September 07 2015

 elb2Our cousins may be enjoying Labor Day stateside but there is a fair whack of good crunchy stuff in today’s Exchange Invest even without their active presence. It looks as if the Viennese are seriously downsizing their international ambitions and about to sell a chunk of the Budapest bourse while A2X are pumping up the hype ahead of attacking the Jo’burg market head on with aggressive price cuts. Elsewhere BATS are approaching MIFID II volume caps with a cunning plan for frequent auctions…and there’s more:

Final Calls:

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

Equally Don’t miss Burgenstock with its all star line up beginning with my Crossfire panel September 23rd.

Public Markets

ICAP Invests In Abide Financial

ICAP made a strategic investment in Abide Financial, a market-leading global regulatory reporting specialist. The investment will enable Abide Financial to continue to expand its global footprint and capabilities.

Read our Premium Exchange Deals Brief.


Markit Completes Acquisition Of DealHub
Business Wire

DealHub will form part of Markit’s Processing division. The deal was announced last month.


China Stock Rout Delaying Market Links With Hong Kong, HKEx Says
Jasmine Ng & Kana Nishizawa – Bloomberg

“Psychologically, this is not the time to talk a lot about mutual market access when you’ve just put out a fire,” HKEx CEO Li said at a conference in Singapore on Monday. “You’d want to calm down, figure out how to clean up and then move forward.”


CSRC Says Markets More Stable, Risks Reduced

China Mulls Circuit Breaker To Avoid Stock Jolts, Xinhua Reports
Fox Hu – Bloomberg

Read in Premium China Capital Markets Transformation Brief – Main File and  HKEx – SZSE Stock Connect.


Europe’s Biggest Stock Exchange Goes Hunting For Whale Trades
John Detrixhe – Bloomberg

Bats Chi-X Europe To Launch Share Auctions (subscription)
Financial Times

BATS Chi-X Europe Announces Launch Of A Periodic Auctions Book
BATS Global Markets

BATS announced the creation of a new order book that will allow market participants to access auction functionality throughout the trading day, in a bid to encourage trading in larger size.

PLY: A fascinating move whose results will be awaited with interest. Essentially ‘plain sight block trades’ are being encouraged by BATS in an innovation to beat the overly prescriptive MIFID II volume rules.


Exchanges Draw Battle Lines For Mifid II Reporting (subscription)
James Rundle & Tim Cave – Financial News

PLY: BXTR already pushed Markit to offload Boat to Cinnober who have now partnered with LSE.



End To Uncertainty After Election Should Boost Investment In Poland (subscription)
Henry Foy – Financial Times

PLY: A spectacularly inane report but typical of the dismal Warsaw foreign press corps. Liquidity problems, yes, but no mention of the elephant in the room: populist politicking of the likely incoming government which will see more meddling with government stakes from a party even more opposed to privatisation than the current control freak incompetents. At least FT finally manages to get over its blind Europhilia for the government and notes that stealing half the citizen’s private pensions has somewhat alienated the electorate. I hope it all works out (privately I have investments in the country above and beyond Exchange Invest involvement) but Poland has an election looming between a pair of economically centre left parties with no evident stomach for the reforms all CEE needs urgently to maintain growth and enable better markets.

Read in Premium Poland At the Crossroads and Poland’s Presidency – A Warning for GPW?


Flash Crash Trader E-Mails Show Spoofing Strategy, U.S. Says
Suzi Ring, Janan Hanna & Tom Schoenberg – Bloomberg

Sarao enlisted a computer programmer to help him work out a system to manipulate stock prices, e-mailing pleas for help perfecting his “spoofing” efforts.

PLY: Once again: stealing a few Chevrolets does not qualify as an attempt to bankrupt the American auto industry which is essentially the leap of leverage undertaken by US Prosecutors.


How To Catch A Spoofer
Matthew Leising, Mira Rojanasakul & Adam Pearce

A federal judge in Chicago is expected to rule soon on a high-profile spoofing case. Brought by local firm HTG Capital Partners, the lawsuit seeks to compel the owner of CBOT to identify those behind thousands of trades that, the company alleges, manipulated the U.S. Treasury futures market.

HTG filed its lawsuit in March (reported here).

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


Failed IPO Casts Shadow Over The Future Of SGX
Rev Hui – Global Capital

Singapore’s equity market appears jinxed this year following the failure of Jiangxi Jiangling Chassis’ S$49m ($34.8m) IPO, which would have been the first transaction to adopt the direct listing framework (DLF) with China. With the trade now in tatters, observers reckon it is time for the Lion City to rethink its IPO strategy.

PLY: Wow, toys, pram, dummy, bathwater, baby! It’s all getting thrown out in this article which shows the ongoing negativity undermining the SGX. GlobalCapital last week noted the IPO “[fell] victim to the global sell-off in equity markets that took hold last week and saw investors running for the hills on all things China.” Clearly SGX needs to move forward but this single data point is hardly a verdict for total volte face. That the Direct Listing Facility between SGX and China has taken since November 2013 to have a listing application may be a better argument…


India – A New Era Begins For Commodity Exchanges
Rajalakshmi Nirmal – The Hindu Business Line

As SEBI and FMC merge and equity exchanges launch commodity trading, competition will increase.

