September 08 2014

elb2Monday morning dawns with Borse Dubai having duly trimmed their LSEG shareholding while ICE has confirmed another incremental stage in making markets better with their acquisition of SuperDerivatives. The potentially seismic news is the apparent progress (after considerable backroom negotiations between LSE and the stakeholders) in opening SwapClear collateral to the core LCH pool – a potential game changer for post OTC clearing (accelerating too the demise of the banks’ oligopoly here). Ponder payment news in Bitcoin to consider just how antiquated the banking system remains.

It’s all here, worth a scroll, with typical added pith, welcome to Monday’s Exchange Invest:

Public Markets

Borse Dubai Announces The Sale Of 8,500,000 Shares In LSEG
Mondo Visione

Borse Dubai has completed the sale of 8,500,000 shares in LSEG. The sale represents approximately 3.1% of the LSEG’s share capital and was conducted by way of an accelerated bookbuild on 4 September. The shares were sold to institutional investors at a price of 2,020p each.

EI reported on September 5th that Borse Dubai has launched an accelerated sale of 8.5 mln shares in LSEG.

PLY: Borse Dubai will now retain their stake through exercising the rights issue it appears.

ICE Announces Transaction To Acquire SuperDerivatives: Supports Expanded Clearing, Data & Risk Management Initiatives
Intercontinental Exchange

ICE announced that it has entered into a definitive agreement to acquire SuperDerivatives, a leading provider of risk management analytics, financial market data and valuation services. The acquisition will accelerate the expansion of ICE’s comprehensive multi-asset class clearing strategy.

EI reported on September 5th that ICE has agreed to acquire SuperDerivatives.

PLY: I still think ICE stole a(nother) march on the lumbering legacies (once upon a time some looked, dynamic; wonder whatever happened to DB1, they appeared to have ambition once?).

LCH.Clearnet To Open the SwapClear Collateral Floodgate?(subscription)
Tim Cave & Anish Puaar – Financial News

PLY: Interesting news suggesting LCH.Clearnet is finally close to a deal on the ‘cross margining’ of assets between SwapClear and other products (aka interest rate exchanges). This is a pivotal issue for the development of the LSE derivatives platform as the SwapClear collateral pool is vast and offsets would be likely to encourage business elsewhere. This is a pivotal issue for the LSE platform – might it even trickle into NLX? The latter already appears to me damaged below the waterline by its hogwash hype and an ongoing lack of evidence that their trades appear suspiciously like a wash from stem to stern.

CME, Thomson Reuters Seen As Favorites To Manage London Gold Fix (subscription)
Ese Erheriene – Wall Street Journal

CME and Thomson Reuters which recently snagged the rights to manage the daily silver fix, are widely tipped to take over responsibility for setting the daily price of gold price. The four banks that currently set the daily gold price fix, together with LBMA, on Thursday called for firms to present proposals to replace the current telephone-based system.

EI reported on July 17th that LGMFL announced 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.

LME Pulls Out Of Clearing OTC Gold Trades On Lack Of Price Data
Reuters

LME will not provide clearing services for OTC trades in gold from Sept. 22 after LBMA said its members would no longer supply price data for forward curves.

PLY: Clearly LME must be wailing and gnashing their teeth at missing out on the silver fix and perhaps the gold fix in London but their opportunity remains so vast they must not lose sight of where they can add value to the entire chain of the metals business – theirs remains a unique, hugely valuable franchise in financial market infrastructure.

HK-Shanghai Stock Market Link May Squeeze Local Brokers
Jill Mao – Bloomberg

Fees in Hong Kong may fall to match those charged in China as the market access link enables Chinese clients to buy stocks in the city directly: Commissions may fall to as low as 0.03%, he said.

