Wednesday 25th May 2016
NEWS TICKER, WEDNESDAY, MAY 25TH: Invesco Perpetual today announced that Thomas Moore has been appointed to join the Henley Fixed Interest investment team* in June. Moore has over 17 years’ experience in fixed interest markets, and joins from Morgan Stanley & Co. where he held the role of managing director and head of European Credit Analytics, building and managing a team of 12 professionals. He began his career in New York in 1999 at Orion Consultants, Inc. where he held a number of roles focused on US and international fixed income markets, before moving to Morgan Stanley in 2004. Thomas is a graduate of Harvard and Oxford Universities and holds an MBA from Columbia Business School. Moore’s appointment follows a series of promotions and additions to the Invesco Perpetual Fixed Interest team in 2015. The Henley Fixed Interest team is now 24 strong and manages assets of £28.8bn across a range of over 27 funds for investors -According to MEA Risk, Al-Qaeda in the Islamic Maghreb has released a statement to claim responsibility for an attack that it reportedly carried out recently at a Areva's uranium mining facility in Arlit, city of Agadez (northern Niger). AQIM statesthat the "Grand Sahara's el-Nosr" brigade conducted the attack, "despite reinforced security and airborne surveillance." In the same statement, the militant organization stressed that its main purpose in the region is to "undermine French and Western interests in the region", which it deems "legitimate targets." It is unknown whether this attack caused any casualties - Maitland, the global advisory and fund administration firm, has opened a new office in Miami. The office will provide Maitland’s LatAm team with a regional base, giving their growing private and institutional client base access to on-the-ground support. The new office is Maitland’s 15th across 12 countries. The firm says economic and political instability in Brazil and LatAm – alongside regulatory changes such as Brazil’s recently announced tax amnesty program – are driving increased demand for its services, especially for clients who have based themselves outside their country of origin. The move ultimately allows Maitland to forge closer relations with its clients, prospects as well as the growing community of service providers in the vicinity. Benjamin Reid, senior business development and client manager, LatAm, has relocated to Miami to the group’s business development efforts in the region and will be joined by Pedro Olmo and Camila Saraiva, as client relationship managers responsible for the day-to-day management of Maitland’s growing book of LatAm clients. Olmo joined Maitland from Turim family office in Brazil where he was the group’s in-house counsel. Meanwhile, Saraiva joins the team from Barbosa legal, a Miami based Brazilian law firm focused on servicing UHNW clients - Investec Bank plc has arranged the long term refinancing of a portfolio of four UK projects totalling 40MW solar portfolio owned by Canadian Solar Inc (NASDAQ: CSIQ. The long term debt was provided by Bayern LB after Investec ran competitive process for Canadian Solar. Investec originally provided a short term bridging facility that funded the portfolio shortly after its connection to the electricity grid - The European Energy Exchange (EEX), in its capacity as the transitional common auction platform acting on behalf of Poland, could not execute today's auction of EU Emission Allowances (EUAs), because it would have cleared below the reference price. The reference price is calculated on the basis of the secondary market price during the bidding window. In accordance with the rules governing the auctions (EU Auctioning Regulation), the auction has been cancelled. The auction volume will now be evenly distributed over the next four scheduled auctions. The auction calendar will be adjusted accordingly and an updated version will be published soon. The European Energy Exchange (EEX) is the leading energy exchange in Europe. It develops, operates and connects secure, liquid and transparent markets for energy and commodity products. At EEX, contracts on Power, Coal and Emission Allowances as well as Freight and Agricultural Products are traded or registered for clearing. Alongside EEX, EPEX SPOT, Powernext, Cleartrade Exchange (CLTX) and Gaspoint Nordic are also part of EEX Group. Clearing and settlement of trading transactions are provided by the clearing house European Commodity Clearing (ECC) - Commercial real estate investor Raven Russia has listed on the Channel Islands Securities Exchange (CISE). The firm is already listed on the LSE. Advisers to the transaction were UK legal advisers Berwin Leighton Paisner, Guernsey legal advisers Carey Olsen, broker N+1 Singer and listing sponsor Ravenscroft. The company has also announced a proposed fundraising of a minimum of £105.5m by way of a placing of new convertible redeemable preference shares with the intention that they will be listed solely on the CISE and traded on the SETSqx platform of the LSE - Allianz Global Investors says that that Deborah Zurkow, CIO and Head of Infrastructure Debt, is to take on a new, broader role, becoming head of the alternatives pillar within its global investment platform. Zurkow will join AllianzGI’s Global Executive Committee, effective June 1st. As head of alternatives, Zurkow will lead the continued build out of AllianzGI’s Alternatives capability, which comprises a diverse mix of both liquid and illiquid alternative investment solutions for clients. Since the creation of AllianzGI’s Alternatives pillar in December 2014, assets under management have doubled, growing from €7.9bn in December 2014 to €15.7bn by the end of Q1 2016. Andreas Utermann, chief executive officer and Global CIO at Allianz Global Investors, says, “Over the last few years, Deborah and her team have helped turn the idea of infrastructure debt as an asset class for institutional investors into a reality. In her new, expanded role, Deborah will be able to put her experience of developing innovative solutions that meet clients’ needs to work across the entire spectrum of Alternatives, one of the fastest growing parts of our investment platform, increasingly attractive to investors looking for alpha in era of financial repression.” In other related moves, Claus Fintzen will become CIO and head of Infrastructure Debt, reporting to Deborah Zurkow, assuming day to day responsibility of AllianzGI’s Infrastructure Debt team with immediate effect. Claus joined AllianzGI in 2012 along with Deborah and three other team members from Trifinium Advisors. As well as being instrumental in helping develop AllianzGI’s infrastructure debt platform, Claus brings 21 years of industry experience to the role – Aquila Capital is providing institutional investors with access to its latest diversified renewable energy portfolio (the Aquila Capital Renewables Fund III) via a bond solution. The securitisation, which already has been given an indicative investment grade rating by an ESMA-recognised rating agency, is targeting an A- rating thanks to the high quality of the underlying portfolio, its efficient structure and very modest structuring costs. Both the securitisation and a direct investment in the Fund provide investors with access to a conservative, broadly diversified portfolio of wind and photovoltaic plants in politically stable countries in Western Europe. The Fund is already invested in 13 operational renewable energy plants in Sweden, Germany, the United Kingdom and France, and benefits from a pipeline of potential investments in excess of €350m. Roman Rosslenbroich, chief executive officer and co-founder of Aquila Capital, says: ”We actively had the securitisation reviewed by a reputable audit firm with respect to its regulatory, legal and tax suitability for the Fund’s anchor investor - a leading German insurance company. Due to significant demand, we are now making this investment opportunity available to additional investors.” - UniCredit is entering into the Swiss ETF market by issuing two ETFs with SIX Swiss Exchange, for which it is also acting as market maker. This increases the number of ETF issuers on SIX Swiss Exchange to an unprecedented 22 and the product range on offer to a new record high of 1,240. The two newly listed ETFs on European convertible bonds offer investors a supplement to the diversification of their portfolios, while offering the advantages of on-exchange trading for what was previously an asset class that was heavily OTC-traded The ETFs are the Swiss franc denominated UC Thomson Rts. Bal. European Convertible Bond UCITS ETF ( LU1199448058) and the UC Thomson Rts. Bal. European Convertible Bond UCITS ETF (LU1372156916) –

