September 29 2014

elb2A busy day chock full of insights and snippets, as befits a Monday…pretty much every vestige or markets is here, you can’t really avoid the risk of not having a little vicarious scroll for knowledge, happy reading:

Public Markets

Kris Gopalakrishnan, Lakshmi Narayanan, Puneet Dalmia, TVS Shriram Eye IEX Stake
Baiju Kalesh, Ram Sahgal & Sneha Shah – The Economic Times

Infosys Vice Chairman S Gopalakrishnan (Kris), Cognizant Vice Chairman and Founder Lakshmi Narayanan, Dalmia Bharat Cement owner Puneet Dalmia and private equity fund TVS Shriram Growth Capital have together bid for a 24.89% stake in FTIL-led Indian Energy Exchange.

PLY: Previous discussion last week here as bidding is lively for what is a remarkably successful exchange nobody has ever heard of but which is no relation to the MTF soon to be exchange rapid mover, IEX.

MCX Updates On Divestment By FTIL
Business Standard

On 27 September 2014, MCX entered into the Master Amendment to Principal Agreements (Agreement) with FTIL to continue availing of technology support & managed services from FTIL on such terms & conditions as contained therein.

The executed amendment Agreement, inter alia, comprises of the following key changes/revisions:

a. Reduction in tenure up to October 2022
b. Lowering of fixed charge for Software Support & Managed Services from Rs. 2 crore to Rs. 1.5 crore per month plus applicable taxes.
c. Lowering of variable charge from 12.5% to 10.3% of the gross transaction charges received by MCX on a monthly basis plus applicable taxes.

PLY: Not quite a bargain but at the same time reducing the tenure from a century or thereabouts to a more workable 8 years, is clearly a major breakthrough. Now, will the regulators investigate what on earth the non executives were smoking when they agreed a 100 year supply deal?

China, Hong Kong Reveal New Rules On Stock Market Link (subscription)
Gregor Stuart Hunter – Wall Street Journal

The Hong Kong and Shanghai stock exchanges have published an overhaul of rules governing the “through train” and HKEx announced a further full system test on October 11th while Shanghai too has been testing intensively across the weekend:

SSE Launches Latest Test For Stock Connect Program
Ecns

On August 25th, HKEx completed connectivity test for Shanghai-Hong Kong stock connect.

HKEx eyes October 27th for the launch of the trading link with SSE, as reported last week.

LME Announces New Fee Schedule
LME

Tariff simplified to give all-in transaction fee in a single currency; discounts offered for some trade types, including Ring trades; supports continued investment in IT, systems and service provisions.

PLY: Students of markets may recall that “tariff simplified’ is a combination of words almost unknown in the exchange world.

LME, Eyeing CME, Seeks Big Jump In Trade Fees
Eric Onstad – Reuters

LME had warned of hefty increases when it publishes its new fees schedule for 2015 on Monday, but has kept the details under wraps.

PLY: …and indeed rate rises are a rarity too as exchanges have traditionally felt beholden to user pressure to not increase. An interesting new era perhaps for some well-positioned bourses…

U.S. Senators Call For Aluminum Warehouse Review By CFTC
Reuters

Three U.S. senators including, Sherrod Brown (a fierce critic of Wall Street bank involvement in metals markts) and Elizabeth Warren, on Friday urged CFTC to “thoroughly examine” the aluminum markets, which they said showed “ongoing irregularities”.

PLY: Urging CFTC to review LME before granting it status as a so-called Foreign Board of Trade, strikes me as a worrying example of creeping protectionism in the USA. Criticising the rather rapacious approach to warehouses by some investment banks is, however, unsurprising and has justification.

Q&A With Brendan Bradley, Eurex: Why We Invited In The Fintech Start-Ups (subscription)
Anna Irrera – Financial News

DB1 in June launched an online platform called Open Innovation, through which early-stage companies can pitch their ideas in the hope of receiving technological and regulatory support from DB1 and getting connected to its network of firms and vendors.

PLY: In the pantheon of capital market revolutionaries, Brendan Bradley, clearly deserves his title chief innovation officer at DB given his extensive pedigree in being an early adopter and promoter of electronic markets and still ahead of the game compared to the vast majority of recent converts to the #fintech movement…

LSE To Pursue African Company Listings (subscription)
Javier Blas – Financial Times

In effect the LSE is trying to repeat its strategy of dual London-Johannesburg listings with Casablanca, Lagos, Nairobi and Cairo.

PLY: Sounds like a sensible approach that can potentially benefit markets.

