October 05 2015


PLY: ICE Clear Singapore gains ESMA nod. So if EU commits FTT suicide, the city state pivot is on (QV DB1’s approach in the same locale). The bigger issue is where does this leave other exchanges currently ‘out in the cold’ when it comes to ESMA recognition, with the process seemingly stalled? Saurabh Sarkar leaving as MCX-SX CEO amidst the ongoing post NSEL train crash in Indian exchanges? Luminex has a spectacular 73 members before launch while DGCX looks at multi-pronged growth strategy. All this and more in today’s Exchange Invest daily…

Meanwhile, further to the kerfuffle about BvB and just what Ludwik Sobolewski said about Romanian government, governance & privatisation, our Premium service publishes internal analysis comparing the versions circulating of that New York presentation: BVB Versus Bursa – A Contentious Speech.

Elsewhere, I am “Heralding The Golden Age of Exchanges” in the latest issue of the ASEA newsletter which you can download here.

Finally in the big wide world out there, English readers will doubtless join our South African readers in being delighted that I’m not interested in rugby. Happy scrolling:

Public Markets

LSE To Proceed With Link Plan Delayed By Swiss-Franc Shock
John Detrixhe – Bloomberg

LSE will link to EuroCCP on October 26th after overcoming regulatory scrutiny in the aftermath of the extraordinary volatility in the Swiss franc. Trades can now go to EuroCCP as well as (LSE majority owned) LCH.Clearnet and SIX x-clear AG.

LME Introduces Measures To Grow Options Trading On Exchange

LME Aims To Boost Options Business, Delay Reporting Of Large Trades

LME plans to defer publication by two business days of all options trades of 100 lots or more, as it seeks to increase turnover of those derivatives.

PLY: An interesting issue: Delaying trade news is fascinating and can have considerable ramifications. Will there be a Holmes A Court moment? Q.V. the legendary West Australian investor provoking an LSE rule change in their options market when he rode a coach and horses through voting threshold issues?

HKEx – Listing Committee Announces Way Forward on Weighted Voting Rights

Listing Committee has decided will not proceed with finalising its draft proposal for discussions with stakeholders nor seek to put forward a proposal for a formal consultation as originally proposed.

Last June HKEx published the conclusions to a concept paper on WVR but the regulators board concluded it did not support the HKEx draft.

Asean Regional Stock Market
Business Mirror

The stock exchanges in Singapore, Malaysia & Thailand launched the so-called Asean Trading Link in 2012. This platform was designed to facilitate investors being able to trade on the home stock-market listed shares of companies in the other countries. But three stock markets do not make for a regional exchange. In fact, the Asean trading link was first only Singapore and Malaysia… Philippine SE (PSE) CEO Hans B. Sicat said this past week that PSE intends to join the trading system as early as 2016.

Read our Premium ASEAN Exchanges Project Brief.


Sebi Announces Risk Management Framework For Commodity Bourses
Ashish Rukhaiyar – Livemint

New Sebi Rules For Commexes
Business Standard

Testing Times For Sebi
Business Standard

Ringing In A New Era For Commodity Market
Rajalakshmi Nirmal – The Hindu Business Line

SEBI framework post merger with FMC (applicable from January 1), lays down the proportion in which commodity exchanges can accept cash and non-cash margins from members.

Read our Premium SEBI-FMC Merger Brief.

ESMA Sees Progress In Reform Of EU Credit Rating Industry

PLY: Like a smug teacher who hasn’t noticed the school buildings are in danger of subsiding into the swamp while parsing grammar tables, ESMA offers some self-congratulation for its role in, well, what exactly? A false ‘crisis’ created by a legalistic ‘culture’ where professional investors sought to pillory a ratings system they actively contributed to, and which government encouraged on the way up, only to blame CRAs ruthlessly as the ‘pollies’ avoided responsibility for their countercyclical stupidity. (Of course a lot of stooge media bought the story hook line and sinker). Meanwhile, to demonstrate that all is sweetness and light in CRA ‘reform’ (aka immolation into state mouthpieces of government bond supplicancy), Italian prosecutors are preparing their cases against CRAs for having the temerity to place the conspicuously ill-managed republic on a par with Kazakhstan. (If I was the government in Astana I would increasingly be minded to sue for defamation).