EI reported on September 05th that a four-party agreement was signed for the establishment of Shanghai – HK Stock Connect

PLY: Readers may recall that fixed commissions were de rigeur in ahem ‘capitalist’ Hong Kong until relatively recently…

SSE Banks Talk Shop As Hong Kong Connectivity Looms
Automated Trader

All the 14 listed commercial banks on the Shanghai Stock Exchange (SSE) will successively hold an array of briefings on business performance during trading days up to 19 September.

CME Revamps Fee Rebates For Energy Trading (subscription)
Gregory Meyer – Financial Times

CME has launched a sweeping revamp of its opaque system of fee rebates for energy traders as it battles flagging volumes in oil and natural gas contracts.

The new incentives replace a hotchpotch of perks with a uniform programme that sweetens traders’ rebates as their volumes surpass certain thresholds.

MCX Action On PwC Report Also Key To Fresh Deals Nod
Ram Sahgal – Economic Times

MCX ability to launch fresh contracts beyond 2014 will depend primarily on its erstwhile promoter FTIL, exiting from the bourse, but that’s not the only condition. It emerges that the regulatory nod for fresh contracts will also be incumbent on the bourse taking action on PwC’s findings in its forensic audit of MCX.

London Metal Exchange Officials Aim To Attract Japanese Traders (subscription)
South China Morning Post

LME CEO Garry Jones will lead a delegation to meet traders and metal users in Japan to promote its products, later this year.

New ISDAfix Rate-Rigging Antitrust Case Isn’t Just Libor Redux
Alison Frankel – Reuters

Daniel Brockett of Quinn Emanuel Urquhart & Sullivan knows as well as anyone what happened last year in the litigation over an alleged conspiracy to manipulate LIBOR. You remember: In a true shocker of a decision, U.S. District Judge Naomi Reice Buchwald, who is presiding over Libor litigation consolidated in federal court in Manhattan, ruled that the alleged Libor rate-rigging didn’t give investors a cause of action for antitrust violations because the supposed conspiracy among Libor panel banks was not anticompetitive. For Brockett, who had been advising clients to bring Libor suits under securities and contract law, Buchwald’s ruling was an opportunity to push his alternative theory of how to recover for Libor manipulation.

EI reported on September 5th that Barclays, Bank of America, Citigroup and 10 other banks were accused in a lawsuit of conspiring to manipulate ISDAfix.

Give Hong Kong Investors Choice Of Dual-Class Share Options (subscription)
South China Morning Post

After being snubbed by mainland e-commerce giant Alibaba for its huge IPO, the city’s financial officials have been engaged in serious soul-searching. As the IPO market is the lifeblood of HKEx, it’s understandable its bosses want listing rules to be as competitive as those of premier investment hubs like New York and London to attract newcomers.

EI reported on September 1st that HKEx is seeking views on loosening shareholder voting rules that spurred Alibaba Group to choose the U.S. for what may be the world’s biggest IPO this year.

PLY: This SCMP editorial makes the best case yet for permitting dual share classes – although supports the refusal to list Alibaba on the Chinese company’s own terms (subsequently agreed to – I maintain, foolishly, by NYSE). However, if we are to admit to the benefit of any regulatory system then it strikes me that just as we broadly support democracy for all its flaws for choosing government, so it ought to be the standard approach to choosing corporate governance on an ownership weighted basis (i.e. one shareholder one vote).

Alibaba Expects IPO To Be Priced Between $60 & $66 Per Share
Reuters
Alibaba Takes IPO Sales Pitch On The Road
Telis Demos & Matt Jarzemsky – Wall Street Journal

Chinese e-commerce company Alibaba said its expects to price its IPO at between $60 and $66 per American Depository share.

Alibaba plans to launch its New York stock market debut in the week of Sept. 8, a person briefed on the matter told Reuters in late August.

EI reported on September 1st that Alibaba planned to launch its US IPO early in the week of Sept. 8.

PLY: An exciting time for many bankers and the NYSE. I still disagree with the shareholding structure but wish the process every success and I sincerely hope we don’t ever have the problems arise which the governance structure may permit.

