September 04 2014

elb2An interesting day of nuanced stories – CCP updates and authorisations, as ITG looks at following everybody else into launching a bond platform, just when ESMA don’t seem to be overly highlighting the bond bubble their fellow Euro-entity the ECB is helping inflate. The Fed looks to replace LIBOR with something it can control better within the US while the big job news is the return of Mayor Mike to the top spot at his eponymous vendor, just as it has begun encountering choppy waters previously unprecedented in its history.

Greetings from Umea (OooohMMM-AY-AH – _not_ UMM-eee-a akin to “EMEA” as Anglophones pronounce it), in sunny northern Sweden (Europe’s joint capital of culture 2014) where I am here to see the great and good of the local community who are involved with Cinnober’s state of the art development office from whence today’s Exchange Invest has had its daily injection of free pith… Happy scrolling:

Public Markets

LME Clear Receives EMIR Authorisation
Mondo Visione

LME (London Metal Exchange) Clear, the new clearing house of the LME announced that the Bank of England has approved its application as a central counterparty under the European Markets Infrastructure Regulation (EMIR). LME Clear’s authorisation takes effect on 3 September 2014.

Fund Managers Warn On China Trading Rules (subscription)
Jennifer Hughes & Lucy Colback – Financial Times

China’s trading rules pose a threat to the early success of the first direct access many foreigners will have to the country’s mainland stock markets, fund managers have warned.

EI reported on September 01st that The valuation difference between Chinese shares traded in Hong Kong and Shanghai narrowed to the least in three months after brokerages said the first full trial of the cities’ exchange link went smoothly.

PLY: The through train needs better custody arrangements and a series of other safeguards and issues to be clarified before the buy side can really endorse it.

CME UPS China Move With Shanghai Clearing Link (subscription)
Joe Parsons – Fow

CME signed an MoU with the Shanghai Clearing House.

CME Clearing Europe Goes Live With BNY Mellon CSD
Automated Trader

BNY Mellon, has announced CME Clearing Europe as the first external client of BNY Mellon CSD SA/NV, the company’s Belgium-based central securities depositary.

PLY: For those who may not have been gripped by the entirety of EMIR (actually a simple and suitably brief piece of legislation), article 47.3 requires CCP margin collateral to be segregated & held by the operator of a recognised Securities Settlement System (SSS), such as BNY Mellon CSD.

Investment Technology To Launch Dark Pool For Bond Trading (subscription)
Bradley Hope & Katy Burne – Wall Street Journal

ITG is jumping into the race to solve one of the trickiest problems for big investors: finding a better way to trade bonds now that banks have stepped back from the business.

PLY: ITG follows, amongst others, its rival institutional liquidity pool, Liquidnet, in moving into the bond markets.

MCX – SX Looks To Dispose Of FTIL’s Stake
Ashish Rukhaiyar – Livemint

PLY: Warrants have already been extinguished and now the MCX-SX is looking at a means to rid itself of FTIL shareholding (5%), alongside the broader picture of securing its own future, financing included.

LCH.Clearnet Collaborates With Euroclear On U.K. Repo Clearing
Jake Safna – Global Custodian

LCH.Clearnet has launched a new central clearing product for U.K government bonds used for general collateral (GC) repo trades aimed at alleviating operational and liquidity risk in managing these transactions.

Fed Steps Up Search For Libor Alternative (subscription)
Gina Chon – Financial Times

The US Federal Reserve is stepping up efforts to corral market participants to agree to alternatives to the US dollar Libor benchmark, in what would be a major transition affecting hundreds of trillions of dollars in derivatives contracts.

PLY: Restoration of probity or just another part of the ongoing land grab by the Fed to bring everything pertaining to the US dollar ‘back’ onshore? My money is more on the former as excuse to execute the latter, see also umpteen clearing issues (CME Europe regulatory permission passim) etc.

Goldman Named to Key Role in Alibaba IPO (subscription)
Telis Demos – Wall street Journal

Goldman Sachs Group Inc. GS -0.09% landed a coveted role in Alibaba Group Holding Ltd.’s upcoming initial public offering as the bank in charge of overseeing the deal’s early share trading.

The role, known as “stabilization agent,” was sought by banks currently working on Alibaba’s IPO because of the prestige and potential additional fees and trading commissions that could be generated from overseeing the trading.

PLY: Clearly Goldman seeks the prestige which goes with a large fee and indeed the right to help on this massive IPO which I still fear is a poisoned chalice for all parties concerned given the highly dubious approach to shareholder democracy.

Private Markets

National E-APMC In The Offing
Rajesh Bhayani – Business Standard

NCDEX Spot Exchange, India’s only e-spot market, has linked 35 APMCs, or mandis, in Karnataka electronically. Through this, a farmer or trader under a mandi can trade in any of the linked mandis through an electronic platform developed by NCDEX Spot Exchange and the Karnataka government, creating the basis for a de facto national agricultural produce marketing committee (APMC) is in the works.

