Sunday 29th May 2016
NEWS TICKER, FRIDAY MAY 27TH: BGEO Group plc, the London listed holding company of JSC Bank of Georgia, has this morning announced that Bank of Georgia, Georgia’s leading bank, and the European Bank for Reconstruction and Development (EBRD) have signed a GEL220m (approximately £70m) loan agreement with a maturity of five years. EBRD obtained the local currency funds through a private placement of GEL-dominated bonds arranged by Galt &Taggart, a wholly owned subsidiary of BGEO. This is the largest and the longest maturity local currency loan granted to a Georgian bank, which will allow Bank of Georgia to issue longer-term local currency loans, providing essential support for micro, small and medium sized enterprises to converge to DCFTA requirements, as well as underserved women entrepreneurs. “We are keen to develop financial products and lending practices, to service specifically women-led SMEs, which will ultimately increase their involvement in developing Georgia’s private sector”, says Irakli Gilauri, CEO of BGEO Group - The UK’s CBI has responded to analysis from the Treasury showing that a vote to leave the European Union could negatively impact UK pensions. Rain Newton-Smith, CBI Economics Director, says that: “All pension schemes benefit when funds can be invested across a stable, growing economy, to best support people in their retirement years. Any financial market turmoil caused by a Brexit is likely to have a negative effect on household wealth, the value of funds and damage pensions here at home, especially for those looking to retire within the next few years. The sheer weight of credible evidence points towards a serious economic shock if the UK were to leave the EU, meaning a hit to the value of our private pensions, jobs and prosperity.” - EPFR Global reports that Nine weeks into the second quarter mutual fund investors remain underwhelmed by their choices as they seek to navigate a global economy characterized by political uncertainty in Europe, lacklustre corporate profits and the prospect of another interest rate hike in the US, economic stress in major emerging markets and Japan's experiment with negative interest rates. During the week ending May 25 all nine of the major EPFR Global-tracked Emerging and Developed Markets Equity Fund groups posted outflows, as did Global, High Yield, Asia-Pacific and Emerging Markets Bond Funds, seven of the 11 major Sector Fund groups and three out of every five Country Equity Fund groups. Alternative Funds look to have taken in over $1bn for the fifth time in the past 14 weeks. Overall, EPFR Global-tracked Bond Funds added $2.6 billion to their year-to-date tally while another $9.1bn flowed out of Equity Funds. Some $12bn was absorbed by Money Market Funds with US funds attracting the bulk of the fresh money. EPFR Global-tracked Emerging Markets Equity Funds remained under pressure from many directions. China's economic data and policy shifts continue to paint a mixed picture for growth in the world's second largest economy, the US Federal Reserve is talking up the prospects of a second rate hike this summer, Europe's recovery appears to be running out of stream and the recent recovery in commodities prices is being viewed with scepticism in many quarters. All four of the major groups recorded outflows during the week ending May 25, with the diversified Global Emerging Markets (GEM) Equity Funds seeing the biggest outflows in cash terms and EMEA Equity Funds in flows as a percentage of AUM terms. Latin America Equity Funds extended their longest outflow streak since late 3Q15 as investors who bought into the prospect of political and economic change in Brazil confront the messy reality. However, year to date Brazil has been the top emerging market for all EPFR Global-tracked Equity Funds as managers bet that the impeachment proceedings against President Dilma Rousseff will open the door to more centrist economic policymaking says the funds data maven. Among the EMEA markets, the firm reports that GEM managers are showing more optimism than investors. EMEA Equity Funds have now posted outflows for five straight weeks and investors have pulled over $300m out of Russia and South Africa Equity Funds so far this month, though GEM allocations for both South Africa and Russia climbed coming into this month. The latest allocations data indicates less optimism about China despite is still impressive official numbers - annual GDP was running at 6.7% in 1Q16 - and the edge the recent slide in the renminbi should give Chinese exporters. GDP growth in Emerging Asia's second largest market, India, is even higher. Elsewhere, India Equity Funds