September 16 2013

elb2 Greetings from London this week. Today in ExchangeInvest:

CBOE has a freeze, CFTC on speed, NASDAQ has faith in Bob Greifeld, various regulatory delays and bottlenecks, ASX apparently hopes to be bought, welcome to 3 new SEFs, and all sorts of issues pertaining to metals…a busy day, happy scrolling:

Public Markets

CBOE Briefly Halts Trading On Two Exchanges

Trading on two of CBOE exchanges was halted for more than half an hour on Friday due to unidentified technical problems.

C2 electronic options exchange was halted for 47 minutes and for 33 minutes on the CBOE Stock Exchange.

PLY: Another worrying stoppage for markets, this time in both equities and options. Not sure what else to add, although I am still not signing up to the media’s apocalypse angle on electronic trading as a whole.

The CFTC Is Beating The SEC On Speed-Trading Rules

After the Flash Crash on May 6, 2010, SEC and CFTC, acted together and issued a joint report (pdf) dissecting how computer-driven trading caused stocks on the Dow Jones to plunge 9 percent in 20 minutes, temporarily vaporizing almost $1 trillion in market value.

Since then, CFTC has been far more aggressive —holding technology advisory committee meetings and sponsoring research into how speed traders affect market volatility. Its commissioners have also been much more vocal in discussing the problems related to HFT than their counterparts at the SEC.

PLY: Useful discussion of how CFTC have endeavoured to engage and resolve issues arising from the HFT revolution.

Nasdaq CEO Greifeld Maintains Board Support (subscription)
The Wall Street Journal

Nasdaq OMX CEO Bob Greifeld maintains the support of the company’s directors.

PLY: As mentioned before, the board of NASDAQ do not strike me as a group likely to rapidly oust Bob Greifeld and the recent electronic glitches reflect the creaking Reg NMS system as much, if not more than, any failings at NASDAQ.

Will Nasdaq Lose The Twitter IPO Thanks To Its Systems Glitches?
Traders Magazine

PLY: Understand social media in a single tweet: That groundbreaking Twitter IPO announcement had 7,500 retweets. Justin Bieber saying hi was retweeted 75,000 times…

Clearly the NASDAQ glitch with the Facebook IPO has a serious overhang and NYX will be keen to exploit it given the roll they have been on this year in converting NASDAQ stocks to the “Big Board.”

LME China Expansion May Include Joint Ventures, CEO Abbott Says

Outgoing CEO Abbott discusses how essentially any possible approach is on the table for HKEX’s LME expansion in China.

LME Critics Push For Transparency
The Wall Street Journal

PLY: Alcoa is voluble on one side opposite to the users, the battle for LME transparency is on and LME has never really done transparency. Developing…

Coalition Augurs Well For Merger: ASX Chief
The Australian

In 2011, the Labor government rejected Singapore Exchange’s $8.4 billion bid for ASX on the basis that it was not in Australia’s national interest.

“I’d like to think, and maybe I’m a bit naive, that we can have a good conversation with any government about the merits of (any) kind of moves to consolidate,” said Funke Kupper, adding a caveat that the company was not currently in any talks.

Turning to technology, Funke Kupper said: “I think there’s no escape for technology-driven businesses, we can’t rest on our laurels and can’t be happy with the way things work,” he said.

“Saying we haven’t had an issue is a statement of the past, not the future, so we must remain vigilant.”

PLY: More evidence that EFK’s ‘national monopoly’ push is to help sell ASX. Wonder if he has a direct incentive to do so? A disappointingly defeatist approach for a once innovative marketplace. Hopefully the new Liberal administration will be freeing up the markets for open competition, not hindering it…

TMX Announces Credit Rating

TMX has received an issuer credit rating of A (high) from DBRS Ltd in anticipation of TMX Group’s intention to refinance a portion of its long term debt. In addition, TMX has received commitments from its lenders that upon the completion of a successful debt offering, the existing credit agreement will be amended on more favourable terms.

