September 10 2014

elb2Today’s news as we rush to pixel, the UK gets the Financial Markets regulatory slot in the new EU cabinet – it may not preclude the EU festering to an eventual sticky end but it may at least delay things in the financial sector… In other news they appointed France’s spendthrift Pierre Moscovici with policing national budgets. Hmmm, things you can’t make up but the EU did it, volume 999 million and something…

Markit, S&P head to head for Barclays Index unit, 15% new limit for foreign holders of Indian exchanges? LSE steady as she goes as Russell rights issue given okay. Today’s the day for another potential EU step back into the dark ages as Finance Ministers discuss the FTT. Kenya stock rockets on first day’s trading. CME ponders manipulation, while ISDA delegates discuss Schrodinger’s paradox of liquidity.

Clearing snippets, tech updates, NY Bitcoin proposals struggling to deal with responses, lots of interesting news…including updates from around the SEF picket line.

Public Markets

S&P, Markit Finalists For $1 Bln-Plus Barclays Index Unit
Mike Stone & Jessica Toonkel – Reuters

S&P and Markit have emerged as final bidders for Barclays Plc’s index business, which could fetch more than $1 billion.

EI reported on August 28th that Barclays’ Index Unit may sell for much more than the original $400 mln. EI also reported on August 14th that Barclays Index Unit drew offers from Nasdaq, CME, Bloomberg and Markit.

PLY: MSCI and Bloomberg et al amongst previously interested parties who have disappeared from the frey. An interesting asset which Markit first pushed in to play, how hard will they play to acquire it to christen their recent IPO?

MCX Moves To Stem Panic, Hopes FTIL Will Exit By September End
ET Bureau – Wall Street Journal

PLY: FMC plays hard ball, refuses new contracts to MCX until FTIL exit – acute pressure on FTIL/Jignesh as a result…

Shortly after news of the refusal, MCX’s share fell by almost 6 per cent from its day’s high, but recovered subsequently. FMC has disallowed MCX from launching fresh contracts from 2014-end until it ensures FTIL is ejected as a shareholder in the bourse.

EI reported on September 4th that MCX-SX is looking to dispose of FTIL’s stake and that MCX may get the go-ahead to launch new contracts up to March 2015.

MCX Hopes FTIL Stake Sale Will Conclude By Month-End
Sharleen D’Souza – Business Standard

MCX said on Tuesday that the process of stake sale by FTIL, its erstwhile anchor investor, might get over by the end of the month. FTIL, it says, has yet to communicate a clear date.

In a filing on the BSE, it said it also hoped to soon get approval from the market regulator to re-launch contracts in futures.

PLY: Investors are understandably jittery that for some reason FTIL may not close the sale of their shares…

LSEG Pre-Close Trading Update & General Meeting
LSEG

LSEG is releasing a trading update ahead of the General Meeting in connection with the Group’s proposed acquisition of Frank Russell Company and associated fully underwritten rights issue, to be held at 09:30, 10 September 2014. This statement also forms a Pre-Close trading update before the Group enters a close period on 1 October 2014.

PLY: Essentially, nothing to see here, although the world expanded as it ought. Shareholders are assumed to have given the green light to the rights deal as we race to pixel.

LSE Builds Ties In MSE
FTSE Global Markets

LSEG and the Mongolian SE (MSE) will collaborate on post trade infrastructure, FTSE index development and opportunities for trading new products and asset classes, including commodity derivatives and FX.

LSEG press release here

EI reported September 2nd that MSE & LSEG will arrange a three-year contract extension to the agreement first signed in 2011.

Robin Hood Tax Will Have A Negative Impact (subscription)
Simon Lewis – Financial TImes

AFME and other members of the European Forum of Securities Associations (EFSA) are writing to finance ministers of the participating member states ahead of the Ecofin meeting to explain our profound concerns about the impact of the proposed FTT on Europe’s economy and its capital markets.

PLY: The inability of the EU to understand economics may yet prove a great university case study for years to come – then again the inability of bankers to realise how loathed they are in the real economy will be a core part of that story. Anyway, FTT remains shorthand for economic hari kiri – but the EU is increasingly practising this with vigour anyway, alas.

US Regulator Would Welcome Delay Of EU Clearing Rules
Douwe Miedema – Reuters

A top U.S. regulator said he would welcome a delay by the EU that gave more time to resolve a conflict with Washington over making derivatives markets safer.

Foreign Investor Cap In Bourses May Be Raised In India
Jayshree P Upadhyay – Business Standard

In a move that could increase the stake of foreign investors in Indian stock exchanges, the government is considering a threefold increase in the single-investor investment ceiling. Currently,a FPI investment in an exchange is capped at 5%.

