Much hoopla on Monday from the FCA, Britain’s newly-fashioned regulator, as it meted out a $903,176 fine to Michael Coscia, a dirty HFT operator caught manipulating crude oil futures back during the autumn of 2011.
We learn that…
Between 6 September 2011 and 18 October 2011 Coscia used an algorithmic programme of his own design to instigate an abusive trading strategy known as “layering”. During this time, Coscia placed thousands of false orders for Brent Crude, Gas Oil and Western Texas Intermediate (WTI) futures from the US on the ICE Futures Europe exchange (ICE) in the UK.
Full details are available in the final notice, but you’ll want to click on the image below for an “animated example of Mr Coscia’s trading…” Read more
Attention over-the-counter (OTC) energy traders who think there’s no prominent high frequency trading (HFT) presence in their section of the market.
A Tabb Group research piece on how HFT practices are likely to creep into credit default and interest rate swaps once the market becomes centrally cleared, automated and standardised has made a striking discovery over the course of its data gathering. Read more
ICE Futures Europe, home of the Brent oil benchmark, has started to publish detailed information about the different types of traders and speculators buying and selling Brent and gasoil futures and options, the FT reports. The London-based exchange, owned by IntercontinentalExchange of Atlanta, follows moves towards greater transparency by the New York Mercantile Exchange, home of the benchmark West Texas Intermediate oil contract, which has published a weekly “commitments of traders” report for years. ICE Futures is the first European-based commodities exchange to publish a “commitments of traders” report. But others are expected to follow in the next few months. London-based Euronext Liffe is planning to release similar information for its benchmark soft commodities futures contracts, including cocoa.
Nasdaq OMX and the IntercontinentalExchange have abandoned their $11.3bn break-up bid for NYSE Euronext after a US competition regulator threatened to sue the companies to block the potential deal, the FT reports. The Department of Justice said that combining the NYSE’s stock market operations with Nasdaq’s would have “substantially eliminated competition” in listings, trade reporting and other areas. Nasdaq and ICE were seeking to derail an agreed merger between the NYSE and Germany’s Deutsche Börse but on Monday withdrew their proposal, adding that they were “surprised and disappointed” by the DoJ’s decision. The WSJ reports that under the Frankfurt company’s pending deal to buy Big Board parent NYSE Euronext, US stock trading is likely to be eclipsed by faster-growing businesses like derivatives and futures trading, much of it outside the US.
Nasdaq OMX and the IntercontinentalExchange have abandoned their $11.3bn break-up bid for NYSE Euronext after a US competition regulator threatened to sue the companies to block the potential deal, reports the FT. The Department of Justice said that combining the NYSE’s stock market operations with Nasdaq’s would have “substantially eliminated competition” in listings, trade reporting and other areas. The failed deal is likely to leave Nasdaq and Ice on the prowl for new prey, argues Reuters.
Nasdaq OMX, the US exchange group, has offered to restore the name “Paris Bourse” to France’s stock market, if it wins the battle for control of NYSE Euronext, current operator of the Paris exchange, reports the FT. The disclosure, by Nasdaq chief executive Bob Greifeld, is the latest move in an intensifying push by Nasdaq and its partner IntercontinentalExchange to persuade NYSE shareholders of the merits of its counter-bid for NYSE Euronext. Nasdaq and ICE are trying to derail the $9.4bn agreed merger between NYSE Euronext and Deutsche Börse, unveiled in mid-February. This week Greifeld met arbitrage hedge funds in efforts to persuade shareholders to vote against the Deutsche Börse deal. Greifeld and Jeff Sprecher, ICE’s chief executive, have also visited Europe in recent weeks to sell their deal to regulators and the French and Dutch authorities.
Investors looking to profit from competing bids for NYSE Euronext are hesitant to build large positions until closer to a July shareholder vote on its agreed tie-up with Deutsche Börse, according to the FT. While NYSE’s board has twice rebuffed a rival offer by Nasdaq and ICE, the two intend to make a hostile offer. However, hedge funds that would normally be attracted to arbitrage the gap between the two offers have failed to show up. They cite the likelihood that Deutsche Börse may offer inducements to close the 11 per cent gap – as of Friday’s close – between the offers, in addition to uncertainty over how antitrust regulators will view the two deals.
