John Lothian Newsletter: CME takes on U.S. rival with smaller silver contract; LSE grabs ETF market share from Europe rivals; SGX Checks Derivatives Trading Glitch to Protect Cash Cow

Apr 19, 2013

Exchange CME Group announces the creation of a smaller and more retail-oriented 1K ounce silver contract. The London Stock Exchange continues to elbow its way toward the front of the ETF volume line in Europe. Singapore Exchange is taking a deeper look at last week’s trading delay to guard against future problems.

First Read

One Last Posting
Ed TillyCBOE
My week as guest editor ends today, and I have to admit it’s not as easy as John, Jim and the JLN team make it look! Thanks John, for giving me the opportunity to cover some serious thoughts in the newsletter this week and to poke some fun, too. It’s been a pleasure.

Finally, a week from today, CBOE and the options industry celebrate their 40th anniversary. As my final plug, I’d like to invite JLN readers to watch “CBOE 40” at, a just-completed video documentary that chronicles the history of CBOE through interviews with key figures in CBOE’s history, including CBOE founder and first president, Joe Sullivan. It’s a fast-paced look behind-the-scenes at events that led to creation of CBOE and the listed option industry with great then-and-now photos that we think you’ll enjoy. I’ll let Jim Kharouf cover the making of the video next week.

***JM: Thanks for the help, Ed and team! Another one down. Next week, we’ve got a special guest editor (who I won’t name just yet) who has been absolutely going crazy trying to get a chance to take over commenting. No, not John Lothian; we changed the locks. See you Monday!


CFTC slaps Linn Group with $400,000 penalty
Lynne Marek – Crain’s
The Commodity Futures Trading Commission ordered Chicago-based futures broker Linn Group Inc. to pay a civil penalty of $400,000 for a regulatory missteps, including failing to properly manage customer accounts and supervise its employees.

**JK – Thwaaak!


The Rewards of Indiscretion
Cracking down on M.&A. leaks may only make them more tempting. Merger practitioners say fresh research showing that news is trickling out less often about companies for sale can partly be attributed to tougher rules and enforcement. Though loose lips come with less chance of deals closing, they also coincide with much higher premiums. Some bankers will always fancy that mix of risk and reward.


Raj Mahajan

Raj Mahajan, Allston Trading CEO, Talks HFT and the Business of Prop Trading

Raj Mahajan took the reins at Allston Trading as CEO in September 2012 and has spent a good deal of his time looking at the issue of high frequency trading (HFT). Allston has been one of the proprietary trading firms who has been willing to publicly discuss HFT, regulation and the future of that form of trading. Mahajan spoke with JLN’s editor-in-chief Jim Kharouf about HFT as well as the business challenges and opportunities for prop firms.

Watch the video »


U.S. Treasury Official: No Financial Firm Will Be Bailed Out Again
Dow Jones
U.S. taxpayers will never again have to bail out a failing financial firm, a top Treasury Department official said Thursday, pushing back at criticism that regulators have failed to appropriately deal with too-big-to-fail banks.

**JK – Read my lips, “No new bailouts.”


Dark Pool Brawl Breaks Out
Scott Patterson – WSJ
A behind-the-scenes brawl has broken out between two market powers that represent opposite ends of the stock-trading spectrum.

***ET: We applaud the SEC for recognizing the difference between option and equity market models: All cleared options contracts must go through one of 11 options markets.

**JK – And who doesn’t love a good brawl once in a while?


Why Women Should Trade
by Rachel Hunter – Trader Planet
I’m a private trader and mother of two great “tween” girls. Trading has a great amount of flexibility, scope for creativity and unlimited rewards totally free of the popular glass ceiling of gender inequality. Along my travels I’ve found women traders seem to make up a very small minority of traders and I’d like to inspire other women to get into trading to enjoy the great potential it offers.

***ET: The market does not discriminate. It will reward — or punish — anyone.

**JK – WILD about trading.


Probe into brokers, escorts and Libyans
Caroline Binham, Brooke Masters and Philip Stafford in London –
Three former employees of Tradition, the interdealer broker, are under investigation by City of London police for allegedly submitting fraudulent expenses, including some in relation to the supply of escorts to employees of the Libyan Investment Authority in the hope of securing future business.