Private Markets

Europe Pushes Back OTC Derivatives Trade Reporting Deadline (subscription)
Financial Times

European regulators have pushed back plans requiring OTC derivatives users to report their trades from late September to November 7th meaning mandatory reporting is unlikely to begin until at least February and not Jan 1, 2014.

Esma added that the first authorisations of clearing houses under new rules would not take place before October 15.

PLY: Now we have regulatory concerns on data fragmentation – albeit over their rules. At the same time, ESMA are clearly pushed with so many deadlines looming as simply too many EU rules are coming onstream at the same time to be manageable within the very finite resources of Europe’s regulators.

Regulator May Delay Swaps Trading Platform Compliance

PLY: …and the same goes for the USA. Now SEF deadlines may be delayed given the many platforms being established.

CFTC Issues Notices Of Temporary SEF Registration To SwapEx, GFI Swaps Exchange & Market Axess SEF

CFTC has approved the applications of SwapEx, GFI Swaps Exchange and MarketAxess SEF for temporary registration as SEFs.

We make it 10 applicants with 5 approved so far by CFTC…

Online Peer-To-Peer Lender Eyes LSE Listing (subscription)
Financial Times

PLY: Fascinating development as P2P/social lending platforms have opened the model from their original individual peer lenders only basis, to allowing corporate vehicles. This is a huge area for development in terms of providing platforms and debt capital as banks are increasingly disintermediated from the lending business.

NSE, BSE Seek Registration With ESMA

India’s two leading bourses NSE and BSE have applied for registration with European Securities and Markets Authority (ESMA), capital market regulator for the EU region, according to sources.

Mt. Gox Responds To CoinLab Lawsuit With $5.5M In Counterclaims

On Tuesday, Mt. Gox filed a response to the lawsuit brought against them by CoinLab. The two companies planned to work together as providers of bitcoin exchange services, but both parties have ultimately claimed a breach of contract by the other. We were first alerted of the latest filing here.

Macedonia: Challenges Remain In Frontier Market (subscription)
Financial Times

PLY: Profile of Macedonia SE as part of a nation profile in FT.

Special Section: FTI, NSEL, India at the Crossroads

PLY: The warehouse stores are worth about 58 million USD and not 381 as previously suggested by NSEL. A general day of noose tightening while there is considerable speculation driven by the small investors body of NSEL that Jignesh Shah is close to selling a significant stake in FTI…

Meanwhile MCX shares have fallen limit don (5%) while FTI is also 5% lower today.

Mumbai Police Probes Jignesh Shah
Hindustan Times
SIT Report On NSEL Payment Crisis Probe By Wednesday
Business Standard

The Special Investigation Team (SIT) set up by the Economic Offences Wing of the Mumbai Police has found substance in the complaints of cheating, fraud and forgery in the NSEL crisis.

NSEL Cowboys Played The Music Till End, Reveals Anjani Sinha’s Testimony
The Economic Times

The cowboys of the scam hit NSEL, like B Ramalinga Raju of Satyam Computer Services, were riding a tiger “not knowing how to get off”.

While fully aware that large borrowers had stopped paying, they suppressed information on defaults and vanishing stocks, because a single default would have brought down the house of cards, it appears from a statement made by NSEL’s former CEO.

They cooked the books, cut deals with one borrower to plug the gap caused by another, rolled over positions that ballooned every month, and even pleaded with a borrower to not stop trading in order to keep the music going.

In a testimony to investigating authorities last week, Anjani Sinha, the ex-CEO of the exchange, admitted to various mistakes and alleged that dubious practices by some colleagues precipitated the crisis, sources told ET.

His admission, which will be independently verified by regulatory and probe agencies, is reminiscent of the confession letter that Raju, the disgraced chief of Satyam, wrote in January 2009 to admit fraud that led to the downfall of one of India’s top software firms.

NSEL Warehouses Stocks Worth Only Rs 358 Crore (USD 57.1 Mln)

FMC, on Friday said 16 NSEL warehouses had stocks worth only Rs.358 crore (USD 57.1 mln) and not Rs.2,389.36 crore (USD 381.13 mln) as the company claimed.

