September 03 2015

elb2 This is a curious world. China catches cold, over reacts and suddenly the western media has an outbreak of Sino-phobia while ignoring the fact that the western blob usually does much the same thing every time their own political classes are faced with a retracement…

Not too far away Chi-X Australia continues to battle its own totalitarian opposition – and it’s making sound progress, including a modest profit according to plan…

In other news, Warsaw looks to lock in bond rates ahead of a likely period of uncertainty, if not outright volatility both within and beyond the boardroom.

Upcoming: Young Markets, my conference on the future of finance in Warsaw September 17th

…and equally don’t forget to register for Burgenstock with its all star line up beginning with my Crossfire panel September 23rd.

Public Markets

Market Calls For US & Europe To End Derivatives Dispute (subscription)
Philip Stafford – Financial Times
World Exchanges Calls On Regulator To Consider Impact On Emerging Markets Due To EU Ccp Recognition Delays – WFE Letter To EU’s Lord Hill Says Delays Risk Capital Flight From Some EM Economies
Bourses Urge EU To Speed Up Rulings On Clearing Houses
Huw Jones – Reuters

The US Committee on Capital Markets Regulation and London-based Financial Markets Law Committee on Wednesday said both sides needed to recognise each other’s rules as equivalent, arguing their differences do not amount to a systemic risk to markets.

…The EU should speed up recognition of non-EU clearing houses to avoid compounding emerging market volatility and fragmenting the $630 trillion derivatives market, WFE said. Delays by Brussels in deciding whether to allow non-EU clearing houses to continue serving European users risk a capital flight from some emerging market economies.

PLY: Even the WFE getting involved with an outbreak of opinion. Interesting times as the TransAtlantic regulators continue to fumble from past swaggering arrogance and, indeed, the EU, once again, demonstrates an entirely tin ear (made from obsolete recycled wind farm equipment presumably). Besides the EU ought to grasp equivalence with both hands now, to avoid being viewed as the genuinely poor relation if the current lost decade of economic growth continues…


WSE Mulls Fixed-Rate Bonds Issue To Refinance Debt

Warsaw SE (WSE) is starting consultations with potential investors aimed at issuing long-term fixed-rate bonds to refinance its existing floating-rate debt. WSE issued bonds worth 245 million zlotys ($65.05 million) in December 2011. The maturity of the bonds is Jan. 2, 2017.

The Polish bourse also said that it is considering an early redemption of the existing bonds.

PLY: Makes sense to get out at what is likely the top of the Polish bond market methinks. Rates are as low as they have ever been since throwing off Communist shackles. They may appear high compared to the west but they are super cheap compared to a region which did the hyperinflation shuffle briefly after freedom first reached Polish shores once again. There is a lot of political upheaval to come and the likely change in government will probably involve a bloodletting of WSE management (ex-minister Pawel Tamborski’s prospects of long-term survival as CEO is, frankly, bleak – purely on party political grounds). GPW ought to lock the debt up asap – rates might head lower but given the storms ahead and a likely populist government (they are not conservative – the broad western media are clueless about Poland!), I would definitely fix my rate exposure ahead of potential volatility.


Shareholders Urged To Vote Down €15m Betfair Pay For Corcoran
John Mulligan – Irish Independent

Betfair shareholders have been urged by PIRC, an influential investor advisory body, not to approve CEO Breon Corcoran’s bumper £11.6m (€15.7m) pay packet at the company’s AGM next week. The embarrassing rebuke comes as Betfair and Paddy Power plot a merger to create the world’s biggest online gambling group. Mr Corcoran – a former Paddy Power executive – will lead the combined group. Advisory group PIRC said Mr Corcoran’s near £1m bonus at Betfair is excessive, as is his total remuneration. Mr Corcoran has also received a £10m golden ‘hello’ payment when he joined Betfair in 2012.

Read our Premium Exchange Deals Brief Part 1, Part 2.


Chi-X Hopes ASIC User Pays Put It Further In The Black
Shaun Drummond – AFR

Chi-X Australia CEO John Fildes​ hopes a full user-pays funding model for the corporate cop will ease the cost of its surveillance on his bottom line, which has moved into the black for the first time since it started competing with ASX in 2011.

