October 28 2014

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The news from Seoul is that Colombian Exchange President Juan Pablo Cordoba is the new Chairman of WFE – representing the Americas by convention, having edged out Sandy Frucher in the final reckoning. I wish Mr Cordoba every success in the future. This is an exciting development for his exchange and MILA the Latin America j.v. but at the same time, WFE needs serious surgery and repurposing to secure a definition that makes it a viable ongoing organisation. A new course has been set in outline by outgoing Chairman Andreas Preuss aided by outgoing CEO Huseyin Erkan but the organisation continues to sit at a critical juncture – like a bidet, it adds an element of prestige but nobody really understands what it is for…

Meanwhile, we have a man at the event and we thank Lars Ottersgard, head of NASDAQ OMX’s powerhouse tech division for his comments from the scintillating city of Seoul which you can find here:

Lars Ottersgård , Executive Vice President, Head of Market Technology, Nasdaq:

Another year, another WFE General Assembly.

I’m currently writing this looking over an incredible view from the Grand Hyatt, which sits on the historic Mount Namsan in the Yongsan district in Seoul.

The Korea Exchange (KRX) has been a gracious host for this largest gathering of exchanges in the world, now in its 54th year. It’s certainly no small feat to cater to such a wide variety of cultures represented here, but KRX has put on a spectacular event and have truly shared their warm hospitality with us all.

Today’s chatter has been all about economy, economy, economy. Whether it’s about SME financing, and how exchanges can play a better role with improving access to capital, or how exchanges themselves are in a slight branding crisis, the role of the exchange in the real economy was pulled apart. “On the latter point, there is wide agreement that exchanges cannot be blamed for systemic issues during the financial crisis.” This was especially echoed by Bart Chilton, former CFTC commissioner, in his fiery opening reception speech last night who clearly places the blame elsewhere in the financial ecosystem.

What I’m hearing from a lot of attendees is that as an industry we are perhaps guilty of not being better publicists to ourselves and truly demonstrating our worth to the rest of the economies we at the heart of – whether that’s with the regulators we share, the retail investors, economists or simply the general public. For the very nascent exchanges in frontier and emerging markets this is especially crucial, though the largest exchanges certainly have their reasons to raise their profile and show their incredible worth. In other words, we as an industry owe it ourselves to step up our game and truly have a well-recognized public face, as we have a significant amount at stake in the global economy game.

Aside from this discussion we heard from keynotes from Dr. Kyungsoo Choi, Chairman and CEO of Korea Exchange, David Wright, Secretary General of IOSCO, Je-Yoon Sin, Chairman of Financial Services Commission among others. There were also new member additions to the WFE family including the Nigerian Stock Exchange, Bahrain Bourse, Euronext and BATS Global Markets bring the total to 64. Juan Pablo Cordoba of the Bolsa de Valores de Colombia will take the Chairmanship baton from Andreas Preuss, Eurex CEO and Deputy CEO of Deutsche Börse AG (who peppered his keynote with a mountain of interesting stats the WFE has crunched on the exchange sector; for example, there are nearly 45,000 listed companies worth 69 trillion US dollars that sit on the exchanges around the world).

The day is nearly finished, and I’ve barely discussed the other interesting panels and goings on. Regardless, it’s been a very intriguing, energetic and interesting one so far. Here’s to tomorrow’s activities….

PLY: …Thank you, Lars for your insights and constructive pointers for the industry & hello to all our readers in Seoul this week. Enjoy the gala dinner which has been served with this splendid Exchange Invest dessert featuring a dash of Ottersgard… Elsewhere in today’s Exchange Invest Daily, we have a new CEO for DB1 (Andreas Preuss extends contract as Deputy) and Reto says auf wiedersehen, pet. DFM numbers stun (again) while CME CEO Gill discusses interest in a KRX stake as co-operation expands.

Public Markets

DB1 Q3 Financial Results
DB1

Net revenue of €495.9 million, up 8% on the prior-year period (Q3/2013: €457.9 million). Operating costs adjusted for exceptional items increased as expected and amounted to €266.0 million (Q3/2013: €236.1 million). The increase is attributable to consolidation effects and higher investments in growth initiatives and infrastructure. Adjusted EBIT up 4%, to €233.5 million (Q3/2013: €224.0 million). As a result, the Group recorded adjusted basic EPS of €0.85 (Q3/2013: €0.83).

