September 09 2014

elb2As we close for pixel it’s game on – interest rates can apparently defy the new gravity of QE and RISE! Springtime for LIBOR goes the tune on every rate traders’ lips today after remarks by BoE Governor Mark Carney this morning…

Meanwhile, in today’s Exchange Invest daily (all free! – how do we manage it?) BGC trumps CME for GFI, this one could run and run… Clearing discussions (and a lot of rumours yesterday’s opening of Swapclear to LCH and thus more markets is hogwash incidentally), banks the risk in CCP in London? CBOE/CME finally getting around to reducing their bloat – no doubt there’s a world of opportunity there! Meanwhile LMAX demonstrates the power of the rebound – from loser to growing powerhouse in under 24 months! Lots of technology news; discussion on multiple continents; mixed in with a rich seam of pith, served chilled at desk or watercooler: happy scrolling…First up live from the battlefields of New Jersey, it’s the great battle for Mickey Gooch’s soul, er, I mean the ownership of GFI:

Public Markets

BGC Partners To Make $675 Mln Bid For Rival GFI

BGC Partners is making a $675 mln all-cash unsolicited Offer for derivatives Broker and rival GFI – where BGC already holds a 13.5% stake; at $5.25, a handy premium of 15% to the CME bid and a significant 68% premium to its close price pre-CME deal announcement.

PLY: The letter makes for interesting reading (it’s in the BGC Press release announcement here). A July 29th letter from BGC appears to have been ignored by GFI management (hmmm arguably a slight corporate governance oversight some might contend).

The letter from BGC concludes:

“We are prepared to make the offer to the GFI shareholders, but we continue to be willing to negotiate directly with GFI, Messrs. Gooch and Heffron and CME regarding a consensual transaction among the parties. We are open to discussing and addressing social issues such as senior management team composition and other concerns that you may have. We are available to commence such discussions immediately and hope that you accept our invitation to do so.“

– Hmmm read one way that looks pretty friendly, read another it could be argued it is suggesting the GFI management team are more concerned about their positions than the welfare of shareholders…all with that faintly ‘Sopranos does IDBs’ undertone that a loaded lawsuit may be unleashed at any time…and there might be a role for CME? Interesting.

EI reported on July 31th that CME will acquire Trayport and FENICS by first acquiring all outstanding shares of GFI Group. EI also reported in September 1st that a shareholder sued GFI saying the price undervalues the shares.

KCG To Sell FCM Business To Wedbush Securities
Mondo Visione

KCG has entered into a definitive agreement to sell certain assets and liabilities related to the Futures Commission Merchant (KCG Futures) business to Wedbush Securities Inc. Terms of the transaction were not disclosed. The transaction, which is subject to customary closing conditions and regulatory approvals, is expected to be completed by year end.

PLY: This FCM business was hardly a strategic fit within the KCG business built from the ashes of KCG and the merger with Getco. Apparently all 45 jobs are currently expected to be maintained.

BVB To Shorten Settlement Cycle From October
Romania Insider

PLY: BvB following the rest of Europe from T+3 to T+2 for cash equities.

Banks & Brokers Could Save €70 Mln ($90.12 Mln) By T2S Switch, Study Says (subscription)
Philip Stafford – Financial Times

Banks and brokers have been urged to adapt their European post-trade infrastructure to the region’s new settlement system as it could save them millions in extra collateral they must find to meet new regulations. A study conducted by consultancy Oliver Wyman, found market participants could save up to €70m ($90.12 mln) in annual costs when T2S comes in.

PLY: Why are we stuck in a real-time digital age at T+2? How unambitious…

Clearinghouses Get CFTC Scrutiny So Solution Isn’t Problem
Silla Brush & Robert Schmidt – Bloomberg

CFTC plans to intensify oversight of swaps clearinghouses to ensure they don’t threaten the financial system they are meant to help secure.

PLY: See also the Premium Post Homer Simpson & The Supermodel Buffet – aka a Guide to Clearing in the New Era

Buy Them! Buy Them All! (subscription)
James Rundle – Waters Technology

ICE’s acquisition of SuperDerivatives, an outspoken little vendor specializing in OTC and electronic trading sides of the derivatives market (just, for God’s sake, don’t call them a SEF), adds to an impressive tally over the last few years. Algo Technologies, after all, was brought into the fold in order to bolster the technology of this century’s banner acquisition to date, in the form of NYSE Euronext.

