October 06 2014

elb2

Greetings from Dublin as another exciting week in markets awaits us. Merger talk, stake sales and all manner of stories in power and other products. T Rowe bashes dark pools as Democrats urge includion of KCG and Citadel in Reg SCI.

Meanwhile it’s the day when Europe makes the leap to T+2… Hooray! Just two more daily incremental reductions to go and we’ll have modern markets…

Public Markets

Dubai SWF Chief Urges Merger Of UAE Bourses
Gulf Times

The head of Dubai’s sovereign wealth fund (SWF) has called for the creation of one stock exchange in the UAE, a merger that officials have unsuccessfully been trying to engineer in the past few years.

PLY: Having multiple emirati markets all doing the same thing has never seemed a good model but at the same time just merging a group of undynamic fiefdoms in to one strikes me as akin to British 1960’s industrial strategy which took us from the Jaguar E Type to the Morris Marina and Austin Allegro within little more than a decade…

Mexico Stock Exchange Suspends Trading
Reuters

Mexico’s stock exchange on Friday suspended trading for an “administrative” break. The exchange halted operations at 9:20 a.m. local time.

New POLPX Set-Up Will Limit Forward Volatility
ICIS

Polish short-term electricity prompt prices will be less prone to spikes with more time to access crucial fundamental market data after new closing times on power exchange POLPX‘s day-ahead platform went live this week.

Thomson Reuters Preps 2015 Fee Hikes (subscription)
Giulia Lasagni & Faye Kilburn – Waters Technology

Thomson Reuters is to raise prices for certain data products and services by up to 10%, effective Jan. 1, 2015, especially for legacy products and services and for contracts agreed at a discount to the current list price…

SEC Members Urge Including Brokers In Trading Safeguards
Dave Michaels – Bloomberg

U.S. rules meant to guard against breakdowns in automated trading systems should be expanded to include brokerages that match orders away from regulated stock exchanges, two SEC members say.

Luis A. Aguilar and Kara M. Stein, both Democrats, have called on SEC Chair Mary Jo White to apply the new requirements to wholesalers such as Citadel and KCG, which collectively execute as much as 19% of shares traded. Brokerages have lobbied to stay outside the reach of the Regulation SCI measures, saying failure of any one broker’s systems won’t disrupt trading beyond its own platforms.

PLY: Hmmmm. I simply don’t know if SCI is the correct mechanism as I race to pixel but there is a pertinence to requiring a strength of system at the likes of Citadel and KCG and others who have become significant aspects to the financial markets infrastructure…

Dark Pools Pitched As Havens Are Anything But, T. Rowe Says
John Detrixhe & Sam Mamudi – Bloomberg

PLY: The headline looked perturbing but the problem remains ‘definition’ aka the remarks made here seem to be pertaining to the banks’ systematic internalisation approaches as opposed to the genuingely value additive “Institutional Liquidity Pools” where there are no market makers but merely huge blocks of stock being matched in a fashion which enormously reduces frictional costs on multiple levels.

Govt Looking At Merging FMC With Sebi
The Indian Express

The government is considering a proposal to merge FMC with capital market regulator Sebi to ensure better monitoring of the commodity futures market.

PLY: The merger makes sense, particularly if they bring in some genuinely reformist management spirit to the newly merged entity to allow Indian markets to be kickstarted into the global economy, as opposed to their current, discredited system of festering micromanagement and interventionism.

Polish Capital Market Ready For Change Of Settlement Cycle From T+3 To T+2
MondoVisione

October 6th, KDPW are ready – and it’s today!

Private Markets

BSE, USE Seek Shareholders’ Nod For Merger
N. Anand – The Hindu Business Line

United SE (USE) and BSE have convened separate meetings of their equity shareholders in Mumbai on October 20 to seek their approval for the proposed merger of the former with the latter. BSE proposes to issue one equity share of Re.1 each for every 385 equity shares of USE. Post amalgamation, the paid-up equity capital of BSE would increase to 10.73 crore from Rs. 10.57 crore.

EI reported on September 2nd that SEBI and the fair trade watchdog CCI approved the merger of USE with the BSE.

IFCI Postpones NSE Stake Sale
Abhijit Lele & Sachin P Mampatta – Business Standard

IFCI, the Delhi-based government finance company, has postponed its plan to divest 2.5% stake in NSE. According to two sources in the know of the matter, lower-than-expected bids from investors have forced the company to postpone its plan.

Last month Malay Mukherjee, CEO & MD, Industrial Finance Corporation of India (IFCI) confirmed the company has received three bids for its 2.5% stake in NSE and the process was expected to be concluded by September 30.

Bats Chi-X Europe Reaps Benefits Of Merger (subscription)
Tim Cave – Financial News

The European arm of privately-held US exchange operator Bats Global Markets has turned a profit for the first time since its launch in 2008, recording pre-tax profits of £16.9 million during 2013 after losing £3 million in 2012. Revenues increased by 5.6% to £55 million and total costs fell by 30% to £38 million.