PLY: DB1 missed consensus estimates it seems although the results were entirely overshadowed by the earlier than expected announcement appointing Reto’s successor.

DFM Q3 Financial Results
Reuters

Dubai Financial Market (DFM) reported an 85% rise in Q3 net profit on Monday as bourse turnover increased.

DFM made a net profit of 153.5 million dirhams ($42 million) in the three months to Sept. 30, up from 82.8 million dirhams in the same period of 2013.

CME Eyes KRX Stake (subscription)
Simon Mundy – Financial Times

CME is considering buying a stake in KRX, the US company’s CEO said, amid fierce competition among leading exchange operators to expand their presence in Asia.

“It would make sense for us – if allowed – to participate in the upside of the exchange, particularly as we are planning to help the exchange on an international expansion,” said Phupinder Gill, CME CEO.

As reported and discussed in August CME, DB1 and Standard & Poor’s have expressed interest in buying a stake in KRX. 2.5% stake in KRX is being put up for sale as a result of the merging NH Investment & Securities / Woori Investment & Securities having a combined 7.5% stake which is above the permitted regulatory threshold of 5%. The stake is apparently worth more than Won90bn ($88 mln) according to the FT.

Ex-UBS Banker Kengeter To Become New DB1 CEO
Elena Logutenkova – Bloomberg

DB1 said former UBS AG executive Carsten Kengeter will replace CEO Reto Francioni next year.

Francioni, 59, will leave his post at the end of May. He has served as the CEO since 2005, leading DB1’s unsuccessful bid to merge with NYSE Euronext in 2012.

Carsten Kengeter, who will already join as a member of the Executive Board in April 2015 at the latest, will take over the position of CEO effective 1 June 2015 after the AGM 2015. The current Deputy CEO, Andreas Preuss, will extend his mandate until 31 May 2018.

DB1 press release here.

Previous discussions on the succession and search for the new CEO here and here.

PLY: Plaudits to Mr Kengeter, ex-of Goldman and UBS on his elevation to CEO of DB1. He has in the past added colour on cost cutting when at UBS, will he similarly be attacking spending at DB1 or will he develop a more dynamic strategy for the business going forward? As of now, DB1 remains a fascinating business but in some senses, feels becalmed…

Institutions Throughout Poland Receive Bomb Threats – WSE Evacuated
The News
WSE Trading Session Continued Uninterrupted Following Evacuation Of Building
MondoVisione

Warsaw SE was evacuated, Monday morning, after institutions across Poland received bomb threats, with up to 54 buildings in the Polish capital receiving threatening emails.

WSE was breached by hackers last week, reported here.

PLY: I maintain zero tolerance for any form of terrorism and applaud WSE for their calm maintenance of an orderly market without problems during this challenging time – it demonstrates the core operational excellence in that business.

New London Gold Benchmark To Go Live In Early Q1 2015 – LBMA
Reuters

Repeats previous news of early 2015 start expected following November agreement on winner from amongst Broker Autilla Ltd (Sapient), CME jointly with Thomson Reuters, ICE, LME and broker ICAP’s online platform EBS who Reuters say have been short-listed to provide the new daily gold price mechanism.

Previous discussions here and here.

Cross-Margining In Europe Faces Long Journey (subscription)
FOW

When Eurex Clearing introduced in June this year the first European cross-margining service between IRS and fixed income futures many in the industry welcomed the development.

PLY: In other words, long before there is any chance of prising open SwapClear and pooling collateral, NLX will already be dead. Then again the perfect panacea that with cross-margining, all life will suddenly be dandy strikes me as nirvana thinking and I am not sure those leprechauns with the pot of gold can be found at the end of the rainbow…

TriOptima Sees Significant Growth In Cross Currency Swap Compression – 5 Cycles Eliminate $500 Billion In Notional
MondoVisione

Client participation in cross currency swap compression cycles has grown from 12 to 20 institutions since its introduction earlier this year, eliminating $500 billion in notional principal outstanding.

PLY: Hooray, hooray and thrice hooray for TriOptima once again.

Private Markets

BIST To Buy A Stake In Kazakhstan’s KASE
Tengri News

According to Kairat Kelimbetov, Central Bank Governor, BIST might be a minority shareholder of KASE. “BIST relies on NASDAQ as a technology partner. Among other things, we are interested in seeing the available technology”, he said.