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

PLY: ICE has acquired a few handy components to give it a SEF push. The OTC connectivity and Rollodex of SuperDerivatives is very useful… It’s also a bit of a damning indictment of the NYSE Technology strategy – given how many assets were found to be surplus to requirements there…

CME Adopts New Disruptive Trading Practices Rule
Gary DeWaal & Adam J. Joines – Corporate & Finance

CME Group exchanges in the US notified the Commodity Futures Trading Commission that they have adopted a new Rule 575 to prohibit certain disruptive trading practices. Among other things, Rule 575 prohibits activity identified by the CFTC as “spoofing” (bidding or offering with intent to cancel before execution), “quote stuffing practices” (submitting or canceling bids or offers to overload the quotation system or delay another person’s trade execution) and the disorderly execution of transactions during the closing period. The Exchanges also filed with the CFTC Market Regulation Advisory Notice RA 1405-5. The Advisory Notice provides additional guidance with respect to practices that violate Rule 575. The Notice includes a question-and-answer section as well as a non-exhaustive list of practices considered by the Exchanges to be violative of Rule 575.

Why CME, CBOE Are On A Weight-Loss Plan
Lynne Marek – Chicago Business

Chicago’s two big exchange operators have been waiting on a trading rebound that just won’t happen, so it’s belt-tightening time.

PLY: Both CBOE and CME have ample scope for cost cuts. Head counts are considerable and productivity low in many areas.

LCH Payments System Raises Concentration Concerns
Cecile Sourbes – Risk

A significant proportion of payments between clearing members and LCH.Clearnet are transferred via just two banks.

When a clearing member has to transfer a cash payment such as initial or variation margin to LCH.Clearnet Limited, the clearing house’s UK subsidiary, it has to do so via an account at a so-called protected payments system (PPS) banking entity. The clearing member deposits its funds in an account at one of the PPS entities, which LCH.Clearnet electronically debits for the amount required.

PLY: As I recall one of the leading banks in the clearing system used to be Scottish – will the possible impending division of the historic union between England and Scotland also impact matters here? At core, the risk in the clearing system per se is hugely oriented to banks and needs to be cured.

Hong Kong Regulators Considering Changes
Cathy Yang – CCTV

Hong Kong regulators are seeking opinions from market participants on “weighted voting rights”, after the city’s bourse lost the Alibaba IPO listing to rival New York.

EI reported yesterday that Hong Kong’s financial officials want to give Hong Kong investors choice of dual-class share options…

CFTC Said To Alert Justice Department Of Criminal Rate Rigging
Matthew Leising & Tom Schoenberg – Bloomberg

Derivatives regulators told the U.S. Justice Department they’ve found evidence of criminal behavior following an investigation into banks’ alleged manipulation of ISDAfix, a benchmark used to set rates for trillions of dollars of financial products.

EI reported yesterday that CFTC plans to scrutinize U.S. banks that are shifting some trading operations overseas to avoid tough CFTC rules.

Pension Funds Sue Stock Exchanges Over HFT (subscription)
Scott Patterson – Law Blog

Three big law firms have joined forces to pursue legal action against major U.S. stock exchanges, claiming the exchanges handed unfair advantages to high-frequency Traders to the detriment of regular investors.

The lawsuit, filed in the U.S. District Court of the Southern District of New York, could test a cornerstone of U.S. securities law: exchanges’ immunity from lawsuits seeking damages.

HFT Leads To Lawsuit Against Exchanges (subscription)
Scott Patterson – Wall Street Journal

Three big law firms have joined forces to pursue legal action against major U.S. stock exchanges, claiming the exchanges handed unfair advantages to high-frequency traders to the detriment of regular investors. The lawsuit, filed in the U.S. District Court of the Southern District of New York, could test a cornerstone of U.S. securities law: exchanges’ immunity from lawsuits seeking damages.

PLY: A potentially seismic ramification looms where exchanges could lose immunity from damages lawsuits.

FMC Writes To MCX On FT-Kotak Bank Deal
Economic Times
When will Financial Technologies-Kotak Mahindra Bank deal conclude? FMC asks MCX
Ashwin Mohan – Economic Times

More than a month after FTIL announced the sale of its 15% stake in MCX to Kotak Mahindra Bank, the regulator FMC has turned the heat on India’s largest commodity exchange by demanding specific details on the transaction timeline.

EI reported on August 28 that FMC approved the Kotak Bank’s deal to acquire 15% stake in MCX.

