October 15 2013

Patrick-l-young-glitches Metals competition while LME look to warehouse in Shanghai’s shiny new FTZ. The US staggers, Bulgarian privatization to reverse the nationalisation of 2010? TriOptima is (as I never tire of noting:) mega. Elsewhere the buy side is reluctant to use hastily regulated SEFs during a government shutdown. I wonder why?

Public Markets

TriOptima’s Largest European Energy Compression Cycle Eliminates More Than 4300 European Energy Forwards And Swaps With A Notional Principal Value Of € 8.4 Billion
heraldonline.com

TriOptima announces that 13 banks and energy houses have eliminated more than 4300 power and gas swaps and forwards with a combined notional principal value of €8.4 billion.

Spurred by recently-implemented EMIR regulations around clearing thresholds as well as the implications of the new leverage ratio and Basel III capital requirements, market participants have been eager to eliminate as much gross notional exposure as possible in their OTC derivative portfolios.

PLY: TriOptima announces this latest excellent development on the same day the Nobel Economics prize was announced: next year I would nominate the founders of TriOptima.

LME Set To Open In Shanghai FTZ
ecns.cn

LME may become the first international exchange house to establish commodities warehouses in the China (Shanghai) Pilot Free Trade Zone (FTZ).

PLY: Clearly Charles Li is keen to see his organisation building on the opportunity in the Shanghai FTZ to help grow HKEx in every sense, as he outlined yesterday…

Harriet Hunnable Q&A: ‘The Market Place For Metals Has To Evolve’ (subscription)
Financial News

PLY: Interview worth reading with CME’s head of metals all about why now is the time to compete against LME…

Taking The Bus On Road To Default
The Wall Street Journal

You know things are getting bad when Wall Street chiefs have to take the bus.

…A couple of weeks ago when Lloyd Blankfein, Jamie Dimon and other top bankers boarded a coach for a short trip to the White House. Their mission: to warn the president about the government shutdown and ensuing politicking over the budget.

One participant told me of how his feelings changed on the two rides: mildly optimistic en route to 1600 Pennsylvania Ave., incredibly worried on the way back.

The episode sums up a crisis in which Wall Street and Washington have been speaking at cross-purposes in the run-up to Thursday’s deadline over the debt ceiling.

PLY: We could note that Mr Dimon’s charge for the bus fare was equivalent to several hundred million dollars per mile. Then again, there is something clearly rotten in the Kingdom of 1600 Pennsylvania Avenue. After all Fannie/Freddie/Fiasco was the catchphrase for the housing bubble but the government has shown no contrition while the private sector is being pilloried and the President continues to bash enterprise. All those factors point to a grim outlook for the US economy as the public sector continues to get its claws into enterprise regardless of whether the laggards (how can they be leaders?) in the Capitol continue to behave in a fashion which would see children rightly banned from the little leagues.

Clearing Firms Gird For Treasury Default (subscription)
The Wall Street Journal

Some of the largest U.S. clearing firms are preparing for a potential U.S. Treasury default.

Citigroup Inc. and State Street Corp. have been discussing ways in which they might impose limits on clients’ use of short-term U.S. Treasury bills due in the coming weeks as collateral, according to people familiar with the matter.

Citigroup has started telling some clients it would rather not take Treasurys maturing Oct. 24 or Oct. 31 as collateral, according to people familiar with the matter. The people said there was no set policy in place, but that the bank was sounding out certain clients about whether they could instead substitute Treasurys that mature later.

PLY: The USA underestimates just how silly it looks and the President has been further diminished by his latest failure on the world stage (regardless of whoever the Basketballer in Chief wishes to blame, the rest of the world clings to the – clearly outdated – notion that Mr Obama is in charge).

Bulgarian SE To Be Sold Next Year?
bg-daily-news.eu

Bulgarian SE will almost certainly be ready for privatization in 2014, BSE was launched for sale under the government of Boyko Borisov.

