October 22 2014

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India creates ugly precedent as government forces NSEL merger on parent FTIL. SGX posts disappointing results as IBKR plunges into the red on market making losses. BGC goes hostile over GFI while EEX buys majority of Powernext. BATS expanding into Turkey as various EU exchanges talk small cap stocks. It’s a bumper day for exchange news, enjoy the rest of your free industry daily Exchange Invest:

Public Markets

SGX Q1 FY2015 Results
SGX

Revenue: $169 million, down 8% y/y, Operating profit: $87 million, down 19%, Net profit: $78 million, down 16%, EPS: 7.3 cents, down 16%. Interim dividend per share: 4 cents, unchanged

Interactive Brokers Q3 2014 Financial Results
Interactive Brokers

PLY: Split the numbers out and clearly market making had a bad quarter while the brokerage business did well. Congratulations to Milan Galik on his elevation to President.

Government To Merge Crisis-Hit NSEL With FTIL
The Economic Times

The government has ordered the merger of scam hit NSEL with parent FTIL, initiating a transaction between two private companies for the first time in the larger public interest.

The decision is aimed at leveraging the assets, capital and reserves of the combined entity for efficient administration and settlement of rights and liabilities of stakeholders and creditors of NSEL, the ministry of corporate affairs said. FMC had recommended the merger on August 18.

PLY: I still think this sets a ghastly precedent given the damaging micromanagement frequently wrought on Indian markets by regulators. Is this the end for Mr Shah? It could yet presage massive upheaval as investors will be seeking a new way forward for the business and a clean slate to rebuild trust. Had Mr Shah been more pro-active in seeking resolution he may have been able to avoid this shotgun merger.

FTIL Investors Have A Tough Call To Make
Jwalit Vyas – The Economic Times

NSEL has returned to haunt FTIL investors with the government proposing the amalgamation of NSEL with its parent. A merger would wipe out FTIL’s net cash reserves of around Rs 1,050 crore (USD 171.5 mln) by straddling it with a huge liability of its subsidiary.

BGC Launches Hostile $675m Offer For Rival GFI (subscription)
Philip Stafford – Financial Times

The New York-based group will offer to buy the 86.5% of shares in GFI it does not own in a deal that values GFI at a tender offer of $5.25 a share. The offer will end on November 19.

If successful, the bid would break up a deal the GFI board had agreed over the summer with CME, the US futures exchange, to buy GFI at $4.55 a share. BGC has argued the CME bid undervalues GFI as it sold the company at a discount to its cash.

Press release here. Previous discussions here and here.

PLY: CME will doubtless be dusting off their playbook of how to deal with opportune bidders who push the price of things up. What once seemed so simple has turned rather messy.

EEX To Take Majority Stake In Powernext
Reuters

EEX will take a majority stake in French rival Powernext from Jan 1, leaving EEX with a 55.8% stake in Powernext. Powernext CEO Jean-Francois Conil-Lacoste will join the board of EEX as executive director of power spot markets.

EEX press release here.

PLY: EEX becomes the clear leader in European power markets albeit with much fragmentation throughout the continent…

Hellenic Exchanges Athens Stock Exchange SA To Decide On Share Capital Increase/Decrease
Reuters

Board to decide upon share capital increase. Says capital increase to be shaped by the co’s reserves; board to decide upon decreasing share capital to write down losses.

Germany Pushes New Stock Exchange Segment For Startups
Deutsche Welle

A new platform is needed at the Frankfurt SE that caters to Internet startups, German Economy Minister Sigmar Gabriel said at a technology summit on Tuesday.

PLY: NeuerMarkt Mark II anybody?

WSE Plans To Improve Small-Cap Market
Kamila Wajszczuk – WBJ

Warsaw Stock Exchange will take measures to improve the quality of the small-cap NewConnect market.

PLY: A mantra around since Ludwik Sobolewski was CEO. New strategy announcement eagerly awaited October 30th…

Private Markets

BATS Plans To Expand Stock Exchange Into Turkey
John Detrixhe – Bloomberg

Bats Global Markets, which vies with LSE for the title of biggest European equity market, is expanding into Turkey from November 3rd, the first foray into an emerging market for BATS.

BATS press release here.

PLY: Understandable in terms of providing comprehensivity across the European landmass but I do not immediately see how BATS can appreciably reduce costs in a market where BIST is already remarkably cheap for equity execution.

Convincing Banks About Bitcoin Is ‘Challenging’
Matthew Sparkes – Daily Telegraph

On the wall of Coinbase’s San Francisco headquarters is a 100 trillion Zimbabwean dollar note. Despite the ludicrous number of zeroes in that figure – $100,000,000,000,000 – it is worthless except as a collectible curiosity – Zimbabwean hyperinflation peaked at 79.6 billion % in November 2008 as the economy collapsed and today has no official currency at all, relying instead on the US dollar, South African rand or even Euro.

