October 9 2015


In the big wide world, Bill Gross is suing Pimco over his departure from the asset manager for $200 million. Or, to put it in our universe, he could buy Bucharest SE (BvB) 3 times over and still have change from the advisor fees… Apparently Enron has been reborn as Volkswagen in terms of scale of corporate crisis scale according to US lawmakers. Now that opens a vast can of worms to consider across the weekend…

Today in Exchange Invest Daily: LSE have finally sold Russell albeit at a price somewhat below their more optimistic estimates back in the day before China’s volatility splurge…

Public Markets

LSE Sells Russell Investments To TA For $1.15B

Sells asset management business to TA Associates (& minority partner Reverence Capital Partners) for US$1.15 bln (£752 mln) in cash. Net cash proceeds will reduce LSE’s pro forma leverage to approximately 1.6x net debt to EBITDA, if measured as at 30 June 2015.

FAO: In June 2014 LSE bought Frank Russell for US$2.7 bln (£1.59 bln). QV EI Premium: LSE – Frank Russell Deal Brief for more details on purchase and this sale…

PLY: In the end somewhat of a disappointment for LSE. Citic ran from the altar a few weeks back when China’s volatility exploded while LSE had previously hoped for a $1.4 billion sale in January.

DB1 Plan Elimination Of 35 Managerial Jobs
John Detrixhe – Bloomberg

DB1 had 4,914 employees as of June 30, compared with 4,070 a year earlier.

PLY: Unsurprising fairly regular cull of middle/senior management which coincides with a new CEO clearly reshaping the business to his liking. Kengeter’s hires already include Rob Jolliffe, as global head of sales and Ashwin Kumar, as head of product development last month. He also completed the 360T deal which had been ongoing since long before his appointment etc. The key question will be who leaves in the programme. Is he intending to clear out those close to EUREX CEO Andreas Preuss or any other key factions in the management?

QV EI Premium:  Dear Carsten – An Open Letter to the New DB1 CEO, Deutsche Boerse’s Asian Experiment and The Direction of Deutsche Boerse.

JPMorgan Trader, ICAP Broker Helped Hayes Rig Libor, SFO Says
Liam Vaughan – Bloomberg

Previous comments here and here.

SEC Accuses NY Trading Firm Of “Spoofing”
Kevin McCoy – USA Today

Briargate Trading & co-founder Erich Oscher have agreed to an over  $1 million SEC settlement over “spoofing” between Oct. 2011 and Sept. 2012.

Q.V. in Premium The Kennel – Premium discussion of the “Hound of Hounslow”.

BlackRock’s Market Fix
Michael P. Regan – Bloomberg

Previously discussed yesterday.

Euroclear & Clearstream Bridge Gap Over Troubled Waters (subscription)
Tim Cave – Financial News

Europe’s two largest settlement houses have overcome difficulties to enhance an interoperability agreement aimed at improving collateral flow.

MEPs Sound Alarm Over CMU Securitisation Plans
James Rundle – Financial News

CMU action plan received a mixed reception during a EuroParl debate on October 7, with MEPs expressing their concerns that excessive securitisation could spawn another financial crisis.

PLY: Securitisation is a saviour for Europe provided Brussels regains a yearning for growth… This argument is a good example of how the EU can always find a problem with ‘the invisible hand’ when there just needs to be an all out assertive dash for growth to rid the continent of at least part of its myriad of problems.

QV EI Premium: EU CMU Brief.

Private Markets

PFTS Supervisory Board to Meet

PFTS plans to call an EGM of its supervisory board following publication of the decision of the National Commission for Securities & the Stock Market of Ukraine on revoking its stock exchange license.

Troubled Chinese Exchange Bodes Ill For Rare Metals Investors
Rurika Imahashi – Nikkei

Confusion is running high over the monthslong trading halt at China’s Fanya Metal Exchange, with angry investors staging protests and the possibility of its bankruptcy threatening the very existence of rare metal producers. Fanya stopped trading 14 kinds of rare metals in July.

Japan’s Daiwa Among First To Gain Myanmar Securities License

Myanmar granted securities licenses to about 10 companies, including a local Daiwa Securities Group affiliate, as the Southeast Asian nation gets ready to open its stock market in December.

FAO: Myanmar planned Yangon SE (YSX) will be operated by Myanmar Economic Bank in partnership with JPX (owns 18.75%) & Daiwa Securities Group (30.25%). QV EI Premium: ASEAN Exchanges Project Brief

FIA Releases SEF Tracker Report For August

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX and FTIL both up circa 1%.

NSEL Scam: Brokers May Get Away Scot-Free As SEBI Too Is Not Interested In Probe

PLY: A disheartening headline for the future of Indian markets and investment. There needs to be a process and resolution – even if it was in the unregulated marketplace NSEL. Without that, this mess will hang over all markets, including the highly reputable and well regulated NSE et al. With IPOs a possible feature upcoming, the NSEL mess will feature in DD. If left broadly unresolved it will be a drag on values.

