October 09 2014


LME wins on appeal: warehouse reform looming imminently! ICE completes on SuperDerivatives. A broad Sukuk platform for Bahrain as the buy side justly worries that financial system stability means much more than merely banker safety nets. ISE adds cross market speed bump while ESMA has a long list of work in progress and a short list of money to pay for it. All this and more, including an apparently shambolic MCX-SX, er mSXI, rights issue (but who said we didn’t warn you there?).

Happy scrolling:

Public Markets

ICE Completes Acquisition Of SuperDerivatives

ICE has completed its previously announced acquisition of SuperDerivatives, a leading provider of risk management analytics, financial market data and valuation services. The acquisition closed on October 7, 2014 in an all-cash transaction of approximately $350 million.

LME Wins Court Appeal In Aluminum Dispute (subscription)
Ese Erheriene – Wall Street Journal

LME won a months long legal dispute with Rusal, and immediately said it will introduce rules to reduce backlogs at metals warehouses early next year. LME said it intends for the rules to take effect on Feb. 1, 2015, and has launched a two-week consultation process with the metals industry about the shift.

EI reported on July 18th regarding LME appealing a previous British High Court ruling in the legal battle with Rusal.

HKEx press release here.

LME Proceeds With Warehousing Reforms

LME announced its intention to implement its linked load-in / load-out (LILO) rule and to proceed with further warehousing reforms following the success of its judicial review appeal.

A two-week consultation with listed warehouse companies began with regard to some minor amendments to the LILO rule, including an altered start date, which will now see the First Calculation Period starting on 1 February 2015, following the required three-month notice period to warehouses.

Investors Warn On Crisis Plan For Derivatives (subscription)
Philip Stafford – Financial Times

Institutional investors and pension funds have warned they may resist a plan by the world’s biggest banks to rewrite their derivatives contracts as part of reforms aimed at preventing a failing institution from destabilising global markets.

PLY: For those shepherding petulant teenagers and also running a bank, it must be tough to know where one entirely narcissistic self-obsessed creature ends, and indeed where the teenager begins. Yip, looks like the idea here is that the banks have gone from having not just a state bailout option but also that the buy side would be forced to deal with them in the event of crisis. That sounds like a recipe for economic suicide even more advanced than the current EU model.

Wall St Watchdog To Shut Penny-Stock Market, Boost OTC Oversight
John McCrank – Reuters

Wall Street’s industry-funded watchdog plans to shutter its antiquated, quarter-century old trading system for penny stocks, while increasing its oversight of OTC securities traded elsewhere,

PLY: Farewell then OTC BB, a market mired in scandal and largely disnitermediated by…well, oh so many means…

ISE Launches Cross Market Speed Bump – ISE & ISE Gemini First To Introduce Risk Management Protections Across Multiple Exchanges

International Securities Exchange (ISE) announced the launch of the Cross Market Speed Bump, which allows Market Makers to establish a common risk threshold across both ISE and ISE Gemini. If the Cross Market Speed Bump is triggered, a Market Maker’s quotes are automatically removed across all products and new quotes are prevented from being accepted on ISE and ISE Gemini. This new protection is an enhancement to the existing Market Wide Speed Bump introduced earlier this year and is the latest in ISE’s industry-leading suite of risk management offerings.

PLY: I suppose this is what one might call chicanery with a sound motive?

CFTC Staff Issues No-Action Letter For Singapore Exchange Derivatives Clearing Limited

CFTC issued a time-limited no-action letter stating against the Singapore based derivatives clearing organization Singapore Exchange Derivatives Clearing Limited (SGX-DC) for failure to comply with the applicable swap data reporting requirements of Commission Regulations 45.3 and 45.4.

Private Markets

mSXI Rights Issue Raised One-Tenth Of What It Claimed
Ashish Rukhaiyar – Livemint

mSXI (former MCX-SX) ended up collecting a net of less than Rs.7 crore (USD 1.14 mln) from a rights issue that closed in April—about one-tenth of the amount the exchange claimed in May to have raised. According to a filing made by mSXI with the Registrar of Companies (RoC) late last month, the management committee of the exchange approved the allotment of 13.7 million equity shares to four entities on 30 June, at a price of Rs.5 each, thereby netting the exchange some Rs.6.85 crore. (USD 1.12 mln). The amount is a fraction of the Rs.60 crore (USD 9.82 mln) that mSXI said it had raised in a statement issued on 2 May detailing the collections through the rights issue, or sale of stock to existing shareholders.

PLY: “M anything but SXI” to investors on the current status quo. Inside this exchange lies a remarkable enterprise but nobody has the key and indeed one might argue there are bureaucrats in the mix who don’t want to find it…

Nepse Formally Begins Paperless Trading
Nepal Upclose

Nepal SE (Nepse) formally embraced the paperless system of stocks trading on Wednesday, with first transactions of the dematerialised shares of commercial banks.

