John Lothian Newsletter: Nasdaq Aims to Pay Up in SEC Facebook Probe; AX trading to shut dark pool platform; SHFE Copper Volume Rises to Record as LME Competition Heats Up

Apr 25, 2013

A ten million dollar payment to the SEC and a promise not to use duckface pictures appears to be on the way for Nasdaq OMX for its handling of Facebook’s IPO. Dark pool operator AX Trading says it will drain the pool and possibly look for a buyer or licenser for its platform. Copper volume in Shanghai hits a new record and sounds the Horn of Competition in the general direction of the London Metal Exchange.

First Read

CME Group sparked shutdown of CFTC’s academic research program
Sarah N. Lynch – Reuters
The world’s largest futures exchange has accused the top U.S. derivatives regulator of illegally sharing sensitive market data with outside researchers who then used the information to publish academic papers about high-frequency trading.

***DA: Was this “fair use” of data, regulatory overreach, or a simple double-cross? When the paper was first published, Commissioner Chilton called it “a key step in the process and it should fuel-inject the regulatory effort going forward.” Now it looks like someone put sugar in the gas tank.

By the way, if you would like to read the paper along with a summary of the key highlights, it has been available on MarketsReformWiki since the day it was published last December, at


Running man: HTG’s Chris Hehmeyer
Automated Trader
It seems somehow fitting that Chris Hehmeyer got his start as a runner on the floor of the Chicago Board of Trade. That was in 1978 and over the next 35 years he has kept on running. Hehmeyer now runs HTG, a company that embraces all manner of traders. When he’s not doing that, he also serves as the chairman of the National Futures Association. Automated Trader caught up with him to hear his thoughts on the value of diversity and what he thinks of some of the impending changes in the marketplace.


ISE Introduces New Corporate Branding
The International Securities Exchange today revealed new corporate branding, including a new logo suite, a redesigned corporate website, and new corporate Twitter and LinkedIn pages.

***JM: I like it! Add red laser eyes and it’ll defeat the bad guys all by itself.


CFTC commissioner seeks more time for penalty cases
Commissioner Bart Chilton at the US Commodity Futures Trading Commission (CFTC) has told Operational Risk & Regulation he will call for Congress to extend the current five-year statute of limitations for bringing civil penalty claims in the US against financial organisations.

***JM: Hi there! We’re from the government. Remember that time your grandpa made all that money?


BlackRock Electronic Bond-Trading Fails From Client Imbalance
Matthew Leising & Alexis Leondis – Bloomberg
BlackRock Inc.’s (BLK) internal electronic bond-trading system failed because it couldn’t attract a critical mass of customers, even as small dealers stood ready to aid trading. Among the 30 clients out of 60 that had the option to use BlackRock’s Aladdin Trading Network, the mix of buyers and sellers wasn’t diverse enough, according to Brian Beades, a BlackRock spokesman.


Finding efficiencies in the promised land of cross-margining
Galen Stops – FOW
New regulations in the derivatives industry are increasing compliance costs for numerous different market participants at a time when volumes and investor confidence are low. The Basel regulations are imposing greater capital requirements on banks while the introduction of OTC clearing means that firms will have to source and post more high quality collateral at the CCP, with many anticipating a shortfall in such collateral as a result.


Looking for something to do around lunchtime? Take a look at the CBOE 40th anniversary video at It’s a great look back at the exchange’s history, and tells an interesting story of adaptation and flexibility.


At its 23rd Annual General Meeting in Vienna today, the International Swaps and Derivatives Association, Inc. (ISDA) elected 12 Board Directors, nine of whom currently serve on the Association’s Board. For the first time in the history of the Association, a Chinese institution is serving on the ISDA Board.


Exchanges boosted as Brent crude trading volumes jump
Ajay Makan in London –
One clear winner has emerged from Brent crude’s foray beneath $100 a barrel – the exchanges which offer trading in the global oil benchmark. April has seen four of the seven busiest days to date for trading in Brent futures on London’s ICE Futures Europe exchange, home to the most popular Brent contracts.

