John Lothian Newsletter: CME considers London futures platform; Tom aims to double market share; JPMorgan’s Iksil Seen Spurring Regulators to Dissect Trading

Apr 10, 2012

CME Group considers the possibility of starting a London-based futures exchange, just in case — not that it could ever happen — a transatlantic merger is not landed and completed. The Netherlands’ TOM retail exchange plans to double its market share in the coming months. The London Whale may be causing enough market waves to force regulators to evaluate the degree to which JPMorgan’s trading has been speculative rather than risk-management-ive. In the top box today, a interview with Rick Lane, the new CTO at Trading Technologies, about the differences between TT and Google and his new agenda for the company he’s rejoined.

Observations – Statistics – Commentary

Broker-dealers unlikely to see renaissance
By Tracy Alloway in New York and Daniel Schäfer in London – Financial Times
On September 5 2008 – days before the financial crisis kicked into high gear – Citigroup strategist Matt King sent a 22-page research note to clients of the bank entitled “Are the brokers broken?”. In it, Mr King argued that the problem haunting the financial industry was not the alphabet soup of CDOs, ABS and ABCP that had come to populate the investment books of US broker-dealers.

**** The BD and FCM model are in serious trouble.


CME Group’s OTC Volume Surpasses $500 Billion in Total Notional Cleared for Interest Rate and Credit Default Swaps
CME Group, the world’s leading and most diverse derivatives marketplace, today announced that the company has surpassed $500 billion in total notional value cleared in interest rate swaps (IRS) and credit default swaps (CDS). In addition, the company had a monthly volume record of $53.3 billion in CDS cleared in March, a 344 percent increase over the previous record month in February.

**** Welcome to the new world order of OTC clearing.


Rick Lane

Rick Lane Discusses His New Role as Chief Technology Officer at Trading Technologies
Rick Lane was recently rehired by Trading Technologies as Chief Technology Officer. Lane left Trading Technologies for Google after selling TickIt Trading Systems to them in 2010. Lane talks about the differences between Trading Technologies and Google, his agenda as CTO and how the Algo Design Lab (ADL) is doing.

Watch the video >


Two Chicago financial execs named to SEC advisory panel
Crain’s Chicago Business
(Crain’s) – Mellody Hobson, president of Ariel Investments, and Mark Tresnowski, general counsel and managing director of Madison Dearborn Partners, were among 21 people announced to the committee today.


Market abuse and long-term investors
Financial Times
Few will take issue with the Financial Services Authority‘s decision to crack down on market abuse. Its recent judgments against two well-known financiers – Ian Hannam, the JPMorgan banker, and David Einhorn, the hedge fund investor, have been greeted largely with approbation. But while investors will applaud steps that entrench the integrity of markets, care must be taken not to choke off constructive engagement between long-term investors and companies.


Another Market Not Available to U.S. Citizens
Jon Matonis – Forbes
I find this incredible. U.S. citizens blocked out a market that the rest of the developed world has access to. Of course, I am speaking about the CFD market. CFD stands for “contract for difference” and it is a marketplace where regular people can trade the markets of the large trading houses without the same capital requirements. So, basically it is a form of democratized financial trading for the masses.


New threat emerges from the shadows
By Patrick Jenkins, Tom Braithwaite and Brooke Masters – Financial Times
When it came to reforming the global financial system, regulators focused on the banks. Weakened by the 2008 crisis, destabilised by the eurozone sovereign debt mess and then hit with higher capital requirements, traditional lenders are on the retreat.


MarketAxess Opens Office in São Paulo
MarketAxess Holdings Inc., the operator of a leading electronic trading platform for U.S. and European high-grade corporate bonds, emerging markets bonds and other types of fixed-income securities, today announced it has opened its office in São Paulo, Brazil.


A Costly Toy Subsidized by Others
When the numbers don’t seem to add up, it’s worth asking some questions. For the last two weeks, I’ve been puzzled by the announcement of a $2.15 billion deal to buy the Los Angeles Dodgers by Magic Johnson and a group of financiers. […] A quick background check and some back-of-the-envelope math raises an obvious red flag: how on earth can this group of individuals afford to pay $2 billion in cash? The answer is that they probably can’t — at least, not by themselves.


