting Derivatives (subscription)

Financial Times

China Securities Body Finds $166 Billion Error In CITIC Sec Reports

Shu Zhang & Nicholas Heath – Reuters

CITIC Securities Co, China’s biggest brokerage, overstated some of its financial derivatives by more than 1 trillion yuan ($166 billion) in monthly reports from April to September

PLY: Hmmm, ‘somebody just missed a decimal point may not wash here.’ Even in dollars 166 billion is a big number, let alone in Yuan… Let’s face it that ‘error’ equates to something like 1.5% of the entire Chinese stock market.

 

LME Finalises Warehouse Rent Caps To Tackle Queues

Eric Onstad – Reuters

LME finalised further reforms (press release) of its warehousing policy by introducing caps on rents and boosting load-out rates to cut waiting times to access metals, implementing higher load-out rates  March 1, 2016, and imposing rent caps May 1, in an effort to remove the financial incentive to maintain or create queues.

PLY: It will be interesting to see if this resolves the queue problems.

 

Big Banks Accused Of IRS Fixing In U.S. Class Action Suit

Mike Kentz – Reuters

Filed in U.S. District Court in Manhattan, The Public School Teachers’ Pension and Retirement Fund of Chicago accuses Goldman Sachs, BAML, JPMorgan Chase, Citigroup, Credit Suisse, Barclays, BNP Paribas, UBS, Deutsche Bank, and RBS of colluding to prevent the trading of IRS on electronic exchanges.

PLY: Phew, this list not being alphabetical there was a microsecond of latency before I realised that Barclays are subject to this action (Presumably the American Bar Association will soon deliver an award to Barclays for their services to the US legal industry as the whipping boy to stitch up even when there was nobody else to sue…they are the sort of ‘points broker’ of US banking lawsuits nowadays it seems – and often unfairly imho).

 

“Lord Libor” Broker Tells London Trial He Was Always Honest

Kirstin Ridley – Reuters

Colin Goodman, a former ICAP broker charged with conspiracy to manipulate benchmark yen interest rates told a London criminal court on Wednesday that 1,000 rate predictions he had sent out over four years had only ever reflected his honest opinion.

PLY: In a sign of the times, I heard recently ICAP are giving all their voice brokers ‘diversity training.’ (Does that mean the spot people have to have a better grasp of forwards through to swaps & vice verse?).

 

Barclays Settles With U.S. Investors Over Libor Manipulation

Jonathan Stempel – Reuters

Barclays has agreed to pay $14 million to settle litigation by holders of its American depositary shares that it conspired with rivals to rig LIBOR, causing its share price to be inflated.

PLY: I wasn’t getting too close to saying anything positive here then my eyes tracked to the next line:

UK’s FCA Fines Barclays £72 Million For Poor Handling Of Financial Crime Risks

MondoVisione

PLY: While somewhat sympathetic that Barclays seems to be a whipping boy for US regulators in various instances, here we seem to have good evidence of my own longstanding experiential pain at being a customer: Barclays bank itself was simply fetidly incompetent and apparently systemically incapable of performing core banking duties.

 

European Commission Welcomes Agreement On New Rules To Prevent Manipulation

MondoVisione

EU Strikes Deal On Rules To Prevent Rigging Of Market Benchmarks

Reuters

The deal struck early on Wednesday between MEPs, the Commission and state representatives, will allow third country indexes to continue being used in the EU “while ensuring that European benchmark administrators will not be disadvantaged”, a statement from Luxembourg, which holds the rotating EU presidency, said.

PLY: Can you smell the hint of a slippery slope? I sense one here insofar as the EU now has to deliver recognition of foreign benchmarks to allow them to be traded in the EU… Presumably more work for the good (but overly modest) ranks of ESMA not to be able to cope with either given their paucity of budget.

 

LBMA: Strong Interest In Making London Gold Market More Transparent

Clara Denina – Reuters

Exchanges, brokers and data vendors are interested in providing clearing or reporting services to make the gold market more liquid and transparent, LBMA said in a statement. Twenty entities have submitted 17 responses to a Request for Information (RFI) process.

FAO: Last month LBMA formally asked exchanges and tech firms to bid for services as a gold exchange or a clearing platform. WGC was also subject of rumours in April about considering launching a new London exchange.