Goldman Banker Turned ASX Listings Head Targets Kiwi Companies
Adam Haigh – Bloomberg

Australian Securities Exchange (ASX) is luring more New Zealand companies to sell shares in Australia with access to the world’s fourth-biggest pile of pension savings.

As many as seven of New Zealand’s 25 largest publicly-traded companies are believed to actively considering an Australian listing…

Private Markets

BATS Global Markets Successfully Operates U.S. Businesses From Disaster Recovery Site As Part Of Business Continuity Planning Process – Company Headquarters Taken Completely Offline For Test Of Business Continuity Plan On September 4th
Mondo VIsione

BATS announced the successful and total operation of its U.S. equities exchanges BZX and BYX, and BATS Options, from its disaster recovery (DR) site as part of its Business Continuity Planning (BCP) process.

Sri Lanka’s Potential To Become A Regional Exchange
Daily Mirror

PLY: Interesting discussion with Michael Preiss and others about the potential for Sri Lanka to become a regional exchange.

Foreign Firms Queue Up To Join Shenzhen Carbon Market
Reuters

The China Emissions Exchange in Shenzhen has granted a trading license to Singapore-based broker Ginga Petroleum, with another eight foreign utilities and trading firms waiting in line for a nationwide market due to begin in 2016.

CBMX Transfer Iron Ore Spot Trading Platform To COREX
Mines Guru -Steel Guru

China Beijing International Mining Exchange (CBMX) has reached agreement with Beijing Iron Ore Trading Center Corporation to transfer the business of China Iron Ore Spot Trading Platform owned and operated by CBMX.

After the transfer, COREX will continue operating the China Iron Ore Spot Trading Platform previously operated by CBMX.

Yuan Trades Now Make Up Over 70% Of Bitcoin Volume
Nermin Hajdarbegovic – CoinDesk

China-based exchange BTC China tweeted that a total of 71% of bitcoin trades last month could be attributed to yuan users – the Chinese market, in other words.

How Bitcoin Brokers Trade Mln Without An Exchange
Joon Ian Wong – CoinDesk

PLY: Discussing the rise of OTC brokered block trades in large amounts of Bitcoin…

Why A Faster Bitcoin Network Would Keep Fees Low
Jonathan Levin – CoinDesk

PLY: Reasons why I love cryptocurrency adds another to this fan block: here is a coherent, cohesive argument concerned about BTC processing charges (minimum fee 0.0001 BTC (5 cents at the time of publication) which reasons that there need to be system improvements towards more efficient protocols to avoid the risk of much higher transaction fees, aka 20 cents.

…Compare this with the dinosaurs convention at the end of the month in Boston where the SWIFT users will toast themselves with self-congratulation at a system which takes days, costs more for a mere message than a full BTC transaction and yet is allowed to plunder customers with outlandish carry costs for a service which merely helps banks maintain an oligopoly of economic rent on customers.

Bitcoin Exchangers Plead Guilty In Manhattan Federal Court In Connection With The Sale Of Approximately $1 Mln In Bitcoins For Use On The Silk Road Website
Mondo Visione

PLY: Usual self-congratulatory US government propaganda about the conviction of Robert M. Faiella, a/k/a “BTCKing,” an underground Bitcoin exchanger, and Charlie Shrem, formerly the CEO and Compliance Officer of a Bitcoin exchange company, in conjunction with the closure of Silk Road.

Safello Announces Social Media-Inspired Bitcoin Wallet
Pete Rizzo – CoinDesk

For the release, the Sweden-based bitcoin services company will leverage Blockchain’s API, though its wallet service will build upon Blockchain‘s basic offering, adding an additional social layer that will allow users to easily search for other users with whom they’ve previously transacted.

PLY: News from Sthlm Tech Fest which was a high energy startup event happening in the Swedish capital when I visited last week.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX is down 1.5%, FTIL pretty flat.

FMC Ends Its Auction Panel On NSEL
Dilip Kumar Jha – Business Standard

FMC has wound up the Monitoring and Auction Committee earlier set up by it to oversee disposal of movable and immovable properties of defaulters on the scam-hit NSEL.

