October 17 2013

Patrick-l-young-glitches An outbreak of US government is on the cards although the status quo remains simply horrid. Elsewhere, CME ups margins and switches benchmarks away from unreliable government agencies. Meanwhile, JPMorgan manage to be fined even while government is in furlough. BvB is the surprise leader in the quarterly exchange investment tables and there are all manner of intriguing IT updates and new products too.

Welcome to the latest edition of Exchane Invest, scroll on:

Public Markets

Why The U.S. Should Be Downgraded
The Wall Street Journal
CME Boosts Margin For Rate Swaps 12% On U.S. Default Concern
Bloomberg
US Eleventh Hour Deal Averts Default (subscription)
Financial Times
Fitch Moves Closer To US Ratings Downgrade (subscription)
Financial Times

The world has lost its faith in the U.S. It no longer deserves to be a Triple-A credit.

This was encapsulated in the nods of agreement that were seen in a packed auditorium at a Washington conference of international bankers on Friday when a visibly angry BlackRock CEO Laurence Fink told the audience that the U.S. is not a “principled nation.”

When men and women who control tens of trillions of dollars in U.S. investments are indicating they’ve lost their faith in America, it goes to the very question of whether the U.S. deserves to be at the center of world finance. It’s clear now that the dysfunctional American political system no longer justifies a Triple-A rating from anyone.

PLY: CME rightly increased margin against a background of some form of agreement which actually only demonstrates that the US political system is not merely broken but has no leadership either. The world shares the pain of the US’s dysfunctional politics. Frankly, we would rather not but we don’t seem to have much choice.

CME To Use OPIS Prices For NYMEX Retail Gasoline & Diesel Swap Settlements
fortmilltimes.com

Plugging a hole left by the U.S. government shutdown, CME will use OPIS retail gasoline and diesel price averages to settle its popular retail fuel contracts replacing averages published by the Energy Information Administration (EIA).

PLY: which also begs the question why government statistics such as these cannot be compiled more cheaply in a private sector venture which can then also sell the data commercially to raise more revenue than the sclerotic centralised administration?

Brazil’s BM&FBovespa To Increase Stock Listing Chapters
Reuters

BM&FBovespa, Brazil’s exchange monopoly, increased on Tuesday the number of stock listing segments to eight from a prior four, in a bid to stimulate companies to go public in South America’s largest equity market.

CFTC Files & Settles Charges Against JPMorgan Chase Bank,N.A., For Violating Prohibition On Manipulative Conduct In Connection With “London Whale” Swaps Trades

PLY: Jamie Dimon goes further ahead in the race for an American Bar Association chargeable hour lifetime achievement award. Meanwhile, CFTC manages to get some cash in to help the US government during its furlough…

The WSJ recently ran an interesting Opinion piece noting how Fannie/Freddie and government agencies in general have gone unpunished in the financial crisis aftermath while JPM, run by Jamie Dimon who has had the temerity to suggest that maybe President Obama is not perfect, seems to be endlessly in the sights of regulators. Yes some clear culpability has emerged but the fact that US regulators can successfully punish JPM even when the government itself is shut down may only add to a certain suspicion that some players are favoured over others for special punishment…

Private Markets

OSC Grants Temporary Relief To Certain SEFs
lexology.com

On October 10, 2013 the Ontario Securities Commission issued Staff Notice 21-707Swap Execution Facilities to notify that it provided exemptive relief in respect of a number of “Swap Execution Facilities” or “SEFs” regulated by CFTC from the requirement to be recognized as an exchange in Ontario.

ECX Moving Online
capitalethiopia.com

ECX, the electronic commodity trading association, is to convert to online trading in Q3 of the current budget year.

CTO Solomon Edossa, said that ECX will move forward with new services. Currently, ECX conducts physical trading from its headquarters located at Mexico Square in Addis Ababa.

Trading Platform Launched In China (Shanghai) FTZ
Global Times

Shanghai International Energies Trading Center Co, a wholly owned subsidiary of the Shanghai Futures Exchange has launched in the China (Shanghai) Pilot Free Trade Zone (FTZ) as a global trading platform for energy and chemical products futures.

PLY: First platform launched in the much discussed Shanghai FTZ.

