September 09 2015

elb2 ICE Singapore announces contracts ahead of launch. ‘Bet Power’ is on as a megamerger which probably pivots Betfair away from its exchange roots while Eric Noll pens a pithy piece seeking better US market infrastructure for investors. ‘Shahdenfreude’ alert: Jignesh is worried he might be going back to jail…

Meanwhile, ICAP boss Michael Spencer makes another impassioned plea for the spineless, visionless British government to Give the Green Light to Heathrow Airport Now.

In the big wide world beyond market infrastructure, Her Majesty Queen Elizabeth II marks the anniversary today of being the longest reigning monarch (23,226 days) in the substantial history of the United Kingdom. She has been Queen through the Cold War, seen the jet age give way to the digital age and indeed financial markets have changed appreciably during her reign – even since she made a hugely welcome trip to the LIFFE exchange over 20 years ago where it was a pleasure to see her take a tour of the floor. Long may she reign over the United Kingdom and the British Commonwealth.

Parish Notices: The not to be missed meetings of the month:

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

Burgenstock An all star industry line up beginning with my Crossfire panel September 23rd.

Public Markets

Betfair, Paddy Power Reach Agreement On 6 Billion Pound Tie-Up
Conor Humphries – Reuters

As in a provisional deal announced in August, Paddy Power shareholders will own 52 percent of the group with Betfair investors owning the rest, subject to shareholder approval.

Read our Premium Exchange Deals Brief Part 1, Part 2.

MCX Case Against MSEI Adjourned
The Hindu Business Line

Bombay High Court on Tuesday adjourned the hearing of the MCX case against the Metropolitan Stock Exchange of India (MSEI) to September 23 even as the stock exchange contested the jurisdiction of the court. As directed by the High Court, the stock exchange deposited ₹20 crore (USD 3 mln) and argued that the case should be heard by the Securities Appellate Tribunal. MCX had filed a writ petition against MSEI for cancelling its warrants worth ₹42 crore (USD 6.33 mln).

Read our Premium Exchange Deals Brief Part 1, Part 2.

CME Europe On Dealing With Derivatives
Cees Vermaas, CEO, CME Europe – European CEO

Sebi Notifies Revised Regulations Ahead Of FMC Merger

The amended regulations include those related to stock exchanges and clearing corporations, to come into force on September 28, the date from which Sebi will begin regulating commodity derivatives as a unified regulator.

Read our Premium SEBI-FMC Merger Brief.

Sebi To Enhance Supervision Of Brokers To Check Misuse Of Funds
Ashish Rukhaiyar – Livemint

Brokerages will be told to strengthen audit systems; bourses to get larger role in monitoring health of such firms.

Lima SE CEO Says Tax Exemption To Help Win Over MSCI
John Quigley – Bloomberg

As officials suspend capital gains taxes on equities for at least three years, they’re also reducing costs for market makers in a bid to encourage trading, CEO Francis Stenning said in an interview from Lima. Trading volumes, which have fallen 80% since 2007, will return to “normal” levels in two to three years, he said.

Previous discussions last month.

Read our Premium MILA Exchanges Brief.

Comment: Give Investors Top Priority In Stock Markets
Eric Noll (CEO Convergex) – Financial Times

PLY: Eric Noll begins a pithy piece: “As US stocks ride the third-longest uninterrupted bull run in history, the question of whether equity markets are rigged continues to pervade the industry.” Customer order prioritisation is the key to his argument to reorganise the dog’s dinner where time/price priority has led to an interesting experiment in applied mathematics.

Incidentally today the FT is offering free access to all comers.

CFTC Orders FXCM To Pay More Than $843K For Supervision And Records Violations
Mike Fox – LeapRate

CFTC press release here.

PLY: Fundamental KYC failures from the days before FXCM unfortunately demonstrated that the complexities of margining were apparently not quite within their leveraged broker dealer skills set. More grist to the mill that the forex market is headed for more exchange-style solutions as I have long argued.

Bursa Malaysia Securities Introduces Guidance On Rebate On Commission For Equities Brokers

IG Group Opens First Middle East Office In Dubai
Matthew Amlôt – CPI Financial

Private Markets

Low Valuations May Force BIST To Delay IPO

Borsa Istanbul (BIST) may be compelled to postpone its IPO due to low valuations, CEO Tuncay Dinc said on Tuesday. The offering is currently planned for the second quarter of 2016, Dinc said.

Read our Premium BIST IPO Brief.

