October 04 2013

elb2 ICE-NYSE edges closer – but will we see such mega deals again? The Indian noose really is tightening around NSEL / FTIL et al by the looks of it. Erbil is the new name in bourses while the EU makes a move on crowdfunding. Intriguing granular technology developments, GTA5 suffers stock market glitches amidst market manipulation fury (is any market sacred?) and much more in today’s Exchange Invest, scroll on:

Public Markets

ICE And NYSE Euronext Go Where Other Exchanges Have Struggled (subscription)
Financial Times

ICE’s purchase of NYSE Euronext has moved one step closer after passing a key European regulatory hurdle, but the $10bn deal has yet to spark another round of global industry consolidation.

ICE and NYSE said late on Wednesday that Euronext’s governing college of regulators were “not minded to object” to their proposed deal, announced in December. The acquisition needs final approvals from national authorities in individual European jurisdictions for it to be completed.

The transatlantic deal is likely to become the industry’s largest since the CME bought the CBOT for close to $12bn in 2007, and a notable cross-border success after several high-profile failures.

PLY: With the Euronext College of Regulators acquiescing, the deal is nearly there. Albeit the merger mania is reaching a logical conclusion as antitrust authorities are wary of ever-larger mega-bourses.

Nasdaq Helps Set Up Iraq Erbil Bourse
Businessweek

Nasdaq OMX is helping to set up a trading system for the Erbil SE, which Iraq’s semi-autonomous Kurdish region plans to start operating by June, the new bourse’s chairman said.

At least 25 companies will list shares on the Erbil exchange by the end of 2014, Abdullah Ahmed Abdulrahman said today in an interview in the northern Iraqi city. Trading will begin with an estimated volume valued at 5 billion dinars ($4.3 million) to 6 billion dinars.

PLY: Competition between regions in Iraq, interesting.

Not With A Bang
The Economist
ICE Successfully Launches ICE Swap Trade
ICE
Trading Commences On The Thomson Reuters SEF
Market Watch

It was not the smoothest of starts. Forcing over-the-counter derivatives trades—contracts that are transacted away from the gaze of regulators—on to visible trading platforms has long been a goal of world leaders keen to reform a shadowy market which they blame for the crisis in 2008. But inaugurating the new platforms could scarcely have been more chaotic.

The past few weeks have seen a flurry of applications for SEF status. There are almost 20 platforms in this newly competitive market, including established operators of electronic markets such as Bloomberg, futures exchanges like ICE, brokers (GFI Group), and new start-ups like Javelin Capital Markets. Some will offer a range of derivatives contracts, others will specialise.

PLY: So far 7 SEFs have launched from the 17 approved out of 18 applicants in the public domain.

NYSE Liffe Latest To Suspend Trading Over Glitch
The Wall Street Journal

On Thursday Liffe, suspended trading in futures and options contracts tied to the Euro Interbank Offered Rate (Euribor) and Euro Overnight Index Average (Eonia) shortly after markets opened at 7:00 a.m. GMT, with all pre-market orders cancelled, before trading resumed around one hour later.

SEC’s Gallagher Calls Exchanges’ Self-Regulatory Role Burdensome
Bloomberg

SEC has moved too far toward treating exchanges like any other investment company by punishing them for technology glitches and mishandling market-data duties, Commissioner Daniel M. Gallagher said today.

Under federal law, exchanges perform some of the functions of a regulator by policing trading on their marketplaces. Some brokers that run competing trading venues have asked Congress and the commission to remove the exchanges’ special status, saying it’s an advantage that shields them from legal liability against private claims.

The commission should conduct a wholesale review of equity market-structure rules, including the self-regulatory nature of exchanges, Gallagher added.

PLY: Wise words from Dan Gallagher whose mature holistic approach to market infrastructure is to be applauded.

Gensler To Step Down As CFTC Chairman (subscription)
The Wall Street Journal

PLY: Probably not a big ‘news’ story but appears to confirm what was already known given that the rather abrasive Mr Gensler was going to find congressional approval hard going for a second term.

TMX CEO Kloet ’Looking At’ Crowdfunding Technology
Businessweek

TMX is investigating the “potentially game-changing” use of crowdfunding as a source of capital markets investment, CEO Tom Kloet said.

Kloet declined to say if TMX was considering building its own version of the technology or if it was looking at an acquisition.

PLY: Exchanges cannot afford to ignore crowdfunding but most seem to be dragging their heels on even recognising the possibility that crowdfunding will succeed (albeit likely with ups and downs along the way).

MCX DGCX Stake Diluted
The Financial Express

MCX today said it has diluted its stake to 3.4 % from the existing 5 % in DGCX through rights issue option.

MCX held 10 % in DGCX when it began operations in 2005 and later reduced it to 5 %.

PLY: Leaving FTIL with 27.51% as reported previously in addition to the FTIL stake.