Nasdaq OMX and IntercontinentalExchange approved a direct offer to acquire NYSE Euronext late on Tuesday, formalising their hostile bid for the biggest US market operator and taking it to shareholders, reports Bloomberg . The exchange offer, designed to circumvent NYSE Euronext directors who have twice rejected the proposal, carries the same price as the original $11.3bn bid announced April 1. The NYSE owner has said it is prefers its February merger agreement with Deutsche Boerse, valued about 7.7% below the Nasdaq bid. Nasdaq CEO Bob Greifeld said the exchange offer “should convince the NYSE Euronext board of the seriousness of our intentions.”
Nasdaq OMX and IntercontinentalExchange have moved closer to making a hostile bid for NYSE Euronext, confirming they would launch an offer for the exchange this month as the pair attempt to derail the US exchange’s agreed deal with Deutsche Börse, reports the FT. Nasdaq and ICE said on Monday the two boards had approved a plan to take their $11bn cash-and-stock break-up bid directly to NYSE shareholders. In April, the exchanges proposed to split the NYSE’s equities and futures businesses, just weeks after NYSE had agreed an all-stock merger with Deutsche. NYSE’s board has twice rejected the rival proposal, which is higher than the Deutsche Börse bid. DealBook notes growing ire among some NYSE shareholders at the company’s refusal to meet with Nasdaq-ICE, while DealJournal says the notion is ‘patently ridiculous’.
Friday’s stunning announcement from the EU Commission below:
The European Commission has opened two antitrust investigations concerning the Credit Default Swaps market. CDS are financial instruments meant to protect investors in the event a company or State they have invested in default on their payments. They are also used as speculative tools. In the first case, the Commission will examine whether 16 investment banks and Markit, the leading provider of financial information in the CDS market, have colluded and/or may hold and abuse a dominant position in order to control the financial information on CDS. If proven such behaviour would be a violation of EU antitrust rules. In the second case, the Commission opened proceedings against 9 of the banks and ICE Clear Europe, the leading clearing house for CDS. Here, the Commission will investigate in particular whether the preferential tariffs granted by ICE to the 9 banks have the effect of locking them in the ICE system to the detriment of competitors. Read more
Nasdaq OMX and IntercontinentalExchange are set to go hostile in their bid for NYSE Euronext after shareholders raised pressure on the NYSE parent for a better deal, reports Reuters. Nasdaq and ICE are expected to soon take their $11.1bn bid directly to NYSE’s shareholders through a tender offer. The move is seen as the next logical step for Nasdaq and ICE after being rebuffed twice by NYSE, which favours its existing $10.1bn deal with Germany’s Deutsche Boerse. A direct appeal to shareholders through a tender offer would intensify pressure on NYSE. Earlier, the FT reported that Deutsche Börse executives for the first time publicly backed statements by Duncan Niederauer, NYSE chief executive, that at least €100m of extra synergies can be extracted from their planned merger. That will quiet speculation the two sides had not previously agreed on what cuts to make. Meanwhile, says DealJournal, Niederauer “has some serious sweet-talking to do”.
Nasdaq OMX and ICE have made a bold move to push NYSE to reopen takeover talks, unveiling a commitment to pay a $350m reverse break-up fee and touting $3.8bn in committed financing, according to the FT. The antitrust review that the fee is meant to salve has nevertheless already begun. The Justice Department is querying market participants about the implications of a Nasdaq-NYSE tie-up, Bloomberg reports. Nasdaq’s chief executive said he had met with the Justice Department twice in the last week and would make a formal filing to regulators soon, the WSJ reports.
Nasdaq OMX and IntercontinentalExchange have offered a $350m reverse break fee and lined up $3.8bn in committed bank financing as part of a fresh approach to buy NYSE Euronext, after the operator of the US exchange rebuffed their initial bid in favour of a merger with Deutsche Börse, reports the FT. The move highlights Nasdaq-ICE’s confidence, only weeks after unveiling their counter-bid, that their proposal stands a better chance of passing antitrust scrutiny faster than the German-US deal can overcome antitrust issues in Europe.