***ET: As easy as this one is, I’m not going there.


The soft commodities grind
Automated Trader
It’s rare for soft commodities to make headlines but they do represent key foodstuffs and any rise in prices is more evident to everyday people. In a similar vein to grains, soft commodities remain in long term downtrends.


Swiss to hold referendum on gold reserves
James Shotter in Zurich –
Switzerland is to hold a referendum on a popular measure that would ban the central bank from selling its gold reserves and force it to keep at least 20 per cent of its assets in the metal. Under the terms of “Save our Swiss Gold”, which is led by members of the ultra-conservative Swiss People’s party, the Swiss National Bank would have to repatriate gold reserves held abroad and keep them at home.

*** ET: Substitute the word “chocolate” for “gold” and “candy” for “metal” and this becomes much more entertaining. Is this why they only let me be “guest” editor?

**JK – I sense VIX Chocolate coming next.


Majority of Germans consider gold a safe investment
Nine out of ten Germans believe investing in gold is safe – yet fewer than one in three include gold in their investment portfolio structure. The biggest gap between attitudes and investment behaviour lies with the 30 to 39-year-olds: although an above-average number of people (51 percent) in this age group believe that gold is very safe, only 29 percent of those surveyed actually invest in it.

***JM: Survey conducted April 3 and 4, 2013. Would be interesting to see if those numbers are much different now.



MarketsWiki Page of the Day
Raj Mahajan

MarketsWiki Recent Updates


Jochen Sanio; Brian Haag; Raj Mahajan

Companies, Organizations and Groups

Eurex; Vienna Stock Exchange; BaFin; BATS Global Markets; Credit Suisse First Boston; TMX Group Inc.; TABB Group; Singapore Exchange Limited; Allston Trading, LLC


EURIBOR; CME Group metals products


Exchange-traded notes; High-frequency trading


38,143,077 pages viewed, 7,454 articles, 156,947 edits
MarketsWiki Statistics

Lead Stories

CME takes on U.S. rival with smaller silver contract
CME Group Inc. said on Thursday it will launch a smaller 1,000-ounce physical silver futures contract that will compete with rivals in attracting more retail demand and hopefully boost flagging trading volumes in the metal.

LSE grabs ETF market share from Europe rivals
Suzi Ring – Financial News
The London Stock Exchange is moving in on the market share of its European rivals in exchange-traded funds, posting a 14% increase in trading turnover volumes in the first quarter and nearing the number one spot.

SGX Checks Derivatives Trading Glitch to Protect Cash Cow
Singapore Exchange Ltd. , operator of Southeast Asia ’s biggest bourse, said it’s reviewing procedures after derivatives trading was delayed by a computer breakdown last week, sending investors to alternate venues.

Russia’s Main Exchange Plans To Develop Gold Bullion Market -CEO
Dow Jones
Russia’s main exchange operator aims to harness the country’s resource riches as the company bids for a position among the global exchange elite, according to its chief executive.

Banks Revive Risky Loans and Mortgages
The alchemists of Wall Street are at it again. The banks that created risky amalgams of mortgages and loans during the boom — the kind that went so wrong during the bust — are busily reviving the same types of investments that many thought were gone for good.

In Cyprus Rescue, Germany Forged a New Vision for Bank Union
With few exceptions, senior European policy makers agree that the euro zone needs a “banking union” to correct flaws in its makeup that have been laid bare by the region’s financial crisis. Trouble is, they don’t agree what “banking union” means.


New Single European Banking Supervisor Agreed
Today in Brussels, EU member states agreed on the setting up of a new EU single supervisor for banks. This followed a key breakthrough in Ministerial talks at the Ecofin informal meeting in Dublin on 12-13 April.

Doing The Right Thing: Compliance That Works For Investors By SEC Commissioner Luis A. Aguilar – The Regulatory Compliance Association – Regulation, Operations & Compliance (ROC) 2013, New York, NY, April 18, 2013

FCA publishes its approach to regulatory failure
The Financial Conduct Authority (FCA) has today published its approach to investigating and reporting on regulatory failure, as required by the Financial Services Act 2012 (the Act).

2013/23 CSA seeks comment on proposals for derivatives market registration and regulation [CSA]
The Canadian Securities Administrators (CSA) today published for comment Consultation Paper 91-407 – Derivatives: Registration, which sets out the CSA’s recommendations on registration and regulation of market participants trading in derivatives.