Deputy Prime Minister Daniela Bobeva announced that work is already underway on the privatization program for 2014.

PLY: Bulgaria’s SE has good management under Ivan Takev and the market has been improving. However, the key first step for anybody doing due diligence is to read the WSJ Op-Ed I wrote with BSE founder Victor Papazov a few years back when in a dark moment for Bulgarian capitalism the government de facto nationalised the exchange at well below market value: Save Bulgaria’s Stock Exchange in 2010. (The government valued the exchange at less than the cash on the balance sheet, let alone the property assets!).

There is great potential in CEESEE stock markets and Bulgaria amongst them but investors like Tom Caldwell’s Urbana Corp have been burned in the past and the government of Bulgaria will have to do its utmost to convince investors that it has turned a corner from its kleptocratic processes in the past, otherwise they will have problems passing even cursory Due Diligence.

CBOE Delays Extended VIX Trading Due To Govt Shutdown
Bloomberg

CBOE, has delayed the start of extended trading of its volatility futures because the U.S. government shutdown is preventing regulators from approving its plans with launch originally scheduled on October 21st.

PLY: I actually hold the opinion that in any case the CFTC and SEC actually have no business in providing a specific permission to what products a regulated exchange can list.

Window Opens For IPOs Across CEE (subscription)
bne.eu

PLY: Some runners and riders in the IPO market east of the Oder. Things could be much worse but overall the infrastructure remains remarkably undeveloped outside of Warsaw and Moscow. While an interesting profile, viewing the region, as, well, a homogeneous region, is a challenge in itself.

Private Markets

US Buyside Adopts Cautious Approach To Swaps Platforms (subscription)
Financial News

PLY: The US buy-side have watched CFTC ‘regulate’ with the indecent haste of a man on stimulants trying to grab all the prizes on supermarket sweep. Unsurprisingly they are not rushing to use SEFs now the government happens to be in furlough. Prudence is still a virtue with some element of the investment infrastructure and the buy-side is to be collectively applauded for it.

CESEE Is Not The Devil Anymore“
friedlnews.com

Vienna CEO Birgit Kuras: “The endless euphoria pushed share prices up. But in the crisis, the CESEE region was the devil.”

PLY: An interesting profile although I am not convinced that the confidence of Vienna SE is anything more than a veneer. The business is deeply troubled from the failed Imperial strategy promoted by the bank shareholders as they collectively colonised the New Europe. Now with banks in retreat, the exchange is left with no clothes and a lot of high western costs. That is a pity as there is potential here but it needs both ruthless cost cutting and indeed, as joint CEO Mrs Kuras notes, the Austrian government needs to get out of its own socialist mindset and unleash the privatizations Austria needs to avoid being little more than a tourist resort for coffee, culture and ski lovers.

Cyprus Bourse Eyes Boost From Chinese Listings, Halloumi Trade
Reuters

Shattered by an international bailout which stripped it of 80 percent of its turnover, Cyprus’s SE is aiming to be a magnet for Chinese firms seeking a foothold in Europe.

CEO Nondas Metaxas told Reuters on Monday that the exchange had listing interest from half a dozen companies with Chinese backers, drawn by the relative ease of rules and tax breaks.

PLY: Nondas Metaxas is a fine man and as a veteran CEO, he has demonstrated a mature and level headed approach to dealing with the dreadful crisis which has affected Cyprus and its exchange.

Vadodara SE Starts Process To Reinstate Its MD
The Economic Times

Authorities of Vadodara SE today initiated the process of reinstating G Someshwara Rao as MD, a week after his sudden resignation triggered a controversy and led to intervention from market regulator SEBI.

Morocco Upgrading Stock Exchange
spyghana.com

The re-classification of Morocco’s Casablanca Stock Exchange (CSE) from emerging to frontier market has the potential to boost capital flows to the bourse, which has faced an increasingly difficult exogenous environment in recent years. Authorities are also implementing reforms that stand to strengthen the exchange in the medium term.