have struggled to attract fresh money as investors wait to for domestic business investment and the government's reform agenda to kick into higher gears says EPFR Global – According to New Zealand press reports, stock exchange operator, NZX, will initiate confidential enquiries into listed companies that experience large, unexplained share price movements, to determine whether they may be holding undisclosed "material" information even while remaining in compliance with the market's Listing Rules that require disclosure of material information at certain trigger points. In an announcement this morning, NZX also warned investors not to assume that a listed entity's Listing Rules compliance statements meant they did not have material information in their possession which would potentially require eventual disclosure - Asian stocks were modestly higher today, largely on the back of increasingly softening sentiment from the US Federal Reserve. Most people think there will be one rate hike this year, but likely it will be in July rather than June. Either way, it will be one and not two or three. Fed chair Janet Yellen is scheduled to talk about interest rates at an event at Harvard University today and the expectation is that a softer approach for the rest of this year will be writ large; a good signal of intent will follow today’s quarterly growth stats. The presidential election will encourage caution; continued market volatility will encourage caution and mixed manufacturing data will encourage caution. Japan’s benchmark Nikkei 225 index added 0.4% to touch 16,834.84 and Hong Kong’s Hang Seng rose 0.9% to 20,576.52. The Shanghai Composite Index gained 0.3% to 2,829.67. The Straits Times Index (STI) ended 6.65 points or 0.24% higher to 2773.31, taking the year-to-date performance to -3.80%. The top active stocks today were SingTel, which gained 1.05%, DBS, which gained 0.07%, UOB, which gained0.11%, Keppel Corp, which gained2.47% and Ascendas REIT, which closed unchanged. The FTSE ST Mid Cap Index gained 0.27%, while the FTSE ST Small Cap Index rose 0.30% - The European Bank for Reconstruction and Development (EBRD) says it is taking the first step towards developing a green financial system in Kazakhstan in partnership with the Astana International Financial Centre (AIFC) Authority. EBRD President Sir Suma Chakrabarti and AIFC Governor Kairat Kelimbetov signed an agreement today on the sidelines of the Foreign Investors Council’s plenary session to commission a scoping study for the development of a green financing system in Kazakhstan. The study, scheduled to be completed in 2017, will assess the demand for green investments, identify gaps in current regulations, and make recommendations for the introduction of green financing standards and for the development of the green bonds market and carbon market services. The development of a green financing system would be consistent with the COP21 Paris Agreement, aligning financing flows with a pathway towards low greenhouse gas emissions and climate resilient development. The AIFC Authority was put in place earlier this year and is tasked with developing an international financial centre in Astana. In March, the AIFC Authority, TheCityUK and the EBRD signed a Memorandum of Understanding to support the establishment of the financial centre and to encourage and improve opportunities for the financial and related professional services industries – Turkey’s Yuksel has issued notice to holders of $200m senior notes due 2015 (ISIN XS0558618384), and filed with the Luxembourg Stock Exchange, that the company has agreed a term sheet with the ad-hoc committee of noteholders and its advisors to implement a restructuring of the notes and is currently finalising the required scheme documentation with the Committee. Once agreed, the Company will apply to the English High Court for leave to convene a meeting of note creditors to vote on the scheme proposals as soon as reasonably practicable when the High Court reconvenes after vacation in June 2016 - Following the agreement in principle of the May 24th Eurogroup for the release of the next loan tranche to Greece, domestic authorities have intensified their efforts for the completion of all pending issues reports EFG Eurobank in Athens. According to Greece’s Minister of Finance Euclid Tsakalotos, on the fulfilment of all pending issues, €7.5bn will be disbursed in mid-June, of which €1.8bn will be channeled to clear state arrears – This weekend is the second UK May Bank Holiday. FTSE Global Markets will reopen on Tuesday, May 31st at 9.00 am. We wish our readers and clients a sunny, restful, safe and exceedingly happy holiday.