***JM: Another winner: right now, we don’t have to have a check on our credit and the health of our first-born child in order to fill our car’s tank.


High-Speed Traders Pulled Back, Not Out, After Fake Tweet
High-speed trading firms pulled back from the market during Tuesday’s rapid, Twitter-fueled swoon, but they didn’t pull out altogether, according to executives. Automated trading programs dialed back exposure to stocks and futures and quoted less-aggressive prices as stock indexes fell in the wake of a bogus Twitter post claiming an attack on the White House, but trading systems and exchanges held up under the stress, traders said.

***JM: Oh, those new-fangled horseless carriages with their daredevil drivers…


Mining Twitter Sentiment For Stocks Dies in London, OK at the SEC, Scary in the Market
Mining Twitter for picking stocks has crashed and burned in London, gotten the nod from the SEC, and caused yet another gut-wrenching lesson in the dangers of electronic markets.

***JM: One more just for fun. I get a chuckle seeing people mine the same sentiment ore from the same quarry with a different shovel, and then get puzzled why they got the same weird metal as all the other times.


Strategic Posturing Behind the Suit Against Corzine
Louis J. Freeh, the bankruptcy trustee for the failed futures firm MF Global, filed a lawsuit aimed at pinning its collapse squarely on Jon S. Corzine, the former chief executive, and two of his top lieutenants. And unlike in many other suits, Mr. Freeh has not named other groups like a company’s directors. […] Mr. Freeh is clearly aiming straight at Mr. Corzine, and is not the type of opponent who can be sent packing with a quick settlement.

***JM: Oh, I think if a quick settlement were to appear at the right
price (we’re still in the “no admit” era, after all), we’d see that taken.


Brokers slammed in PBS documentary
Jason Kephart – Investment News
The struggles Americans face in saving for retirement are blamed largely on financial advisers in a PBS documentary aired Monday night. In “The Retirement Gamble,” a new film for PBS’ “Frontline” series, producers point to the fees investors are charged in their 401(k)s — largely made up of mutual fund fees and commissions — as the biggest obstacle standing in the way of being able to save for retirement.

***JM: I’m lost. Why buy a financial product from a salesman, if you don’t want to pay a salesman? So much can be avoided with that little two-word phrase: “So don’t.”



MarketsWiki Page of the Day
The Order Machine (TOM)

MarketsWiki Recent Updates


Anthony George Gero; Satish Nandapurkar; Bernard Dan; John Shay; Thomas Cunningham; Robert Krause

Companies, Organizations and Groups

Boston Options Exchange; The Clearing House; Casablanca Stock Exchange; The Order Machine (TOM)


Liffe CONNECT; CETIP Trader; Moroccan All Shares Index (MASI); Moroccan Most Active Shares Index (MADEX)


Five Minutes With Thomas F. Callahan


38,397,996 pages viewed, 7,460 articles, 158,026 edits
MarketsWiki Statistics

Lead Stories

Nasdaq Aims to Pay Up in SEC Facebook Probe
Nasdaq OMX Group Inc. plans to set aside $10 million in anticipation of settling a regulatory investigation into its handling of Facebook Inc.’s stock-market debut, according to people familiar with Nasdaq internal discussions.

AX trading to shut dark pool platform
Jacob Bunge – Dow Jones
AX Trading Group LLC decided to close its share-trading platform, or dark pool, citing slow pickup in the business, according to the company. The Stamford, Conn.-based firm is talking with potential acquirers and partners and is looking into potential deals to license its trading technology, according to Kevin Callahan, chief executive.

SHFE Copper Volume Rises to Record as LME Competition Heats Up
Copper’s aggregate trading volume and open interest in Shanghai rose to records as prices fell to the lowest in three and a half years, amid competition to replace London as the world’s largest metals marketplace.

Equiduct targets funding boosts in investor talks
Anish Puaar, Michelle Price and Tim Cave – Financial News
Equiduct is holding talks with potential new shareholders with the aim of attracting crucial funding for the beleaguered pan-European share trading platform, Financial News has learned.