FMC To Move This Week On MCX ‘Fit & Proper’ Test
The Economic Times

All eyes are now on Forward Markets Commission (FMC). What it says will sway the fortunes of Jignesh Shah and his boys. The verdict from FMC, the commodity market regulator, will determine whether Shah will face a new battle to save his empire or salvage it by putting the blame on a few managers.

PLY: It will be fascinating to see what FMC do and the rationale given behind their actions..

Jignesh Shah Planning To Sell Stake, Says NSEL Investor Forum
The Financial Express

NSEL Investor Forum believes Jignesh Shah is at an advanced stage of discussions to sell a significant part of his 48% stake in FTIL.

Investors Await NSEL Bullion Delivery
The Times of India

NSEL did not share the details of the deliveries made so far but admitted that there was a backlog in clearing e-series dues as there was heavy redemption pressure but added that there were no issues with the stocks, which had been audited. “The redemption pressure is as high as 1,200 redemption requests a day, as against 10 such requests earlier… Investors used to trade the e-series units in the market but after the market closed they have to convert to physical stock.

Panel Of Secretaries On NSEL To Meet On September 18
The Financial Express

A panel of secretaries, headed by Economic Affairs Secretary Arvind Mayaram, is likely to meet on September 18 to review developments at payment crisis-hit NSEL.

“The review meeting on NSEL is scheduled for September 18 when the reports of the two working groups would be considered,” a finance ministry official said.

Panels May Suggest Bringing All Exchanges Under Single Regulator

The two committees appointed by the government to examine possible violations by NSEL and suggest measures to plug loopholes may recommend bringing all exchanges under a single regulatory body and not permitting stand-alone spot exchanges to operate.

MCX Stock Exchange Director Ashok Jha Quits Board
The Times of India

Ashok Jha, who is one of the four shareholder directors at MCX Stock Exchange, has decided to step down from the board.

“I have decided that it’s time to pursue things that one always wanted to and by next year I won’t be involved with more than a couple of companies. It has nothing to do with NSEL, which is a completely separate entity and I had nothing to do with it,” Jha said, adding that he had also resigned from the board of an asset management company where he was a director.

Uncertainty Over Joseph Massey’s Tenure As MCX-SX Chief
The Economic Times

Can Joseph Massey continue to be the chief of the MCX Stock Exchange? The question cropped up a day after capital markets regulator Sebi said its recognition of the bourse was incumbent upon key management personnel like its MD being in compliance with the Stock Exchanges & Clearing Corporations (SECC) Regulations 2012.

Who Are IBMA’s Clients, Apart From Sahara Q Shop?

Indian Bullion Markets Association-IBMA, indirectly owned by FTI, is the biggest member-creditor in the NSEL system. Who were IBMA’s clients? The biggest was Sahara Q Shop (19%) followed by a large number of commodity brokers like KR Choksey Commodity, Almondz Commodities and Capital First Commodities etc.

IBMA, promoted by Jignesh Shah-led Financial Technologies (India) Ltd, is supposed to receive a whopping Rs 1,170 crore (USD 186.63 mln) in settlement from NSEL. While we wrote about the complete list of NSEL members, nothing much was known about IBMA clients.

The members of IBMA are some of the top names in commodities market and include Sahara Q Shop Unique Products Range Ltd, KR Choksey Commodity Brokers and Almondz Commodities to name a few.

NSEL Case Put On Fast-Track
Business Standard

More speed is expected in addressing the NSEL crisis as FMC oversight moves to within the Finance Ministry portfolio making action easier to coordinate.

Govt Seeks RoC Report On NSEL Matter
Business Standard

The Corporate Affairs Ministry has sought a report from the Registrar of Companies (RoC), Mumbai on NSEL, which is engulfed in a major payment crisis involving over Rs 5,500 crore (USD 877.33 mln).

