September 30 2014


PLY: Welcome to edition 350 – thanks to all our supporters who have sponsored, subscribed and eased the burden on my wallet, in delivering the first daily news source for everything in exchanges and market structure!

PE firm Vista buys Tibco as LIFFE Commodity brand is subsumed into ICE. Lou Eccleston to replace Tom Kloet as TMX CEO, while ICAP finance chief resigns amongst a series of job moves. In a packed free Exchange Invest Daily, there is mention of pretty much everything from swaps to capital formation, collateral developments, multiple regulatory issues and much more…happy scrolling, it’s worth it.

(Meanwhile, it’s the annual beano for bank payments legacy monopolist Swift. Doubtless many will be waking this morning wishing their hangovers were delivered T+2 but then again this serial drinkathon devoted to placing lipstick on the ultimate pig of financial infrastructure is apparently so social that everybody gets to feel just as antiquated as the core SWIFT technology itself come the morning. Naturally the wires are full of stories attempting to justify the expense of being in Boston. I have judiciously pared coverage to try to spot pertinent news and opted to pith that instead of tedious blanket coverage).

Public Markets

Jignesh Shah Exits MCX
Business Standard
Updates On Kotak Mahindra Bank Buys 15% Equity Stake In MCX
The Hindu Business Line

With all regulatory approvals in place, on September 29, 2014, Kotak Mahindra Bank completed the purchase of 76,49,755 equity shares aggregating to 15% equity stake in MCX, from FTIL, for a consideration of Rs. 459 crore ($76.1 million).

PLY: Jignesh Shah, doubtless through gritted teeth, wishes his creation MCX well as his FTIL maintains an abbreviated IT contract as discussed yesterday.

ICAP Warns Of 15% Fall In Revenues (subscription)
Claer Barrett – Financial Times

ICAP has warned that half-year revenues are likely to be 15% lower than last year due to trading performance being “materially impacted” by a lull in market activity and regulators’ efforts to clamp down on financial risk.

ICAP Trading Statement here.

PLY: ICAP, while seeing some grounds for optimism is clearly not yet quite so upbeat as BGC (see below).

qv also our premium post ICAP Explores A New Galaxy and the excellent (open access) guest posts by Jake Pugh here and here.

BGC Partners Updates Its Outlook For Q3 2014
BGC Partners

Q3 2014 Outlook Compared with Q3 2013 Results
– expected distributable earnings revenues to be between approximately $410 million and $435 million, compared with $414.4 million.
– anticipated pre-tax distributable earnings to increase by between approximately 39% and 60% and to be in the range of $52 million to $60 million, versus $37.4 million.
– expected its effective tax rate for distributable earnings to be approximately 15%, compared with 14.5%.

PLY: BGC expectations above the top end of its predicted range as finally a semblance of the SEF transition is gaining hold…

DTCC & Euroclear Seal Collateral Pool Venture (subscription)
Philip Stafford – Financial Times

DTCC and Belgium’s Euroclear confirmed they would create a venture called DTCC-Euroclear Global Collateral Ltd.

PLY: The discussions took a lot longer than T+2 as is understandable but the creation of a j.v. collateral pool across the Atlantic is, at its core, a good one. Takes me back to the FIA’s foray into B2B exchanges (remember them?) in 2000A.D. when we convened in Boston and I recall Phil Bruce then of LCH discussing a form of trans-Atlantic clearing house venture. Wonder how that is coming along…

TMX Appoints Lou Eccleston As CEO

Mr. Eccleston, who will assume the role effective November 3, 2014, will also join the TMX Group Board.

PLY: Good luck to Mr Eccleston who has no direct exchange experience but is regarded well, albeit with leadership credentials to prove according to several sources on Bay Street I spoke with yesterday. Meanwhile, a fond farewell to Tom Kloet, I can only wish him every success in whatever form his ‘retirement’ may take. If Mr Eccleston wants to help the exchange world, he ought to consider giving Mr K a role to enable him to be the World Federation of Exchanges Chairman as the post is up for grabs and the convention is for the Americas to occupy the post this time around.

ISE Files Application For Third U.S. Options Exchange

DB1’S International Securities Exchange (ISE) said on Monday it plans to open a third exchange in the first half of 2015 as it tries to attract more trading volume in an already crowded marketplace.

PLY: Mercury will follow the typically well implemented, fast growing Gemini and the original ISE platform – will this be the lucky 13th exchange in the bakers’ dozen of US options markets?

Zignani: Opportunities In Europe Beckon For LSE (subscription)
Dan Barnes – Financial News

LSEG expanded its post-trade operations in 2014 by launching globeSettle, a second CSD in addition to Monte Titoli, the Italian CSD acquired by the group in 2007, here Financial News interviews head of the LSEG post-trade sales team Alessandro Zignani.