London Is Right Not To Say ‘Open Sesame’ (subscription)
David Wighton – Financial News

PLY: Applauding the LSE’s restraint in saying no to Alibaba’s IPO with its off-beat approach to shareholder democracy and control.

CME Clearing Europe Selects globeSettle As Collateral Location Venue
MondoVisione

Third CCP to select globeSettle. Clearing members will be able to choose to place collateral with globeSettle.

ISDA Seeks Green Light On Margin Model (subscription)
Philip Stafford – Financial Times

Derivatives markets participants are expecting to receive the green light from regulators to develop an industry initiative designed to head off potential pricing confusion as new rules come into force.

PLY: Without ISDA master agreements where would we be?

FSB Releases Proposals On Cross-Border Recognition Of Resolution Actions & Action To Address Cross-Border Close-Out Risk
MondoVisione

The Financial Stability Board (FSB) is launching today a public consultation on a set of proposals to achieve the cross-border recognition of resolution actions and remove impediments to the cross-border resolution.

New Zealand’s Financial Markets Authority Approves NXT Market Registration & Listing Rules
MondoVisione

NZX is pleased to announce that the Financial Markets Authority has approved the registration and rules for NXT, a new NZX market designed for small and mid-sized businesses.

MOEX: Central Bank Of Russia Assigns NSD & NCC Status As Systemically Important Financial Institutions
MondoVisione

The Central Bank of Russia (CBR) has assigned the National Settlement Depository (NSD) and the National Clearing Centre (NCC) status as systemically important financial markets infrastructure institutions.

NASDAQ OMX Welcomes Cinnober To First North
MondoVisione

NASDAQ OMX announced that the trading in Cinnober Financial Technology AB (shortname: CINN) shares commenced on First North at NASDAQ OMX Stockholm. Cinnober belongs to the Technology sector and is the 31st company to be admitted to trading on First North’s Nordic markets (Stockholm, Helsinki, Copenhagen and Iceland) in 2014.

PLY: Cinnober shares being added from a previous berth since 2005 on Alternativa Sweden (Alternativa aktiemarknaden), a trading platform under the supervision of the Swedish Financial Supervisory Authority.

Private Markets

China Invites CSE To Partner Pan Asia SE
Business Standard

China’s Kunming Province has picked up an unlikely counterpart for collaboration at one of its ambitious projects, Pan Asia SE — Calcutta SE (CSE).

The Pan Asia Exchange, which is in incipient stage, is a brain child of the Chinese provincial government, envisaged as a collaboration between Bangladesh, India, China and Myanmar, and some other South Asian countries including Pakistan, for inter regional trade of scrips in the infrastructure sector.

CSE To Help DSE Launch New Products
Business Standard

Meanwhile, Calcutta SE (CSE) will help its Dhaka counterpart to introduce new asset class in the stock exchanges in the neighbouring country, having signed an MOU, with Dhaka active in the creation of the Pan Asia SE initiative too.

Bangalore Stock Exchange All Set To Sell Assets
Shyam Prasad S – Bangalore Mirror

Bangalore Stock Exchange (BgSE) may soon be able to liquidate its assets and divide the proceeds among its members.. The physical assets of the stock exchange include its corporate building and land on JC Road, and another plot on Infantry Road. The assets, if liquidated, are expected to fetch more than Rs 250 crore (USD 40.6 mln) which will be split between the 900 shareholders. Trading on BgSE stopped more than a decade ago, and as of now only its subsidiary BgSE Financial is active.

Liquidnet Founder Unconcerned About Tightened Dark Pool Regulations (subscription)
Enoch Yiu – South China Morning Post

The Securities and Futures Commission is tightening regulations on dark pool operators to ban retail investors from trading on the platform, but Seth Merrin, the founder and CEO of Liquidnet, said he was not worried as his platform served only the biggest asset managers.

Iran – SEO To Set Up Currency Futures Exchange
Financial Tribune

The Securities and Exchange Organization plans to set up a futures exchange for trading of foreign currencies.

PLY: Presumably US dollar trades will not be settling on the other side of the Atlantic due to ongoing sanctions issues…

HitBTC Partners With World’s First Licensed Bitcoin Derivatives Platform TeraExchange
Free Press Release Center

HitBTC, and TeraExchange, a SEF registered with CFTC, signed an agreement to share data.

