September 03 2014

elb2IEX raises $75 million round and is headed for an exchange application (hooray!) as CME tops up the coffers in its European subsidiary. Lots of regulatory politics. Various articles on swap transition as the EU continues its longstanding suicide mission to return to the dark ages with discussion continuing on a Transaction Tax. Meanwhile, there’s a video follow up to the welcome news of how ICE are busy turning the NYSE into something that might actually practice, as opposed to merely preaching, capitalism.

Interesting day, nuances abound, happy scrolling…

Public Markets

CME Injects Extra £10 Mln Into European Exchange (subscription)
Anish Puaar – Financial News

Chicago Mercantile Exchange (CME) has injected another £10 mln into its fledgling European derivatives exchange, taking its total spend on the new venture to over £35 mln.

Companies House filings show the additional funding was received on July 10. The money will be used to meet regulatory requirements.

PLY: That makes it 35 million pounds pumped into CME Europe whose launch was shamefully delayed by bickering regulators – not surprising that they would add some cash before the arrival of new CEO Vermaas (admittedly we hear rumours that Euronext enforced his gardening leave so it could be early next year before Cees arrives at his new London office). Equally given that CME has a coherent business proposition, that 35 million Pounds pales into relative insignificance compared to the 43 million pumped into NLX (April 29th) by parent NASDAQ OMX to operate, er, well, what could be politely termed, a Quantitative Easing scheme for market makers, with no clear signs that a viable economically relevant business is going to emerge out the other side.

Interdealer Broker Rankings 2014: Sef Questions Piling Up (subscription)
Joe Rennison – Risk

It has been a year of bewildering change for interdealer brokers, and the sector is still trying to find out where it sits in the new market structure.

Call It Whatever You Like, But A Financial Transaction Tax Is Bad News
Ben Wright – Telegraph

You really would have thought that Europe’s finance ministers had better things to talk about. But, no, when they gather in Italy at the end of next week, a good portion of the agenda will be taken up with discussions about introducing a financial transaction tax in the European Union.

EI reported on May 01st that ‘For all the political fuss over the eurozone’s planned financial transaction tax, it is likely to resemble a levy Britain has imposed for more than 300 years’. On April 25th that ‘EU Court To Rule On UK Challenge To Transaction Tax’. And, on February 18th that ‘Germany and France will lead a face-saving bid this week to revive a flagging project to tax financial transactions in 11 euro zone countries’. etc etc.

PLY: FTT remains a poisoned chalice in Europe’s increasingly ham-fisted endeavours to avoid ongoing continental depression.

Frontloading Still A Thorn In Industry’s Side
Automated Trader

Published responses to ESMA’s clearing obligation consultation show an industry still grappling with the potential fallout of implementation.

PLY: An interesting article. For busy readers seeking a rapid summary concerning the overall process of moving OTC markets to CCP and beyond, deploy the three words: “dinner”, “dog’s” and “woof” in a sentence. Add a rejoinder of ‘marry in haste and repent at leisure’ for emphasis.

TWSE & LSE Discuss Potential Cross-Border Trading Cooperation
Mondo Visione

Mr. Lee Sush-der, Chairman of the Taiwan Stock Exchange (TWSE), led a delegation to London on 1 September 2014. During the visit, TWSE met with the London Stock Exchange (LSE) to discuss areas for potential cooperation.

Extreme Makeover: NYSE Edition (subscription)
Paul Vigna – Wall Street Journal

PLY: Bradley Hope chats about his story we covered yesterday ‘Can NYSE Be Saved?’ looking at the ICE insurgency to turn around the flaccid NYSE.

MCX Slips To Sixth Slot In Global Commex Rankings On CTT, Low Volatility
Ram Sahgal – Economic Times

MCX (Multi Commodity Exchange) has slipped three notches to the sixth rank among global commexes in terms of commodity futures contracts traded last year, while India’s largest agri bourse has fallen a notch to ninth position.

