Confidential matter. No part of it may be circulated, quoted, or reproduced for distribution without prior written approval. This material was used during an oral presentation; it is not a complete record of the discussion. Exchange Highlights (as of 16:30 GMT time – market close in London) ERDesk Exchange Sector Review Week ending May 21 st 2010 1 This week: The sector was down 600 bps, underperforming global equities by 100 bps. Interdealer brokers were down 600 bps. YTD the sector is underperforming global equities by 325 bps. The US Senate approved the Wall Street reform bill which calls for exchange trading and central clearing of OTC derivatives, with exemptions for non-financial firms using the contracts for hedging purposes (but the Senate bill offers fewer exemptions than the House bill). Banks will be forced to spin off their derivatives desks and their proprietary trading desks and abstain from sponsoring hedge funds or private equity funds (with the details left for regulators to define) (see page 7). CBOE members approved the restructuring plan, preparing for a $292 mn IPO, which would value CBOE at $2.57 bn, having $25 as the lower price of the IPO range (with 11.7 mn shares being offered). The company will begin charging access fees and plans to charge $7,500 per month to market makers and floor brokers. CBOE expects to sell no fewer than 1,025 trading permits upon restructuring, a high figure compared with ISE’s less than 200 members electronically trading similar options volumes. SEC proposed caps on option trading fees would also cost CBOE between $14 mn to $24 mn in revenues (see page 8). Senator Max Baucus (Chairman of the Senate Finance Committee) and Representative Sander Levin (Chairman of the House Ways and Means Committee) introduced a bill being discussed today that plans to tax carried interest (currently taxed at the 15% capital gains tax which will increase to 20% in 2011) as ordinary income. Carried interest would be taxed at 50/50 split rate between ordinary income and capital gains (about a 30% rate) for the first two years after enactment and the split would change to 75/25 after two years (increasing the rate by 35%), which would result in a 157% tax rate increase from current levels. Germany’s BaFin banned until March 31, 2011 naked short sales of the largest financial firms’ stocks (including Deutsche Boerse), eurozone sovereign bonds and prohibited trading CDS on European sovereign debt not used for hedging default risks. BaFin said CDS spikes were threatening “the stability of the financial system as a whole” and feared write-downs of €800 bn (twice the country’s financial system reserves) after an RBC report accused German banks of not disclosing their €45 bn exposure to Greek debt. The ban sparked a capital flight into Switzerland (BNP Paribas said €9.5 bn flowed into Swiss franc accounts during the first hours after the announcement, forcing the Swiss Central Bank to offset the hold down the franc). German banks have second lowest risk –weighted capital ratios in the world (after Japan) and the banking system has a leverage ratio of over 50x. The following companies reported 1Q10 earnings: -LSE FY10 GBp59.6 -19% Y/Y -PSE PHP8.58 +6 Y/Y -EXAE €0.15 +69 Y/Y -ICAP FY10 GBp35.1 +1 Y/Y -MF $-0.78 -6% Y/Y
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Confidential matter. No part of it may be circulated, quoted, or reproduced for distribution without prior written approval. This material was used during an oral presentation; it is not a complete record of the discussion.
Exchange Highlights (as of 16:30 GMT time – market close in London)E
RD
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Exc
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1st
2010
1
This week:
The sector was down 600 bps, underperforming global equities by 100 bps. Interdealer brokers were down 600 bps. YTD the sector is underperforming global equities by 325 bps.
The US Senate approved the Wall Street reform bill which calls for exchange trading and central clearing of OTC derivatives, with exemptions for non-financial firms using the contracts for hedging purposes (but the Senate bill offers fewer exemptions than the House bill). Banks will be forced to spin off their derivatives desks and their proprietary trading desks and abstain from sponsoring hedge funds or private equity funds (with the details left for regulators to define) (see page 7).
CBOE members approved the restructuring plan, preparing for a $292 mn IPO, which would value CBOE at $2.57 bn, having $25 as the lower price of the IPO range (with 11.7 mn shares being offered). The company will begin charging access fees and plans to charge $7,500 per month to market makers and floor brokers. CBOE expects to sell no fewer than 1,025 trading permits upon restructuring, a high figure compared with ISE’s less than 200 members electronically trading similar options volumes. SEC proposed caps on option trading fees would also cost CBOE between $14 mn to $24 mn in revenues (see page 8).
