Despite another rough year in 2012, investments in hedge funds this year topped the levels achieved in 2011. ICE delays the listing of 2015 cotton futures contracts as it reviews the process for registering the commodity for delivery. FINRA takes aim at several large US banks, fining them for using off-limits bond funds to pay for political lobbyists. In First Read today, take a look at this week’s New Kids on the Block segment, featuring online futures broker Optionshop.
New Kids on the Block: Optionshop
by Sarah Rudolph – JLN
In the wake of the MF Global and PFG scandals, many derivatives trading firms have been paring back their resources or “restructuring,” and volumes in equity options, among others, have come down. However, amid the bad news there are some underlying trends that bode well for the industry, according to Bob Fitzsimmons, CEO of the startup online futures broker Optionshop.
The firm is taking advantage of both the trend towards electronic trading of options on futures and the interest in commodities among retail investors. Optionshop is a Chicago-based firm founded by OptionsCity, a professional market making technology platform in the futures and equity options space, and Third Stone Partners, a futures option trading firm on the floor. It plans to launch January 7 and will specialize in the execution of options on futures.
“The founders realized that retail investors and traders have had access to equity markets for years, but that in spite of the huge growth and electronification of the futures markets, there weren’t any systems out there designed to give professional quality tools to the retail participants who wanted to trade those products,” Fitzsimmons said. “So Thirdstone and OptionsCity decided to devise their own system, and they approached me to spearhead the effort.”
For the rest of the profile, visit the John Lothian Newsletter blog at jlne.ws/RFXw9j
High-Speed Traders Race to Fend Off Regulators
JENNY STRASBURG AND SCOTT PATTERSON – WSJ.com
The chief executive of Knight Capital Group Inc. told Congress in June that rapid-fire trading, the backbone of its business, is a boon to the overall stock market. He cited a study that cautioned regulators against unintended consequences of curbing the practice known as high-frequency trading.
**** But then, they only know one speed.
NYSE wins 2012 IPO wars
The NYSE landed the majority, or roughly 53%, of all U.S. initial public offerings. That’s quite a reversal from 2011, when Nasdaq won 78 IPOs and NYSE claimed just 71 listings for its exchange.
**** And they put the award on ICE.
Investors yank $150 billion from stocks
Blame the Baby Boomers. While the U.S. stock market has been on a bull run since early 2009, individual investors have been pulling billions of dollars out.
**** Call it the Demographic Cliff.
The S.E.C. at a Turning Point
New York Times
Neil Barofsky’s track record and unimpeachable integrity make him the ideal choice to oversee enforcement at the Securities and Exchange Commission, an economist writes.
***** I thought the SEC was always at a turning point, or was it just that they kept going in circles?
‘Whale’ Capsized Banks’ Rule Effort
SCOTT PATTERSON – WSJ.com
Wall Street banks entered 2012 confident they could stall a wave of rules that they feared would hurt profits. But they are ending the year largely resigned that their activities will be constrained and monitored more closely by the government. One big reason for the change: J.P. Morgan Chase & Co.‘s “London whale” losses.
**** But the blubbering continues.
Fund Industry Challenges CFTC Registration Rule
JAMILA TRINDLE – WSJ
The mutual-fund industry is renewing a challenge to a rule that requires fund firms that trade in gold, oil or other commodities to register with an additional federal regulator.
**** I am not a legal expert, but this argument seems dubious. It seems more likely fodder for the debate to combine the SEC and CFTC.
MarketsWiki Recent Updates
Companies, Organizations and Groups
32,917,327 pages viewed, 7,304 articles, 151,510 edits
Hedge fund inflows outstrip 2011
Harriet Agnew – Financial News
The global hedge fund industry is on track to bring in more net new money in 2012 than 2011, despite the average fund looking set to underperform the S&P 500 for the fourth year running.
ICE mulls change to cotton registration process
IntercontinentalExchange Inc has delayed listing its December 2015 cotton contract for trading while it considers changing its process for registering the fiber for delivery against the exchange, it said in a notice on Wednesday.
Finra Fines Five Banks Including Citigroup, Goldman on Lobbying
Citigroup Inc. and Goldman Sachs Group Inc. are among five firms that agreed to pay $4.48 million to settle regulatory claims they used municipal and state bond funds to pay lobbyists.