PLY: The problems facing Morocco just like, say, Egypt and so forth is that the regulatory environment is anti-entrepreneur and hence despite inherent mercantile abilities, the exchange has problems as there is no genuine capitalist ecosystem. Build that and the exchanges can flourish.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX is limit up at +5% while FTIL is down nearly 4 today as we await the weekly NSEL default. the Fraud Squad (EOW) amongst others are now pushing to have liens placed on assets of Jignesh Shah, FTIL and others. Interesting.

NSEL Probe Gets Wider
Business Standard

The probe in the NSEL payment crisis is being widened, with more agencies joining the investigations.

PLY: It’s good that everybody is investigating but I am a tad concerned about the size of government when there are so many agencies – that never leads to efficient use of taxpayers’ money and is frequently highly inefficient in investigative terms.

Case Filed Under Money Laundering Act
Livemint

The Enforcement Directorate (ED), the agency which looks into foreign exchange violations and money laundering, on Monday registered a case against NSEL, its promoters including Jignesh Shah, and directors under the Prevention of Money Laundering Act (PMLA).

PLY: MPLA allows confiscation of assets. Watch this space:

Mumbai Police Wing Seeks Powers To Attach Properties Of Shah, Others
Business Standard
Accused Took Rs 150 Crore (USD 24.44 Mln) In ‘Commissions’
The Times of India

EOW has sought recommendations of the Mumbai and Mumbai Suburban district collectors for invocation of the provisions under the Maharashtra Protection of Interest of Depositors Act, 1999, (in financial establishment).

PLY: So now we could have an inter-agency feud over who confiscates what…

No Question Of Govt Taking Over NSEL: Chidambaram
businesstoday.intoday.in

Ruling out takeover of the crisis-ridden NSEL, Finance Minister P Chidambaram has said its parent group FTIL and related entity MCX are under watch and persons responsible for the alleged irregularities will have to pay the price.

PLY: Logical statements from government being rare, this is a good one. The government needs to oversee less and there is no sensible reason to take over the running of NSEL nor could it be seen how government could make NSEL a better business. Correct Move by Mr Chidambaram.

Financial Technologies’ Chennai Connection
Business Standard

PLY: The Chennai connection for FTIL is outlined and a total zinger of a quotation on Jignesh by his former business partner, C Subramaniam: “Technocrats do not delegate. They become possessed. When you run 20 companies, you need to be a super-human to get into everything.”

Returns That Weren’t Cost NSEL Rs 1,700 Cr (USD 277 Mln)
Business Standard

A forensic audit commissioned by FMC has found NSEL gave away Rs 1,700 crore (USD 277 mln) as returns during its lifespan.

According to regulatory officials, this sum, around 30 per cent of the Rs 5,600 crore (USD 912.4 mln) the exchange owes to 13,000 investors, was paid using the money brought in by new investors, as trades on the platform did not generate actual returns.

PLY: Everybody shouts Ponzi when they see a financial fraud. With NSEL it appears the accusation is true…

Former Home Secretary Pillai To Join MCX-SX Board
Zeenews

Former Home Secretary Gopal Krishna Pillai has been nominated as public interest director on the board of MCX-SX.

Would You Hold Ratan Tata Responsible Or His Employee For Plant Failure Situation: Jignesh Shah To Investor
India Today

Jignesh Shah: “If today Ratan Tata is the chairperson of 10 companies, and in case, if there is a big fault in one of the plant, than would Ratan Tata know about it or would he come himself to solve it or his employees would be responsible for it”

In a telephonic conversation with one aggrieved investor, Jignesh Shah used these words and much more. Headlines Today has the exclusive clip of that audio conversation in Gujarati.

PLY: I think the question is the problem here. Let’s rephrase it: “If Mr Tata was renowned as a micromanager who had attended board meetings and signed off on a faulty design to the plant, allowed that plant to flout regulations and then gone on to claim ignorance when the plant failed, would he bear any responsibility?”

