John Lothian Newsletter: Senate confirms Mary Jo White as SEC chairwoman; Warsaw Exchange Said to Hold Talks With Vienna Exchange; CFTC Said to Subpoena ICAP Brokers, Dealers on Swap Prices

Apr 9, 2013

Mary Jo White receives unanimous approval in her bid for confirmation as chair of the US SEC. The Warsaw and Vienna stock exchanges are in talks to discuss a possible merger. The CFTC has subpoenaed brokers at ICAP with regard to possible rate-fixing, though ICAP says that they don’t contribute to the rate in question.

First Read

Exchanges Are Moving to Curb Private Trades
NATHANIEL POPPER – NYTimes.com
The chief executives of the three largest stock exchanges are joining forces for the first time to push regulators to rein in the increasing amount of trading that is moving off public exchanges and onto platforms like so-called dark pools. The leaders of the New York Stock Exchange, Nasdaq and BATS Global Markets, the third-largest exchange operator, are planning to meet on Tuesday with officials of the Securities and Exchange Commission, according to people brief
jlne.ws/YIet46

***GK: The US listed options industry has from the start precluded dark pools from trading the fungible products now available on eleven exchanges (soon to be twelve). This has delivered benefits to retail and institutional customers in the form of transparency, liquidity, customer service and continuous innovation.

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“It’s fragmentation, Jim, but not as we know it” – why Dodd-Frank won’t work
Steve GrobFidessa
Interesting last week to see that GFI has applied to the CFTC to become a futures exchange. This follows on from ICAP’s purchase of Plus Markets (now ISDX) and so it surely can’t be too long before the other IDBs follow suit and execute their own regulatory hedges too. What they are worried about is that the regulatory regime around swaps seems to favour futurisation rather than SEFs and so will hand the keys to the kingdom over to the likes of the CME, ICE and other derivatives exchanges. This is leading to a headlong rush to set up futures exchanges and so we may see a similar type of market fragmentation that equity markets experienced thanks to RegNMS and MiFID
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***GK: The longer our regulators (both in the US and abroad) take to finalize the details of these far reaching policies, the more effort and cost will be spent on setting up “the hedge.”

**JK – Mr. Grob knows fragmentation when he sees it.

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Thousands of U.S. Companies Aren’t Ready to Use Swaps After May 1 – ISDA
KATY BURNE – Dow Jones
With a deadline looming, thousands of American companies are in a tug of war with Wall Street over trading in the multitrillion-dollar market for derivatives. By May 1, federal regulations will require dealers in derivatives called swaps to have extensive records about their customers. There is a countdown clock on the International Swaps and Derivatives Association website asking companies to sign up. But ISDA estimates that about 80% of companies that are covered by the rule haven’t completed the new registration process.
jlne.ws/YIentr

***GK: Throughout history, we have seen countdown clocks that ended with a whimper instead of a bang. Planes did not fall out of the skies, elevators did not plummet and I was able to use my ATM for cash as we moved into the 21st century.

**JK – ATMs unless you live in Cyprus.

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Richard Sandor Joins Endurance Asset Management, LLC
Endurance Asset Management, LLC is pleased to announce the addition of world-renowned financial innovator Richard L. Sandor as a Managing Director. Sandor will serve on the firm’s Investment Committee and help grow the breadth and depth of Endurance’s investor base. Endurance, founded in October 2003, is an SEC-registered investment advisor that manages a multi-strategy fund of funds.
(via email)

**JK – Richard Sandor does more in a day than most do in a month.

***GK: Richard, wishing you the very best in this new endeavor. I am sure that you will pour your energy into this new engagement like you have done with all your previous opportunities.