Chinese Bitcoin Exchange Huobi ‘Loses 5,000 BTC’ In £1.2m Blunder
Anthony Cuthbertson – International Business Times

Chinese bitcoin exchange Huobi has revealed that an accounts error has resulted in significant amounts of cryptocurrency being accidentally and incorrectly deposited into customers’ accounts…

Swedish Research Says Bitcoin Not Affecting Economy
Richard Atkins – Tech News

Bitcoin has not affected the stability of Sweden’s economy, according to a new paper published by the country’s central bank.

PLY: Heartening news confirming the bad news for luddites everywhere that innovation actually tends to make life better…

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX up 2%, FTIL up 4%.

FTIL’s Argument Misleading, NSEL’s Merger In Public Interest: Investors Forum To Sebi
The Indian Express

NSEL Investors Forum has written to Sebi, highlighting “misrepresentations and suppression of material fact” by FTIL in its press release dated September 16.

Do We Need To Show India As Unsafe For HNIs: NSEL Investors To FM Arun Jaitley
Jash Kriplani – Financial Express

PLY: Hmmm, still not buying the shotgun merger idea as anything but a bad piece of corporate governance practice while clearly we need sales of assets and an order for FTIL to compensate immediately any shortfall. The merger concept will be bogged down in legal actions and merely delay settlement, despite the rather unrealistic expectations of the investors, many of whom seem to have merged bloodlust for Jignesh Shah with their debts being repaid.

Technology

NSE Launched New Bond Trading System
NSE

PLY: Plaudits to this year’s storming ‘new’ vendor of exchange technology, STT of South Africa who have added another market, this time the bond platform of Nairobi Securities Exchange NSE in addition to their recent delivery to Dar Es Salaam.

BSE Aims High-Speed Trades, Eyes Most Advanced Bourse Slot
Times of India

Having begun with a humble background of functioning under banyan trees, India’s leading bourse BSE is now eyeing a slot among the world’s most technologically advanced exchanges and is targeting ten-times faster trades on its platform within three years.

PLY Having visited BSE within the past decade and experienced a seen akin to “Modern Times” that 1936 classic Chaplin movie, it is remarkable how they have quantum accelerated into the modern world in recent years…

AFET To Switch On New Trading System “Core 4” This October
Tivarati

The Agricultural Futures Exchange of Thailand (AFET) has had a new trading system developed, from Core 2 to Core 4, and is now getting ready to officially switch on the new trading platform this October, offering 3x transactional capacity 8 times the speed of the previous system.

The Challenges Of Going Electronic (subscription)
Philippe Morel & Rupert Bull – Financial News

There are two primary drivers currently affecting capital markets and investment banking businesses: regulation and electronification.

PLY: Investment bankers, people supposedly in the vanguard of all manner of financial transactions yet it seems their debate on ‘electronification’ is about where European futures traders were in 1999…as I recall somebody wrote a book about it even then…

Products

Euronext To Lower Client Fees For Dutch Options – Retail Investor Trading Up To 50% Cheaper
MondoVisione

PLY: The faint whiff of desperation hits Euronext Amsterdam. After Cees Vermaas jumped ship to head CME Europe as the TOM insurgency gathered speed, they have now taken an axe to fees in what, alas, smacks of desperation to keep the ruthless efficiency of the upstart NASDAQ backed TOM in its place. Will it work? Well the blood flow strikes me as pretty much a haemorrhage of late…

Singapore Kilobar Gold Contract To Launch In October 2014
MondoVisione

International Enterprise (IE) Singapore, Singapore Bullion Market Association (SBMA), SGX and the World Gold Council, announced that the new exchange-traded Singapore Kilobar Gold Contract will launch on Monday, 13 October 2014.

Career Paths

MV reports that PIMCO Chief Investment Officer, William H. Gross, resigned and will depart the firm immediately. Douglas Hodge and Jay Jacobs continue in their roles as CEO and President.

Futures Magazine reported that:

Janus Capital Group appointed William H. Gross to manage a recently launched Janus Global Unconstrained Bond Fund and related strategies, and will join Myron Scholes, Ph.D., and other members of the Janus team focused on global asset allocation.

LCH Clearnet has hired Diane Bouwmeester as its group general counsel and head of compliance.
Bouwmeester steps into the role from Freshfields Bruckhaus Deringer, where she has been a senior associate since 2007.

Daniel Ivascyn was appointed group chief investment officer of PIMCO, after the departure of Bill Gross.

Stock Exchange of Thailand (SET) appointed Rinjai Chakornpipat as SVP and head of product business development.

