October 29 2015


In the big wide world, China just quantitatively eased the One Child policy… In the US, CNBC seem eager to be even more left wing than that bastion of corporate socialism, the FT. (Frankly the good folks of CNBC Europe could have done a better job in their pyjamas from London at that hour – at least they seem to believe in freedom & free markets). When the Presidential candidates weren’t being interrupted by CNBC’s amateur petulance, Chris Christie offered a zinger which comes close to something discussed recently in this journal: “We have $19 trillion in debt, we have people out of work, we have ISIS and Al Qaeda attacking us, and we’re talking about fantasy football?”

…Rumours the people of New Jersey were so ecstatic they have closed a few bridges in Governor Christie’s honour may yet prove a little wide of the mark but his point was spot on.

Bumper day for markets, pith, the Exchange Invest universe – very good CME results, DB1 go for tripartite Sino-European j.v. Exchanges and others complain about the Himalayan mountain ranges in the carpet of capital rules while CME makes a tiny step forward which is a great leap for clearing (and on a normal day would lead the pith). Lots happening, you cannot afford not to scroll…

Public Markets

CME Reports Strong Q3 Results

Q3 revenues +12% to $850 million, adjusted net income, $344 million, adjusted diluted eps $1.02 (both grew more than 20%). Operating income $516 million, net income $360 million, diluted eps $1.06.

PLY: CME Phupinder Gill is, amongst a league of dedicated executives, imho the hardest working of them all. His ability to focus and at once recognise the big picture is apparent in this result, and other news today. CME remains a powerhouse top tier business. My only complaint: I would love to see it being a little more buccaneering and progressive…tricky with its governance structure. However that may appear churlish given the small step of payment brilliance below:

Exchanges Band Together To Seek Softer Bank Capital Rules
Financial Times

PLY: A 500lb gorilla of a letter sent via that 500lb gorilla clearer ABN Amro, lining up a host of major players both making markets and delivering them. Responds to yesterday’s bank worries. Letter polite but firm as per the genre. Draws support across the silos and the CCP singularities as well as the ambidextrous NASDAQ (signed by the hefty offices of Hans-Ole so presumably representing both sides of the NASDAQ CCP agenda?). Surprisingly, the ‘bankerphiles’ at LSE are not present, nor DB1 (maybe the latter were too busy practising their Chinese logograms). Anyway, it’s good to see CBOE, CME, ICE, NASDAQ, OCC representing a huge swathe of market infrastructure.

Cracking letter can be read here.

Shanghai SE, DB1, China Financial Futures Exchange Jointly Establish CEINEX

Shanghai SE, DB1 & China Financial Futures Exchange (CFFEX) officially founded their joint venture “China Europe International Exchange”.

PLY: A new offshore RMB market “CEINEX” based in Frankfurt with, therefore, EU regulation looming. Marks a whole platform approach on top of EUREX”s successful product offshoring (e.g. with KRX et al). Clearly a more exciting development than we previewed here, albeit the proof of the pudding will not merely be in the eating but also how this market reacts to any setbacks in asset values given the recent knee jerk hysteria of Chinese authorities. Exciting deal for DB1 as a group and it clearly gains some form of march on the likes of LSE (with a flawed ‘through train’ extension theory) and even HKEx, who might have hoped for something similar given their SIno-centric focus. Good work by DB1/EUREX team who clearly worked on this long before new CEO Carsten Kengeter rocked up to sign the deal.

QV EI Premium: China Capital Markets Transformation Brief – Main File

Deutsche Börse Reports Strong Q3 Performance, Accelerated Growth
Finance Magnates

Net group revenue increased by 20% y/y to €594.4 million.

PLY: In a volatile market, some analysts are disappointed the numbers were not better. The story remains that DB1 is dropping off the tail of the leaders quartet to a form of limbo (no end of hype can ever revisit that embarrassingly gauche “LSE-DB1” merger of equals shuffle, surely?) and CEO Carsten Kengeter needs to remind investors of the value within his group’s diverse asset portfolio. Collateral counts?

CME & Real -Time Payment Transfer Platform, Dwolla, Sign Commercial Agreement To Provide Payment Efficiencies To Clearing Members
(press release)

PLY: #Brilliant. A small step, at once a great leap forward. CME is already an early backer through its fintech development programme of Dwolla and here is proof in practice of a nifty means to expand payments architecture in an efficient and timely manner. Elegant, magnificent and proof of the thinking going on behind the scenes as CME looks at reworking its business. More please.