Kazakhstan has chosen Turkey as its strategic partner. Mid-September KASE signed a framework agreement on strategic cooperation with BIST; the agreement lays foundations for a long-term partnership, including through reciprocal purchase of shares.

PLY: Very interesting insofar as this would suggest an expansion of the BIST ability to leverage its NASDAQ OMX tech agreement (achieved via the NASDAQ OMX strategic stake in BIST) which promises a win win for all parties.

KRX Joins Hands With SZSE
Yonhap

Korea Exchange (KRX) signed a preliminary deal with the Shenzhen SE (SZSE), one of China’s three stock exchanges, to develop new financial products in relation to South Korea becoming an offshore yuan clearing hub.

NSE Becomes A Full Member Of WFE, At General Assembly In Korea
MondoVisione

Nigerian SE (NSE) announced that it received a unanimous vote for admission as a full member in the WFE.

PLY: Chairman Andreas Preuss and CEO Huseyin Erkan stand down with a remarkable new role call of members – Nigerian Stock Exchange, Bahrain Bourse, Euronext and BATS Global Markets have all been confirmed as new members at the AGM which is good news, bringing up that number made famous by the Beatles… what now for the WFE “When I’m 64?”

NSE Announces Tax Exemption On Commissions On Transactions
StarAfrica

Nigerian SE (NSE) says the exemption of VAT on all commissions applicable to capital market transactions is now effective.

LedgerX Hopes To Establish First U.S.-Regulated Options Exchange For Bitcoin
Yuliya Chernova – Wall Street Journal

A new startup out of New York called LedgerX LLC has recruited big financial-industry names to its board of directors and raised venture funding from Lightspeed Venture Partners, Google Ventures and others to add a dose of legitimacy to the bitcoin market.

LedgerX hopes to become the country’s first bitcoin options exchange with Uncle Sam’s blessing. It submitted applications to CFTC in late September to be approved as a derivatives exchange with bitcoin as the underlying asset to be traded, according to LedgerX co-founder and CEO Paul Chou.

PLY: Interesting venture and a delight to see the excellent former CFTC Chairman and NYMEX CEO Jim Newsome on the board. We wish all parties every success as the cryptocurrency revolution continues.

Special Section: FTI, NSEL, India at the Crossroads

PLY: Both MCX and FTIL are flat today as the defenestration of the Indian corporate code continues to run rampant.

NSEL Fraud: Govt Mulls Revamp Of FTIL Board
The Economic Times

As it tries to recover investors’ money in NSEL fraud, the government is considering a proposal to revamp the board of the crisis-hit exchange’s parent firm, FTIL.

Technology

Southeast Europe Stock Exchanges Launch Procurement For IT Platform
Novinite

SEE Link, a joint-stock company established by the Bulgarian SE (BSE), the Macedonian SE (MSE), and the Zagreb SE (ZSE), is to launch a procurement procedure for an IT platform (ITP) which would facilitate order-routing.

Marex Spectron Creates Pioneering LME Trading Platform
Commodities Now

Marex Spectron has created an electronic trading platform for clients who need to execute latency-sensitive strategies on LME while remaining fully compliant and without sacrificing prudent risk management.

UK Power Market Participants Gain Unprecedented Access To Real-Time Flow & Generation Data Via Genscape’s Proprietary Monitoring Technology
MondoVisione

smartTrade Launches End-To-End Solution To Automate Fixed Income Flows
MondoVisione

smartTrade Technologies announced the launch of a new end-to-end trading solution designed for Fixed Income and OTC derivatives businesses.

Products

Nasdaq Presses On With Plan To Clear Forex Derivatives In Europe (subscription)
Philip Stafford – Financial Times

Nasdaq is to press ahead with its long-touted plans to clear some foreign exchange instruments in Europe as local regulators finalise mandatory rules for trading off-exchange derivatives.

The US-Nordic group has lodged an application in recent weeks with European regulators for approval to clear a range of non-deliverable forwards (NDFs) and options.

PLY: The gradual reform of the forex business is gaining pace. Interesting to see how the silo end of the NASDAQ OMX empire is looking to expand and given their abilities in the various Scandinavian silos they operate, their NDF venture looks very interesting – a captivating niche for their business model to profit in potentially.