ESMA has elected three new members to its Management Board to replace outgoing members whose term will expire in October this year. The election took place at the Board of Supervisors meeting in Rome on 25 September and the successful candidates, who will serve a term of 2½ years beginning on the 1 November 2014, are:

Cyril Roux, Central Bank of Ireland (CBI), Ireland – new member;
Gérard Rameix, Autorité des marchés financiers (AMF), France – ending first term and re-elected; and
Marek Szuszkiewicz, Komisja Nadzoru Finanswego (KNF), Poland – new member.

The outgoing members were Jean Guill from the Commission de Surveillance du Secteur Financier (CSSF) of Luxembourg and Julie Galbo of Denmark’s Finanstilsynet.

The Management Board, chaired by Steven Maijoor, Chairman of ESMA, is responsible for ensuring that the Authority carries out its mission and performs the tasks assigned to it under the Regulation. The Management Board now consists of:

Steven Maijoor, ESMA;
Cyril Roux, Central Bank of Ireland (CBI), Ireland;
Kostas Botopoulos, Hellenic Capital Markets Commission (HCMC), Greece;
Gérard Rameix, Autorité des Marchés Financiers (AMF), France;
Klaus Kumpfmüller, Finanzmarktaufsicht (FMA), Austria;
Marek Szuszkiewicz, Komisja Nadzoru Finanswego (KNF), Poland; and
Martin Wheatley, Financial Conduct Authority (FCA), UK.

Financial Calendar

This week

ICE $0.65 Q3 dividend payment

New announcement

SGX Q1 FY2015 results – 21 October 2014
CBOE Q3 2014 financial results – Friday, October 31, 2014 – press release here.

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

Analyst Notes

JPMorgan Chase Raised Their Price Target On Betfair From GBX 1,050 To GBX 1,175 – “Neutral” Rating

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

OnDeck Capital Eyes Joining P2P IPO Drive (subscription)
Tracy Alloway, Nicole Bullock, Eric Platt & Arash Massoudi – Financial Times

OnDeck Capital, an alternative lender that uses new technology to make small business loans, has filed confidentially for an IPO according to a copy of the filing seen by FT. P2P platform Lending Club officially announced plans for an IPO in a filing last month.

Equity Crowdfunding At Year One, What’s The Impact?
Kay Koplovitz – Forbes

A total of 534 out of 3,361 companies successfully hit their equity crowdfunding target in year one, thank you Title II of the JOBS Act. According to Crowdnetic, $217.7 million equity capital was raised, which averages $407,685 per company. Despite the 2 824 that did not get funded, I see the one-year anniversary of the JOBS Act Title II provisions as a success.

The Outlook For P2P Lending In China
Yangjie She & Naiwen Zhang – Crowdfund Insider

The main engine of China’s P2P lending market is strong demand for consumer loans and huge supply of individual investments. Primary parties of the P2P lending market are micro and small enterprises, as well as individuals.

Other stories

Latest Charles Li Direct – Unlocking The Value Of The LME
MondoVisione

LME has released its revised fee structure, which is part of its move to become a more commercialised exchange. HKEx CEO Charles Li discusses the new fee structure and recent launch of LME Clear, and how both fit into HKEx and the LME’s long term strategic plan.

PLY: Never forget Mr Li has a stunning asset in his portfolio with LME and its potential remains somewhat boundless. Peel away a few kerfuffles and we have a great opportunity for this business under CEO Garry Jones.

ESMA Publishes Draft RTS On Major Shareholder Disclosures
MondoVisione

ESMA has published its draft Regulatory Technical Standards (RTS) under the revised Transparency Directive relating to the notification of major shareholdings.

Geese Must Hiss Against Tax On Golden Eggs (subscription)
David Wighton – Financial News

Stamp duty is a really lousy tax…

Leo Melamed’s Greatest Trade
Skylar Zhang – Futures Magazine

On Sept. 23, Leo Melamed, widely known as the father of financial futures, addressed an audience of Futures industry professionals at the CTA Expo, offering personal stories of his experiences that got him to where he is today.

Melamed said that the first lesson his father taught him occurred when their family was in Lithuania. His father held up one Polish złoty and one Lithuanian litas, asking the young Melamed how much they were worth in relation to each other. Melamed could only guess that they were the same, as the government had dictated. His father then took him to a bakery and bought a piece of bread, worth one Lithuanian litas. But when his father tried to pay with one złoty, the baker stopped him and said, “Two złoty, one litas.”

“It was a lesson I never forgot,” Melamed said. “Because what my father explained was the Milton Friedman doctrine…only the free marketplace can give you the true value of nearly anything.”

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