October 22 2013

Young-Future-Trends The Indian government lurches towards more anti-shareholder moves. LCH.Clearnet gets a new CEO, various new products, EMCF-Euro CCP clears UK anti trust, Jeff Sprecher speaks about NYSE while Italy endeavours to shore up government bond derivatives…

& naturally much more too, scroll on, it’s the market structure daily, Exchange Invest:

Public Markets

ICE’s Sprecher Sees Continuing Role For Humans At The NYSE
Bloomberg

PLY: Jeff Sprecher has a marvellous mot juste moment:

“It’s sort of like buying someone’s house. I don’t really feel comfortable talking about how I’m going to redecorate. There’s something kind of unseemly about that. You don’t want to actually talk about their drapes. You actually want to own the house and then let them move to Kansas, and then you can go in.”

(& No I hadn’t realised Duncan was moving west either…).

French Tax On Intraday Trading Loses Support
The Wall Street Journal

Despite previous calls by France’s Socialist government to rein in financial markets, the government’s firm stand against a proposal to tax intraday trading is yet another sign of its waning political will to curb speculative trading, and force the financial sector to significantly contribute to public finances.

PLY: France’s government is a doctrinaire socialist disaster area… Yes, that probably is tautology. Then again anybody who sees the light on the stupidity of FTT is welcome to recant. Elsewhere the German electoral “winner” (sic) Angela Merkel is being pressured with all manner of anti-bank initiatives in coalition talks with the German socialists.

EMCF And EURO CCP To Combine

EMCF and EuroCCP announced that the Office of Fair Trading (OFT), the UK’s consumer and competition authority, has recommended an unconditional clearance for the two clearing houses to combine to form a new pan-European cash equities clearing house that builds on the strengths of both firms.

PLY: It will be interesting to see how the combined entity moves forward given strong competition in equity clearing from the likes of LCH.Clearnet and particularly the mutualised model of SiX which delights many end users.

Alibaba In Talks With London Bourse After Hong Kong Snub (subscription)
South China Morning Post

PLY: Alibaba continues to play the field, having apparently spoken with London Deputy Mayor Kit Malthouse Mayor Boris Johnson during his visit accompanying Mayor Boris Johnson to Hong Kong last week.

Scratching That (Gl)Itch: Exchanges Test For Crashes (subscription)
Financial News

Would you drive a car designed and built by Nasdaq OMX, NYSE Euronext or any other major stock exchange operator?

PLY: A good article with many interesting inputs across the exchange market, including one Patrick L Young noting: “Outages are not purely their fault: it is like blaming Cadillac when your tyres blow out because the quality of the road is rubbish. On the whole, systems are scintillatingly reliable.”

LME Chief Defends Warehouse Policy As Alcoa Writes To Regulators
The Telegraph

PLY: LME CEO Garry Jones is quoted thus: “We’re not going to destroy a market that has been here for almost 137 years in five minutes, that would be madness. I don’t think it needs it but there are ways we can modernise. The modernisation trend has already begun,”

Italy Plans To Offer Guarantees On Govt Bond Derivatives
Reuters

The Italian Treasury plans to introduce a system of bilateral guarantees for derivative contracts over domestic government bonds signed with national and foreign banks to help lenders manage risks and facilitate its debt sales.

Under the planned system, outlined in a draft law seen by Reuters, the Treasury and the banks will exchange cash sums on a short-term basis depending on the mark-to-market of their respective derivatives positions.

A Treasury official told Reuters the new system would help Italy issue debt denominated in currencies other than euros.

PLY: Presumably this will help Italy with the issue it has had of late since LCH essentially removed a lot of the key facets to CCP from Italian bond/repo trade.

Poland Takes Step To Boost Trade On Gas Exchange
Reuters

The Polish Power Exchange, will allow new participants (e.g. trading companies and large customers) to trade directly on its new gas exchange from November 1.

USDA To Keep Releasing Crop Reports During CME Trading Hours, Despite Complaints
Reuters

A top U.S. Agriculture Department official said key monthly U.S. crop reports will continue to be released during CME trading hours, despite complaints from the grain industry that high-speed traders have access to the data before it becomes available on public websites.