Senator Max Baucus (Chairman of the Senate Finance Committee) and Representative Sander Levin (Chairman of the House Ways and Means Committee) introduced a bill being discussed today that plans to tax carried interest (currently taxed at the 15% capital gains tax which will increase to 20% in 2011) as ordinary income. Carried interest would be taxed at 50/50 split rate between ordinary income and capital gains (about a 30% rate) for the first two years after enactment and the split would change to 75/25 after two years (increasing the rate by 35%), which would result in a 157% tax rate increase from current levels.
Germany’s BaFin banned until March 31, 2011 naked short sales of the largest financial firms’ stocks (including Deutsche Boerse), eurozonesovereign bonds and prohibited trading CDS on European sovereign debt not used for hedging default risks. BaFin said CDS spikes were threatening “the stability of the financial system as a whole” and feared write-downs of €800 bn (twice the country’s financial system reserves) after an RBC report accused German banks of not disclosing their €45 bn exposure to Greek debt. The ban sparked a capital flight into Switzerland (BNP Paribas said €9.5 bn flowed into Swiss franc accounts during the first hours after the announcement, forcing the Swiss Central Bank to offset the hold down the franc). German banks have second lowest risk –weighted capital ratios in the world (after Japan) and the banking system has a leverage ratio of over 50x.
The sector was down 6% over the past week, underper forming global equities by 100 bps. Interdealer brokers were down 600bps.
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-5%
-6%
-4%
-2%
0%
-6%
1000
1050
1100
1150
1200
1250
1300
5/14
5/17
5/18
5/19
5/20
MSCI World Index ERDXT Index ERDBT Index
Weekly Returns
-9%
0%
-2%
-10%
-9%
-4%
-1%
-2%
-8%
-12%
-6%
-1%
-1%
-5%
-11%
-1%
-10%
-6%
-3%
-5%
-12%
-4%ASX
BM&F Bovespa
BME Spanish Exchanges
BMV
Bursa Malaysia
CME Group
Climate Exchange
Deutsche Börse
Dubai Financial Market
Hellenic Exchanges
Hong Kong Exchanges & Clearing
IMAREX NOS ASA
Intercontinental Exchange
JSE Securities Exchange
LSE Group
Nasdaq OMX
NZX Group
NYSE Euronext
Osaka Securities Exchange
Philippine Stock Exchange
Singapore Exchange
TMX Group
ERDXT -8%
YTD Returns
-9%
-31%
-14%
-9%
-25%
2%
-18%
-8%
-8%
8%
9%
-2%
-14%
-12%
17%
-10%
-10%
23%
-20%
-13%
-9%
-9%
ASX
BM&F Bovespa
BME Spanish Exchanges
BMV
Bursa Malaysia
CME Group
Climate Exchange
Deutsche Börse
Dubai Financial Market
Hellenic Exchanges
Hong Kong Exchanges & Clearing
IMAREX NOS ASA
Intercontinental Exchange
JSE Securities Exchange
LSE Group
Nasdaq OMX
NZX Group
NYSE Euronext
Osaka Securities Exchange
Philippine Stock Exchange
Singapore Exchange
TMX Group
ERDXT -12%
Stock Performance (as of Thursday closing)
NYX, BME, EXAE ICE and DB1 were the worst performers this week. YTD the sector is down -12%, with NZX, EXAE, TMX and BME underperformin g the group and BMV, CLE, JSE, NYX and OSE outperforming their peers.