BMV Joins The United Nations’ Global Compact
Mondo Visione

Mexican Stock Exchange (BMV) announced its adhesion to the United Nations’ Global Compact, with which not only will it continue with its sustainability efforts, but also will align its strategy with the ten universally accepted principles of the Global Compact. These principles include aspects such as Human Rights, Employment Standards, the Environment and Anti-corruption Policies. The intention is also to seek better access to the best practices and the learning platform offered by the Global Compact on these issues.

PLY: I retain considerable discomfort over addition of principles which are based on unproven science or prone to left wing manipulation. However with many exchange staff being de facto NGO workers in mentality, they feel comfortable signing up to glittering poisoned chalices of red tape.

Companies Can Influence HFT Trading In Their Own Stocks – CMCRC
Mondo Visione

The Capital Markets Cooperative Research Centre (CMCRC) has released new analysis on the influence of tick size on HFT and algorithmic trading.

The research by CMCRC PhD candidate Tony Zhang and Dr Vito Mollica from the MGSM showed that companies can influence the level of algorithmic trading in their own stocks, should they want to do so, by adjusting their share price level.

PLY: Another fascinating piece of research from CMCRC.

Private Markets

USE Merger To Help BSE Push Liquidity To Market: CEO

The merger of the United Stock Exchange (USE) and Bombay Stock Exchange (BSE) will result in the former’s promoters, many of whom are banks, become owners of BSE, BSE CEO Ashishkumar Chauhan told CNBC-TV18’s Aastha Maheshwari in an interview.

The merger has already received approval from the Competition Commission of India.

EI reported on September 2nd that SEBI and the fair trade watchdog CCI approved the merger of USE with the BSE.

CFTC Staff Issues No-Action Letter For Commodity Pool Operators Of Commodity Pools That Are Not Registered Investment Companies With Wholly-Owned Trading Subsidiaries
Mondo Visione

CFTC’s Division of Swap Dealer and Intermediary Oversight (DSIO) issued a no-action letter for CPOs of certain commodity pools that are non-registered investment companies (Parent Pools) that use wholly-owned trading subsidiaries to trade commodity interests (Trading Subsidiaries).

Sebi May Decide Fate Of VSEL
Economic Times

Vadodara Stock Exchange (VSEL) said it was up to Sebi to take a call on closing down the bourse after it failed to meet a key requirement set by the market regulator.

VSEL is facing closure after its failure to comply with a SEBI directive that it must reach a turnover of Rs 1,000 crore ($165.56 mln) by May 30, 2014 and a minimum networth of Rs 100 crore by May 2015.

LMAX Exchange Named Britain’s Fastest-growing Tech Firm
Mike Fox – Leap Rate

LMAX Exchange, the provider of an exchange-based currency trading platform, has been named number one as Britain’s fastest-growing private technology company by Fast Track, after its annual sales rose 307.8 per cent over the past three years to £18.37m ($29.53 mln) last year.

The firm ranked 15th last year when Fast Track’s list of the 100 fastest-growing companies was published in The Sunday Times, but its trading volume of over $1 tln last year has propelled it to the top of the rankings.

PLY: A rapid turnaround for LMAX which was sold off by Betfair to management for 3.6 million Pounds (circa $5 million) in December 2012…

OKPay ‘Ordered’ To Hand Over Customers’ $6.1 Mln To Mt Gox
Jon Southurst – CoinDesk

Payment processing firm OKPay has defended its recent transfer of withheld deposits totalling almost $6.1m to Mt Gox, saying a court order compelled it to make the payments.

The $6,014,910 amount consisted of deposits from individual OKPay customers around the world to Mt Gox in the period immediately preceding the exchange’s collapse.

Special Section: FTI, NSEL, India at the Crossroads

PLY: A flat day for both MCX and FTIL despite the news confirming the slow rate of due recovery:

Negligible Progress In Dues Recovery From NSEL Defaulters: FMC

NSEL has made only a negligible progress in recovery of dues from defaulters, regulator FMC has said.

“The Commission has noted that depletion of human resources, lack of financial resources and weak organisational structure at NSEL has posed a major impediment in the recovery process and consequently contributed to negligible progress in recovery of dues by NSEL from the defaulting members,” FMC said in a its latest circular.


Nasdaq OMX Partners With Corvil To Enhance Risk Wrapper On TradeGuard (subscription)
Marina Daras – Waters Technology

Nasdaq OMX has announced a partnership between its Global Access Services business and data analytics vendor, Corvil, to enhance RiskWrapper, the risk measurement solution built into TradeGuard’s platform.

