October 15 2015


Polish government’s inability to separate demagoguery from corporate governance bites GPW even though the exchange is explicitly not at fault (an interesting case study in the risks implicit within government shareholders). FTIL continues to pare its IEX stake as Square hits the ramp en route to IPO – very interesting!

…and there’s much more, here’s today’s Exchange Invest news:

Public Markets

FTIL Completes 11% Stake Sale In IEX

FTIL on Wednesday said it has completed the sale of 11% stake in Indian Energy Exchange (IEX) to DCB Power Ventures and Kiran Vyapar. With this, the company has completed the sale of a 13.60% stake in IEX, on a fully diluted basis.

FAO: After last week’s 2.6% stake sale to Aditya Birla Capital Advisors, this is presumably another tranche of the share purchase agreement with multiple buyers to sell a total of 5.78 mln shares, or 19.06% (409.95 crore rupees (USD 62 mln)). After this deal completes, FTIL will retain 6.94% of IEX.

QV EI Premium: FTIL Stakes Sales Brief and IEX India Sale

WSE CEO Under Investigation In Ciech Privatisation Probe
The News

Head Of WSE Questioned In Anti-Corruption Probe (subscription)
Henry Foy – Financial Times

PLY: The Warsaw SE CEO has helped agents of the country’s anti-corruption agency with their enquiries, in connection with the sale of shares in a state-run company during his previous position as a Deputy Minister.

Warsaw SE is NOT involved in any way here albeit the exchange itself is suffering a long tail curse thanks to the meddling ways of the lacklustre Polish government which artificially manipulates control in the exchange through voting rights. Moreover for all I know, there may be absolutely no case against Pawel Tamborski either – I have no knowledge of the minutiae. While Pawel Tamborski is qualified to lead the WSE, the manner of his appointment demonstrated the incapacity of the dismal Polish PO government to operate in a transparent and coherent way and that now leads to another round of time wasted defending an excellent business thanks to the crass inadequacy of its largest shareholder.

LSE Introduces New MiFID II-Ready Trading Enhancements For Block Trades

LSE Offers Alternative To Dark Pools To Meet New Rules

LSE has changed the way it processes large-scale deals to help clients comply with the execution of large scale deals in light of newly finalised MiFID II rules.

Spotlight Falls On Conflict Between LME, Floor Members

At the heart of the dispute is a move to promote standard monthly dates on the exchange’s electronic system LMEselect to attract funds, boost volumes and expand revenues.

Applying The Brakes Is The New Way To Try To Beat The Market
Philip Stafford – Financial Times

UBS Overcharged Itself For Some Derivatives
Matt Levine – Bloomberg View

PLY: Mr Levine gets to the nub of the difference between financial professionals and those fiscally semi-detached crusties ranting about the state of the 1% from Hillary Clinton down… The socialist argument goes that banks/financial institutions are homogeneous enterprises out to get the 99% whereas in fact they are in essence hundreds of tiny statelets all out pleasantly extracting whatever monopoly rent they can attain from anybody, even those in the self-same broader ‘organisation.’ QV y’day’s UBS story.

NZX’s Tim Bennett: Sharemarket Could More Than Double
Catherine Harris – Stuff

The sharemarket could double in the coming years as people’s Kiwisaver funds pile up.

PLY: We’re having a discussion across our offices today – does this sort of blue sky aspiration have a place in this newsletter, or is it just fluff? A lot of CEOs make equivalent statements & I am not sure it adds value. On the other hand it allows us to recall smaller exchanges (in this instance, NZX is a strong survivor with attitude to profit). Feedback welcome.

China Should Be Wary Of Stimulus Pleas – HKEx’s Li
Pratima Desai & Veronica Brown – Reuters

A stronger, more open China needs structural reform and it should not yield to expectations of fresh stimulus to boost economic growth.

PLY: In other words, China should not follow the desperate attempts of the West where all problems are met with more QE and more Europe just when neither is working.

China Not Far From Everyone’s Minds At LME Week
Neil Hume & Henry Sanderson – Financial Times

QV EI Premium: China Capital Markets Transformation Brief – Main File.

PLY: One overwhelming piece of feedback I have received from LME London Metals Week which suggests that longstanding Copernican precepts are being reset and the world may actually revolve around Garry Jones. I wonder what they mean?