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CME Group’s former CEO pay valued at $6.1M in 2012
Chicago Tribune
CME Group Inc paid its former CEO Craig Donohue $6.1 million last year, making him its highest-paid executive even though he held the post for only the first four months of 2012, according to a regulatory filing on Monday.
jlne.ws/YIentt

***GK: Craig, wishing you the very best in whatever new endeavors you are now able to pay for.

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Glitch delays Singapore derivatives trade
Jeremy Grant in Singapore – FT.com
SGX, the Singapore exchange, suffered a rare technical outage on Tuesday that delayed dealing for up to three hours in some of Asia’s most widely traded derivatives contracts.
jlne.ws/YIet4a

***GK: It has been my long held position that after these “rare” technical outages (which will continue to be experienced by exchanges, dark pools, brokerage firms, etc.), information sharing would benefit all involved to develop better controls, preventing future situations of a similar nature. Other industries (i.e. airline and automobile) perform post-event analysis to prevent future accidents – isn’t it time for the financial industry to do the same?

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Deutsche Börse Market Data & Analytics site gets Japanese and Korean language versions
Deutsche Börse today announced the launch of Japanese and Korean language versions of its Market Data & Analytics (MD&A) website, as part of its efforts to enhance access and information for prospective clients in Japan and South Korea.
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***GK: Deutsche Börse – 最高の会社 !

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The Fine Line Between Political Intelligence and Insider Trading
PETER J. HENNING – NYTimes.com
Life in Washington is all about information – who will support or oppose an initiative, how will an agency address an issue in its rules, and when will a decision be announced. The pervasive role of the government in the economy makes that information particularly valuable to investors. And that can lead some to get a jump on the market if they learn about changes in policy before others.
jlne.ws/YIet4e

***GK: I don’t believe that it is a fine line. If you are trading on information that no one else is privy to, it is insider trading.

**JK – Or as they said in Spinal Tap:
David St. Hubbins: “It’s such a fine line between stupid, and uh…”
Nigel Tufnel: “Clever.”

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Chasing the hedge-fund lie
David Weidner, MarketWatch
If you’re the sort of investor who chases hedge funds, marking your calendar for the next disclosure of holdings from David Einhorn
or John Paulson, you can quit reading. Almost nothing that follows is going to get through to you.
jlne.ws/YIet4f

***GK: You might consider a hedge fund replication strategy delivered through an ETF (*shameless plug*).

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TradingScreen CEO to Lead EMS Roundtable at 2013 TradeTech Europe
TradingScreen CEO Philippe Buhannic will moderate a roundtable at the 2013 TradeTech Europe conference on Wednesday, April 17, 2013, in London. Along with a panel of financial industry experts, Buhannic will discuss the benefits and challenges of implementing a multi-asset class execution management system (EMS).
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MarketsWiki Page of the Day
CME Group commodity products
jlne.ws/10HHIC2

MarketsWiki Recent Updates

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Lead Stories

Senate confirms former prosecutor Mary Jo White as SEC chairwoman
Jim Puzzanghera – LA Times
The Senate on Monday confirmed Mary Jo White to chair the Securities and Exchange Commission, placing a tough former prosecutor in the role as Wall Street’s top watchdog. White was confirmed by a unanimous voice vote in the Senate, an indication of broad bipartisan support.
jlne.ws/YIeqp0

Warsaw Exchange Said to Hold Talks With Vienna Exchange
Bloomberg
The Warsaw Stock Exchange and the Vienna bourse are discussing a merger that would create a hub for equities trading and initial share offerings in central and eastern Europe, said three people familiar with the talks.
jlne.ws/YIet4n

CFTC Said to Subpoena ICAP Brokers, Dealers on Swap Prices
Matthew Leising – Bloomberg
The Commodity Futures Trading Commission has issued subpoenas to ICAP Plc (IAP) brokers and as many as 15 Wall Street banks as part of an investigation into possible price manipulation of benchmark interest-rate swaps, according to people familiar with the matter.
jlne.ws/16IN1VJ

