London!...They're all at it, decouple location, LME...Iron Ore

G’day All!

This blog posting coming from London....and directly from my Google account.

I’m getting ready for a New Years Resolution to migrate away from dependency on Outlook contacts onto something more virtual and portable…and for now that is gmail.

So, for those that are picking this up via the blogspot or LinkedIn just send me an email if you want to rejoin the blog roll or list of people whom I “push” the blog out to on a Friday night.

Lots, as ever, going on in Europe. And as ever not enough time to cover it all.

NYSE, where Patrick Birley left this week, along with CME and Nasdaq all doing their thing.

I put the Singapore story in just because of the stupidity of it. The trading center of a commodity needs to have nothing to do with delivery points. I love the fact that Cork in Ireland used to be the epi-centre of the butter market. Today, Liverpool, UK (of Beatles fame) is the world centre for cotton trading. I see about as many cotton fields in the UK as I do open cut mines (think LME).

The LME numbers are eye-watering. 2.2byn for a 12myn profit business. Ouch.

And Greece loses a little of its effervescence.

I put the LiquidNet story under policy. Just because it continues to show the negative HFT sentiment that is still being fuelled out in the market.

In the Aussie markets there is a perception that all is well. Yes, a commodity boom covers over many ills. A lot of attention is placed on the FX and interest rates but not a lot of focus on the Iron Ore price which I think is a great bell weather for the nation. If China catches a cold (or find alternate supplies for their commodities), Australia will get a strong bout of pneumonia. All was rosey in the land down under and the Aussie battler is not battling too hard when iron ore is over $150/tonne. If iron ore drops below $100 it’ll be the banks that are battling.

Have a great week-end all!

S  

PLATFORMS

CME Europe Limited (CMEEL) application to become a Recognised Investment Exchange (RIE) under section 287 of the Financial Services and Markets Act 2000
CME Europe Limited (CMEEL) has made an application to the Financial Services Authority (FSA) to become a Recognised Investment Exchange (RIE) under section 287 of the Financial Services and Markets Act 2000.
CMEEL is a UK subsidiary of the Chicago Mercantile Exchange Inc. (CME Inc.) which proposes to establish a London-based derivatives exchange offering foreign exchange (FX) derivatives and expanding into other asset classes over time. CMEEL expects to launch the exchange in mid-2013.
http://www.oft.gov.uk/OFTwork/consultations/cmeel/

Nasdaq’s U.K. Derivatives Platform Seeks 10% Market Share
Nandini Sukumar - Bloomberg

Nasdaq OMX Group Inc. (NDAQ), which is setting up a derivatives trading system in London to compete with Europe’s two biggest futures exchanges, will seek more than 10 percent market share in its first year of operation.

“Success is at least 10 percent,” Nasdaq Chief Executive Officer Robert Greifeld said in an interview in London yesterday

http://www.bloomberg.com/news/2012-10-11/nasdaq-s-u-k-derivatives-platform-seeks-10-market-share.html

Singapore Good Place for Water Derivatives Exchange
Bloomberg
Singapore would be a natural setting for a water derivatives exchange and it’s in country’s interest to set one up, the Straits Times reported, citing carbon-trading pioneer Richard Sandor.
http://www.bloomberg.com/news/2012-10-11/singapore-good-place-for-water-derivatives-exchange-times-says.html

Bucking the trend, LME looks at expanding floor trading
floor supporters hope that the new owner - the Hong Kong Exchanges and Clearing Ltd (HKSE) (0388.HK) - will attract ring-dealing members from China. For its part, the HKSE is eager to boost income after it paid $2.2 billion to beat out IntercontinentalExchange (ICE.N) to buy the LME, a steep premium for a market that turned in a profit of $12 million last year.
http://www.reuters.com/article/2012/10/11/us-lme-trading-open-outcry-idUSBRE89A07O20121011