Latest Video

LME goes east

Tuesday, 24 July 2012
LME goes east In the latest manifestation of China’s rising economic power, Hong Kong Exchanges & Clearing (HKEX) has agreed to buy LME Holdings, the parent company of the London Metal Exchange, for £1.388bn, an eye-popping 58.3x net profits for 2011 even adjusting for a higher fee schedule implemented only on July 2nd this year. It is a trophy price for a trophy property: the largest base metals futures and options exchange in the world, with an estimated 80% market share. If the transaction receives shareholder and regulatory approval—not a racing certainty, given the unusual voting rights of LME shareholders—the new owners of a traditionally western capitalist bastion reflects the relentless eastward shift in capital flows, driven by China’s rapid economic growth.

In the latest manifestation of China’s rising economic power, Hong Kong Exchanges & Clearing (HKEX) has agreed to buy LME Holdings, the parent company of the London Metal Exchange, for £1.388bn, an eye-popping 58.3x net profits for 2011 even adjusting for a higher fee schedule implemented only on July 2nd this year. It is a trophy price for a trophy property: the largest base metals futures and options exchange in the world, with an estimated 80% market share. If the transaction receives shareholder and regulatory approval—not a racing certainty, given the unusual voting rights of LME shareholders—the new owners of a traditionally western capitalist bastion reflects the relentless eastward shift in capital flows, driven by China’s rapid economic growth.

The imperative to secure ownership of the LME by Chinese entities will come as no surprise. The Middle Kingdom now accounts for 42% of global metals consumption; Chinese companies already trade on the LME through member firms; and several LME members have opened offices in Hong Kong. Newedge, whose 15% to 18% market share by volume makes it the largest LME ring-dealing member, even has a joint venture with Citic, the Chinese financial conglomerate, through which qualified customers can trade on the Shanghai Metals Exchange, the regional market for the same metals that dominate trading on the LME: ­aluminium, copper, zinc and lead.

John FayJohn Fay, global head of fixed income, currencies and commodities at Newedge.Shanghai still takes its opening cue from LME closing prices, but the relationship between the two exchanges has evolved into a two-way street—traders now track closing prices and trends in Shanghai before they set opening prices in London the next day. If the Shanghai market were to open up to foreign participants, John Fay, global head of fixed income, currencies and commodities at Newedge, expects overall trading volume would grow but does not see business migrating from London to Shanghai. “Liquidity moves to where the capital is created,” he says. “The markets in China will continue to grow, but it will be complementary to growth on the LME. It will be additional volume.”