ICAP Statement re. Media Speculation
ICAP plc, the world’s leading interdealer broker and provider of post trade risk and information services, notes recent media speculation on the CFTC’s inquiry into the IDSAFIX process.
jlne.ws/YIetkC

Citigroup To File Facebook Claim, Undecided On Suing Nasdaq -Sources
Dow Jones Newswires
Citigroup Inc. (C) plans to file a claim seeking compensation from Nasdaq OMX Group Inc. (NDAQ) for losses the bank suffered trading in last May’s market debut of Facebook Inc. (FB), according to people close to the discussions.
jlne.ws/YIeqp4

Volcker: Central banks are too aggressive
CNN Money
Former Federal Reserve chairman Paul Volcker warned Monday about potential dangers from what he calls “unorthodox” and aggressive moves by central banks around the world.
jlne.ws/YIetkE

Norway Seeks Nibor Overhaul as Probe Fails to Disprove Rigging
Bloomberg
Norway’s financial watchdog recommended an overhaul of practices shaping its benchmark interbank rate, after the regulator said a probe couldn’t disprove claims of manipulation.
jlne.ws/YIeqp7

Is bankers’ pay going up or down?
William Wright – Financial News
It is not often that bankers are keen to boast about how little they earn. But, as politicians and regulators turn the screw on pay and bonuses, investment banks have been falling over themselves to show how much they can cut what they pay their staff. If only politicians could see beyond their anger, bankers lament, they would realise that the problem they are seeking to fix is already half mended.
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Regulatory

Where Bank Regulators Go to Get Rich
William D. Cohan – Bloomberg
Mary Schapiro, the former chairman of the Securities and Exchange Commission, must take us for fools. No need to worry about her and the so-called revolving door between government and Wall Street, she told the Wall Street Journal on April 2, after announcing she would be joining the Promontory Financial Group LLC as a managing director in its Washington office, in charge of its governance and markets practice.
jlne.ws/YIetkH

SEC Probes Firms Providing Financial Advice to Municipalities
Dow Jones
U.S. regulators are probing whether securities firms are circumventing rules implemented in the wake of the financial crisis to protect municipalities against potentially biased investment advice, according to people familiar with the matter.
jlne.ws/YIeqpc

Titan Regulation Welcomes Megan Flaherty as Senior Managing Director
Titan Regulation, a Chicago-based compliance and regulatory advisory firm serving hedge funds, broker-dealers and private equity groups, announced today that Megan Flaherty has joined the company as Senior Managing Director. Ms. Flaherty most recently served as Director of Compliance, Chief Legal Counsel and Chief Compliance Officer for Wolverine Asset Management, LLC, and its affiliated entities.
jlne.ws/YIetkN

Regulation Of Cross-Border OTC Derivatives Activities: Finding The Middle Ground – Speech By SEC Chairman Elisse Walter – American Bar Association Spring Meeting, Washington D.C.
jlne.ws/YIeqFr

FSB Launches Peer Review On The FSB Principles For Reducing Reliance On CRA Ratings
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Exchanges & Trading Facilities

Send, BME’s Fixed Income Platform, Admits To Trading Public Debt Issues
The 50 outstanding issues by the Spanish Treasury as well as the 100 strips (Public Debt) will start trading today on SEND, BME’s electronic Fixed Income platform for retail investors, following their admission by AIAF, the Spanish Fixed Income Market.
jlne.ws/YIeqFu

Liquidnet Announces Innovative Partnership with NYU Stern School of Business
Business Wire via Yahoo! Finance
Liquidnet, the global institutional trading network, announced today that as part of its commitment to talent engagement through education, the company has launched an innovative partnership with the NYU Stern School of Business.
jlne.ws/YIetkP

NASDAQ OMX March 2013 volume
The NASDAQ OMX Group, Inc. today reported monthly volumes for March 2013, and quarterly volumes and estimated revenue capture for the quarter ended March 31, 2013, on its investor relations website. A data sheet showing the monthly volumes can be found at: http://ir.nasdaqomx.com/monthly-reporting/.
jlne.ws/YIeqFv