Read in Premium SEBI-FMC Merger Brief.


India Becoming Increasingly Important To Global Commodities Markets: LME
Ben Kilbey – Platts

LME Sets Sights On India With Metals Roadshow

LME Looks To ‘Enhance Transparency’ To Kerb Pricing
Ben Kilbey – Platts

LME is looking to “enhance transparency” around the closing kerb session by stopping carry trades one minute before the close of three-months pricing.

Private Markets

Hungary Central Bank Eyes Hiking Stake In Bourse

Hungary’s central bank is in talks to buy big stakes in the Budapest SE from Austrian owners. The bank holds a 6.9% stake in the bourse, Austrian CEESEG Aktiengesellschaft owns 50.5% and Oesterreichische Kontrollbank AG holds 18.3%.

PLY: Very exciting news. Given that the Hungarian Bourse has a competent management team in place under the engaging Zsolt Katona, this is perhaps the best news for ages in CEESEE market terms. Hungary has huge potential and in the macro picture the Viennese vision has floundered as the Austro-Hungarian Empire was, anyway, never much good at commerce once industrialisation took hold in other parts…

Read in Premium CEESEG Stakes Sales Brief.


Trader Promises Price War to Undercut Africa’s Biggest Exchange
Renee Bonorchis – Bloomberg

Kevin Brady, once head of equity trading for South African-born bank Investec, wants to compete with JSE. To do that he plans to undercut the monopoly’s fees.

“Our target is to make the end-to-end cost of an equity trade between 30 to 50 % cheaper,” Brady said. “Our value proposition is about giving people a choice and a high-performance platform with top-end technology and a material reduction in price.”

The new exchange, A2X, may open for trade in H2 2016 if the regulator, the Pretoria-based Financial Services Board, approves its license application, which was first lodged in May. Brady is starting it with partners Ashley Mendelowitz, formerly of technology company Peresys, and Sean Melnick who co-founded investment firm Peregrine Holdings.


BSE To Launch Roll-Over Facility In Stock Lending & Borrowing
Financial Express

In a bid to increase participation in the stock lending and borrowing (SLB) market, leading stock exchange BSE will introduce the roll-over facility under this scheme.


ECX Launches Online Trading System
Bethelhem Lemma – 2Merkato

For the time being the e-trading has been launched in Addis Ababa, but Ethiopian Commodity Exchange (ECX) has a plan to launch the service in Hawassa, Humera and Nekemte, trading centers to be established.

ECX Plans More Commodities With Electronic Trading
Aaron Maasho – Reuters

ECX plans to double the items it trades by next year after introducing an electronic platform to replace its system of shouting and gesturing orders.

Myanmar To Commercially Tax All Transactions On Yangon SE
Asean Briefing

Read in Premium ASEAN Exchanges Project Brief.

Ghana – CSD Announces Settlement Cycle Change

Effective Monday, September 14, 2015, trades done on the Ghana Fixed Income Market and the CSD in Bank of Ghana and Ghana Cocobod Securities, including Treasury Bills and other Corporate Bonds will settle on a T+2 rolling settlement cycle for both securities and funds.

US Marshals To Auction Silk Road’s Last Stash Of Bitcoin

The total stash confiscated by the US Marshals Service is close to 174,000 bitcoins, which includes 144,000 bitcoins from Ross Ulbricht and the rest from bitcoin wallets connected to Silk Road. The total value of bitcoin in fiat currency at that time (2013) was close to $130 million. Most of these bitcoins have already been sold through a series of auctions (reported here and here) and the remaining will be cleared soon in the upcoming auction.

Why The Future Of Bitcoin Lies In Europe
Chris Grundy – CoinDesk

PLY: A very coherent argument, by Chris Grundy of the fascinating Bitbond platform, echoing and enhancing my frequently expressed sentiments, discussing how the US is gradually shooting itself across both feet as regulators demonstrate an ongoing leaden footed approach to the cryptocurrency revolution.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX down 2%, FTIL (ahem, 63 Moons) is rocketing up 13.5% apparently on “bargain hunting” after losing 32.51% in the previous 13 sessions. The stock traded Rs 148.10 August 18th and closed at 99.95 Rs on Sept 4th…


Massachusetts Regulator Investigates BNY Mellon Fund Pricing Snafu
Ross Kerber & Tim McLaughlin – Reuters

The top securities regulator of Massachusetts said on Friday he is investigating the computer glitch at BNY Mellon that disrupted pricing on more than $400 billion worth of mutual fund and ETF assets.

PLY: Perhaps they could investigate with the sort of vigour being brought against that relatively petty offender, Mr Hound of Hounslow.

Trading Glitch Prompts PSE To Review Guidelines
Business World Online

Philippine SE (PSE) is set to evaluate its guidelines to improve its response to trading issues after a technical glitch disrupted trading last week for nearly five hours, the longest in the bourse’s history.