PLY: Plaudits to Mark Hemsley and team, especially as there has been cynicism about the ability of BATS to profit in Europe from their volume dominance.

Red Flag Raised Over Funding For Newcastle Stock Exchange
Sydney Morning Herald

The Newcastle-based National SE (NSX) is receiving life support from its largest shareholder, as questions are raised by its auditor and industry peers about its ability to continue as a going concern.

PLY: A sad case as there is a market for this bourse but it has not managed to capitalise on its licence…

Israel Missing Out As IPOs Bypass Bourse
Gabrielle Coppola – Bloomberg

Erel Margalit, a member for the Labor party of Israel’s Knesset and former venture capitalist, said TASE must become more open to attract new listings and halt a decline in trading volumes.

Nigerian Bourse Launches Direct Market Access
StarAfrica

Nigerian SE (NSE) says it is supporting Direct Market Access (DMA) as an interim step to the implementation of the phase 1 Sponsored Access for the West African Capital Market Integration (WACMI) programme.

Baku SE Starts Making Its Own Investments At The Stock Market
Abc.az

Baku SE (BSE) has decided to diversify its financial assets using local capital market instruments.

“The Exchange will do it by investing its funds into local corporate bonds, liquidity of which is supported by market makers.

PLY: Is Baku creating a pathfinder approach to enabling LSE to retain the fund management arm of Russell?

Russia Proposes Monetary Penalties For Bitcoin Use & Promotion
Pete Rizzo – Coindesk

The Ministry of Finance of the Russian Federation has released the full version of the draft bill that, if passed in current form, would effectively ban the creation and distribution of software that allows for the use of money substitutes, including bitcoin and all digital currencies.

PLY: Discouraging but understandable that the political classes will panic given the Ruble being in freefall.

Bill Gates: Bitcoin Is ‘Exciting’ Because It Is Cheap (Video)
Charlotte Krol – The Daily Telegraph

Bill Gates has praised Bitcoin, saying it is an “exciting” invention.

The co-founder of technology giant Microsoft said: “Bitcoin is exciting because it shows how cheap it can be – Bitcoin is better than currency in that you don’t have to be physically in the same place.”

PLY: …& don’t forget real-time, there is no T+2 is innovative nonsense in the cryptocurrency world!

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX is flat while FTIL continues to slip (-3%) as investors try to find a new plateau for the stock now it is ‘merely‘ an IT vendor and not an exchange operator / innovator. Clearly the previous path to growth has died as the spirit of Shahdenfreude has risen.

Technology

High-Frequency Firm Said To Be Finalist To Run Nasdaq Price Feed
Sam Mamudi & Nick Baker – Bloomberg

Nasdaq-listed stocks SIP competitors are Tradeworx Inc.’s Thesys Technologies LLC and Nasdaq itself with the choice coming October 8th.

JSE Purchases The Denodo Data Virtualization Platform To Enable Its New Enterprise Data Access Layer
MondoVisione

Denodo Technologies, is a leader in data virtualization.

ITG Gains Traction With POSIT Alert Brazil
MondoVisione

ITG provided an update on POSIT Alert Brazil, the first fully electronic block crossing network for Brazilian equities. Since the general release in late May 2014, the pool of liquidity in POSIT Alert Brazil has grown to a daily average of $200 million, with average executed trade size of approximately $900,000. POSIT Alert Brazil is not a dark pool; it employs ITG’s advanced trade matching technology to execute crosses on Bovespa, adding to exchange liquidity – a modern version of the traditional “upstairs block cross” executed on exchange.

ZSE To Automation Trading System On Course
The Zimbabwe Mail

Fifteen companies have complied with the automated Zimbabwe SE (ZSE) requirements and will soon enjoy benefits from the paperless trading systems.

Banks Warm Up To Bitcoin Technology (subscription)
Anna Irrera – Financial News

The financial services industry is changing its stance on the technology behind cryptocurrencies, conceding that it could be a useful tool.

PLY: As always the legacy linear financial services industry has denied with the gusto of a politician caught loitering outside his mistresses apartment before gudgingly edging towards acceptance of the approaching new reality and then after a spot of enabling/endorsing, it will seamlessly paper over the cracks and deny it ever failed to predict the future with perfect 20:20 hindsight.

Products

CME Plans To Slash Trading Hours For Livestock Futures (subscription)
Kelsey Gee – Wall Street Journal

CME unveiled plans to sharply reduce electronic-trading hours for its livestock-futures contracts.

CME press release here.

PLY: Until now, the trend has almost invariably been towards longer hours but presumably this shows my longstanding granular benchmarks theory is gaining momentum and now foreigners have their own benchmarks…while American farmers sleep, who wants to ‘police’ the prices? An interesting development from CME.