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Exchanges P/Es Relative to their Domestic Index P/E sAsian exchanges continue to trade at a premium to t heir domestic index P/Es
As of 16:30 GMT time
4
P/E ‘11 Premium Expected Earnings Growth ‘10-‘11
Australian Securities Exchange
BM&F Bovespa
BME Spanish Exchanges
BMV
Bursa Malaysia
CME Group
Climate Exchange
Deutsche Börse
Dubai Financial Market
Hellenic Exchanges
Hong Kong Exchanges & Clearing
IMAREX NOS ASA
Intercontinental Exchange
JSE Securities Exchange
LSE Group
Nasdaq OMX
New Zealand Exchange
NYSE Euronext
Singapore Exchange
TMX Group
Osaka Securities Exchange
Australian Securities Exchange
BM&F Bovespa
BME Spanish Exchanges
BMV
Bursa Malaysia
CME Group
Climate Exchange
Deutsche Börse
Dubai Financial Market
Hellenic Exchanges
Hong Kong Exchanges & Clearing
IMAREX NOS ASA
Intercontinental Exchange
JSE Securities Exchange
LSE Group
Nasdaq OMX
New Zealand Exchange
NYSE Euronext
Singapore Exchange
TMX Group
Osaka Securities Exchange
10%
22%
0%
20%
17%
15%
82%
30%
39%
8%
17%
67%
15%
19%
12%
16%
19%
19%
-24%
20%
8%
Average growth 18.6%
32%
47%
28%
44%
74%
40%
188%
13%
247%
18%
84%
41%
40%
28%
5%
-20%
12%
-2%
14%
56%
-21%
Sector weighted average 45%
Short Interest
Short interest as % of float Change from previous month
Ratios as of
5
0.76%
4.02%
2.05%
3.15%
0.04%
2.50%
29.21%
3.72%
3.75%
1.82%
May 20
May 20
Apr 15
Apr 30
May 20
Apr 15
Apr 30
Apr 15
Apr 15
Apr 30
BM&F Bovespa
CETIP
CME Group
Climate Exchange
Hong Kong Exchanges & Clearing
Intercontinental Exchange
LSE Group
Nasdaq OMX
NYSE Euronext
TMX Group
BM&F Bovespa
CETIP
CME Group
Climate Exchange
Hong Kong Exchanges & Clearing
Intercontinental Exchange
LSE Group
Nasdaq OMX
NYSE Euronext
TMX Group
1.9%
-11.4%
-25.2%
92.7%
-13.0%
0.4%
5.9%
50.3%
-10.6%
-89.4%
Earnings Shares Last Y/Y
Ticker Date Outstanding Price in Local in US$ P/E, '10 P/E , '11 11 10 11 10 11 10 11
The exchange sector weighted average ’11 P/E is 15. 6x
Friday, May 14, 2010
16:30 GMT
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US Regulation Overhaul
The Senate passed the Wall Street reform bill calli ng for central clearing of OTC derivatives
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The US Senate approved by 59 to 39 votes the Wall Street reform bill which calls for:
• Exchange trading and central clearing of OTC deriva tives , with exemptions for non-financial firms using the contracts for hedging purposes. This provision is present in the House and Senate bills, but the Senate bill offers fewer exemptions for hedgers.
• Banks who wish to access the Fed’s discount window will be forced to spin off their derivatives desks .
• The creation of the Financial Stability Oversight Council, chaired by the Treasury Secretary to identify systemic risks, prevent “too big to fail” situations and the formation of asset bubbles. Systematically significant companies will be forced to draft a “living will” to ensure an orderly wind down of their operations in case of bankruptcy.
• The government will be able to seize and liquidate failing financial institutions to prevent future bailouts from being funded with taxpayers’ money.
• The Senate bill also mandates that banks spin off their proprietary trading desks and sell their stakes in hedge funds and private equity firms (the Volker rule), but it leaves it up to regulators to draft the details of the proposed rule.
The Senate’s legislation will have to be reconciled with the House bill passed last year before it can be signed by President Obama.
Both the Senate and House bills would benefit derivatives exchanges which could see their volumes soar once OTC derivatives move onto regulated exchanges. The clearing of interest rate swaps alone (with $437 trillion in notional outstanding) could provide clearinghouses with a $1.2 bn p.a. revenue opportunity, potentially increasing CME’s EPS by $3.87.
CBOE’s IPO
Members approved the restructuring plan and the comp any plans offer 11.4% of its shares in a $292 mn IPO
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CBOE members approved the restructuring plan, preparing for a $292 mn IPO, which would value CBOE at $2.57 bn , having $25 as the low price of the IPO range (with 11.7 mn shares being offered).
With the restructuring and demutualization, the company will begin charging access fees. CBOE released tentative pricing for trading access which will significantly increase the group’s revenues.
The initial permit fees that CBOE currently plans to implement are:
CBOE said it is currently expects to sell no fewer than 1,025 permits upon re structuring . CBOE has 944 memberships currently in use. ISE, handling a similar volume in single stock options and ETF options, currently has less than 200 electronic members and a couple dozen trading firms acting as market makers.