EU Ratings Watchdog Says Competition Still Patchy
Huw Jones – Reuters

Attempts to boost competition in credit ratings has made little impact in parts of the EU and stronger enforcement powers are needed. ESMA regulates 24 ratings agencies currently authorised in the EU, a sector dominated by the “Big Three”, Moody’s, Fitch and Standard & Poor’s.

PLY: One might argue it is curious how the “invisible hand” seems to go in reverse when the blob beats all the existing players with huge sticks and threaten hell fire and damnation…

First Brokers Stand Trial Over Libor
Lindsay Fortado – Financial Times

PLY: Six shags could soon be lags, following in the footsteps of Tom Hayes. Expect lots of titillating headlines from sensationalist media and much bourgeois judgement. IMHO, vulgarity is not a crime, nor is being stupidly alpha male but this didn’t seem to stop a confluence of innuendo broadly delivering a swingeing US fine to Barclays a few months back…

ICE Clear Singapore Receives Recognition under EMIR – On Track For November 17 Launch

PLY: Delight for ICE with another well executed process while there is a cause for concern in other proceedings. The ESMA process to reciprocate recognition of other clearing houses in parts of the world beyond the EU is hardly going well, causing a bottleneck of what could be seen as clumsy protectionism by the Brussels bloc. It’s not pretty and has a certain whiff of that Born edict from the CFTC to close the doors to rampaging alpha European exchanges and their then bewildering screen trading ways when the US was at its weakest in the late 1990’s as the first wave of the Capital Market Revolution’s forces hit the market…

Private Markets

Luminex Enlists 73 Members Ahead Of Trading Launch

PLY: Make no mistake, 9 key owners and 73 significant funds does not a perfect Institutional Liquidity Pool make but it is definitely a bullet being honed as a Liquidnet/ITG killer.

Read in Premium Platonic Virtues? and Luminex – Crazy Name, Crazy Development?

NSE To Introduce Self-Trade Prevention Mechanism From October 12

PLY: Stopping the crossing spoof trade by preventing direct trade in the same order book by a member for the same client code originating from same or different trading terminals of the member.

CSRC Ready To Pull The Trigger For IPOs
Xie Yu – SCMP

Regulator ‘mulling’ a move that may help Chinese companies seeking cash after they delisted from US before domestic market meltdown.

PLY: Crunchy stat of the day: ChiNext’s tech heavy stock board was trading an average P/E of 140 June 10 4 days before a major correction. Now, prices are an altogether, er, more respectable, 78 times?

…Puts the NYSE Composite in perspective at just over 20…


NMCE Fate Hangs In Balance
Business Standard

NMCE has had a net worth circa Rs 60 crore (USD 9.2 mln) for several years, making it the only national exchange which does not meet the SEBI minimum net worth required for a national comex at Rs 100 crore (USD 15 mln).

The others, MCX and NCDEX, had a total net worth of Rs 1,357 crore (USD 207 mln) and Rs 354 crore (USD 54 mln), respectively, as of June 30. NMCE faces problems in raising more funds due to monetary irregularities by its original promoter, Kailash Gupta, MD of Neptune Overseas, with a 30.1% stake in NMCE.

PLY: A worrying stand-off for pretty high net capital requirements which suit incumbents but rob India of competitive potential.

DGCX Pursues Two-Pronged Strategy To Re-Define Priorities
Siddesh Suresh Mayenkar – Gulf News

Exchange aims to deepen its membership pool and spice up product mix as it targets 100% growth in volumes.

PLY: It was great to see CEO Gaurang Desai at the successful recent Burgenstock meeting and his plans are an excellent means to build on the existing success of DGCX in multiple arenas…

Korean BTC Exchange Coinplug Receives $5 Mln In Series B Funding

Dutch Central Bank Research Head ‘Not Opposed’ To Bitcoin
Pete Rizzo – CoinDesk

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX is off 1%, FTIL flat, as elsewhere Metropolitan (formerly MCX-SE) is about to look for a new CEO.


Online Trading Hacks Continue, Scottrade Admits To Client Info Breach

OANDA Faces Its Own Platform Outages After FXCM Reports Cyber Hacking
Ron Finberg – Finance Magnates

After FXCM said last week that its systems were hacked, Scottrade has admitted that hackers successfully accessed their systems, gaining access to certain information on up to 4.6 million clients. The information accessed apparently includes just client names and street addresses.