ESMA Announces A Vacancy For A Temporary Agent Head Of Unit (Legal, Cooperation And Convergence Unit) – Deadline 20 May 2013

[France] The AMF launches a consultation on amendments to Books III and V of its General Regulation further to the European EMIR Regulation

Exchanges & Trading Facilities

Eurex deepens dialogue with Chinese market participants and supervisory authorities
Deutsche Börse Group and its subsidiary Eurex, the international derivatives marketplace, have become the first non-Chinese exchange operator to hold a conference on the derivatives markets and their contribution to a country’s economic growth.

Oslo Børs Emphasises The Nordic Dimension For The Bond Market
As part of its Nordic focus, Oslo Børs announces that Oslo ABM has changed its name to Nordic ABM. Nordic ABM targets fixed income issuers throughout the Nordic region, and a number of Nordic issuers have already listed bond issues on Nordic ABM. Since the Burgundy markets will become part of the Oslo Børs offer in June, a new fixed income market will be added to the trading system which will allow trading in fixed income instruments intended for Swedish investors that are denominated in Swedish kronor.

New Records Of The Moscow Exchange’s FX market
On April 17, 2013 the Moscow Exchange’s FX market saw a record high in number of trades and trading volume. During that day 38,677 FX trades were executed, an absolute maximum value since the launch of the market in 1992.

CME Group Announces New Physically Delivered 1,000 oz. Silver Futures Contract
Press Release
CME Group, the world’s leading and most diverse derivatives marketplace, today announced the launch of a new physically delivered Silver (1,000 oz.) futures contract, scheduled to begin trading in June 2013.

[CBOE] Relocation of Option Classes from Post 5, Station 9

Program Trading Averaged 25.1 Percent of NYSE Volume during Apr. 8-12

Taminco Corporation Celebrates First Day of Trading on the New York Stock Exchange

Intelsat Celebrates First Day as a Publicly-Traded Company on the New York Stock Exchange

Moscow Exchange To Increase The Maximum Amount Of Foreign Currency Accepted As Collateral For Derivatives Trades To 50 Million US Dollars

Hedge Funds & Managed Futures

Howard tops hedge fund rich list as wealth hits 1.5 billion pounds
Reuters via Yahoo! News
By Laurence Fletcher LONDON – Star trader Alan Howard has cemented his place as the wealthiest hedge fund manager in this year’s Sunday Times Rich List with a jump in his net worth, after further profits from his main hedge fund.

March Performance Update Of The EDHEC-Risk Alternative Indexes – Good Month Of March For Hedge Funds
In March, the stock markets continued to rise for the fifth consecutive month with significant momentum. The S&P 500 gained 3.75%, registering a 10.61% progression during the first quarter of 2013. Equity implied volatility dropped sharply, reaching a five-year low of 12.7%. High-grade bonds were mixed but almost unchanged (Lehman Global: 0.10%, Lehman US: -0.21%), credit spreads were flat (index: 0.04%) and convertible bonds rebounded vigorously, benefiting from their equity component (1.34%). Commodities scored a modest 1.05% gain. The dollar, finally, maintained some momentum with a 0.79% return.

Hedge fund exit requests seen stable in coming months
Reuters via Yahoo! Finance
Client demands to pull money out of hedge funds fell in April and are expected to remain at a steady level in the coming months as investors wait to see how funds cope with the continuing European debt crisis.

Managers of Hedge Funds Hit by Union
The Wall Street Journal via Yahoo! Finance
The nation’s second-largest union for teachers said some prominent managers of hedge funds get investments from public pensions while supporting groups that attack traditional pensions.

Blackstone’s earnings soar as it exits investments
Reuters via Yahoo! Finance
Blackstone Group LP , the world’s largest alternative asset manager, reported a 28 percent rise in first-quarter profit on Thursday as its real estate, private equity, credit and hedge fund units successfully sold assets.

UBS industrials banker Knapp leaves for Blackstone: sources
Reuters via Yahoo! News
NEW YORK – UBS’ global head of industrial investment banking has left the firm to join The Blackstone Group’s advisory business, according to two sources familiar with the matter.

Paulson’s Advantage hedge fund off in April on gold: source
Hedge fund manager John Paulson’s Advantage Fund is losing money again this month in the wake of a sharp selloff in gold, a source familiar with the numbers said on Thursday.