FMC has told NSEL the three-member committee, headed by ex-judge V C Daga, set up by the high court here to ascertain the dues payable by each defaulter and to recover these, will be on the job. Also, most of the assets of the defaulting members have been attached by the city police’s economic offences wing. These are to be disposed by the legal authority appointed under the Maharashtra Protection of Interest of Depositors (in financial establishments) Act.

PLY: No news yet on when the auctions will finally take place…

NSEL Investors To Challenge Accused Jignesh Shah’s Bail In Supreme Court
Business Insider

PLY: Hell hath no fury as a creditor scorned. Those reading social media will be aware that simply incarcerating Mr Shah is only one demand being made, as some rather extreme folks are asking for a lot more, not all of it constitutional methinks.

Technology

ICE Announces Launch Of 30 New Energy Contracts At ICE Futures Europe & ICE Futures US
Mondo Visione

ICE announced the introduction of 30 new energy futures and option contracts on September 22, 2014, subject to the completion of necessary regulatory and governance processes.

The new contracts, which will be available for trading at either ICE Futures Europe or ICE Futures U.S. and cleared at ICE Clear Europe include: crude oil and refined products, North American and UK natural gas, US power, natural gas liquids (NGL), and wet freight futures and option contracts.

ICE press release here

GuavaTech Offers Ultra-Low Latency For Hong Kong
Automated Trader

GuavaTech has extended its existing data centre presence in Asia to HKEx facility.

Thomson Reuters Maps 12-Month Retirement-Upgrade Schedule (subscription)
Faye Kilburn – Waters Technology

Thomson Reuters has notified customers that it will retire a number of legacy products over the next 12 months, as part of an ongoing program to migrate all customers to its next generation Elektron Real Time datafeed.

Streamlined Mortgage Underwriting System Available From ICAP Patent Brokerage
ICAP

ICAP Patent Brokerage announces for sale patents disclosing a system and method for obtaining universal multiple mortgage automated underwriting approvals via an online application. This IP package is available from inventor Richard Nacht as part of the Live Financial Auction Series, with a bidding deadline of October 23, 2014.

“This IP enables lenders and other market participants to close loans faster, cut costs and streamline the underwriting process. The IP also benefits home buyers who receive a true loan approval, portable among lenders, because it has been underwritten to the standards of many lenders, brokers and loan programs,” says Doug Rhoten, Chairman of ICAP Patent Brokerage.

Products

CFTC To Scrutinize Swaps Loophole (subscription)
Andrew Ackerman & Scott Patterson – Wall Street Journal

CFTC plans to scrutinize U.S. banks that are shifting some trading operations overseas to avoid tough CFTC rules. The agency also will work with other regulators to determine if the practice poses a risk to Wall Street.

CFTC Weighing Broader Commodities Hedge Exemptions Pushed By BP
Silla Brush – Bloomberg

The main U.S. derivatives regulator is working to address energy and agricultural firms’ concerns that rules meant to curb speculation in commodities could harm their business, according to the agency’s chairman.

Stronger Together: Eurex & G.H. Financials Promote Offer On Euro Yield Curve
Eurex

Eurex Exchange offers traders and investors access to more than a dozen listed derivatives covering the full range of both the unsecured (money market and swaps) and secured (bond and repo) euro interest rates yield curves. These offerings are complemented by EurexOTC Clear through which Eurex Clearing offers central clearing of OTC interest rate swaps. In combination with Eurex Clearing Prisma higher margin efficiency is achieved through cross margining – providing an attractive single venue for trading and clearing.

SGX Faces Uphill Challenge In Trading Bonds
Goh Eng Yeow – Business AsiaOne

Making it easier for retail investors to buy bonds – as laudable as this objective may be – is not good enough by itself. The big challenge facing financial regulators in Singapore is to nurture a vibrant trading market to ensure that an investor can sell a bond as easily as he can buy it.

