October 17 2014


LME wins platinum and palladium fixes to set up showdown with CME and others over the London Gold FIX. EUREX abandons Ruble trade just as a few first flakes of snow are falling on Red Square as I type. Various deals including an apparent transformation in First Derivatives. Singapore makes rare regulatory error, as US delivers slapdown to EU over derivatives rules while Chicago Fed is, like me, eager to see transparency at the top of the waterfall…

Happy scrolling, it’s been a memorable week in Moscow, off to Krakow next.

Public Markets

Schwab Reports Q3 Net Income Up 11% YoY
Charles Schwab

Charles Schwab announced that its net income for Q3 2014 was $321 million, comparable to $324 million in Q2 2014 & up 11% from $290 million for Q3 2013. Net income for the nine months ended September 30, 2014 was $971 million, up 29% from the year-earlier period.

R K Damani, Shivanand Shankar Acquire Over 1% Stake In MCX
Sharleen D’souza – Business Standard

India’s two leading stock market investors, Radhakishan Damani (1.34%) and Shivanand Shankar (1.27%), acquired more than one per cent stake each in MCX.

Goldman Sachs In Talks To Acquire ETF Provider IndexIQ
Jessica Toonkel – Reuters

Goldman Sachs is in discussions to acquire IndexIQ, a Rye Brook, New York-based ETF provider which could enable Goldman to introduce passively managed and actively managed ETFs within months.

Eurex Delays Plan For MOEX Partnership (subscription)
Chiara Albanese – Wall Street Journal

Eurex has shelved plans to partner with the MOEX to offer trading in ruble derivatives per their partnership agreement signed in August 2013.

PLY: Disappointing news from EUREX who presumably are worried about upsetting US regulators in particular. Hopefully a sensible normalisation of relations can soon be achieved to further enable growth in overseas investment interest in MOEX and Russia.

LME Takes Battle To Washington After London Warehouses Win
Douwe Miedema – Reuters

Fresh from a court win in Britain, LME now faces one of its biggest hurdles yet in its years-long crisis over its warehousing policy that consumers say has inflated prices: convincing U.S. lawmakers its reforms are enough.

LME’s Fee Hike Plan Will Roil Metal Brokers: Triland
LME Fee Increases Could Be Almost 100% For Some (subscription)
Metal Bulletin

LME’s plan to hike trading fees next year will likely force brokers and banks to ditch some commission-free terms and review their business models…

Singapore Votes To Scrap ‘One Share, One Vote’ Policy
Adam Brown – IR Magazine

Singapore’s parliament has scrapped the country’s ‘one share, one vote’ policy for public corporations to give them more options when issuing shares as part of an overhaul of business law meant to ease regulation and give companies more flexibility, according to local media reports.

PLY: A bad, regressive move by Singapore which I believe will be regretted in the city statein due course.

Fed Official Slams ‘Fantasy’ Of CCP Default Management (subscription)
Cecile Sourbes – Risk

An official at the Federal Reserve Bank of Chicago has described as “fantasy” the idea that clearing house procedures for a default can work as the number of CCPs in the OTC market increases. The default management process relies on traders who are seconded from surviving bank members.

PLY: Yip, yip and thrice yip. My calls for clarity at the end of the waterfall are endorsed explicitly by the Fed – and quite right too. We cannot remotely endanger the sanctity of market structure and need every possible security blanket and additional contingency to ensure market confidence when the post OTC market’s CCP-centricity comes to be tested.

Markit Chief Calls For More Unity (subscription)
Tim Cave – Financial News

Markit CEO Lance Uggla has urged the financial industry to work “better together” as it faces up to regulatory headwinds, a pressure to reduce costs and a lack of data standards.

PLY: The difficulty with ‘unity’ is that it often seems to be sell side unity which is of course an oxymoron. On various levels.

