John Lothian Newsletter: Six buys Oslo Clearing for $32m; Chile’s BEC set to list Nasdaq stocks; BoE’s Haldane says technology may trigger UK banking revolution

Dec 17, 2012

Swiss exchange operator SIX Group reaches out to buy Norwegian clearing house Oslo Clearing, giving it access to clearing operations as regulatory change increases the importance of that sector. Nasdaq OMX is set to activate a year-old listing agreement with Chilean exchange BEC. Bank of England’s Andrew Haldane suggests that a banking revolution may shortly occur as technology changes the way business is conducted; no word on whether the revolution will include upgrading the ethical practices of the industry.

First Read

LME Celebrates A Record Year Following Acquisition By HKEx
The London Metal Exchange (LME) celebrates another record year with volumes 10% higher and a series of industry awards. The Exchange won six awards in 2012, including Commodities Exchange of the Year (awarded by Commodities Now), Chief Executive of the Year for Martin Abbott (FOW), Chief Technology Officer of the Year for Michael Warren (Financial News), New Metals Product of the Year for LMEswaps (FOW), and Company Secretarial Team of the year (ICSA).

**** Think of this as an increase in volume for credit default swaps on sovereign debt.


The year the computer said ‘No’
Michelle Price and Tom Osborn – Financial News
It was a year in which the prize for worst electronic trading snafu was hotly contested. Bats Global fired the starting gun with the first glitch, when the US exchange was forced to pull its own initial public offering on its very own order book in March, following a software malfunction. It was to have been the crowning moment of its boast as the “Better Alternative Trading System”.

**** Now we have prizes for the worst of things? Who is going to buy a table at this dinner presentation?


Merger would bring more transparency, New York focus to Getco
By Lynne Marek – Crain’s
In just 13 years, Chicago-based Getco LLC has become a major player in the insular world of high-frequency trading. Now, it’s looking to both radically expand its business and change its culture with one deal. The privately held Getco is offering to merge with troubled Knight Capital Group Inc., creating a publicly traded, New York-centric company nearly five times Getco’s current size.

**** Becoming a public company would bring a change in culture to Getco that is unimaginable.


Asset kingpins reclaim the high ground
Sophie Baker – Financial News
They are described in a number of unflattering ways, but the detail-heavy and technology-driven work done by the world’s largest custodians has become increasingly important over the past 12 months. In the five years since the financial crisis, their ability to keep track of and provide services to assets has become increasingly appreciated by their clients.

***** They know where your cheese is.


Views from the top: Regulation and the new normal
Financial News
As the financial services industry digests a wave of incoming regulation and adjusts to a new climate, Financial News asks leading executives: Are regulators and policymakers beginning to adopt a more realistic approach? and Has the financial industry begun to accept a ‘new normal’?

**** What is normal? What is really new?


Russia Missing Opportunity to Boost Trading in Micex Revamp
Russia’s stock exchange is missing an opportunity to boost trading as it reorganizes its benchmark equity index, according to the asset management arms of OAO Sberbank, Alfa Bank and VTB Group.

***** Who?


Quotes of the year: Who said what, when in 2012
Financial News
Financial News revisits the most memorable quotes in finance from the last 12 months.

**** The quotes of the year here are all off the record.


Achilles and the tortoise: a paradox of active management
William Hutchings – Financial News
Achilles and the tortoise are sitting beside the Aegean Sea, taking a break from the latest in a series of races. So far, the fleet-footed Achilles, who is required to give the tortoise a head start, has never been able to catch him up, much to his chagrin. But today, for a change, the hero seems rather pleased with himself.

***** A journalist and a cliché are sitting in a bar…..


Futures Past: IDFA Review
Neil Young – Hollywood Reporter
More than a decade after mental-health indie Manic established him as a name to watch, writer-director Jordan Melamed delivers a belated but welcome sophomore effort with documentary Futures Past. What starts off as a heartfelt tribute to a Chicago stock-exchange in the throes of traumatic “modernization” gradually becomes a fascinating portrait of Melamed’s ever-tempestuous relationship with his father Leo, kingpin of said exchange.