Equiduct Trading Statistics Q1 2013
Equiduct, the Pan-European trading platform with a premium Best Execution service, today published its trading statistics for the first quarter of 2013. Equiduct executed 1.7 million trades in Q1 2013 and recorded a turnover of E9.5 billion, a 14% increase compared with the same period in 2012. E5.4 billion of this turnover resulted from retail activity on Equiduct’s premium Best Execution service PartnerEX. Clients trading on PartnerEX also benefitted from an average price improvement per trade of E1.89 versus the home market, allowing European retail investors to save E279,698 by trading at the best price.
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Bulgarian Stock Exchange Monthly Report – March, 2013
jlne.ws/YIetkR

Thomson Reuters Global Equities Monthly Market Share Data Updated To Reflect March 2013 Activity
jlne.ws/YIeqFy

TSX Trading List Leaders by Volume and by Values – March 2013
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Warsaw Stock Exchange Management Board And Exchange Members Confirm The First Day Of Availability Of UTP On 15 April 2013
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TOM Insight March 2013
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Hedge Funds & Managed Futures

KPMG Fires a Senior Partner in an Insider Trading Episode
FLOYD NORRIS – NYTimes.com
KPMG said late Monday night it had fired a senior partner in its Los Angeles office after learning that he had provided inside information to an unnamed individual “who then used that information in stock trades involving several West Coast companies.”
jlne.ws/YIetB7

Cerberus Turns Up Risk Factor
AL YOON – WSJ.com
Cerberus Capital Management is braving one of the credit markets’ riskiest areas. The firm, known for its purchase of Detroit auto maker Chrysler LLC during the financial crisis, wants to buy the dicey portions of securities tied to commercial mortgages, people familiar with the fund said.
jlne.ws/YIeqFG

Brevan Howard hires Credit Suisse rates trader
Farah Khalique and Harriet Agnew – Financial News
Brevan Howard Asset Management has recruited a senior currency and rates trader from Credit Suisse as it continues to bulk up with hires from the sellside.
jlne.ws/YIetB8

FOCUS: Speculators Continue To Sell Gold, Silver Futures, Options — CFTC
Kitco
For the second week in a row, speculators shed bullish gold and silver futures and options contracts traded on the Comex division of the New York Mercantile Exchange, according to U.S. government data, with funds turning net-short silver in one of the reports.
jlne.ws/YIeqVW

Federal Reserve Chairman Ben S. Bernanke At The “Maintaining Financial Stability: Holding A Tiger By The Tail” Financial Markets Conference Sponsored By The Federal Reserve Bank Of Atlanta, Stone Mountain, Georgia, Stress Testing Banks: What Have We Learn
jlne.ws/YIetB9

Banks & Brokers

Stripping Dimon Of Chairman Role Is Overkill, A Bad Move For JPM
Forbes
Jamie Dimon is being forced to check his ego as calls to strip him of the chairman role grow louder.
jlne.ws/YIeqVX

UBS Australia Head of Hedge Fund Sales Moves to New York
Wall Street Journal Blogs
UBS AG’s Australian head of hedge fund sales Thomas Anglin has relocated to New York as part of the creation of a new global sales desk, according to an internal memo obtained by Deal Journal Australia.
jlne.ws/YIetBa

Judge weighs fairness of Citigroup’s $590 million investor pact
Reuters via Yahoo! Finance
A federal judge grilled lawyers for Citigroup Inc and shareholders on Monday over a proposed $590 million (386 million pounds) settlement of an investor lawsuit over its exposure to toxic mortgage assets, asking if the accord was fair given none of the bank executives named as defendants would contribute money to it.
jlne.ws/YIeqVY