EI reported on September 2nd that SGX is consulting the public on a proposal to give retail investors improved access to bonds currently offered only to institutional and accredited investors.

China’s Shanghai Futures Exchange To Launch Nickel And Tin Futures In 2014
SMM

Shanghai Futures Exchange (SHFE) is going to launch China’s first nickel and tin futures within this year along with futures on a base metals index.

Interactive Data Launches Continuous Fixed Income Evaluated Pricing Service – Service Expanded To Offer Continuous Evaluated Pricing Across Multiple Fixed Income Asset Classes
Mondo Visione

This service allows IDC to transcend end-of-day and intraday ‘snap’ pricing and offer its clients greater pre-trade transparency support and price discovery capabilities on a continuous basis throughout the trading day.

Japan’s Financial Services Agency Publishes A Report On OTC Derivatives As Of End-June 2014
Mondo Visione

Pursuant to Article 156-66 of the Financial Instruments and Exchange Act, the FSA publishes a report on over-the-counter (OTC) derivatives as of end-June 2014. This report aggregates OTC derivatives transactions data which are reported by the Financial Instruments Business Operators, etc. in Japan.

FSA press release here, here & here

With A Bitcoin ETF, Risk Isn’t Virtual (subscription)
Rob Curran – Wall Street Journal

Some wealthy investors are already buying into a trust that tracks the average dollar price of the virtual currency. And the firm behind that trust is racing one other group to bring bitcoins to the masses in the form of a publicly traded fund.

Bitcoins were worth about $10 each less than two years ago, then more than $1,100 a few months later, and now trade around $475.

PLY: This is an interesting incremental move but actually not the revolution I suspect many may attribute to the hype of its launch…

Indexes

Time Schedule Update To Nordic & Baltic Equity Indexes Transition To Global Index Calculator – New Date: December 8, 2014
GlobeNewswire

NASDAQ OMX will start to calculate Nordic and Baltic equity indexes and other related indexes via its state-of-the-art Global Index Calculator powered by NASDAQ OMX INET technology – the world’s fastest trading system technology. The date has been changed from the previously announced date in November 10, 2014.

In Genium Consolidated Feed (GCF), the indexes will be connected to a new source that replaces the current ICS sources. ICS sources not affected by this migration project will continue to be available in GCF.

Vietnam To Launch State Treasury Bond Indexes In Sept
Reuters

The Hanoi Stock Exchange, Vietnam’s smaller bourses of the two, said it would launch a set of bond indexes tracking state treasury bonds of different terms later this month, the Vietnam Economic Times newspaper reported.

The exchange will consider creating indexes for government-backed, municipal and all market bonds after implementing and assessing the treasury bond indexes, the report said.

Career Paths

MV reported that Perseus announced company growth in strategic senior member hires. Anthony Gerace is President, Global Financial Services, Jeff Mezger, VP Product Management, Mark Studenka, Network Services Architect, Amanda Altobello, Business Development & Raniere Tesser, Network Engineer.

FTF reported that SimCorp named James Corrigan as Managing Director of SimCorp’s North American operations, Corrigan was Executive Vice President of Capital Markets & Global Trading at SunGard Financial Systems.

MV reported that Securities and Exchange Commission (SEC) announced Tracey L. McNeil as the first Ombudsman for the agency. Ms. McNeil is currently a Senior Counsel in the SEC’s Office of Minority and Women Inclusion (OMWI)

MV reported that Securities and Exchange Commission (SEC) announced Brent J. Fields as the agency’s Secretary, Mr. Fields is an 18-year SEC veteran who has worked primarily in its Division of Investment Management

LME To Hire Sales Head; Favours Direct Talks With Clients (subscription)
Metal Bulletin

LME is looking to hire a sales head to pitch its new products to clients, with the hiring expected by the end of this year, in line with the new style of “direct client interaction” that the HKEx has brought to the exchange in London.

