October 16 2014


The gravitational pull towards renewing modernity at the CME leads today while elsewhere platform vendor Alphapoint is amongst those successfully announcing new Bitcoin funding rounds. SIP issues are festering as conflicts of interest dominate an increasingly contentious debate. FTT damage to Italy assessed while DTCC looks at triparty repo clearing with confidence just as CCP safety debate ramps up. SEC plans more dark pool enforcement as SiX fears Switzerland may become an MTF/OTF haven.

Public Markets

CME Faces Up To Painful Reality (subscription)
Philip Stafford – Financial Times

One of the biggest criticisms in the industry for years has been the number of employees CME has employed. Now it is slimming down. Under a euphemistically-titled “refocus on future growth”, CME is cutting 5% of its global workforce, around 150 jobs.

PLY: Clearly the human impact must be appreciated but it has been transparently clear that CME was increasingly a behemoth in an era when global players are constantly finding ways to increase efficiency. Given the bloodletting at LIFFE in recent times as it was merged into ICE (never mind NYSE), CME is merely reacting to a renewed recent trend.

Data Processor Sparks Governance Row At U.S. Exchanges
Herbert Lash – Reuters

Outcries over a conflict of interest involving data processors central to securities trading could lead NYSE and Nasdaq to loosen their decades-long grip over a lucrative backwater of the U.S. stock market.

Previous discussions here and here.

PLY: The SIP process looks murkier by the day. The sell side versus exchange dynamic has been discussed already. I am uncomfortable with a prop trading firm controlling a SIP. At the same time, allegations made here that ISE hugely undercut NYSE, yet lost the vote raises questions about the process…

Stock Connect Scheme On Track As Beijing Approves Top Brokers (subscription)
Jeanny Yu – South China Morning Post

Several top mainland brokers have been granted licences to participate in the Shanghai-Hong Kong Stock Connect scheme, adding to investor confidence that the programme will start on schedule.

On August 25th, HKEx completed connectivity test for Shanghai-Hong Kong stock connect. HKEx eyes October 27th for the launch of the trading link with SSE, as reported here.

LME Wins Battle But Its Warehouse Campaign Will Be Long
Andy Home – Reuters

LME has won an important battle in the campaign to overhaul its dysfunctional physical delivery system after Britain’s Court of Appeal last week overturned a previous High Court ruling in favour of Rusal.

The LME can now implement its proposed solution, dubbed LILO, albeit only in February 2015, which amounts to a 10-month delay from the original April 2014 deadline. Never mind. It has been clear for some time that warehousers have already changed their operating models to comply with the rule, which will penalise those that take in more metal than they load out.

Clearing House Recovery Plan Urged (subscription)
Philip Stafford – Financial Times

Clearing houses should be given all the tools needed to keep the critical market infrastructure alive rather than close them and risk prevent a future market disaster, global regulators have said.

A report published on Wednesday said it was “essential” that systemically-important market plumbing such as clearing houses should be given every chance to recover from any threat to its financial viability.

PLY: The CCP business needs to go “all in” with every kind of defence that aids confidence – right now there is a myopia towards the top of the waterfall in many circles and that is just not good enough.

SEF Rulebook Review Could Shuffle Market
Mike Kentz – IFR Asia

Swap execution facilities awaiting final confirmation from the CFTC regarding their status as registered derivatives trading platforms say that eventual decisions made by the agency are likely to rattle a so-far benign market.

PLY: By summer 2015 we will know if the Provisionals have received sticky status and more permanent regulation. Another important baby step for the developing SEF industry.

US Agency Aims To Grow Tri-Party Clearing (subscription)
Tracy Alloway – Financial Times

The Fixed Income Clearing Corporation will announce on Wednesday it is seeking regulatory approval to expand its safeguarding of trades in a crucial $1.6tn segment of the financial system known as the tri-party repo market.

The move comes after regulators at the Federal Reserve expressed concerns about the repo market, where financial institutions from large banks to hedge funds pawn their assets in exchange for trillions of dollars worth of short-term financing.

DTCC press release

PLY: I discuss Repo in my MondoVisione “Trading Places” column this week. It is only fair for there to be concerns about tri party repo as it is the lifeblood of the banking system.

