September 05 2014

elb2It’s Friday and it’s a rather manic day. I had the pleasure of giving a keynote in Umea last evening at the opening of the fantastic new Cinnober lab facility in the wonderful northern Swedish city which is truly in the forefront of much in design and creative thinking: expect further spectacular results from the team at Cinnober in due course!

Meanwhile, in today’s daily Exchange Invest bulletin:

Bourse Dubai book building on expected pre-rights LSE stake trimming, as ICE buys SuperDerivatives to add a whole new layer to the competition for market data services and messaging (very interesting)… ESMA adopts pragmatic tone to CCP crisis resolution tools. Alaskan pension fund sues banks over LIBOR fixing, bankers apparently cool on HK dual share proposal, and a great deal more – happy scrolling!

Public Markets

ICE Looks To Crack Financial Data Market (subscription)
Ed Hammond – Financial Times

Intercontinental Exchange (ICE), has agreed to acquire SuperDerivatives, an Israeli financial technology group, as it seeks to penetrate the lucrative information market. ICE is expected to pay $350 mln in cash for the Tel-Aviv based business and a deal could be announced as early as this week.

PLY: A fascinating transaction insofar as it moves ICE closer into another arena for profiting from data as well as giving it a toehold in the increasingly fascinating dance about the future of messaging – where you may recall Bloomberg was apparently unassailable until revelations last year showed that the data was a touch porous for certain journalists and others…

Meanwhile, EI reported on June 27th that Wickr, said it has raised $30 mln from investors including CME to help develop self-destructing messaging technology for use by financial services firms and gaming companies…and, on August 4th that Wall Street firms led by Goldman Sachs are close to buying a stake in chat and instant messaging startup Perzo Inc.

CCPs To Get Multiple Recovery Planning Tools (subscription)
Cecile Sourbes – Risk

ESMA Publishes Guidelines Regarding CPSS-IOSCO Principles For Financial Market Infrastructures In Respect Of Central Counterparties
Mondo Visione

European Central Bank’s (ECB) Coeuré says upcoming CPSS-Iosco report will set out a range of tools Central Counterparties (CCPs) can use for recovery purposes, instead of specifying a one-size-fits-all approach.

PLY: Less prescription and not having everybody corralled with the same constraints sound wise, as a single templated approach to resolving crisis situations is rarely a wise move imho.

Borse Dubai Launches Sale Of 8.5 Mln LSE Shares

Borse Dubai has launched an accelerated sale of 8.5 mln shares in the London Stock Exchange (LSE) , representing around 3.1% of the company’s issued capital with a latest price guidance of 20.20 ($32.95) pounds each, one of the sources said, valuing the stake at 171.7 mln pounds & representing a 3% discount to the closing price of 20.85 ($34.01) pounds.

EI reported on July 10th that Qatar Holding is to trim its 15% stake in the owner of LSE by a third ahead of a $1.6bn rights issue by the British bourse to fund its acquisition of Russell Investments.

Four-Party Agreement Signed For Shanghai-HK Stock Connect
Shanghai Daily

Establishment Of Shanghai – Hong Kong Stock Connect

A four-party agreement was signed on Thursday for the establishment of Shanghai-Hong Kong Stock Connect, a scheme that will allow investors with access to one market to buy and sell eligible shares listed on the other market.

Stock Exchange of Hong Kong Limited (SEHK) and Hong Kong Securities Clearing Company (HKSCC), wholly-owned subsidiaries of Hong Kong Exchanges and Clearing (HKEx), signed the agreement with the Shanghai Stock Exchange (SSE) and China Securities Depository and Clearing Corporation (ChinaClear).

HKEx press release here.

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 the first full trial went smoothly. Previously EI reported: August 28th ‘Traders Predict HK-Shanghai Stock Link Will Take Off’. August 25th that, HKEx completed connectivity test for Shanghai-Hong Kong stock connect. August 20th that the ‘through train’ link will speed up reforms of China’s stock markets. August 11th that the first trial of the Shanghai-Hong Kong Stock Connect took place on the mainland.

Barclays, BofA, Citigroup Sued For ISDAfix Manipulation
Bob Van Voris & Matthew Leising – Bloomberg

Barclays Plc (BARC), Bank of America Corp., Citigroup Inc. (C) and 10 other banks were accused in a lawsuit of conspiring to manipulate ISDAfix, a benchmark used to set rates for interest rate derivatives and other financial instruments. The Alaska Electrical Pension Fund sued yesterday in Manhattan federal court, claiming the banks colluded to set ISDAfix at artificial levels that allowed them to manipulate payments to investors in the derivatives.

PLY: No signs of benchmark settlements yet – in any of the several senses that may be construed.

