October 02 2015

elb2PLY: I do believe today we are bidding a very fond farewell, tinged with sadness at the loss of the leading SEC Commissioner of his generation, Dan Gallagher who last month announced he would not stay on at the agency past Oct. 2. I wish Dan every success in the future and wherever he reappears, he will be a huge asset I am sure as he has been a pragmatic supporter of the industry.

Today in Exchange Invest Daily: Hackers attack already injured FXCM, CME must name spoofers to court, Dutch pensions giant backs IEX, DB1 completes 360T funding, MPID applies to Indian exchanges – a ruling on deposits which strikes me as potentially quasi-seismic? Oh and it looks as if the Romanian marketplace is headed towards another spat centred on the BvB management. And there’s more…happy scrolling:

…Meanwhile, on the fringes of the exchange parish, an interesting kerfuffle overnight. One of the highest profile British fund managers, Katherine Garrett-Cox, despite being CEO, has been ousted from the Alliance Trust board as part of and ongoing activist shareholder battle with Elliott Advisors (leaving the board entirely non-executive incidentally). Exchange folks will recall the name of the Alliance Trust – Chairman Karin Forseke, once a leading part of the LIFFE team under Daniel Hodson.

Public Markets

Hackers Attack FXCM

Statement On FXCM Cybersecurity Incident

FXCM said its systems were hacked and a “small number” of unauthorized wire transfers were made from customer accounts, sending the company’s shares down 25% to a record low. All funds have been returned to the accounts that were compromised.

PLY: Really the last thing which the beleaguered FXCM needs now. Some wags may state it is the second time they have been hacked this year, the first being at the hands of the Swiss National Bank…

DB1 Places EUR 500 Million Corporate Bond

Aggregate principal amount of EUR 500 million due in 2025. The notes carry a yearly coupon of 1.625%. Financing of 360T transaction completed.

Last month DB1 announced it has successfully completed the placement of 2,475,248 treasury shares, thereby raising a total amount of 200 million Euro as part of financing the 360T acquisition (a total cost of 725 million Euros).

Read our Premium 360T Deal Brief.

NYSE Says Ready For Possibility Of Hurricane Joaquin Hitting NYC

NYSE anticipates U.S. exchanges will be open for normal trading sessions on Monday if Hurricane Joaquin makes landfall on the U.S. East Coast.

BISX Office Closed October 2 – Nassau Hurricane Joaquin Warning

CME Ordered To Tell Judge Names Of Alleged Spoofers In HTG Case
Matthew Leising – Bloomberg

U.S. District Judge Edmond Chang, who is presiding over a lawsuit filed this year (reported in March) by HTG Capital Partners, ruled Sept. 29 that CME must tell him the identities of the trading firms accused of spoofing. CME will be permitted to hand over the information under seal, to the judge alone.

HTG, run by Chris Hehmeyer, is seeking to identify the entities it says illegally engaged in spoofing. In the lawsuit, HTG produced a list of 6,960 instances when it was allegedly tricked by spoofers in 2013 and 2014.

More about HTG lawsuit here and here. Q.V. in Premium The Kennel – Premium discussion of the “Hound of Hounslow.

The So Called “Summary” Of Sobolewski’s NY Speech On BVB’s Website Is A Lie (Romanian version)
Adina Ardeleanu – Bursa

PLY: Wow! Heady stuff deploying that “L” word! Our crack investigative troops are working on a Premium post to compare the issues here and we hope to have something this afternoon examining the harsh war of words between the Romanian financial daily and the BvB management. The gloves are clearly off.

Meanwhile, with some daggers being sharpened in Bucharest as ever the outlook is murky for the BvB CEO. Elsewhere, I am not so sure Ludwik can smoothly regain his old GPW seat when the (seemingly inevitable) opposition victory takes place in next month’s election. However with Polish business clearly perturbed about PiS opposition economic policies (which are even more populist than the utterly inadequate, kleptocratic incumbent administration), rumours suggest Ludwik is hoping for a dose of government power in the near future.