 

Sebi May Seek Relief For Commodity Exchange Warehouses

Ram Sahgal – The Economic Times

There could soon be a glimmer of hope for hedgers and traders in farm futures such as pulses and oilseeds. Sebi is planning to write to the government to exempt exchange warehouses from stock limits under the Essential Commodities Act once prices of these commodities stabilise.

Private Markets

Shareholders Accuse NSE Of Trying To Delay Public Listing

Swaraj Singh Dhanjal – Livemint

The National SE (NSE) management is trying to further delay a public sale of its own shares by setting preconditions to the process, three shareholders who attended a meeting with the management said.

PLY: I have a great admiration for the operational excellence of NSE management. At the same time I cannot help but feel investor Sohil Chand of NVP is hitting a nerve when he complains: “Every time, they come up with a new excuse to delay the listing further.” The innate conservatism of the reactionary governmental machine centred around SEBI is holding India back & NSE’s zeitgeist remains close to that nerve. There needs to be clear deregulatory process all round and a move to a proper free market on all fronts, including listing the powerhouse exchanges of the nation, washing away the sheer idiocy of the simply dreadful Jalan report et al.

 

Ghana – CSD Launches Improved Securities Settlement System In January

Graphic

The CSD (Gh) has successfully merged the two platforms that were used to settle transactions done in debt and equity onto a common platform.

 

DraftKings, FanDuel Argue Against New York Ban (subscription)

Sharon Terlep – Wall Street Journal

The two largest daily fantasy sports operators appeared in court Wednesday to argue vigorously against the NY AG’s plan to shut them down in the state.

PLY: I argued a few weeks back that the fantasy sports operators had arrived in a tricky position and were badly placed. Sadly it looks as if I was more right than wrong with my prognosis – political prosecutors are making hay while the US system has had an increasingly average economic decade…

 

Coinsetter Blames Bitcoin Compliance Costs For New Account Fees

Stan Higgins – CoinDesk

NY-based bitcoin exchange Coinsetter has instituted a new $65/month account fee, a move it says is aimed at offsetting its compliance costs. Coinsetter told users that it was instituting the fee in a bid to “compensate for the increasing costs of holding bitcoin accounts in a US-based setting”. The new fee is scheduled to go into effect on 1st December.

PLY: Once again the “NY Bit Licence” is clearly shown to be a failure, another tax on customers endeavouring to invest in their future suffers a remarkable impediment due to the blob’s overarching actions.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX up 1.5%, FTIL flat.

Magistrate Court Initiates Proceedings Against Ketan Shah

Business Standard

FTIL had accused Ketan Shah of posting false and misleading information about the company and its officials on social media.

PLY: I have seen Mr Shah’s rather raw and arguably overly emotive postings as being a touch OTT but the fact that FTIL is now seeking to drown out dissent over NSEL opens a whole new can of worms and will do nothing to correct the prevailing opinion amongst many in the rest of the world that FTIL is trying to cover up the NSEL collapse in a fashion which is profoundly unpleasant, to put it mildly. FTIL has been involved in NSEL and needs to be able to cope with criticism, even where it may be overly emotive (and perhaps even more extreme) – but this happens in billion dollar fraud cases! Perhaps if FTIL had sorted restitution of the situation, their reputation would be on the way to redemption, as opposed to festering as it does now?

Technology

Euronext Extends Contract With LuxSE

MondoVisione

Euronext today announced that it has signed a three-year contract with the Luxembourg SE (LuxSE) to provide trading platform hosting and technology services for market management.

PLY: Luxembourg extends a deal which began in 2007. Moreover, I commend Euronext for posting a logical, coherent and factual press release, without using nebulous terms such as partnership and so forth. Euronext: ‘home to simple commercial transactions without hype.’ That in, and of, itself is a huge step forward from that far distant foggy dynasty of carpetbaggers who used to own Euronext from across the oceans. Hmmm, if they don’t already, Euronext might like to have a Thanksgiving lunch to celebrate their success in  their own recent tale of liberty. As a free entity, Euronext are doing better than ever before.