OIC & Borsa Istanbul VIOP Sign Content Sharing Agreement

Options Industry Council (OIC) has entered into a content licensing agreement with Borsa Istanbul Derivatives Market (VIOP) to develop an options education program for Turkey.

Kenya Bourse IPO Raises $7 Mln For Expansion
Reuters Africa

Nairobi Securities Exchange (NSE) has raised 627 mln Kenyan shillings ($7.1 mln) for expansion in an oversubscribed IPO.

EI reported on July 09th that Kenya’s stock exchange will become the second publicly traded African bourse with an IPO.

PLY: Welcome, NSE, to the public universe of market infrastructure.

DigitalTangible Launches Crypto 2.0-Powered Gold & Bitcoin Market
Pete Rizzo – CoinDesk

While existing services allow bitcoin users to buy gold with bitcoin, DigitalTangible offers a novel innovation for the market, using an underlying crypto 2.0 protocol that issues tokens representing physical gold and attaches them to bitcoin addresses, thereby allowing traders to seamlessly move between bitcoin and gold.

Bitcoin? Yawn. CheapAir Is Now Taking Litecoin & Dogecoin

Last November CheapAir became the first airline to accept Bitcoin and then later, the first to let travelers book hotel rooms and Amtrak train seats with the digital currency – since then its Bitcoin sales have topped $1.5 mln.

FinTech Manifesto: Government Should Make UK Bitcoin-Friendly
Nermin Hajdarbegovic – CoinDesk

The ‘Startup Manifesto’, as it is called, was published by the Coalition for a Digital Economy (Coadec) this week, and was authored by Guy Levin, the coalition’s executive director. Notable investment firms backing the proposal include Index Ventures, King and Seedcamp.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX is down 2% and FTIL up 1.6% after several flat days, with some new stories trickling through from NSEL and environs:

Bombay High Court Sets Up Panel On NSEL Funds
Swati Deshpande – Times Of India

The Bombay high court has set up a committee of three, headed by retired Justice V C Daga, to determine money to be paid by alleged defaulters in the Rs 5,600-crore ($933 mln) National Spot Exchange scam.

The committee will also zero in on the assets of various defaulters or third parties who had borrowed money from the exchange but are yet to pay to the lenders. This committee has a role similar to a commissioner as well as a receiver with a mandate to explore and negotiate mutual settlements, and receive funds from these

Regulator Went Easy On NSEL Scam, Investor Forum Says

In a strongly-worded letter to Finance Minister Arun Jaitley, a forum formed by NSEL victims has accused FMC of delaying taking action on the exchange even when early signs of troubles arose, and has called upon the government to merge it with its parent Financial Technologies (FTIL) to quicken the recovery of funds.

How Jignesh Shah Lost The Plot & His Empire

PLY: Another rise and fall profile of Jignesh Shah. Not much new but always welcome to those readers still going through the various stages of “Shahdenfreude.”


Interactive Data Provides DMA Services To SIX Swiss Exchange
Automated Trader

Interactive Data will provide clients with direct market access (DMA) services to SIX Swiss Exchange, effective immediately.

Fidessa Offers UK Brokers Alliance News Service

Fidessa has expanded the service it offers its UK broker clients with the addition of Alliance News, a new journalistic news service targeted at UK companies, investors and their advisors.

Press release here.

Exchange Glitch Hurts German Bond Auction Demand – Traders
John Geddie & Clare Hutchison – Reuters

Derivatives exchange Eurex suspended trading on its five-year German bond future contracts on Wednesday morning, a move that dented demand at a coinciding five-year German bond auction, traders said. Technical issues arose between 0755 GMT and 0859 GMT, right in the middle of the bidding period for Germany’s new five-year bond.

Sungard To Help Asian Firms Adapt To Change
Asset Servicing Times

To help adapt to industry change, a group of financial services firms in Singapore have migrated their operations to SunGard’s managed services.

SmartTrade Adds New OMS Functionality (subscription)
Marina Daras – WatersTechnology

SmartTrade Technologies has added new functionality to its OMS to support both e-orders + manual trading books & optimize clients’ trading flow across multiple desks on a global scale. The OMS will now include the externalization of orders for management by algorithms and support for custom order types. Aix-en-Provence, France-based smartTrade has also added a set of rules for order routing to traders at manual desks and algos to ensure that all desks involved in the trading chain can access the tool.


CME, SCH To Develop OTC Products & Services (subscription)
Danial O’leary – Global Capital

CME and the Shanghai Clearing House (SCH) plan to jointly develop products and services in the OTC derivatives market and will cooperate in areas of risk management and market research

The two firms signed a MoU Tuesday in Chicago.

To Help Market Players, MCX May Get Nod To Roll Out New Contracts Up To March
Suresh Iyengar – Business line

After an extended battle, MCX may get the go-ahead to launch new contracts up to March 2015 if not for the whole of the next calendar year. This will be an interim arrangement till its promoter, Financial Technologies (FTIL), gets all regulatory approvals to sell its 15 per cent stake to Kotak Bank.

