September 11 2015

 elb2Fourteen years in many ways does not dull the pain felt acutely in our industry and broadly across civilisation at the attacks of 09/11. There are many still suffering the legacy of those terrorist acts. All victims remain in our thoughts today.


In Exchange Invest Daily: The Father of financial futures, Doc Sandor is back in the exchange business – hooray! First Bitcoin futures market regulated by CFTC. Outsider nominated as Euronext CEO. Turret merger on horizon? CMU still looks gorgeous – particularly so against the ugly summer of failure from the EU overall. Indian IEX stake sale, BIST Chairman endorses finance of Islam for the world, and much more…

Don’t forget to register for Burgenstock, kicking off with my Crossfire panel returning with a satrt studded line up including NSE CEO Chitra Ramkrishna, CME CEO Phupinder Gill, ICE Europe boss David Peniket, NASDAQ Europe boss Magnus Billing and former SwX exchange CEO & FESE President Christian Katz.

A last word too on Young Markets, my conference on the future of finance in Warsaw September 17th (next Thursday). In addition to the main programme at the Westin Hotel, on 17th, there will be a workshop at the Warsaw Stock Exchange next Tuesday afternoon led by the Polish Academy of Sciences CIAMSE Division discussing HFT… email me for more details, or register here.

…Finally, somewhere between our markets & ‘the big world out there’, a thought for the day: With Russia & Brazil both now ‘junk’ status – will some fund manager start extolling the virtues of the “ICS?” – or is the acronym headed for the remarkably binary “IS?”

Public Markets

Stephane Boujnah Nominated As CEO Of Euronext

PLY: Euronext has proven a good management team. The board seems to be the worry. This appears a sound hire in terms of management experience, albeit I am never quite convinced the conceit of a banker running an exchange is as smooth as many perceive (not if you want top performance, anyway). However, the worry, as outlined in a timely note by Peter Lenardos of RBC last night is the stress on the system that some of the key senior management team may seek to leave…

Euronext has done miraculously well in the wake of the NYSE debacle, I sincerely hope Mr Boujnah can keep the momentum rolling forward and wish him every success.

Environmental Financial Products (EFP) & CBOE Announce New Interbank Lending Exchange and Interest Rate Benchmark

CBOE, Northern Trust & Sandor Team On New Financial Exchange
Lynne Marek – Crain’s Chicago Business

Financial futures guru Richard Sandor has a history of popping out big ideas, and he’s got another one. With backing from CBOE, Sandor announced the creation of the American Financial Exchange, an electronic marketplace where small and midsized banks—mainly those with about $1 billion to $50 billion in assets—will be able to lend and borrow short-term funds.

The aim of the exchange is to give the hundreds of smaller banks across the country more access to those types of funds in a transparent marketplace, said Sandor, who will serve as the new Chicago-based company’s Chairman & CEO. “It’s going to turn Chicago into a banking center like it once was,” Sandor predicted.

PLY: A new exchange is always grounds for joy. To have a new exchange created by the industry’s genius emeritus, Richard Sandor is a bounteous joy! A fascinating and useful idea which brings the best of derivatives practice to the real economy. I wish the venture every success.

Losses Mount For Nasdaq’s London Problem Child (subscription)
Tim Cave – Financial News

The European derivatives exchange launched by Nasdaq in 2013 continued to struggle last year, with losses since inception totalling well over half of its parent’s near-£60 million investment.

PLY: NLX has bought old partners out and is now ‘head to head’ with LSE’s “Rita” for members. That doesn’t make life easier for either platform and I remain sceptical about their longevity. However, management are still pushing, that dogged persistence may yet succeed. NLX right now is out of the money but with no sign of an expiration date. At least the burn rate is significantly lower than it once was. (For the history, QV our Premium NLX Brief).

Garry Jones: Looking At Strengthening Our Ties With The Indian Market
Rajesh Bhayani  – Business Standard

CFTC Approves Final Regulation Requiring All Registered IBs & CPOs, & Certain Registered CTAs To Be Members Of A Registered Futures Association

PLY: A good day for the NFA monopoly, will we see competition in the “RFA”  space?

Private Markets

TVS Capital Buys 3% Stake In IEX From Bessemer Venture For Rs 75 Crore (USD 11.3 Mln)
Sneha Shah & Madhav Chanchani – The Economic Times

Even as the Multiples PE led consortium is trying to buy a 24% stake in Indian Energy Exchange (IEX) from Jignesh Shah’s FTIL, TVS Capital has bought 3% stake from Bessemer Venture Partners for Rs 75 crore (USD 11.3 mln), valuing the company at Rs 2,500 crore (USD 377 mln). Bessemer will make a 7 times return on the investment with this exit (it invested in the company in 2010 when the company was valued at Rs 350 crore (USD 76 mln)).

