September 22 2014

elb2LME opens its new real-time CCP – a very exciting development powered by Cinnober technology, while ICE completes its sale of NYFIX and Metabit. Craig Donohue cleans house at OCC, sweeps out CEO, further reforms likely, lots of OTC CCP and SEF discussion, not all of it regulation, as we approach Monday with an urge to scroll and take in the day’s exchange news, happy scrolling and greetings from a delightfully sunny Istanbul, welcome to your free daily Exchange Invest:

Public Markets

LME Opens First Clearing House In Its 137-Year History (subscription)
Philip Stafford – Financial Times

LME will open the first clearing house of its 137-year old history on Monday, with the £50m project intended to underpin the bourse’s tilt at opening Chinese markets. The completion of the three-year scheme was a key part of HKEx’s £1.4bn takeover of the group 18 months ago.

LME Clear received EMIR authorisation on Sep 3rd.

PLY: Plaudits to the LME team on delivering a fascinating new clearing house, powered by Cinnober technology, adding to their ongoing work with BM&F Bovespa in a similar field.

Farewell from LME to LCH which served it dutifully for decades. The hit was expected but nonetheless must hurt the bottom line of the LSE’s integrated (but maybe we won’t call it a vertical silo?) CCP business arm.

ICE Completes Sale Of NYFIX & Metabit To ULLINK

ICE announced that it has completed its previously announced transaction with ULLINK for the combined sale of NYFIX and Metabit, both units of NYSE Technologies. The transaction closed on September 19 and terms were not disclosed.

EI reported on June 24th the agreement ICE made with ULLINK to sell NYFIX and Metabit.

Taiwan Bars Retail Investment Through Shanghai-HK Stock Connect
Liang Shih-huang – Want China Times

While many Taiwanese investors have high hopes of using the Shanghai-Hong Kong Stock Connect mechanism to invest in China, the Financial Supervisory Commission (FSC), the top financial regulator in Taiwan, said Thursday that it will not allow local retail investors to take advantage of the platform to buy shares on the mainland.

The Shanghai-Hong Kong Stock Connect, or “through train” scheme to allow retail investors to trade shares across the border, subject to a quota, was announced in April.

PLY: An interesting concern as Taiwan’s regulator tries to shore up his national markets but in a way which I fear will only lead to all manner of workarounds, some perhaps highly unconventional.

Nasdaq Chief: BIST’s Future Looks Bright
Furkan Naci Top & Bahattin Gonultas – Anadolu Agency

BIST has all of the elements necessary to become the most important exchange in the region, the vice-chairman of Nasdaq OMX has said.

Speaking to Anadolu Agency on the sidelines of the fifth Istanbul Finance Summit which finished on Tuesday, Meyer “Sandy” Frucher said the long term perspective among analysts was that the exchange, which began operating in April 2013, will become the most important stock market between central Europe and central Asia.

PLY: A fair comment from Sandy Frucher.

One Thing Should Be Certain In Life: The Death Of The FTT (subscription)
Richard Saunders – Financial News

The monster keeps rising from the slab. No matter how many times the EU FTT gets thumped over the head with a large club, it refuses to die.

PLY: In its 6 month Presidency the Italians are eager to enact an FTT and thus drag Europe down to the declining living standard of the EU-Mediterranean region. This vanguard of an 11 nation suicide pact is both against the principal of a single European Union and indeed entirely anathema to economic progress. Mr Saunders is right, this beast must die…or we will all move to North America, Istanbul or Singapore …or wherever the outlook is pro business and indeed pro growth which is tragically not the case in the floundering European Union or its FTT schism of left wing anti-capitalist lunatics.

Regulators Move To Tackle Derivatives Data-Sharing Impasse (subscription)
Philip Stafford – Financial Times

The Financial Stability Board (FSB), a national regulators’ umbrella association, on Friday recommended creating a single centralised repository, either physical or digital, to draw together fragmented data on trades for OTC derivatives, worth a notional $700tn.

PLY: An issue of globalisation and a situation where the New World Order conspiracy theorists will have a field day but alas one which I fear is hugely unworkable as global growth moves east and government continues to lose the control it once enjoyed over money itself…

The Challenge Of Achieving True Data Transparency
Max Bowie – Waters Technology

Discussing the European Financial Information Summit…

Wall Street Regulator Unveils Proposals For Dark Pools, Bond Markets
Sarah N. Lynch – Reuters
FINRA Board Approves Series of Equity Trading & Fixed Income Rulemaking Items

FINRA unveiled a list of proposals on Friday to bolster rules governing alternative trading platforms like “dark pools,” computerized high-speed trading, and price transparency in the corporate bond market.