U.S. Judge Finds Inefficiency, Complexity But No Aluminum Conspiracy: Home
Andy Home – Reuters

The dismissal by U.S. District Judge Katherine Forrest of a barrage of lawsuits alleging foul play in the aluminum market does not mark the end of this particular story. Only LME appears to be in the clear after the same judge ruled earlier that as an “organ” of the UK government the LME is immune from any lawsuit under the Foreign Sovereign Immunities Act.

EI reported on August 27th that a US court has dismissed LME as a defendant in an antitrust case in which aluminum prices were allegedly manipulated, saying the London-based exchange has U.K. sovereign immunity.

PLY: An idle water cooler thought lest your Friday wasn’t busy enough – would the “organ” of government issue allow LME and indeed other exchanges / CCPs in future to avoid such action if TTIP is signed?

Little Need For HKEx Dual Class Proposal, Bankers Say (subscription)
Lorraine Cushnie & Rashmi Kumar – Global Capital

Just one week before Alibaba is due to open books for its jumbo New York IPO, HKEx has launched a concept paper on Whether it should allow dual class shareholding. But with very few issuers demanding this structure, bankers reckon that even if it brings in new rules, it is unlikely to change the dynamic of the market.

EI reported on September 01st that the bourse issued a “concept paper” Friday about the possibility of allowing minority-control voting structures.

PLY: Interesting that after all the wailing and gnashing of teeth on the loss of Alibaba’s IPO the local bankers are sanguine about the concept of dual shareholding structures to which I remain entirely allergic.

Nasdaq CEO: We Have To Confront Brutal Reality
Geoff Colvin – Fortune

PLY: I Must admit, readers may appreciate that I read this headline and thought of something not mentioned in this interview with NASDAQ OMX CEO Bob Greifeld. Then again in my defence I could think of 43 million reasons to think brutal reality would arrive on the opposite side of the Atlantic to much of the focus of Mr G’s remarks here.

Exclusive – U.S., Europe Head Toward Delay In Squabble Over Swaps Rules – Source
Douwe Miedema – Reuters

The European Union is discussing delaying a deadline for a second time in its efforts to reform the global derivatives market, as talks with U.S. regulators have failed to produce a breakthrough on a main sticking point: The two sides are still at odds on allowing clearing houses, which stand between buyers and sellers of derivatives to reduce risk, to operate in each others’ jurisdictions

PLY: Balkanisation of clearing is not a sensible way forward for globalised markets. Not quite sure where the blame lies – unilaterally or bilaterally but clearly the market can only prosper with clarity and resolution…

Swaps Rule Requires $644 Billion In Collateral, Regulator Says
Silla Brush & Jesse Hamilton – Bloomberg

U.S. banks would need $644 bln in collateral to offset risks in swaps traded among themselves, according to an analysis prepared by the US Office of the Comptroller of the Currency concerning rules re-proposed by regulators & pertaining to trades that won’t be guaranteed by CCPs.

Century-Old London Gold Price Benchmark Starts Makeover

The operator of the London gold price benchmark said on Thursday it formally started the process to find a new administrator for the century-old mechanism that will halt the telephone call that four institutions enter twice a day in favour of an electronic solution.

EI reported on July 17th that LGMFL announces a number of developments in relation to the gold fixing process, including its intention to appoint a third party administrator to assume responsibility for the administration of the gold fixing process.

Canada’s Collapsing IPO Markets Hard To Explain
Financial Post

The dot-com boom and bust, and then the 2008 financial crisis, provide little assistance in explaining these statistics. Toronto Stock Exchange (TSX)’s parent company has been travelling the country raising the profile of its new venture, TSX Private Markets. At the same time, Canada’s securities commissions are engaged in the most comprehensive overhaul of the private placement regime in more than a decade. In Ontario, in particular, this would reverse the increasingly restrictive trends of previous reforms and liberalize its private capital markets.

Africa’s Biggest Stock Market Named Best Regulated In WEF Report
Neo Khanyile – Bloomberg

Johannesburg Stock Exchange (JSE), operator of the continent’s largest equities and bond markets, ranked first among 144 nations for the effectiveness of regulation and supervision, the World Economic Forum said.

It’s the fifth consecutive year the JSE was listed first in the Global Competitiveness Report, the exchange said in an e-mailed statement today. South Africa ranked third in the ability to raise finance through the local equity market and the effectiveness of corporate boards. It was second in protecting the rights of minority shareholders and 53rd on its Global Competitiveness Index.

UBS MTF Trading Notice – Introduction Of T+2 Settlement Period
Mondo Visione

From 6 October 2014, the standard settlement period for transactions executed on UBS MTF will be shortened from T+3 to T+2 (trade date plus two business days).