FAO: CME Clearing Europe (see yesterday) selected globeSettle as collateral location venue while in June, LCH.Clearnet and CC&G chose globeSettle.

New EU Financial Services Chief Flexible On Rules
Huw Jones – Reuters

New EU rules making banks and markets safer could be swiftly tweaked to get right balance between effective regulation and encouraging funding to the economy, the bloc’s new financial services chief said.

PLY: A vestige of pragmatism will be a joy to behold at the Commission after the suave but stunningly leaden-footed Michel Barnier hands over (part of) his brief to Briton Jonathan Hill. Hill ought to ponder whether he really needs to implement all the rules passed by the last Parliament. The EU is already mired in long-term decline and I am still bereft of any shining insight into what the vast bulk of MIFID II actually does to make markets better or help investors – and that is just one of far too many regulations pursued by Mr. Barnier’s ultimately unproductive through hyperactivity, Commissionership.

TriOptima’s Latest triReduce Energy Compression Cycle Breaks Previous Record By 110%, Eliminating $12.1 Billion Notional

PLY: The word stunning, is apt for TriOptima which has perhaps done more for OTC trading and risk management than any other innovation in the past decade.

OCC & U.S. Options Exchanges Announce New Risk Control Standards To Strengthen Industry Protections

New risk control standards include price reasonability checks, drill-through protections, activity-based protections and kill-switch protections, pending regulatory approval.

PLY: Sounds encouraging but how is the proportional burden being shifted away from individual member responsibilities to the centre? That is always a concern as digital markets appear to be tending to make the many pay for the potential recklessness of the few. Such collectivisation is deeply flawed.

Crawling Before Walking (subscription)
James Rundle – Waters Technology

SEFs are enormously expensive to run, and if you’re not Bloomberg, Tradeweb, or some of the larger IDBs and information providers, you’re already facing an uphill battle from the start.

PLY: Last year’s gold rush mentality towards SEFs was a wondrous example of market insanity to which few wanted to listen and now it seems the cost base was kept far too high to enable any reasonable length of burn for those who started them. By default, I sympathise with anybody whose business is failing but alas the runes were there and many look foolish on the grounds of calculable myopia. I always thought it was pretty clear we were looking at something like Gilt IDB mark 2 breaking out…Too many wannabe SEFs made elementary mistakes based on far too great assumptions of the pace of adoption in a world of pancake flat interest rates.

FSB Backs Derivatives Crisis-Clause (subscription)
Philip Stafford – Financial Times

The Financial Stability Board on Monday accepted a proposal overseen by ISDA to insert a so-called “stay” on the bank’s derivatives contracts, which are frequently worth billions of dollars in notional value.

PLY: Good.

CME & CFFEX Sign Market Data Agreement

CME and China Financial Futures Exchange (CFFEX), the sole mainland Chinese financial derivatives exchange signed an agreement whereby CME will license and distribute CFFEX market data outside of mainland China.

NASDAQ OMX Implements T+2 Standard Settlement On Its Nordic And Baltic Markets

Collaboration Key To The Future Of Market Infrastructure (subscription)
Anish Puaar – Financial News

PLY: Chris Church, CEO of Swift in the Americas, was, er, swift, to expound the notion that all legacy suppliers of decrepit systems in this digital future thingie must stick together and defend their future salaries / pensions to the max, through finding a way to complexify the already dystopian spaghetti of old, rubbish, solutions which are clearly at the heart of the problem… Therefore slowly discussing alliances and a plethora of MOUs are great for wage slaves and consultants but will ultimately largely fail to deliver much in the way of useful market solution, as in fact capitalism needs competition, not crypto-Marxist structures supporting outmoded models.

…I have taken the liberty of interpolating a bit but I think that is the general gist…by the way didn’t Anish Puaar leave Financial News; seems he scored a farewell trip to Boston, good for him.

JSE Amends Listing Requirements, Introduces Fast Track Listing Process

Private Markets

Exchanges Need To Change Mindset: BSE CEO Ashish Chauhan
The Economic Times

Calling for radical steps within stock exchange space, leading bourse BSE’s CEO Ashish Chauhan has said that the players in this business need to change their mindset and shift focus from trading revenues to give a boost to the capital-raising atmosphere.

PLY: What a joy to see these progressive remarks from an Indian exchange CEO. What a remarkable occurrence to have it coming from the (admittedly reforming for a while) once somnolent BSE. Mr Chauhan shows leadership in calling for more capital formation but he also must clearly realise that the regulators have not been benign to market structure and thus India needs a lot of reform to truly compete – but if unleashed it would be fantastic for the nation, the region and the world.

