September 08 2015

elb2

 If you missed yesterday’s bulletin while on Labor Day holidays, click here first: Exchange Invest market infrastructure daily, September 7, 2015.

Lots of interesting nuggets today, join the dots with various forex pointers, some metals news, China discussions, CCP from multiple angles etc – happy scrolling!

Public Markets

JPMorgan Abandons Floor Trading At LME
Eddie Van Der Walt & Javier Blas – Bloomberg

…Leaving 9 firms, including Societe Generale, Sucden Financial and INTL FCStone, in the ring which dates back to 1877. JPMorgan started LME floor trading after buying RBS Sempra Commodities in 2010.

CME Challenges LME In Its Metals Trading Heartland
Andy Home – Reuters

When HKEx bought the venerable old LME back in 2012, it did so with eyes firmly fixed on China. That remains the vision, although HKEx’ ambitions in the commodities space have taken back seat to its Stock-Connect (read in Premium HKEx – SSE – Stock Connect Brief Part 4) bridge between Hong Kong and mainland Chinese stock markets.

What HKEx almost certainly wasn’t expecting back in 2012 was a challenge to LME’s existing franchise outside of China. But U.S. exchange CME has other ideas. It has announced its fourth new base metals contract and with the latest, a European aluminium premium contract, it is taking the battle into LME’s historic heartland.

PLY: That incredible Frequent Flyer mile accumulation on the part of CME Chairman Emeritus Leo Melamed over the decades is clearly playing off…

Frankfurt Pips London As German Debt Agency Picks Eurex Clearing
Brian Parkin – Bloomberg

The German government chose EurexOTC Clear to settle its future interest swap transactions in a boon for Frankfurt as the sovereign’s bond issuer seeks to benefit from new rules that require central clearing of derivatives.

PLY: This is akin to a clearing equivalent of the 360T deal i.e. of course it is good for DB1 but it was also pretty obviously bound to happen, otherwise DB1 would lose credibility / momentum.

Human Decisions Blamed For August’s Stock Market Rout (subscription)
Dan McCrum – Financial Times

Human decisions to sell stocks may have been behind the August rout for equity markets after all, with hedge fund and mutual fund managers selling in response to turbulence and fears for the Chinese economy. The conclusion, based on work by strategists at JPMorgan, is a riposte to those who have attempted to blame esoteric trading strategies such as “risk parity” for the size and speed of the summer correction.

PLY: The brilliant economist Richard Duncan, who it was my pleasure to share a stage with in Seoul a few years back, has long been ahead of the curve imho in pointing out how liquidity is the biggest driver of asset values in the modern era.

China’s Stock-Rescue Tab Surges To $236 Billion
Kana Nishizawa – Bloomberg

China To Cut Dividend Taxes For Long-Term Shareholders
Reuters

China SOE Reform Plan Said to Seek Share Listings, Privatization
Bloomberg

Read in Premium China Capital Markets Transformation Brief – Main File.

Belarus’ Central Bank Granted Access To MOEX FX Market
Belarusian News

PLY: Another incremental step forward for the EEU (Eurasian Economic Union, seeing as you asked). Separately, I still think last week’s announcement of a Sino-Russian CSD linkage is a highly significant move most folks have missed amidst their efforts to talk down, er, analyse, China.

Zambian Commodity Exchange  To Partner With JSE
Zambia Daily Mail

Zambian Commodity Exchange (ZAMACE) will soon sign a partnership agreement with JSE to boost liquidity to the local agro-commodity market.

Private Markets

Profits Surge At Bats Chi-X Europe (subscription)
Tim Cave – Financial News

Revenues at the European stock market run by privately-held US exchange operator Bats Global Markets climbed nearly 10% to more than £60 million in 2014, as the business targets replicating its equities success in other asset classes.

PLY: The forex platform Hotspot is coming online and a fascinating new equity auction process was announced yesterday (well new to BATS, hardly new to markets if you recall a great many ideas past…). Revenues clearly encouraging at BATS Chi-X.

Third Time Lucky For Bitcoin Group At An IPO?
Shaun Drummond – SMH

Bitcoin Group, slated as the second digital currency company to list on the ASX, is set to finally float after twice revising its listing date since it first lodged its prospectus with the corporate cop in June.

The bitcoin “miner” lodged a replacement prospectus on Friday, with a listing date set for November 11. The bookbuild for the offer started on Tuesday and will close on October 30.

Previous discussions here.

PLY: An illuminating case of a BTC miner’s wafer thin margins – AUD $1.73 million (USD 1.21 mln) in revenue with a total profit of $10,000 (USD 7k). Miners are a power play (genuinely – price of electricity is the key variable) alongside the ongoing arms race for miner hardware which the IPO proceeds are to be predominantly spent on. However, viability is the issue if Bitcoin remains at current levels, or even falls… Bitcoin Group plays a low power cost play across Australia, Iceland and China but looks at a cursory glance a fascinating, if highly speculative punt in a market where miners have been hugely squeezed as competition went exponential in recent times.