Nasdaq OMX will integrate Corvil’s streaming analytics platform to monitor trading activity directly from network data. The RiskWrapper solution will now give clients added protection by monitoring trades at the network level and comparing trades within the risk system as well as alerting users to anomalies without adding latency.

Thomson Reuters Launches New Data Service To Help Clients Comply With Solvency II Requirements
Mondo Visione

Dedicated Solvency II Data Service available through Thomson Reuters DataScope Select, designed to help insurers, asset managers, FUNDadministers and custodians meet capital adequacy and disclosure obligations under Solvency II.

CFN Buys Microwave Network To Enter Chicago-NY RF Data Fray
Max Bowie – Waters Technology

Low-latency fiber network provider CFN Services has unveiled ultra-low-latency microwave connectivity network that transports CME Group market data between Chicago and New York with latency of between 8.4 and 8.7 milliseconds (depending on which datacenters clients connect to for receiving data) – 5.5 milliseconds faster than the vendor’s existing fiber routes.

Chapdelaine FX Taps Integral Development For FX Platform Upgrade

Integral Development Corp, a leading FX trading network, and Chapdelaine FX, a division of Tullett Prebon, announced significant upgrades to the Chapdelaine FX platform that will further differentiate their offering from other services.

Exegy Announces New Feeds & Business In Foreign Exchange
Mondo Visione

Exegy Inc., a provider of high-performance market data normalization and distribution solutions, has announced the availability of six new feed handlers for foreign exchange venues expanding Exegy’s broad portfolio of over 200 market data feed handlers, including feed handlers for the leading bank portals and ECN platforms for currency trading., Exegy announced support for the Cantor Fitzgerald StreamFX, FX All Active Trading, ICAP EBS Ai, Integral FX Inside, LMAX InterBank, and LMAX Professional feeds.

Perseus Begins Global Data Net Expansion (subscription)
Max Bowie – Waters Technology

New York-based low-latency network provider Perseus Telecom is expanding its LiquidPath data connectivity service from focusing on providing connectivity between the US and South American markets to primary market centers worldwide, followed by second-tier and frontier markets based on client demand.

SimCorp Clients Live With Latest EMIR Trade Reporting Requirements
Digital Journal

Following the second compliance deadline for reporting derivatives trades to a trade repository (TR), SimCorp confirms that their clients successfully met the requirements as set out under EMIR.

From August 11, investment management firms are required to include valuation and collateral reports in addition to the data that must already be reported to one of the TRs authorised by ESMA.

Trustron Adopts Omgeo CTM
James Rundle – Waters Technology

South Korea-based Trustron Asset Management has selected Omgeo Central Trade Managaer (CTM) to handle its domestic post-trade equities activity.

The adoption of CTM will allow the firm to standardize and automate its post-trade settlement and matching operations. It will also utilize Omgeo’s web-based settlement notification service Alert.

Markit Signs Infosel For Collaboration Services (subscription)
Faye Kilburn -Wates Technology

Mexican data vendor Infosel has joined Markit Collaboration Services, the open messaging network initiative from Markit that allows financial professionals to communicate and share information across communication platforms.

Infosel plans to add about 5,000 users from its client base to Markit’s global network via Microsoft’s Lync messaging software, to enable communication with other members of the Markit Directory─a validated “phonebook” of identity and contact data.

Horizon Launches New Version of Trading Platform
Marina Daras – Waters Technology

Horizon Software, the algorithmic trading technology provider, has launched a new version of its electronic trading platform, Horizon v2.1, which includes a set of compliance tools to help users with market-making obligations globally.

Moskovskaya Birzha : Annual Load Testing Of Moscow Exchange Trading & Clearing Systems On 20 September 2014
4 – Traders

Moscow Exchange has scheduled a public load testing scheduled on 20 September 2014 for FX, Derivatives and Equity markets trading and clearing systems.


Taiwan Allows Onshore Trading Of Foreign Derivatives
Xiao Wang – Risk

Taiwan regulators have relaxed restrictions on trading foreign derivatives onshore as part of a broader policy of what it terms “financial import substitution” – a strategy that aims to build up the domestic finance sector.

On July 30 Taiwan’s Financial Supervisory Commission (FSC) introduced a new policy allowing local banks, and Taiwanese branches of foreign banks, to trade and settle offshore-issued derivatives products for institutional clients in Taiwan. Previously these services could only be done offshore.