PLY: Plaudits to Chi-X which has worked its way into profit as per the original business plan, in year three while it invests heavily in product and service expansion. Moreover this has been against an atmosphere of rank hostility from the ASX which retains its Dickensian obsession for exchanges remaining in the era of workhouses. Revenue rose by an excellent 67% with market share reaching circa 20% in the areas where they have been rather grudgingly given the right to compete with the incumbent.

Chi-X Australia continues to fight a battle, under a supposedly free market government with the incumbent monopolist behaving like NYSE circa 1973 faced with Nixon’s great deregulatory leap forward. There needs to be change, a revolution in Australian markets and Chi-X is leading the process and demonstrating the merits of better, cheaper markets, despite a Dickensian monopoly kitchen sinking its regressive opposition… Ultimately without competition the Australian investor is the loser so long as competition is constrained.


China Blame Game Spooks Investors (subscription)
Patti Waldmeir, Josh Noble & Stephen Foley – Financial Times

“I can feel the government supervision is strengthening. We are required to use more gentle wording in reports and our opinion should not be too strong,” said an analyst at a Chinese brokerage.

PLY: Which reminds me of those folks arrested in Italy for having the temerity to rate Italian Government Bonds as the dubious potentially toxic stuff it realistically is…or those EU regulators banning short selling when the markets correctly spotted a few naked Emperors in the banking system during the last crash. However, the west wants a smug ‘we’re superior to those manipulative Chinese” story so that’s what a rather blinkered media delivers…


CSRC Slaps Fines On Financial Platforms For Trading Breaches (subscription)
Jing Yang, Xie Yu & Sidney Leng – SCMP

Authorities in China on Wednesday slapped fines on three financial information firms, including one controlled by Alibaba founder Jack Ma Yun, as part of a crackdown to stabilise stocks.


China Should Welcome Its Short Sellers (subscription)
John Gapper – Financial Times

PLY: Yes, just like Europe, oh hold on a second, the festering EU and its bankrupt governments (qv France) habitually attack anybody noting an imperfection in markets, ban short selling and rant about the evils of capitalism… Not much difference there then, is there? (Oh except China when it emerges from this kerfuffle will grow once again).

Thus Mr Gapper hits the nail on the head in China but a little perspective would become the Brussels Bugle – the Chinese have merely leveraged approaches beloved of the sad and the superannuated officials from Brussels across the continent.

Private Markets

Coinbase Launches In Singapore

Leighton Cosseboom – Tech In Asia

Also launched operations in Canada this week.


Bitcoin Group’s IPO On ASX Gets Officially Rescheduled
Maria Nikolova – LeapRate

Bitcoin Group Limited, a Melbourne-based Bitcoin miner, was supposed to have its IPO on ASX on September 2, 2015, but the date was changed to “To be announced” (TBA). The change comes after a series of stop orders by ASIC, the latest of which was issued on July 31, 2015. The regulator did not state publicly its rationale for the measures taken but made clear it related to the specific company and not virtual currencies in general.


BitPay Calls On Industry To Form ‘Bitcoin Association’
Ian Allison – IBT

BitPay, the leading processor of Bitcoin payments, said it’s about time the biggest companies in the space began working together, and even suggested the formation of a “Bitcoin Association” to help promote the currency.

PLY: Not surprising that an association is mooted although there is already the Bitcoin Foundation (with ‘trouble a’t mill’ around there too). Part of the problem is also that a core decentralised system does not always lead itself to, well a central club promoting it. It has to be said though such advertising as suggested for a Bitcoin Association reminds me of the worst totalitarian excesses of the 1970’s when Britain was awash with slick marketing of ghastly statist product – that seems to go against the Bitcoin rationale to me… See also today’s Premium post Association Alert – The State of the Clubs (Part 1).