Bitcoin Has Burst, But Could Still Revolutionise Banking (subscription)
John Authers – Financial Times

The essential breakthrough of bitcoin is to allow two people to exchange money directly with each other, without the need of an intermediary, and to do it wholly digitally.

How Mainstreaming Bitcoin Makes It More Like Wall Street

BTC transaction data is surprisingly accessible thanks to the way bitcoin works—all transactions are recorded into the blockchain, part of the ever-expanding log of computational problem-solving at the heart of the crypto-currency’s technology. But one reader noted an important exception: This doesn’t measure an increasing amount of bitcoin activity going on “off the chain.”

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX up 1%, FTIL +2%, no developments.


SEC Delays Action On Wall Street Safeguards (subscription)
Scott Patterson – Wall Street Journal

Regulators have delayed action on a proposal to require trading firms to put in place new testing and maintenance checks aimed at preventing market mishaps such as Nasdaq Stock Market’s fumbling of the Facebook Inc. IPO, amid internal conflicts over the scope of the rule within SEC, with Democratic commissioners Kara Stein and Luis Aguilar pushing to extend the rule to more trading activity, among other changes.


Bahrain Bourse Preparing Islamic Product Range
Gulf Business

Bahrain’s stock exchange plans to launch a range of Islamic investment products, including a novel equity-based murabaha financing tool and Islamic REITs. The Bahraini stock market is seeking to attract regional funds in the face of heavy competition from bigger markets such as Saudi Arabia, Qatar and UAE; Islamic financial products are a major part of the strategy. The exchange aims to host trading of sukuk (Islamic bonds), which at present is mostly done over the counter, said Shaikh Khalifa bin Ebrahim Al-Khalifa, appointed as CEO of Bahrain Bourse in May.

PLY: All sounds sensible to me.


Tokyo SE: Start Of Calculation Of JPX-Nikkei 400 Net Total Return Index

JPX, Tokyo SE and Nikkei Inc. have been jointly calculating and publishing the JPX-Nikkei Index 400 and its total return version (JPX-Nikkei 400 Total Return Index).

New FTSE ASFA Australia Bond Index Series Launched

Australian fixed-income market volume has more than doubled since 2008

Career Paths

Icap’s Global Head Of Futures Next To Leave (subscription)

Gary Pettit, the global head of financial futures and options at Icap, is set to become the most high-profile broker to leave the firm.

FESE: Search Secretary General

FESE AISBL is seeking to recruit a Secretary General to lead its work in Brussels.

PLY: Roll Up! Roll Up! First time in ages we have had such a public call for applicants. Clearly a broad search process is underway and I applaud FESE for making it a genuine public offer as opposed to an opaque OTC deal…

Lord Hill from the UK has been confirmed as EU Financial Commissioner after winning a vote of MEPs following his second meeting with the European Parliament.

Financial Calendar

New announcements

TMX Q3 Financial Results – Thursday, November 6, 2014 – press release here
ITG Q3 2014 Financial Results – Monday, November 3, 2014 – press release here
Interactive Brokers Q3 2014 Financial Results – Tuesday, October 21, 2014 – press release here

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

Analyst Notes

CME “Neutral” Rating Reiterated By Deutsche Bank – $82.00 Price Objective, Up From $76.00
Zacks Restated Their “Neutral” Rating On Interactive Brokers – $26.00 Price Objective

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.


Lending Club Besting P2P Borrowing Peers Ahead Of IPO
Ryan Chiles – Time

With an initial goal of $500 million, Lending Club intends to go public in 2014. Here’s how the three major U.S. P2P lenders compare.

Other stories

10 Things On Esma’s Agenda Next Year (subscription)
Anna Irrera – Financial News

Europe’s financial watchdog has published its programme for the coming year in which it estimates it will need a 16% budget increase to keep up with the increasing workload.

1. Getting ready for Mifid II
2. Negotiating market abuse agreements
3. Advising on benchmarks
4. Authorising CCPs
5. Keeping an eye on the watchdogs
6. Monitoring financial activities
7. Looking into HFTs
8. Supervising the credit rating agencies
9. Implementing IT projects
10. Chairing the supervisory committee

PLY: In other news, the atrophy of ongoing economic dyslexia threatens the very existence of the Eurozone and EU itself – which leaves a large question mark hanging over just how ESMA expects to square the budgetary circle.

CFTC’s Global Markets Advisory Committee Releases Agenda For Upcoming Public Meeting – Members Of The New Foreign Exchange Markets Subcommittee Announced

CFTC released the agenda for the upcoming Global Markets Advisory Committee (GMAC) public meeting that will be held October 9, 2014 at CFTC’s headquarters in Washington, D.C. The CFTC also announced the members of the new Foreign Exchange Markets Subcommittee who will join the first panel discussion regarding whether mandatory clearing should be required of Non-Deliverable Forwards swaps contracts.

IOSCO – Report Of The Board: The Year In Review And The Year Ahead

A speech by Greg Medcraft, Chairman, Australian Securities and Investments Commission to the 39th IOSCO Annual Conference, 1 October 2014.

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