Sebi Grants Conditional Renewal To MCX-SX Clearing Corporation
The Economic Times

Sebi granted conditional one-year renewal of recognition to MCX-SX Clearing Corporation, which were among the entities where Jignesh Shah-led FTIL was asked by the regulator to divest stake.

The capital market watchdog’s nod for MCX-SX CCL comes within weeks of renewing the approval for MCX-SX.

mSXI Loses Grip On Currency Derivatives
Ashish Rukhaiyar – Livemint

MCX-SX, now Metropolitan Stock Exchange (mSXI), share in currency derivatives has fallen to an average daily volume of 12% sharply down from 41% in August 2013. MCX-SX has lost most of its volumes to BSE, which launched its own platform in November last year. Segment leader National SE (NSE), too, has seen its share dip in the past few months.

PLY: As mentioned last week, the worst exchange rebrand in history (edging out the classic EUREX-SwX structured products j.v. “Scoach” which in ‘homey’ street slang suggested “to steal with stealth”), the self-proclaimed Mumbai Metrosexuals* are clearly far too SXI for forex.

*Hmmm, phrased this way, the former MCX-SX sounds like a 20:20 cricket franchise.

Cryptocurrencies Have ‘Some Way To Go’ (subscription)
Anna Irrera – Financial News

PLY: Swift CEO desperately clings to hope that cryptocurrency can be stifled long enough to keep his pension in the clear. Naturally, he is wrong, just like the legacy co-operative managers were in exchanges during the 1990’s. I realise I am pithing all over SIBOS’ parade today but when you can feed an Indian family for the price of a Swift message, any decent lateral thinker can see the writing on the wall: the status quo won’t do…

In news elsewhere, Circle opened for business yesterday – money transfer via the blockchain. So that’s real-time money movement (yeah T+really0): for free. To advance that great Hamel & Sampler quote, the bullet is in the post to Swift. Actually make that an entire arsenal with Swift’s name on it.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX is flat while FTIL is off 2%, as news of the FTIL exit from MCX is absorbed.


TIBCO To Be Acquired By Vista Equity Partners For $24.00 Per Share In Cash – Transaction Values TIBCO At Approximately $4.3 Billion

TIBCO Software has entered into a definitive agreement to be acquired by Vista Equity Partners, a leading private equity firm focused on software, data and technology-enabled businesses. TIBCO stockholders will receive $24.00 per share in cash, or a total of approximately $4.3 billion, including the assumption of net debt.

PLY: Interesting, one of the bigger market infrastructure PE deals for some time…can Vista take Tibco forward?

SWIFT To Launch New Business Intelligence Solution For Securities Markets – Watch For Securities Will Provide Market Participants With Greater Business Insights To Inform Decision Making

Colt Launches FX Liquidity Access Service Connecting London, New York And Tokyo Markets – Simplifies Market Participants Access To FX Liquidity Centres


CME’s Hunnable: New Hong Kong Gold Futures Contract To Allow ‘Easy Arb’

A new gold futures contract that CME aims to launch in Hong Kong by year-end will not only provide another venue for traders to take outright positions but is aimed at “easy arb” for those who want to hedge or trade price variations in different parts of the world.

ICE Europe Takes Over Liffe Commodities
Morgane Lapeyre – Bloomberg

ICE eliminated the Liffe name and incorporated cocoa, robusta coffee, white sugar and feed wheat futures and options into ICE Futures Europe, owner of the Brent crude contract.

PLY: ICE is dominant in softs and the LIFFE commodities business was always a bit of a carbuncle to the core LIFFE rate and equity product suite, foisted on the mutual London exchange when the London Commodity Exchange finally ran out of road having struggled ever since its London FOX property futures fiasco. A logical branding move. Will ICE take out the LIFFE name too in due course? It would not surprise me.

SHFE May Soon Start Nickel, Tin Contracts (subscription)
Metal Bulletin

Shanghai Futures Exchange (SHFE) may shortly introduce nickel and tin futures, the bourse has already started training courses with major market participants.

Tokyo Financial Exchange: Extension Of Three-month Euroyen Futures Discount Program

TFX has determined to extend Three-month Euroyen Futures Discount Program for a further six months from 1 October 2014 to 31 March 2015.

ESMA Consults On Draft Guidelines Clarifying The Definition Of Derivatives Under MiFID

ESMA has published a consultation paper on future guidelines clarifying the definition of derivatives as financial instruments under the current MiFID I.

PLY: Surely the definition of overly hasty regulation must be one where laws are passed and then the regulators have to go back and define what the products covered actually are? Q.V. this to my criticism of the outgoing Commissioner Barnier above… and consider haste, repentance, leisure in a regulatory sentence.

