October 02 2013

elb2 NSEL defaults because the government froze their bank accounts while SEFs are launching left, right and centre. Qatar buys out NYSE – who are coy about the sale price while ICE prices notes to pay the cash portion of NYSE as they await the final regulatory sign-offs.

Multiple stories today while I am in Brussels, scroll on:

Public Markets

Qatar Holding Buys NYSE Euronext Out Of Qatar Exchange
Reuters

PLY: NYSE sells its 12% stake in Qatar Exchange to (now sole shareholder) Qatar holdings. NYSE Euronext paid $200 mln for 20% in 2009 and has not disclosed the sale price, having reduced its stake last year.

ICE Group Prices $1.4 Bln In Senior Notes
ICE

ICE priced an underwritten public offering of $1.4 billion in new senior notes.

The net proceeds from the offering, together with cash on hand and borrowings under ICE’s existing credit facility, will finance the cash portion of the purchase price of NYSE Euronext under the terms of the merger agreement announced on December 20, 2012, as amended and restated on March 19, 2013.

PLY: Meanwhile what I am hearing from my trip to Brussels this week is a lot of pedantic meddling from the college of regulators over board positions and other minutiae over which regulators ought to have no influence. Eventually ICE will own NYSE but not for a few days yet…

LSE Moves To Re-Energise Derivatives Markets (subscription)
Financial News

LSEG has laid out plans for revitalising its UK and Italian derivatives markets, which have both suffered from falling volumes this year.

CME’s Duffy To Testify Before House Committee On Agriculture
CME Group

CME Executive Chairman Terry Duffy will appear before the U.S. House Committee on Agriculture, subcommittee on general farm commodities and risk management, Wednesday, October 2, to discuss protection of customer property in the futures industry.

Edwin Marcial: No More Mr. ICE Guy
waterstechnology

The unofficial motto of ICE is, “Show, Don’t Tell.” When someone suggested a publicity campaign to announce the acquisition of NYSE, the response was: “Why? We just bought ourselves $8 billion worth of free publicity.”

PLY: Interesting profile of ICE CTO.

U.S. Securities Watchdog Proposes New Rules For “Dark Pools”
Reuters

A U.S. securities industry watchdog has proposed new rules to monitor transactions in “dark pools” run on alternative trading systems (ATSs), rivals to traditional exchanges whose growth critics blame for less transparency in the stock market.

ATSs would be required to report weekly volume and the number of trades for each security.

Identity Crisis For Algos
Futures & Options World

Fidessa’s Christian Voigt examines the complexities of the new German algo-tag legislation.

Yesterday saw the publication of the XETRA and Eurex rule changes relating to the German HFT Act in which they provide details of how to implement the new RegulatoryID.

Under the new rules it will no longer be enough simply to differentiate between algo and non-algo orders (such as under the current CME regime).

EuroCCP Narrows Losses On Higher Market Share (subscription)
Financial Times

Pre-tax losses at EuroCCP narrowed by a fifth last year as Europe’s largest cash equities clearing house grabbed a leading market share.

SGX Looks To Expand Overseas Presence (subscription)
Financial Times

SGX is looking for a replacement for David Battle as chief representative for its London office as it embarks on an expansion of its overseas presence.

Private Markets

Aquis Exchange To Hold Rehearsals Before Start Of Operations
Bloomberg

Aquis Exchange, a London-based trading system founded by Alasdair Haynes, plans to hold two “dress rehearsals” in the coming weeks before starting operations, according to a notice sent to clients on October 19 and November 9th.

MIAX Options Exchange Enters Into Strategic Transaction With Six Exchange Members
MarketWatch

PLY: To cut through the gobbledygook: 6 market makers with rights to buy stock: Bank of America-Merrill Lynch, Interactive Brokers Group, KCG Holdings, Inc., Morgan Stanley, Susquehanna International Group and Wolverine.

KRX To Expand Overseas Business To Tackle Market Slump: CEO
yonhapnews.co.kr

The new chief of the Korea Exchange (KRX) said Tuesday that he will seek to expand the bourse operator’s overseas businesses to tackle the falling profitability in the local market.

“The KRX will strengthen its export of information and technology systems to overseas and garner a larger slice of the global market,” said Choi Kyung-soo, the KRX’s new president, during his inauguration speech.

The KRX named the former government official as its new president last week, a decision which came three months after the previous KRX chief Kim Bong-soo resigned from his post in the middle of his term in June.