PLY: BIST has a few problems not least of which is a certain feeling they are worth much more than they are. However it is tricky to leverage valuation on a very conservative management culture. Yip Turkey is a huge opportunity and the BIST manages to charge low fees but the overall entity needs to look more like a business albeit that the valuation is also very much aligned with the Turkish economy where currently the political situation is highly volatile.

Peter Thiel’s Valar Ventures & Citi Ventures Back Stock-Trading Startup
Anna Irrera – Wall Street Journal

Peter Thiel’s Valar Ventures and Citigroup’s Citi Ventures have backed a New York-based startup that lets retail investors place orders for securities on news websites, financial blogs and mobile apps, as investments in young financial-technology companies continue to grow. Trading Ticket will use the $4 million seed investment to expand its global presence and extend partnerships with publishers.

PLY: An interesting fintech startup which actually has a crunchy purpose. Success clearly not assured but it is an interesting concept.

Nigerian SE & The Quest For Global Exposure

Nigerian SE CEO Seeks Tax Breaks For Companies Choosing To List
Naija 247

Read our Premium Rise of Africa Brief – Part 5.

Dividend News

Scrip Dividend Scheme, Interim Dividend For Y/E 31 December 2015 Calculation Of Market Value

HKEx: Forfeiture Of Unclaimed Interim Dividend For 2009

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX and 63 Moons (FTIL) respectively up 1% and down 1% while reader Shahdenfreude may be close to reaching giddy new levels:

Delhi Court Refuses Anticipatory Bail To Jignesh Shah
N Sundaresha Subramanian – Business Standard

A district court in Delhi on Tuesday dismissed the anticipatory bail application filed by National Spot Exchange (NSEL) founder Jignesh Shah. Shah had sought anticipatory bail in the matter of a complaint filed by Delhi-based Classone Exports, which lost nearly Rs 23 crore (USD 3.46 mln) in the NSEL payment crisis that broke out in July 2013. He might now move the high court for anticipatory bail, his lawyers said.

PLY: A clear case that Jignesh Shah fears further incarceration after his 108 days in jail last year. He is also convinced of his innocence according to his lawyers. Many market watchers may perceive this as a dizzying example of the seemingly never-ending hubris of Mr Shah or his descent into complete delusion. Interesting that in court his lawyers are accusing the sugar traders on NSEL: Mohan India, Brinda and Tavishi as the beneficiaries of the NSEL fiasco. We’ve seen many false dawns before but clearly Jignesh Shah is rattled right now as he seeks a higher court application to pre-empt any further incarceration. QV in Premium NSEL Scandal Brief – Part 16.


Trading Resumed On MOEX After Network Failure

Operation Of The MOEX Market On 8 September

Trading in shares, derivatives and foreign currency resumed on MOEX by 1415 GMT on Tuesday after a network equipment failure caused trading to be halted for over an hour on all markets. Last MOEX outage was reported last week. MOEX announced last month that the SPECTRA system updated to v4.5.

PLY: MOEX has had a slightly torrid summer in tech.

EBS BrokerTec Licenses FX Bridge’s FX Options Software


CME Expands Deliverable Swap Futures Offering With 7-Year & 20-Year Denominated Contracts

ICE Futures Singapore To Launch With Five New Contracts On November 17, 2015

ICE Futures Singapore and ICE Clear Singapore expects to launch on November 17, 2015, with five new contracts: Mini Brent futures, Mini Gasoil futures, Kilo Gold futures, Mini Onshore Renminbi futures, Mini Offshore Renminbi futures.

In February ICE delayed the scheduled March 17 launch after Zhengzhou Commodity Exchange (ZCE) threatened legal action to stop the US group launching two commodity futures replicating contracts offered in China (reported in March).

Read our Premium brief: ICE – SMX Deal Brief.

PLY: The contracts are much more benign to Chinese minds clearly after there was a kerfuffle on the first run. That we get Mini Brent may look like its own benign move but that is the voice of a market saying: “impose an EU FTT & you’ll find our markets here in Singers.” I wish ICE Singapore every success with its rejuvenation of the former Singapore Mercantile Exchange (founded by FTIL).

Exchanges Vie For Credit Swaps Trading
Joe Rennison – Financial Times

ICE is hoping for more luck second time around as it relaunches an electronic trading platform that failed to gain traction at the start of 2014.

PLY: Single name CDS volume is down 2/3rds since the frothy peaks of 2008. A lack of corporate bond liquidity is not helping matters.