The SEC recently published for comment proposed rule amendments that, if adopted, would place a $0.30 per contract limit on the total access fees that an exchange may charge for the execution of an order against a quote. The SEC estimated in its release, based on December 2009 options trade data available to the SEC, that if the $0.30 fee cap were applied as proposed, the potential reduction in annual revenue to CBOE could be approximately $23.9 million. CBOE estimated it would only reach around $14.2 million.
• $7,500 per month for market maker and floor broker permits, • $2,000 per month for electronic access permits.• Additionally, CBOE intends to initially assess a $3,000 per month surcharge to market makers that trade SPX options. There are 197
members trading SPX options.• CBOE currently plans to discount these permit fees by 20% through the end of 2010.
Exchanges NewsBy company
ASX: Fortis is planning to launch a clearing facility in Australia and has been “working closely” with Chi-X Global according to the Australian Financial Review.
BM&FBOVESPA started trading Hydrous ethanol futures (ETH) and options contracts. The new cash-settled contracts have a size of 30 cubic meters; trade in R$; with expirations at the last business day of each delivery month and have a maximum daily price fluctuation of 6.5%.
Burgundy applied with the Swedish Financial Supervisory Authority for exchange status
Bursa Malaysia’ s FTSE indexes were not disseminated between 11:09 am and 12:16 pm local time. The cause of the problem was not disclosed yet.
Calastone : Redmayne-Bentley connected to Calastone’s independent cross-border transaction network.
CBOE will sell 9.6 million shares in its IPO offering on June 14, Members and brokers will sell 2.1 million shares at a minimum price of $25 per share, or $2.57 billion, according to a recent regulatory filing.
CBOE members will vote today on the restructuring plan to demutualize and go public.
Chi-X Australia appointed Mike Aikins as Chief Technology Officer and Andrew Walton as Business Development Manager. Mr. Aikins was previously Head of Telecommunications, CTO and Lead Architect for the ASX and Mr. Walton has 10 years of project management experience in IT and business development of trading systems, including roles at UBS, BNP Paribas and the ASX,
Citi launched a new collateral management service offering exposure monitoring, margin calling, collateral optimization and rehypothecation. The company appointed Rajen Shah as head of the new service; he previously served as product executive-global custody at JPMorgan.
Clearstream and Luxembourg’s central Bank launched LuxCSD, a new central securities depository service that will provide issuing and central settlement and custody services for securities of all types, incorporated in Luxembourg. The venture will be jointly owned by Clearstream and the BCL and operations are planned to start in the first half of 2011.
Compagnie Financiere Tradition acquired a 45% stake in Finarbit for an undisclosed amount. Tradition's Swiss subsidiary and Finarbit will collaborate on an operational level to further develop both companies' Swiss based operations.
CME will clear 12 new commodity shipping routes as well as backstop ten new Worldscale-based tanker accords.
CME delayed the launch of CME Clearing Europe and augmented its line up to include energy products and other asset types, including CDS. CME Clearing “revised its plans and proposes to offer clearing services for OTC energy products in the first instance. It intends to introduce clearing services for CDSs at a later stage,” according to a Office of Fair Trading notice to members confirmed by CME.
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CME sent a letter to clearing members admitting it experienced problems in handling message flow after the May 6 trading session. The post-trade message delays had no impact on trade matching and order routing according to the company.
CME began tracking the spread between its July and September wheat futures contracts as part of the "variable storage rates" (VSR) plan.
DB1: Xetra started trading five new index ETFs issued by ComStage and six ETFs issued by db x-trackers.
DB1 indicated that Germany’s ban on naked short-selling is “not beneficial” and is “inconsistent procedures in European countries regarding short selling bans are not beneficial for the financial center Germany. Outside Germany, naked short selling is still authorized and thus possible. This is opposed to the intended level playing field in Europe,” a company statement read.
DFM: NASDAQ Dubai April equities trading value increased +83% Y/Y to $94 mn while equities volumes declined -15% Y/Y to 168 mn shares.
DFM and ADSX are holding merger talks according to The National. ADSX deputy CEO, Rashed Al Baloushi, said “the exchange has to be big enough to reflect the real economy of the country … I very much wish to see the exchanges come together.”
European Energy Exchange (EEX) admitted GASPOOL Balancing Services as a trading participant.
ELX released a new simplified two-tier fee schedule: $0.35 per contract bundled fee including exchange and clearing and $0.18 per contract for users with ADV above 1,200 contracts.
