October 30 2013

elb2 Results season in full swing while simultaneously we are scouring the countryside to find out which bank is not actually helping authorities with some enquiry or another…

Moscow follow-on offering planned, NASDAQ and Nairobi have glitches while TriOptima cleans up as usual while bigger changes may be afoot in swaps trading than perhaps even the regulators anticipated…

Public Markets

Deutsche Börse AG Publishes Q3 2013 Results
Deutsche Borse

Deutsche Börse AG published its figures for the third quarter of 2013 on Tuesday, generating group net revenue of €457.9 million (Q3/2012: €471.0 million), a slight decrease year-on-year.

PLY: Almost at consensus but not very exciting numbers from DB. Like so much of DB1 group, good but not great. DB needs a dose of innovation, revolution and indeed an uptick (a big uptick) in momentum to really achieve its potential.

Warsaw SE Q3 Results
WSE

The WSE Group generated an operating profit of PLN 92.2 million (USD 30.32 mln) in the first nine months of 2013, a decrease of 6.2% (PLN 6.1 mln – USD 2 mln ) compared to the operating profit of PLN 98.4 mln (USD 32.25 mln) in the first nine months of 2012.

Selected consolidated financial data of WSE Group in Q3 2013 here.
Report for WSE Group in Q3 2013 here.
Basic financial data of the Warsaw Stock Exchange Group (.xls) here.

PLY: Deconstruct the exceptionals and these are good WSE numbers against a background where the economy has dipped to near recession, the government has proposed stealing half the private pension pot, and the IPO flow, while encouraging, has not been as stellar as some recent years. That said the national rail cargo franchise is headed for an imminent IPO which can only help Q4. Certainly on these figures there is no reason to seek the daft ‘merger’ proposed by Vienna. Warsaw has a bright future amidst some stormy seas.

Thomson Reuters Q3 2013 Results
Thomson Reuters

Revenues grew 2% before currency
Adjusted EBITDA grew 4% to $845 million with a margin of 27.5%, up 100 basis points
Underlying operating profit grew 3% to $548 million with a margin of 17.8%, up 30 basis points
Adjusted earnings per share were $0.48, unchanged from prior-year period
Financial & Risk Q3 net sales positive; Surpassed 100,000 installed Eikon desktops in October
Positioned to accelerate transformation:

– Up to $1 billion of share repurchases planned
– Planned charge of approximately $350 million to be incurred primarily in Q4
– Increasing focus on organic growth and scale initiatives

PLY: Reuters, that ongoing engine of crisis masquerading as a data vendor, continues to stumble along under Canadian ownership. Eikon over 100,000 terminals is only a few years late while the business remains a huge sprawling chaotic mess which needs enormous surgery. At the same time, TMR’s subscription bases means it remains largely indestructible despite a history of slow moving reform. Market rumours abound that there was a week earlier this year when there wasn’t a restructuring/redundancy programme in operation across the TMR group but, well, you know how rumours can get out of hand.

Moscow Exchange To Sell More Shares Next Year
Reuters

The Moscow Exchange plans a secondary share offering H1 2014 where the country’s central bank will sell a stake, perhaps all of, its 22.5 percent stake.

PLY: Moscow Exchange remains one of the most exciting developments in the world, backed by a highly progressive financial centre initiative. Watch this space, it’s an exciting stock.

Nasdaq Mulls Greater Anonymity For HFTs (subscription)
Financial News

Nasdaq OMX is considering giving high-speed and other proprietary traders greater anonymity when transacting on its European exchanges, as part of changes to its rulebook in the region.

China Financial Futures Exchange & NASDAQ OMX Sign MOU
Nasdaq OMX
Nasdaq To Develop Markets With China Financial Futures Exchange
Bloomberg

China Financial Futures Exchange (CFFEX) and NASDAQ OMX, signed an MOU to strengthen cooperation and promote mutual development. CFFEX Chairman Zhang Shenfeng and NASDAQ OMX Vice Chairman Sandy Frucher signed the MOU.

PLY: With various offices in the New Europe I am seeking to engage an experienced Kremlinologist to analyse exchange “MOU” press releases to see if there is actually any value behind them. This one strikes me as “Air Miles Sandy justifies trip to Mexico for WFE conference” (I couldn’t, alas). That is doubtless unfair on the excellent offices of Mr Frucher but rather reflects a complete exhaustion of interest in bland MOUs (accompanied by breathless hype-laden press releases) which rarely deliver enough substance to justify the airfares that underpinned their signing.