Special Section: FTI, NSEL, India at the Crossroads

PLY: Nearly 3% up for Moon Men Inc (nee FTIL) and MCX too, as we have a few snippets:

CLB Adjourns Hearing On FTIL Case To Sept 8
The Hindu Business Line

The Company Law Board (CLB) on Wednesday adjourned to September 8 hearing on the MCA’s petition to supersede the Board of FTIL (now 63 Moons Technologies), having previously put a stay on the CLB’s June 30 order barring FTIL from selling or alienating the assets and investments of the company.


Investor Group Moves CLB In FTIL Case
Business Standard

The petition was filed in the ongoing case between the union government and FTIL over superseding the latter’s board. Among other reliefs, the petition sought a stay on FTIL’s move to pay dividends to its shareholders saying that this would shrink the resources available to NSEL investors in the event of the proposed merger between FTIL and NSEL is completed by the government.

Read our Premium NSEL Scandal Brief – Main File.


ICAI Forms ‘Prima Facie’ View On NSEL Auditor
N Sundaresha Subramanian – Business Standard

ICAI has been probing complaints against Mukesh P Shah & Co, the entity which audited NSEL in the run-up to its collapse, following the payment crisis in July 2013. The first complaint was in September 2013 by one Uday Punj, followed by two more by investors.


BNY Mellon Pricing Snafu Highlights Bank’s Fragmented Technology
Tim McLaughlin & Svea Herbst-Bayliss – Reuters

BNY Mellon Corp’s recent high-profile computer glitch has highlighted how reliant the bank is on a patchwork of in-house and third-party technology platforms despite a pledge by CEO Gerald Hassell to simplify things.

PLY: Is “Fragmented” this week’s polite synonym for archaic? We crossed a rubicon this week. QV in Premium: Technology On The Edge.


MOEX: SPECTRA System Update To V4.5 (СР2015-2)

SPECTRA trading system version 4.5 is scheduled to roll on production for 7 September 2015.


EEX To Launch Wind Power Contract In Early 2016
Vera Eckert – Reuters

EEX also confirmed earlier schedules for a renewable power futures contract that could act as an insurance against green energy price spikes.

PLY: In other news, German households now pay an average of 270 Euros per annum to cover Mrs Merkel’s spineless energy policy.


LME To Introduce Scrap & Rebar Cash Settled Contracts In November
Paul Ploumis – Scrap Monster

Products designed to complement the existing LME Steel Billet contract and are scheduled to be launched on November 23rd.


NCDEX Awaits FMC Merger With Sebi To Launch Weather ETFs
The Economic Times

As National Commodity and Derivatives Exchange (NCDEX) is currently being regulated by FMC whose norms don’t allow any such product, it is waiting for the merger of the commodities regulator with Sebi to be completed by September end, before it formally unveils the product.


Dark Pool Bond Trading: Getting Buy-Side Buy-In (subscription)
Kris Devasabai  – Waters Technology

In the second part of this two-part feature (part one here) Kris Devasabai looks at the impact dark liquidity pools will have on the global bond trading marketplace.


Harmonisation Of Key OTC Derivatives Data Elements (Other Than UTI & UPI) – First Batch, Consultative Report Issued By CPMI-IOSCO

Career Paths

FT reports that Zar Amrolia, Deutsche Bank’s former co-head of fixed-income, currencies and commodities has formally left the bank and is set to join high frequency market maker XTX Markets.

CoinDesk reports that ItBit has hired former New York State Department of Financial Services (NYDFS) general counsel Daniel “Danny” Alter as its general counsel and chief compliance officer.

Financial Calendar

04.09.2015 – Record date CBOE $0.23 dividend
04.09.2015 – TMX $0.40 dividend payment
04.09.2015 – BGC Partners’ BoD $0.14 quarterly dividend payment

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

Analyst Notes

CBOE Reiterated By UBS To “Neutral” – Price Target Raised To $66 From $62

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


Dispelling The Myths Associated With P2P Lending
Kevin Caley – FT Adviser

Other stories

ASEAN Capital Markets Forum Drives Greater Connectivity Of The ASEAN Capital Markets

Read our Premium ASEAN Exchanges Project Brief.

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