Nasdaq Clearing Responds To Debate On CCP Concentration & Systemic Ris

PLY: The man who runs the excellent OMX CCP, the thoughtful Fredrik Ekstrӧm, President, Nasdaq Clearing finds himself elevating a degree of heated agreement with the WFE’s splendid thought provoking paper of last week. Well worth reading his comments.

CBOE Holdings Declares Q4 Dividend
(press release)

Quarterly cash dividend of $0.23 per share of common stock payable on December 18, 2015, to the unrestricted common stockholders of record on December 4, 2015.

Investor Relations Symposium Latest Initiative Under HKEx’s Stock Connect Education Programme

PLY: “Through train” to have added emphasis on IR as a side element of the ongoing successful linkage. Good.

QV EI Premium: HKEx – SSE – Stock Connect Brief Part 1, Part 2, Part 3

FXCM Reprimanded & Fined By French Watchdog
Avi Mizrahi – Finance Magnates

PLY: As discussed last week, FXCM “only’ have to pay 200K Euros ($220K)) when they could have faced up to a million Euros. Not that they will be wildly relieved given their low latency crisis to crisis lurch this year.

Regulatory Approval: HK Trading Firms Can Join Euronext Paris Derivatives

PLY: HK SFC permission granted.

ICE Seeks To Reassure Investors On IDC Buy
Kaja Whitehouse – USAToday

PLY: Weird, clueless, ill-informed article demonstrating zero appreciation of the ICE and how its execution skills made legacy incumbents look foolish. Correspondent probably on the fast track to CNBC or FT with this abject lack of insight. Then again the silent army could be at work here: that cabal of disgruntled ex-NYSE group staff who found themselves leaving the gentlemans’ club when ICE decided to turn it into a business, is significantly toxic in its bitterness. Worse still some journalists listen to them. That voluble minority remain so chronically uninformed that it is not surprising they are finding the job hunt challenging while enjoying a pastime of lobbing grenades at the three dimensional ICE folk who dared to make the Big Board work for users and shareholders alike.

Premium: Exchange Deals Brief 1, Exchange Deals Brief 2

CCP Agrees Stock Exchanges Can Be Amalgamate
Daily Times

General Body Of Lahore SE Approve  Integration

PLY: “The Competition Commission of Pakistan” – yip, if only they regulated the Indian Energy Exchange (IEX) western readers’ confusion would be complete…

Previous story about  creation of Pakistan Stock Exchange in EI Newsletter – 27.10.2015

China & The UK Find Common Ground In Promoting RMB
Charles Wallace – Institutional Investor

PLY: …Except the Chinese just gave DB1 the first dibs on the derivatives business leaving London with some RMB clearing opportunities and LSE kind of dangling on the end of a virtual “through train” whose physical tracks (on the new silk road) cover multiple gauges with a terminus in Lodz, Poland. Previous story about renminbi futures contracts in London in – 19.10.2015

Easier Sebi Rules Fail To Lure Start-ups To Launch IPOs
Anirudh Laskar – Livemint

PLY: Four months after a SEBI edict, is barely a blink of the blob’s eye, and at least PE/VC et al can be relied upon not to change the rules arbitrarily at whim.

Private Markets

Liquidnet Record EMEA Q3

PLY: Great numbers from Liquidnet Europe, (disclosure: where I completed my term as a NED at the start of this year). Block appetite is strong in Europe and competitor platforms such as Plato are increasingly regarded as a Corbynite joke by many in the marketplace (if that results in the Plato politburo seeking to send me to dark pool Siberia, well, so be it). The Liquidnet European business is a great asset aided by the ITG, er, hiatus. However, with LSE Turquoise blocks growing, and overall commissions declining (albeit still giddy) there is much to play for and also much for Liquidnet to be concerned about in its (by far) most profitable region. Well done Mark Pumfrey and team on these excellent results – the continental European expansion has gone notably well.  Also look at that average block size: $1.5 million – a stunning number around 50% up on the average of only a few years ago, in fact if I recall correctly, not far from doubling the post Lehman clip size nadir in block trading.