Bank of America Merrill Lynch Asia Debt Head Departs
Wall Street Journal Blogs
Bank of America Merrill Lynch’s head of debt capital markets for Asia has left the firm just weeks after being promoted to the position.
jlne.ws/YIetBc

Interdin partners Integral for margin FX platform
Interdin, the largest retail broker in the Spanish Financial Futures Market (MEFF), partnered with Integral Development Corp, a leading provider of FX trading solutions and services, to add margin FX trading capabilities to its existing platforms.
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A.I.G. Seeks to Bar Greenberg From Suing U.S. on Its Behalf
MICHAEL J. DE LA MERCED – NYTimes.com
The American International Group already ruled out suing the federal government over its bailout during the financial crisis. Now it is asking a federal judge to stop its former chief executive from suing in its name.
jlne.ws/YIetBg

Austrian bank chief returns E2m of pay
James Shotter in Zürich – FT.com
The chief executive of Austria’s second-largest bank by assets, Raiffeisen Bank International, has returned E2m of his pay from 2012, saying that executive remuneration could sometimes “turn out to be too high”.
jlne.ws/YIeqW4

Clearing & Settlement

Markit Acquires DTCC Stake in MarkitSERV
Markit, a leading, global financial information services company, today announced that it has acquired the ownership stake in MarkitSERV held by the Depository Trust and Clearing Corporation (DTCC). Markit and DTCC founded MarkitSERV in 2009 as a joint venture that combined the firms’ electronic trade processing services for OTC derivatives.
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CME Group Clearing Advisory: NYMEX Options Expiration Operational Procedures for the Trading Floor and Clearing Members (GX) Effective Tuesday, April 9, 2013
jlne.ws/YIeqWa

CME Group Clearing Advisory: Minimum Price Increment Change for U.S. Midwest Domestic Hot-Rolled Coil Steel Index Average Price
jlne.ws/YIeqWc

CME Clearing: Electricity Inter-Commodity Spread Credits- Effective Tuesday, April 9, 2013
jlne.ws/YIetBn

Indexes & Products

According To ETFGI Net Inflows Of $55 Billion In Q1 2013 Helped To Push Assets Invested In ETFs And ETPs Listed In The United States To A New All-Time High Of $1.47 Trillion At The End Of Q1 2013
jlne.ws/YIetBp

Moscow Exchange Indices Weekly Review: April 1 – 5, 2013
jlne.ws/YIercv

Technology

Livevol Unveils Powerful Custom Scans in Livevol Pro
Business Wire via Yahoo! Finance
Livevol, a leading derivatives financial technology firm recognized for their expertise in the equity options marketplace, released its latest version of their flagship option analytics platform today, Livevol Pro, with two new tools that give clients powerful market scanning capabilities.
jlne.ws/YIercz

Enforcement

CFTC Charges New York Firm 4X Solutions, Inc. and its Principal, Whileon Chay, with Forex Fraud Ponzi Scheme
The U.S. Commodity Futures Trading Commission (CFTC) today announced the filing of an enforcement action in the U.S. District Court for the Southern District of New York, charging Defendants 4X Solutions, Inc. (4X) and its principal, Whileon Chay, both of New York City, with fraud and misappropriation in a $4.8 million foreign currency (forex) trading Ponzi scheme.
jlne.ws/YIercB

SEC Charges Former Medical Device Company Employee For Illegally Tipping Brother With Quarterly Earnings Data
jlne.ws/YIercC

Blind Spot Covered Ex-Trader’s Trail
AARON LUCCHETTI and JUSTIN BAER – WSJ.com
Morgan Stanley plans to claw back some of the pay it owes a trader who pleaded guilty last week to a federal wire fraud charge for misleading his former employer, Goldman Sachs Group Inc., according to people familiar with the case.
jlne.ws/YIercD

ASIC suspends AFS licence of LM Investment Management Limited
jlne.ws/YIetRH

[ASIC] Former Citigroup broker pleads guilty to insider trading
jlne.ws/YIetRJ

Environmental & Energy

California Governor Clears Way for Carbon Market Link to Quebec
Bloomberg
California Governor Jerry Brown approved a proposal to link the state’s carbon cap-and-trade system with a program in Quebec, a step that would allow companies to trade carbon permits across borders.
jlne.ws/11MMjWk

**RKB — Recap: A panel of economics and markets professors recommended in September that the air board delay a link with Quebec until the markets in both California and the province are “found to be well-functioning.” That finding probably can’t occur until at least 2015, the committee said last September.