Hellenic Exchanges reported 1Q10 EPS of €0.15 (+69% Y/Y), on revenues of €19.2 mn (+50% Y/Y) and operating expenses of €5.3 mn (-7% Y/Y). 1Q10 traded value increased +75% Y/Y to €12.2 bn.
Hellenic Exchanges approved a €0.22 dividend relating to 2009 earnings.
HKEx Chairman, Ronald Arculli, said the exchange is not considering a change in its policies regarding short selling following Germany’s move.
ICAP plans to launch a fully electronic, dealer-to-dealer, trading platform for interest rate swaps.
ICAP FY’10 adjusted EPS from continuing operations rose 1% Y/Y to GBp 35.1. Revenues were up 1% Y/Y to GBP 1.605 bn, with voice and electronic broking flat Y/Y at GBP 1,036 mn and GBP 252 mn , respectively, post trade and information up 18% Y/Y to GBP 142 mn and new businesses up 3% to GBP 175 mn. ICAP showed strong numbers in FX, commodities and emerging markets revenues and lower interest rate and equities revenues.
ICE: Cheiron Trading registered with ICE Futures Canada as a Liquidity Provider.
ICE Futures Canada registered Macquarie Commodities Trading as a general trading participant.
JSE April trades on the equities market increased +18.2% Y/Y to 7.6 mn valued at more ZAR219.2 bn.
Exchanges News (cont’)
10
Knight announced a joint marketing alliance with Houlihan Lokey to provide investment banking, capital markets and sales and trading services to their clients. the alliance will focus on equity and fixed-income underwriting.
Citadel and Knight experienced breakdowns during market plunge on May 6, according to WSJ. Citadel ceased taking orders in several securities and Knight experienced delays in less than 1% of the orders handled.
Knight indicated that about 99.6% of orders on May 6 were executed without interruption. Affected trades were from retail brokers; trades from mutual funds and other institutions were not delayed. “We arguably provided more liquidity to our clients than anybody did that day (…) The order routing slowed down when the market was rebounding. When we noticed it, we flipped to a backup system and everything was restored to normal operating procedures,” CEO Thomas Joyce commented. A daily record for US equity volume was set with volume of $71.6 bn and 9.3 mn trades.
London Metal Exchange started cash trading in molybdenum and cobalt contracts. “Initial trading is encouraging and suggests the market is positively engaging with the new contracts,” said Chris Evans, Head of Business Development.
LSE CEO Xavier Rolet said “the biggest challenge -for MiFID II- is transparency and the balance between retail and institutional needs. Without institutional crossing networks some of the latent wholesale liquidity would go unexecuted or be simply more difficult to execute. We should be careful to ensure that the differing needs of wholesale and retail participants are properly recognized.”
LSE will start trading on its new Millennium platform in September and Turquoise may move in August according to the WSJ.
LSE FY10 EPS declined 19% Y/Y to GBp 59.6, in line with consensus estimates. Revenues were down 6% Y/Y to GBP 628 mn, due to 23% lower trading fees, partially offset by 3% higher post trade services and 4% higher information and IT revenues. Analysts were expecting revenues of GBP 620 mn. Expenses increased 5% Y/Y to GBP 350 mn due to higher compensation and amortization costs related to the acquisitions of Turquoise MTF and MilleniumIT.
MasterCard reached a settlement with Heartland Payment Systems in connection with Heartland’s previously announced data security breach. Under the agreement Heartland will fund up to $41.4 mn of “alternative recovery offers” that will be made to eligible MasterCard card issuers to settle their claims.
MasterCard called House and Senate conferees to reject an amendment to the Financial Regulatory Reform Bill proposed by US Senator Richard Durbin (D-Illinois) that would limit interchange fees. VISA said it is disappointed with the proposed amendment, which was “written and backed by lobbyists representing the nation's largest retailers” and “could significantly harm consumers."
MF Global reported GAAP EPS loss of -$0.78 on net revenues of $240.5 mn (-4.2% Q/Q; -6.3% Y/Y) and expenses of $357 mn (+40.1% Q/Q; +2.1% Y/Y) including severance costs and the acceleration of previously granted sign-on bonus and other retention payments of $29.1 mn. The company will review its compensation structure, including the elimination of future service requirements on the majority of previously granted sign-on bonuses and other retention payments which will result in a one-time write-off of upfront compensation expense; a global hiring freeze; set compensation targets; reduce workforce by 10 to 15% in 2Q10 and other indicatives.
