The SEC says Deutsche Börse’s Eurex exchange broke some rules in how they sold index futures to US residents, but not bad enough to be formally charged over it. Regarding JPMorgan, however, the SEC is said to be close to finishing a settlement over the London Whale Mess (that’s the official name for it) that will include an admission of guilt on JPMorgan’s part. Yes, really, apparently so. Lawsuits against metal warehouse operators may end up posing uncomfortable questions to the London Metal Exchange, as well.
Wedding Bells for Ryan Lothian
A hearty congratulations to our very own Ryan Lothian, who is getting married tomorrow. To show just how strong this relationship is, Ryan, an avid Cubs fan, is getting married in St. Louis.
Coming up next week, John will be taking his son Tim to college. (We will measure the tire tracks left after unloading the last bag.) Have fun at school, Tim.
Finally, Jim Kharouf will be taking some time off beginning next week and returning September 3. This seems oddly fair, as John took 9 weeks off to get new knees (he counted 6), daily workouts, followed by at least three scouting trips.
And with that we say, have a nice weekend.
NYSE Euronext’s Duncan Niederauer on Botched IPOs, Lost Trading Volume
“One of the things we learned in the crisis was that if you have a choice between a market being transparent or opaque, it’s considerably better for the market to be transparent”
**JK – Duncan edging ever closer to Yogi Berra.
Hedge funds: nice backlash, but we still growin’
Cardiff Garcia | FT Alphaville
Before anything, go read Josh Brown and come back. The total number of extant hedge funds is again above 10,000 and industry assets also continue to reach new highs, though in recent years it’s been overwhelmingly driven by market returns rather than investor net inflows.
***DA: Why do accredited investors invest in hedge funds? Because they can!
The Top Systemic Threats to the Capital Markets
Michael Leibrock :: TabbFORUM
Despite progress over the past five years, systemic risks facing the global financial services industry are growing in complexity, they are more difficult to anticipate, and new gaps continue to surface in the industry’s ability to protect against emerging and unidentified threats.
***DA: We have met the enemy, and he is us.
FTTs and ET – a dangerous combination
Steve Grob – FOW
There has been a lot of talk recently about the introduction of Financial Transaction Taxes. This has even extended to speculation here in the UK that we should tax those naughty HFT practitioners too. Seemingly everyone has a view on this and whether such taxes actually punish the banking community or the end investor. But the real point is that such taxes just won’t work, at least not in Europe anyway.
***JM: Ok, let’s go through this again. TAXES are designed to RAISE REVENUE. LAWS AND REGULATIONS exist to guide BEHAVIOR. It’s a miracle these folks aren’t struggling to breathe through their ears. Not you, Steve.
Aequitas Innovations: Innovation For Fair Markets – Aequitas Position Paper
Aequitas has developed new approaches designed to bring meaningful competition and choice to Canadian marketplace participants. Aequitas will offer a highly differentiated alternative to the dominant market structure model that will cater to the needs of traditional investors and issuers, protect against predatory and opportunistic trading strategies, and enhance the capital formation process.
Getting Their FIX
Trade Talk – Trading Technologies
According to the Futures Industry Association, exchange-traded futures and options volume grew 133 percent globally from approximately 9 billion contracts in 2004 to over 21 billion in 2012. Equities trading grew at an even faster rate, up 180 percent from 3.5 billion shares in 2004 to 9.8 billion shares in 2012 according to the World Federation of Exchanges.
Norway Fund to Create Advisory Board
KJETIL MALKENES HOVLAND – WSJ.com
Norway’s $760 billion sovereign wealth fund, the world’s largest, appointed an advisory board in a bid to improve its performance, its management company said Friday, as it announced a 0.1% return on its investments in the second quarter.
***JM: No, I’m not on it. When they called me, my best idea was, “Well, you should probably stop buying securities that are about to decline in value.” I still think that’s a pretty good idea, but it didn’t impress them much. Things go at a different speed down south there, I guess.
CBOE bars regulatory staff from receiving stock-based pay
The Chicago Board Options Exchange, which paid a $6 million fine in June for failing to properly oversee its own marketplace, has barred regulatory staff from receiving compensation tied to the company’s soaring stock price.