TASE To Expand Derivatives Trading In January
Reuters

TASE will launch trading of options and futures on the Tel Aviv 100 benchmark index in January.

TriOptima & LCH.Clearnet’s SwapClear Complete The First South African Rand Compression Cycle For Cleared Swaps – $284.3 Billion Eliminated In Notional
MondoVisione

October 6 2014 TriOptima, leading provider of OTC derivative post trade services, announces that LCH.Clearnet’s SwapClear members have eliminated $284.3 billion in notional in the first triReduce and SwapClear compression cycle for cleared South African rand (ZAR) iIRS.

PLY: As always my delight at the brilliance of TriOptima remains impossible to suppress, let alone, compress.

New Transmission Capacities Must For Competitive Power Mkt:IEX
Business Standard

With transmission congestion curtailing millions of units of electricity supply every month, Indian Energy Exchange (IEX – 95% market share) has said there is a need to build new transmission capacities to ensure a well-functioning power market in the country.

Rwanda’s East Africa Exchange To Expand Commodities Trade (subscription)
Nicholas Bariyo – Wall Street Journal

Rwanda’s East Africa Exchange plans to expand the range of agricultural commodities it sells, to include tea and coffee, and broaden its regional reach with more warehouses in neighboring countries.

PLY: Good.

Career Paths

FN reports that former Chi-X Global CEO John Lowrey has joined the board of a new electronic bond platform, Emerging Markets Bond Exchange (emBonds). The platform was founded last year by Mehmet Artun, a former global head of emerging markets credit flow trading at Deutsche Bank, and Kerim Acanal, a former rates trader at Credit Suisse, Citigroup and Lehman Brothers who has also worked at Pharo Management.

LeapRate reports that Gavin Foster, Head of FX & Director at London Capital Group, has left the company. Foster is formally on garden leave, with his position now taken by Peter Wells. Wells joined LCG last month from ICAP, where he spent five years as Desk Director.

Foster’s exit is the latest in a line of senior executives at LCG who have either left voluntarily or been shown the door, as Charles-Henri Sabet and his investor group have taken control of LCG and have begun to reshape both its management and strategy.

Other recent exits include CEO Kevin Ashby and COO John Jones.

Crowdfund Insider reports that P2P lending platform Zopa appointed Jaidev Janardana as COO. Jaidev was previously the CMO for Capital One UK.

IOSCO re-elected Mr. Greg Medcraft as Chairman of the IOSCO Board.

ESMA: Vacancy notice – Senior Officer – Financial Reporting
MondoVisione
The deadline is 2 November 2014.

ESMA: Vacancy notice – Senior Officer – Risk Specialist For CCP
MondoVisione

The deadline is 2 November 2014.

Financial Calendar

New announcements

SGX Q1 FY2015 Financial Results – 21 October 2014
NASDAQ OMX Q3 2014 Financial Results – Friday, October 24, 2014
BGC Partners Q3 2014 Financial Results – Thursday, October 30, 2014
CME Q3 2014 Financial Results – Thursday, October 30, 2014
Thomson Reuters Q3 2014 Financial Results – Thursday, October 30, 2014
CBOE Q3 2014 Financial Results – Friday, October 31, 2014

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

Share Notes

Interactive Brokers SVP Milan Galik sold 1,800 shares Thursday, October 2nd at an average price of $24.92 (bargain $44,856.00). He now owns 710,417 shares. Mr. Galik’s regular sales are chronicled on this specific page.

Analyst Notes

ICAP “Sell” Rating Reaffirmed By Liberum Capital – GBX 306 ($4.97) Price Objective
Liberum Capital Restated Their Sell Rating On Tullett Prebon – GBX 240 Target Price

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

Wall Street’s Siren Song Lures P2P Lenders Into Treacherous Seas (subscription)
Jonathan Ford – Financial Times

US P2P platforms, Lending Club and OnDeck Capital, are planning IPOs on the stock market and investors may give them Netscape-style valuations. Lending Club, which could be valued at $5bn when it floats next month, had revenues of just $98m last year.

PLY: Understandable, this is the future replacement for the tired, tawdry and utterly unsustainable business line called “banking.”

Other stories

The Riddle Of Europe’s Capital Markets Union (subscription)
Simon Nixon – Wall Street Journal

When the going gets tough, the EU gets going on a big new integration project. Faced with weak growth, high employment and rising debts in many countries, the latest buzz in Brussels is a “capital-markets union.”

The idea is the brainchild of incoming European Commission President Jean-Claude Juncker, and has been seized upon as a logical follow-up to last year’s creation of a banking union.

There is just one problem: No one is really sure what it means. That appears to include Jonathan Hill, the British commissioner-designate responsible for turning this slogan into reality. Mr. Hill was unable to set out a convincing agenda before a European Parliament committee last week.

PLY: A policy to create a better EU capital market with possibly a Financial Transaction Tax at its core – the EU is in much much more grave danger than anybody appears ready to state.

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