Nasdaq Glitch Prompts Trading Halt In Some Markets (subscription)
The Wall Street Journal
Nasdaq OMX – Statement On Global Index Data Service (GIDS 2.0)
Nasdaq OMX

The Nasdaq Composite was frozen for nearly an hour during mid-session trade Tuesday after Nasdaq OMX Group experienced problems transmitting data for stock-market indexes, the latest in a series of U.S. equity market breakdowns.

“Tuesday Oct. 29th NASDAQ OMX experienced an interruption of service related to the dissemination of Global Index Data Service (GIDS 2.0).

The disruption was caused by a human error.”

PLY: So indices were affected, not stocks per se but that didn’t stop another tedious round of media bleating.

NZX Joins World Federation Of Exchanges

The WFE is an international trade association of 57 publicly regulated stock, futures and options exchanges.

PLY: WFE has an interesting period ahead. It has a strong new CEO in Huseyin Erkan but really it is difficult to know what its purpose is. 57 members is only scratching the surface of potential membership but then again the WFE (and hopefully Mexico will achieve this) needs to define itself as more than a quasi-Victorian talking shop. Exchanges need a genuinely cohesive pan-industry group at the global level – hopefully WFE can grow into this and push The Exchange Manifesto.

GBOT Is Now Bourse Africa

Global Board of Trade Ltd. (GBOT), the first international multi-asset class exchange from Mauritius will now be known as BOURSE AFRICA LIMITED (BOURSE AFRICA). The change in the name symbolizes the larger focus of the exchange towards Africa and the opportunities offered by the African Financial and Commodities Markets.

PLY: Breaking as we went to press, so just time for some low latency comment: A rationalisation in the sprawling FTIL empire although frankly a slightly odd one as I keep hearing that throughout the African continent, the Bourse Africa name is regarded with caution apparently due to ongoing implementation delays and allegations that some overseas management were a bit ‘difficult’ to deal with. Not sure who that could infer of course but certainly combining a pretty unsuccessful (delayed) entity with a hugely delayed and utterly unsuccessful entity makes some element of sense. A bit of a blow to Botswana’s financial centre ambitions if it is all moving to Mauritius.

Private Markets

Tradeweb Applies With CFTC To Offer First Credit-Swap Trading
Bloomberg
CFTC Seeks Public Comment On Certification From TW SEF LLC To Implement Available-To-Trade Determinations For Certain Interest Rate And Credit Default Swaps

Tradeweb Markets LLC asked U.S. regulators to make it mandatory to trade credit-default swaps on its new government-mandated platform.

Tradeweb’s is the first application to CFTC to cover credit swaps including contracts based on the Markit iTraxx Europe Index and the Markit CDX indexes tied to corporate debt in the U.S. and Canada. The New York-based company also applied to offer IRS.

Javelin Capital Markets LLC and TrueEX Group LLC became the first SEFs to file a request with the CFTC earlier this month, both to offer interest-rate swap trading.

PLY: Has anybody else got the eerie feeling that in the haste to write a lot of minutiae, nobody was quite considering the big picture and hence Dodd-EMIR-Frank has left a large stable block with doors hanging akimbo across all the stalls while the fields are full of fast disappearing thoroughbreds?

TriOptima Collaborates With Industry To Reduce 25% Of iTraxx And 56% Of CDX Index Tranche Legacy

TriOptima has implemented an advanced triReduce compression methodology for Index Tranche trades with non-standard coupons, known as “legacy” trades as well as the more recent Index Tranche trades with standard coupons.

triReduce compression cycles eliminated 25% or €35.9 billion of the European-based ITraxx and 56% or $189.6 billion of US CDX Index Tranche legacy notionals. Total notionals eliminated in the triReduce index tranche cycles were €80.4 billion and $281.3 billion including trades with standardized and non-standardized coupons.

PLY: Doubtless “I Love TriOptima” tee shirts may not be popular amongst, say, the twerking fraternity, but I imagine a great many bank risk managers (et al) would happily wear one beneath their shirt and tie. Another excellent tweak (not twerk) from a fantastic ICAP business.

Nairobi SE Interruption In Trading
NSE

October 29 2013, there were no trades in the market due to a technical hitch.

Chinese Love Bitcoin: Drive Prices Into The Stratosphere
Business Insider

Remember when Bitcoin prices crashed after the government shut down illicit online emporium Silk Road?
That already seems like a distant memory.

