John Lothian Newsletter: Deutsche Boerse CEO Says Asian Expansion as Top Priority; Scoach joint venture to be terminated; LSE’s Orb shines as retail investors flock to bonds

Feb 21, 2013

The CEO of Deutsche Boerse starts an opportunity committee focused on ways to increase its presence in Asia. Swiss exchange operator SIX and Deutsche Boerse break off their joint operation of Frankfurt-based Scoach. The London Stock Exchange’s bond trading platform ORB does increasing business in an environment of hesitant business lending. In today’s First Read, follow the link to the final installment of JLN’s Restoring Customer Confidence series; and see who’s just signed on as a new John Lothian News sponsor.

First Read

McGladrey Becomes Major John Lothian News Sponsor
John J. Lothian & Company, Inc. is pleased to announce that McGladrey LLP, the fifth largest U.S. provider of assurance, tax and consulting services, has become a major sponsor of John Lothian News by agreeing to become a Partner Level sponsor of MarketsWiki and a Premier sponsor of MarketsReformWiki.

McGladrey LLP, which was formed by the merger of McGladrey & Pullen LLP and RSM McGladrey, Inc. in 2011, traces its roots back to 1926. McGladrey is a licensed CPA firm, and is a member of RSM International, the seventh largest global network of independent accounting, tax and consulting firms.

“We (McGladrey) are proud of our new association with John Lothian News and look forward to contributing to its success as one of the best read sources of news affecting the financial markets,” said John Hague, Partner, Financial Services Industry Leader, at McGladrey LLP.

“We are very pleased to have a prominent audit, tax and consulting firm such as McGladrey support MarketsWiki, MarketsReformWiki and the work of John Lothian News,” said John J. Lothian, President & CEO of John J. Lothian & Company, Inc. and founder of the online knowledge base. “McGladrey has long been a friend of John Lothian & Company, Inc. and a contributor to the John Lothian Newsletter and we are excited to bring the relationship to this next level.”

Learn more about McGladrey at www.mcgladrey.com.

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New Restoring Customer Confidence Video
The final scheduled video in our Restoring Customer Confidence series deals with electronic confirmations of customer funds. As the industry continues to deal with these issues, John Lothian News may highlight new ideas or developments in future Restoring Customer Confidence videos.

Restoring Customer Confidence More ideas»
Confirmations: Plugging Into Electronic Confirmations

Confirmations: Plugging Into Electronic Confirmations
MarketsWiki.tv

Capital Confirmation, which runs Confirmation.com, is credited with helping to unveil the massive $215 million fraud at Peregrine Financial Group (PFG) in July 2012. The web-based audit confirmation service was hired by the National Futures Association (NFA) last year and applied its technology to PFG. After forcing PFG to use the electronic confirmation service, rather than use the traditional paper-based auditing system, PFG’s fraud was discovered by the NFA.

Brian Fox, founder and chief marketing officer of Capital Confirmation, explains how this straightforward technology of providing a third party confirmation service, can help protect customer funds and restore customer faith in the audit system used in the futures industry.

Watch the video »

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About the Restoring Customer Confidence video series
In the aftermath of the MF Global collapse, fraud at Peregrine Financial Group and high profile high-frequency trading shocks, John Lothian News asks – how do you restore customer confidence and bring traders back? Previous videos:

Visit the video series page on MarketsWiki.tv

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Is the CME Group “skirting” the CFTC’s new requirements for swaps?
Philip McBride Johnson – FOW
The Commodity Futures Trading Commission is reportedly examining whether the CME Group‘s new interest-rate swap futures contract, that converts to a swap at maturity, is an end run around rules adopted by the CFTC for “major swap participants,” including the requirement to register as such if an annual volume threshold is reached. Those rules do not apply to futures contracts.
jlne.ws/YoID7x

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EXCLUSIVE: Ex-MF Global head Jon Corzine may be banned from futures trading industry
KAJA WHITEHOUSE – NYPOST.com
The future is murky for former NJ governor and fallen financial titan Jon Corzine. Two directors of the National Futures Association will move tomorrow to ban Corzine from the multibillion-dollar futures trading industry in light of the scandalous collapse of MF Global — the commodity futures brokerage firm Corzine once headed.
jlne.ws/134Px9r

***** Normally some sort of case is won against someone before this happens. I understand the motivation, but how about at least a “he knew or should have known” violation being won first?

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BlackRock lawsuit shines light on hidden fund fees
Ian Salisbury – MarketWatch
Despite recent regulatory efforts, fund fees remain murky to most regular investors. But a high-profile investor lawsuit against BlackRock, whose iShares funds dominate the business of exchange-traded funds, may finally shine a light on one of the least-understood aspects of those costs.
jlne.ws/Zrq2hU

***** The story of when good firms are in a slimy business. Securities lending needs lots of light, some soap, hot water and a big luffa.