Is Singapore Ready For Dual-Class Shares?
Stefanie Yuen Thio – Business Time

In the light of HKEx’s recent decision, Singapore should grab the opportunity to take the plunge and forge ahead.

PLY: Given the decades of hard work under the visionary leadership inspired by Lee Kuan Yew which took Singapore from a swampy city with sub Jamaican GDP to a world powerhouse; dual share listings would be a profound great leap backwards – qv the Polish story at the top of this bulletin – and a sign of sheer desperation on the part of SGX which needs measured innovation, not knee jerk pleasuring of some dynastic shareholders.

CFTC Further Implements Trade Execution Requirement

Statement Of CFTC Commissioner J. Christopher Giancarlo On The Fourth No-Action Letter Delay For Certain Package Transactions

CFTC’s Division of Market Oversight (Division) announced further extension of time-limited no-action relief for swaps executed as part of a package transaction in the categories, described below, that currently receive relief under CFTC Letter 14-137.

PLY: This process strikes me as the CFTC’s equivalent to one of those bridge to nowhere doozies that get included in a bill as a piece of pork. In this case it’s regulatory pork – a process by which the politicians can say “Ha! That showed them!” while cutting their nose off to spite their faces (probably in the Oval office with a ceremonial sword seized from the British during the war of Independence). Or as Commissioner Giancarlo more (but, frankly, not a lot, more) diplomatically notes: “As I have previously stated, the package transaction issue is an example of the CFTC’s misguided approach to SEF execution.”

Private Markets

FIA Conducted Raid At Karachi SE

Two employees were also arrested during the raid.

PLY: For those with images of Walt Lukken striding through the corridors of the KSE brandishing writs & revolver, wearing body armour extolling the benefit of off balance sheet instruments, actually FIA here means the Federal Investigation Agency of Pakistan (crunchy acronym all the same).

Square Files For IPO, Plans To List On NYSE

Plans to raise up to $275 million.

Irish SE Commences New Innovation Programme Across The Organisation

PLY: Innovation is good and ISE has some excellent thinkers both within and beyond the CEO’s office.

Saudi Arabia Mulls Rule Changes To Widen Foreign Investor Access
Deema Almashabi – Bloomberg

Saudi Arabia may soften the rules for foreigners seeking to own stocks in the kingdom as the country aims to boost liquidity on Tadawul.

Tyler Winklevoss Breaks Down Four Layers Of Gemini’s Super-Secret Bitcoin Security
Michael del Castillo – NY Business Journal

When Tyler and Cameron Winklevoss launched Gemini, their bitcoin marketplace, they set out to design it to be one of the safest venues.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX flat, FTIL rallies over 1%.

One More Held By Mumbai Police For Multi-Crore NSEL Scam
Indian Express

The Economic Offences Wing of the Mumbai Police has made one more arrest in connection with NSEL, bringing the total number of arrests up to 27 in the case. According to EOW officials, the arrested accused is Rajeev Todi (50), responsible for misappropriation of Rs 201 crore (USD 31 mln) of the money that the investors has invested in the NSEL and had been on the run since the FIR was registered.

Before He Was Moved Out, Finance Secy Wrote: Revenue Dept Helping Jignesh Shah
Appu Esthose Suresh – Indian Express

In a scathing note to Union Finance Minister Arun Jaitley, four days before he demitted office as Finance Secretary, Rajiv Mehrishi, who is now Home Secretary, said the Department of Revenue had launched a “blatant attempt” to help “Shri Jignesh Shah at the cost of the investors who have been cheated in the NSEL scam”. He said the Revenue Department had come to Shah’s “rescue” against the government’s effort to merge NSEL with FTIL.

PLY: Internal divisions and perhaps political manipulation which is worrying but at the same time skewering FTIL by destroying the established precept of separate corporate legal structure is dangerously short sighted.

NSEL Says Proposed Merger With FTIL Is ‘Bad’ In Intent, Law
The Hindu Business Line

QV EI Premium: NSEL-FTIL Merger Brief and NSEL Scandal Brief – Part 16.

PLY: Yip, yip and thrice yip.


Markit To Create Know-Your-Vendor Data Hub

PLY: Interesting.