Mt. Gox Can Now Pay For DDoS Protection In Bitcoin
MarketWatch

There’s good news for the bitcoin exchange Mt. Gox, which had been plagued by distributed denial-of-service attacks earlier this year: It can now pay for DDoS protection in bitcoin.

That’s possible because Baidu – widely touted as the Google of China – now accepts the virtual currency for its security service called Jiasule, according to a press release.

PLY: Slightly tenuous story but the BTC issue is key. While the British Finance Minister has de facto deregulated EU banking for Chinese entities this week and given a notable competitive advantage to the overseas institutions, the Chinese are keen to use all manner of alternative currencies where the west is still proving less flexible.

Special Section: FTI, NSEL, India at the Crossroads

PLY: Jignesh Shah’s fate hanging by a thread helps MCX to be limit up (+5%) and FTIL 1% higher…

Jignesh Shah’s Fate Hangs In Balance As MCX Board Meets Oct 22
Business Standard
FMC Gears Up For MCX Offensive
Business Standard

FMC is planning to unleash a series of actions over the next few days that will change the face and functioning of the country’s largest commodity bourse.

MCX, hit by troubles at NSEL, is set to see changes at multiple levels. While there will be new independent directors at the board level, day to day management will also undergo changes.

NSEL Buyers May Have Been Fronts To Siphon Off Money
Livemint

FMC has written to the government that it suspects the 24 buyer-members who figured in the payments crisis at the exchange may have been used as fronts to siphon off most of the Rs.5,574.35 crore (USD 905 mln) they owe to about 13,000 investors.

FMC asked the ministry of consumer affairs, food and public distribution to refer the matter to the ministry of law and justice, and indicated that NSEL promoters may have to eventually bear the responsibility of paying investors, given that they own almost 100% of the spot exchange.

PLY: Ultimately FMC intends to have FTIL et al pay for any losses…

Company Run By Wife Of Former NSEL CEO Punched Rs 40,000 cr (USD 6.49 Bln) MCX Trades
The Economic Times
Ex-NSEL Head Anjani Sinha Grilled By Enforcement Directorate
ndtv.com

When the NSEL fraud began swelling out of proportion, SNP Designs Private Ltd (SNP) controlled by Shalini Sinha wife of then CEO Anjani, began punching in leveraged trades worth thousands of crores on commodity futures exchange MCX – a listed entity that’s part of the group that owns a majority stake in the troubled spot exchange.

More startlingly, the Grant Thornton report points out that leveraged trades worth around Rs 40,000 crore (USD 6.49 bln) were executed since April last year despite SNP making heavy losses and no margin being collected from it by the party through which it traded on MCX.

Technology

HKEx Upgrades Derivatives Trading & Clearing Systems To Genium INET
HKEx

HKEx has upgraded the trading and clearing systems for its derivatives market -HKATS (Hong Kong Futures Automatic Trading System) and DCASS (Derivatives Clearing and Settlement System) – to Genium INET.

NexxCom Wireless For LSE
sddt.com

San Diego-based NexxCom Wireless, a broadband wireless equipment and systems business, has partnered with LSE to offer a wireless communications link between LSE’s city of London data center and the Equinix London data center campus in Slough.

Instinet Enhances Trade Analytics Platform With Indigo Launch

Instinet Incorporated today announced the launch of Indigo™, the latest addition to its global suite of advanced trade analytics and visualization tools.

Products

EEX Relaunches Trading Of French Physical Futures
Commodities Now

As of 13 November 2013, EEX will relaunch trading in physically fulfilled power futures for the French market area.

India – Guar Futures Cartel: Betul Oil Under CCI Scanner
Business Standard

The Competition Commission of India (CCI) has stepped up its probe into the cartelisation that rigged the prices of guar gum and seeds in futures market last year. This had raised prices to Rs1 lakh (USD 1623) a quintal and forced FMC to ban futures trade in this segment.

Indexes

FTSE MondoVisione Exchanges Index Up 4.2 % In Q3
Mondovisione

PLY: Market cap minnow BvB was up 39.6% when Ludwik Sobolewski’s accession as CEO prompted investors to hope he could turn the exchange into a market while Spain’s BME and LSE made the top three with 29.8% and 22.7% increases respectively, in share price value.