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20-20: BATS extends its reach

Thursday, 15 December 2011
20-20: BATS extends its reach When Joe Ratterman took over as chief executive officer of BATS in July 2007, he named his priorities as price innovation, including data for free, smart and fast technology, and good customer service. Within a few years he has taken BATS from a fledgling trading platform to a company which some value at $1.1bn, based on an upcoming flotation aiming to raise $100m. Ruth Hughes Liley analyses the firm’s contribution to diversity in the global trading market as it reposes in a “quiet period” prior to its IPO. http://www.ftseglobalmarkets.com/

When Joe Ratterman took over as chief executive officer of BATS in July 2007, he named his priorities as price innovation, including data for free, smart and fast technology, and good customer service. Within a few years he has taken BATS from a fledgling trading platform to a company which some value at $1.1bn, based on an upcoming flotation aiming to raise $100m. Ruth Hughes Liley analyses the firm’s contribution to diversity in the global trading market as it reposes in a “quiet period” prior to its IPO.

December 2011 prove a landmark for BATS Global Markets. During the month, the UK Competition Commission official was expected to ink its approval of BATS’ takeover of Chi-X Europe, Europe’s largest multilateral trading facility (MTF). The new BATS Chi-X Europe will be the largest trading centre in Europe in terms of market share and notional value traded. In the first quarter of 2011, Chi-X Europe accounted for €454.6bn traded while BATS own MTF, BATS Europe, traded €171.2bn. Chi-X Europe will add a derivatives offering to the combined company through an agreement with Russell Investments.

It was also a month in which BATS Global Markets was set fair to challenge NYSE Euronext and NASDAQ OMX with a new listings service on BZX. BATS operates two stock exchanges in the US, the BZX Exchange (BZX) and the BYX Exchange (BYX), which account for around 10% to12% of all equity trading in the United States on a daily basis. BATS Listings will be headed by Brian King, who has managed client relationships at BATS for four years.



Launched from a suburb of Kansas City, Missouri, onlookers were unsure about the success and direction of BATS at its launch in 2005.  Started by a handful of people and still only employing barely more than 100 worldwide, in May 2011 it filed with the SEC to raise $100m in a flotation, which some estimates say values the company at $1.1bn. The flotation will fund acquisitions and provide an exit strategy for some of its original investors, which include Getco, Credit Suisse, Morgan Stanley and Deutsche Bank among others.

Chief executive officer (CEO) Joe Ratterman’s expansion plans for BATS—originally just a simple electronic communications network—have coincided with huge upheavals in the financial markets. In October 2008, in the middle of the fallout from the Lehman Brothers crisis, it launched a multilateral trading platform, BATS Europe. At the same time on the other side of the Atlantic, it also launched BZX. Work on the European platform was complete in six months with Ratterman saying at the time: “This is a testament to our focus and determination to move at ‘BATS speed’ and the drive to simply get things done.”  The platform is headed by chief executive officer Mark Hemsley.

In 2007, BATS represented around 15% the size of NASDAQ. In 2009, it represented around 55%. Today its 12% US equities market share compares with NASDAQ’s 18%. For its other businesses, US equity options market BATS Options holds around 3.8% matched market share and BATS Europe just over 5% as of October 2011.

Not content with expansion at home and in Europe, BATS is also looking further afield. The firm has set up a partnership with Claritas, a Brazilian asset management firm, to work on creating a new stock exchange in the country, with attendant clearing and depositary services. Brazil is the fourth-largest market in the world, with opportunities to challenge the incumbent stock exchanges.

It is that “better place to do business” which has been BATS’ focus with Ratterman at the helm. BATS originally stood for Better Alternative Trading System and its logo incorporates the slogan “Making Markets Better”.  “The last two years have been very exciting and rewarding as we took BATS from a napkin drawing to one of the fastest-growing market centres in the nation,” he told members then. “Because our employees and investors come from the industry, we are well-positioned to help make the markets a better place to do business.”

While it is acknowledged that a listing business will add to BATS’ revenue, some believe they will find it harder to make a success of it than they did with their trading business; high-frequency trading provided a ready-made market for the trading business.

Ratterman bases his success on the technology which underpins BATS. It includes parallel routing strategies which aim to provide best execution more efficiently while accessing multiple market venues simultaneously. Several matching engines provide up to five times more capacity than required and it has kept latency low.

Ratterman has also implemented innovative pricing with BATS National Best Bid and Offer (NBBO) Setter programme, which rewards clients not just because of size but also because of actions which improve market quality. Ratterman says: “This has been such a hit on the BATS Options market that we have recently rolled it out on our two US equity exchanges as well. It’s the first of many innovations to come from BATS based on a new paradigm shift in pricing models.”

Pricing has been used as a strategy to expand. An initial aggressive fee structure that lost money on every trade in order to attract customers was successful: the firm now claims more than 300 broker-dealer customers. In October 2011, the firm began to provide rebates for firms taking liquidity from the BYX Exchange order book for all securities priced $1 or above. Customer service is one of Ratterman’s original stated aims for BATS—in 2007 Ratterman told his members: “We are listening to you, our customers. We want to be your market.”

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