Man vs. Machine: Squawk Box Trumps Twitter
Matthew Jarzemsky – WSJ
When Twitter proved an unreliable source of information Tuesday, traders turned to a form of communication that predates the digital age: the squawk box.

CME Group’s Duffy: No Trades Changed or Canceled Amid Twitter Hoax
Dow Jones
CME Group Inc. ( CME ) Executive Chairman and President Terry Duffy said in a Fox Business Network interview Wednesday that no trades were changed or canceled amid the brief stock-market decline stemming from Tuesday’s Twitter hoax.

Swaps trading enters new era
Michael Mackenzie in New York –
The standardisation of global derivatives is set to enter a new phase, led by the introduction of so-called “MAC” swaps for interest rates across a number of currencies.

Janet L. Yellen, Possible Fed Successor, Has Admirers and Foes
In July 1996, the Federal Reserve broke the metronomic routine of its closed-door policy-making meetings to hold an unusual debate. The Fed’s powerful chairman, Alan Greenspan, saw a chance for the first time in decades to drive annual inflation all the way down to zero, achieving the price stability he had long regarded as the central bank’s primary mission.

Transparency Is the Rule in Chapter 11—Except for CEOs
When Reader’s Digest first ventured into bankruptcy in the summer of 2009, the multimillion-dollar payouts to top executives that showed up in court filings sparked outrage from employees facing layoffs and retirees staring down benefit cuts.

Did Jon Corzine Pick the Wrong Failing Company?
Jonathan Weil – Bloomberg
Louis Freeh has established himself as a highly regarded corporate sleuth since leaving the top post at the Federal Bureau of Investigation more than a decade ago. It’s too bad the public couldn’t get someone of similar stature to investigate Fannie Mae, where Freeh once served on the board.


CFTC’s Chilton Says Staff Eyeing Trading After Hoax
Dow Jones
Commodity Futures Trading Commissioner Bart Chilton said agency officials are looking into trading that took place after the Tuesday Twitter hoax that sent markets careening sharply lower in a matter of minutes.

CFTC Announces Departure of Office of International Affairs Director Jacqueline H. Mesa; Sarah E. Josephson Announced as New Director
Commodity Futures Trading Commission (CFTC) Chairman Gary Gensler today announced that Office of International Affairs (OIA) Director Jacqueline H. Mesa is leaving the agency for other pursuits. Chairman Gensler also announced that current Division of Clearing and Risk Deputy Director Sarah E. Josephson will take over immediately following Ms. Mesa’s departure. Both changes will take place on May 10.

CFTC Announces Public Meeting of the Technology Advisory Committee
The Commodity Futures Trading Commission (CFTC) announces that on Tuesday, April 30, 2013, the CFTC’s Technology Advisory Committee will hold a public meeting at the Commission’s headquarters in Washington, DC from 10:00 a.m. to 4:00 p.m. The meeting will focus primarily on issues related to swap data reporting.

Directors Take Shelter in Trading Plans
Daniel Donoghue steamed across the squeaky wood floor of the exclusive Minneapolis Club last year. He had a bone to pick with the chairman of a medical-device maker. Inside one of the ivy-covered club’s private dining rooms, Mr. Donoghue, the company’s largest investor, complained that amid a turbulent period at the company a member of the board of directors had unloaded most of the stake held by an investment fund he ran.

Montréal CAVAC and AMF in support of victims of financial crime
The Autorité des marchés financiers and the Montréal Crime Victims Assistance Centre signed an agreement today in an effort to break the isolation of victims of financial crime and help them regain control over their lives.

Exchanges & Trading Facilities

The BOX Options Exchange announced today it has received SEC approval to launch its Complex Order Book on Friday, May 3, 2013. “With the addition of the Complex Order Book, BOX will be the first exchange to offer NBBO protection for complex order executions,” said Tony McCormick, CEO of BOX.

Actant To Provide Access To Bats Options
BATS Options, a U.S. equity options market operated by BATS Global Markets (BATS), and Actant, a leading provider of trading solutions for financial firms, today announced that traders using the Actant Quote trading system now have access to the BATS Options market.

