Lead Stories

SEC Alleges ‘Systemic’ Lapses in Oversight at CBOE
Jacob Bunge, The Wall Street Journal
The Securities and Exchange Commission fined CBOE Holdings Inc. CBOE $6 million for alleged breakdowns in its regulatory and compliance functions related to its oversight of what the SEC called abusive short-selling activities.
http://jlne.ws/117In32
** Press releases from both the SEC and the CBOE regarding this are below in the “Regulation” section. -JB

CME primed for new derivatives rules
Neil Munshi, Philip Stafford and Michael Mackenzie, Financial Times
CME Group, the world largest futures exchange operator, is leading a group of US exchanges hoping to take full advantage of the next phase of new US rules tightening up derivatives trading, which came into force on Monday.
http://jlne.ws/11xe42g

Chasing Alpha With Your Hands Tied Behind Your Back
Ed Lopez, SunGard (via TABB Forum)
Equilibrium of front-office efficiency and control is important to avoid risks and losses. But the raison d’être of portfolio managers and traders alike is ultimately to grow assets and make money for the firm. How can front-office staff be effectively supported in this quest while keeping regulators satisfied and being compliant?
http://jlne.ws/1922Yra

More evidence that Thomson Reuters data may be leaking out earlier than it’s meant to
Simone Foxman, Quartz
High-frequency traders have a distinct advantage in the way Thomson Reuters distributes its University of Michigan Consumer Sentiment Index, a monthly report compiled by Thomson Reuters and the university. In court documents filed last week, the data provider revealed that it distributes data to “‘ultra-low latency’ subscribers” at 9:54:58 AM ET. That’s a full two seconds before most of its subscribers get access to the data at 9:55:00. Non-subscribers are supposed to get access to the data at 10:00:00 AM ET, but the data is widely shared well before then.
http://jlne.ws/11dMreO

‘Fear Index’ Got You Scared? Don’t Be.
Jon Markman, Investor Place
nvestors might be bracing themselves for a rough summer, but in the short-term, I’d take the panic with a grain of salt. Investors have a tendency to freak out with very little provocation.
Case in point: VIX values during the past 10 days.
http://jlne.ws/11dP9B2

Turnkey Trading Partners Named Best North American Regulatory Advisory Firm
Press Release (via Newsday)
Turnkey Trading Partners is proud to announce that it’s been voted Best North American Regulatory Advisory Firm,€ by Hedgeweek magazine. Hedgeweek’s fourth-annual Global and USA Awards recognize excellence among hedge fund managers and service providers around the world.
http://jlne.ws/13RVQKU
** For more on Turnkey, check out last year’s MarketsWiki.tv interview with founder James Bibbings. -DA

Exchanges

CME Plans September Launch in London  
Jacob Bunge and Michelle Price, The Wall Street Journal
CME Group CME aims to launch its new European futures market on September 9 and has started testing the platform’s trading systems with customers, according to the platform’s chief executive.
http://jlne.ws/11dOfo3

CME Group Announces Daily Trading Volume Record in NYMEX Brent (BZ) Crude Oil Futures
Press Release (CME)
CME Group, the world’s leading and most diverse derivatives marketplace, announced it reached a trading volume record for its NYMEX Brent (BZ) crude oil futures contract on Friday, June 7, 2013. Trading volume for NYMEX Brent reached 52,352, compared to April 12, 2013, the last record day, when volume reached 44,357 contracts.
http://jlne.ws/1922Yrc

To Date, Only Entity Offering Binary Options with Status as a Deignated Contract Market – Nadex
Press Release (Nadex)
The Commodity Futures Trading Commission’s (CFTC) Office of Consumer Outreach and the Securities & Exchange Commission’s Office of Investor Education and Advocacy are issuing this Investor Alert to warn about fraudulent schemes involving binary options and their trading platforms. These schemes allegedly include refusing to credit customer accounts, denying fund reimbursement, identity theft, and manipulation of software to generate losing trades.
http://jlne.ws/Nqewuj