Technology

Malaysia – Launch Of New Bursa Trade Platform Brought Forward
thestar.com.my

Bursa Malaysia Bhd will bring forward the launch of a new trading platform, Bursa Trade Securities 2 (BTS2), to go live on Dec 2.

Indexes

NASDAQ OMX Expands The NASDAQ BulletShares Index Family
Nasdaq OMX

NASDAQ OMX is launching eight new indexes today in the NASDAQ BulletShares® Index Family.

The new NASDAQ BulletShares Ladder Indexes are traditional bond ladders implemented through indexes utilizing target maturity bond ETFs.

Career Paths

Michael Geltzeiler, who currently serves as CFO and group EVP for NYSE Euronext, will join ADT Corp. as CFO. He will be responsible for leading the company’s financial strategy to help drive profitable growth and create shareholder value.

Nasdaq OMX has hired Steven Taylor, a technical specialist in the markets division of the FCA. He will join Nasdaq’s NLX platform in its market development team next month.

Financial Calendar

Today:

Interactive Brokers Q3 financial results
Charles Schwab Q3 2013 quarterly earnings results

Thursday

SGX reports 1Q FY2014 results

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

Share Notes

Following his sale of 5,000 shares Monday, August 12th at an average of $3.96, (bargain $19,800.00) reported on August 16, the sale of 49,700 shares Monday, September 16th at an average price of $4.06 (bargain $201,782.00) reported on September 18 and the sale of 62,300 shares Wednesday, September 18th at an average price of $4.06 (bargain $252,938.00) reported on September 20 GFI Group EVP J Christopher Giancarlo sold another 5,000 shares Thursday, October 10th at an average price of $3.52 (bargain $17,600.00). He now owns 8,995 shares.

Crowdfunding

Former Google President Crowdfunds In Japan With Countdown
crowdfundinsider.com

Countdown is owned and operated by Alex Corporation based in Tokyo. Alex Corporation does several different things. They not only develop products which are interconnected or the internet of things but they also interconnect people. Alex also hosts and operates an e-commerce platform which is design oriented selling some very cool looking products. The site Alexcious allows you to “discover the beauty of Japan” – shipping worldwide – it is definitely worth checking out.

Other stories

FESE European Equity Market Report – September 2013 Figures

The European Equity Market Report is a piece of analysis that allows for an accurate comparison of trading statistics across European trading venues.

PLY: Interesting stats, anything from FESE is always worth reading, speaking of which:

Interview By Boersen-Zeitung With Judith Hardt, FESE Director General

In the context of the FESE lobbying campaign on MiFID, Judith Hardt, FESE Director General, gave an interview to the German newspaper Borsen Zeitung. In the interview, Judith mentions the following:

Our hope for MiFID II is that the orders that are traded over the counter, should be brought back on regulated markets or MTFs.

The European Parliament resolution of 2010 governing the ‘dark pools’ encourages transactions to happen on organized trading venues. This report was heavily influenced by Markus Ferber, the rapporteur for MiFID II.

OTFs would have the right to choose their customers, unlike stock exchanges and MTFs. The danger is that non-OTC trading will move to discretionary OTFs platforms.

We hope that Markus Ferber can enforce the opinion of the European Parliament.

PLY: It is a rich irony of the anti-banker culture in the European Parliament that actually many moves currently may be against the best interests of open public markets and in favour of more bank-driven platforms which will not help the market infrastructure but rather prop up many (often outmoded) dealing activities by banks and the sell side…

Nobel Prize Goes To Prophets Of The Stock Exchange
dw.de

Eugene Fama, Robert J. Shiller and Lars Peter Hansen dare to predict the future. Now they have been awarded the Nobel Prize for their research on how to predict shares and index developments.

PLY: Good to see the prize going to a trio with some excellent research pedigree which has actually been practically useful to market participants: congratulations one and all!

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