Market participants, who are facing difficulty in rolling over their investments due to lack of contracts for next year, have asked the Government to allow the exchange to launch contracts for financial year 2014-15, that is up to March, if not for the whole of calendar year 2015.

Career Paths

Michael Bloomberg Returning To Run Bloomberg LP (subscription)
Lukas I. Alpert – Wall Street Journal

Less than a year after leaving office as mayor of New York City, Michael Bloomberg will return as Head of Bloomberg LP, the financial data and media firm he founded and still controls, the company announced Wednesday. Mr. Bloomberg, 72 years old, will take charge at the end of the year, when Daniel Doctoroff, who has been CEO since 2008, will step aside, the company said.

PLY: Pretty amazing stuff although Dan Doctoroff has not struck me as being able to cope with changes in the structure around him – including recent direct attacks on Bloomberg messaging. Has Mayor Mike still got his vendor mojo? This could be an interesting period as for the first time in its history, Bloomberg no longer appears to be almost effortlessly expanding its empire…rather it has barely had time to grasp it is at the top of the tree, thanks to multiple competitive threats.

Former FIA Europe Chief Takes Saxo Role (subscription)
Anish Puaar – Financial News

Anthony Belchambers will take the role of NED at Saxo Capital Markets. It is Belchambers’ second NED position since leaving FIA Europe, following his appointment to the Board of Nasdaq OMX’s NLX European derivatives exchange.

PLY: Good luck to Anthony in this new role. Wonder how much he is enjoying the excitement of being on the board of NLX? Can he even hear himself think during board meetings with all that flap of butterfly wings pulsing through the system every hour or so?

Stock Market Wire reported that London Capital Group (LCG) appointed Charles-Henri Sabet as Executive Chairman, Sabet is currently a Director of (GIO) Global Investments Opportunities Management. LCG says Giles Vardey, former Chairman is stepping down from the position but will remain on the board as Non-Executive Senior Independent Director.

PLY: Interesting move as CEO Kevin Ashby continues to reshape the LCG and Mr Sabet has been involved in investing in the group recently.

MV reported that Mr. Wu Lijun, former Assistant Chairman of the China Securities Regulatory Commission (CSRC), appointed as Secretary of the CPC SZSE Committee and Nominated Board Chairman of the SZSE.

MV reported that Financial Industry Regulatory Authority (FINRA) announced Linda D. Fienberg, President, FINRA Dispute Resolution, and Chief Hearing Officer is planning to leave the organization at the end of November. Ms. Fienberg has responsibility for FINRA‘s dispute resolution and disciplinary hearing programs.

SR Labs Taps Lava Founder For CEO, Post-Wombat Buy (subscription)
Max Bowie – Waters Technology

New York-based low-latency data platform and feed handler provider SR Labs has appointed veteran technology industry executive Richard Korhammer as CEO, following its recent acquisition of the Wombat data platform business from Intercontinental Exchange’s NYSE Technologies division.

Korhammer, who takes on the role on Monday, Sept. 8, is best known as the CEO and founder of order management and market data platform provider Lava Trading, which he sold to Citigroup, where he remained for two years following the sale as managing director of global equities electronic trading. Since leaving Citi in 2006, Korhammer has served as interim CEO and chairman of OES MarketGroup, chairman and director of The Receivables Exchange, and currently as chairman of Australian interest rate marketplace operator Yieldbroker – a position he expects to continue while serving as CEO of SR Labs.

Financial Calendar


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.

Other stories

CDS De-Correlation A Threat To CVA Hedging, Traders Warn (subscription)
Kris Devasabai – Risk

The decline in single-name trading could cause credit default swap indexes to decouple from their constituents. The ongoing slump in traded volumes of single-name credit default swaps (CDSs) is a “nasty side effect” of international regulatory reforms, a senior banker has claimed, raising fears that credit valuation adjustment (CVA) hedging will become increasingly difficult should the long-standing correlation between single-name and index CDS products break down.

ESMA Sees Valuation Risks In Key Market Segments
Mondo Visione

The European Securities and Markets Authority (ESMA) has published its Report on Trends, Risks and Vulnerabilities No. 2, 2014, and the Risk Dashboard for 3Q 2014. Overall, ESMA’s report finds that valuation risks in key market segments are rising and merit investor attention. In the first half of 2014, conditions in the EU’s securities markets, asset management industry and market infrastructures remained favourable. Prevailing optimistic market sentiment was at odds with sluggish underlying economic fundamentals, but in line with the ultra-low interest rate environment.

PLY: An odd surmise in this message sent via MondoVisione (who don’t edit the content from the source), as nowhere in the headlines does it scream: “Italian Bonds yield 2.4%, are you having a laugh?” which would be the way I see market valuation risk at the moment in perhaps the greatest bond bubble of all time…

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