Greetings From Bitcoin Island
Jeremy Kahn – Bloomberg

No place on the planet has welcomed digital currencies as warmly as the Isle of Man.

PLY: A super profile of the delightful Isle of Man. Great to see its cryptocurrency guru, my old friend, Brian Donegan, looking as dapper as ever, photographed on the world’s leading cryptocurrency jurisdiction.

Special Section: FTI, NSEL, India at the Crossroads

PLY: 63 Moons (FTIL) up 2% after yesterday’s explosive double figure percentage jump while MCX is up 3%.

MCX Takes Mumbai Police To Court
Business Standard

MCX has moved the Bombay High Court against alleged inaction by the Mumbai police on various complaints related to its erstwhile business partners and service providers. Nearly eight months after transferring the complaints from one arm to another, the police has closed most of these cases without proper investigation, the bourse has alleged.

PLY: Not encouraging news but at least MCX appears eager to both recover losses and create clear blue water from its former promoters at ‘JigMoon-corp.’

Technology

Software Glitch Putting Custody Arrangements In Spotlight
Rick Baert – Pensions & Investments

The issue is leading asset owners to take another look at their custodians.

PLY: Not so much a story developing as one which is festering, potentially with huge impacts to the custody industry and its legacy vendors. See also Premium: Technology On The Edge.

Bitcoin Trading Service Magnr To Offer Back-Office Blockchain
Ian Allison – IBT

Magnr is spinning up a blockchain dubbed “Project Kodo”, and has also announced that Colin Kwan will become the company’s new CEO and oversee the development. Magnr currently offers margin loans for Bitcoin trades, and uses revenue from its trading platform to pay interest to Bitcoin savers.

PLY: Interesting article with a few pithy comments about legacy investment banks and what Blockchain might do for them.

Products

TFX Announced Details Of New “Click Large” Forex Offering
Maria Nikolova – LeapRate

Tokyo Financial Exchange (TFX) has disclosed detailed launch schedule and product specification of its new Exchange FX margin trading market. The launch date is set for November 30, 2015, going live with 5 major currency pairs: USD/JPY, EUR/JPY, GBP/JPY, AUD/JPY, & EUR/USD.

Spot FX Trading On Thomson Reuters Platforms Hits 5-Month High
Reuters

Indexes

Taiwan SE & JPX Link Markets With Cross-listing Of Index Products
MondoVisione

Osaka Exchange: Outline Of Specifications For TAIEX Futures
MondoVisione

Career Paths

Finance Magnates reports that ADS Securities has hired Francis Lee as MD of ADS Securities Hong Kong.

Markit appointed Yaacov Mutnikas as co head of Markit’s Solutions division focusing on risk analytics, portfolio management and enterprise data management solutions. Yaacov joins the executive leadership team reporting to CEO Lance Uggla.

Magnr appointed Colin Kwan as CEO to oversee the development of “Project Kodo”, a back-office blockchain project.

BCS Global Markets appointed Adam Wood as director in the prime brokerage sales team in London.

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

CME Downgraded By Vetr From “Strong-Buy” To “Buy” – $104.72 Price Target

CBOE Upgraded By Zacks From “Hold” To “Buy” – $71.00 Price Target

Liberum Capital Reissued “Sell” Rating On ICAP – GBX 453 Price Objective

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

Crowdfunding

Crowdfunding- Taking An Initiative Is Only A Campaign Away!
Beata Young – HanzaTrade

PLY: My modest little iceberg in financial markets infrastructure, HanzaTrade is up for a Polish e-commerce award as I mentioned last week. Elsewhere the quintessentially brilliant Mrs Young is a richly deserving nominee as one of the Most Influential Women in CEE startups.

Other stories

Does Postponement Of The Interoperability Question Make Sense?
Mobis Philipose – Livemint

There is hardly any incentive for competing clearing corporations to sit across the table and hammer out a framework for interoperability.

PLY: The legacy of the Kamath Committee which therefore means the interoperability is really only for items cross-listed on multiple markets. Then again the proposed Rs 300 crore ($45 million) regulatory capital for clearing houses going forward may squeeze smaller exchanges out of business which I don’t see as conducive to better markets in a nation as vast as India. Good article, as always, from Mobis Philipose.

MCX Signs MoU With IamSME of India
Livemint

MCX has signed a MoU with an Integrated Association of Micro, Small & Medium Enterprises of India (IamSME of India) to create awareness among micro, small and medium enterprises (MSMEs) on the benefits of commodity price risk management.

PLY: Good move.

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