Claims Grow That Old Data Will Distort EU Dark Pool Caps
Tim Cave – Financial News

Claims that that new restrictions on dark pools will get off to a bad start have intensified after the EU refused to budge on the data on which the rules will be based.

PLY: The dark pool cap farago is writ large in demonstrating everything which is wrong with the festering idiocracy of the EU and its financial regulatory regime which needs to be substantially pruned – as we all hope CMU may be able to achieve. (“Hope” not “expect” I hasten to add but I live in, well, “hope”).

Fed’s Dudley Downplays Market ‘Liquidity’ Concerns, Eyes HFT
Jonathan Spicer – Reuters

William Dudley, New York Fed president, largely dismissed concerns that bond market liquidity has sharply diminished following U.S. regulatory reforms, saying the rise of HFT probably plays a bigger role in any changes.

FMC & SEBI: Finally In Step
Madan Sabnavis – The Hindu Business Line

Read our Premium SEBI-FMC Merger Brief.

ESMA Publishes 14th Update To Its EMIR Implementation Q&As

ESMA Clarifies AIFMD Provisions On Depositaries & CSDs

ESMA Publishes Responses To The Consultation On Review Of EMIR Article 26 Of RTS 153/2013

Private Markets

BCS To Expand Into North America With Acquisition Of Alforma Capital Markets
AT Monitor

BCS Financial Group entered an agreement for the strategic acquisition of Alforma Capital Markets, the wholly-owned New York-based subsidiary of (Russian owned) Alfa-Bank.

Dutch Pensions Giant Throws Support Behind IEX Group
Tim Cave – Financial News

PLY: Europe’s second largest pension fund, the Dutch ABP backs IEX, good move for market choice.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX down 1.5%, FTIL down 1%. The Indian registrar of companies has rejected the name change of FTIL to 63 Moons – strike one for a more suborbital rebrand clearly…

Bombay HC Says MPID Act Applicable On NSEL
Dilip Kumar Jha – Business Standard

High court dismisses NSEL plea questioning applicability of the Maharashtra Protection of Interest of Depositors in Financial Establishment Act (MPID) to the Rs 5,600-crore (USD 850 mln) payment crisis. This also means the Act will apply on all exchanges in the country.

PLY: Three setbacks for FTIL in 2 days. The name change (below), the restraint on dividend disbursement etc yesterday and now this which is more material… If I understand correctly, the court has ruled exchanges must treat cash as deposits and hence subject to more rules closer to banking… That impacts all exchanges in India methinks, not quite sure how profoundly but it does seem material.


RoC Disapproves FTIL’s Change Of Name
Business Standard

FTIL had decided on 63 moons technologies inspired by the 63 moons of Jupiter, the “most powerful planet in the universe that stands for knowledge, wisdom foresight, growth and prosperity”. An unimpressed RoC has said the “proposed name is too generic”.

PLY: Yesterday FTIL promised to bounce back over the next three years.


NYSE Arca – Quoting Issue Resolved Before Open
Chuck Mikolajczak – Reuters

Arca experienced an issue quoting Tape A and Tape B symbols starting at 4:45 a.m. ET (0845 GMT) and was resolved at 5:55 ET (955 GMT) before trading began.

ASX Hires For Data-Crunch Unit Amid Tech Revamp
Adam Haigh & Eduard Gismatullin – Bloomberg

ASX is hiring at least 20 people to help crunch data that can be packaged and sold on, as it works on the biggest overhaul to its trading technology in more than a decade.

Its futures market will move to a new technology platform in April and equity trading will join that same system in September 2016.

PLY: ASX’s CTO is the man with a plan integrating ASX’s systems on Cinnober technology (replacing NASDAQ and an in-house derivatives system) with an integrated cash and derivatives platform. Today’s trivia: it’s almost 18 years since ASX led the world going from open outcry equities trading to electronic marketplace. Indeed, Monday October 19th seemed such an innocuous date in that planning meeting earlier in 1987…


BATS Global Markets Launches BATS ETF Marketplace, Redefining ETF Industry With Innovative Benefits For Issuers, Market Makers, Investors

Plans reported yesterday. “BATS ETF Marketplace” which will pay ETF providers as much as $400,000 a year to list on BATS.