NASDAQ OMX Reports First Quarter 2013 Results
The NASDAQ OMX Group, Inc. today reported results for the first quarter of 2013. First quarter net exchange revenues were $418 million, up from $414 million in the prior year period, driven by increases in our Global Technology Solutions and Global Information Services segments, partially offset by lower U.S. cash equity trading revenues. On an organic basis (constant currency and excluding acquisitions) first quarter net exchange revenues decreased 2% year-over-year.

NASDAQ OMX Announces Quarterly Dividend Of $0.13 Per Share

Exchange Sector Shows Strengthening In Share Values – FTSE Mondo Visione Exchanges Index Increases By 12.9 Per Cent In Q1 2013 – Index Closed Up 0.8 Per Cent In March

NYSE MKT Issues Short Interest Report

NYSE Group Inc. Issues Short Interest Report

NASDAQ Announces Mid-Month Open Short Interest Positions In NASDAQ Stocks As Of Settlement Date April 15, 2013

Trading Schedule Of The Moscow Exchange For The May Holidays

Trading Schedule Of The Moscow Exchange’s FX Market For The May Public Holidays

Moscow Exchange: Results Of Auction For Placement Of The Russian Federation Government Bonds, Issue No26212RMFS

Hedge Funds & Managed Futures

Hedge fund fees hot topic at R.I. Investment Commission
The Providence Journal
Rhode Island has moved about $1 billion of its $7.6-billion state pension fund into hedge funds over the past 18 months, a move that General Treasurer Gina M. Raimondo defended against critics Wednesday in a meeting of the state Investment Commission.

Texas University Fund Sold $375 Million in Gold-Bar Holdings
The University of Texas Investment Management Co., the third-largest U.S. academic endowment, sold $375 million in gold bars from holdings of about $1.4 billion and reinvested the proceeds in gold futures and equities.

Guggenheim Hires Ex-Lehman Executive Schiffman in Deals Push
Guggenheim Partners LLC, the $180 billion asset-management firm whose executives own a stake in the Los Angeles Dodgers, hired Glenn H. Schiffman, the former head of Asia-Pacific investment banking at Lehman Brothers Holdings Inc., to expand its investment banking unit.

HEARD ON THE STREET: Wheels Come Off the Commodities Supercycle
Have we fallen off the cycle or is the bike broken? Since 1998, commodities have been in a bull market—the so-called supercycle, where surging demand for raw materials eclipses supply, juicing prices to abnormal highs.

Economic pressures tarnish Turkey’s gold trade
Daniel Dombey in Istanbul and Funja Guler in Ankara –
Sitting in his tiny shop in the heart of Istanbul’s Grand Bazaar, Mehmet Ali Yildirimturk explains why, despite the fall in gold prices this year, Turkey remains fascinated with the metal.

U.S. Mint Sales of Gold Coins at Three-Year High on Price
Debarati Roy – Bloomberg
Sales of gold coins by the U.S. Mint are heading for the highest level since December 2009 after prices in New York had the worst two-day slump in three decades.

Traders Bet on a Sugar Rush
Sugar prices are tumbling as investors brace for a rush of supply from Brazil this year. Sugar futures are down 10.8% this year, ending Wednesday at their lowest level since July 2010.

Issuance of E45 million in Benfica SAD bonds a success

Banks & Brokers

Citi CEO: Bank’s Major Restructuring Is Over
Citigroup Inc.’s top executives said the bank will continue to favor share repurchases over dividends and that the post-crisis period of substantial bank restructuring is over.

Citigroup Wins Shareholder Support for Compensation Plan
Citigroup Inc. shareholders, who rejected the bank’s 2011 compensation plan, voted in favor of the latest round of payouts after the lender said it overhauled rewards for top executives.

Deutsche Bank Must Face Los Angeles Suit Over Slumlord Claim
Deutsche Bank AG must face a lawsuit by Los Angeles claiming the bank let foreclosed properties in low-income neighborhoods fall into disrepair and illegally evicted tenants to sell foreclosed buildings.