Looking at the morality behind the money
Yale Daily News
For professor Robert Shiller, there is a conversation that must be had about finance. After teaching the course “Financial Markets” for about 25 years and seeing it uploaded on Open Yale Courses in 2008 and again in 2011, he said he felt responsible for ensuring that his students understood the morality behind their career choices. His book “Finance and the Good Society,” published March 20, aims to answer questions about the virtues of the field.


Chinese ‘Nick Leeson’ rogue trader sentenced to death after £10m fund scam
By David Baker – Mail Online
A Chinese rogue trader who ‘cheated’ investors on her way to losing £10m in gold trading has been sentenced to death today. The 30-year-old Wang Caipang was handed the sentence by a court in Wenzhou in east China after she borrowed the cash between January and October 2010.


MarketsWiki Page of the Day
Bruno Iksil


MarketsWiki Recent Updates

Peter Hiom; Donald R. Wilson, Jr.; Richard Gorelick; Jeremy Wright; Emily Portney; Ron Grossman; Catie Lee; Al Peras; Jeannie DeVita; Kurt M. Johnson; Jim Tometz

Companies, Organizations and Groups
Iowa Grain Company; Archer Daniels Midland; NYSE Arca Options

21,719,678 pages viewed, 6,791 articles, 138,934 edits
MarketsWiki Statistics

Lead Stories

CME considers London futures platform
By Jeremy Grant in London – Financial Times
CME Group is considering opening a futures exchange in London as a way for the US operator of the Chicago Mercantile Exchange to expand in Europe. The development is a sign that if the Chicago company does not win the bidding for the London Metal Exchange, it could build a European futures exchange to complement its existing clearing business.

**** What happened to the NYMEX London license?

Tom aims to double market share
By Philip Stafford – Financial Times
The Order Machine, a start-up Dutch retail trading platform, is aiming to crank up the pressure on NYSE Euronext in the Dutch derivatives market by doubling its market share in the coming months.

JPMorgan’s Iksil Seen Spurring Regulators to Dissect Trading
Market-moving trades by JPMorgan Chase & Co. (JPM) ‘s chief investment office probably will force regulators to seek more detail on banks’ derivatives positions to help them distinguish risk management from speculation.

Time to Cast More Light on Finance’s ‘Shadows’
We recommend printing the accompanying map of the shadow banking system as a 36” by 48” poster. The unusual advice, contained in a report by the Federal Reserve Bank of New York in 2010, sums up the regulatory efforts around “shadow banking”—the vast amount of financial transactions such as mortgage-backed securities and “repo” deals among banks that take place outside traditional channels.

Banks staff up for arms race over equity derivatives
Tim Cave – Financial News
European banks are aggressively bulking up their equities derivatives franchises, in stark contrast to the cuts being made in other business lines, prompted by the prospect of higher margins and growing demand for derivatives products from hedge funds and institutional investors.

Bernanke Calls on Regulators to Limit Risks of Shadow Banking
Federal Reserve Chairman Ben S. Bernanke called for new steps to curb “shadow banking” operating beyond standard oversight while saying the economy has far to go before fully recovering from the credit crisis.

Exchanges resist new rules for ETFs
Michelle Price – Financial News
Two of Europe’s largest exchanges have opposed a proposal that would require trading platforms to ensure a minimum number of marketmakers for their exchange-traded fund segments.

Despite Warning, Old Handouts Die Hard for Greek Politicians Facing Voters Soon
With the country perched on the edge of a financial abyss and international creditors anxiously awaiting more belt-tightening measures, Greek lawmakers have been working extra hard lately. But not always in the ways one might expect.

Bonds With Banks Fraying
European companies are swarming to the corporate-bond market for financing and vastly reducing their reliance on banks, a move that could mark a significant change in the region’s financial landscape.