Since reaching a low of $US 109 on the Mt. Gox exchange the day of Silk Road incident Oct. 2, prices have climbed nearly $US100, reaching as much as $US 233. Prices haven’t fallen below $US200 since Sunday.

PLY: The reason is simple: China is now the largest takeaway market for Bitcoin.

Dividend News

Thomson Reuters – A quarterly dividend of $0.325 per share is payable on December 16, 2013 to common shareholders of record as of November 21, 2013.

Special Section: FTI, NSEL, India at the Crossroads

PLY: After last week’s derisory 49,000 dollars, NSEL repayments bounced back with nearly 5 million dollars which sounds great but in the great schema of repayments (back when Jignesh Shah was trying to retain a vestige of credibility) that still makes it twenty-several million bucks short for the week alone.

Rumour has it that jailing some defaulters seems to be encouraging other debtors to try harder to repay their debts. Funny that.

MCX is up 2.5% while FTIL is soaring 11.9%, perhaps driven by many rumours of purchases of offshore stakes in the FTIL exchange empire along with likely exclusion of the stock from BSE stock lending provisions which appears to have driven a short covering rally.

Week One: Rs 92.73 crore (USD 14.37 mln) paid
Week Two: Rs 12.05 crore (USD 1.79 mln) paid
Week Three:Rs 15.37 crore (USD 2.29 mln) paid
Week Four: Rs 7.77 crore (USD 1.21 mln) paid
Week Five: Rs 8.57 crore (USD 1.35 mln) paid
Week Six: Rs 11.45 crore (USD 1.82 mln) paid
Week Seven: no payout – bank accounts frozen
Week Eight: Rs. 2.85 crore (USD 457.9 k) paid
Week Nine: Rs. 28.34 crore (USD 4.58 mln) paid
Week Ten: Rs. 30 lakh (USD 49k) paid
Week Eleven: Rs. 29.05 crore (USD 4.72 mln) paid

NSEL Defaults For 11th Time; Pays Rs 29.05 Crore (USD 4.72 Mln) Against Rs 174.72 Crore (USD 28.4 Mln)
The Economic Times

NSEL defaulted for the 11th straight time today as it could pay only Rs 29.05 (USD 4.72 mln) crore to investors against a scheduled payment amount of Rs 174.72 crore (USD 28.4 mln).

With today’s pay-out, NSEL settled about Rs 209 crore (USD 34 mln) against Rs 5,600 crore (USD 911 mln) dues to 13,000 investors.

NSEL Pay-In Picks Up
Business Standard

Presumably fearing a spread of the action by the economic offenses wing (EOW) of the city police in the NSEL crisis, some borrowers of the latter have speeded up their settlement payments.

At its 11th scheduled payout on Tuesday, the exchange had got Rs 29.05 (USD 4.72 mln) crore till early evening from defaulting members, the second largest since its first pay schedule on August 20.

NSEL Member Mohan India Agrees To Pay Rs 771 Crore In One Year
The Economic Times

NSEL today said its Delhi-based member Mohan India Ltd has agreed to pay to the exchange about Rs 771 crore (USD 125.4 mln) in final settlement over the next year.

Mohan India will make a down payment of Rs 11 crore (USD 1.79 mln) and the balance will be paid over the next one year, it said. The firm’s total outstanding was Rs 950 crore (USS 154.59 mln).

Former MD ‘Paid Bribes To Taxmen’
Mumbai Mirror

Arrested NSEL executive Amit Mukherjee, has alleged that the commodities bourse paid Rs 11 crore (USD 1.79 mln) as bribes to government officials, including income tax sleuths, to dodge tax scrutiny.

PLY: Internal blamestorming by affidavit is not usually conducive to harmony. Moreover maintaining “fit & proper” against these sorts of accusations ought to be difficult for others.

NSEL Crisis: RBI Says No Risks To Banking System
ndtv.com

A day after flagging concerns over NSEL, the Reserve Bank of India (RBI) has ruled out any threat to the banking system from the Rs.5,600-crore payment crisis.

“We have no issue with the NSEL crisis as at present there is no problem to the banking system because of the scam,” RBI Governor Raghuram Rajan told reporters.