NYSE Euronext will likely ask Nasdaq OMX for a $2bn reverse break-up fee before it is ready to engage in talks about merging, people familiar with the matter have told Reuters. NYSE wants guarantees that any deal would survive antitrust scrutiny, but its request far outweighs the amount Nasdaq is prepared to offer, of around $250m, the sources added. Nasdaq’s joint bid with ICE suffered rejection by NYSE’s board last week over antitrust issues. NYSE’s $5bn valuation of its derivative business also contrasts with Nasdaq’s $6.3bn offer, creating concerns over taxable gains in the deal, a source said.
The chief executives of NYSE Euronext and Deutsche Börse are presenting shareholders with a defence of their proposed tie-up to fend off interest in a rival bid to break-up the deal by Nasdaq OMX and the IntercontinentalExchange, reports the FT. Following the NYSE Euronext board rejection on Sunday of the joint Nasdaq-ICE $11.3bn cash and share bid for the company – versus the $9.7bn value of the Börse all-share offer for NYSE – Duncan Niederauer, chief of NYSE Euronext, and Reto Francioni, Deutsche Börse chief, plan to meet shareholders. Robert Greifeld, Nasdaq chief executive, and Jeff Sprecher, ICE chief executive, have already been meeting shareholders. The rival bidders said on Sunday they would step up their outreach to shareholders.
The board of NYSE Euronext unanimously voted on Sunday to reject the offer from Nasdaq OMX and the Intercontinental Exchange to break up its planned merger with Deutsche Börse, setting the scene for battle over the largest US stock markets, reports the FT. Meanwhile Duncan Niederauer, chief executive of NYSE Euronext, promised extra cost savings in the Deutsche Börse-NYSE proposed all-stock deal, and Reto Francioni, Deutsche Börse chief, said other European exchanges could be included in the deal. In a statement, the NYSE Euronext board said the deal with Deutsche Börse, in train for several years, would “create substantially more long-term value for shareholders, and is significantly more likely to close”. Francioni, who would chair the joint group, told Swiss media that Swiss and Spanish exchanges might also join the merged group. The WSJ offers a ‘scorecard’ to keep tabs on the escalating ‘battle for the Big Board’.
Shareholders in the NYSE Euronext face a potentially interesting decision, says the FT. The $11.3bn counterbid by Nasdaq OMX and IntercontinentalExchange for the NYSE, launched on Friday, offers investors a premium of about 19% based on Thursday’s stock price, to the deal agreed with Deutsche Börse in February. But where New York’s tie-up with Frankfurt promised global scale, emerging markets exposure and a strong presence in derivatives, Nasdaq and ICE are instead offering old-fashioned consolidation, based on cost-cutting. As Lex notes, “this battle has only just begun”.
Nasdaq OMX and IntercontinentalExchange have been talking in recent days on a bid to grab NYSE Euronext from German rivals, but the best price for the deal remains an obstacle, the WSJ reports. The two sides have agreed that NYSE’s price would have to be greater than $40 per share, roughly $10.5bn. Deutsche Börse’s mooted merger with NYSE values the company at $35.75 a share. Analysts have said that the two rival bourses would have to bid at least $43 a share in a probable cash-stock deal. In addition to doubts over the maximum price that should be paid for NYSE, talks between Nasdaq and ICE have been complicated by ICE’s pressing to make a combination with Nasdaq exclusive.
Nasdaq OMX and IntercontinentalExchange have continued talks in recent days about a possible joint bid for NYSE Euronext, but the two companies still are working to overcome hurdles, reports the WSJ, citing people close to the matter. One of the biggest sticking points is the price of a bid for NYSE Euronext, which announced in February an agreement to be acquired by Frankfurt’s Deutsche Börse. Both ICE and Nasdaq have tentatively agreed they would need to pay more than $40 a share, or roughly $10.5bn, for NYSE Euronext, and that the value of the businesses Nasdaq wants represent slightly more than half the value of the company, the people said.