 

Cryptsy & Kraken Targeted With Extreme DDoS Attacks

Joseph Young – newsBTC

Cryptsy, a Belize-based cryptocurrency and bitcoin derivatives exchange has been suffering from a series of extreme denial of service (DDoS) attacks, that have effectively disabled the site and bitcoin wallets since November 22. Over the past few weeks, prominent bitcoin exchanges and payment processing platform including Kraken and OKCoin have been targeted with DDoS attacks of similar magnitude, temporarily disabling bitcoin accounts and withdrawals during the recent bitcoin price surge.

PLY: The low hanging fruit for DDoS used to be betting sites & prediction markets (e.g. Intrade), it now seems to be folks trying to get to the hot wallets in cryptocurrency exchanges.

Products

ASX & Perth Mint To Develop Precious Metals Derivatives Products

ASX

PLY: A good idea. There is a lot happening in metals markets and Perth mint has proven an innovative commercial player amongst the world’s mints…

 

MGEX Announces The Launch Of Calendar Spread Options

MondoVisione

PLY: MGEX has also had some good volume numbers of late.

 

CLS & Markit Extend FX Settlement To Cross Currency Swaps

Finextra

CLS Group (CLS), a leading provider of risk mitigation and operational services for the global FX market, & Markit launched of a new FX settlement service for the cross currency swaps market.

 

Markets Must Get Used To Price Quirks (subscription)

Dan McCrum – Financial Times

Less capital and more technology are likely to bring more dislocation.

PLY: One could also (see lawsuits above) suggest more openness about allowing banks to have competition in IRS (and bonds) from other liquidity providers / trading houses et al, would substantially improve the state of the market, as opposed to leaving it a banker oligopoly. It’s funny how banker poodles like Xavier always rage about having open access in futures without much spotlight being given to how the swaps market is determined to stick to dealing outside platforms, or at least ensuring flow continues to be between banks and none of the pesky upstarts who might remove some of the quirks…

 

China Allows First Foreign Institutions Into Interbank FX Market

Reuters

QV Premium: China Capital Markets Transformation Brief – Main File.

PLY: Good.

 

The Ballad Of The Repo Trader

Tracy Alloway – Bloomberg

From bad to verse.

PLY: Somewhere amidst my myriad bookshelves, is a copy of John Percival’s original forex haiku from decades back which somehow complements this… (Gosh: two down, we’re on our way to an Exchange Invest poetry anthology if we’re not careful).

 

ESMA & SFC To Exchange Information On Derivative Contracts Held In TRs

MondoVisione

ESMA & HK’s SFC have concluded a MoU that will allow the exchange of information on derivative contracts held in trade repositories.

Career Paths

JPX decided on a new executive structure adding Koichiro Miyahara & Hiromi Yamaji as new executive officers.

 

BM&FBovespa: Arrest Of Board Member Won’t Impact Operations

Reuters

BM&FBovespa said that Wednesday’s arrest of billionaire financier and board member André Esteves is unlikely to impact operations. Brazil’s federal police arrested Esteves, CEO and controlling shareholder of investment bank Grupo BTG Pactual, on suspicion of obstructing justice in a sweeping corruption investigation. Court representatives said Esteves had been arrested temporarily for five days, with a potential extension of five days.

 

HKEx Women’s Exchange Promotes “Women on Boards”

HKEx

Financial Calendar

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

Share Notes

In connection with a monthly share savings plan for employees of subsidiaries, Oslo Børs VPS Holding has sold a total of 1645 shares. New holding is 11028 shares. Employees paid a share price of NOK 87,11- per share, but were allowed a discount of 20% on purchases up to NOK 625.

Other stories

Exchange Groups Keep Jonathan Hill Busy

Anna Irrera – theTally – Financial News

Many would expect investment banks and trade associations to be regular visitors to Brussels, but new data shows exchange groups are just as active lobbyists on financial regulation.

PLY: The top investment banks spend about the same per entity as the exchanges in total. Plus there are way more banks lobbying than extant platforms. Defending the marketplace means exchanges & venues must spend a great deal of time / money / effort in the attempts to build fairer, more open markets (or in the case of LSE Rita-Curve/NLX and so forth in derivatives, ensure that the strings being pulled by the banks aren’t too obvious). The nature of the blob is what it is and we rest in hope that within Commissioner Hill’s term, proper free markets can emerge for the betterment of Europe (admittedly with the proviso that the current EU may not even last to see the fruits of Lord Hill’s labours).

Once again Happy Thanksgiving to one and all!

 

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