PLY: Registering algorithmic creators sounds like another centralised dog’s dinner to me – what is an algorithm? Must every client be registered? Who decides? Where is the money coming from to police this database? Has anybody ever heard of pragmatic, intelligent rulemaking as opposed to huge clunking, unfeasible grabs for power?

Dark Pools Need To Let Light In & Gain Mass: Liquidnet CEO (subscription)
Kenneth Lim – Business Times

Strong institutional volumes and increased transparency are necessary for dark pools to remain viable, said Liquidnet founder and CEO Seth Merrin.

PLY: As always Seth Merrin provides an enlightened view of just what works in the dark and what doesn’t. The market for Institutional Liquidity Pools remains a huge one which the world must foster as otherwise those pension funds not already decimated by transaction taxes and so forth, will be irrevocably harmed by regulatory fiat.

SEF Trading Volumes Emerging From Summer Doldrums (subscription)
Ivy Schmerken – Wall Street & Technology

Tradeweb’s SEF saw a twenty-fold increase in interest-rate derivatives trading volume in the first two weeks of September…

PLY: It was as much a case of gradual implementation as a summer doldrum – the media-consulting classes had themselves worked up into a frenzy which missed the point on implementation day: the urge to hedge rate exposure with rates at zero is just not that pressing…the full SEF revolution will take a while (and that is both dependent on testing & implementation schedules amongst counterparties as well as the emergence of a post QE yield curve).

SEF Establishment Forces Big Decisions For Sell-Side Firms (subscription)
James Rundle – Waters Technology

The launch of SEFs was always going to mean tremendous change for the derivatives market. For the sell side it’s also prompted soul searching around how they differentiate themselves for institutional clients.

PLY: “Differentiate” themselves here may mean “justify their position in the food chain” aka for banks “how long before the game is up and we charge commoditised prices for swaps that tend towards ETD charges?”

US Court Orders SEF-Registration Rethink
Michael Watt – FX Week

A US court ruling has forced CFTC to conduct a cost-benefit analysis of several key provisions of the Dodd-Frank Act, in a move that could revive the acrimonious debate over European compatibility with SEF registration rules.

CFTC Staff Provides Time-Limited No-Action Relief For SEFs From Certain Block Trade Requirements

CFTC’s Division of Market Oversight (DMO) provided time-limited no-action relief concerning SEF access for block trade execution. This time-limited relief to SEFs is until December 15, 2015, at 12:00 am EST.

Private Markets

Nepal – Investors Reluctant To Open Demat Account
Sagar Ghimire – My Republica

Though share transactions of commercial banks in demat mode is set to start in just sixteen days, very few investors have opened their demat accounts so far, just 762 of the circa 10,000 regular investors on the exchange.

The Regional Energy Exchange, Ready By The End Of The Year

Countries in South-Eastern Europe are on schedule with the creation of the regional exchange, and it will become operational by the end of the year, as announced by Mirela Săndulescu, the head of the Strategic Cooperation Department of the Romanian energy exchange OPCOM.

PLY: Very interesting for Balkan energy markets…

Japan’s First Bitcoin Payment Platform Launched: Bitcheck
Crypto Coins News

Bitcoin Advocacy Center Launches With Over $1M Annual Budget
Sid Kalla – Coinsetter

Jerry Brito, a former executive director and research fellow at Mercatus Center is executive director of the Washington D.C. advocacy group, Coin Center which will lobby for cryptocurrency promotion.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX and FTIL both off 1% as there is a paucity of news on any repayment to creditors today.


MOEX: Derivatives Market Trading & Clearing System Operations Hardware Malfunction

At 12:49 pm Friday, a hardware malfunction affected one of the Derivatives Market”s trading & clearing servers. A number of participants required data re-synchronisation to continue trading.

BCS Financial Group Selects Horizon Software For Market-Making And Distributing Russian Derivatives

BCS Financial Group has selected Horizon Software to launch its derivatives market-making and distribution activities. Horizon will provide Delta One and Option Trader, its market-making platform, which includes native exchange connectivity to numerous exchanges throughout Europe. Horizon’s flexible APIs will allow the market-making platform to be seamlessly integrated into BCS Financial Group’s existing infrastructure.

Oslo Børs VPS: Delta – Millennium Exchange: T+2 – Questions And Answers To The New Settlement Cycle

As Oslo Børs VPS is reducing the settlement cycle for the Norwegian market with one day as of 6 October 2014, we have made a summary of general Q&A.


Bats To Launch Trade Reporting Service For ETFs (subscription)
Philip Stafford – Financial Times

Exchange Bats Chi-X Europe, is to begin a trade reporting service for ETFs in a bid to bring more order and transparency to the fragmented market where most products are traded OTC.