Schwarzenegger: California’s silent disaster
Los Angeles Times Op-Ed
I will always remember the day I woke to the news that more than 2,000 fires were burning in California. I thought I must not have heard correctly. Two thousand fires? How could that be?
jlne.ws/17odpFQ

Op-Ed: Why We Support a Revenue-Neutral Carbon Tax
The Wall Street Journal
Americans like to compete on a level playing field. All the players should have an equal opportunity to win based on their competitive merits, not on some artificial imbalance that gives someone or some group a special advantage.
jlne.ws/10IXPiR

Asia-Pacific

China’s Xi Says Fast Growth Over
ANDREW BROWNE And CARLOS TEJADA – WSJ.com
Chinese President Xi Jinping said China’s days of breakneck growth are over as the world’s No. 2 economy tries to balance expansion with sustainability and increasing environmental awareness.
jlne.ws/YIercF

Hong Kong Money-Laundering Laws Don’t Catch Chiefs
CNBC
Experts estimate tens of billions of dollars are laundered in Hong Kong every year, much of it crime-related or drug-related money funneled from China or the gambling haven of Macau. The NYT reports.
jlne.ws/YIetRK

Tokyo Stock Exchange: TOPIX Futures Open Interest Reaches A New Level
jlne.ws/YIercJ

SGX Derivatives Market Opens For Trading
jlne.ws/YIercK

HKEx Monthly Market Highlights – March 2013
jlne.ws/YIetRP

HKEx: On-Floor & Off-Floor Trading Statistics
jlne.ws/YIetRR

TOCOM Gold Advanced Beyond 5,000 Yen Per Gram
The Tokyo Commodity Exchange, Inc, announced that its February 2014 Gold futures contract (most active/back contract month) temporarily marked
jlne.ws/YIetRT

Hong Kong’s Securities And Futures Commission Suspends Sky Cheung Shi Gaii For 30 Months And Fines Him $500,000 For Regulatory Breaches
jlne.ws/YIetRV

Hong Kong’s Securities And Futures Commission Bans Luk Ping For 10 months
jlne.ws/YIersZ

Frontier Markets

Emerging markets’ thirst for coffee jumps
Emiko Terazono in London – FT.com
Coffee consumption in emerging markets jumped 10 per cent in 2012, one of the largest increases on record. The International Coffee Organization in London pointed to a rise in coffee drinking in countries such as China and Russia.
jlne.ws/YIeu8b

Investors reject dedicated Bric funds
Financial News
Investors continued to pull money from funds focused on equity investments in Brazil, Russia, India and China in the first quarter, according to new research, with so-called dedicated Bric equity funds posting net outflows consistently since early 2011.
jlne.ws/YIeu8c

Tehran Stock Exchange Trading Statistics Report 1Q13
The total index (TEDPIX) of Tehran Stock Exchange (TSE) closed at 39990.2 point at the end of March 2013, 5.8 percent higher than the beginning of the year’s figure. However, TSE’s blue-chip index (TEDFIX 30) lost about 2 percent in the 1Q13, and closed at 2097.3.
jlne.ws/YIeu8e

Qatar Financial Centre Authority Sells Qatarlyst to Ebix Inc.
jlne.ws/YIeu8g

Additional Funding To Boost Capacity Development In Southern Africa By IMF Regional Technical Assistance Center
jlne.ws/YIeu8i

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