October 10 2014


DB1 pushes Asian pivot with SSE agreement looming. NSE reborn from CBOE closure. French wheat silos closed to new grains. Mention of swaps, regulation and all manner of ramifications. News reaches us of an IDB replacing voice brokers in futures (we just wonder what they have done for the past decade?) Meanwhile FTIL shares are rocketing up, presumably rumours abound in Mumbai that haven’t reached me in transit!

The entire Q3 appears to be one almost consistent sweep of travel and next week I am delighted to be off to Russia at the weekend where I will be chairing a session at the Moscow Open Innovation Forum, amidst several thousand delegates in the Technopolis venue which consists of no less than a space equivalent to 17 Red Squares packed with innovation in every aspect of life…

Have a great weekend, here’s today’s free Exchange Invest:

Public Markets

DB1 Set For Wide-Ranging Cooperation With SSE

Deutsche Boerse (DB1) is set to unveil a wide-ranging cooperation with the Shanghai SE (SSE), perhaps as early as today. The deal would give Chinese investors direct access to the German and European financial market.

See our Premium posts: The Direction of Deutsche Boerse, Deutsche Boerse’s Asian Experiment and China Liberalises

PLY: Proof, pudding, eating…telegrams from the front awaited.

Fuld Advises On Deal To Buy National Stock Exchange (subscription)
Bradley Hope – Wall Street Journal

A little-known company called OpenMatch Holdings agreed to buy the 130-year-old National Stock Exchange in a deal advised by former Lehman Brothers CEO Richard Fuld.

The Jersey City, N.J.-based NSX, which is part-owned by the CBOE SE, closed down at the end of May amid low trading activity. It handled roughly 13 million shares on its last day of operations, or about 0.2% of all U.S. stocks traded.

PLY: Exciting news that the US NSE (originally the Cincinnati Stock Exchange) is not dead. Whether the general public feels the same way about Mr Fuld falls beyond the focus of Exchange Invest.

Complexity & Cost Could Derail Stock “Through Train” (subscription)
William Barkshire – South China Morning Post

Shanghai-Hong Kong Stock Connect is undoubtedly a major development in terms of the opening up of mainland financial markets and HKEx should be congratulated on its work to deliver an exciting market innovation.

PLY: Twice in a week (after his comments the other day), William is right, there are issues but also correct to point out the potential quantum shift presuming this works.

Powerlytics Receives Strategic Investment From CME
Business Wire

Powerlytics, a big data provider of financial insights and analyticst has raised a strategic round of capital from CME.

In May CME launched a startup-focused fund called Liquidity Ventures 1 LLC

CME Plans To Corner Invoice Spread Trading, Dealers Claim (subscription)
Peter Madigan – Risk

CME has sparked outrage among dealers by discussing plans to launch invoice spread trading on its SEF. Critics claim this would allow it to corner the market, after a rule tweak by the exchange in March this year effectively made it impossible to execute the trades at other venues. Invoice spreads pair up interest rate swaps with CME-listed US Treasury futures in a single package.

PLY: Are the dealers upset because CME aims to provide the product and hence make a de facto monopoly or are they upset because creating monopolies is what the sell side believe is their god-given right?

CME Drops New Trader Scheme (subscription)

CME will not renew its New Trader Incentive Programme when it expires at the end of the year. The NTIP programme was introduced in 2011.

ICAP Cuts Hit Financial Futures Broking Desk

ICAP is winding down its financial futures voice broking desk…

Read our premium post ICAP Explores A New Galaxy.

PLY: Hmmm, my gast is moderately flabbered to hear there is such a thing as a futures voice broker… Reminds me of an old boss at Tulletts, picking up the APT system mouse and trying to shout his order into the LIFFE after hours system. Plus ca change, or something…. Seriously futures voice brokers? What do they do? Use voice recognition to accept trades into the OMS/EMS?

Private Markets

TeraExchange Completes First Bitcoin Derivatives Trade On Regulated Exchange
PR Newswire

TeraExchange announced the first bitcoin derivative transaction to be executed on a regulated exchange., between digitalBTC, and a hedging counterparty.