I don’t happen to believe there needs to be another probe but the many outstanding probing tentacles need to be unified and the octopus of investigation must show some teeth in resolving the problems. The data is broadly there, why are the guilty going free?


Nasdaq’s SMARTS Launches Trade Surveillance Monitoring For Dark Pools

PLY: The excellent SMARTS product has been tweaked for everything under the ‘dark pool’ moniker from systematic internalisers to Institutional Liquidity Pools.


CME Launches South American Short-Dated New Crop Soybeans Options

Gentlemen May Prefer Bonds, But More Traders Take Stocks (subscription)
Max Colchester & Peter Rudegeair – Wall Street Journal

Wall Street’s trading business is going through a profound change—and bonds are on the wrong side of it.

PLY: QV Back in 1974, the world ended as fixed commissions meant nobody could ever make a cent on equity trading ever again…


Covered Bonds Veteran Warns Against ‘One Size Fits All’ Model (subscription)
Tim Burke – Financial News

The European Commission should heed the advice “if it ain’t broke, don’t fix it”, when tinkering with covered bonds, says a 17-year veteran of the sector.

PLY: Alas the EU has built a huge blob on precisely the basis of breaking things which were once working…

Buy Side Held Back By Confusion On Cross-Trading Swaps
Taylor Harrison – Risk

Asset managers could realise significant cost savings by internalising some of their swaps flow, but CFTC rules prevent them.

FINRA: Statement Regarding New Rule To Enhance OTC Equities Transparency

TriOptima & SwapClear Eliminate 20% Of Interdealer Notional Outstanding In Cleared Canadian Dollar IRS

PLY: Fridays are always improved by news of TriOptima’s wondrous compressions.


LSE confirms that the separation of Russell Index business from Russell Investments is expected to be completed in Q1 2016. Following this date the Russell Index business will be fully integrated with FTSE.

Deutsche Bank To Launch CORAX

Deutsche Bank’s Research unit is launching a new set of proprietary FX positioning indices called CORAX (Categorised ORderflow from Autobahn FX).

PLY: Rather cool stuff, derivatives of conventional data are the sort of great nuggets now being mined.

Career Paths

FOW reports that David Feltes, COO of CME Europe, is to leave in the coming weeks. He joined CME Europe in 2012.

PLY: This is a significant loss for CME whose Europe exchange has been shaped by Dave Feltes more than any other party. Wherever he goes next, Dave will be a huge asset. CME is the poorer for his departure but it is hardly surprising as CME’s failure to make him CEO of CME Europe Exchange was illogical.

Len Brennan, President & CEO, will continue to lead Russell Investments, and will remain a member of the Board of Russell Investments. He will step down from the Executive Committee of LSE.

PLY: Having apparently always refused to split Russell under the previous ownership, I am still not sure Len did the best job in delivering value to Northwestern mutual in selling one entity to LSE for them to reparcel it and sell it on. It will be interesting to see how he can maintain his fiefdom in the asset management business going forward.

The Hindu reports that Metropolitan SE (formerly MCX Stock Exchange) has called for a board meeting on Saturday to appoint a new MD & CEO with the incumbent Saurabh Sarkar deciding to move on for better prospects.

PLY: All the very best  to Saurabh Sarkar who has been faced with a multiplicity of problems in seeking to rebuild MCX-SE after a torrid period of disruption in the wake of the NSEL crisis.

‘Flash Crash’ Fix Faces New Setback
Andrew Ackerman – Wall Street Journal

A troubled market monitoring project launched after the 2010 “flash crash” has faced a new setback: regulators have failed to hire a technology expert to oversee development of a giant computer system to track the trading of stocks and options.

PLY: The sentence “giant computer system” and “regulators” sends shivers down my spine as the deliverables invariably seem to be troubled with “delays” and “cost overruns.”

BSE Fines 370 Firms For Not Having Women Director

Sebi had issued guidelines in February last year asking companies to appoint at least one woman director on their boards by 1 October, 2014.

Financial Calendar

Interactive Brokers Q3 Results – Tuesday, October 20, 2015 – press release

BGC Partners’ & GFI Group’s Q3 2015 Results – Wednesday, October 28, 2015 – press release

ICE Q3 2015 Results – Tuesday, November 3, 2015 – press release

TMX Q3 2015 Results – Thursday, November 5, 2015 – press release

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

Analyst Notes

Raymond James Raises Price Target For Nasdaq OMX To $61.00 From $60.00 – “Strong Buy” Rating

CBOE Target Price Hosited By KBW From $67.00 To $69.00 – “Market Perform” Rating

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

Other stories

CFTC Financial Data For FCMs Update

China Launch Of Renminbi Payments System Reflects Swift Spying Concerns (subscription)
Gabriel Wildau – Financial Times

China launched a cross-border renminbi payments system yesterday, a big step in its drive to boost international use of the Chinese currency and protect itself from US agencies with access to the Swift system.

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

PLY: It’s SIBOS next week: doubt it will make much difference to the dinosaur’s annual boondoggle but China effectively doing its own thing is another nail in the coffin of a simply dismal cooperative disaster at the heart of the money game…

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