Greece's biggest company, Coca Cola Hellenic, is leaving the country
Reuters

"The Greek bourse is losing a very good company and the London Stock Exchange is gaining a very important group," said Hatzidakis. "It's very bad news for the Greek economy and bourse."
For brokers on the stock exchange, losing a stock that made up 8 percent of daily turnover this year will be unwelcome - especially since total volumes are down by half since last year.
http://www.reuters.com/article/2012/10/11/us-greece-coke-idUSBRE89A17P20121011

CLEARING

Analysis: Commodity exchange battleground switches to "swaps"
Ann Saphir | Reuters
Chicago-based giant CME Group Inc. has lost ground in the estimated $1.2 billion-a-year business of guaranteeing over-the-counter swaps to arch-rivalIntercontinentalExchange Inc. in recent years, company data show, as the Atlanta-based upstart offered cutting-edge trade technology
http://news.yahoo.com/analysis-commodity-exchange-battleground-switches-swaps-231528137--finance.html

trueEX to Use CME Clearing to Power Swaps Execution
Press Release
trueEX, LLC, an electronic execution platform for the global interest rate swaps (IRS) market, announced today that it has executed a clearing agreement with CME Clearing. trueEX provides execution and processing services as a CFTC-regulated Designated Contract Market (DCM) for the global IRS market.
http://in.finance.yahoo.com/news/trueex-cme-clearing-power-swaps-120000719.html

CFTC Staff Responds to Frequently Asked Questions on the Reporting of Cleared Swaps
Today, Commodity Futures Trading Commission (CFTC) staff is responding to frequently asked questions from market participants and other interested parties on the reporting of cleared swaps as required under part 45 of the Commission’s regulations.

http://www.cftc.gov/PressRoom/PressReleases/pr6381-12

POLICY

Speech By Adair Turner, Chairman, FSA City Banquet At The Mansion House, London
http://www.mondovisione.com/media-and-resources/news/speech-by-adair-turner-chairman-fsa-city-banquet-at-the-mansion-house-london/

Swap Transparency Hailed by Gensler as Rules Begin Oct. 12
Bloomberg
JPMorgan Chase & Co., Goldman Sachs Group Inc. and the $648 trillion swaps market will enter a new era of transparency when Dodd-Frank Act regulations for dealers begin taking effect tomorrow.

http://www.bloomberg.com/news/2012-10-12/swaps-rules-u-a-e-debt-basel-deadline-compliance.html

Liquidnet in talks to expand European partnerships

In recent months, regulatory focus on high-frequency traders has intensified, with both US and European exchanges mulling tighter controls over the activity.

Merrin said: "With every regulator grappling with how to deal with high-frequency trading, we view ourselves as exchanges' instant solution to that problem. We are HFT-free and provide access to the largest pool of institutional liquidity money."

http://www.marketwatch.com/story/liquidnet-in-talks-to-expand-european-partnerships-2012-10-11?siteid=rss

STUFF

The lore of ore
The most important commodity after oil deserves more attention than it gets
http://www.economist.com/node/21564559

HOUSES AND HOLES ON IRON ORE
This is more plausible but is still pretty rosy. My own view is that the global zombie will shuffle forward so long as Europe fails to abandon its fiscal suicide pact so I see 2013 steel output as flat. Hence, an average iron ore price of $110 is more likely in the first half and then falling again in the second. Same for metallurgic coal. Australian production expansion will need further rationalisation in both.
There is also a potted history of iron ore at The Economist today but it is surprisingly free of useful data and hence its conclusions are pretty useless.
http://www.macrobusiness.com.au/2012/10/daily-iron-ore-price-update-8/?utm_source=Media+List&utm_campaign=545475bf20-RSS_DAILY_MAILCHIMP_CAMPAIGN&utm_medium=email

KICKSTARTER COMES TO THE UK
Crowdfunding site Kickstarter will launch in the UK at the end of the month, providing a platform for Brits to raise funds for projects.
Full story: http://www.finextra.com/News/Fullstory.aspx?newsitemid=24162