A Fugitive With a Cause
DOREEN CARVAJAL and RAPHAEL MINDER – NYTimes.com
Hervé Falciani is a professed whistle-blower — the Edward Snowden of banking — who has been hunted by Swiss investigators, jailed by Spaniards and claims to have been kidnapped by Israeli Mossad agents eager for a glimpse of the client data he stole while working for a major financial institution in Geneva.
|View Special Report »|
Talking about Asia often leaves professionals from those regions a bit tongue-tied. When JLN decided to do a special report talking about Asia, many of those experts had the same question: “Which country? Asia is a big place.” Indeed, talking about Asia is difficult, given the number of markets and regulatory differences, not to mention geographic distance between various Asian financial centers.
The debate still goes on over which one or two or three are the most important in the region. Some say Japan, while others discuss Hong Kong’s status. Others like the positioning of Singapore. And this doesn’t include Australia, South Korea, Taiwan, mainland China or India. But collectively, the region is a force in the derivatives world. JLN interviewed seven executives on the changes, challenges and opportunities that exist in the region today.
|View Special Report »|
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U.S. SEC says Eurex made missteps in handling of its futures index
Sarah N. Lynch | Reuters
The U.S. Securities and Exchange Commission on Thursday accused the Germany-based futures exchange Eurex with violating federal securities laws related to sales to U.S. investors, but said it decided not to formally charge Eurex’s operator, Deutsche Boerse, with any wrongdoing.
S.E.C. Is Said to Press JPMorgan for an Admission of Wrongdoing
BEN PROTESS and JESSICA SILVER-GREENBERG – NYTimes.com
Federal regulators are seeking to level civil charges against JPMorgan Chase and extract a rare admission of wrongdoing from the nation’s biggest bank as an investigation into a multibillion-dollar trading loss enters its final stage.
**JK – Say it, say it! Say UNCLE!
Lawsuits to air London Metal Exchange’s dirty laundry
Susan Thomas and Josephine Mason – Reuters
Lawsuits alleging aluminium price fixing by big banks will shine an uncomfortable light on the role played by the London Metal Exchange, suggesting that the murky world of metal trading is likely to attract more attention from the authorities. Even if it successfully defends itself from class action lawsuits by aluminium manufacturers, the LME may have to accept greater external oversight into a trade that until now flourished with little external supervision.
Exclusive: U.S. steps up probe of JPMorgan over Bear mortgage bonds
The U.S. Department of Justice has stepped up a probe in recent weeks into Bear Stearns & Co’s mortgage dealings in the run-up to the financial crisis, according to two sources familiar with the situation, raising the possibility that JPMorgan Chase & Co may face yet another case over mortgage bonds.
Iksil to face no U.S. charges in ‘Whale’ probe: source
The trader at the center of JPMorgan Chase’s $6.2 billion trading loss last year will not face U.S. charges related to the incident, a source familiar with the matter said on Thursday.
Wanted: writer to help Fed share its feelings
Gary Silverman in New York – FT.com
I have a modest proposal for Barack Obama. I think that the president should consider writers as well as economists as he looks for the next chairman of the Federal Reserve. I say this with all due respect for the reputed frontrunners, economists Janet Yellen and Lawrence Summers. Their CVs have a lot more lines on them than mine does. I just fear that people of this sort were meant for a time that has come and gone – by which I mean the era when central bankers actually moved interest rates up and down.
Not All Central Bankers Love QE
Alen Mattich – MoneyBeat – WSJ
Central bankers may well have thrown themselves into quantitative easing not because it was sensible, reasoned monetary policy, but because they had to be seen to do something after bailing out Wall Street. This argument would be provocative enough coming from your averagely important economist-cum-pundit. But it was made by a leading economist who has since been named the head of a major central bank.
MCX sees bank guarantee withdrawal by brokers
The Multi-Commodity Exchange has started bearing the brunt of the commodity transaction tax, as well as the recent payment crisis at the National Spot Exchange Ltd. Both MCX and NSEL are part of the Financial Technologies group.
Top six NSEL investors owe 70% of total dues
Hindu Business Line
The top six investors in the beleaguered National Spot Exchange platform owe about Rs 3,925 crore or 70 per cent of the total outstanding of Rs 5,599 crore.
London Metal Exchange Said to Consider People for CEO
The London Metal Exchange, the largest industrial-metals futures bourse, is considering three people for the role of chief executive officer, according to two people familiar with the process.
