September 20 2013

elb2 A balletic Moscow buyback, Vienna waltzes out of derivatives, S&P gets techno cranky, Greifeld succession tango, Brazilian regulatory rumba, Spanish CCP flamenco and Gary Gensler/LIBOR (which defies any further dance metaphors).

Last day in London; before I depart after a great week:

Cinnober promoted Umea’s incoming Capital of Culture status with a most elegant soiree. Meanwhile BCS officially launched in London with a masterful demonstration of their HFT capacity espoused by the waiters pouring champagne with ULL gusto. Great evenings, thanks to you both.

Today EI is blessed with some fascinating stories, useful granular reading to make you wiser at the water cooler:

Public Markets

S&P Warns Stock Exchanges: Clean Up Your Technology Glitches

S&P has just released a very interesting report with a pointed warning to US bourses: exchanges that have significantly more technical problems than others could lose market share as investors lose confidence in the exchange.

“as technical problems occur more frequently, operational risk is becoming a more important component in our analysis and could result in downward pressure on ratings over the next few years.”

PLY: Well, I suppose the positive spin is to note that at least here a ratings agency is trying to join a much-hyped bandwagon which might not actually involve curve fitting risks to a formula to encourage investment, for once. Seriously, the idea of making it a pure ratings issue has all manner of ramifications and I am not sure this has really been thought through as one man’s glitch is hardly another’s ‘flash crash?’

Inside Nasdaq’s Succession Planning Process
The Malaysian Insider

A recurring question gnaws at the NASDAQ board: If CEO Bob Greifeld were to leave, who would step into his shoes?

PLY: Interesting speculation: do a deal with LSE and inject former investment banker Xavier Rolet as unified CEO while there is apparently at last confirmation of specific succession planning. Certainly NASDAQ needs a new broom.

Rival Exchanges Struggle For Access To Brazil (subscription)
Financial Times

PLY: BM&F seem comfortable to deploy any argument they can to convince their regulators to keep competition out of Brazil.

Moscow Exchange Announces Results Of Supervisory Board Meeting

PLY: In a week when BCS, the powerhouse broker cum investment bank you may not have heard of, launched in London with a wondrous soiree, Moscow Exchange continues its development.

There’s a buy-back, a Supervisory Board reduction to 15 from 19, and progress in increasing the stake in the grain-based platform National Mercantile Exchange (NME) where MOEX already 36.51% of NME. Good progress.

OMIClear Joins Interbolsa
NYSE Euronext

The Iberian Energy Clearing House is now an Interbolsa Special Participant.

PLY: Following on from SIBEX yesterday, smaller clearinghouses rush to cuddle up to larger entities to become EMIR compliant.

CFTC’s Gensler Says Libor Overhaul Will Take Time

Gary Gensler has stepped back from previous calls to scrap Libor, saying instead that reform needed to be led at a global level and would take time.

PLY: The fact that a leading former Goldman Sachs executive turned regulator could make such odd statements as killing LIBOR overnight always struck me as an unedifying low in the Gensler regime.

Tech Questions Loom After Major Exchanges Tie The Knot

PLY: A journalistic “he says, she says…” trade publication article with comments about IT post bourse merger…

Private Markets

Vienna SE Throws In Towel On Derivatives

The Vienna SE has decided to halt trading in derivatives from March, throwing in the towel in the face of overpowering competition from Eurex.

Options and futures on Austrian shares have been traded on the Eurex exchange in Frankfurt since 2006, it said in a terse statement after a supervisory board meeting.

PLY: A spectacular fail from the Vienna bourse. The inability of manage to rationalise that placing their entire business on the Xetra platform would result in their derivatives liquidity draining to Frankfurt demonstrates a lethal cocktail of hubris and ignorance. Vienna is increasingly a flat cash enterprise in a derivatives world; a franchise without sustainable business model. Frankly even co-operating assiduously with Vienna (unless they can engineer a ‘predator partnership’ a la CME) can damage the Warsaw SE brand, let alone the horrors of a merger…

TeraExchange Receives Temporary Registration as a SEF
Temporary Registration Of Javelin SEF, LLC And BGC Derivative Markets, L.P.

TeraExchange, Javelin SEF, LLC (Javelin) and BGC Derivative Markets, L.P. (BGC) have received temporary registration from the CFTC to operate SEFs.

PLY: Currently 8 of 13 publicly known applications have been approved although we expect another surge of applicants to create at least 20 SEFs.

SIX Acquiring Austrian Card Provider PayLife

SIX, which operates the infrastructure underpinning the Swiss financial sector, is acquiring PayLife GmbH, the Austrian market leader in the field of cashless payment, from a group of Austrian banks.

PLY: Not quite traded markets but card payments are good businesses for integrated exchange businesses and in Europe the infrastructure of pure finance is, at best, Dickensian. Unifying card finance can be a big help to small and large business from east to west plus fees and margins are fat and in need of innovation.