PLY: Today’s first slightly seismic news as it appears the Modi government is going to reform as we have been hoping. The idea of a 5% limit for exchange shareholdings is anyway an archaic mechanism – 15% is much better and likely to attract a lot more interest in the likes of MCX-SX which is still a fabulous binary bet (it will either go bust or burst back like a Phoenix – with suitable management imho).

CFTC Data Capabilities Lagging, New ISDA Chief Warns (subscription)
Ed Beeson – Law 360

In some of his first public comments since leaving CFTC last month, Scott O’Malia on Tuesday returned to a topic that consumed much of his time as a member of the agency: its struggles to process the torrent of market data coming its way.

PLY: Seamlessly moving from CFTC to ISDA, Scott O’Malia tells us what we already know – the CFTC (and indeed the same is true for most every regulator) is swimming in an ocean of big data, unable to work out quite how, or perhaps, how to afford, to process it.

SGX & TWSE Study Stocks Trading Link
Mondo VIsione

SGX and Taiwan SE (TWSE) will enter a Letter of Intent tomorrow to study and work towards linking the two stock markets.

PLY: Remember Young’s first rule of exchange MOUs: They are never worth the air miles they earned in their creation unless both parties have skin in the game to profit.

BVB To Reduce Trading Fees
Andrei Chirileasa – Romania Insider

Bucharest SE (BVB), the operator of the Romanian capital market, recently announced that it will reduce trading fees starting October 1, 2014, in an effort to make the market more accessible to investors.

Chi-X Says ASIC Levies Cost It Half Its Trading Revenue
Shaun Drummond – Sydney Morning Herald

Chi-X Australia says the corporate cop’s funding model costs it half the exchange’s trading revenue and has stifled its ability to compete ever since it started in October 2011.

CEO John Fildes has renewed his call for an overhaul of ASIC’s “cost recovery” levies, introduced in 2010 when the regulator took over market surveillance responsibilities from the ASX.

PLY: A great example of how, consciously or subconsciously the government-regulatory nexus works to keep incumbents bloated and in business. Chi-X have really been on the button in Australia since day one and their market share and ability to reduce costs against a leviathan incumbent which has thrown every possible obstacle into its path clearly demonstrates this.

NSE Shares Almost Double In Kenya Debut
Eric Ombok & Charles Wachira – Bloomberg

Nairobi Securities Exchange (NSE), the second African bourse to IPO (after JSE in 2006) stock jumped 72% to 16.30 shillings ($0.18) by the close in Nairobi with 3.84 mln shares traded. It earlier rose to as high as 18 shillings ($0.20) from an initial public offering price of 9.50 shillings ($0.11).

EI reported on September 4th that NSE raised 627 mln Kenyan shillings ($7.1 mln) for expansion in an oversubscribed IPO.

PLY: welcome to the investor universe, NSE, we look forward to reporting on your public success in Exchange Invest.

Swaps Dealers Warn On Market Transparency (subscription)
Gina Chon – Financial Times

PLY: Essentially a classic case of Schroedinger’s liquidity. The CLOB is all bright shiny, new and welcoming but a cartel of sell side luddites akin to the trades unionists who brought Britain to its knees during the 1970’s are unwilling to enter the SEF and have formed a secondary picket line around the platforms. We’re left at an impasse – although when the urge to hedge becomes more pressing that will break down. Meanwhile a little muscular regulation would not go amiss – just posting bouncers by the doors of the SEFs would show that flying pickets from banks are not encouraged…

These Kinds Of Market-Rigging “Practices” Will No Longer Be Allowed On The CME
Tyler Durden – Zerohedge

It has been an interesting week for the CME: first it was revealed a week ago that in order to “stimulate” the market, the CME is willing to pay central banks a liquidity rebate in order for the world’s monetary authorities to “make markets” in the most important S&P 500 future, the E-Mini, confirming not only that central banks directly trade the S&P 500, but are incentivized to nudge it along the preferred central bank direction: up. Then last week, none other than the CME’s own 10-K proved that something changed in 2013, when for the first time central banks officially became counted as clients of the biggest US derivative exchange.

the CME’s fall from efficient market grace accelerate when it advised the CFTC that the derivative market would be adopting a new Rule 575 to eliminate “Disruptive Practices Prohibited.”

PLY: Ouch.

