October 01 2014


PLY: Welcome to another bumper free issue of Exchange Invest. The stabling industry comes under consideration in various ways (scroll on!) as Japan has a corker of an error while Swift are meanwhile busy trying to cut the cost of messaging by staggering percentages but that only shows the limitations of both maths and indeed their antiquated technology to operate in the digital world as opposed to the solid state lands of their birth. Meanwhile the Phillippines market merger is going nowhere. NASDAQ leads in IPOs Q3 in the USA as Romania kills RASDAQ. CME makes venture investment, swaps blah blah, BNY Mellon abandons derivatives brokerage/trading and much more, happy scrolling.

Public Markets

617 Billion In Japan Stock Orders Scrapped After Error
Anna Kitanaka & Toshiro Hasegawa – Bloomberg

Stock orders amounting to more than the size of Sweden’s economy were canceled in Japan today, in what industry body JSDA said pointed to a trading error.

At 9:25 a.m. Tokyo time, orders for shares in 42 companies totaling 67.78 trillion yen ($617 billion) were canceled, according to data compiled by Bloomberg from the Japan Securities Dealers Association.

PLY: See Exchange Invest passim (pretty much daily recently for my thoughts on safety and accountability). You see all that centralised risk stuff? All brilliant except that it just allows imbecilic errors to take place at the member end as traders are not concerned if their systems run amok. Counterparties must be held responsible… and as for this shambles: Well somebody let an order to buy 57% of Toyota through their gateway to the market… Such transgressions must be punished severely and markets must ensure they place the onus on the counterparty entering the order.

Philippine – Merger Of Stock, Bond Markets Unlikely Before January Next Year
Krista Angela M. Montealegre – Interaksyon

The merger of the Philippines’ stock and bond trading platforms may take longer than expected amid differences over who should sit in the committees that would oversee the unified market.

The PSE is acquiring (reported in August) at least 67% of PDS, but has yet to sign the final term sheet with the Bankers Association of the Philippines (BAP).

PLY: Ah yes, the old “who gets what bauble of power on the committees issue. Funny isn’t it how ICE went from zero to market leader and clearly the best managed bourse in history without there ever being a squeak of such a discussion…

Osaka Exchange Sees Closer Ties With Tocom (subscription)
William Mitting – FOW

Osaka Securities Exchange is seeking closer ties with the Tocom as the Japanese group draws up plans to expand its asset class coverage.

PLY: There is a very neat little business in TOCOM, a market with many key Japanese fixes in its portfolio.

NASDAQ Leads U.S. Exchanges For IPOs In Q3 2014

NASDAQ announced it welcomed 76 new listings in Q3 2014, including 41 IPOs, on The NASDAQ Stock Market (NASDAQ), to bring its total IPO count to 140 for 201; more IPOs than any other U.S. exchange and an 8% increase in listings compared to the same quarter last year. The combined proceeds raised by NASDAQ’s IPOs YTD is approximately $16.7 billion.

PLY: Next step: NYSE to announce most money raised thanks to Alibaba.

SGX: T+2 Is Not The End Of Contra Trading (subscription)
R Sivanithy & Amit Roy Choudhury – Business Times

SGX remains on track to shift from a T+3 settlement period to T+2 – possibly by 2016 – but when it does, it does not mean the end of “contra” trading.

BVB’s Rasdaq Market To Be Abated (subscription)
Oana Gavrila – Ziarul Financiar

The Romanian Parliament adopted a bill on Tuesday abating the Bucharest SE (BVB)’s Rasdaq market and issuers listed on this segment will transfer to a regulated market or an ATS or will be delisted.

PLY: As is so often the way in Romania, RASDAQ was a fudge, neither ATS in EU law nor an exchange. Now, as nobody decided what to do with it, the listings have to transfer elsewhere. It would be a great opportunity for SIBEX if they had an outbreak of management but most will fall into the clutches of Ludwik Sobolewski at BvB where presumably he hummed a little Stolat to himself yesterday at news the WSE’s Catalist Bond market was five years old.

CME’s Nymex Must Face U.S. Regulator’s Lawsuit Over Employee Leaks

CME’s Nymex must face a lawsuit brought by regulators seeking to hold it liable for the actions of two former employees accused of leaking trade details, a U.S. judge ruled on Tuesday.

PLY: Visit emerging markets and the industrial noises are creating new factories, skyscrapers for offices and residential and generally purposing a growth economy. In the US, the industrial grade drilling noises are all too often attorneys (prosecutorial or otherwise) mining for a new rich seam of potential litigation.

HKEx CEO Says Protests No Threat To China Stock-Trading Link

The CEO of HKEx has dismissed fears that civil unrest in Hong Kong could disrupt the launch of the ‘through train’ which is expected to begin Oct 27.