**** “Chicago stock-exchange”?


HFT firms step into the spotlight
Tim Cave – Financial News
Europe’s trading conference circuit can be a monotonous affair at times, with the same speakers debating hackneyed topics. But one session at the ICI Global Trading and Market Structure get-together in London earlier this month will have piqued the interest of even the most travel-weary attendee.


Quote Stuffing Bombshell
Now comes along this paper (see below) from Credit Suisse, one of the global leaders in electronic trading and research. This paper describes Quote Stuffing as a strategy employed by HFT. Note that the term Quote Stuffing did not exist until we coined it in June 2010. Credit Suisse’s paper shows how easy it is to detect. And that is true, it is that simple to spot and it continues to occur. Which is why the last 2 years have been confusing and frustrating to no end. With abundant evidence to the contrary, why would SEC Regulators deny that Quote Stuffing exists and that our analyses are “the stuff of conspiracy theories”? We are not about to engage in conspiracy theory talk now by saying someone is being paid or compensated to shill for HFT/Wall Street and putting the reputation and authority of the regulators at risk.


Sean Tully

CME Group’s Sean Tully Introduces Deliverable Interest Rate Swap Futures

Sean Tully is the managing director of interest rate futures products for CME Group, the world’s largest derivatives exchange. He recently led the development and implementation of CME’s Deliverable Interest Rate Swap Futures, a new type of derivatives product that aims to offer interest rate swap exposure, combined with the liquidity, transparency and margin efficiency of a futures contract.

Tully is a 20-year veteran of the financial sector who, prior to joining CME Group in August 2011, led the fixed income trading group at German banking firm WestLB and, prior to that, spent over ten years as a derivatives trader with Citibank and Greenwich Capital. Tully spoke with John Lothian News Editor-at-Large Doug Ashburn about the new interest rate swap futures contracts, which launched on December 3, 2012.

Watch the video »


MarketsWiki Page of the Day
William J. Brodsky

MarketsWiki Recent Updates


Ann M. Cresce; Eric Maine; William Barkshire; Aubrey Ho; Spencer Campbell; William J. Brodsky

Companies, Organizations and Groups

Hong Kong Mercantile Exchange; Atrium Trading Inc.; Chicago Board Options Exchange


32,342,449 pages viewed, 7,286 articles, 151,214 edits
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Lead Stories

Six buys Oslo Clearing for $32m
Philip Stafford –
SIX Group, owner of the Swiss stock exchange, is to buy the clearing operations of its Norwegian counterpart for NKr180m ($32m) in a deal which will prepare it for sweeping changes in derivatives markets.

Chile’s BEC set to list Nasdaq stocks
Jude Webber in Buenos Aires –
The 20 most active stocks traded on Nasdaq OMX., the transatlantic exchanges operator, are set to be listed on the Bolsa Electrónica de Chile (BEC) as the two bourses bed in a long-term alliance agreed more than a year ago.

BoE’s Haldane says technology may trigger UK banking revolution
Reuters via Yahoo! News
LONDON – Britain may be facing a banking revolution as technology transforms business lending and the dominance of its banks, a senior Bank of England official told the Independent newspaper on Monday.

British Regulator Says Banks ‘Too Big to Prosecute’
New York Times
Andrew Bailey, the future chief of the Prudential Regulation Authority, a newly created British regulator, believes that some banks have become too big to prosecute, a fear that has been echoed in the United States.

Rivals Mulled Sweetening Knight Bids
Two companies competing to acquire Knight Capital Group Inc. discussed over the weekend whether to increase their bids, but they seemed to hold back ahead of the brokerage firm’s board meeting set for Monday morning, according to people involved in the talks.