Lunch With BS: Chitra Ramakrishna
Shyamal Majumdar & Sachin Mampatta – Business Standard

Chitra Ramakrishna, MD & CEO, National Stock Exchange (NSE) may have little time to practise the veena but her playbook is full, with plans to take the Nifty to many more countries

Financial Calendar

Wednesday

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.

Thursday

LSE rights issue- trading in the nil paid rights commences.

Friday

Record date NASDAQ OMX quarterly dividend of $0.15
Interactive Brokers $0.10 quarterly dividend payment.
BME €0.40 interim dividend payment.

Share Notes

Interactive Brokers Group SVP Milan Galik Sold 1,800 shares Thursday, September 4th at an average price of $24.06 (bargain $43,308.00) He now owns 728,417 shares.Mr. Galik’s regular sales are chronicled on this specific page.

Analyst Notes

Credit Suisse boosted Their Target Price On CBOE Holdings $48.00 To $49.00 – “Underperform” Rating

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.

Crowdfunding

Lending Club May Need To Justify Its Valuation
Antony Currie & Daniel Indiviglio – New York Times

Lending Club is positioning itself as one of the biggest challengers to American banks. The company is growing quickly, has backing from the likes of Google and counts the former Morgan Stanley chief John J. Mack and former Treasury Secretary Lawrence H. Summers among its directors. It’s also planning an IPO. But there are reasons to be cautious.

Lending Club charges a fee to match borrowers with institutional and retail investors and takes no credit risk. It doesn’t need branches, deposits or loan-loss buffers, so it can usually offer better rates for the loans it facilitates – up to $35,000 for individuals and $100,000 for small businesses.

Crowdfunder Makes Successful Pitch To Own Platform
Insider Media

Growth Capital Ventures, a North East-based business that develops and operates online funding and investment marketplaces, has used its own platform to raise capital – reaching its target of £150,000 within ten minutes.

The company opened its doors for investment by listing on GrowthFunders, an equity and rewards-based crowdfunding and co-investment marketplace, which connects online angels, angel networks and VCs to businesses with high growth potential.

Mass Adoption Of P2P Lending Could Boost UK Economy By £32 Bln ($51.77 Bln)
Bernard Ginns – Yorkshire Post

Liberum Capital estimates that every household in Britain would be £10 better off every week if they rejected traditional banking.

PLY: Reducing the cost of banking would also reduce the leverage of British banks…oh and what it does to central government fiat…ugly for those politicians who have been spending beyond their means.

Kiwi Bank Heartland Purchases 10% of P2P Lender Harmoney
JD Alois – Crowdfund Insider

New Zealand bank Heartland, an institution with roots going back to 1875, has taken a 10% equity stake in P2P lending startup Harmoney just months after Harmoney received its license to operated in New Zealand.

Other stories

From August’s Trading Places: Transaction Reporting Under EMIR, Ian Salmon Of ITRS
Mondo Visione

As pressures for timely reporting of OTC transactions mount on both sides of the pond, Ian Salmon of ITRS explores the challenges that this presents, while explaining why the sell-side requires a fresh approach to avoid heavy fines and reputational damage…

Alexander Justham: How The LSE Went From The 17th Century Coffee House To An International Exchange Group
This Money

PLY: Approaching 300 years old, the LSE is profiled via its CEO. The easiest way to think of it though is if you can compare the foul brews which were “coffee” in Jonathan’s would not remotely compare with the fine brews of the Taylor St baristas et al just off Thromgorton Street today. Has the dealing system progressed equivalently? Today’s watercooler topic for discussion courtesy of Exchange Invest…

Betfair Gets To Keep Operating New Jersey Online Casino
Christopher Palmeri – Bloomberg

Betfair (BET), a London-based online betting company, will continue to offer Internet wagering in New Jersey after its U.S. partner, Trump Plaza, closes.

New Jersey’s Division of Gaming Enforcement signed an order allowing the company to continue operating its online casino while the Trump Plaza winds down.

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