Gold, Currency to Some, Is Acting Like a Speculative Commodity
New York Times
To the faithful, gold is different from any other commodity. But its precipitous rise since the financial crisis, and its recent sharp fall, sure make it look like one.

Silver, Devil’s Metal, Gets Snakebitten
Tatyana Shumsky – WSJ
As bad as gold’s losses have been, silver is doing worse. The Devil’s Metal, as silver is often called, has lived up to its name with prices plunging 15.7% over the Friday-Monday period, well in excess of gold’s 13% drop over the same period.

Och-Ziff Capital Management Group LLC to Release 2013 First Quarter Results and Announce 2013 First Quarter Dividend

Banks & Brokers

Global sales head steps down at RBS
Giles Turner – Financial News
The global head of sales at Royal Bank of Scotland has stepped down, Financial News has learned. The senior departure is the second from the UK bank’s markets business in a week.

ECB’s Asmussen urges governments to press ahead with banking union
Reuters via Yahoo! Finance
Germany’s representative on the European Central Bank’s Executive Board urged governments on Friday to press ahead with Europe’s planned banking union to strengthen the financial system and avert future crises.

Berenberg’s Perrott Leaves to Join Autonomous Research
Nandini Sukumar – Bloomberg
Richard Perrott, an analyst covering exchanges and inter-dealer brokers at Berenberg Bank, left to join Autonomous Research LLP, the independent research firm founded by former Merrill Lynch & Co. executives.

Amid Shakeup, Barclays’ Investment Banking Chief Steps Down
New York Times
Two top lieutenants to the bank’s former chief executive, Robert E. Diamond Jr.,are stepping down. And in an effort to bolster its American operations, Barclays named Skip McGee, a former Lehman Brothers banker, chief executive of Barclays Americas.

German regulator to intensify Deutsche Bank libor probe: sources
German regulator Bafin has raised doubts about Deutsche Bank’s internal probe of its role in setting inter-bank lending rates and will intensify its probe of Germany’s biggest lender, two sources familiar with Bafin’s report said.

BofA’s Merrill Unit Sputters as Moynihan Reduces Risk
Hugh Son & Donal Griffin – Bloomberg
Bank of America Corp.’s first- quarter revenue from fixed-income trading slumped more than most of its peers, eroding the biggest source of profit at the firm’s Merrill Lynch investment bank amid a push to curtail risk.

Morgan Stanley’s Still the Sick Man of Wall Street
Morgan Stanley’s first quarter earnings show that not much has been done to heal the weakness in its fixed income department. Revenue plummeted 40 percent.

Morgan Stanley Shrinks Investment Bank Pay Pool 14% as Jobs Cut
Morgan Stanley , owner of the world’s biggest brokerage, set aside $1.89 billion to pay employees at its investment-banking and trading division in the first quarter, 14 percent less than a year earlier.

Jefferies International swings to loss
Matt Turner – Financial News
The European arm of US investment bank Jefferies Group swung to a £25.4m loss in the year to November 30 2012 – a challenging year in which rising staff costs combined with falling trading revenues.

Deutsche Bank’s Wilkes Named to Head High-Grade Credit Trading
Deutsche Bank AG , Germany’s biggest lender, appointed Josh Wilkes as head of investment- grade credit trading in the U.S.

KPMG Will Reassess Safeguards in Wake of Trading Case
KPMG LLP said it plans to reassess its internal safeguards, the latest fallout from an insider-trading case that has led to the firing of a senior partner and the accounting firm’s resignation as the auditor for two companies.

GFI Group Inc. Schedules First Quarter 2013 Earnings Release and Conference Call

Morgan Stanley Reports First Quarter 2013

E*TRADE Financial Corporation Announces First Quarter 2013 Results

Clearing & Settlement

CME Clearing – Performance Bond Requirements – Environmental, FX, and Weather Outrights; Electricity and Metals Inter-Commodity Spread Credits – Effective Tuesday, April 23, 2013

CME Clearing – Performance Bond Requirements: GSCI and DJ-UBS Commodity Index Inter-Commodity Spread Ratios- Effective Tuesday, April 23, 2013

Indexes & Products

STOXX Announces Results Of Annual Emerging And Developed Markets Classification Review
STOXX Global 1800 Index To Cover All Developed Market Countries


Caplin and OpenFin Partner to Accelerate HTML5 Adoption
Caplin Systems Ltd, the web trading technology company, and OpenFin, a provider of finance-grade runtime technology, today announced a partnership that brings together the companies’ market leading product offerings in a move to accelerate the adoption of HTML5 for development of high-performance trading applications.