The excellent offices of Tyler Durden hit an intriguing nail on the head here in many senses. Exchanges have, and I maintain still have, the right to promote liquidity with incentive schemes. However, the excessive use of the schemes and some dubious deployment and modification (no need to be paranoid of course I mean you, NLX) of these schemes is leaving them increasingly discredited. Meanwhile, isn’t it illegal to subsidise the government, I mean giving the central bankers refunds… after all when friends have worked for US regulators and I tried to buy them a drink, it was always a challenge while they were in government office as they wanted to be absolutely above board (I always admired their probity as it was just an attempt at being a decent host!). Clearly the bankers ought to refuse such incentives?

CFTC Eases Hedge-Fund Advertising Ban (subscription)
Andrew Ackerman – Wall Street Journal

U.S. commodity regulators took long-awaited steps to make it easier for hedge funds and other firms to raise cash by publicly advertising stakes in their funds.

CFTC late Tuesday eased long-standing marketing restrictions on so-called private offerings by hedge funds and other funds sold only to wealthy investors, a move aimed at aligning the CFTC’s restrictions with similar rules set by the SEC.

Private Markets

Qatar Venture Market To Begin Early Next Year
Mohamed Shoeb – The Peninsula

Qatar’s venture or junior stock market listing SMEs is all set to be operational by early next year with five SMEs expected to be listed.

IEX Gears Up For Cross Border Power Trade
Business Standard

In a move that would boost cross border exchange of electricity, country’s largest power bourse Indian Energy Exchange (IEX) expects to have participants from neighbouring Bangladesh and Nepal trading on its platform in the “next few months”.

The necessary approvals that would pave the way for Bangladesh and Nepal to purchase electricity from the IEX are getting processed, a senior exchange official said.

PLY: Excellent news, cross border power trading helps improve access and cost of energy for everybody.

CFTC Staff Issues Exemptive Letter To Commodity Pool Operators Expanding The List Of Permissible Third-Party Recordkeepers
Mondo Visione

CFTC Division of Swap Dealer and Intermediary Oversight (DSIO) recently issued an exemptive letter that allows CPOs to use additional recordkeepers beyond those enumerated in Commission regulations 4.7(b)(4) and 4.23(c).

China Sets Sights On LME With New Graphite Trading Platform
Laura Syrett – Industrial Minerals

A China-based trading platform that includes industrial minerals as well as metals could pose a direct threat to the LME’s coveted position in the commodities trading industry, but even parties to the latest exchange scheme admit that details for the plan are sketchy.

SECP ‘Struggling’ To Demutualise Bourses
Kalbe Ali – Dawn

Despite the passage of two years, the Securities and Exchange Commission of Pakistan (SECP) has not been able to pursue case of demutualisation of stock exchanges.

Investors In India Vie For Shares Of Stock Exchanges
Sachin P Mampatta – Business Standard

Dealers in shares of unlisted companies are seeing increased demand for the shares of Bombay SE (BSE) and the National SE (NSE), owing to the bullish market sentiment and rising stock exchange volumes.

NASDAQ Dubai Delays Dual Listing Deal With Egypt’s Clearing House till Oct
Amwal Al Ghad

NASDAQ Dubai decided to deter dual listing plans with Egypt’s Central Securities Depository (MCDR) till end of next October, said MCDR chairman Mohamed Abdel-Salam.

EI reported on September 1st that Nasdaq Dubai is expected to ink an agreement with Egypt’s MCDR during the month.

BitVC Kicks Off Bitcoin Futures Platform with Trading Contest
Jon Southurst – CoinDesk

Huobi is launching a bitcoin futures trading feature on its BitVC platform with a 10-day simulated trading competition to get users involved.

Bitcoin Foundation Deems Latest NYDFS Letter ‘Disappointing’
Stan Higgins – CoinDesk

The Bitcoin Foundation is reporting that certain information it requested from the New York Department of Financial Services (NYDFS) under the Freedom of Information Law will not be delivered as soon as originally suggested.

The latest correspondence stated the foundation would now receive information about the BitLicense’s deliberation process within 120 days. The organisation had originally hoped to receive a response within 20 days of its filing.

PLY: New York’s plan to blaze a trail in Bitcoin regulation looks increasingly discredited, if not downright dysfunctional on multiple levels.

Special Section: FTI, NSEL, India at the Crossroads

PLY: Another flattish day with MCX up 1% and FTIL flat, although interesting both shares did not end up in worse positions due to the

MCX Contract Launch Calendar For 2015 Kept In Abeyance: FMC
LiveMint

FMC will not approve new contracts for trading on MCX and the contract launch calendar for 2015 will be kept in abeyance…

…The commodity market regulator also sought more clarity from MCX on the stake sale deal between FTIL, its promoter, and Kotak Bank.