PLY: Amidst the ‘hypocracy’ which usually engenders the press release field, for once BATS hits the spot with this release – there is a clear market redefinition going on here which may have massive ramifications for not just ETFs but all forms of listings.

In Defense Of Derivatives: From Beer To The Financial Crisis
Bruce Tuckman – CATO Institute

PLY: The Cato Institute stands for free markets and in this splendid discussion, outlines some sound reasons why derivatives work and indeed, as I noted first some 20 years ago, how “this is a derivatives world.”

MAS Consults On Margin Requirements For Non-Centrally Cleared OTC Derivatives

PLY: Ought to be an interesting discussion given the cluster of exchanges now locating CCP bandwidth in Singapore.

Russia’s Banks Seek FX Rule Change To Disrupt High-Speed Traders
Ksenia Galouchko – Bloomberg

The proposal would require firms that place many small currency orders to pay five times as much to trade. The recommendation came from a committee of advisers to MOEX, a group that includes some of the biggest FX traders in Russia. Five HFT firms would see their trading costs jump, according to the exchange, which didn’t identify the companies.

Dubai Regulator Stops Accepting Applications For FX Companies’ Representative Offices
Maria Nikolova – LeapRate

The measures are in place until the DFSA implements relevant policy to protect retail investors from the risks associated with Forex and other highly leveraged products.

PLY: Not sure the retail forex market is clearly getting the message yet but they appeal to regulators nowadays somewhere on a par with a disease like leprosy.

Regulator Clears NSE For Derivative Trade
Richard Mungai – The Star

Nairobi Securities Exchange (NSE) is likely to launch derivatives trading this quarter, according to CEO Geoffrey Odundo. NSE postponed the launch, in Q1 & Q2 due to delays in authorisation (now completed) from the Capital Markets Authority.

Read our Premium Rise of Africa Brief – Part 5.

Career Paths

Roland Bellegarde is now a Senior Advisor to the CEO at Saudi SE (TADAWUL).

PLY: All the best to Roland.

D. Angar resigned as the Acting CEO of Mongolian SE (MSE). M. Bolor was appointed as new Acting CEO of MSE.

MGEX re-elected Marc L. Gordon and Murray Stahl to the Board. Newly elected to the Board was John A. Griffith. All will serve two-year terms.  

KCG Puts London Traders At Risk
Tim Cave – Financial News

KCG Holdings has begun a process to cut its staff in London, as part of a review by the firm’s new leadership team in Europe.

Financial Calendar

New announcements

Thomson Reuters Q3 2015 Results – Friday, October 23, 2015.

CBOE Q3 2015 Results – Friday, October 30 – press release here.

SEC Equity Market Structure Advisory Committee Meeting on October 27 – press release here.

ITG Q3 2015 Results – Thursday, November 5, 2015

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

Analyst Notes

Lending Club “Sell” Rating Reiterated By Compass Point – $12.00 Price Objective

A full table of current analysis can be found on our Analyst Ratings page which is updated daily.


Lending Club Responds To Treasury Dep’t Request For Information

SoFi Seems To Push Back IPO Plans, Raising $1 Billion
Connie Loizos – TechCrunch

PLY: SoftBank, Third Point, huge cash input…no probably not a rush to IPO right now methinks.

Indonesia’s Financial Services Authority To Regulate Crowdfunding
Deal Street Asia

Indonesia’s Financial Services Authority, (OJK), will announce a regulation covering crowdfunding next week.

Other stories

ESMA Approves Greek HCMC Short Selling Ban On Bank Shares

Old Engine Of Wall Street Is Sputtering (subscription)
Ben McLannahan – Financial Times

Volcker rule still causing a lot of grief within banks.

PLY: The quasi-Dickensian structure of banks / investment banks is leading us to a brave new world. What worries me is how many exchanges are essentially Stockholm syndrome captives of the legacy banks’ passive aggressive hostage taking.

From Belligerent Bantamweight To Gentler Giant: 20 Years Of DTCC Abroad
James Rundle – Financial News


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