What’s Next For Euronext In Amsterdam?
Futures & Options World

Amsterdam has a long history of being a driver of innovation in the European financial markets. Euronext’s Amsterdam subsidiary will have to harness some of that history to re-establish itself as an independent entity…

Private Markets

TrueEX Files CFTC Application To Offer Rate-Swaps Trading
Bloomberg

TrueEX Group LLC filed an application to offer the most-active interest-rate swaps on its exchange platform, joining another firm in an action that may hasten the migration of derivatives to public markets.

The step is part of a process that eventually will move trillions of dollars of derivatives to government-mandated platforms under the Dodd Frank Act. While swap execution facilities were required by CFTC to be ready for business by Oct. 1, trading on them is voluntary. Once approval is granted for an application such as trueEX’s, swap users will be forced to buy or sell contracts on the new systems.

PLY: Adds to Javelin’s move reported yesterday.

Special Section: FTI, NSEL, India at the Crossroads

PLY: Tuesday: time for the weekly NSEL payment default later today while MCX is up nearly 2% and FTIL up 0.5%. The media meanwhile is excited that Jignesh Shah will be at least arrested, if not imprisoned, within days.

Worryingly, government is considering more stringent shareholding limits in exchanges which can only stifle competition and innovation. Bad bad bad.

Govt, FMC Plan To Reduce Shareholding Of Anchor Investors In Commodity Exchanges
The Economic Times

The commodity market scam and findings of multiple ongoing probes are paving the way for a wider change in shareholding rules in exchanges.

The regulator, FMC, and the government are contemplating abolition of the concept of anchor investor in commodity exchanges and capping the shareholding of such investor at 15% or even lower. Also, in a move to achieve a diversified shareholding, the policy-makers plan to simplify rules on transfer of shares and relax restrictions on shareholders from trading on the bourse platform.

PLY: Bad news. The reduction of anchor shareholders is the sort of poorly considered regulation long feared – essentially making exchanges not capitalist entities. There is no reason why a private entity cannot own any exchange 100%. In this case, government regulation spectacularly failed and now the bureaucrats are trying to change the rules in a Stalinist fashion to get the problem off their backs in a way which will harm innovation in markets.

EOW To Take Action Against Jignesh Shah Soon
India Today
NSEL: Police Say Board Was Aware Of Scam, EOW To Attach Investors’ Assets
First Post
Probe Reveals NSEL Board ‘Orchestrated’ Meetings
The Indian Express

Don’t be surprised if you learn that the economic offence wing (EOW) of Mumbai police has arrested Jignesh Shah – the promoter of NSEL, MCX and FTIL, or attached his properties across the country.

…Apparently Mumbai police believes that the NSEL board was in the know of all transactions at the debt ridden spot exchange, with instances of board meetings being “orchestrated”.

According to a senior official of the Economic Offences Wing (EOW), the investigations have found that minutes of meetings were “cooked up” with signatures of absent members on board papers.

PLY: Arrests must surely be imminent in the private sector which hopefully will also extend to penalties for the civil servants who abjectly mismanaged the regulation of this market.

CBI Examining Role Of Senior Officials In Consumer Ministry
The Economic Times

The Central Bureau of Investigation (CBI) is examining the role of senior bureaucrats in the consumer affairs ministry who allegedly did not act against NSEL despite specific warnings. The CBI is also probing why senior officials of public sector units (PSUs) like MMTC approved investments in NSEL despite knowing it was an unregulated body.

Who Regulates NSEL? Asks Bombay High Court
Livemint

The Bombay high court on Monday asked the central government, ministry of consumer affairs and commodities regulator FMC to clarify by Friday the name of the agency that has the “power to supervise and regulate” the crisis-hit NSEL, failing which it will pass an order on its own.

Anjani Cross-Examined At FT Tower
Business Standard
Anjani Sinha Not To Be Made Approver: Police
The Hindu Business Line

The Economic Offences Wing of Mumbai Police has no plans to make former NSEL CEO Anjani Sinha an approver in the ongoing investigations.

PLY: An “approver” is essentially a suspect who turns states’ evidence.

Probe Auditor SV Ghatalia’s Role, Says Investor
The Economic Times

An investor who registered a criminal complaint against NSEL and its promoters has requested the Mumbai police to look into the role of auditor SV Ghatalia & Associates, an Ernst & Young affiliate, which audited the books of the exchange in the past.