Irish SE Launches Pre-Legal Entity Identifier Service
Finextra

The Irish SE’s pre-Legal Entity Identifier (LEI) service is now open for online applications on ISEdirect.ie

Zimbabwe: Govt To Finalise Commodities Exchange Set-Up
allafrica.com

Government needs to finalise the setting up of a commodities exchange as soon as possible for industry to start recognising benefits from the resuscitation of the agricultural sector, the Minister of Industry and Commerce, Mr Mike Bimha, has said.

Nairobi SE (NSE) Halt In Trading

On October 01 the NSE Automated Trading System (ATS) encountered a serious network error that resulted in a halt in trading from 11.30 am.

Normal trading will resume from tomorrow Wednesday, 2nd October 2013.

Special Section: FTI, NSEL, India at the Crossroads

Finally some action took place yesterday – with the freezing of bank accounts and no payment whatsoever a a result in the NSEL weekly schedule. Action has taken place of some form, what will happen next after all the searches of offices and homes of leading FT/NSEL folk the other day?

Week One: Rs 92.73 crore (USD 14.37 mln) paid
Week Two: Rs 12.05 crore (USD 1.79 mln) paid
Week Three:Rs 15.37 crore (USD 2.29 mln) paid
Week Four: Rs 7.77 crore (USD 1.21 mln) paid
Week Five: Rs 8.57 crore (USD 1.35 mln) paid
Week Six: Rs 11.45 crore (USD 1.82 mln) paid
Week Seven: no payout – bank accounts frozen

It’s Mahatma Gandhi’s birthday in India today so markets are closed.

EOW Freezes NSEL Bank Accounts; Exchange Defaults 7th Time
Zeenews

The economic offences wing of the Mumbai Police on Tuesday froze the bank accounts of the crippled NSEL even as the CBI started a probe into alleged duping of customers and irregularities by the commodity exchange.

The NSEL defaulted on its committed weekly payout for the seventh consecutive time today after the accounts were frozen.

“NSEL is unable to make any payouts today. We have informed FMC (the regulator) of this development. We are taking legal advice to un-freeze the settlement bank accounts and investors and members will be notified in due course,” the statement added.

Police sources said they did not freeze the escrow account as it was opened for the specific purpose of making payouts to investors and brokers.

The escrow account was opened by NSEL after it was ordered by the government to ensure payouts on priority to investors after the exchange halted trading two months ago.

CBI Registers Preliminary Inquiry Into NSEL Case
The Economic Times

CBI has started an inquiry into alleged irregularities and duping of customers by NSEL.

CBI said that the Economic Offences Wing of its Mumbai branch had received complaints from the investors who lost their money with the spot exchange promoted by Jignesh Shah-led FTIL.

Corporate Affairs Ministry Orders Inspection Of NSEL, FT Books
ndtv.com

The Corporate Affairs Ministry has ordered inspection of accounts of beleaguered bourse NSEL and its promoter entity FTIL

NSEL, promoted by Jignesh Shah-led FTIL group, is already being investigated by various other regulators and agencies in the wake of payment crisis and continued violations of regulations.
PLY: Of course much heralded for weeks…but surely this must be the beginning of the end for FTIL’s exchange empire?

NSEL Impact: Banks, FIs May Be Asked To Manage MCX-SX
The Hindu Business Line

Banks and domestic financial institutions (FIs) may soon be asked to take over the management of MCX-SX, India’s youngest bourse.

This view, doing the rounds of the Finance Ministry, emanates from the recommendations of the Arvind Mayaram Committee, which looked into the NSEL crisis. In its report, the committee has suggested separation of the bourse’s management from the promoters of FTIL entities.

PLY: Clearly the aim is to squeeze FTIL out which take a while given their direct and alleged indirect holdings.

NSE Excludes Financial Tech From F&O
The Hindu Business Line

NSE has excluded FTIL from the derivative segment. All the existing contracts — October, November and December — will expire on October 31.

Narendra Modi Assures Help To NSEL Investors
Business Standard

Gujarat Chief Minister and Bhartiya Janata Party’s Prime Ministerial candidate Narendra Modi assured “all possible help” to the troubled investors of NSEL.

NSEL: Unearthing Or Protecting?
Livemint

In all the 66 years after independence, whenever a scam was unearthed, government actions have followed a certain pattern. There is a prima facie investigation; the case is quickly handed over to the Central Bureau of Investigation (CBI) and, after a big show of searches, raids and arrests, it dwindles into never-ending litigation. As the case drags on, key documents go missing; the CBI is unable to prove any of the tall claims that were made to back their initial arrests; and the evidence that is put out at trial is weak and inadequate.