The imposition of a commodity transaction tax (CTT) on metals and energy futures contracts and select processed farm futures like sugar, soyabean oil, etc last year, amid lacklustre price movement in commodities like gold and silver and the fallout from the NSEL scam are behind the poor showing this year.

PLY: Further proof that transaction taxes don’t work but the EU, despite a zany multi-culti agenda in some areas, will doubtless ignore this clear evidence…

Brussels Urged To Resolve Delay Over Trade Rules Definition (subscription)
Philip Stafford – Financial Times

Commodity industry groups have urged Brussels to resolve a long-running delay over their definition of off-exchange derivatives, arguing the deferment is putting European markets “at a material competitive disadvantage” to rivals.

Lobby groups representing more than 900 commercial commodity market participants sent a letter last Friday to Jonathan Faull, the head of the European Commission’s markets division, urging him to define which overseas markets would be exempt from tougher new rules clearing over-the-counter derivatives trades.

PLY: Sorry to have to bang on again but an under-budgeted regulatory nexus with an unrealistic political agenda of regulation will always have problems thus – none of it is good for business, or Europe’s waning reputation as a zone which can deliver a sound economy.

South Africa Still Unsure About Onshore CCP (subscription)
Fiona Maxwell – Risk

After years of waiting, and heated debate, South Africa recently unveiled its draft clearing rules, but they duck the biggest question of all – whether to require use of an onshore clearing house.

PLY: Interesting analysis as once again the advantages of LCH’s longstanding “append the noun ‘clear’ to any proper noun” strategy dating back to the magnificent vision of David Hardy has incredible optionality. Rand clearing looks to be heading towards LCH as opposed to staying onshore, despite (or perhaps because of) the South African government’s currency restrictions.

Pegas To Start U.K. Gas Trading As Competition Heats Up
Isis Almeida – Bloomberg

The Pan-European Gas Cooperation (between EEX and Powernext SA) plans to start exchange trading of U.K. natural gas futures.

Private Markets

IEX To Apply For Exchange Status (subscription)
Scott Patterson & Jenny Strasburg – Wall Street Journal

IEX Group Inc., the upstart private trading venue that launched less than a year ago, plans within a week to seek U.S. regulatory approval to become a full-fledged stock exchange, according to people familiar with the company’s plans.

If the Securities and Exchange Commission (SEC) gives the green light, IEX would be the first major new stock exchange in the U.S. since BATS Global Markets launched an exchange platform in 2010. IEX, which currently operates as a dark pool, hopes to gain full exchange status within a year.

EI reported on August 13th that ‘ IEX expected to file its application to become a full-fledged stock exchange with SEC’. And, on July 7th that ‘IEX is mulling public exchange status’.

PLY: The addition of IEX as a full exchange will make for a better market infrastructure with an additional, intriguing business model which is gaining traction, and investment:

Steve Wynn Joins Bain Capital In Financing IEX Dark Pool
Sam Mamudi – Bloomberg

IEX has raised $75 mln from backers including billionaire Steve Wynn, Bain Capital Ventures and Spark Capital for its efforts to become a registered stock exchange.

PLY: A brilliant endorsement of the IEX model and great news for not just Brad Katsuyama and his visionary team (well done!) but also good news for markets – competition will drive better solutions for all investors.

Surge In Sales Volume Of Products Linked To Indian Equities Can Threaten NSE’s Pricing Power: Experts
Ashutosh Shyam – Economic Times

The volumes of equity-linked Indian products traded on offshore exchanges are picking up thick and fast. The cumulative sales volume of offshore trading instruments with Indian equities as their underlying assets – such as Exchange traded funds (ETF), American depository receipts (ADR) and SGX Nifty – has reached a historic high of $1.6 bln per day.

PLY: It’s encouraging that interest in India is growing so considerably but also worrying that India could be losing market share…then again the investor oblivious nature of Indian investor rules which block so many from entering the market are clearly to blame. Judicious deregulation all round and open access is the only road ahead to really help the Indian economy grow sustainably.