Private Markets

Gmex In Talks With Exchanges Over Licensing Plans (subscription)
Anish Puaar – Financial News

Global Markets Exchange (Gmex), the European derivatives trading start-up, is considering plans to licence its interest rate swap future to other exchange groups with the aim of boosting trading in the product and lowering collateral costs.

The group, which is awaiting approval from the UK’s Financial Conduct Authority (FCA) ahead of an expected launch later this year, is one of a number of derivatives initiatives that have emerged as a result of regulatory reforms that will push more swap trading onto exchanges and through clearing houses.

PLY: Euro futures to be cleared through EUREX clearing (therefore alongside EUREX’s own swap future launched last Monday) by dint of the 5% DB1 bought in GMEX while CEO Hirander Misra looks to licence other currency swaps to exchanges around the world.

NZX Backs NZ’s Growing Angel Movement

New Zealand stock exchange (NZX), the operator of New NZX, has thrown its support in behind New Zealand’s growing angel movement, by sponsoring the Angel Association of New Zealand (AANZ).

LUSE Prepares For AIM Designated Advisor
UK Zambians

Lusaka Stock Exchange (LUSE) says it is anticipating the availability of a designated advisor in readiness for the Alternative Investment Market by November.

Nepse Tells Firms To Demat Shares Within 21 Days
Himalayan Times

Nepal Stock Exchange (Nepse) has directed all the listed companies that are yet to be registered with CDS and Clearing Ltd (CDSC) to get their shares dematerialised within the next three weeks, as the regulation has made electronic share settlement mandatory and only demat shares can be traded after October 19.

ATM Industry Association Opens Up To Bitcoin

ATM Industry Association has called on bitcoin ATM operators to join with it in promoting improved security and governance for virtual currency machines. The call to action follows the publication of an ATMIA position paper on the crypto-currency which argues that bitcoin is not a threat to cash, or to established electronic payment methods.

Bitcoin Promoter Pleads Guilty Over Silk Road Charges
The Telegraph

A man who helped to promote Bitcoin wants to remain in the business despite pleading guilty on Thursday to indirectly helping send more than $1 mln in the digital currency to users of the illicit online marketplace Silk Road, his lawyer said.

Charlie Shrem, 24, pleaded guilty at a hearing in New York federal court to one count of aiding and abetting an unlicensed money transmitting business.

BitFury Capital Invests In Bitcoin Security Specialist BitGo
Nermin Hajdarbegovic – CoinDesk

BitFury Capital, the investment arm of bitcoin mining infrastructure provider BitFury, has announced an undisclosed investment in BitGo.

The news marks the venture capital firm’s second investment in recent weeks, following confirmation that it had invested in an anonymous bitcoin wallet provider.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX is up 1.5% and FTIL nearly 3% today as there is some more news of investigative developments at NSEL:

NSEL Scam: Economic Offences Wing To Question More Than 10 Brokers
Ram Sahgal – Economic Times

The Economic Offences Wing (EOW) of the Mumbai Police will begin calling in more than 10 brokers on the scam-hit National Spot Exchange (NSEL) over the next few days for recording fresh statements, with police-appointed forensic experts having completed their audit of these brokers whose client and own funds of around Rs 2,400 ($397.25 mln) crore are stuck on the bourse.

Forensic experts US Gandhi & Co and Chetan Dalal & Co have submitted their final reports on Motilal Oswal, India Infoline Anand Rathi, Systematix, Geojit, Phillip Commodities, Nirmal Bang, etc., police sources told ET.


QED Adds Eurex Futures Order Book Data

Quincy Extreme Data service (QED) distributes select Eurex futures in major trading centers in the UK, New Jersey and Illinois at the lowest known commercial latency.

EEX Selects TT For Direct Screen Offer

European Energy Exchange (EEX), Europe’s leading energy exchange, and Trading Technologies International (TT), have agreed to supply the exchange’s trading participants with direct access to the exchange via the TT direct screen.

Why Data Centers Matter For HFT
Bill Fenick – WallStreet & Technology

With HFT and electronic trading on the rise, firms are asking whether their legacy IT infrastructure is sufficient to support a higher volume of these transactions.

ConvergEx Improves Its Algos
Automated Trader

Using historical data and real-time auction imbalance information, ConvergEx’s algorithms can now determine the optimal number of shares to commit to the auctions, to minimise market impact and determine how best to trade the shares that remain in the market.


Euronext Eyes Decision On Wheat Quality Terms By November
Valerie Parent & Gus Trompiz – Reuters

The Euronext exchange said it aimed to decide in the next two months whether to add new quality terms to its milling wheat futures contract, in line with rules set by silos to ensure delivery of suitable wheat out of a poor French crop.