Factbox: “Fiscal cliff” tax, budget provisions in detail
Reuters via Yahoo! News
WASHINGTON – The “fiscal cliff” is only days away and efforts to avert it are making little progress, with some U.S. lawmakers predicting the tax increases and federal spending cuts involved will start taking hold in January, unless a deal comes together very quickly. If these jolts to the economy are allowed to occur, a recession could follow, economists have forecast.
U.S.-China Audit Spat Could Spill Over
MICHAEL RAPOPORT – WSJ.com
As U.S. regulators and Chinese authorities spar over the right to oversee audits of companies in China, U.S. multinational firms like Sanmina Corp. could suffer collateral damage.
Brokers struggle in oversupplied market
Vanessa Kortekaas – FT.com
If there is one thing that London’s stockbrokers agree on, it is that there are simply too many of them, chasing too little business. But where brokers are starting to disagree is over the chances of a recovering equity market improving their fortunes – and the shape of their business in future.
The ‘Lagarde List’ Is Back, And Things Could Get Really Explosive In Greece Again
Business Insider via Yahoo! Finance
Remember Greece? The infamous “Lagarde List” saga has the potential to drag it back into the spotlight tomorrow.
CFTC Mutual Fund Rule Appeal Sought by Business Groups
The U.S. Chamber of Commerce is seeking to appeal a judge’s decision to uphold a rule by the Commodity Futures Trading Commission requiring mutual funds with commodities investments to register with the agency.
US must see other countries have laws too
Ann Lee – FT.com
The US Securities and Exchange Commission recently moved to sue the Chinese affiliates of the big four accounting firms for not sharing details of their audits of Chinese companies. From the US perspective this was a reasonable response to the perceived opacity of Chinese companies listed on US exchanges. Allegations of fraud at companies such as Sino-Forest have led to a wave of auditor resignations this year.
ISDA Response To EC Consultation On A Possible Recovery And Resolution Framework For Financial Institutions Other Than Banks
Exchanges & Trading Facilities
Societe Generale Corporate & Investment Banking joins EurexOTC Clear for Interest Rate Swaps
One of the largest European banks, Societe GeneraleCorporate & Investment Banking, has become a clearing member of EurexOTC Clear for Interest Rate Swaps (IRS). By joining this new CCP for OTC derivatives, Societe Generale Corporate & Investment Banking and its clients will thus be able to prepare for the start of the clearing obligation in Europe.
OSE announced a trading overview (preliminary estimates) in Year 2012 & December 2012.
Annual trading volume of derivatives in 2012 was 205,082,401 units (preliminary estimates) as the first exchange in Japan, and it hits the record high.
Bucharest Stock Exchange And EBRD Launch A Joint Project On Corporate Governance In Romania
Bucharest Stock Exchange Will Submit Under The Approval Of Shareholders A New Pricing Policy Meant To Stimulate The Increase Of Trading Volumes
Direct Edge Trading Notice #12-63: Market Holiday Reminder – New Year’s Day
Vienna Stock Exchange Last Trading Day On December 28, 2012
Hedge Funds & Managed Futures
Winton CEO to step back
Harriet Agnew – Financial News
The chief executive at hedge fund manager Winton Capital Management is to step down early next year, Financial News has learnt, but will remain at the firm.
DealBook: Porsche Wins Dismissal of Hedge Fund ‘Short Squeeze’ Lawsuit
International Herald Tribune
A New York state appeals court dismissed a lawsuit brought by hedge funds against Porsche on Thursday, handing the German automaker a big victory in the long-running legal battle over its controversial takeover of Volkswagen.
Einhorn’s Greenlight May Lose $67.6 Million on Marvell
Greenlight Capital Inc., David Einhorn ’s New York-based hedge fund, may have lost as much as $67.6 million from its stake in Marvell Technology Group Ltd. as the shares tumbled over the past two days, according to regulatory filings.
Bondholders add twist to Argentina debt spat
Jude Webber in Buenos Aires – FT.com
A group of funds caught in the middle of Argentina’s latest debt saga has asked New York state’s highest court to define the meaning of a pivotal clause in a high-profile legal dispute that has sparked fears of a fresh sovereign default.
Fiscal cliff uncertainty stirs Vix volatility
Dow Jones Newswires – Financial News
The market’s so-called fear gauge vaulted above a closely watched level Thursday on “fiscal-cliff” anxiety, before soothing news pulled the Vix down and diminished deep stock-market declines late in the day.