Environmental Trading News

German Renewable Power Cheaper Than Fossils in 2030, Study Shows
Germany will pay less for electricity from renewable sources than from coal and natural gas in 2030 if it reaches energy targets, the environment ministry said.

**RKB: Study details plan to exit nuclear energy by 2022 and raise the share of renewable sources to at least 35% of the power mix by the end of this decade.

(In German)

Energy: Refined out of existence
Financial Times
Sunoco petrol stations are a fixture of the US eastern seaboard, their blue-and-yellow awnings touting the brand’s status as official fuel of Nascar racing. But after July, none of the petrol they sell will actually be made by Sunoco.

For more environmental trading news, subscribe to the Environmental Markets version of the John Lothian Newsletter edited by Jim Kharouf.
Visit http://www.jlnenvironmental.comto subscribe.

Exchange & ECN News

Clearstream’s March 2012 figures
In March 2012, the value of assets under custody held on behalf of customers registered a decrease of 2 percent to E 11.1 trillion (compared to E 11.3 trillion in March 2011). Securities held under custody in Clearstream’s international business kept the level of the same month last year with E 5.9 trillion in March 2012 while domestic German securities held under custody decreased by 4 percent from E 5.4 trillion in March 2011 to E 5.2 trillion in March 2012.

Athens Exchange Derivatives Market Monthly Statistical Bulletin March 2012

Bucharest Stock Exchange Newsletter March 2012

Banks, Brokers & Dark Pools

Putting It Into Perspective: Bruno Iksil’s $100 Billion Position Makes Him The Seventh Largest Bank Holding Company By CDS Exposure
Zero Hedge
With the story of Bruno Iksil refusing to be swept under the rug (for now), we had the urge to show just how his position stacks up in comparison to the CDS holdings for all the bank holding companies tracked by the Office of the Currency Comptroller. Recall: ” Iksil may have built a position totaling as much as $100 billion in contracts in one index, according to the market participants, who …

President of Federal Reserve Bank of New York to speak Thursday in Syracuse
The Post-Standard
As the president and chief executive officer of the Federal Reserve in New York, William C. Dudley serves as a permanent member of the Federal Open Market Committee which formulates the country’s monetary policy.

RBS and Lloyds tackle legacy of bad debts
By Robin Wigglesworth – Financial Times
When Andy Cumming took over the management of Lloyds Banking Group’s restructuring unit in early 2009, he quickly became aware of the problems stemming from Lloyds’ financial crisis-induced shotgun marriage to HBOS.

HSBC in talks to sell South Korea retail unit
Market Watch
HSBC Holdings is in talks to sell its South Korean retail banking business to the Korea Development Bank, the London-headquartered bank said in a statement Tuesday. The move is in keeping with HSBC’s strategy announced last year to pare back its retail banking business in markets where it has a relatively small presence or are underperforming.

HSBC unit to sell Montagu Private Equity stake
Market Watch
HSBC Holdings PLC said Tuesday its unit HSBC Bank PLC has agreed to sell its 19.9% stake in private equity firm Montagu Private Equity LLP to MLLP Holdings Ltd., a company indirectly owned by members of Montagu’s management team.

Reminder: BGC Partners to Host Investors and Analysts on Wednesday May 30, 2012
Reminder – BGC Partners, Inc., a leading global brokerage company primarily servicing the wholesale financial markets, today announced that it will host analysts and professional investors for a half-day presentation about the Company in New York City on Wednesday, May 30, 2012.

Scottrade Earns Top Spot in Customer Loyalty
Business Wire via Yahoo! Finance
Investing services company Scottrade, Inc. scored highest in customer loyalty among 11 financial services brands in the 2012 Satmetrix Net Promoter Benchmark Study.

Bank of America, Barclays Deny Illegal Acts Over Archstone
Bankrupt Lehman, which has agreed to buy half of the banks’ Archstone stake for $1.3 billion, revised a lawsuit last month to stop them from selling their remaining stake for almost $1.5 billion to the Zell company.