CFTC’s Massad Sees ‘Progress’ On Global Derivatives Rules (subscription)
Andrew Ackerman – Wall Street Journal

European policy makers are far behind their U.S. counterparts in setting up postcrisis regulations for the multitrillion-dollar derivatives industry but Timothy Massad, the top U.S. overseer of swaps, said a coordinated system will ultimately emerge.

PLY: I can only vaguely imagine the delight of the Eurocrats at hearing this putdown from the pages of the WSJ. Despite the odd crazed myopic Europhile on the payroll, the Journal manages to retain a mostly objective view on Brussels…which of course goes entirely against the Brussels’ desire for more fawning agitprop from the FT and other house journals.

Wells Fargo To Shut Its ‘Dark Pool’ As Demand Falls

Wells Fargo is closing down its dark pool due to decreased customer demand.

Private Markets

BSX To Close Due To Hurricane Gonzalo

Due to the approach of Hurricane Gonzalo, the Bermuda Stock Exchange (BSX) and the market will remain closed for Friday, 17 October, 2014. BSX anticipates that it will re-open for business at 8:30 a.m. Monday, 20 October, 2014.

African Stock Exchange Partners With DB1 Prior To Launch In 2015
Forex Magnates

The African Stock Exchange (AFSX), the first pan-African stock exchange, has announced it will partner with DB1 to tap expertise, technology and support services when the trading venue officially launches next year.

DB1 press release here.

PLY: Plaudits to DB1 on an interesting deal as clearly the AFSX has considerable ambition…

Special Section: FTI, NSEL, India at the Crossroads

PLY: No news as MCX and FTIL are both up around 1%.


First Derivatives Secures Majority Shareholding In Kx Systems In Transformational Deal

First Derivatives announced it has reached agreement with the founders of Kx Systems to acquire a further 46.47% stake in Kx for a total consideration of £36.0m. As a result First Derivatives’ holding in Kx will increase from its current 20.1% to 65.2% on a fully diluted basis. This increase in holding is expected to be earnings enhancing in the current financial year for the Company.

PLY: Interesting, something to percolate over the weekend as to just how tranformational this is…

ITG Launches POSIT Marketplace 3.0
Globe Newswire

ITG announced the launch of the POSIT® Marketplace 3.0 algorithm to increase fill rates in non-displayed venues while filtering out potentially toxic liquidity.


LME Wins Tender To Manage Platinum & Palladium Price Fixing (subscription)
Ese Erheriene & Matthew Cowley – Wall Street Journal

LME will set a key global price for platinum and palladium from December with a new electronic process, marking the latest overhaul of a major benchmark in the wake of increased regulatory scrutiny.

PLY: A great win for LME which must provide added momentum in the race for the London Gold fix…

LME press release here.

The Future Of Listed Derivatives (subscription)

Renaud Huck, head of buy-side, Deutsche Börse Group-Eurex Exchange, and Bruno Pannetier, chief investment officer at Old Park Capital, discuss the evolution of the listed derivatives market…

Career Paths

Liquidnet has further strengthened its fixed income team in Europe with the appointment of Jonathan Gray as Head of Fixed Income Sales. Reporting directly to Mark Pumfrey, CEO Liquidnet Europe and Constantinos Antoniades, Global Head of Fixed Income, Jonathan will be responsible for expanding the number of buy side institutions on the platform adding additional liquidity and supporting growth through the introduction of new asset classes.

Thomson Reuters Founders Share Company announced that it has appointed Nicholas Lemann to its BoD.

Financial Calendar

Next week

SGX Q1 FY2015 Results
NASDAQ OMX Q3 2014 Financial Results
Interactive Brokers Q3 2014 Financial Results
Record date Tullett Prebon 5.6p interim dividend

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

Other stories

Industry Steering Committee & Working Group Formed To Drive Implementation Of T+2 In The U.S.

DTCC, in collaboration with the financial services industry, has formed an industry steering committee and an industry working group.

PLY: Rampant excitement as the US tries to lurch to T+2, forming a committee a few weeks after Circle announced real-time clearing for Bitcoin payments which is ostensibly free. Guess which legacy systems face extinction?

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