Probably not with cotton futures now through $2/lb.
The spread between the two main global oil benchmarks, West Texas Intermediate and Brent, is blowing out (again). And it’s been doing so for most of the month.
We’ve documented the problems associated with the Nymex WTI crude contract regarding the onset of contango and Cushing syndrome in the US .
But as the CME Group — owner of the Nymex — has pointed out to us (in defence), it’s not like the world’s other global benchmark traded on the rival ICE exchange, Brent crude, doesn’t suffer from its own unique issues too. Read more
We couldn’t possibly let this go past our Reuters screen without a pun headline:
Here’s a Friday mystery. Presenting December ICE dollar index futures as traded on November 20:
First there was the London loophole. Now, it appears, the development of another entirely new loophole is underway. Let’s call it the physical loophole.
From Intercontinental Exchange CEO Jeffrey Sprecher’s Tuesday testimony to the CFTC on the matter of position limits and the influence of speculators on the price of commodities: Read more
Yes, everyone — bar the old open outcry pit traders — loves electronic trading in commodities.
Ahead of this week’s CFTC hearings on position limits and speculator influence on prices, however, have the commodity regulators perhaps forgotten to question the obvious? That is, the influence of electronic trading on commodity prices. After all, it has only been a few years since ICE and Globex screens revolutionised the way commodities are traded. Coincidentally, it has been in that time that the so-called price “anomalies” have begun to manifest themselves. Read more
The US will drive oil trading overseas if it is too heavy-handed in regulating energy futures markets, Jeff Sprecher, chief executive of the Atlanta-based InterContinental Exchange, has warned. US politicians have accused ICE of enabling traders to manipulate oil markets and push up fuel prices by taking large positions on ICE Futures Europe, its UK subsidiary. About 15% of all futures trading on the benchmark WTI contract takes place on ICE Futures Europe, which is regulated by the FSA, the UK watchdog, rather than its US counterpart, the CFTC. Angered at what they claim is the FSA’s lax approach to regulation, some US lawmakers have condemned a “dark market” that enables US-based traders to avoid the CFTC’s oversight. Congress will this week consider proposals to extend US regulation to the “London loophole” or to close it.
ICE Futures Europe, the London energy exchange operated by the InterContinental Exchange of the US, has received agreements from almost all of its members to start using ICE’s new clearing house and abandon their current clearer, LCH.Clearnet. The development is the latest twist in what is emerging as the biggest battle between trading and clearing systems to have emerged in London in years. It is also a serious blow to LCH.Clearnet, Europe’s largest independent clearer, as it tries to shore up its business as some of its biggest clients take their business elsewhere or reduce their relationship with the clearer. Until now, it has been unclear whether ICE users would feel sufficiently confident in ICE’s planned clearing operation to commit to shifting their open interest from LCH.
The competition between financial institutions to position themselves in the $62,200bn credit-default swap market intensified on Tuesday when InterContinental Exchange, which operates energy derivatives markets in the US and UK, announced a $625m deal to buy Creditex, an inter-dealer credit derivatives broker. ICE’s move came days after 11 of the world’s biggest investment banks announced plans to create the first central clearer for credit derivative contracts by September. ICE, which already clears over-the-counter contracts in energy products, intends to use Creditex’s OTC trading model to expand into inter-dealer OTC markets beyond credit derivatives.
London’s vast energy markets could be damaged if a looming battle for control of liquidity in its energy contracts were to get out of hand, the Futures and Options Association warned Wednesday. The Intercontinental Exchange, or ICE, is locked in battle with rival New York Mercantile Exchange, together with LCH.Clearnet, the London-based clearer, about competing clearing offerings. At stake is whether market users will elect to shift their open positions from LCH.Clearnet, which ICE currently uses, to a new clearing house planned by ICE – or keep them at LCH.Clearnet. Fearful of losing the business, LCH has teamed up with Nymex in efforts to prevent the biggest users of London’s energy products defecting to ICE’s new clearing house.