Mutual Funds Square Off Their Entire Holding In FTI
Business Standard

PLY: Discusses mutual fund holders of FTI…

Investors Hit Social Media To Take On NSEL Brokers

The troubled investors in NSEL, desperate to regain their investments from the commodity exchange, have taken to social networks to vent their ire against brokers on whom they were relying for their transactions.

PLY: As can be seen from messages to my personal Twitter feed @FrontierFinance and @ExchangeInvest…

India Commodity Regulator Moves To Strengthen Corporate Governance Of Exchanges

India’s commodity regulator has moved to strengthen corporate governance of commodity exchanges by issuing guidelines to restrict board representation by promoter members.

An exchange promoter cannot have board representation higher than their total shareholding, capped at 26 percent at the end of the fifth year of operation.


Calypso Technology Opens Office In Dubai

Calypso Technology Inc. , the leading integrated capital markets platform provider, announced that they have opened an office in the Dubai International Financial Centre.


China’s Dalian Exchange Gets Approval For Iron Ore Futures

Dalian Commodity Exchange has received regulatory approval to launch China’s first iron ore futures and hopes to launch by year end.

Dalian’s iron ore futures will be the world’s first physically-backed derivatives contract, making it a strong competitor against the cash-settled iron ore swaps contracts cleared by the Singapore Exchange and CME.

The China Securities Regulatory Commission (CSRC) said on Friday that it had given approval for the launch.

FMC Asks MCX, NCDEX To Probe Guar Futures Price Movement
The Hindu Business Line

Commodities market regulator FMC has asked MCX and NCDEX to probe the volatility in guar futures prices and submit a report within 15 days after prices rose 85% in the past month.

CFTC Certifies Euronext Indexes

The AEX- Index mini futures contract and the CAC40 Index mini futures may be offered or sold to persons in the U.S. including through direct access terminals in the U.S.

Financial Calendar


Record date NYSE Euronext for $0.30 Q2 dividend

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

Share Notes

IntercontinentalExchange Insider Charles Vice sold 2,000 shares Wednesday, September 11th at an average price of $180.94 (bargain $361,880.00). He now owns 42,718 shares.

IntercontinentalExchange SVP Johnathan Short sold 3,089 shares Wednesday, September 11th at an average price of $181.19 (bargain $559,695.91). He now owns 12,644 shares..

IntercontinentalExchange SVP Edwin Marcial sold 3,279 shares Thursday, September 12th at an average price of $181.21 (bargain $594,187.59). He now owns 20,689 shares.


PayPal Pledges To Overhaul Approach To Crowdfunding

PayPal last week promised to review how it handles crowdfunding efforts after several projects had their funding frozen by the online payment service.

In a blog post, PayPal said that crowd-funding campaigns – made popular in the past year or two by services like Kickstarter and Indiegogo – are a new concept and therefore “potentially open to abuse.”

“PayPal has a responsibility to ensure that the system remains secure, in compliance with government regulations around the world, and that consumers who contribute to these campaigns understand where their money is going,” wrote Tomer Barel, vice president of risk management at PayPal.

The company is not opposed to helping crowdfunding projects. “When done right, crowdfunding is a powerful catalyst for innovation,” Barel wrote. “However, it’s clear that our existing policies and processes aren’t working quite right for this particular fundraising model.”

Other stories

Fines For Derivatives Reporting Failures (subscription)
Financial News

Brokers and asset managers face heavy fines if they fail to report derivatives trades correctly, but meeting new rules is a struggle for many.

Under the Dodd-Frank Act in the US and European and Markets Infrastructure Regulation, information on derivatives trades must be reported to trade repositories. However, they do not store this information centrally and so they must pull it together by connecting multiple systems or install a new, single platform.

Africa Exchange Holdings, FG Sign MOU On Commodity Exchange
Business Day

Africa Exchange Holdings (AFEX), has signed an MoU with Nigeria’s Federal Ministry of Agriculture to create a pioneering warehouse receipt system that would enable Nigerian farmers and cooperatives to store their produce at accredited warehouses.

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