A Shadow Over Banks As UBS Nears Libor Deal
UBS AG is ready to face the music. Now executives at other banks wonder what comes next as U.S. and U.K. regulators charge ahead with their interest-rate probe. The Swiss bank is set to agree as soon as this week to pay roughly $1.5 billion to settle allegations of wrongdoing related to benchmarks such as the London interbank offered rate, or Libor, say people close to the talks.

Concern grows around bank credit ratings
Giles Turner and Matthew Attwood – Financial News
Bankers are becoming increasingly concerned about the consequences of further bank downgrades caused by regulation aimed to make banks safer.

The long overdue death of clone banks
William Wright – Financial News
After years of strategic conformity, investment banks are beginning to adopt different business models, focus on what they think they do well, and generally shrink their way to greatness. But unpicking the past could be difficult and expensive


Here Comes the CFTC: The Regulators Keep Coming Back for More
By Matt Grinnell, Fidessa
The latest batch of rules from the US Commodity Futures Trading Commission (CFTC), which come into effect this month, will require many firms currently outside the CFTC’s supervision to register as Commodity Pool Operators.

ESMA Is Recruting For A Team Leader Post-Trading (AD 9) – Deadline 23 Jan 2013

CFTC’s Division Of Swap Dealer And Intermediary Oversight Issues No-Action Relief For Certain Swap Dealers Concerning Annual Reports Of Chief Compliance Officers

CFTC’s Division Of Market Oversight Issues No-Action Letter Addressing Timeline For Swap Dealer Compliance With Large Swap Trader Reporting Rules

ASIC consults on periodic statement requirements and relief for AQUA products

Exchanges & Trading Facilities

Xetra-Gold most successful ETC on Xetra for past five years
Xetra-Gold (ISIN: DE000A0S9GB0) has been the most frequently traded Exchange Traded Commodity (ETC) on Xetra since its launch on 14 December 2007. With an average monthly turnover of E164.9 million, Xetra-Gold accounts for around 25 percent of Deutsche Börse’s total ETC turnover. The issuer is Deutsche Börse Commodities GmbH, a joint venture between Deutsche Börse, five banks (Commerzbank, Deutsche Bank, DZ Bank, B. Metzler seel. Sohn & Co. and Swiss bank Vontobel) and gold producer Umicore.

EO2 lists on NYSE Alternext

[CBOE] Trader E-News

ISE Weekly Listings, December 14, 2012

OneChicago Holiday Notice – December 2012 Holiday Schedule – Holiday Trading Hours

TOM MTF Statistics Week 50 – 2012

Hedge Funds & Managed Futures

KKR raises $6bn Asia fund
Henny Sender in Hyderabad –
US private equity firm KKR has met its goal of raising $6bn for its new Asia fund, according to people familiar with the matter, making it the largest-ever fund focused on the region.

Build Your Own Hedge Fund
The Wall Street Journal via Yahoo! Finance
Hedge funds had a two-decade run as the investment of choice for wealthy investors. But lackluster performance since the financial crisis and high fees are prompting some investors to roll up their sleeves and build their own. Just this year, money managers have launched 15 “multialternative” funds, so named because they use several different hedge-fund strategies, according to fund tracker Morningstar. That brings the total number of funds in the category to 81, and together they have attracted $3.3 billion this year.

Private equity takes the slow road to consolidation
Dan Dunkley – Financial News
The global private equity market is experiencing one of the most difficult periods in its history. The market has been plagued by the lack of credit available for new deals, increasing pressure to return capital to investors, and the toughest fundraising climate for a decade.

Hedge Funds Reduce Bullish Bets by Most in a Month: Commodities
Hedge funds cut bullish commodity bets by the most in a month as the Federal Reserve warned the U.S. budget impasse may damage the economy, increasing concern about demand just as prices head for the first loss since 2008.

Arden Asset Management Launches Novel $700 Million Mutual Fund Providing Hedge Fund Manager Access with Daily Liquidity
Business Wire via Yahoo! Finance
Arden Asset Management LLC , a leading independent alternative asset management firm with approximately $7.5 billion under management, announced that it has launched an open-end mutual fund with more than $700 million in assets as of December 17, 2012.