It is precisely this kind of financial disaster which Bitcoin proponents like to point to as both incentive and justification for creating a currency totally outside the control of governments.

Dividend News

Interactive Brokers declared a quarterly cash dividend of $0.10 per share. This dividend is payable on December 12, 2014 to shareholders of record as of December 1, 2014.

Special Section: FTI, NSEL, India at the Crossroads

PLY: Intriguingly, FTIL has leapt nearly 10% on the news of forced merger – has somebody done the maths and reckoned resolution will free FTIL to prosper / be acquired by somebody outside the current ruling clan? Meanwhile, MCX is flat.

NSEL Scam: 2 Top Business Men Arrested
DNA

The Economic Offences Wing (EOW) of the Mumbai police, on Tuesday, arrested two top businessman from defaulting companies, which collectively owe over Rs 1,000 crore (USD 163.3 mln) to NSEL: Gagan Suri , a director of Yathuri Associates, and Ranjeev Agarwal, promoter of PD Agro Processors.

Technology

DFM Signs MoU With Raqmiyat & Kony To Develop ‘Smart Borse’ Applications
Finextra

DFM signed a MoU with “Raqmiyat” and “Kony” with the aim to develop a series of applications as part of the exchange’s strategy to fully implement the “Smart Borse” concept over the coming period.

Products

HKEx To Launch Mini Base Metals Contracts On Dec. 1
Reuters

HKEx plans to launch so-called “mini” industrial metals futures contracts on Dec. 1 had previously said it planned to launch contracts in copper, aluminium and zinc this year.

HKEx press release here.

Eurex Focused On Clients For New Products (subscription)
Luke Jeffs – FOW magazine

RBI, FMC To Discuss Entry Of Foreign, Domestic Institutions In Commodity Futures
Business Standard

After years of regulatory dithering, foreign and domestic institutions might look forward to entry into the commodity derivatives market.

RBI & FMC are meeting next week to consider the proposal, suggested by a sub-committee of the Financial Stability and Development Council.

MOEX: New Indicative FX Rate Methodology To Take Effect
MondoVisione

The new version of the Indicative FX rate methodology approved by the MOEX Supervisory Board on 17 October, is to come into force on 22 October.

Indexes

Osaka Exchange: Certification Received For JPX-Nikkei Index 400 Futures
MondoVisione

Osaka Exchange (OSE) is pleased to announce that CFTC has certified under CFTC Rule 30.13 that the JPX-Nikkei Index 400 Futures may be offered or sold to U.S. persons, at the end of CFTC business day of October 20, 2014 (U.S. EDT).

Upon OSE’s plan to launch the JPX-Nikkei Index 400 Futures on November 25, 2014, OSE has requested for certification to the CFTC in order to expand opportunities for the investors.

Career Paths

FT reports that the veteran head of Mexico’s stock exchange, Luis Téllez, has announced his resignation and will step down from the start of next year. (press release here).

Interactive Brokers BoD appointed Milan Galik as President of the Company.

FN reports that Lisa Dallmer, former NYSE Euronext executive (COO European cash market execution services), has joined BlackRock in New York as COO for global operations and technology.

Powernext CEO Jean-Francois Conil-Lacoste will join the board of EEX as executive director of power spot markets when the proposed EEX takeover of Powernext closes.

Traders Magazine notes that Financial Products, a partner of Credit Suisse, has hired Alan Rubenfeld as a regional director, with a focus on exchange traded notes. Rubenfeld, a professional with over 25 years of securities sales experience, will be responsible for the distribution of Credit Suisse’s ETNs and structured notes to the registered investment advisor community. He was most recently director of sales for QuantShares, a provider of factor-based ETFs. He has worked as a managing director at Deutsche Bank Securities and BNP Paribas, and as an executive director at UBS.

Traders Magazine reports that Venovate, an online brokerage platform for alternative investing, hired Jerry Chafkin to its BoD. Chafkin is EVP and chief investment officer of AssetMark and was formerly with Charles Schwab. Chafkin, was CEO at AlphaSimplex Group, a liquid alternative asset management specialist in Cambridge, MA before joining AssetMark. Earlier, he was CEO at IXIS Asset Management U.S., a holding company of asset management firms. He was also a member of the Executive Committee at Charles Schwab.

SEC announced that John J. Cross III, Director of the Office of Municipal Securities, will leave the agency in November.

Financial Calendar

Today

MarketAxess Holdings Q3 2014 Financial Results Wednesday, October 22nd

Friday

NASDAQ OMX 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

CFTC & Manitoba Securities Commission Sign Counterpart To Memorandum Of Understanding To Enhance Supervision Of Cross-Border Regulated Entities
MondoVisione

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