But the NSEL scam seems to be following a new pattern of inaction. Indeed, the enormity of the NSEL scam has unravelled slowly—first with the revelation that the bourse has no regulator; then, the trade guarantee fund of a few hundred crores of rupees suddenly dwindled into lakhs; and, finally, it transpired that there were no commodities in its warehouses across the country. Instead, all the data was fudged, as the bourse was running a simple funding operation offering high returns and no collateral.

Initially, the lack of action suggested a new maturity on the part of government. After all, in the previous scams, actions like arrests and remand hindered actual recovery of money. It appeared that, this time, the focus was on recovery. However, one now begins to wonder whether the so-called investigation and committee reports are just a sham to hoodwink NSEL’s rich investors who, many believe, can afford to lose the money (remember, some of the small investors have already received their money).

PLY: Quotation of the day: “But the NSEL scam seems to be following a new pattern of inaction.” Interesting article.

Technology

CQG To Co-Locate At SGX Data Centre
Finextra

CQG, Inc. today announced its forthcoming co-location at SGX data centre, placing the company’s trading infrastructure in closest proximity to the SGX matching engine.

IT – NASDAQ OMX Genium INET External Test System 2 Shutdown
Nasdaq OMX

Due to the successful launch of Collateral Management Service (CMS) and all members are now migrated to CMS, the Genium INET External Test System 2 will be closed down permanently October 10th, 2013.

Products

Launch Of SGX Thermal Coal Futures

SGX announced the launch of two thermal coal futures contracts on Monday, 21 October 2013:

SGX API 8 CFR China Coal Index Futures

SGX IHS McCloskey Indonesian Sub-bit FOB Index Futures Contracts

The contracts will be traded and cleared on SGX-DT and SGX-DC, respectively.

PEGAS: Quality-Specific Natural Gas Products Successfully Launched

Trading of quality specific natural gas products has been launched on PEGAS, the common platform of European Energy Exchange (EEX) and Powernext. These products, which are traded on the Natural Gas Spot Market of EEX, comprise high-calorific (H-gas) as well as low-calorific natural gas (L-gas) for both German market areas GASPOOL and NetConnect Germany (NCG).

Indexes

CBOE Introduces Short-Term Volatility Index
CBOE

CBOE has created a new benchmark volatility index — the CBOE S&P 500 Short-Term Volatility Index (ticker symbol: VXSTSM) and began disseminating values for the new Short-Term Volatility Index yesterday.

Whereas VIX has a 30-day horizon, VXST looks out just nine days, making it particularly responsive to changes in short-term volatility triggered by market events, such as earnings, government reports and Fed announcements.

There are plans for CBOE and CBOE Futures Exchange, LLC (CFE®) to introduce VXST Weeklys options and futures.

CBOE To Launch New Volatility-Based Products On US Small-Caps (subscription)
Futures and Options Intelligence

CBOE and its futures exchange CFE will later this month launch new futures and options contracts based on the volatility of small-cap US stocks.

S&P Dow Jones Indices Expands Its S&P GSCI Dynamic Roll Family

S&P Dow Jones Indices announced today the launch of the S&P GSCI® Soybean Meal Dynamic Roll and S&P GSCI Soybean Oil Dynamic Roll which are designed to alleviate negative roll yield from contango while aiming to minimize turnover.

These Indices follow the S&P GSCI Dynamic Roll methodology which utilizes a two part process to determine the optimal futures contract to be held every month. After contracts pass a liquidity screen for inclusion, the first step is to measure which of those contracts have the highest implied roll yield, indicating the least contango or most backwardation. The second step is to check whether the incumbent contract has a high enough implied roll yield rank to continue to be held, aiming to minimize turnover.

Career Paths

Cinnober, has named Jonas Engman, 35, as CEO of Cinnober North in Umeå as part of the company’s long-term strategy and means that Nils-Robert Persson, who has held the principal responsibility for establishing operations in Umeå, can now focus on his regular role as Chairman of the Board.

Financial Calendar

Today:

Launch ICE Swap Trade LLC
Launch trueEX LLC SEF

Tomorrow

Hellenic Exchanges EUR 0.03 special dividend (share capital return) payment

Interactive Brokers Q3 financial results – October 15

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

Crowdfunding

Pozible To Launch U.S. Crowdfunding Platform ‘In Early October’
billboard.com

Australian-originated crowdfunding platform Pozible will launch in the U.S. in the coming days.

The company’s co-founder Alan Crabbe has relocated to San Francisco to run the new office, which will get its commercial launch in the “first week of October,” or soon after, he explains.

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