PLY: I believe the problems all emanate from the PSETradex system (front end) provided by N2N Connect Berhad and is not linked to the systems provided by NASDAQ in June 2015.

Saudi SE Announce The ‘Go-live’ Date Of Its New X-Stream INET Platform
CPI Financial

Saudi SE has announced that Sunday, 13th September, 2015 will be the “Go-Live” date for the new X-Stream INET trading platform by NASDAQ.

Forza Monza! Forza Market Data! (subscription)
Max Bowie – Waters Technology

PLY: Max Bowie presumably enjoyed the back to back victories of Britain’s Lewis Hamilton at the Italian GP yesterday making it a worthwhile visit to the atmospheric Autodromo Nazionale Monza. Another excellent column notes how the past is, well, the past. Some, in market data and other places, have long suffered with modern upheaval…


CME Throws Down Gauntlet To LME With New Aluminium Premium Contract
Clara Denina – Reuters

The new 25-tonne contract will trade on the global CME Globex platform from Sept. 21 and will be cash settled against Metal Bulletin’s assessment of aluminium spot price transactions in Europe.

The exchange’s other aluminum (U.S) Midwest premium contract was launched in April 2012.

FCA Warns On Risk Of Commodity Trading Market Abuse
Commodities Now

FCA has raised concerns about the poor awareness of market abuse risk and the lack of effective controls among commodity traders and brokers. The review focused on firms trading and broking across the Oil, Energy, Metals and Soft commodities sectors and considered the adequacy of their front office and market abuse controls.

PLY: Then again when a vast quantity of wash trades took places for months in interest rates, the FCA seemed muddled about the priorities of fair markets and market abuse – commodity players under regulatory scrutiny may want to therefore claim a competitive reason to escape any public regulatory wrath.

Calls For Easier Bond Market Rules Ring True (subscription)
Robin Wigglesworth – Financial Times

The bond market has always been one of the murkiest corners of the financial system — a vast, dark pool prowled by predators waiting to pounce on less sophisticated investors. The corporate bond market is particularly opaque…

PLY: Essentially, delaying TRACE announcements beyond the existing 15 minutes: An idea which simply strikes me as bonkers and demonstrates how the interests of the market are rarely served by a media in the back pocket of the banks (the FT has a big back pocket, it incorporates the EU too). The notion that less transparency will suddenly make the bond market work so much better is – bonkers. The whole problem remains: a bank-centric market is not capable of working efficiently on a broader scale and that needs an entire rethink.

Derivative Trading Alarm Sends Scandinavia Into Clearing Dispute
Frances Schwartzkopff – Bloomberg

PLY: Scandinavia doesn’t like the idea of enforced CCP… Interesting…& potentially explosive. The risk of having a non G20 member which is a coherent capital market entity with its own currency (Sweden) is clearly a valid catalyst here although it does further make one wonder why the G20 is economically relevant in some senses (or at least taken seriously) – certainly at the end of the tail of development.

Career Paths

Reuters reports that SEC Republican member Daniel Gallagher announced on Friday that he will not stay on at the agency past Oct. 2. Gallagher submitted his resignation letter to the White House in May, but he had not announced a date of departure.

Statement Of SEC Commissioner Daniel M. Gallagher

PLY: The US regulatory framework will be much the less without the excellent crusading work of Mr Gallagher who often has appeared the lone voice of reason against a blob which seems to have lost its purpose or was simply stuck in too many previously defined ruts. Dan Gallagher has been a brilliant SEC Commissioner, I wish him every success in the future.

SIX Swiss Exchange hired Jennifer Hlad as head account manager of UK and Ireland.

PLY: Good hire by SIX Swiss Exchange and all the best to Jen on her new appointment – delighted to see this former Liquidnet staffer finding an exciting new position.

Jefferies hired Martin Coughlan, a top UBS executive, to run equity trading in Europe.

P2P lending marketplace Faircent has appointed Bejoy Varghese as CTO.

Sebi Seeks Services Of 22 FMC Officials Post Merger
The Economic Times

Sebi has sought services of 22 employees out of 41 presently working with FMC after the merger of commodities market regulator with itself.

Read in Premium SEBI-FMC Merger Brief.

Financial Calendar

11.09 – Record date Nasdaq $0.25 quarterly dividend

11.09 – BME €0.4 first interim dividend payment

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

Analyst Notes

Barclays Cut Price Target On ICE From $274.00 To $273.00 – “Overweight” Rating.

CME “Neutral” Rating Reaffirmed By JPMorgan Chase – $97.00 Target Price, Down From $99.00.

CBOE “Neutral” Rating Restated By JPMorgan Chase – $55.00 Price Objective, Up From $50.00.

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


Lending Club Celebrates $11 Billion in Loans (Infographic)
JD Alois

An accomplishment that took about 8 years to accomplish.

Other stories

Notice Regarding Conclusion Of Litigation Against Tokyo SE



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