PLY: An encouraging development both for Taiwan’s ambitions to ultimately serve the RMB market but also a useful opportunity for Taiwanese investors to trade abroad too.

Amman Bourse Ready For Listing, Trading Sukuk

The acting CEO of Amman Stock Exchange (ASE), Nadir Azir, said that ASE improved notably from the beginning of 2014 until last August and is ready for Sukuk listing and trading.


FTSE Heads To The Frontier With New Index Series
Todd Shriber – ETF Trends

FTSE’s new frontier indices will initially include nearly 370 companies from 26 countries.

Solactive Launches New Hedge Fund Replication Index – Licensed To Société Générale Corporate & Investment Banking
Mondo Visione

Solactive AG has launched a new, innovative index in the hedge funds space, the Solactive Hedge Fund Holdings US Index (HEDGEUS,) which will be used as underlying by Société Générale Corporate & Investment Banking (SG CIB) for swaps, options, and certificates.

Career Paths

Financial News reported that Liquidnet confirmed the Departure of COO John Kelly.

Financial News reported that Abide Financial, a provider of trade reporting services in Europe, has added Kathleen Traynor, a former FIA Europe regulatory Executive, to its board ahead of a Planned Geographical Expansion.

MV reported that Securities and Exchange Commission (SEC) announced Victor J. Valdez named COO & Managing Executive of the agency’s Enforcement Division, Currently Mr. Valdez comes to the SEC from the Federal Deposit Insurance Corporation (FDIC), where he is the Deputy Director of Strategic Planning & Corporate Programs for FDIC’s Corporate University.

Waters reported that CFN has hired Guy Scott as Vice President of Global Sales for capital markets, Scott was most recently Managing Director of sales at trading software vendor Trading Technologies.

MV reported that Calastone, the global funds transaction network, today announced the appointment of Jon Willis as Chief Commercial Officer starting 1st October 2014.

Financial Calendar


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
Interactive Brokers $0.10 quarterly dividend payment.
BME €0.40 interim dividend payment.

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


RCS Capital Corporation Launches “We Are Crowdfunding” Platform
Samantha Hurst – Crowdfund Insider

RCS Capital announced on Monday (September 8th) the launch of “crowdfunding 2.0″ investment platform, We Are Crowdfunding. The new website is designed to provide investors direct access to high caliber, institutional quality public and private investment offerings.

We are Crowdfunding will offer a spectrum of expertly screened investment opportunities including public and private real estate investment offered as mutual funds, interval funds, private fund vehicles, and other individual real estate investments. A variety of new investments will continue to be added to the platform.

Investments In Crowdfunding Platforms Have Already Doubled This Year

With almost three quarters of 2014 complete, angel and venture capital has poured more than $140 mln into the infrastructure of crowdfunding, more than double the amount invested last year and 43% more in individual deals.

Other stories

Financial Transaction Tax Offers Viable Solution – DSC

The 2014 election campaign has nudged the need for a Financial Transaction Tax into the spotlight, with several parties promoting the tax which has been Democrats for Social Credit policy since the late 1980s.

PLY: Not content with the disaster which is the Obama white house some left wingers want to go further and dismantle the core system which made the USA the greatest economy in the history of the world.

EBRD Supports Development Of Capital Markets In Romania
Mondo Visione

The Romanian authorities have embarked on an extensive capital markets development agenda which aims to improve the functioning of the local capital markets, enhance liquidity and increase availability of capital markets products.

In line with its current strategy for Romania, EBRD supports the government’s agenda and continues to promote further development of local capital markets through investments, technical assistance and policy dialogue.

PLY: Given the ramshackle roll call of frequently corrupt, almost Invariably incompetent, figures in government in Romania (much of the capital markets are not much better imho), that the EBRD supports the government’s agenda sounds more like a supranational admission of defeat than the ringing endorsement this press release was probably expected to deliver

Duco Selected By R. J. O’Brien
Mondo Visione

Duco announced that R. J. O’Brien & Associates LLC (RJO), has signed for Duco Cube, the leading, hosted self-­service control solution, for its global reconciliation business.

DME Announces Joint Seminars With China’s INE
Mondo Visione

Dubai Mercantile Exchange (DME), the premier international energy futures and commodities exchange in the Middle East, has announced plans to hold two joint seminars with the Shanghai International Energy Exchange Corporation (INE).

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