Exchange Sector Review - Week ending October 22nd, 2010
This week:
The sector was down 100bps, underperforming global equities by 100bps. Interdealer brokers were down 200bps. YTD the sector is underperforming global equities by 50 bps.
Rumors of a SGX-ASX merger surfaced as trading in both companies was halted given that “a party has recently re-activated confidential discussions with ASX concerning a possible business combination”. We see few cost synergies in a merger given the companies high EBITDA margins (78% for ASX and 62% for SGX) and the required separate clearing structures. The impending loss of ASX’s monopoly in cash trading would also affect the value of the transaction for SGX as it also aiming to trade Australian equities via its Chi-East JV with Chi-X (who is also about to receive a trading license from Australian regulators) (see pages 7-9).
BATS launched its second US equities Exchange, BATS Y-Exchange (BYX), with all US equity symbols to be added by October 22.
Brazil raised its fixed income investments IOF tax to 6% from 4%, and derivative margin deposits IOF tax to 6% from 0.38%, in an effort to curb the recent BRL rally. The Brazilian government also banned financial institutions from lending, renting or swapping assets to foreign investors who intend to use the assets for operations in derivative markets, including OTC derivatives.
BVMF3: the Brazilian government may ask the exchange to double or triple margin requirements on futures contracts in an effort to reduce leverage, according to Valor Economico.
TOCOM and Tokyo Grain Exchange (TGE) are currently in merger discussions “to ensure a sustainable development of agricultural products in Japan”, according to TGE president Yoshiaki Watanabe.
The following companies reported quarterly earnings:
• SGX SGD0.07 -21% Y/Y
• BMV MXN0.27 +16% Y/Y
• BURSA MYR0.05 -7% Y/Y
• Bombay SE Net Income: INR1 bn (1H10) -11% Y/Y
Next week:
-The following companies will report quarterly earnings:
• Monday, October 25th: IVZ
• Tuesday, October 26th: AMTD, OXPS, WDR
• Wednesday, October 27th: DB1
• Thursday, October 28th: CME, TMX, DFM, BEN
Friday, October 29th: NDAQ, BME
SOURCE:
Equity Research Desk
www.erdesk.com
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