PLY: As an aside, fascinating to see all that comment in the media noting that “the protests in Hong Kong threaten its financial centre.” First time I can recall that democracy endangers prosperity…interesting line which as always the fourth estate haven’t given much consideration to in the haste for deadlines and headlines.

Dwolla Looks To New Markets After CME Investment

Dwolla has raised $9.7 million in a funding round led by exchange operator CME in a move that signals the digital payments startup’s intentions to move beyond the retail world.

In May CME launched a startup-focused fund called Liquidity Ventures 1 LLC

Should SGX Allow Dual-Class Structures? (subscription)
Dayne Ho & Stefanie Yuen Thio – Business Times

PLY: No.

A Second Custodian Bank At PEX

Palestine Exchange (PEX) and Cairo Amman Bank signed a custody agreement.

BNY Mellon To Shut Derivatives Sales, Trading Business

BNY Mellon will exit the derivatives sales and trading business.

PLY : Concentrating on collateral and custody.

Tabb Survey: Swap Participants Air Discontent With SEF Rules (subscription)
Ivy Schmerken – Wall Street & Technology

The jury is still out on whether SEF rules will produce a positive outcome for the swap market, and some participants are shifting to alternative instruments, according to Tabb Group’s fourth SEF Industry Barometer.

PLY: The SEF rules will inexorably improve swaps trading (although they may need updating and changing along the way – this is of course why we have wise and beneficent pragmatic western regulators). OTC incumbents say the jury is out: aka they haven’t figured out yet if they survive at which point their judgement on the whole affair may maybe said to be somewhat self interested.

CFTC Staff Announced Extension Of No-Action Relief Concerning Certain Straight Through Processing Obligations For SEFs & DCMs From Compliance With Certain Requirements Of Commission Regulations For Package Transactions

No-action relief from Commission Regulation 37.9(a)(2) regarding methods of execution for required transactions, or Commission Regulations 37.203(a) and 38.152 that prohibit pre-arranged trading… [see Swaps Made Available To Trade Chart]….Expires February 16, 2015.

CFTC & ASIC Sign MoU To Enhance Supervision Of Cross-Border Regulated Entities

CFTC Chairman Tim Massad & Chairman Greg Medcraft of ASIC signed an MOU regarding cooperation and the exchange of information in the supervision and oversight of regulated entities operating on a cross-border basis in the US and Australia.

Private Markets

Yangon Stock Exchange Launch In 2015
Bangkok Post

Yangon Stock Exchange (YSE), which will replace the Myanmar Securities Exchange Centre (MSEC), will be launched by October 2015.

BSE Tweaks Minimum Base Capital Rules

Bombay SE (BSE) has tweaked the Base Minimum Capital (BMC) norms for brokers, deposits will be maintained with the exchange, not the clearing corporation.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX flat as FTIL drifts 1.5% as the market continues to digest Jignesh Shah’s IT baby without It’s sister exchange MCX and soon the siblings too…


BATS Delays New Feed Launch After SEC Extends Review Period
Max Bowie – Waters Technology

BATS Global Markets has delayed the launch of its BATS One consolidated feed of data from its four US equities markets after SEC extended its 45-day period by a further 45 days to give the commission “sufficient time to consider the proposed rule change and the [two] comments received.”

BOAT Introduces MMT Standard In Trade Reporting

BOAT has announced the implementation of Market Model Typology (MMT) in its OTC trade reporting platform.

Markit sold BOAT to Cinnober Financial Technology on 1st July this year.

FINRA Solicits Comment On Proposed Rule To Implement CARDS

FINRA today issued Regulatory Notice 14-37 requesting comment on a proposed rule to implement the Comprehensive Automated Risk Data System (CARDS).


Nasdaq OMX Plans First German Renewable Power Futures In 2015
Isis Almeida – Bloomberg

Nasdaq OMX’s commodities unit, which runs Europe’s oldest electricity market, plans to offer German renewable power futures as solar and wind met a record share of the country’s demand last year.

PLY: As I recall last year Germany generated 2 billion euros worth of renewable energy, at at a cost of 22 billion euros. I feel there may be er, sustainability issues here but then again clearly I am no Angela Merkel.

MCX To Launch New 2015 Contracts From October 1
The Economic Times

New contracts in commodities such as gold, silver, aluminium, lead, nickel, zinc, copper, crude oil, crude palm oil, mentha oil, cardamom, cotton, cotton seed oilcake launched today.

NCDEX Modifies RM Seed Futures Contract
Business Standard

NCDEX R M Seed (rape mustard seeds) futures contract has been simplified by reducing acceptable grades of RM seed.

NZX Launches Step-Change In Dairy Forecasting

Two online tools designed to provide better insights into New Zealand milk production and farmgate milk prices have been launched by NZX Agri.