Special Section: FTI, NSEL, India at the Crossroads

MCX rallying 3.5% while FTI is down a similar amount today. It’s another day of noose tightening around Jignesh and the boys while there is interesting analysis of open interest moves and a shrinkage of the MCX board’s FTI representatives to meet FMC requirements.

MCX Says 3 Officials Cease To Be Directors As Per New FMC Norms

Complying with the latest norms from FMC on appointment of exchanges board composition, MCX said only one official is eligible to remain as director

Venkat Chary, C M Maniar and Shvetal Vakil will cease to be MCX directors with effect from August 31 but
Joseph Massey will remain (although at the AGM he is retiring and offering himself for reappointment).

PLY: Unsurprising that Massey remains as Shah’s trusted ‘executive’ on the board.

CBI Verifying Facts In NSEL Case
The Economic Times

CBI is verifying facts in connection with a complaint of duping of investors by NSEL which is already under scanner of SEBI and Enforcement Directorate.

Open Interest On MCX, MCX-SX Takes A Nosedive

PLY: A useful study: investors are moving Open Interest away from MCX. That ought to help NCDEX (shareholders include ICE) to regain market share having been roundly thrashed by MCX in recent years. MCX under new ownership may bounce back of course.

Govt May Consider Sebi-Like Regulations For Commodities Market
The Economic Times

As a multi-agency probe continues into the Rs 5,600-crore (USD 901.6 mln) payment crisis at NSEL, the government may consider streamlining the norms for commodities and capital markets, regulated by FMC and Sebi, respectively, to plug potential regulatory gaps.

The idea is to make the regulations governing commodity derivatives markets much more stringent and bring them at par with the norms applicable for Sebi-regulated capital markets.

PLY: Sounds like a good intention but probably the end result will be perplexingly overly prescriptive and stifle innovation…


Launch of NYSE® Diversified High Income Index
NYSE Euronext

NYSE® Diversified High Income Index (NYDVHI), is a new instrument designed to measure the performance of a broad, diversified basket of 138 publicly-traded securities that provide exposure to multiple asset classes, sectors and segments that historically pay high dividends on distributions.

Financial Calendar


CBOE $0.18 Q2 dividend payment

Next week


ASX AUD 82.3 cents full-year final dividend for the year ended 30 June 2013 payment
CME $0.45 Q3 dividend payment
Financial Technologies India AGM
Hellenic Exchanges ex-dividend date for special dividend of EUR 0.03 (share capital return)
Record date Moscow Exchange EGM on 14.11.2013


NASDAQ OMX $0.13 Q2 dividend payment
Record date Hellenic Exchanges for EUR 0.03 special dividend (share capital return)


CME Europe Ltd. Launch Date

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

Share Notes

Following his sale of 5,000 shares Monday, August 12th at an average of $3.96, (bargain $19,800.00) reported on August 16 and the sale of 49,700 shares Monday, September 16th at an average price of $4.06 (bargain $201,782.00) reported on September 18 GFI Group EVP J Christopher Giancarlo sold another 62,300 shares Wednesday, September 18th at an average price of $4.06 (bargain $252,938.00. He now owns 13,995 shares.

Analyst Notes

Stifel Nicolaus lifted their target price on ICE from $185.00 to $195.00 – “Buy” rating
ICE “Buy” rating reiterated at UBS AG – $215.00 price objective

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.


What You Need To Know About The New Equity-Crowdfunding Model

Until now, crowdfunding has come from backers who donate money with no expectation of a financial return, but that’s about to change. The JOBS Act, which offers the first changes to securities law in more than 80 years, enables a new equity-crowdfunding model that allows backers to buy shares in posted ventures.

Under the new law, a company seeking money from “the crowd” may sell up to $1 million in securities in any 12-month period to an unlimited number of investors via a Securities and Exchange Commission-approved crowdfunding platform. Although right now, only accredited investors can purchase these securities, the general public will have the same opportunity when the SEC implements its new “Crowdfund Investing” rules in 2014.

PLY: A brief primer lest you may have forgotten…

Other stories

JP Morgan Chase&Co. To Pay $200 Million For Oversight, Management, And Controls Deficiencies

The Federal Reserve Board on Thursday announced that JPMorgan Chase & Co., New York, New York (JPMC), a registered bank holding company, will pay a $200 million penalty for deficiencies in the bank holding company’s oversight, management, and controls governing its Chief Investment Office (CIO).

The Board’s action on Thursday was taken in coordination with the Office of the Comptroller of the Currency, the Securities and Exchange Commission, and the Financial Conduct Authority of the United Kingdom. The penalties issued by the agencies total approximately $920 million.

PLY: Couldn’t resist running this more because of the fabulously disingenuous headline leading to (buried at the end of paragraph 2) mention that, oops actually that number is $920 million.

Western banks wonder why they are not trusted and widely loathed. I don’t.

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