NYSE & Palo Alto Networks Introduce New Book For BoDs Looking To Address Today’s Cybersecurity Challenges


Industry Upbeat On Prospects For LME Steel Contracts
Maytaal Angel – Reuters

A range of industry players in both physical and financial markets are backing LME’s new steel derivatives contracts, boding well for the exchange’s bid to make inroads into the new market.

LCH.Clearnet Enhances SwapClear Compression Offering

LCH.Clearnet extended SwapClear’s blended-rate compression offering to enable members and their clients to compress Forward Rate Agreements (FRAs). The first blended-rate compression run for FRAs saw $1.9 trillion eliminated.

China To Extend Onshore FX Trading To Overlap With London

China’s foreign exchange market will soon extend trading hours for the yuan to 11.30 p.m. EDT to overlap with European trading hours.

Yuan Now Third Most Traded Currency On EBS Platform
Patrick Graham – Reuters

Derivatives To Blame For August 24th Crash, Says KCG
Mark Melin – Value Walk

NSE Incentives To Boost ETFs
Ashley Coutinho – Business Standard

Simplifying Complexity: Trading Complex Order Books In Options-Part 1
Ivy Schmerken – Markets Media

The appetite for multi-leg options strategies is on the rise. But this also means capturing liquidity that is fragmented across multiple options exchanges.

Buyside Bond Holding Boom Falls Short Of Market-Making Shift
Alastair Marsh – Bloomberg

The accumulation of bond holdings by fund managers hasn’t dislodged banks from the center of fixed-income markets, according to market participants.

Grant Thornton – London Unlikely To Capture Catastrophe Bond Market

London will struggle to become a home for the catastrophe bond market due to higher taxes and regulatory hurdles compared with offshore regimes.

DGCX In Talks With Producers To Launch Tea Futures
Sutanuka Ghosal – The Economic Times

Dubai Gold & Commodity Exchange (DGCX) is in talks with Indian tea producers as well as those in countries like Kenya and Sri Lanka to work out the modalities of tea futures.]

FAO: As reported yesterday, Jakarta Futures Exchange (JFX) is planning to start tea futures next month. The largest tea producer in the world is China followed by India, Kenya and Sri Lanka.


JPX: Calculation & Publication Of “S&P/JPX Smart Beta Index Series”

JPX, Osaka Exchange & S&P Dow Jones Indices: Launch Of S&P/JPX JGB VIX Index

Career Paths

Waters Technology reports that Interactive Brokers hired exchange data licensing veteran Bill Lee as senior market data advisor.

NZ P2P lender Harmoney appointed Jon Barlow, Founder of Eaglewood Capital Management and Phin Upham, Principal at Thiel Capital, to its Advisory Board.

Financial Calendar

Charles Schwab Q3 Results – Thursday, October 15, 2015

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

Share Notes

ICE Chief Strategy Officer David Goone sold 1,158 shares on October 9th, 2015, at $228.9 (bargain $265,066). He now owns 28,684 shares.

LSE CEO Xavier Rolet sold 52,527 shares on October 14th, 2015, at GBX 2,380 ($36.46) (bargain £1,250,142.60 ($1,915,340.28)).

Check our Share Notes section in Premium.

Analyst Notes

Moody’s Investors Service (Moody’s) assigned a Baa3 rating to Fidelity National Information Services’ (FIS) proposed senior unsecured notes. The stable outlook remains unchanged.

A full table of current analysis can be found on our Analyst Ratings page which is updated daily.


Lending Club Opens To Investors In Missouri, South Carolina & Tennessee

…bringing the total number of states available to retail investors to 39.

Seedrs, KissKissBankBank Partner With ING On Crowdfunding “Fast Track”
JD Alois – Crowdfund Insider

Other stories

Lord Hill Defends Securitisation At Parliamentary Hearing (subscription)
James Rundle – Financial News

The Future Of Europe’s Financial Market Infrastructure: The Eurosystem’s Vision 2020: – Speech By Yves Mersch, Member Of The Executive Board Of The ECB, Singapore, 14 October 2015

The Important Work Of Boards Of Directors, SEC Commissioner Luis A. Aguilar, 12th Annual Boardroom Summit & Peer Exchange, New York, NY, Oct. 14, 2015


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