The Standard OTC Oxymoron (subscription)
Alex Harborne & Thomas Krantz – Financial Times

…post-crisis we have a new term to juggle; the paradoxically named “standardised OTC”. OTC denotes something bespoke, while “standardised” suggests something “off the peg”. Investors like OTC contracts because they are tailored to meet a specific need.

PLY: This update just in from the stable door: The horse has indeed bolted but a large team of consultants are convinced the problem need never again arise provided the stable owner retains them.

Career Paths

The BoD of Nairobi Securities Exchange has appointed Mr. Andrew Wachira as Acting CEO effective from October 1, 2014. This follows the exit of Mr. Peter Mwangi as CEO on September 30, 2014.

Mr. Wachira has over 10 years’ experience at the Exchange, heading the Compliance and Legal Department since 2009. The process to recruit a permanent CEO is underway.

EI reported on August 22nd that Peter Mwangi stepped down from his position effective November 23, 2014. Mr. Mwangi was appointed Group CEO of Old Mutual Kenya last month (reported August 27th)

MCX-SXCCL Seeks Candidates For MD, CEO Post
The Economic Times

Soon after receiving conditional renewal of recognition from Sebi, MCX-SX Clearing Corporation Ltd invited applications for the post of MD and CEO.

The capital market watchdog Sebi’s nod for the clearing house is subject to various conditions, including that a MD and Compliance Officer is appointed “at the earliest”.

See announcement here.

PLY: Note the clearing corp has not yet rebranded to mSXI CC but it may only be a matter of time unless they have an outbreak of management.

ECX In Quest For New CEO
Addis Fortune

Ethiopian Commodity Exchange (ECX) is soon to have a new CEO. In the mean time, the BoD has short listed five candidates and began evaluating their CVs.

PLY: Feels like it was only yesterday they waved goodbye to Eleni…

Swiss Finance Council (SFC) is pleased to announce that Daniel Bolder, Christophe Bonte and Sandra De Sutter (former FESE staff) have joined its EU Representation office in Brussels. The Swiss Finance Council was established in November 2013 to engage in a dialogue around policy developments in finance at a European and international level.

PLY: The interests of Swiss banks, already in safe hands under Chairman Alexis Lautenberg and CEO Judith Hardt, are now even better served by these appointments, particularly the arrival of the incomparable Sandra De Sutter.

Wall Street’s Chat Plan Turns To Perzo Chief (subscription)
Justin Baer – Wall Street Journal

David Gurle is on the cusp of a deal to sell his two-year-old Silicon Valley startup, Perzo Inc., to 15 of the world’s largest banks and money managers.

Goldman Sachs nears a deal to buy Perzo, as reported here.

Financial Calendar

This week

ICE $0.65 Q3 dividend payment

New announcement

SGX Q1 FY2015 Financial Results – 21 October 2014
NASDAQ OMX Q3 2014 Financial Results – Friday, October 24, 2014 – Press release here.
BGC Partners Q3 2014 Financial Results – Thursday, October 30, 2014 – Press Release here.
CME Q3 2014 Financial Results – Thursday, October 30, 2014 – Press Release here
CBOE Q3 2014 Financial Results – Friday, October 31, 2014 – Press Release here.

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

Share Notes

Interactive Brokers SVP Milan Galik sold 1,800 shares Friday, September 26th at an average price of $25.12 (bargain $45,216.00). He now owns 714,017 shares. Mr. Galik’s regular sales are chronicled on this specific page.

Analyst Notes

ICAP “Hold” Rating Restated By Societe Generale – GBX 360 Target Price
Espirito Santo Investment Bank Research Reiterated Their Sell Rating On ICAP – GBX 312 Price Objective

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.

Other stories

New Capital Markets Industry Structure Emerging – Oliver Wyman And SWIFT Report Finds Market Forces Combine To Disrupt The Traditional Value Chain And Force Participants To Adapt Business Models

Launched during Sibos 2014, Oliver Wyman and SWIFT jointly published a report titled, The Capital Markets Industry: The Times They Are A-Changin’, that analyzes the medium-term outlook for the structure of the capital markets industry.

PLY: Further reports are emerging across the world massed ranks of consultants are gathering at stable doors and displaying an able impression of investigators in the tv drama CSI, albeit with more Powerpoints. In Boston terrified flocks of management sheep are apparently really interested to learn all about the ‘future’ prospects for their stable doors, based on game theory and other marvellous analytical tools…

[To be fair to Oliver Wyman in the specific case of Swift, finding a working stable door would be an exciting and the dinosaur needs all the help it can get from any quarter to avoid a long painful death which could in the meantime severely impact market development in the west as it is tethered to an outmoded legacy monopolist].

IOSCO Issues Report On Market-Based Financing For SMEs And Infrastructure

IOSCO published a research note on Market-Based Long-Term Financing Solutions for SMEs and Infrastructure.

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