FSB – Foreign Exchange Benchmarks – Final Report

The FSB has released the final version of its report on FX rate benchmarks. This report has been prepared in light of discussions with a range of FX market participants across the globe, along with submissions received in response to an interim report published in July 2014 for wider public consultation.

Career Paths

TMX announced (press release here) that it has selected Lou Eccleston to lead the organization as its CEO. Mr. Eccleston, who will assume the role effective November 3, 2014, will also become a member of the TMX BoD.

Mr. Eccleston brings to TMX more than 30 years of extensive experience gained in senior leadership roles in the information services, financial technology and capital market services sectors. Most recently, he was President, S&P Capital IQ and Chairman of the Board, S&P Dow Jones Indices, which are business lines of McGraw Hill Financial. He was with that organization for 6 years. Previously, Mr. Eccleston was at Thomson Financial for 4 years in the roles of President of Global Sales, Marketing & Services and President of the Banking and Brokerage Group. Mr. Eccleston was at Bloomberg LP for 14 years, where he held a number of roles including CEO of Bloomberg Tradebook for 6 years. He also served as Chairman and CEO of Pivot Inc., a capital market software services company.

PLY: The seniority is clearly not in doubt but as I mentioned above the question mark Mr Eccleston needs to prove is whether he really is a leader as CEO…time will tell.

ICAP announced that Iain Torrens, Group Finance Director, is leaving the Group to join TalkTalk Group PLC. He will remain in situ until a replacement is found.

NASDAQ OMX announced (press release here) longtime senior executive John L. Jacobs, creator of NASDAQ-100 Index Tracking Stock, will retire after more than 30 years’ service to the company.

Effective January 2, 2015, Mr. Jacobs will retire from his position as Executive Vice President of Global Information Services, comprising the company’s data products and index services businesses. Mr. Jacobs has agreed to serve as a strategic advisor to the company through 2015. The company has begun an internal and external search for his successor.

CME announced the expansion of several leadership positions in its international business:

William Knottenbelt has been appointed Senior MD, International. He will oversee the company’s core business growth, customer relationships and new business opportunities throughout EMEA, Asia and Latin America, reporting to CME CCO Bryan Durkin.

Kevin Collins has been appointed MD, Client Development & Sales – International, leading all sales efforts across asset classes for the EMEA, Asia and Latin America regions, reporting to Durkin.

Martin Fraenkel has been appointed Global Head of Energy, overseeing the development and execution of CME’s energy strategy in the U.S. and internationally, reporting to Derek Sammann, CME Global Head of Commodities and Options Products.

PLY: Clearly congratulations are in order but it strikes me the structure of the CME may not be modelled on the Soviet Politburo circa 1978 but sometimes it feels that way, trying to work out just who is important, who isn’t, who is EVP of making the tea etc.

MV reports that AlfaSec Advisors recruited Jennifer Heathfield-Lee and Patrice Hiddinga effective September 30th.

Jennifer Heathfield-Lee held several senior positions with software vendors and leading financial institutions, most recently with HSBC and Euroclear.

Patrice Hiddinga, prior to joining AlfaSec, was MD, Strategy and Corporate Development at BNP Paribas CIB. Previously, he had similar roles at BNP Paribas Securities Services and Deutsche Boerse Group.

Financial Calendar

This week

ICE $0.65 Q3 dividend payment

New announcement

SGX Q1 FY2015 Financial Results – 21 October 2014
CBOE Q3 2014 Financial Results – Friday, October 31, 2014 – Press Release here.
BGC Partners Q3 2014 Financial Results – Thursday, October 30, 2014 – Press Release here.

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

Analyst Notes

Numis Securities Restated Their “Sell” Rating On ICAP – GBX 303 Target Price

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 Becomes Global Phenomenon
Devin Thorpe – Forbes

Crowdfunding itself is going viral around the globe. It seems that everywhere you look, crowdfunding is popping up in a big way. This is top of mind for me as I jump on a plane to Moscow to deliver a keynote address at CrowdMap ’14.

Other stories

ESMA Consults On Proposed List Of Main Indices & Recognised Exchanges Under The CRR

ESMA has opened a public consultation regarding the Capital Requirements Regulation (CRR). The CRR tasks ESMA with defining “main indices” and “recognised exchanges”, concepts that are used –inter alia – in the specification of “eligible collateral”.

PLY: Anything with the term capital requirements in the title reeks of danger when emanating from the EU and its agencies as it is likely to signal more corporate protectionism, less dynamism and increase the stasis of the failing European project as currently undertaken. #Worrying.

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