Regulatory News

The SEC News Digest
The SEC News Digest provides daily information on recent Commission actions, including enforcement proceedings, rule filings, policy statements, and upcoming Commission meetings.

SEC Announces Members of New Investor Advisory Committee
The Securities and Exchange Commission today announced the formation of a new Investor Advisory Committee required by the Dodd-Frank Wall Street Reform and Consumer Protection Act.

SEC Settles Fraud Charges Against Silicon Valley Man
The Securities and Exchange Commission today charged a Silicon Valley man who raised millions for two Internet start-ups by falsely promising investors that his companies were on the verge of undergoing successful initial public offerings and were well on their way to becoming the “next Google.”

SEC freezes accounts of 7 charged with insider trading of Zhongpin shares via Yahoo! Finance
The SEC has obtained a court-ordered freeze of the assets of six Chinese citizens and one British Virgin Islands entity charged with insider trading in Zhongpin Inc., a China-based pork processor whose shares trade in the U.S.

In Response To ESMA Consultation Paper On ETFs, EDHEC-Risk Institute Calls For Improved Transparency, Governance And Auditability Of Indices
Press Release
In commenting on the ESMA Consultation Paper entitled “ESMA’s guidelines on ETFs and other UCITS issues” (ESMA/2012/44, January 2012), EDHEC-Risk Institute has welcomed the broadened focus of this new consultation, which goes a long way towards approaching important issues in a horizontal way across all UCITS, rather than in a vertical way limited to UCITS ETFs, but regrets that the consultation paper has not gone further in several key areas:

Remarks By U.S. Treasury Department Deputy Secretary Neal Wolin Before The President’s Advisory Council On Financial Capability

Former Bell Potter advisor charged with fraudulent conduct

Federal Court In Texas Orders Total Call Group, Inc. And Its Principals To Pay Over $4.8 Million In Fines For Making False Representations And Issuing False Account Statements In Forex Fraud

Investments – Indexes – Managed Futures – Managed Funds

Hybrid models eyed for money market funds
By Dan McCrum – Financial Times
Money market funds have for decades existed in the half shadows cast by banking and debt markets, but the Securities and Exchange Commission is set to push the industry into the full glare of regulation with proposals to be published for consultation as soon as this month.

Hedge funds do better, but still lag market
CNN Money
So far in 2012 investors would have done better putting their money in a low-cost stock index fund than the average hedge fund.

First Trust May Join Hedge Fund ETF Fray
International Business Times
First Trust, the tenth-largest U.S. ETF issuer by assets, has filed plans with the Securities and Exchange Commission to possibly list a hedge fund ETF becoming the latest ETF sponsor to look to make inroads in this niche.

When safe stock funds cost you money
Reuters via Yahoo! Finance
During the financial market turbulence of recent years, fund marketers have launched a number of stock funds that boasted exceptionally low volatility. They were the equivalent of sea-sickness pills for those who still wanted to go on stock-market cruises. Yet these exchange-traded funds (ETFs) make less sense when the stock market is bullish.

Energy: Refined out of existence
By Gregory Meyer – Financial Times
Sunoco petrol stations are a fixture of the US eastern seaboard, their blue-and-yellow awnings touting the brand’s status as official fuel of Nascar racing. But after July, none of the petrol they sell will actually be made by Sunoco.

New NZX Equity Indices Methodology

UBS Declares Coupon Payments on Seven ETRACS Exchange Traded Notes

Discover Financial Unveils Exchange Offer For Two Series Of Notes

DFC Global Corp. Announces Proposed Private Offering of $200 Million of Senior Convertible Notes

Technology News

Korean Investment & Securities Co. Ltd. selects Orc to offer low-latency access to Korean markets
Orc, a leading provider of technology and services for the global financial industry, today announced that Korean Investment & Securities Co. Ltd. (KIS) has selected Orc to meet growing market demand for low-latency connectivity to the Korea Exchange (KRX).