Bloomberg & Traiana Develop Solution For FX Options Post-Trade Processing

Citigroup FX Trader Seeks ‘Truth’ In Wrongful Firing Case
Katie Martin & Jane Croft – Financial Times

Career Paths

Ilan Gotsman, the relatively low profile co founder of GHF Financials and Butterfly Investments (a proprietary arbitrage business in ETD) is joining DB1 to advise EUREX with immediate effect, working on ways to improve the derivatives division’s competitive position. Interestingly, he is reporting to new Group CEO Carsten Kengeter and EUREX CEO Andreas Preuss.

PLY: Carsten Kengeter is wasting no time with strategic hires which clearly must result in some others being squeezed out? QV Last week’s announcement of Ashwin Kumar as DB1 Global Head of Product Development.

Luminex Completes CEO Transition

Jonathan A. Clark has assumed the role of permanent CEO effective replacing interim CEO Michael S. Cashel who will return to his position of SVP of Fidelity Trading Ventures. Mr. Cashel will continue to serve in an advisory capacity. In addition to the CEO transition:

Brian Williamson has been appointed Head of Sales. Mr. Williamson has extensive experience in trading and relationship management including with Liquidnet, where he served as a Senior Global Relationship Manager, and with The Boston Company, where he was VP for Equity Trading.

James C. Dolan, has been appointed Chief Compliance Officer. Mr. Dolan has an extensive background in top compliance roles, including nearly twenty years with NASD (FINRA), most recently serving as VP of Compliance for Fidelity Institutional.

David Hagen has been appointed as Head of Product. Prior to joining Luminex, Mr. Hagen was a Director at Pico Quantitative Trading.

Daniel J. Consigli has joined Luminex as the firm’s controller. He most recently served as a divisional financial officer at IDB Bank.

Luminex plans to open for trading in Q4 2015 as a new, independent platform for investment managers with a long term focus to trade large blocks of stock with other investment managers.

PLY: Interesting line of hires – also curious typo, Brian Williamson is later “Mr Williams” in the press release. Hiring direct from Liquidnet a sign of clear intent of course… Read our Premium Luminex – Crazy Name, Crazy Development?

Fintech startup Trading Ticket announced that Valar Ventures founding partner Andrew McCormack and the founding CEO of online brokerage DLJdirect, Blake Darcy, have joined its board. Ramneek Gupta, Citi Venturesco-head of global ventures investing, will become a board adviser.

SEC named Smeeta Ramarathnam has Deputy Director in the Office of Credit Ratings.  She begins her new role later this month.

McGraw Hill Financial announced a series of leadership changes across the company.

Following the successful completion of the SNL Financial acquisition on September 1, 2015, the Company’s S&P Capital IQ business will be combined with SNL Financial under the leadership of Mike Chinn, former President and CEO of SNL Financial, who has been named President of the combined entity.

Imogen Dillon Hatcher, who previously served as President of S&P Capital IQ, has been named President of Platts.  Larry Neal, Platts’ President since 2009, has decided to retire and will remain as a senior advisor reporting to Doug Peterson through the end of 2015.

John Berisford, EVP of Human Resources at McGraw Hill Financial, has been named Acting President of Standard & Poor’s Ratings Services, succeeding Neeraj Sahai, who has resigned to pursue other opportunities.  France Gingras, SVP of Human Resources, will serve as Acting EVP of Human Resources at the Company.

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.

Share Notes

ICE insider Charles A. Vice sold 2,000 shares Thursday, September 3rd at an average price of $228.71 (bargain $457,420.00).

Interactive Brokers Vice Chairman Earl H. Nemser sold 2,595 shares Friday, September 4th at an average price of $37.57 (bargain $97,494.15).

Check our Share Notes section in Premium.

Analyst Notes

Nasdaq A Strong Candidate To Beat The Market
Seeking Alpha

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


Funding Circle’s New Auction Model Is Already Drawing Criticism
Ryan Weeks – equities

PLY: Interesting move to credit based fixed pricing…food for thought.

Visa Veteran Backs Marketplace Lender
Ben McLannahan – Financial Times

CommonBond Raises $35 Mln In Latest Funding Round
Olivia Oran – Reuters

Hans Morris, a long-time Citigroup banker and former president of Visa, has become the latest finance-industry veteran to back an online lending marketplace, joining a $35m round of equity financing for CommonBond, a student loans specialist.

Economics Of Online Markets
Niranjan Rajadhyaksha – Livemint

Other stories

China Just Killed the World’s Biggest Stock-Index Futures Market
Kyoungwha Kim – Bloomberg

The Internationalization Of The Renminbi
Dan Steinbock – ValueWalk

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

GreySpark Research: Equity Trading Houses Return To Profitability But Must Evolve Businesses

PLY: The investment banks have a model for equity brokerage which is pretty Dickensian. Like bond trading there is still huge scope for change as this paper notes.

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