Euronext’s wheat contract, a price benchmark in Europe, is defined as a milling wheat grade suitable for making bread. But traders see its current quality specifications as basic.

LME Says Aluminium Premiums Contract Is Next Focus After LME Clear (subscription)
Metal Bulletin

London Metal Exchange (LME) is focused on the launch of an aluminium premiums contract, after getting approval from the Bank of England for its new clearing platform.

US Energy Firms Cheer Regulators’ Shift On Margin Rule (subscription)
Alexander Osipovich – Risk

In an about-face, the Fed and other bank regulators exempt non-financial end-users from requirement to post margin on non-centrally cleared swaps.

Energy companies breathed a sigh of relief this week after US bank regulators scrapped a three-year-old proposal that would have required non-financial end-users to post margin on bilateral swap transactions not cleared through a central clearing house.

HKEx Preparing Launch Of Cash-Settled Contracts In Al, Cu, Zn; Physical To Follow (subscription)
Metal Bulletin

HKEx is working on the launch of its cash-settled aluminium, copper and zinc contracts and will launch physical-delivered contracts once these are successful.


CBOE Plans Trading On Government-Debt Volatility Index (subscription)
Saumya Vaishampayan – Wall Street Journal

Futures trading on the CBOE/CBOT 10-year U.S. Treasury Note Volatility Index, under the symbol VXTYN, is expected to begin on Nov. 13, subject to regulatory review, and will allow users to hedge interest-rate volatility risk, the CFE said.

CBOE press releases here.

CBOE To Enhance VIX Index Methodology By Including SPX Weeklys Option Series
Mondo Visione

Starting October 6, CBOE plans to begin including SPX Weeklys options series — expiring every Friday, except the third Friday of each month — in its CBOE Volatility Index (VIX Index) calculation.

NASDAQ OMX Announces Launch Of A New Index Effective September 9, 2014
Nasdaq Trader

Effective Tuesday, September 9, 2014, NASDAQ OMX will begin disseminating the NL20E Index.

Career Paths

BATS Global Markets In Search Of New President (Subscription)
Bradley Hope – Wall Street Journal

BATS Global Markets. has quietly begun searching for a new President just over a month after it forced William O’Brien out of the position.

Clearing Expert Exits LSE Futures Project (subscription)
Time Cave – Financial News

A Senior Consultant to a London Stock Exchange (LSE) initiative to launch a new European swap future in alliance with a group of banks has left the project, according to two people familiar with the situation. Jake Pugh, an Independent Consultant and former MD of ICAP‘s futures business, left the LSE‘s initiative, called Project Rita, last week.

Globe Newswire reported that Norman Hay, retired recently as CEO of Cargill, International S.A. and Head of the Petroleum Business Unit, joins PanXchange, Inc. as Director.

MV reported that Baymarkets AB, the specialist OTC derivatives, fixed income and commodities market systems provider, announced that it has appointed Stu Taylor, CEO of Algomi as a Non-Executive Director.

MV reported that The Investment Industry Regulatory Organization of Canada (IIROC) announced the appointment of Andrew J. Kriegler as the incoming IIROC President and CEO. and he will also become a member of the IIROC Board of Directors at that time. Mr. Kriegler currently serves as Deputy Superintendent of the Office of the Superintendent of Financial Institutions (OSFI).

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.

Next Week

Record date CME $0.47 quarterly dividend.
LSEG EGM to approve the rights issue and will also release a pre-close statement for the five-month period to 31-Aug.
LSE rights issue- trading in the nil paid rights commences.
Record date NASDAQ OMX quarterly dividend of $0.15
BME €0.40 interim dividend payment.
Interactive Brokers $0.10 quarterly dividend payment.

New announcement

ICE Q3 2014 Financial Results on Tuesday, November 4, 2014

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

Share Notes

CME Group COO Bryan T. Durkin sold 25,625 shares Tuesday, September 2nd. at an average price of $76.75, (bargain $1,966,718.75) He now owns 46,930 shares.

Charles Schwab Director Preston C. Butcher purchased 7,683 shares September 4th. at an average price of $8.7902, (bargain $67,535.10) He now owns 8,053 shares.


P2P Lending Grows As A Disruptive Force In Finance
Claire Davidson & Nerd Wallet – NASDAQ

KPMG: Banks Wonder If Crowdfunding Is Friend Or Foe
JD Alois – Crowdfund Insider

Global tax and advisory firm KPMG recently commented on the crowdfunding industry and how traditional banks are sizing up the new, innovative form of finance.

Other stories

Five Risks Weighing On ESMA’s Mind (subscription)
Anna Irrera – Financial News

In its latest report on trends, risks and vulnerabilities in Europe’s markets, the European Securities Markets Authority yesterday highlighted issues that could cause instability.

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