Exchanges News (cont’)
11
MGEX will reincorporate as a Delaware non-stock corporation, pending regulatory review.
NASDAQ OMX: GlobeNewswire launched its full-service offering for Search Engine Optimization (SEO) of press releases.
NASDAQ OMX delayed the closure of NEURO to July 1st to complete customer migration to Equiduct.
NASDAQ OMX and SunGard launched SunGard's APT, a new risk analytics for a range of selected NASDAQ OMX indexes that provides risk modeling, reporting, attribution and scenario analysis capabilities.
NASDAQ OMX UK electricity market, N2EX, will charge no annual clearing membership fee and will provide a 50% reduction to the annual trading membership fee for 2010. This will apply to all members joining N2EX before 1 September 2010 as well as to all existing members. The primary objective of N2EX is to open up the UK wholesale markets to a wider spectrum of participants.
NASDAQ OMX Nordic will extend the European harmonized tick sizes to cover all Nordic Large Cap shares traded on NASDAQ OMX Nordic exchanges starting June 7. This aims at minimizing implicit transaction costs and increasing liquidity.
Nomura nominated former LSE CEO Clara Furse and Lord Colin Marshall, former chairman of British Airways to serve as outside directors.
NYX: NYSE Euronext added 93 new eligible stocks to the Deferred Settlement Service “long-only” segment. Effective May 26, all shares traded continuously on NYSE Euronext in Paris with an ADV of more than €100,000 will be eligible.
NYX CEO Duncan Niederauer said circuit breakers “need to be applied to all equity markets, not just some of the markets."
NYX: NYSE Technologies established Knight Capital as a destination on the Secure Financial Transaction Infrastructure network.
NZX 1Q10 profits declined -3% Y/Y to NZ$2.9 mn on a revenue increase of +46 % Y/Y and a more than double of expenses.
NZX announced the resignation of Geoff Brown as Head of Market Products.
NZX appointed Fiona Mackenzie as Head of Markets. Ms. Mackenzie was previously Head of Liquidity and Traded Products
Pink OTC Markets appointed Todd Graber as CFO. Mr. Graber was previously CFO of Quadriserv.
Pink OTC Markets 1Q10 net income increased +62% Y/Y to $0.96 mn or $0.09 per share on revenues of $6.6 mn (+23% Y/Y).
RTS Realtime Systems launched RTD Tango Trader, which “combines the advantages of “point and click” and high-speed algorithmic trading”.
Santiago Stock Exchange certified Fidessa to provide access to the exchange that will allow to route orders electronically via Fidessa’s trading platform or via Fidessa's FIX connectivity.
Exchanges News (cont’)
12
SGX signed a MOU with the Financial Affairs Office of the Chongqing Government in China that aims to promote the listing of Chongqing enterprises on the exchange. The FAO will provide guidance to potential listing aspirants and facilitate regulatory processes and approvals from relevant Chinese authorities.
The Stock Exchange of Thailand , the Market for Alternative Investment, the Bond Electronic Exchange and Thailand Futures Exchange will be closed for the rest of week after the main stock exchange building was set on fire by protesters yesterday.
TMX: The Montréal Exchange will start listing serial and quarterly mid-curve options on BAX futures on May 21.
Turquoise announced a new pricing promotion to take effect on 1 June. Clients that increase their passive trading activity versus their Q1 2010 average will qualify for the scheme. The first €2.5 bn per month will receive a rebate of 0.28bps, the following €3.5 bn a 0.48bps rebate, and the following €4 bn a 0.28bps rebate. New members can also qualify for the rebate as long as they exceed a passive value traded of €1 bn. Turquoise's aggressive fee remains at 0.28bps.
VISA deposited $500 mn into the litigation escrow account previously established under the company's retrospective responsibility plan.
List will open a new operating subsidiary in Warsaw and appointed Wojciech Kaszycki to manage it. Mr. Kaszycki was previously a distributor for List in Poland.
Asset Managers
Eaton Vance reported 2Q10 EPS of $0.29 (-22% Q/Q; +38% Y/Y) on revenues of $273 mn (+38% Y/Y). AUM reached $176.2 bn (+9% Q/Q; +39% Y/Y) on net inflows of $5.3 bn.
EFG International CEO, Lukas Ruflin, indicated that the private-banking unit started the year slow, but “from March, the development was as expected,” according to Finanz und Wirtschaft.