PLY: As discussed elsewhere.

Technology

SZSE Chooses Kx For Trading Analytics In Financial Innovation
Mondo Visione

Kx Systems, a 20-year leader in high-performance database and time-series analytics, has been selected by the Laboratory for Financial Innovation at the Shenzhen SE (SZSE) in Shenzhen, China for trading analytics.

March Into New On-line Voting Era – Shenzhen Stock Exchange Optimized & Upgraded Online Voting System
Mondo Visione

Recently, Shenzhen SE (SZSE) released revised Shenzhen Stock Exchange Implementation Rules on Online Voting at the General Meeting of Listed Company (hereinafter referred as Implementation Rules) and Shenzhen Stock Exchange Business Guidance on Identification of the Investors’ Online Identity (hereinafter referred as Business Guidance), prioritizing and upgrading online voting system comprehensively.

MCI Releases Tts JSE Equity Market FIX Market Data Feed
IT Web

MCI Consultants, a primary solution provider within the financial markets since 1992, announced the release of its FIX* market data feed with the intention of providing low latency FIX data feeds to clients wanting to take South African equity market data in FIX format.

Thomson Reuters Is Said To Put Some Trade Publications Up For Sale
William Alden – New York Times

TMR is looking to sell a group of trade publications including peHUB, Buyouts and Venture Capital Journal, according to a report by peHUB on Monday.

PLY: I applaud PEHub reporting on its own possible ownership change – good evidence of independent spirit amongst the journalists!

Tabb Delivers ‘Clarity’ With Trade Data, Routing, Fill Rate Analytics (subscription)
Max Bowie – Waters Technology

Research firm Tabb Group has unveiled a new trade data and routing analysis service, dubbed Clarity, that will help market participants monitor and benchmark the impact on execution price performance of routing strategies for US equities trades that involve multiple trading venues.

Diliger Expands Procurement Platform Functions (subscription)
Giulia Lasagni – Waters Technology

Diliger, a London-based market startup data procurement platform, is adding new functionalities to its platform aimed at improving the procurement management cycle.

Cryptzone Acquires HiSoftware – Combined Company Offers Powerful Suite Of Dynamic Access Management, Data Security And Compliance Solutions
Mondo Visione

Cryptzone, a global provider of data security and identity and access management (IAM) solutions, has acquired HiSoftware Inc., a leading provider of governance, compliance and security solutions. HiSoftware’s product portfolio provides a highly complementary set of solutions that will enhance Cryptzone’s already robust capabilities in securing critical data in the cloud, on mobile devices, and in customer data centers.

EidoSearch Upgrades Predictive Front End (subscription)
Max Bowie – Waters Technology

Toronto-based predictive analytics provider EidoSearch has rolled out a new interface that makes it easier for end users to perform analytics on Big Data via a desktop browser or mobile device.

EidoSearch’s new release features expanded datasets for global equities and futures data, including historical data, new types of analytics developed based on millions of back-tests, and a more intuitive interface with improved custom page views, heatmaps and alerts.

Products

CFTC Keeping Tabs On LME Amid Aluminium Warehousing Crisis
Douwe Miedema – Reuters

U.S. commodities market regulator is still keeping tabs on the London Metal Exchange (LME) as the 137-year-old exchange tries to resolve an ongoing crisis over its warehousing policy that end users say has inflated prices and distorted supplies.

In an interview with Reuters, Timothy Massad, the newly installed chairman of CFTC said the regulator has been in touch with the LME as it prepares to launch a new aluminium contract in a bid to ease concerns that global aluminium pricing is broken.

ISDA Insight Survey: Derivatives Vital To End-Users, But Fragmentation A Concern
Mondo Visione

OTC derivatives continue to be an integral part of end-user risk management strategies, according to a survey published by the ISDA at its 2014 ISDA Annual North America Conference in New York.

An overwhelming majority of end-users intend to keep their use of derivatives at similar or higher to current levels over the last three months of the year. However, the survey shows that end-users are concerned about the impact of a lack of regulatory coordination, market fragmentation and increased costs of hedging.

IOSCO Updates Survey On Commodity Derivatives Markets Supervisory Principles
Mondo Visione

IOSCO issued the Update to Survey on the Principles for the Regulation and Supervision of Commodity Derivatives Markets, which updates its 2012 review of the implementation of IOSCO’s principles for commodity derivatives markets.