Unlike other futures exchanges, LME operates three trading systems that work in parallel: a continuous electronic trading platform open 24/7, ring dealing sessions on the exchange floor, and OTC trades negotiated off the floor. No matter where trades take place, they are centrally cleared by LCH.Clearnet, at least for now. The LME plans to set up its own clearing house by 2014, an initiative HKEX supports and to which it can bring its own expertise in clearing (albeit not in commodities). Self-clearing will give the LME greater flexibility to launch new products and may enable the exchange to take as eligible collateral assets not acceptable to LCH.Clearnet for initial and/or variation margin.

The LME also offers a wider range of delivery dates than other futures exchanges: daily “prompt dates” out to three months, weekly out to six months, and thereafter monthly to 15, 27, 63 or 123 months forward depending on the metal. HKEX has committed to retain this structure at least until 2015, but Fay is keen to see it preserved in perpetuity. “It is the model our customers want because it is built for size or speed,” he says. “They want to go to the floor for price discovery and liquidity, to be able to trade electronically or over the counter (OTC), and they want it all cleared.”

The LME model is unique, but may not remain so. In fact, it offers a viable template for trading financial OTC derivatives on an exchange: the prompt date flexibility eliminates the mismatch between quarterly contract expiration dates and the dates to which commercial participants need to hedge. “The LME model is an answer to Dodd Frank,” says Fay.

HKEX intends to help the LME expand in Asia through a combination of enhanced data distribution, the introduction of futures contracts denominated in renminbi (RMB) and additional warehouses. LME operates a network of more than 600 licensed warehouses around the globe in which market participants can deposit ­deliverable material in exchange for a bearer warrant for the number of contract lots the metal represents at that location. None of the existing warehouses are in mainland China, however; Chinese companies typically deliver to warehouses in South Korea if need be, which is typically in times of tight supply.

Michael Overlander, chief executive of Sucden, a ring-dealing LME member that accounts for between 10% and 15% of trading volume, says past efforts to license warehouses in China have foundered on doubts about the rule of law in the country. If someone presented a bearer warrant to the warehouse at an inopportune moment, would the operator honour the obligation?

“In countries where the LME does have warehouses the warrant would never be questioned,” says Overlander. “I think fear of the unknown legalities has prevented the LME from putting warehouses on the ground in China.” Local warehouses would no doubt improve liquidity and attract more Chinese participants to the LME, but while HKEX can help the LME cut through bureaucratic red tape it may not be able to resolve the legal difficulty.

HKEX wants to leverage its existing renminbi-based trading and settlement infrastructure in Hong Kong to support new LME futures contracts denominated in the Chinese currency. Although these products would be another step toward the internationalisation of the renminbi, Overlander does not see them as an immediate precursor to free convertibility. “The Chinese government has shown a great reluctance to take the handcuffs off the RMB,” he says. “It will first have to relax the controls to get people excited about a currency with limited uses.”

Michael OverlanderMichael Overlander, chief executive of Sucden.Both Sucden and Newedge own shares in the LME but, at just under 3%, their holdings are far smaller than their market shares of exchange ­business. Maintaining the business model should be more important to both firms than the price at which they can sell LME shares, but few people are altogether immune to the lure of money. “I would be lying if I said the equity isn’t important,” says ­Overlander. “It would be hard to see the value of our shares topped in the foreseeable future. It was a relatively easy decision for us to support the transaction: we were satisfied with the buyer and the price.”

The losing bidders—Intercontinental Exchange and CME Group—must now explore alternatives if they wish to expand in base metals. For ICE, it would be a new business line, while CME has a copper contract traded on the Comex that competes directly with the LME. Apart from copper, CME has historically focused on precious metals—gold, silver, platinum and palladium—that do not overlap with LME products.

The LME’s dominant position represents a significant barrier to entry, however. Market participants have great confidence in price discovery on the LME, so much so that prices for physical contracts (which are not traded on the LME) are usually based on LME prices. The LME warehouse infrastructure would be hard to replicate too. “Virtually anywhere in the world, metal can be stored in exchange for a negotiable LME warrant. Warrant holders can have almost instant access to material on whatever day they want,” says Overlander. “The warehouse network is just one example. It would be tough to knock the LME off its pedestal.”

The reaction in some quarters to the LME sale—another British champion passes into foreign hands—may be more Sinophobic than xenophobic. Nobody claimed that American interests would interfere with price discovery in London when ICE bought the International Petroleum Exchange or NYSE Euronext took control of LIFFE. Chinese influence in London is likely to grow if Chinese companies do more business on the LME but ­Overland insists Chinese ownership will not affect market operations. “Whatever the rationale for buying the LME, it was not to manipulate prices in favour of Chinese buyers,” he says. “The LME will still have to comply with FSA rules that govern regulated investment exchanges, which are designed to make sure the market has the confidence of users.” 

Current Issue


Related News

Related Articles

Related Videos