LME Rule Changes Seen By Eurofer Benefiting Metals Producers
Bloomberg

Metals producers are set to benefit at the expense of consumers as the LME considers altering rules for withdrawals from warehouse inventories, the European Steel Association said.

Private Markets

Australian Swap Dealers Begin Reporting OTC Derivatives Trades To ASIC Through DTCC’s Global Trade Repository Service

DTCC announced that five of the major Australian banks active in the OTC derivatives market are now reporting their transactions to DTCC’s Global Trade Repository, under trade reporting rules recently finalized by ASIC.

Chile, Colombia, Peru Integrate Currency Trading
ilovechile.cl

Chile, Peru and Colombia announced that they are integrating their foreign exchange markets with the goal of lower costs, increasing activity and liquidity in the combined US$2,798 bln daily average turnover market.

The framework of the integration is through the Latin American Integrated Market (MILA in Spanish), which is already in place facilitating the combined stock markets for the three countries since last year.

Bitcoin Rebounds After Plunge On Silk Road Charges (subscription)
The Wall Street Journal

Bitcoin, recovered on Thursday after plummeting a day earlier on news that the founder of an Internet drug market that relied on the virtual currency was arrested by federal authorities.

PLY: It is fascinating that Bitcoin is always tarred with being used on the Silk Road where some people sold a lot of boring stuff and others sold naughty stuff. Therefore Bitcoin is evil. To expand that argument: Colombian drug dealers use bearer bonds to sell their drugs which are issued by the Federal Reserve so clearly therefore the US government is corrupt and ought to be shut down… Oh hold on, it already is. Hmmm.

Special Section: FTI, NSEL, India at the Crossroads

MCX is up 1% while FTIL is up 2%. The lawyers are now seeing the fruits of the crisis, the police claim to have gathered evidence and the outlook remains bleak. Unless those frenzied rumours of government protection prove true, we may indeed be headed to a denouement for Jignesh Shah et al…

Jignesh Shah, NSEL Conspired With Defaulters, MMTC Tells AG
Business Standard

State-owned firm MMTC has told the Attorney General of India (AG) that NSEL promoter Jignesh Shah, board members and the management team led by Anjani Sinha and even the so-called defaulters acted in collusion to dupe investors.

FMC Bars NSEL, Group Companies From Commodity Auctions
The Financial Express

FMC today barred NSEL and group firms from auctions of commodities held by the bourse after a complaint that firms related to the former NSEL MD took part in the bidding process.

A five-member panel will now oversee the auctions at NSEL.

Jignesh Shah’s NSEL Crisis: Raids Complete, EOW Claims Gathering ‘Substantial Evidence’
The Financial Express

The Economic Offences Wing (EOW) of Mumbai police which began raiding as many as 193 locations on Monday, including housing premises of NSEL top brass, brokers and defaulters, claim to have collected “substantial evidence.”

EOW Team Finds 58 Out Of 62 NSEL Warehouses Empty
The Financial Express

EOW on Thursday said that their search of NSEL warehouses have substantiated the charge that it did not back up the investments made through it with goods of equal value, as more than half of its warehouses were found to be empty.

“Of the 62 warehouses, we have so far finished searching 58, out of which 30 were found to be totally empty, while four were found to be bogus. The remaining warehouses contain some goods but not in a substantial quantity. The discovery substantiates that the NSEL did not store goods of value equal to the investments being made through it, as it was supposed to. There are now four warehouses that still remain to be searched,” said Additional Commissioner of Police, EOW, Rajvardhan Sinha, adding that “the overall search and seizure operation in 95 % complete.”

The Economic Offences Wing will now focus on the money trail.

PLY: With 30 entirely empty warehouses and 4 bogus ones, I am a mite tempted to suggest that there may be evidence of criminal activity here, certainly I am inclined to suggest a failure of management oversight…

No Warehouse Sealed By EOW, Says NBHC
The Economic Times

FTIL division National Bulk Handling Corporation Ltd (NBHC) today said the Economic Offences Wing (EOW) of Mumbai police has not sealed any of its warehouses.

Bombay HC Hears Four Cases Against Exchange
Business Standard

Four cases filed by different sets of investors of NSEL came for hearing in the Bombay High Court on Thursday.

Court Appoints Receiver To Inspect Goods At NSEL Warehouse
The Hindu Business Line

The Bombay High Court has appointed a receiver to inspect the goods lying at the warehouses managed by NSEL and submit a report within two weeks from the date of hearing.

NSEL E-Series Settlement Delayed As Bombay HC To Pass Order Today
The Financial Express

The scheduled settlement of the e-series contract under the mechanism suggested by NSEL was stalled on Thursday due to a directive by the Bombay High Court in response to a writ petition filed by two parties — Tarun Amarchand Jain HUF and Ashish Seth HUF — seeking to halt the settlement process. The court decided to resume the hearing of the petition on Friday.