Criminal Complaint Lodged Against NSEL Auditors
Moneycontrol

After the management and borrowers, it is the auditors who are going to face heat. NSEL investor Pankaj Saraf has filed a criminal complaint with the Economics Offences Wing against audit firms SV Ghatalia and Deloitte Haskin & Sells to examine their roles as auditors of Financial Technologies and NSEL respectively.

NSEL Exhausted Settlement Fund To Cover Pay-In Shortages By Members
Business Standard

The forensic auditor appointed by FMC has thrown more light on the mysterious disappearance of NSEL’s Rs 800-crore (USD 130.18 mln) settlement guarantee fund (SGF).

After examining the affairs of the exchange since June 30, the auditor said the SGF was depleted, as it was used to meet pay-in shortages of paired contracts. “We observed pay-in shortages on a daily basis, with regard to the settlement-related payment obligations from various members. All these shortages were substantially in relation to paired contracts,” auditor Grant Thornton said in a supplementary report last week.

PLY: This further raises potentially career killing questions about board oversight of NSEL.

BSE To Drop Jignesh Shah Led Financial Technologies From SLB Segment From Nov 8
The Indian Express

BSE today said it will exclude Jignesh Shah-led Financial Technologies India Ltd (FTIL) from trading in the Securities Lending and Borrowing (SLB) segment with effect from November 8.

Technology

Xetra Release 14.0 Launched
Deutsche Borse

Deutsche Börse has introduced a further-developed version of its electronic trading system with Xetra Release 14.0. Functionalities, interfaces and order types have been improved in line with the demands of the market.

The system also builds the IT framework for complying with the upcoming German HFT Trading Act.

NYSE Technologies Connects SuperFeed™ To The New HKEx Orion Market Data Platform
NYSE

NYSE Technologies is offering consolidated market data from the HKEx Orion Market Data (OMD) Platform via SuperFeed™.

Products

Dubai To Add Spot Gold Contract (subscription)
The Wall Street Journal

Dubai has been a gold-trading center in the Middle East for decades, but the market’s size has increased exponentially in recent years as the trade has expanded from traditional “souks” to the Dubai Gold & Commodities Exchange.

First Trade In Italian Power Futures Registered
Commodities Now

Having launched October 1st, the first trading transaction in Italian power futures was registered yesterday on EEX for clearing via European Commodity Clearing (ECC). The trade with a volume of 7,200 megawatt hours and a price of EUR 62.25 per MWh for delivery in November 2013, was concluded between Gunvor International B.V. and A2A Trading S.r.l. via the broker Spectron Energy Services Limited.

Dalian Commodity Exchange Official Details Quality Standards Of Egg Futures Contracts

Indexes

CBOE To Introduce Mini-SPX Options With PM Settlement On November 5
CBOE

CBOE will list a Mini-SPX Index option (options symbol: XSP) contract (one tenth of the value of the SPX) with a new PM-settlement feature beginning on Tuesday, November 5.

The PM-settlement is preferred by many investors, including institutions that have end-of-day reporting requirements. PM-settlement, also used for single-stock and ETF options, allows investors to trade in and out of positions easily on settlement day.

FTSE Launches New Shariah Developed Minimum Variance Index

Methodology is a design-first in Shariah finance world; combining Shariah investment principles with advanced risk management techniques.

Specifically designed to meet the needs of the Shariah market globally and Index series certified Shariah-compliant by independent consultants, Yassar Limited.

Career Paths

With effect from 1 February 2014, René W. Keller (aged 49) is to assume group-wide responsibility for Applications & Architecture as well as the role of Group CIO within the IT&MD+S Executive Board area of Deutsche Börse AG. The Swiss-born IT engineer will report directly to Hauke Stars, Executive Board member of Deutsche Börse AG.

Financial Calendar

Tomorrow

BME Q3 Results

MCX Q2 results Nov. 9th 2013

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

Analyst Notes

CBOE Holdings Upgraded At Macquarie To “Outperform” Rating

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

Rabobank Is Fined, CEO Is Out In Libor Settlement (subscription)
The Wall Street Journal

Dutch lender Rabobank agreed to pay $1.07 billion to settle accusations that it skewed key financial benchmarks and its chief executive resigned, the latest casualty of a global interest-rate-rigging scandal.

Rabobank’s settlement with U.S., British, Dutch and Japanese authorities brings to five the number of large financial companies that have admitted trying to manipulate the London interbank offered rate, or Libor, and other benchmarks that underpin interest rates on trillions of dollars of financial contracts world-wide.

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