FAO: In June FTIL signed an agreement for the sale of 16.6% stake for Rs.357.06 crore (USD 56 mln), valuing the exchange at around USD 337 mln. After the deal, FTIL will retain 9.4% of IEX – although it is under an order to discard all its holding.

Read our Premium Exchange Deals Brief Part 1, Part 2, IEX India Sale and FTIL Stakes Sales Brief.

BIST Chairman Says All Stocks Exchanges Should Be Run In Islamic Way
Hurriyet Daily News

The chairman of Borsa Istanbul (BIST), Talat Ulussever, said the term “Islamic finance” should be changed to “Finance of Islam,” as income inequality problem could be solved through an interest-free Islamic finance model that will pave the way for creating a more prosperous and equal world for everyone.

PLY: A somewhat thought provoking perspective.

In Moneylife Ruling, Judge Accuses NSE Of Arrogance
Ami Shah – Livemint

When the Bombay high court ruled against the National SE (NSE) in a defamation case it filed against financial news website Moneylife and its founders, the court noted that the NSE had failed to respond to enquiries the defendants made before publishing an article on alleged wrongdoing at the bourse.

CFTC Issues Order of Temporary Registration As A SEF To LedgerX LLC

PLY: Big news: LedgerX becomes the first BTC futures market regulated by the CFTC (rem: advisors to the project include former Chairman Jim Newsome – who was later CEO of NYMEX and oversaw the takeover by CME).

Bitcoin Venture Capital Markets Heating Up As Five Bitcoin Startups Raise $45 Million
Joseph Young – Bitcoin Magazine

This week, five Bitcoin startups, including Chronicled, Chain, Abra, Case and Coinalytics, have raised more than $45 million in funding…

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX is flat, 63 Moons (FTIL) continues its remarkable run of late with gains of 9% today.


IPC & Etrali Announce Potential Combination

IPC Systems made a binding proposal to combine the businesses of IPC and Etrali Trading Solutions.

PLY: Turrets, still with us, oozing into other areas but in a sort of headline decline with some potential. Bringing together IPC and eTrali may be merging blacksmiths in the eye of the Ford Model T but if a polished single unit can be created, there is an interesting play.

Blythe Masters Says US Lags In Blockchain Use (subscription)
Kadhim Shubber & Philip Stafford – Financial Times

Blythe Masters, has cautioned that the US is likely to lag behind other countries in using the technology underpinning the cryptocurrency bitcoin to modernise their securities markets.

PLY: Vertical silos better placed to innovate as opposed to old line mutuals like DTCC is part of the Masters’ argument…raising the question just why some regulators, politicians et al are so eager to destroy the more innovative for profit ecosystem at the heart of free markets…


LME Says In Talks On Launch Of Precious Metals Derivatives
Karen Rebelo – Reuters

LME is in talks with the gold industry with a view to launching precious metals derivatives. Talks would include the London Bullion Market Association (LMBA) and the World Gold Council.

PLY: The World Gold Council is believed to be pursuing its own exchange plan since April when reports surfaced of discussions with banks while LBMA commissioned an Ernst & Young study on how to develop an exchange (some headlines were published but the study has remained opaquely unpublished despite our requests).

Like It Or Not, China’s Crude Oil Futures Will Be A Global Benchmark
Henning Gloystein – Reuters

A derivatives contract would give the Shanghai International Energy Exchange, known as INE, a slice of an oil futures market worth trillions of dollars, offering a rival to London’s Brent and U.S. West Texas Intermediate (WTI).

PLY: Roger that.

Read our Premium China Capital Markets Transformation – Commodities Trading & Warehousing Brief Part 4.

Citadel Pushes Into European Swaps Market (subscription)
Dan McCrum & Joe Rennison – Financial Times

Citadel Securities has launched a European fixed-income market-making business.

FX: Debate On Last Look Continues To Rage
Paul Golden – Euromoney

Regulators might be suspicious of it, but even market participants who have shifted their stance on ‘last look’ reckon clients should be allowed to make up their own minds.

PLY: ‘Last look’ remains a ludicrous impediment to a fair market and will ultimately be wiped out as/when more platforms adopt a more open approach to the world of trading, as opposed to subsidising banks to pick and choose their business. Encouraging client choice is a good start and proscription usually backfires anyway.

LME Clear Receives BoE Approval To Accept Warrants As Collateral


Turkish Derivatives Launch On LSE Derivatives Market

LSE Derivatives Market launches trading in BIST 30 Index futures and options denominated in Turkish Lira, cleared by LCH.Clearnet. The launch follows a partnership agreement signed between LSE and BIST earlier this year and of course BIST buying a stake in LCH.Clearnet.

Shanghai SE, Shenzhen SE, China Financial Futures Exchange: Notice Of Soliciting Opinions On Regulations Of Circuit Breaker Mechanism For Index

Career Paths

Euronext’s Supervisory Board has unanimously approved Stéphane Boujnah as CEO of Euronext N.V. and Chairman of the Managing Board.