CME To Launch Calendar Swaps For Malaysian Palm Olein In Dollars
Anuradha Raghu – Reuters

CME said it would launch U.S. dollar-denominated calendar swaps for Malaysian palm olein in November, giving investors a way to reduce default risks and hedge refining margins.

CME press release here.

CME, KRX Announce After-hours Access To US Dollar Futures Contract On CME Globex
CME

CME and KRX announced that effective December 8th, KRX’s US Dollar Futures contract will be hosted after-hours on the CME Globex electronic trading platform, providing international market participants expanded access to the Korean markets.

SGX Plans China Derivatives As Stock Link Buoys Futures
Jonathan Burgos – Bloomberg

SGX plans to develop more derivatives focused on the world’s biggest emerging market after volume for FTSE China A50 Index futures jumped to a record last quarter, Michael Syn, SGX’s head of derivatives, said in an interview on Oct. 23. The Hong Kong-Shanghai stock-trading program announced in April is reviving foreign investor appetite in mainland Chinese shares, Syn said.

Singapore To Examine Swaps Trading Change (subscription)
Jeremy Grant – Financial Times

Singapore is considering whether to require market participants to trade on regulated electronic trading platforms, marking a change of tack on its policy on a key aspect of OTC derivatives reforms.

Sweeping reforms of the $700tn OTC derivatives markets have been under way since the G20 in 2009 agreed on measures to clean up the financial system after the crisis of the previous year.

BSE Plans Foray Into Commodity Trading; Board Gives Nod For New Platform
The Economic Times

BSE will soon make a foray into commodity trading. A proposal to start a new platform for commodities trading was approved by the BSE board on October 20.

BSE’s rival in equity trading, National SE (NSE), already has a presence in the commodity segment through a stake in NCDEX. Bourses such as BSE entering commodity trading are eyeing the passage of Forwards Contract Regulations Act.

Indexes

MexDer Launches The New Mini IPC Future Contract
MondoVisione

This product broadens the range of current investors and participants in the Derivatives Market.

Ideal instrument for retail investors who want to do strategies and have exposure to the Mexican SE market through derivatives.

Career Paths

DB1 said former UBS AG executive Carsten Kengeter will replace CEO Reto Francioni next year.

Carsten Kengeter, who will join the Executive Board by April 2015 at the latest, will take over as CEO effective 1 June 2015 after the AGM 2015. The current Deputy CEO, Andreas Preuss, will extend his mandate until 31 May 2018.

HKEx announced that Mr John Estmond Strickland has served a notice on the Board of Directors of HKEx to resign as an Independent NED of HKEx effective 31 October 2014 having reached the age of 75.

FN reports that London-based fintech company OpenGamma has appointed Mark Beeston, the former head of post-trade at Icap as chairman of its board.

Mark Beeston, founder and CEO of fintech venture capital firm Illuminate Financial Management who left Icap in January 2014, has replaced OpenGamma’s co-founder Kirk Wylie as chairman of the board, according to a statement from the firm.

Wylie has taken the role of chief innovation officer.

The firm also appointed Cristóbal Conde, former CEO of SunGard, to the board. Conde held a number of executive management roles at SunGard, and was chief executive for 12 years.

Ever-expanding retail FX company FxPro has recruited ex-ICAP Ed Anderson within its eFX Sales division, based in London.

Financial Calendar

Thursday

CME Q3 2014 Financial Results
BGC Partners Q3 2014 Financial Results
Thomson Reuters Q3 2014 Financial Results

Friday

CBOE Q3 2014 financial results

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

Analyst Notes

Barclays Reaffirmed Their “Overweight” Rating On NASDAQ OMX – $47.00 Price Objective, Down From $48.00

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.

Other stories

ESMA Agrees To Short-Selling Measures Introduced By Italian CONSOB
MondoVisione

ESMA has issued an opinion regarding the emergency measures introduced by the Italian Market regulator under the Short-Selling Regulation (SSR). The SSR requires ESMA within 24 hours following the notification by a national competent authority to issue an opinion on whether it considers the measure, or proposed measure, necessary to address the exceptional circumstances.

CFTC To Hold An Open Commission Meeting On November 3rd
MondoVisione

CFTC Chairman Tim Massad announced that the Commission will hold an open meeting on Monday, November 3, 2014 at 10:30 a.m.

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