BATS press release here.

South Africa To Start Electronic Trading Of Govt Bonds
Robert Brand – Businessweek

South Africa will implement an electronic trading system for government bonds, mandating primary dealers to quote two-way prices on the securities, developed and regulated by JSE and run in tandem with its existing reporting system.

DGCX To Begin Black Pepper Contracts Early Next Year
Mr Subramani – The Hindu Business Line

DGCX will launch black pepper contracts early next year but before that it will commence soyabean oil contracts in November – both physically deliverable.

NCDEX To Clean 6,400 Tons Adulterated Black Pepper At Earliest
The Economic Times

Leading agri-bourse NCDEX said it will clean 6,400 tonnes of adulterated black pepper lying in Kerala at the earliest and resume fresh contracts early next season starting January.

Investec Structured Products Partners With Calastone And Novia Financial

Investec are first to offer automated dealing of structured products to Wraps and Platforms via Calastone’s global transaction network.

Chi-X Japan Launches Chi-Match VWAP Cross

Chi-X Japan Limited, a wholly owned subsidiary of market operator Chi-X Global Holdings LLC, has successfully launched Chi-Match VWAP Cross (Volume Weighted Average Price) on September 1, 2014. Chi-Match VWAP Cross offers participants a broker neutral morning, afternoon and full-day cross. Chi-X Japan trading participants access Chi-Match through existing connectivity.

Career Paths

Reuters reported that the CEO of OCC, Michael Cahill, will retire from the company at the end of the year after one year in the role, the company said on Friday. Chicago-based OCC, formerly known as the Options Clearing Corp, did not immediately say why CEO Michael Cahill, 56, is retiring or what his plans are. He has worked at the clearinghouse for 32 years and was promoted to CEO from president, COO and treasurer on Jan. 1.

OCC statement here.

PLY: A brief tenure which suggests that Executive Chairman Craig Donohue (who also assumed office on January 1st) is intending to announce more sweeping changes to the organisation going forward.

Stock Exchange Boss Talks Of Marriages And Kings (subscription)
Margareta Pagano – Financial News

Maggie Pagano talks to Xavier Rolet…

Financial Calendar

This week

ASX 89.9c dividend payment
CME $0.47 quarterly dividend payment
LSE rights issue – Final day for acceptances and the rump placing
NASDAQ OMX $0.15 quarterly dividend payment

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

Share Notes

ICE CEO Jeffrey C. Sprecher sold 75,000 shares on Wednesday, September 17th sold at an average price of $200.00 (bargain $15,000,000.00). He now owns 271,105 shares. All ICE insider stock transactions are chronicled here.

Interactive Brokers SVP Milan Galik sold 1,800 shares on Thursday, September 18th at an average price of $25.71 (bargain $46,278.00). Mr. Galik’s regular sales are chronicled on this specific page.


Capgemini: We Will See Acquisitions Of P2P Lending Platforms By Banks Soon
JD Alois – Crowdfund Insider

Capgemini recently posed the question; ”To what extent is crowdfunding a problem for our traditional bank manager? And what, if any, pressure does this bring to our big banks?”

We think this is an astute question to ask – especially in the UK where peer to peer lending is experiencing dramatic growth. Meanwhile traditional banks… well not so much.

Other stories

Alibaba Celebrated IPO & First Day Of Trading On NYSE

Alibaba opened for trading Friday on NYSE under the ticker symbol “BABA” after its IPO on the floor of the NYSE. Barclays is the Designated Market Maker for the company’s stock, which opened at $92.70.

Alibaba IPO Ranks As World’s Biggest After Additional Shares Sold
Elzio Barreto – Reuters

Alibaba’s IPO now ranks as the world’s biggest in history at $25 billion, after the e-commerce giant and some of its shareholders sold additional shares.

Are Fairer Markets More Efficient? – Research From The CMCRC Suggests A Correlation

New research released by the Capital Markets Cooperative Research Centre (CMCRC) examines the relationship between violations of integrity standards set by exchange- operators or regulators and the consequences for security market efficiency. The research covering over 30 markets shows that while improving market fairness helps reduce transaction costs, not all market design changes simultaneously enhance both fairness and efficiency.

WSE Maintains Trading Session Timetable Until End Of 2015

Speech By David Lawton, Director Of Markets, At The UK Financial Conduct Authority MiFID II Conference 2014 – MiFID II: The Future Of European Trading In The Balance

Speech By Maggie Craig, Acting Head Of Savings And Investments, At The FCA MiFID II Conference 2014.Investor Protection In The UK: New Tools, New Challenges

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