KRX Obtain CFTC Acknowledgement As Clearing Organization

EFSA To Finalise Financial Evaluation Rules
Mohamed Ahmed – Daily News Egypt

Dalian Commodity Exchange & Borsa Istanbul Sign Mou

Mt Gox CEO Re-Arrested For Fraud & Mis-Use Of Funds

Should Bitcoin Exchanges Use Provision Protocols To Prove Their Solvency?
Nuno Menezes – newsBTC

Special Section: FTI, NSEL, India at the Crossroads

MCX Q2 Net Up 6% At Rs 31 cr (approx. 4.8 mil USD)
Business Standard

Multi Commodities Exchange (MCX) has earned a net profit of Rs. 31.03 crore, (approx 4.8 million dollars) up 6% y/y for q/e September 30, 2015.

PLY: Both MCX and FTIL flat, no resolution news although the MCX figures are pretty encouraging methinks.


High-Speed Traders Slow To Break Into IRS Market
John Detrixhe, Matthew Leising –  Bloomberg

PLY: Isn’t the key problem IRS still being frequently traded with name disclosure “outside” the SEFs?


Markit Launches Credit & Portfolio Analysis Tool For The Loan Market (press release)

Business Wire

WSO Credit Manager, a credit and portfolio analysis application for investment professionals focused on bank loans, designed in partnership with CVC Credit Partners and other industry experts.The application helps portfolio managers and credit analysts make investment decisions by centralising the data they need to select investments, monitor credit performance and identify risk.

KRX Will Exempt Trading Fee For Mini KOSPI 200 F&O

Korea Exchange (KRX) has decided to exempt the trading fee and clearing fee for Mini KOSPI 200 futures and options trading for 2 months from November 2 to December 30, 2015.

Career Paths

MGEX Board Appointed Public Directors, Officers, Committee Assignments: two public directors were appointed by the Board: Steve Fanady and Bradley R. Griffith will each serve two year terms alongside previously appointed public directors Michael V. Dunn and Alan J. Swimmer (both starting second year of 2 year terms). The Board also the executive committee. Christopher T. Matzdorf was named Board chairman; Murray Stahl was elected first vice chairman; Michael O. Miller was named second vice chairman. Public directors Michael V. Dunn and Alan J. Swimmer complete the executive committee.

…And just in case you were asleep for the past few weeks of speculation, finally Barclays confirmed veteran US banker Jes Staley as CEO while IG Group has appointed  Daniel Williams as its Global Head of Internal Audit.

Financial Calendar

29.10 – BVB EGM

28.10-30.10 – KRX general meeting of ISG at Seoul

29.10 – CME Q3 2015 Results

30.10 – JPX Earnings FY2015

30.10 – CBOE Q3 2015 Results

30.10 – WSE Q3 2015 Financial Results

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

Share Notes

ICE Reaches New 12-Month High After Dividend Announcement

Interactive Brokers Group (NASDAQ:IBKR) President Milan Galik sold 12,862 shares of the firm’s stock in a transaction dated on Monday, October 26th at an average price of $39.31, for a total value of $505,605.22.

Analyst Notes

Betfair Group Given Consensus Recommendation of “Hold” by Brokerages

Lendingtree Rating Increased to Strong-Buy at Zacks

NASDAQ OMX Group Downgraded from “buy” to “hold” by Vetr Inc.

The NASDAQ OMX Group, Inc. Given $60 Consensus Target according to analysts polled by Zacks Research.

Societe Generale Reiterates GBX 2,600 Price Target for London Stock Exchange Group Plc

Tmx Group Limited Given New C$49.00 Price Target at National Bank Financial

A full table of current analysis can be found on our Analyst Ratings page which is updated daily.


New Crowdfunding Rules Set To Give Retail Investors Access To Private Firms
Francine McKenna-MarketWatch

The rule is the last key piece of the Jumpstart Our Business Startups Act passed in 2012 to help smaller companies raise capital more easily and cheaply. Chairman Mary Jo White previewed the new rules in a speech Wednesday in New York.

Crowdfunder UK Queues Up New Equity Crowdfunding Round
JD Alois – Crowdfund Insider

Other stories

McKinsey’s Trading Prophecy Is A Wall Street Ruled By Machines
Hugh Son – Bloomberg

PLY: McKinsey have a track record in leveraging inaccurate predictions intended to convince the gullible into spending money on their parasitic consulting services (qv dismally sloppy economic incoherence such as “The Emerging Equity Gap”). The sad truth is that many legacy exchanges actually buy services on the back of the scaremongering pitch. You can’t blame the McKinsey folks for hawking their wares, if the buyers are so incapable, I suppose. McK might even be a bit right here but then again this is a clear prediction of, er, the present – a process which has never struck me as much fun. Had they been able to write this in, say, 1998, I might have been impressed.


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