Regulation

SEC Charges CBOE for Regulatory Failures
Press Release (SEC)
The Securities and Exchange Commission today charged the Chicago Board Options Exchange (CBOE) and an affiliate for various systemic breakdowns in their regulatory and compliance functions as a self-regulatory organization, including a failure to enforce or even fully comprehend rules to prevent abusive short selling.
http://jlne.ws/11dK2Rg
** Here is the SEC press release from a bit more than a year ago that started this. -JB

CBOE Statement on SEC Administrative Proceedings, June 11, 2013
Press Release (CBOE – Full Text)
Our ability to work effectively and cooperatively as co-regulators with the SEC is central to our role as an SRO. In addition to working proactively with the SEC throughout its investigation, we voluntarily launched our own exhaustive, internal assessment of regulatory and compliance practices across our entire organization, assisted by third-party consultants and independent outside counsel. All actions either required or recommended by the SEC, as well as those resulting from our rigorous self-review, have been or are now being implemented. This settlement marks a significant step in putting the SEC matter behind us, but our commitment to maintaining the very highest standards in regulation and compliance will be carried forward throughout our organization.
http://jlne.ws/14v7Mo2 (PDF)

Major Clearing Brokers Announce Support for the ISDA Clearing Connectivity Standard in Accordance with June 10(th) Clearing Deadline  
Press Release (via The Wall Street Journal)
The International Swaps and Derivatives Association, Inc. (ISDA), and Sapient Global Markets, a division of Sapient (NASDAQ: SAPE), today announced that four of the largest over-the-counter (OTC) derivatives clearing brokers (known in the U.S. as Futures Commission Merchants, or FCMs) have confirmed their support for the Clearing Connectivity Standard (CCS) initiative to standardize reporting for cleared OTC derivatives.
As part of the Dodd-Frank Act of 2010, the U.S. Commodity Futures Trading Commission (CFTC) has mandated certain OTC derivative products be centrally cleared. June 10, 2013 is the second of three CFTC mandated clearing implementation dates for the industry in 2013.
http://jlne.ws/19230Q0

Signs of greater dark transparency
Richard Henderson, The Trade USA
The US finance industry’s self regulatory body has approached dark pool operators for evidence of how, where and with whom client orders are routed, to better monitor transparency – but key industry figures concur r

egulators must proceed cautiously.
http://jlne.ws/11dOwaq
** Can dark be transparent? -JB

European regulator threatens derivatives reporting delay
Anish Puaar, Financial News
Under-resourced regulators and industry resistance could push key European derivatives reporting rules well into 2014, further delaying Europe’s implementation of G20 reforms that will reshape the swaps market.
http://jlne.ws/13z3Z6o

Technology

[Video] High Frequency Trading Falls on Hard Times
Bloomberg
Bloomberg Businessweek’s Matthew Philips and Steve Ehrlich, former CEO at Lightspeed Financial, discuss the current state of high frequency trading and how traders became the victims of their own success. They speak on Bloomberg Television’s “Bloomberg Surveillance.”
http://jlne.ws/1922Yrg
** You have to play this in slow motion to understand it. -JL

GuavaTech Inc. Announces CBOE Futures Exchange Hosting and Connectivity Access at London LD4 Co-Location Facility
GuavaTech, Inc., a leading managed service provider specializing in customized IT solutions for proprietary trading firms, investment banks, hedge funds, broker/dealers, and FCMs, today announced that it will begin offering proximity hosting and ultra-low latency connectivity solutions for CBOE Futures Exchange (CFE) at the LD4 data center located in London, UK. GuavaTech now provides CFE with market data access and co-location services at LD4. This connectivity to the CFE Enhanced (CSM) market data feed and the Unicast trading feed now offers European traders the ability to access all CFE quotes and trades, including spreads. In addition, CFE has installed fee waivers through the end of 2013 to enable low-cost entry through the LD4 co-location facility.
(via email)

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