Banks & Brokers
Bank C.E.O.’s on Thinning Ice
New York Times
At least one of the three big bank chief executives to survive the financial crisis could be without a job by the end of 2013.
Banks fined over bond fees
The Sacramento Bee
In a case involving California municipal bond sales, five leading Wall Street investment banks were fined Thursday for using taxpayer money to pay a lobbying group in San Francisco.
2012 In Review: The Year Of Banks Behaving Badly
International Business Times
Former Federal Reserve Chairman Alan Greenspan created a stir in 2008 when he conceded he was “in a state of shock and disbelief” that banks didn’t exactly work in people’s best interests.
FN highlights of 2012: Goldman Sachs overhauls junior staff structure
Among the many investment banking reorganisations this year was Goldman Sachs’s move in September to restructure its team of analysts and associates across Europe.
Lehman’s Cash Rises to $5.6 Billion Before Creditor Payment
Lehman Brothers Holdings Inc., which is due to make a third payment to creditors in March, had $5.6 billion in free cash on Nov. 30, an increase of $1.1 billion during the month.
Deutsche Bank Sued Over $173 Million in Mortgage Bonds
Deutsche Bank AG was sued in New York by Landesbank Baden-Wuerttemberg, which accuses the German bank of fraud in the sale of $173 million in mortgage-backed securities in 2007.
RBS Wins Dismissal of Woori Bank Suit Over CDO Investment
Royal Bank of Scotland Group Plc won dismissal of a lawsuit filed by Seoul-based Woori Bank over losses from investments in collateralized debt obligations tied to the housing market.
Bankia investors face severe losses
Tobias Buck in Madrid – FT.com
The bleak prospects for as many as 350,000 retail shareholders in Bankia of recovering anything more than a token amount of their investment dimmed further on Thursday after it was revealed that the nationalised Spanish lender had a negative economic value of E4.15bn.
Indexes & Products
S&P Dow Jones Indices Announces Changes To The S&P/TSX Canadian Indices – A Share Distribution And Price Adjustment In The S&P/TSX Composite Index
Luxembourg Stock Exchange: Annual Revision Of The LUXX Index On 2 January 2013
BME: IGBM Index New Composition For The First Half 2013 – The index Will Comprise 112 Stocks, After Two Exclusions And One Inclusion
SunGard Named a Top Vendor in the 2012 Chartis RiskTech100 Rankings
SunGard has placed as a top vendor in the seventh annual RiskTech100 rankings compiled by Chartis Research, a leading provider of research and analysis on global risk technology markets.
FINRA Sanctions Five Firms $4.4 Million for Using Municipal and State Bond Funds to Pay Lobbyists
The Financial Industry Regulatory Authority (FINRA) today announced that it has sanctioned five firms a total of more than $4.48 million for unfairly obtaining the reimbursement of fees they paid to the California Public Securities Association (Cal PSA) from the proceeds of municipal and state bond offerings.
Judge OKs deal for NY hedge fund boss Rajaratnam to settle SEC civil suit with $1.45M payment
Minneapolis-St. Paul Star Tribune
NEW YORK – A New York hedge fund founder serving the longest prison term ever given for insider trading also will be writing the government a big check.
China central bank vows to step up reforms of finance sector
Reuters via Yahoo! Finance
BEIJING – China’s central bank pledged to quicken the pace of reforming and opening up the country’s financial sector in 2013, while preventing systemic risks.
Goldman Sachs Buying Japan’s Exporters on Abe Policy Bets
Goldman Sachs Group Inc. is buying shares of Japanese exporters and banks as Prime Minister Shinzo Abe’s new government promises to do more to end deflation and weaken the yen.
Yuan Sets Tone for Asia as Japan Dethroned by China: Currencies
Asian central banks are tolerating gains in their currencies against the yen as China’s economic recovery diminishes concern that stronger exchange rates may damp their export advantages.
HKFE Announces Revised Margins For Futures Contracts
Press Conference By Ikko Nakatsuka, Japan’s Minister For Financial Services
IMF Managing Director Christine Lagarde Exchanges Financing Documents With Mauritius For New Africa Training Institute
Malawi Stock Exchange Weekly Report – Week Ending 28 December 2012
MCX-COMDEX Weekly Market Report December 21, 2012 – December 27, 2012