Capital One Settles Accusations It Understated Loan Losses
Federal regulators on Wednesday accused Capital One and two of its executives of understating millions of dollars in auto loan losses suffered during the financial crisis.

Clearing & Settlement

DTCC Launches New Loan/SERV Balance Reconciliation Platform
The Depository Trust & Clearing Corporation (DTCC) announced today that it has launched a new Loan/SERV reconciliation platform called Balance Reconciliation that simplifies the reconcilement process for lenders by focusing on balances only.

CME Group Clearing Advisory: NYMEX Options Expiration Operational Procedures for the Trading Floor and Clearing Members (OB, OH, I, ON) Effective Thursday, April 25, 2013

CME Group Clearing Advisory
COMEX Options Expiration Operational Procedures for the Trading Floor and Clearing Members (HX, OG, SO) Effective Thursday, April 25, 2013

Indexes & Products

New State Street bond index ETF launched on Xetra

BlackRock Adds Quant ETFs to the Fold
ETFguide via Yahoo! Finance
BlackRock released five new ETFs that select stocks by using quantitative screens. The first set of funds, the iShares Enhanced ETFs, use BlackRock’s proprietary research rather than tracking an index.


Sungard Receives Top Honors In The 2013 Sell-Side Technology Awards
SunGard has won “Sell-Side Technology Provider of the Year” and “Best Market Surveillance Product” in the first-annual Sell-Side Technology Awards.

NYSE Technologies Named ‘Best Data Center Provider to the Sell Side’ by Waters Technology
NYSE Technologies, the commercial technology division of NYSE Euronext, today announced that it was named ‘Best Data Center Provider to the Sell Side’ by Waters Technology. The award was presented at the Waters Technology, Sell Side Technology Awards, event which was held on April 23, 2013.

Numerix Wins Big at 2013 Sell Side Technology Awards Taking Best Overall Sell-Side Product of the Year
Numerix, the leading provider of cross-asset analytics for derivatives valuations and risk management, today announced it has won the award for “Best Sell-Side Credit Risk Product” and “Best Overall Sell-Side Product of the Year” in the inaugural Sell Side Technology Awards presented by Waters Technology.

ACTIV Financial Named Best Data Provider to the Sell-Side at Sell-Side Technology Awards 2013
ACTIV Financial, a global provider of real-time, multi-asset financial market data and solutions, today announced that the firm was named “Best Data Provider to the Sell-Side” at the Sell-Side Technology Awards.

OneTick Named Best Big Data Provider for the Sell-Side at Sell-Side Technology Awards 2013
OneMarketData, LLC, the leader in tick data management and analytics, today announced that OneTick, the single solution for tick data management, analytics and complex event processing (CEP), was named “Best Big Data Provider for the Sell-Side” at the Sell-Side Technology Awards.

Anova Technologies wins BEST LOW LATENCY NETWORK at the 2013 Waters Technology Sell Side Awards
Anova Technologies, the preeminent financial and exchange connectivity provider, was selected at last night’s Waters Technology Sell Side Awards Dinner as the Best Low Latency Network Category Winner. Although this was the inaugural year for the Sell Side Awards, it received numerous entries for each category.

Advise Technologies launches CPO-PQR electronic filing platform
Advise Technologies, LLC, a software solutions provider for global regulatory compliance, today announced that it will offer the first CPO-PQR e-filing platform to the National Futures Association (NFA) EasyFile portal. This will be the first time that filing electronically is possible for Form CPO-PQR.

OTP Bank Selects Numerix CrossAsset Analytics Platform for Pricing Complex Structures and Model Validation
Numerix (, the leading provider of cross-asset analytics for derivatives valuations and risk management today announced that OTP Bank PLC, a leading bank in the Central & Eastern European countries has selected the Numerix CrossAsset analytics platform to support its derivatives analytics capabilities extending its expertise across the bank.