Wealthy NSEL Investors Like Akshaye Khanna Deserve No Sympathy
FirstPost

The Bollywood actor Akshaye Khanna lost Rs 50 lakh (USD 80.9 k) by giving the money to a firm that promised to double the money in 45 days by investing in commodities. NSEL has managed to default on Rs 5600 crore (USD 906.14 mln) of its obligations to its investors. Should one feel sorry for Akshaye Khanna or the numerous investors who lost money in NSEL?

PLY: Sympathise with all losers but encourage them to take note that they have total responsibility for their actions and need to do due diligence…

Technology

Deutsche Börse Market Data + Services Launches Virtualised Private Simulation
Deutsche Borse

Deutsche Börse Market Data + Services has released Virtualised Private Simulation (VPS) – a proprietary cloud-based solution providing clients with self-provisioned, on-demand access to Eurex Exchange’s T7 simulation environment allowing members to develop and test the T7 system according to their own schedule.

PLY: A good idea. How does it work with the problem of clock/timing/timestamp issues I wonder.

Aquis Exchange Joins IPC’s Connexus Extranet Service

Aquis Exchange has joined IPC’s Connexus Financial Extranet service as it awaits regulatory approval.

Products

Moscow Exchange Launches Metals Trading
Forex Magnates

Moscow Exchange has launched precious metals trading.

SGX To Develop Commodity Products With Shanghai Futures
Reuters

SGX, is to develop commodity derivatives in energy, metals, chemicals and commodity indexes with the Shanghai Futures Exchange for both markets.

ETF Palette Set To Remain Fragmented (subscription)
Financial News

Europe’s fragmented ETF landscape is shifting with the arrival of Bats Chi-X Europe’s new pan-European platform listing ETFs.

Indexes

CME To Resume Lean Hog And Feeder Cattle Indexes This Week
Reuters

CME on Monday said it would again issue the exchange’s lean hog and feeder cattle indexes, which had been temporarily suspended by the partial federal government shutdown.

Career Paths

LCH.Clearnet has announced that Suneel Bakhshi, the President of Citigroup Global Markets in Japan has been appointed as its new Group CEO.

PLY: Mr Bakhshi has a strong OTC pedigree which will clearly help shape LCH’s moves to gain a more sustainable revenue model as its futures/options clearing franchise has fragmented.

Financial Calendar

Tomorrow:

NASDAQ OMX Q3 results

This week:

GFI Group Q3 2013 financial results
IEX Launch

Next week

Deutsche Borse Q3 Results
Thomson Reuters Q3 Results
WSE Q3 Results
BME Q3 Results

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

Analyst Notes

Earnings Projected To Decrease For Nasdaq
Forbes

Nasdaq OMX reports Q3 earnings on Wednesday, October 23, 2013, and the consensus earnings per share estimate is 62 cents per share.

The consensus estimate is down from 67 cents expected 3 months ago, but unchanged over the past month. Analysts are projecting earnings of $2.53 per share for the FY. After being $743 million a year ago, analysts project revenue to drop 32% year-over-year to $508.2 million in Q3. Annual revenue is projected to come in at $1.89 billion.

The company has seen steady earnings for the last eight quarters, but income has been sliding year-over-year by an average of 16% over the last four 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

Senators Press SEC On ‘Crowdfunding’
The Wall Street Journal

U.S. securities regulators should expedite long-delayed “crowdfunding” rules allowing entrepreneurs to tap investors for small amounts of capital, a bipartisan group of eight Senate lawmakers said Monday.

SEC should quickly propose rules that would allow entrepreneurs to use Internet portals to raise small amounts of cash from a large number of people, wrote Sen. Jeff Merkley (D., Ore.), Jerry Morgan (R., Kan.) and six other senators in a letter to SEC Chairman Mary Jo White.

PLY: Bravo.

Other stories

NYSE Cancels Mistaken Options Trades On Dow Average, S&P 500
Businessweek

NYSE canceled some options trades tied to three of the most-watched U.S. equity indexes after determining they were mistakes.

NYSE reviewed transactions executed between 4:12 p.m. and 4:15 p.m. New York time for contracts linked to the Dow Jones Industrial Average, Standard & Poor’s 500 Index and Russell 2000 Index as well as Citigroup, according to messages sent by the exchange operator. Fewer than 150 trades were voided, spokesman Eric Ryan said in an e-mail.

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