Consistent with the 2012 review of implementation of the IOSCO’s principles for commodity derivatives markets, the majority of respondents to IOSCO’s 2014 update were broadly compliant with the Principles. Where commodity derivative markets exist and market authorities were yet to be fully compliant, many of those market authorities had identified initiatives aimed at achieving full compliance over time.

US CFTC To Vote Sept 17 On Proposed Margin Rules For Uncleared Swaps
Reuters

The top U.S. derivatives regulator said on Tuesday his agency will convene a public meeting on Sept. 17 to consider proposed rules that will determine how much money, or margin, buyers and sellers must set aside when trading riskier, uncleared swaps.

CFTC Chairman Timothy Massad announced the meeting date at a hearing before the U.S. Senate Banking Committee. The meeting will come just a few weeks after the country’s top banking regulators released their own proposal for new rules requiring margin for uncleared swaps.

CFTC announcement here.

Career Paths

MV reported that ABN AMRO Clearing recruited Noel Singh for FX Product Manager, Mr Singh was previously Head of FX Prime Brokerage at SEB Merchant Bank AB & extensive experience in both FX products & Prime Brokerage.

Waters reported that CME hired former LSE executive Ross Stuart as Senior Director of Information Products Management, Stuart was most recently Business Development Manager for Real-Time Data at the LSE.

Crowdfund Insider reported that Blue Elephant Capital Management announced Brian Weinstein, a former Head of Fixed Income at BlackRock, joined their firm as a Managing Partner.

Financial Calendar

Today

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.

Tomorrow

LSE rights issue: trading in the nil paid rights commences. The rights issue terms are 3 for 11. The issue price is 1295p. The rights issue is expected to raise £938 mln in net proceeds and will result in an additional 74.3 mln shares outstanding.

Friday

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

New announcement

LSEG H1 Interim results ending 30 September 2014 on 13 November 2014

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

Share Notes

NASDAQ OMX EVP Thomas A. Wittman sold 13,590 shares at an average price of $43.05 (bargain $585,049.50) he now owns 47,077 shares.

MarketAxess Holdings Director Stephen P. Casper sold 1,500 shares Monday, September 8th. at an average price of $59.48 (bargain $89,220.00) he now owns 41,959 shares.

Analyst Notes

GFIG Is In Overbought Territory
Zacks

GFI Group (GFIG) has moved higher as of late, but there could definitely be trouble on the horizon for this company. That is because GFIG is now in overbought territory with an RSI value of 84.14.

PLY: Perhaps or it might go to the moon as the CME bids up.

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

CFTC Staff Issues Exemptive Letter Providing Relief From Certain Agency Regulations To Be Consistent With JOBS Act SEC Amendments
Mondo VIsione

CFTC Division of Swap Dealer and Intermediary Oversight (DSIO) issued an exemptive letter, which provides relief from certain provisions of Regulations 4.7(b) and 4.13(a)(3) restricting marketing to the public.

This exemptive letter harmonizes Regulations 4.7(b) and 4.13(a)(3) with Rule 506(c) of Regulation D and Rule 144A, which, as amended by the Securities and Exchange Commission (SEC) pursuant to the Jumpstart Our Business Startups Act (JOBS Act), permit general solicitation or advertising subject to specific conditions.

Crowdfunding Company Is Named As ‘New Radical’ For Changing Britain For The Better
Olivier Vergnault – Western Morning News

Cornwall-based Crowdfunder has been named as one of the 2014 ‘New Radicals’ by the UK’s innovation foundation, Nesta.

Other stories

IOSCO Reviews Implementation Of PRA Principles
Mondo Visione

IOSCO issued the report Implementation of the Principles for Oil Price Reporting Agencies (The ‘IOSCO Oil PRA Principles’), prepared in collaboration with the International Energy Association (IEA), International Energy Forum (IEF) and Organization of Petroleum Exporting Countries (OPEC). The report reviews the implementation of the IOSCO Oil PRA Principles during the 18 months after their publication in October 2012.

SEC’s White: Fiduciary Rule Important, But Dodd-Frank, JOBS Mandates Come First
Think Advisor

SEC Chairman Mary Jo White said Tuesday that she has asked the SEC to place a “high priority” on its fiduciary rulemaking options list, and that the regulator continues to give “serious consideration” to input received from stakeholders regarding a fiduciary rulemaking.

However, White said several times during her testimony before the Senate Banking Committee at a hearing titled “Wall Street Reform: Assessing and Enhancing the Financial Regulatory System,” that the SEC is “very focused on our mandated rulemakings under Dodd-Frank” and the Jumpstart Our Business Startups (JOBS) Act.

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