Bitcoin Phenomenon ‘Scares’ Governments & Banks, Creating New Open Society: Experts
Ekaterina Blinova – RIA Novosti

Bitcoin “scares” banks and governments, as the cryptocurrency cannot be regulated and can be used for money laundering and fraud. Proponents of digital currencies praise Bitcoin for its freedom from government scrutiny, claiming that the decentralized currency is a step towards a “free” society.

PLY: A wholehearted yip here. Incidentally, I expect Bitcoin will be discussed on the panel I am chairing about the future of finance at the Moscow Open Innovation Forum next week.

Bitcoin: Not Just For Libertarians & Anarchists Anymore
Olga Kharif – Businessweek

PLY: The media, as usual so slow to adopt, they are on a par with the regulators and political classes, run human interest stories apparently shocked that normal people might choose to use Bitcoin…

CFTC Acknowledges Bitcoin’s Long-Term Promise At DC Hearing
Tanaya Macheel – CoinDesk

CFTC held a meeting in Washington, DC to discuss bitcoin as it relates to the agency’s role as the country’s chief futures and options regulator.

Panelists for the CFTC event included Coin Center executive director Jerry Brito; New York Law School professor Houman Shadab; BitPay chief compliance officer Tim Byun; and TeraExchange president and co-founder Leonard Nuara.

While only covering basic elements about the subject and sidestepping larger questions about bitcoin’s classification as a currency or commodity, the roughly two-hour session appears to have done much to convince the CFTC of the potential of digital currency.

PLY: There are clearly some journalists who ‘get it’ about cryptocurrency and right now the CFTC are the regulator closest to appreciating what BTC is doing and will do for markets – keep up the good work.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX up 1% as rumours swirl (of what we know not!) as FTIL is up 11%


Anyone For Tea And Sympathy With Beleaguered HFT Firms?
Dr. John Bates – Traders Magazine

HFT firms are taking a battering as lawsuits, sluggish markets and regulators combine to curb the excesses of this once unassailable industry.

PLY: Markets come, markets go, players come, players go. The HFT industry has growing pains – maturity involves taking it on the chin and not seeking sympathy like a refugee from the perennial self-indulgence of reality television.


CFTC’s Wetjen Urges Fix To Commodity Options Problem (subscription)
Alexander Osipovich – Risk

CFTC commissioner Wetjen says seven-part test on definition of a swap under Dodd-Frank “was not specific enough or clear enough” for industry participants and has called for the agency to take action on an issue stemming from its Dodd-Frank Act regulations.

Russian Corporate Eurobonds To Start Trading On Moscow Exchange

On 14 October 2014 MOEX admits to trading 13 issues of Russian corporate Eurobonds.

Euronext Delivery Silos Stop Taking In Wheat

Both delivery points for the Euronext wheat market have stopped taking wheat in the run-up to the expiry of November futures following silo operator Socomac’s decision on Thursday to halt reception due to slow exports and tight capacity.

Lower wheat quality than usual in this year’s rain-affected harvest has made it harder for traders to export French wheat, leading to a build-up in stocks at ports.

PLY: To recap, France is bankrupt: the economy sclerotic, the government aloof, broadly perceived to be self-indulgent crooks/imbeciles more concerned with their paramours than the provinces. Now they have problems with the core ingredient of bread. Hmmm, anybody care to speculate on what comes next?


Osaka Exchange: Expansion Of Contract Months For Options On Nikkei Stock Average & Introduction Of Weekly Options

Osaka Exchange will introduce new options contracts on the Nikkei Stock Average in addition to the current contracts, which expire on the second Friday. The new options contracts will be set so that they expire on Fridays on which there are no expiring regular options.

Career Paths

The Chartered Institute for Securities & Investment (CISI), a charity and professional body, welcomes the appointment of Dame Colette Bowe as Chair of the Banking Standards Review Council.

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

LSE “Market Perform” Rating Reaffirmed By BMO Capital Markets – GBX 1,800 Target Price
Bank of America Reaffirmed Their “Neutral” Rating On CME – $82.00 Target Price, Up From $76.00
Interactive Brokers “Outperform” Rating Reaffirmed By Keefe, Bruyette & Woods – $29.00 Price Target, Up From $27.00

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.

Other stories

Opening Statement Chairman Timothy G. Massad Before The Global Markets Advisory Committee Open Meeting

Statement Of Commissioner Mark Wetjen Before The Global Markets Advisory Committee Open Meeting

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