STOXX & Eurex Repo Extend GC Pooling Index family To Cover Entire Money Market Yield Curve
Deutsche Borse

The STOXX GC Pooling Index family has been expanded by 14 new indices to cover the full money market yield curve up to twelve months.

PLY: Good move.

Career Paths

KC Lam, former CME Group sales head, has joined SGX as a director in international sales, responsible in particular for forex products and services.

Financial Calendar

Today:

SGX reports 1Q FY2014 results

GFI Group Q3 2013 financial results on Thursday, October 24, 2013

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

Share Notes

Following his sale of 7,500 shares Tuesday, August 13th at an average price of $31.86, (bargain: $238,950.00) reported on August 19th and the sale of 7,500 shares Friday, September 13th at an average price of $31.23 (bargain $234,225.00) reported on September 18th NASDAQ OMX EVP Bruce Aust sold another 7,500 shares at an average price of $33.11 (bargain $248,325.00). He now owns 114,751 shares.

Following his sales of:

2,000 shares Tuesday, August 6th at an average price of $16.64, (bargain $33,280.00) reported August 12th
2,000 shares at an average price of $16.78 (bargain: $33,560.00) reported August 13th
2,000 shares Monday, August 12th at an average price of $17.02, (bargain $34,040.00) reported August 16th
2,000 shares Friday, August 16th at an average price of $17.16 (bargain $34,320.00) reported August 21
2,000 shares Tuesday, August 20th at an average price of $17.15 (bargain $34,300.00) reported August 23
2,000 shares Thursday, August 22nd at an average price of $17.10, (bargain $34,200.00) reported August 27
2,000 shares Monday, August 26th at an average price of $17.26 (bargain $34,520.00) reported August 29
2,000 shares Friday, September 13th at an average price of $17.57 (bargain $35,140.00) reported September 18
2,000 shares Tuesday, September 17th at an average price of $17.89 (bargain $35,780.00) reported September 19
2,000 shares Wednesday, September 25th at an average price of $18.67 (bargain $37,340.00) reported September 30th

Interactive Brokers SVP Milan Galik sold another 2,000 shares Friday, October 11th at an average price of $19.28 (bargain $38,560.00). He now owns 777,604 shares.

Analyst Notes

Compass Point Dropped Their Price Objective On CBOE From $50.00 To $45.00 “Neutral” Rating
National Bank Financial Lowered Their Price Objective On TMX From C$47.00 To C$44.00
Credit Suisse Lifted Their Price Objective On Shares Of Charles Schwab From $19.00 To $20.00 – “Neutral” Rating
Compass Point Upgraded The Rating On Charles Schwab From “Sell” to “Neutral”, And Raised The Price Target From $17.00 To $20.00.

SGX’s Total Revenue Seen To Fall 10% To S$182 Mln (USD 146 Mln)
sbr.com.sg

DBS, estimates total revenues to drop by 10% to S$182mln (USD 146 mln), expenses to remain stable at S$81 mln (USD 65.3 mln), and net profit of S$84 mln (USD 67.7 mln) for the quarter. Base DPS of 4 cts is expected to be declared, similar to previous quarters.

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.

Crowdfunding

Crowdfunding Options Would Be Expanded Under Michigan Proposal
mlive.com

Proposed legislation would allow Michigan businesses to use crowdfunding websites to seek investments in exchange for company shares.

Bill sponsor Rep. Nancy Jenkins, R-Clayton, said her proposal would boost the state economy by giving small business owners and entrepreneurs options for raising capital.

PLY: Again the individual states are leading the sclerotic central government

Other stories

TBC Bank Shifts IPO To London (subscription)
Financial News

TBC Bank, Georgia’s second-largest bank, whose stakeholders include JP Morgan and Ashmore Asset Management, is eyeing a London flotation after previously indicating a preference for Warsaw.

First Derivatives Launches Australian Centre Of Excellence
Finextra

First Derivatives, today launched its Global Centre of Excellence for Financial Market Analytics and Surveillance in Sydney, Australia.

SEC Charges Knight Capital With Violations Of Market Access Rule

SEC announced that Knight Capital Americas LLC has agreed to pay $12 million to settle charges that it violated the agency’s market access rule in connection with the firm’s Aug. 1, 2012 trading incident that disrupted the markets.

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