Stéphane Boujnah joins Euronext (from November after an EGM to validate his position & regulatory approval) from Santander Global Banking and Markets where he has held the position of Head of Continental Europe since June 2014. In the meanwhile interim CEO  Jos Dijsselhof remains in situ.

Canaccord Genuity appointed Mark Iannotti as MD and Head of Securities, UK & Europe, effective September 29, 2015.

SEC named Robert Cohen and Joseph Sansone as co-chiefs of the Division of Enforcement’s Market Abuse Unit, a national specialized unit that focuses on complex insider trading rings and other abusive trading schemes and misconduct.  

CFTC Chairman Timothy Massad announced that Eric J. Pan will be the agency’s new Director of the Office of International Affairs. Mr. Pan will join the CFTC from SEC, where he serves as the Associate Director for Regulatory Policy in its Office of International Affairs.

At the AGM of the Investment Industry Regulatory Organization of Canada (IIROC) member firms elected and re-elected individuals to the IIROC Board of Directors.

IIROC’s Board is comprised of 15 Directors, including IIROC’s President & CEO Andrew Kriegler, with an even number of Independent and Industry (Marketplace or Dealer Member) Directors. Two of the seven Industry Directors represent marketplaces and five of the seven represent dealer members.

At the 2015 AGM, six Directors were elected/re-elected to serve on the Board for a two-year term:

Mike Gagné (Vice Chairman), Brian Heidecker  (Independent Directors)

Rita Achrekar (newly elected), Luc Bachand, Holly Benson (Dealer Directors)

Nicholas Thadaney (newly elected) (Marketplace Director)

Eight Directors will continue to serve the second year of their two-year terms:

James Donegan, Marianne Harris (Chairman), Edward Iacobucci, Gerry J. O’Mahoney, Catherine Smith (Independent Directors)

Paul Allison, Jean-Paul Bachellerie (Dealer Directors)

Tal Cohen (Marketplace Director)

At the Board meeting held on September 10, 2015, the Board re-elected Marianne Harris and Mike Gagné to serve respectively as Chairman and Vice Chairman.

Chaiyawat Tipped To Be SET Chairman
Nuntawun Polkuamdee – Bangkok Post

Former Bank of Thailand governor Chaiyawat Wibulswasdi is tipped to replace Sathit Limpongpan as Chairman of Stock Exchange of Thailand (SET).

Deputy finance permanent secretary Naris Chaiyasoot is expected to take over as Chairman of SEC.  

Mr Chaiyawat will be appointed to the SET’s board of governors this month to replace one of the two governors, Mr Sathit and Suthichai Chitvanich, whose terms end this month.

Independent Directors Of MCX Get Pay Hikes Of Up To 200%
N Sundaresha Subramanian – Business Standard

PLY: The ranges here are circa $33k for the former Chairman through to $16-$18K for the NEDs. Given the relative income gap, it has to be said a non-executive career in India looks a lot more enticing than, say UK MTFs (NLX NEDs seem to get a paltry 20k GBP ($30K) each which strikes me as one of the worst risk rewards in history – at least, presumably NASDAQ pays them in good time).

Financial Calendar

11.09 – Record date Nasdaq $0.25 quarterly dividend

11.09 – BME €0.4 first interim dividend payment

Next week

14.09 – Interactive Brokers $0.10 quarterly dividend payment

15.09 – Thomson Reuters $0.335 quarterly dividend payment

16.09 – Record date ICE $0.75 Q3 2015 dividend

16.09 – NZX 3.0 cents interim dividend payment

18.09 – CBOE $0.23 quarterly cash dividend payment

New announcement – CME Q3 2015 Results – Thursday, October 29, 2015.

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

Share Notes

Interactive Brokers insider Thomas A.J.Frank sold 12,826 shares Wednesday, September 9th at $38.35 (bargain $491,877.10).

Interactive Brokers Vice Chairman Earl H. Nemser sold 2,565 shares Wednesday, September 9th at $38.35 (bargain $98,367.75).


Orchard Platform Raises $30M – Marketplace Lending Remains On Fire
Ron Finberg – Finance Magnates

Hangzhou-based P2P Lending Platform Weidai Nabs US$24M In Series B, Led by Hakim Co.
Erin Hobey – Crowdfund Insider

Other stories

European Commission – Speech – CMU: Vital For Growth

Five Takeaways From The Draft CMU Action Plan (subscription)
James Rundle & Tim Burke – Financial News

CMU draft plan offers a glimpse into the next phase of the much-mooted idea to create a unified capital markets regime across all 28 member states.

PLY: It still looks so beautiful and while I think Lord Hill is a pro free market Commissioner, alas (existential crises asides which threaten the EU’s very existence), the natural inclination towards the corporate socialist blob remains the threat here and that innovation will be stifled, as the EU’s suicidally anti-commerce policies on VAT have shown, having destroyed thousands of initiatives this year already). QV Premium The Beauty of Capital Market Union and EU CMU Brief.


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