First Derivatives- Contract win with major Australian bank
First Derivatives, a leading provider of software and consulting services to global investment banks, brokers and hedge funds is pleased to announce that it has signed an annual software license with one of the big four Australian banks to implement its’ Delta Stream solution within the bank’s eFX division.

ANALEC Expands Into U.S. – ModelViewer To Aid Investment Managers In Asia Equities

Level 3 Communications Sets First Quarter 2012 Earnings Call Date

Viteos Fund Services Achieves Straight Through Processing with FINCAD Analytics Suite

Media News

Study: CIOs May Like To Talk The Social Media Talk, But Only 10% Walk The Walk
The use of social media in the enterprise has been a path well-trod by companies using mass market tools like Twitter, Facebook and LinkedIn to communicate with peers, customers, investors and anyone else who might be interested in what they’re up to. But when it comes to the most senior information executives, they’re actually a little antisocial.

Facebook to buy Instagram for $1bn
By Richard Waters and Chris Nuttall in San Francisco – Financial Times
Facebook is paying $1bn to buy Instagram, a fast-growing online photo-sharing site, in its largest acquisition to date.

Reports Economic Calendar

USDA Today

CBOE Events Calendar

Economic Release Calendar
The Economic Release Calendar (PDF) is a schedule of government, academic and industry economic releases, provided as a service to CME customers.

Asia-Pacific News

SGX proposes rule changes to enhance risk controls in derivatives market
Singapore Exchange (SGX) is consulting the public on proposed rule changes as part of enhancements in risk controls in the SGX Derivatives Trading market.

SGX proposes enhanced regulatory framework for direct access to securities market
Singapore Exchange (SGX) is consulting the public on proposed rule changes to enhance the regulatory framework for direct access to its securities market, in preparation for the ASEAN Trading Link.

In Asia, Fickle Millionaires Vex Banks
The private bankers who have descended on Asia hoping to tap into the world’s fastest expanding pool of millionaires are finding that those clients aren’t very big on relationships.

China Regulator Probes Bank Fees Amid Rising Public Anger
FOX Business
China’s bank regulator has warned the nation’s banks they will be “severely punished” for charging excessive fees in a fresh sign of official displeasure with the nation’s state-run banking system.

Materials of International Conference on Asian Market Integration and Financial Innovation

Shanghai Stock Exchange Adopts New Measure For Fund Market

Tokyo Commodity Exchange: Good Delivery Material Price Differential For April 2012 Rubber Contract

Tokyo Financial Exchange: Rollover Of Leading Contract Month For Three-month Euroyen Futures Effective From 6 April 2012

China Merchants Securities (HK) Co., Ltd. Implements NASDAQ OMX’s SMARTS Broker To Manage Equities Surveillance

Frontier Markets

Saudi king slams stock market manipulation: report
Reuters via Yahoo! News
King Abdullah has ordered a crackdown on manipulation of Saudi Arabia’s booming stock market, insisting action should be taken if necessary against improper trading by members of the royal family, the daily Alsharq newspaper reported on Monday.

Sukuk Shortage Stymies Funds With $192 Billion: Islamic Finance
Malaysian and Indonesian pension funds, which have a combined $192 billion of assets, say plans to increase holdings of Islamic bonds are being hampered by a shortage of investment-grade sukuk.

HSBC Holdings Plans To Sell Operations In Pakistan

First Day Dealings Of The Palestine Securities Exchange (PSE) On The Palestine Exchange (PEX)

Tehran Stock Exchange – First Quarter 2012 Report 2012

Miscellaneous News

Europe has yet to make Europeans
By Gideon Rachman – Financial Times
“We have made Italy, now we must make Italians.” So said Massimo d’Azeglio, an Italian intellectual, just after his country’s unification in 1861. The current generation of EU politicians face a modern version of the d’Azeglio dilemma: They have made a European Union, now they must make Europeans.

John Lothian Newsletter

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Past JLN Newsletters

How Ken Griffin rebuilt Citadel’s ramparts

How Ken Griffin rebuilt Citadel’s ramparts

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