CFTC Commitments Of Traders Reports Update

Banks & Brokers

Deutsche Bank Probes Claims It Deleted E-Mails in Tax Inquiry
Deutsche Bank AG , whose offices were raided by German police four days ago, said it will investigate allegations employees deleted e-mails prosecutors had requested as part of a tax-evasion probe.

Deutsche Bank ruling on Kirch adds to legal woes
Reuters via Yahoo! Finance
Deutsche Bank was ordered by a judge to pay damages to the representatives of deceased media mogul Leo Kirch, the latest blow to Germany’s flagship lender which is reeling from a string of legal problems.

BNY Mellon Makes Executive Changes; Names New CEO of Investment Services, President
Dow Jones
Bank of New York Mellon Corp. ( BK ) has named Karen B. Peetz, its current chief executive of financial markets and treasury services, as its new president, among a slew of other executive changes.

Bankers forced to crowd round IPO tables
By Michael Stothard –
The number of investment banks working on individual initial public share offerings has reached a record high as bankers scramble for work amid a dearth of global deal activity.

UBS to admit Japan criminal wrongdoing in Libor case: sources
Reuters via Yahoo! News
ZURICH/LONDON – UBS will admit to criminal wrongdoing by its Japanese arm, where one of the Swiss bank’s traders manipulated yen Libor and euroyen contracts, to secure a $1-billion-plus settlement with regulators, people familiar with the matter said on Friday.

JPMorgan Names Chang as Global Head of Fixed-Income Research
JPMorgan Chase & Co. named Joyce Chang as its global head of fixed-income research, according to an internal company memo seen by Bloomberg News and confirmed by London-based spokesman Patrick Burton.

Unwinding the whale trade of 2012
Farah Khalique – Financial News
On May 11, the US markets closed at 4pm as usual, but what came next was a bit of a shock. In an impromptu conference call, chief executive Jamie Dimon announced that JP Morgan had lost billions of dollars and was on the verge of losing more.

Norway to Evaluate Nibor Interest Rate System
Dow Jones Newswires
Norway’s Finance Ministry said Friday it has asked the country’s Financial Supervisory Authority to evaluate whether the system for setting the interbank Nibor reference rate should be changed.

ED&F Man Capital Markets Approved as Member of ICE Futures Europe and ICE Clear Europe
Business Wire via Yahoo! Finance
ED&F Man Capital Markets, the global financial brokerage business, is pleased to announce that it has been approved as a full member of ICE Futures Europe and ICE Clear Europe. ICE Futures Europe is IntercontinentalExchange’s London-based, regulated futures exchange for the global energy markets.

Knight Capital Group Releases November 2012 Volume Statistics
Knight Capital Group, Inc. (NYSE Euronext: KCG) today released U.S. equity Market Making, Knight Direct equity and Knight Hotspot FX foreign exchange volumes at for the month of November 2012.

Clearing & Settlement

LSE and LCH review terms of E463m deal
David Oakley and Philip Stafford –
The London Stock Exchange and LCH.Clearnet, the European clearing house, are in talks about changing the terms of an agreed E463m deal, even as the proposal passed a key regulatory hurdle. The two parties have been thrown by tough new European rules forcing clearing houses to hold more capital. LCH needs to raise up to E375m to meet the new rules.

SIX Purchases Oslo Clearing ASA
Press Release
Oslo Clearing is 100% owned by Oslo Børs VPS Holding ASA, and is authorized to act as a central counterparty in accordance with the Norwegian Securities Trading Act. Oslo Clearing currently carries out CCP clearing of financial directives and security lending products. SIX has agreed to acquire 100% of Oslo Clearing from Norway’s Oslo Børs at the price of approximately NOK 180 Millions, assuming freely available cash or book equity to amount to about NOK120 millions.

Iberclear Overhauls Its Website

Indexes & Products

New Lyxor chief outlines ETF ambitions
Chris Flood –
Arnaud Llinas, the newly appointed global head of Lyxor’s exchange traded fund and indexing business, aims to help Lyxor recapture market share to become Europe’s second largest ETF provider by the end of 2013.