Meanwhile, apparently unrelated to FXCM’s problems, OANDA customers were unable to access their accounts for nearly two hours and were directed to call customer support to close positions.

Markit Finalizes Acquisition Of CoreOne Technologies
Maria Nikolova – LeapRate

Deal unveiled in August this year.

ICAP Preps For ‘Industrial Revolution’ In Fintech
Markets Media

PLY: Where ICAP’s Euclid Opportunities is fascinating (and correct!) is in its focus in fintech from the inside out – as opposed to all those colourful quasi-retail ‘outside in’ focussed projects prevalent elsewhere in the fintech segment.

There’s HFT In Treasuries Trading? What’s Next, Computers In Phones?
John D’Antona Jr. – Traders Magazine

As reported last week, a total of 23 cases have been filed so far by investors claiming the US Treasury Market is rigged.

Flashboys Return: The Transatlantic War For Milliseconds
Rory Mulholland – Irish Times

Express, a superfast data cable between the US and Europe, has just gone live at a cost of €270m…

India – Investor Association Moves House Panel On Algorithm Trades
N Sundaresha Subramanian – Business Standard

Delhi-based Midas Touch Investor Association has submitted a representation to the Veerappa Moily-headed Parliamentary committee on finance on alleged irregularities in the processes followed by Sebi in introducing algorithmic trading in Indian markets.

Nasdaq Blockchain Chief: Bitcoin’s Currency & Ledger Are ‘Two Innovations’
Pete Rizzo – CoinDesk

Exclusive interview – Fredrik Voss, VP and head of blockchain strategy at Nasdaq.

PLY: Pity they couldn’t find something less obvious to headline as Fredrik delivers some useful analysis in the body of the text.

Blockchain Eyed As Boost For Cross-Border Investment
Anna Irrera – Financial News


DB1 Launches Intraday Volatility Forecast For Futures Of DAX, EURO STOXX 50 And Euro-Bund

PLY: Once upon a time, EUREX introduced a thing called Volax then discontinued it not that long before ViX became a fascinating market fetish.

BSE To Stop LEIPs On Single Stock Options From October
The Economic Times

PLY: Exchange stops paying market maker incentives shock…

Will Liquidnet’s New Fixed-Income Dark Pool Boost Liquidity?
Amey Stone – Barron’s

Liquidnet’s new system (launched last week) may ultimately prove a big help. But one thing it can’t do — create buyers if there aren’t any.

PLY: The big worry is how the bond bear is coming closer. The S&P high-yield Corporate Bond Index posted a YTM of 7.51% last week compared to 6.21% in late February. The question is not how to match bonds when there are no buyers but rather who wants bond platforms when there is no volume?


SGX Launches Index Services In Asia

SGX Index Edge business will create and offer comprehensive index services tailored for issuers, asset managers and investors in Asia.

ESMA Adds Index CDS To Central Clearing Obligation

Career Paths

dna India (amongst other sources) reports that Metropolitan SE (MSEI)‘s MD & CEO Saurabh Sarkar will resign soon as the bourse grapples with tough business conditions and low cash reserves. The board will meet next week to decide on new appointment for the position. Metropolitan Clearing Corporation‘s head Udai Kumar is likely to be given interim charge.

PLY: Saurabh Sarkar was previously CEO of the USE. It’s a pity to hear he is likely moving on but the MCX-SX position is tricky due to a lack of cash and also what seems to be a somewhat conflicted board (albeit understandably so having been spun abruptly out of the then flaming wreck of FTIL’s exchange business in the immediate aftermath of the NSEL debacle).

SEC named Chyhe Becker as Associate Director in the Division of Economic & Risk Analysis (DERA).

SFC welcomes the re-appointment of Mr. Carlson Tong as the Chairman of the SFC for a term of three years effective from 20 October 2015.

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.

Share Notes

NASDAQ OMX EVP Lee Shavel sold 10,231 shares Thursday, October 1st at $53.10 (bargain $543,266.10). He now owns 85,399 shares.

Other stories

Fed Leaks, Dark Pools And Muni Bonds
Matt Levine – Bloomberg View

Statement Of Commissioner Daniel M. Gallagher On His Departure From The SEC

PLY: Dan Gallagher is a good man who made a great SEC Commissioner in challenging times and will be missed in government. However his brain will be welcomed back in the private sector where he is a pragmatic and profound defender of free markets delivering prosperity for all.


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