Dark Pools Face More Enforcement Actions, SEC Lawyer Says
Dave Michaels & Greg Farrell – Bloomberg

SEC is investigating special order types, how brokers route trades and payments they receive for sending customer orders to wholesale market makers, according to Daniel M. Hawke, chief of the SEC’s market abuse unit.

PLY: Until best execution culture truly takes the US market by the scruff of the neck, the SEC has little choice but to flex these muscles it seems.

FTT Continues To Drag On Italian Equities Trading (subscription)
Tim Cave – Financial News

In research published last week, Credit Suisse found that the average daily turnover in Italian equities was down 22% in August this year, compared with January to February 2013, before the tax was introduced.

PLY: A mere 0.1% exchange / 0.2% OTC fee introduced in March 2013 has clearly cost countless investors vast sums through a less liquid market in Italy just as the nation’s economy has been gently festering its way towards oblivion.

Private Markets

Swiss Takes On New Financial Rules Riles SIX

SIX rails against what looks to be a very light touch approach to competing non-exchange platforms under Swiss law – could the Helvetic Confederation become an MTF/SEF haven?

Zimbabwe Unveils Listing Regulations For Proposed SME Bourse

Zimbabwe SE (ZSE) has released the first draft of listing regulations for the proposed Zimbabwe Emerging Enterprise Market (ZEEM).

Digital Currency Exchange Tech Platform AlphaPoint Secures $1.35 Million Funding

PLY Plaudits to AlphaPoint on securing $1.35 million in funding to enhance Bitcoin exchange platform provision. Their development has proceeded apace in recent months and their platform is providing a great basis for exchanges in all forms of Bitcoin transfer and trading.

In February AlphaPoint and bi.tt launched the first BTC exchange in the Caribbean.

BitFlyer Bitcoin Exchange Gets $236,000 To Expand Overseas
Pavel Alpeyev – Bloomberg

Japanese bitcoin exchange BitFlyer raised 25 million yen ($236,000) from New York-based Bitcoin Opportunity Corp. to fund its overseas expansion.

Special Section: FTI, NSEL, India at the Crossroads

PLY: FTIL bounces back 1% from a recent losing streak while MCX is up 1%. News and resolution of the crisis are both absent today.


ASX Chief Downplays Local HFT
Michael Roddan – Business Spectator

Elmer Funke Kupper, CEO of ASX, says American-style HFT constitutes around 20% of the local market, although instances of predatory high frequency trading are rare.

See interview here.

PLY: In other news, Chi-X Australia have been trumpeting more breakthroughs for their rapidly growing equity platform competing against the ASX legacy monopoly leviathan.

Orc Launches Smart Order-Router For Multi-Venue Trading (subscription)
Marina Daras – Waters Technologies

Orc has launched its routing engine, Orc Smart Order Router (SOR), to achieve best execution while reducing costs via FIX connectivity.


NCDEX To Expand Basket For Trading In Forward Segment
Sharleen D’souza – Business Standard

NCDEX is planning to expand the basket of commodities on its recently launched forward trading platform. The platform will now include commodities such as tur, urad and jute.

Career Paths

FN reports that Socratis Ayiomamitis, previously COO at Goldman Sachs’s Sigma-X dark pool, joined Euronext this month as head of business development for UK cash equities.

Reuters reported that BCS Financial Group named Tim Bevan CEO of BCS Prime Brokerage. Prior to joining BCS in 2012, Bevan worked at Otkritie Capital, where he was director of global electronic trading.

FX – Week reports that Tom Marano has joined Gain Capital as MD of its institutional FX electronic communications network (ECN), GTX.

Risk reports that the Head of the CFTC’s Division of Clearing and Risk, Ananda Radhakrishnan, is reportedly leaving the US agency for a role in private practice.

The Securities and Futures Commission (SFC) welcomes the re-appointment by the Financial Secretary of Dr Kelvin Wong Tin-yau as a NED for a term of two years effective from 20 October 2014.

Financial Calendar

New announcements

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

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


P2P Lending: Lessons From Across The Pond

The UK P2P market is booming and as we prepare for the last push in 2014, it’s a good chance to reflect on what has been a ground-breaking year.

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