***JM: Yes, we covered this topic yesterday, but I had to include this article today just for the title. I’m delighted to see that the LME has ruled out the possibility of hiring squirrels, plants or perhaps a rock as their next CEO, and will focus instead on people.
New Embarrassment for British Regulator
MARK SCOTT – NYTimes.com
Britain’s Serious Fraud Office faced renewed embarrassment on Thursday after it admitted it had lost thousands of documents linked to an investigation into the British aerospace giant BAE Systems.
SEC Cautions Exchanges and Investment Professionals to Monitor Composition of Indices When Offering Futures Products
The Securities and Exchange Commission today issued a report cautioning exchanges and investment professionals to monitor the composition of indices used in offering financial instruments to determine if they are security futures products and ensure they are complying with the federal securities laws.
ESMA Proposes Delay To Reporting Date For Exchange Traded Derivatives
The European Securities and Markets Authority (ESMA) has sent the European Commission a Final Report proposing an amendment to Article 5 of the Commission Implementing Regulation (EU) No.1247/2012 (ITS on reporting) on the format and frequency of reporting to trade repositories under EMIR.
Exchanges & Trading Facilities
UBS and trueEX form liquidity alliance for Interest Rate Swaps Creating liquidity in Standard Coupon Standard Maturity …
trueEX, LLC, the first CFTC-regulated electronic exchange for interest rate swaps (IRS), today announced that UBS has completed full certification and testing on the trueEX exchange and will offer client access to trueEX pricing as part of their liquidity aggregation strategy.
Brazil’s Cetip, BM&FBovespa beat profit estimates in tough quarter
Brazilian exchange and clearinghouse companies posted second-quarter results on Thursday that beat estimates, as a jump in volatility in domestic financial markets stoked revenue, but worrying economic trends could erode investor confidence.
Ljubljana Stock Exchange: Monthly Statistical Report July 2013
NYSE Governance Services, Corporate Board Member Airs 200th Episode Of “This Week In The Boardroom” – Weekly Webcast Series Features NYSE CEO And Special Guests Discussing Governance Trends
Program Trading Averaged 25.3 Percent Of NYSE Volume During July 29-Aug. 2
Hedge Funds & Managed Futures
Soros Fund withdrawing all of its money from Pershing: source
Soros Fund Management LLC is withdrawing its money from William Ackman’s Pershing Square Capital Management due to performance, according to a person close to the matter said on Thursday.
SAC to Keep Managing Money While Facing Indictment
PETER LATTMAN – NYTimes.com
Federal prosecutors and the investment firm SAC Capital Advisors agreed on Thursday to a protective order that requires the firm to keep most of its money in its fund while operating under a criminal indictment, according to a person briefed on the case.
Pimco’s Gross says firm will win ‘war’ on bonds
Bill Gross, the founder of Pimco who is often known as the “bond king,” on Thursday said that Pimco would overcome the bond market selloff that began in May as he urged investors not to flee the fixed-income market.
Norway oil fund picks up stocks in Q2, sheds UK bonds
Norway’s $760 billion oil fund, the world’s biggest investor, increased its holdings of stocks in the second quarter, sharply reduced its British bond holdings and picked up more Japanese government debt.
BNP Paribas infrastructure spin-off fund hits E200m
Becky Pritchard – Financial News
Glennmont Partners, the firm that spun out of BNP Paribas in January, has reached a first close of E200 million on its second infrastructure fund, as fundraising in the sector reaches its highest level since 2008.
Pimco, BlackRock Seek to Bar California Mortgage Seizures
Pacific Investment Management Co., BlackRock Inc. and Bank of New York Mellon Corp. are seeking a court order blocking Richmond, California, and Mortgage Resolution Partners LLC from seizing mortgages through eminent domain, saying the initiative would hurt savers and retirees.
Korea State Fund to Spend Up to $10 Billion on Alternatives
Korea Investment Corp., the nation’s sovereign wealth fund, plans to spend as much as $10 billion to triple its allocation to alternative assets, diversifying its portfolio to smooth the fund’s returns.
RWE bond with E1 billion volume moves to Prime Standard for corporate bonds
Banks & Brokers
Commerzbank CEO will stay on to complete revamp: paper
Martin Blessing, chief executive of German lender Commerzbank , said he will not step down from the bank until his reform program has been completed.