Rafferty Asset Management Closing Three Exchange Traded Funds
The Board of Trustees of the Direxion Shares ETF Trust has decided to liquidate and shutter three exchange-traded funds (“Funds”) based on the recommendation of Rafferty Asset Management, LLC, the Trust’s advisor.

Annual Changes To The NASDAQ-100 Index

S&P Dow Jones Indices Announces The Results Of December 2012 Canadian Index


Trading Technologies Hires First User Experience Expert, Madeline Jannotta
Madeline Jannotta, 27, was recently hired as a User Experience (UX) Researcher at Trading Technologies International, Inc. (TT), a leading global provider of professional derivatives trading software and solutions. This is a newly created position at TT. Jannotta officially started on November 1, 2012. Jannotta will be responsible for analyzing and creating use cases for TT’s flagship platform, X_TRADER.
(via email)

Fidessa Connects Sell-Side OMS To Squawker Block Trading Negotiation Venue
Squawker, the negotiation venue for sell-side block trading, today announced that Fidessa group plc, provider of high-performance trading, investment management and information solutions for the world’s financial community, has completed the pan-European FIX integration from Fidessa’s OMS to Squawker.

Interactive Data Announces Additional Enhancements to Vantage, Its Innovative Fixed Income Evaluation Transparency Tool
Interactive Data Corporation, a leading provider of independent evaluated pricing, valuation and reference data services, today announced the release of a new set of enhancements to Vantage. With these new tools, Vantage can more effectively meet the requirements of both the buy-side and sell-side in their efforts to assess the key inputs used by Interactive Data in its evaluated pricing processes.

Results Of The FTSE SET Index Series Semi-Annual Review


DealBook: S.E.C. Says Asset Firm Manipulated Trades to Enrich Some Clients
New York Times
Federal regulators said that Aletheia Research and Management steered profits to some clients, and to the firm’s co-founder, Peter J. Eichler Jr., at the expense of others.

British Authorities Charge Hedge Fund Founder
New York Times
The founder of Weavering Capital, one of Britain’s oldest hedge funds, has been charged with fraud, fraudulent trading and false accounting.

ASIC bans director of forex promoter for five years

Environmental & Energy



Hong Kong loses IPO crown
Josh Noble in Hong Kong –
After three years of ruling the world, Hong Kong’s crown has undoubtedly slipped. This year the city fell to fourth place in the global rankings for initial public offerings, only narrowly topping Kuala Lumpur, the Malaysian capital.

Abe intensifies pressure on Bank of Japan
Jonathan Soble and Michiyo Nakamoto – Financial Times
Shinzo Abe has intensified pressure on the Bank of Japan to further ease monetary policy after leading his party to a dramatic victory in Sunday’s general election.

China lets foreign sovereigns, central banks exceed $1 billion investment limit
Reuters via Yahoo! News
SHANGHAI – China’s foreign exchange regulator has removed the $1 billion limit for foreign sovereign wealth funds, central banks and monetary authorities buying Chinese assets through the Qualified Institutional Investor Programme.

China Exchanges Services: Adjustment For CES China 120 Index

HKEx Announcement : Notice Of Substitution Of Issuer

Osaka Securities Exchange SPAN Parameter Updated – Dec. 25, 2012 To Dec. 28, 2012

Hong Kong’s Securities And Futures Commission Encourages Listed Companies To Disclose Inside Information Before 1 January 2013

Japan’s Financial Services Agency: Administrative Action Against Standard & Poor’s Ratings Japan K.K.

Regulatory Announcement – SGX Finds Omission Of Information In Healthway Medical Corporation’s Announcement On Director Appointment

Frontier Markets

Looking beyond emerging markets to “frontier” economies
Reuters via Yahoo! Finance
With China, Brazil and India hitting icy patches on their economic growth paths, investing in even younger emerging markets looks promising.

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