Sapient Global Markets Extends Compliance Management and Reporting System with Addition of Portfolio Reconciliation Capabilities
Sapient Global Markets, part of Sapient has today announced the ability for its popular Compliance Management and Reporting System to facilitate portfolio reconciliation. CMRS allows firms to collate vast amounts of data from disparate systems, apply reporting eligibility logic, translate it into the destination message format, and deliver it directly to Swap Data Repositories

Indusind Bank Selects Calypso For Full Front-To-Back Office Treasury – Cross-Asset Platform To Grow Indusind’s Treasury Business And Manage Risk

RTS Discusses Partnership with KVH
RTS Realtime Systems
RTS’ very own Andy Woodhouse discusses the strategic partnership with KVH.

Join RTS at CME Tech Talk 2 – RTS Realtime Systems
May 1, 2013 3:30 pm-7:00 pm

Misys Wins Asian Banker Award For “Best Single Country Treasury Management Project” With Maritime Bank – Demonstrates Its Ability To Support Vietnam’s Rapidly Growing Financial Services Industry


SEC Charges Capital One with Understating Auto Loan Losses
The Securities and Exchange Commission today charged Capital One Financial Corporation and two senior executives for understating millions of dollars in auto loan losses incurred during the months leading into the financial crisis.

FCA fines EFG Private Bank £4.2m for failures in its anti-money laundering controls
The Financial Conduct Authority (FCA) has fined EFG Private Bank Ltd (EFG) £4.2 million for failing to take reasonable care to establish and maintain effective anti-money laundering (AML) controls for high risk customers. The failings were serious and lasted for more than three years.

Portfolio manager agrees to pay $50,000 for repeated deficiencies
As part of a settlement agreement with the British Columbia Securities Commission, Quantum Financial Services (Canada) Ltd. has agreed to pay $50,000 to the commission after acknowledging repeated procedural deficiencies.

Environmental & Energy

Record Carbon Plunge Means Pain for Europe’s Utilities: Energy
European utilities, which have lost investors money for the past three years, can expect nothing but more pain after the European Parliament rejected a proposal to support prices in the world’s largest carbon-credit market.

Column: Carbon market is a political scapegoat – Wynn
European lawmakers have made emissions trading a scapegoat as they grapple to compete with far cheaper U.S. energy prices, yet taxes and other charges dwarf the impact a boost in carbon prices would have had.

EU faces energy policy vacuum after 2020
EU ministers meeting in Dublin stood far apart on what energy and environment policy could follow a set of 2020 targets, with a binding legal deal unlikely before 2015.


Japan Exchange Group & Korea Exchange Sign A Letter Of Intent (LOI)
Today, Japan Exchange Group, Inc. (JPX) and Korea Exchange Inc. (KRX) signed a Letter of Intent (LOI) to aim for listing TOPIX Options on KRX. Moving forward, both parties will make preparations for the listing of Korean won-denominated TOPIX Options on KRX.

Shandong, Shanghai Stock Exchange Ink All-round Cooperation Agreement
On April 22, the Shandong Provincial People’s Government and the Shanghai Stock Exchange (SSE) sign a memorandum on comprehensive strategic cooperation in Jinan, Shandong Province.

Japan Exchange Group: Regarding Media Reports On Tokyo Stock Exchange Regulation’s President
Today, certain media reported on a change of President at Tokyo Stock Exchange Regulation (TSER), a subsidiary of Japan Exchange Group, Inc. (JPX). However, the board of directors of JPX and board of governors of TSER have not made any decision, nor has JPX released any information on the matter reported at present.

The three must-nots in China amid belt-tightening
Caixin Online
The days of belt-tightening are finally here. China’s latest fiscal data shows that in the first quarter of this year, its public revenues grew by only 6.9%, down 7.8 percentage points from a year earlier.

HKEx Announces Appointments To Various Committees

HKEx: Poll Results Of The 2013 Annual General Meeting

Frontier Markets

African Property Fund to Raise $85 Million as Retailers Eye Land
HBW Group Pty Ltd., a South African real-estate developer, plans to raise $85 million by selling shares in an African property fund as retailers look for land to expand in the world’s second-fastest growing region.

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