Morgan Stanley Wealth hires ex-Merrill strategist Lisa Shalett -sources
Lisa Shalett, the former chief investment officer of Merrill Lynch’s global wealth management division, will be joining Morgan Stanley later this year, two sources said on Thursday.
Goldman promotes ECM ‘grandmaster’
Matt Turner – Financial News
Goldman Sachs has handed Alasdair Warren, its head of equity capital markets, convertibles and equity derivatives in Europe, the Middle East and Africa, a new role running its financial sponsors group in the region, and appointed two senior bankers to replace him.
Goldman Sachs Cooperating With U.S. Credit-Swaps Inquiry
Michael J. Moore – Bloomberg
Goldman Sachs Group Inc., the fifth-largest U.S. bank by assets, said it’s cooperating with the U.S. Department of Justice’s four-year-old antitrust probe into the credit-default swaps market.
David Weidner’s Writing on the Wall: Goldman just isn’t Goldman anymore
It used to be that the Goldman Sachs Group Inc. calling card was the most gilded on Wall Street. There were few, if any, singular stars at the firm. When a Goldman banker showed up at the CEO’s office or the boardroom of a Fortune 500 company, the only introduction needed was “this is (insert name here) of Goldman Sachs.”
What’s E*Trade Doing With Its Customers’ Orders Anyway?
Regulators are looking into whether E*Trade executes its customers’ trades at the best available prices
Clearing & Settlement
Hubs will not fix clearing certainty issue, critics claim
Peter Madigan – Risk.net
Despite the launch of two new credit-checking services, critics claim the over-the-counter derivatives industry has still not found a way of providing certainty at the time a swap is executed that it will be accepted for clearing. Banks and trading platforms are already signing up to use the services, but some have misgivings about whether these so-called hubs, run by Markit and Traiana, will work as planned.
Brazil’s Cetip beats second-quarter profit estimates on revenue
Cetip SA Mercados Organizados , Latin America’s largest securities clearinghouse, slightly beat second-quarter profit estimates on Thursday, after revenue rose more than expected.
Clearstream’s July 2013 Figures -Value Of Assets Under Custody 3 Percent Higher Than In July 2012
In July 2013, the value of assets under custody held on behalf of customers registered an increase of 3 percent to EUR 11.5 trillion (compared to EUR 11.2 trillion in July 2012). Securities held under custody in Clearstream’s international business increased by 1 percent to EUR 6.1 trillion in July 2013 while domestic German securities held under custody increased by 6 percent to EUR 5.4 trillion in July 2013 (July 2012: EUR 5.1 trillion).
Indexes & Products
Cash lure to stop firms deserting ETFs in times of stress
Arash Massoudi and Tracy Alloway in New York – FT.com
On Wall Street, it seems money talks. Three years after the “flash crash” that sent prices of exchange traded funds reeling, US stock exchanges say they have worked out a way to motivate the financial firms that are supposed to ensure smooth trading in ETFs: pay them more.
[TSE] ETF/ETN Monthly Report for Jul 2013
MarketPrizm adds HKEx to colo infrastructure
MarketPrizm has expanded its Asia-Pacific mutualised DMA platform with the setup of low latency data and technology services at Hong Kong Exchanges and Clearing’s Hosting Data Centre. The move aligns strategically with the launch of HKEx’s Orion Central Gateway and Orion Market Data.
Broker cops fine over high-speed trades
Gareth Hutchens – Business Day
A high-frequency trader was allowed to make hundreds of potentially highly suspect trades for three weeks in late 2010, and the broker that facilitated those trades has now been fined $130,000. But the corporate regulator will not say who the high-frequency trader was, if it is still operating here, or if it will be facing disciplinary action.
Judge orders hold on administrative proceeding against SAC’s Cohen
Steven A. Cohen got a reprieve on Thursday, albeit a small and temporary one, when an administrative law judge approved a request to stay a case brought by securities regulators, who have accused the billionaire hedge fund manager of failing to supervise two of his employees.
Fine against British fund for abusive trades must be cut: U.S. court
A British hedge fund firm and its chief executive must give up $38.4 million of profit tied to abusive mutual fund trading, but a civil fine in that amount must be reduced, a federal appeals court said on Thursday.