Special Section: FTI, NSEL, India at the Crossroads

PLY: A third consecutive flat day for MCX and FTIL with a paucity of news on the NSEL affair.

Technology

EEX Launches New Transparency Website
Mondo Visione

At www.eex-transparency.com, visitors can gain access to comprehensive fundamental data and relevant information for wholesale energy trading.

PLY: Hours of fun for all the family – seriously, a good, useful addition to markets akin to the transparency equity trading information from the block traders et al of late.

OANDA Partners With MotiveWave Software To Add Professional FX Trading Analysis Tools – Global Forex Broker Enhances Its Technical Analysis Offering, Including Professional Tools Tor Elliott Wave Theory
Mondo Visione

Forex specialist OANDA, is partnersing with Toronto-based MotiveWave Software, a developer of easy-to-use high-performance charting & trading software for the individual trader.

ITB Unveils New Data Display In Updated Trading Interface (subscription)
Max Bowie – Waters Technology

ITB, a New York-based provider of fixed income liquidity aggregation and trading software, has rolled out a new trading interface with enhanced data displays geared towards better serving the data requirements of institutional bond traders and creating greater transparency across fixed income asset classes.

Products

CME Launch Of Illinois Basin Physically Delivered Coal Futures
Mondo Visione

Chicago Mercantile Exchange (CME) announced the launch of Illinois Basin physically delivered Coal futures contracts in October, pending all regulatory approvals. The contracts will be listed by & subject to NYMEX rules.

Indexes

BM&F BOVESPA Announces New Theoretical Portfolios For Ibovespa & Other Indices
4-Traders

Get to know Ibovespa Theorical Portfolio for Sep./Dec. 2014

Thomson Reuters Launches Corporate Responsibility Indices To Measure European ESG Performance
Mondo Visione

Thomson Reuters, has announced the launch of a suite of indices to measure the performance of European companies with superior ratings for Environmental, Social and Corporate Governance (ESG) practices.

Career Paths

MV reported that FIA Europe announced appointment of Corinna Schempp, former Senior Regulatory Advisor for LCH.Clearnet Limited as Director of Regulation. Corinna will join FIA Europe from 15 September 2014.

Traders Magazine reported that REDI Technologies has hired Mike Lax as its new Head of EMEA Sales. Lax, an 11 year veteran, comes from Thomson Reuters where he was a Senior Sales Executive. And, Commodity Futures Trading Commission (CFTC) appointed Christopher Kirkpatrick, former Attorney Advisor for the U.S. Chemical Safety and Hazard Investigation Board in Washington, D.C. as its Secretary.

Risk reported that Marex Spectron appointed Jeremy Elliott, former CEO of Energy at Marex Spectron and Hunter Baldwin, MD of North American Operations at Marex Spectron, to replace Gordon Bennett, its Global Head of Energy, who has left the broker after 12 years.

Financial Calendar

Friday

TMX $0.40 quarterly dividend payment
Record date ASX 89.9c dividend
BGC Partners $0.12 quarterly dividend payment
FTIL Rs. 2 interim dividend payment

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

Analyst Notes

Charles Schwab Corp “Neutral” Rating Restated By Zacks – $30.00 Price Objective

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

Dealing With Change: The Opportunity Of Regulatory Innovation
Angele Grech – Mondaq

We are living in a world where change has become the norm. Consumer needs change, financial products are developed and financial markets continuously evolve and innovate. As financial markets adjust, so too must regulatory systems which oversee them. Regulation must interface with innovation in a mutual and dynamic relationship in order to enhance the positive regulatory effects on innovation.

This is reflective of the approach of the Malta Financial Services Authority which has been progressively developing as a single financial services regulator since before Malta joined the European Union in 2004 and adopted the Euro as a currency in 2008.

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