Rs 18cr (USD 2.93 Mln) Frozen In NSEL Accounts
The Times of India

EOW froze Rs 18 crore (USD 2.93 mln) in various bank accounts, including that of NSEL.

Moreover, it has issued a lookout notice to all airports against 20 persons so that they cannot flee the country. Jignesh Shah, chairman of FTIL group, and others have been summoned to give their statement to the EOW.

PLY: Finally the government has taken steps to preclude 20 (unnamed but doubtless we can guess a few) individuals from fleeing India.

Govt Nominated Commodity Markets Regulator To Oversee NSEL In 2011
Business Standard

PLY: FMC may have been regulating NSEL earlier than is presumed but it seems, as always in India, the plan was mired in bureaucratic wrangling…

Technology

CME To Use Perseus Telecom Time Synchronization Service
Forex Magnates

A further technical development has been announced by Perseus Telecom, which has released a time synchronization system, designated High Precision Time.

The functionality of the service is intended to enable customers to synchronize their time systems across various data centers at which the service is provided, commencing with the CME data center facility in Aurora, Illinois.

NASDAQ OMX Launches iPad App For Workspace Virtual Data Room
Nasdaq OMX

NASDAQ OMX has launched a new WorkSpace application for iPad, now available and accessible for download in the Apple iTunes store. The app is a state-of-the-art, mobile-optimized user experience designed to create a secure, streamlined business and document management process, while improving productivity for users.

PLY: Two interesting granular developments to help markets from CME and NASDAQ.

Products

Moscow Exchange Launches Futures On Leading German Stocks

Moscow Exchange initiated trading of five futures contracts on top five German issuers BMW AG, Daimler AG, Deutsche Bank AG, Siemens AG, and Volkswagen AG with Finam as market maker.

Indexes

Markit Licenses CDS Indices To SEFs
bobsguide.com

Markit, a leading, global financial information services company, announced that it has licensed its Markit CDX North America IG, Markit CDX North America HY and Markit iTraxx Europe indices to leading SEFs.

PLY: Note multiple licences, not exclusives.

Career Paths

SEC announced two promotions to senior positions in its Division of Economic and Risk Analysis (DERA). Scott Bauguess has been named deputy director, and Vanessa Countryman will become chief counsel.

MGEX, announced the results of its annual Board of Directors (Board) election, held October 3, 2013. Re-elected to the Board were Richard A. Dusek and Marc L. Gordon. Newly elected to the Board was Murray Stahl. All will serve two-year terms.

Financial Calendar

NASDAQ OMX Q3 results October 23, 2013.

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

Analyst Notes

LSE “Reduce” Rating Reaffirmed At AlphaValue – GBX 1,478 Price Target

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.

Crowdfunding

Crowdfunding Sites Face Possible Regulation, EU’s Barnier Says
Businessweek

Michel Barnier, the European Union’s financial services chief, said he’s considering possible regulation of crowdfunding, in a bid to protect users and stimulate the industry.

Barnier said the European Commission, the EU’s executive arm, is examining the need for a “single European framework” for crowd-financing services and will consult on possible measures until Dec. 31, according to a statement on its website today.

Crowdfunding In The EU – Exploring The Added Value Of Potential EU Action
EC : Public Consultation On Crowdfunding–FAQ
Following the Workshop on Crowdfunding organised on 3 June 2013 in Brussels, the European Commission has launched a consultation inviting stakeholders to share their views about crowdfunding: its potential benefits, risks, and the design of an optimal policy framework to untap the potential of this new form of financing.

PLY: Fresh back from Brussels to Warsaw today and guess what is top of my reading list for the weekend?

Other stories

SIFMA Statement & Fact Sheets On The Debt Default Threat

SIFMA today issued the following statement from former Senator Judd Gregg, CEO of SIFMA, on the seriousness of the debt default threat.

PLY: While we are on the same topic, my own RT Op-Edge remarks were published here.

Twitter Files For IPO, Shows $317M In Revenue
Wired

Twitter has filed to go public, saying it will sell shares under the name TWTR. The IPO will initially seek to raise up to $1 billion.

PLY: With a net loss for 2012 of $79 million, Twitter isn’t quite the US government but it isn’t awfully solvent either. Not that this will stop the mega-hype of its IPO… Oh, and I have to admit to disappointment at the ticker symbol TWTR – what was wrong with TWIT?

GTA 5 Players Attempting To Manipulate In-Game Stock Market
DUbergizmo

Rockstar Games’ Grand Theft Auto 5 was just updated to allow for players to take part in Grand Theft Auto Online yesterday, although its launch didn’t go without some hitches…

PLY: I am bemused to see that in a game dealing with essentially ongoing criminality in ‘supersize’ proportions, many players opted to manipulate the GTA stock exchanges while the technical glitches clearly just made it feel more like the ‘real’ thing…

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