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Getco and Knight Capital unveil senior management team
Dow Jones Newswires
High-frequency market maker Getco and Knight Capital Group unveiled the management team of the new public company expected to form from the merger between the two financial firms.
jlne.ws/YoIDnV

**** I remember when Getco employees were not even allowed to tell people what they did at the firm. Wow!

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Changes afoot in Russia
Galen Stops – FOW
In September 2011 Russian President Vladimir Putin said in a speech that he wanted to modernise Russia, get more capital flowing into Moscow and to create a Russian middle class. Less than two months later Micex and RTS, two exchanges that had been competing for around 10 years, announced that they were to merge.
jlne.ws/YoIAZj

**** What kind of schwag does the new Russian exchange give away at trade shows?

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A Revolving Door in Washington With Spin, but Less Visibility
JESSE EISINGER, ProPublica – NYTimes.com
Obsess all you’d like about President Obama’s nomination of Mary Jo White to head the Securities and Exchange Commission. Who heads the agency is vital, but important fights in Washington are happening in quiet rooms, away from the media gaze.
jlne.ws/YoIDo3

**** I was still obsessed with Mary Schapiro. You mean I need to change my obsession?

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Intrade traffic plummets after CFTC action
Gregory Meyer in New York – FT.com
The number of people using Intrade has plummeted since a US government crackdown late last year, calling into doubt the online prediction market’s powers to divine the wisdom of crowds on matters ranging from election results to the stock market.
jlne.ws/YoIAZn

***** So the owner of Intrade died climbing Everest a couple of years ago and the headline writer says traffic plummets. Hmm.

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Twitter: The New Frontier for Securities Fraud
FOX Business
Fraud on sites like Twitter is on the rise, and it’s sending shivers down the backs of executives and investors everywhere.
jlne.ws/YoIAZq

***** Yes, there is fraud in any new way to anonymously communicate with people. Shocking!

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Rosenblatt European Market Structure Conference
Buy-siders: Join Rosenblatt Securities and a group of distinguished industry speakers in London on March 12th for a discussion of the critical issues confronting European market structure. Now in its 3rd year, our European Market Structure Conference boasts its best lineup yet with keynotes from Xavier Rolet, CEO of the LSE Group, and Doug Cifu, President & COO of Virtu Financial. They are joined by Edwin van der Kruk, CEO of Optiver, and a number of other recognised European industry and regulatory figures. Our half-day program (starting at 8:30 am) will include panels on “Challenges for Investors in Executing & Routing Orders in the Current European Market Environment” and “Who are the Winners and Losers in the Changing European Regulatory Environment?”

For more details, see
jlne.ws/YoIDEk

***** The always interesting Rosenblatt Securities.

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Lead Stories

Deutsche Boerse CEO Says Asian Expansion as Top Priority
Bloomberg
Deutsche Boerse AG set up a committee to consider opportunities as the operator of the Frankfurt stock exchange focuses on Asia to drive growth amid declining volumes.
jlne.ws/YoIDEo

Scoach joint venture to be terminated
In a joint Media Release issued today, SIX and Deutsche Börse have announced that the Scoach cooperation agreement, launched in 2007, is to be terminated as of 30 June 2013. The contributing markets of Scoach will return to the parent companies, and the successful exchange for Structured Products in Zurich will be continued.
jlne.ws/YoIDEt

LSE’s Orb shines as retail investors flock to bonds
Tim Cave – Financial News
The Oxford English Dictionary says that an orb is “a sphere or globe” or “any heavenly body, [such] as the moon or sun”. It is an apt moniker, therefore, for the London Stock Exchange’s Order book for Retail Bonds, which has been glowing as an alternative source of company finance amid the dim world of bank lending.
jlne.ws/YoIDEx

Hong Kong pinning hopes on IPO surge
Josh Noble in Hong Kong – FT.com
On the face of it, Hong Kong’s market for new equity listings has perked up. Deal volume in the year to date is at its highest since 2010, while retail investors have finally returned. But, with many of the recent deals faring poorly in secondary trading, and China’s equity rally losing steam, the market for new offerings may stall before it gets out of first gear.
jlne.ws/YoIBfL

Deutsche Börse chief brands FTT ‘crazy’
Michelle Price and Shanny Basar – Financial News
The chief executive of German exchange operator Deutsche Börse this morning described European plans to introduce a financial transaction tax as “crazy” and damaging to small companies.
jlne.ws/YoIBfR

European Banks Move to Boost Health Gauge
LAURA STEVENS And MARGOT PATRICK – WSJ.com
Big European banks are boosting a key gauge of their financial health through largely cosmetic maneuvering, even as regulators in some countries try to crack down on the practice.
jlne.ws/YoIDEB