Franklin Resources priced $300 mn of 2% Notes due 2013 at 99.823%, $250 mn of 3.125% Notes due 2015 at 99.890% and $350 mn of 4.625% Notes due 2020 at 99.889%. The offering will close May 20 and Banc of America and Morgan Stanley are will act as joint book-runners. The Company will use the net proceeds for general corporate purposes.
Goldman Sachs Asset Management is trying to grow its 401(k) business, offering alternative asset funds and target-date funds providing guaranteed income. GSAM currently has about $840 bn in AUM.
IVZ: Powershares will launch the International Corporate Bond Portfolio ETF.
Janus ’ BoD rejected last year two bids from MassMutual (who manages the Oppenheimer fund family) and Franklin Resources according to the Denver Post. Janus turned down a $13.50 per share bid from BEN (a 50% premium to market prices at the time).
Exchanges News (cont’)
13
Janus plans to add performance fees to eight mutual funds (Forty, Twenty, Global Opportunities, Overseas, Aspen Forty, Aspen, Aspen Global Opportunities, Aspen Overseas and Aspen Twenty). On June 10 shareholders will vote to allow the company charge a fixed 64 bps plus 15 bps based on performance over a 36 month period.
JP Morgan Asset Management launched the Asian Infrastructure & Related Resources Opportunity Fund invest in toll roads and other transportation assets as well as power generation and other infrastructure projects in Asia. The fund raised $858.6 mn in seed money.
Jupiter Asset Management plans a £250 mn IPO on LSE next month, which could potentially value the £20 bn fund manager at as much as £1 bn.
Legg Mason and Grail Advisors will introduce a new actively managed ETF, the Grail Western Asset Enhanced Liquidity ETF that will invest in short-term debt.
UMB Financial : UMB Fund Services acquired the managed account solutions business of JP Morgan Worldwide Securities Services (WWS) for an undisclosed amount. WWS provides back and middle office services for retail managed accounts of asset managers.
Man Group acquired GLG Partners for $1.6 bn. Shareholders will receive $4.50 in cash for each share (a 55% premium to Friday’s close), while GLG partners (holding 50% of the company’s shares) will receive Man Group shares valuing each GLG share at $3.50 (a 20% premium to Friday’s close). GLG had $23.7 bn in AUM at the end of March.
Northern Trust filed with the SEC to launch fixed income ETFs.
SEI’s Global Wealth Services has been selected by PFP Group to administer its discretionary business.
State Street Global Advisors added nine Asian currencies to a program that helps institutional clients control their currency risks. The currencies are those from China, Thailand, Hong Kong, Indonesia, India, the Philippines, Singapore, South Korea and Taiwan.
State Street was appointed by Norges Bank as administrator for its oil fund’s real estate portfolio.
TIAA-CREF appointed Scott Wise as CIO and endowment management head of its newly created endowments and foundations business. Wise previously served as CEO of Rice University’s endowment fund.
Waddell & Reed was pointed out as a key firm selling a large amount of “e-mini” futures contracts during the market plunge on May 6. CFTC Chairman Gary Gensler commented that the company didn’t do anything wrong and only acted as a “bona fide hedger”. WDR accounted for nine percent the e-mine contracts traded during the critical 20 minute window and CME "found no evidence of improper trading activity or erroneous trades by CME Globex customers.“
Discount Brokers
E*TRADE April DARTs increased +11% M/M to 181,556, net new brokerage accounts totaled 17,627 and ending brokerage accounts 2.6 mn (+2% Y/Y). Total customer assets increased +2.3 % M/M (+36% Y/Y) to $162.4 bn on net new assets of $0.2 bn.
Exchanges News (cont’)
14
optionsXpress April retail DARTs increased +13.7% M/M to 33,300, with 3,200 new accounts, client assets increasing +3.9% M/M (+42% Y/Y) to $7.8 bn and margin balances increasing +3.9% M/M to $209 mn.
TD Ameritrade April DARTs increased +15.1% M/M to 426k; total client assets increased +2.6% M/M to $350.5 bn; avg. spread based balances increased 1.3% M/M to $54 bn and avg. fee-based balances increased +4.2% M/M to $64 bn.
By regulatory bodies
Venezuela temporarily halted currency trading while it sets up an electronic platform to eliminate speculation. The Venezuelan government is looking to limit FX fluctuations.