Thomson Reuters Brings Enhanced Workflow Capabilities to Disclosures Reporting
Thomson Reuters, the world’s leading source of intelligent information for businesses and professionals, today announced further strategic enhancements to its Accelus Disclosure Solutions PROFILE software, a next generation workflow solution that enables publicly-held organizations to more accurately prepare, update and deliver their financial disclosures to the U.S. Securities and Exchange Commission (SEC).

Equinix Announces Significant Expansion To Increase Data Center Capacity In Singapore
Equinix Launches Third Data Center And Expands Second Facility To Meet Strong Market Demand For Premium Data Center Services In Singapore

Bank Of America Merrill Lynch Goes Live On AlgoSpan Low Latency Infrastructure And Exchange Access
AlgoSpan, the specialist market infrastructure provider, is pleased to announce that Bank of America Merrill Lynch has gone live with AlgoSpan’s European low latency exchange market access platform, “AlgoNet’.


CFTC Orders The Linn Group, Inc., a Registered Futures Commission Merchant, to Pay $400,000 Civil Monetary Penalty for Customer Account Deficiencies and Supervision Failures
The U.S. Commodity Futures Trading Commission (CFTC) today announced that it entered an Order requiring The Linn Group, Inc. (TLG), a Chicago-based Futures Commission Merchant (FCM), to pay a $400,000 civil monetary penalty for failing to properly handle, monitor, and report the customer funds that it maintained, as required by the Commodity Exchange Act (CEA) and CFTC Regulations, and for supervision failures.

CFTC Charges Accounting Firm Tunney & Associates, P.C. and Its Sole Owner Michael Tunney with Failing to Properly Audit a Registered Futures Commission Merchant
The U.S. Commodity Futures Trading Commission (CFTC) today announced that it filed a Complaint against Tunney & Associates, P.C. (Tunney & Associates), an accounting firm with offices in Hammond, Indiana and Orland Park, Illinois, and Michael Tunney (Tunney), its sole owner and a certified public accountant (CPA) licensed in Illinois and Indiana, alleging violations of the CFTC’s Regulations related to conducting audits for The Linn Group, Inc. (TLG), a registered Futures Commission Merchant (FCM).

SEC Charges Chicago-Based Investment Adviser with Defrauding CalPERS and Other Clients
The Securities and Exchange Commission today charged the CEO of Chicago-based investment advisory firm Simran Capital Management with lying to the California Public Employees’ Retirement System (CalPERS) and other current and potential clients about the amount of money managed by the firm.

SEC’s Settlement With SAC Capital Draws Judicial Scrutiny
In another high-profile settlement, a federal judge again scrutinized the Securities and Exchange Commission’s willingness to settle charges with defendants without requiring an admission of wrongdoing.

FCA bans and censures managing director of SIPP operator Montpelier Pension Administration Services Limited
The Financial Conduct Authority (FCA) has banned Kevin Wells, the managing director of Montpelier Pension Administration Services Limited (MPAS), from performing any significant influence function at any regulated firm, and also censured him.

New Zealand’s Financial Markets Authority: Five Star Finance Saga Draws To A Close With Prison Sentence For Neill Williams

Environmental & Energy

Deutsche Bank Signs up for New York City Mayor Michael Bloomberg’s Carbon Challenge
Business Wire via Yahoo! Finance
Deutsche Bank today announced its participation as one of ten charter members in New York City’s Carbon Challenge to commercial offices. Deutsche Bank is one of five companies to pledge a reduction of greenhouse gas emissions from our New York City offices by 40% in the next ten years.


Singapore Exchange appoints Jenny Chiam as new Securities Head
Singapore Exchange (“SGX”) appoints Jenny Chiam to the position of Senior Vice President, Head of Securities. Prior to joining SGX, Ms Chiam served as the Head of South East Asia Equities and as CEO of Nomura Securities Singapore.

Mark Mobius: I Am Still Bullish on China
Leading emerging markets investor Mark Mobius on why he is still bullish on China.

Frontier Markets

MCX Weekly Market Report April 12, 2013 – April 18, 2013

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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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