FCA fines compliance officer and broker whose actions enabled market abuse to be committed in October 2010
FCA decides to fine Tariq Carrimjee in relation to market abuse committed by Rameshkumar Goenka in October 2010
Binary options – AMF Cautions About Solicitations by Banc de Binary
Securities manipulation – AMF charges Clément Forget and Claude Parent
BCSC panel dismisses allegations against Vancouver mining company, three directors and President and CEO
BCSC panel upholds IIROC decision that Victoria broker contravened IIROC suitability rules
[ASIC] Perth man pleads guilty to insider trading charges
[ASIC] Receiver appointed to LM fund
Environmental & Energy
Solar Shipments Surge in Second Quarter as Asia Demand Rises
Justin Doom – Bloomberg
Solar-panel shipments in the second quarter from three of the four largest producers exceeded projections by as much as 32 percent as demand in Asia surged.
**JK – A sunny quarter for solar.
How A Powerful Group Of Corporations Quietly Tried To Roll Back Clean Energy Standards, And Failed Miserably
This year ALEC decided to prioritize the dismantling of states’ renewable energy standards and targets across the country. Their record? 0 for 13. In the states where ALEC and its members sought to repeal or weaken renewable energy standards or targets, not a single bill passed in 2013.
**JK – And bright days for the renewable energy standards. And check out the story on Michigan in REC section.
REDD+ Finance: Lessons From The US
Jeff Metcalfe – Ecosystem Marketplace
The Tropical Forest Group has been tracking the REDD+ finance flowing from the U.S. in its U.S. REDD+ Finance Database (USRFD). This contains more than 800 data points for REDD or sustainable forestry reported by United States agencies with data transcribed from public documents. Although it is not linked to the US government, the USRFD is the only centralized way to assess US REDD+ finance from USAID, the Treasury Department and the US State Department.
Chi-X Global and SBI Japannext set sights on South Korea
Jeremy Grant in Singapore and Simon Mundy in Hong Kong – FT.com
South Korea is set to become the third Asian equities market to open to competition between exchanges and upstart trading venues after Chi-X Global and SBI Japannext, both backed by large banks, said they were exploring entering the country.
China to tighten requirements for foreign investment in banking
China is set to revise rules on the setting up of new banks in the country, aiming to tighten requirements for foreign firms while easing regulations for local entities, a draft of revised rules published by the banking regulator showed on Friday.
Japanese Institutional Investor Wants Greater Corporate Efficiency
Kosaku Narioka – MoneyBeat – WSJ
Following the collapse of Japan’s bubble economy in the early-1990s, many domestic firms were widely criticized by overseas shareholders for their unwillingness to acknowledge the need for painful reforms.
Brave hearts follow as China sucks in materials
James Mackintosh – FT.com
Buying anything on the strength of Chinese trade data might seem brave, even foolhardy. It is only four months since the country clamped down on the falsifying of exports to bypass capital controls and convert dollars to renminbi. But investors did not seem to care on Thursday, when the figures showed a jump in exports and imports in July, beating forecasts and raising hopes that the economy was doing better than thought.
Hong Kong’s Securities And Futures Commission: Investor Convicted Of Market Manipulation
Chinese Fund Manager To Create Products Using FTSE/JSE Index
The Johannesburg Stock Exchange (JSE) has signed a letter of intent for an index product licence with Chinese fund manager GF Fund Management Co to create exchange traded funds (ETFs) based on the FTSE/JSE Top40 Index.
Malawi Stock Exchange Weekly Trading Report – 08th August, 2013
4 Biggest Big Data Myths
Phil Simon, InformationWeek – Wall Street & Technology
There’s no shortage of noise surrounding big data. Today it seems that every software vendor, consulting firm and thought leader has developed the “right” definition of the term. While I’d argue there is no such definition, I would like to dispel a few of the most commonly held myths about the subject, many of which I explore in Too Big to Ignore: The Business Case for Big Data.
‘Like’ This Article Online? Your Friends Will Probably Approve, Too, Scientists Say
KENNETH CHANG – NYTimes.com
If you “like” this article on a site like Facebook, somebody who reads it is more likely to approve of it, even if the reporting and writing are not all that great. But surprisingly, an unfair negative reaction will not spur others to dislike the article. Instead, a thumbs-down view will soon be counteracted by thumbs up from other readers.