The Canadian Securities Administrators (CSA) and the Investment Industry Regulatory Organization of Canada (IIROC) will analyze the risks involved in electronic trading and will discuss standardization of electronic trading parameters among exchanges and ATS.
The CFTC’s technology advisory commission will meet on July 14 to discuss issues in high-frequency trading such as equal access to co-location.
The CFTC approved the reestablishment of a Technology Advisory Committee (TAC) that will be charged with keeping the Commission abreast of new technologies to better oversee the derivatives markets. Commissioner Scott O’Malia was appointed as Chairman of TAC for a two-year term. “The market events of May 6th clearly highlight that technology drives the structure and function of the markets … We must develop a deep understanding of technological innovation and what it means for the markets we oversee,” O’Malia said.
US securities exchanges and FINRA will file proposed rules today to pause trading in certain individual stocks if prices move down 10% or more in a five-minute period. The SEC said the circuit breaker would give the markets the opportunity to attract new trading interest in an affected stock, establish a reasonable market price and resume trading in a fair and orderly fashion. Initially, the new rules would be in effect on a pilot basis through Dec. 10, 2010.
FOA CEO Anthony Belchambers said he opposes a global tax on derivatives transactions. German Chancellor Merkel said she would work to build support for a global tax on financial markets."What Germany will have to decide is will we go it alone, and will the Swedish experience have any warnings in doing that," Belchambers said.
German regulator BaFin banned naked short selling of the ten largest financial stocks (including Deutsche Boerse and the largest banks and insurance companies), European sovereign debt and CDS, effective today and programmed to remain in place until March 31, 2011.
The Polish National Depository for Securities appointed KDPW_CLEARPOOL as transaction settlement guarantor.
SEC: Goerge Canellos, of the NY office, plans to scrutinize institutional sales. “The SEC is a little less willing to assume that if the product is sold to institutional investors we should be a little less concerned about it," Canellos said in an interview with Bloomberg Television.
The SEC and a group of US exchanges are considering market-wide circuit breakers for various time frames that will be triggered if the market falls 5%, 10% and 20%.
Exchanges News (cont’)
15
The SEC and CFTC released a joint report with preliminary findings regarding the market events of May 6. The report cites the withdrawal of liquidity by electronic market makers and the use of market orders, including automated stop-loss orders. The report also mentions linkages between the decline in the prices of index ETFs and the E-mini S&P 500 futures, on the one hand, and simultaneous and subsequent waves of selling in individual securities, on the other. In addition, “the liquidity mismatch may have been exacerbated by disparate trading conventions among various exchanges, whereby trading was slowed in one venue, while continuing as normal in another.
A joint CFTC-SEC Advisory Committee on Emerging Regulatory Issues will hold its first meeting on May 24 to discuss the preliminary findings of the market events of May 6. Joseph Stiglitz will be a member of the Joint Committee.
SIFMA CEO Tim Ryan said on the Senate bill on financial regulation that "there are several provisions that would undermine the original goals for reform by creating unintended consequences that could have a negative impact on our economy. Provisions like the so-called Volcker Rule would impose sweeping new restrictions on size and activities that were not a cause of the financial crisis."
United Nations Framework Convention on Climate Change (UNFCCC) appointed Christiana Figueres as Executive Secretary. Ms Figueres was previously Vice Chair of the Carbon Rating Agency and a member of the CRA rating committee.
Senate Banking Commission Chairman Chris Dodd and Agriculture Committee Chairman Blanche Lincoln “told the Financial Times there was room to negotiate on a proposal that would force banks to spin off their swaps desks.
US Senator Chris Dodd (D -Conn) filed an amendment to the OTC derivatives bill to ban certain "naked" CDS trading. Under the terms of the amendment, the government will have the ability to waive the restrictions in part or in whole. By a vote of 57 to 38, the Senate rejected a stricter version of the proposal introduced by Democratic Senator Byron Dorgan
US Senate Democrats intend to vote on the OTC derivative bill as early as this Wednesday.
US Senator Chris Dodd withdrew an proposed amendment to spin off banks’ derivatives trading desks.
The US Senate approved the the Financial Regulatory Reform Bill in a 59-to-39 vote. The bill will be reconciled with the one passed by the House of Representatives last December, before being sent to the President.
Exchanges News (cont’)
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US Volume Tracker
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ELX PureTrading
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