Russia’s missing billions revealed
Charles Clover in Moscow – FT.com
Russia’s central bank governor has lifted the lid on $49bn in illegal capital flight last year – more than half of which, he says, was controlled “by one well-organised group of individuals” that he declined to name.
jlne.ws/YoIDED

Ex-UBS Adoboli supervisor goes to Getco
Arash Massoudi in New York – FT.com
The banker who once supervised Kweku Adoboli, the rogue trader who cost UBS $2.3bn, is in line to become the head of global equities at Getco when it completes its takeover of Knight Capital, the high-frequency trading firm said on Wednesday.
jlne.ws/YoIDUS

Regulatory

FSA to publish internal Libor probe soon
Reuters via Yahoo! News
LONDON – The Financial Services Authority will publish its internal review into when it first knew about banks rigging the Libor benchmark within weeks, before the watchdog is scrapped. The watchdog told parliament’s Treasury Select Committee in a written submission released to the media that the review was being conducted by its internal audit division.
jlne.ws/YoIBwf

ESMA Seeks Feedback On Its Technical Advice To The Commission On Fees For Trade Repositories
On 14 January 2013 ESMA received a formal request from the European Commission (the Commission) to provide technical advice to assist the Commission in formulating a Regulation on fees for Trade Repositories (TRs) by a delegated act.
jlne.ws/YoIDUW

ESMA And The EBA Publishes The Responses To The Joint Consultation On Benchmark-Setting Processes
To access the responses, please
jlne.ws/YoIBwm

[AMF Canada] Integrity in Public Contracts Act – New contracts now covered under Act
jlne.ws/YoIBwp

Exchanges & Trading Facilities

NYSE Liffe welcomes Marigold International Securities LTD. and Gold Mountain Futures LTD as new members
jlne.ws/YoIDV7

ASX Ltd Half-Year Report 2013
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Appendix 4D – Half-Year Report
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ASX Ltd Half-Year Interim Dividend Announcement
jlne.ws/YoIEbu

ASX Ltd Half-Year Media Release
jlne.ws/YoIEbw

ASX Ltd Half-Year Result Analyst Presentation
jlne.ws/YoIBMX

Hedge Funds & Managed Futures

Commodities Tumble on Speculation Hedge Fund Selling Positions
Bloomberg
Commodities fell, heading for the biggest loss in more than three months, as metals and energy tumbled amid speculation that a hedge fund was selling.
jlne.ws/YoIBN1

Marc Faber: Get Ready For Decade-Long Low Interest Rates
Seeking Alpha
Marc Faber, author of the “Gloom Boom and Doom” report expects a major low in interest rates for the years to come. In this article we will look at the reasons and the investment implications for his comments.
jlne.ws/1556jUp

Thomson Reuters Extends Commodity Research and Forecast Service on Eikon to Include Metals Analysis
Thomson Reuters today announced it has extended its commodity research and forecast service on its flagship financial markets desktop, Thomson Reuters Eikon, to include key insight for metals markets professionals. Thomson Reuters Eikon now enables metals traders and analysts to combine rich research content and forecast analytics from Thomson Reuters GFMS with real-time and historical metals news and pricing information to understand potential future effects on prices.
jlne.ws/YoIC3i

Once Bashful, Hedge Fund Pros Bask in Media Glare
Michael Santoli via Yahoo! Finance
Why are so many big-name hedge fund managers so chatty lately? There was a time not long ago when even well-known hedge fund captains – those with enviable portfolio returns, whispered-about personal wealth and reputations for flame-tempered investment brilliance
jlne.ws/YoIEbE

Eton Park founder eyes $300m for new venture
Harriet Agnew – Financial News
More details are emerging about Ronit Capital, the London-based hedge fund manager being set up by ex-Eton Park Capital Management founding partner Edward Misrahi.
jlne.ws/YoIErT

Banks & Brokers

U.S. DOJ probing JPMorgan over Bear Stearns mortgage products
Reuters via Yahoo! News
The U.S. Justice Department is investigating JPMorgan Chase & Co over allegations that Bear Stearns provided misleading information about its mortgage products during the lead-up to the financial crisis, according to people familiar with the matter.
jlne.ws/YoIErW

Citigroup Chairman Not Pushing Bank Breakup
Dow Jones
Even thinking about breaking up is hard to do. Just ask Citigroup Inc. Michael E. O’Neill was among a small group of directors who after the financial crisis urged the company to weigh splitting up the third-largest U.S. bank, said people familiar with the deliberations.
jlne.ws/YoIC3w

Citigroup Says Alternative Assets Chairman Chad Leat to Retire
Bloomberg
Citigroup Inc., the third-biggest U.S. bank, said that fixed-income veteran Chad Leat will retire after 16 years at the lender.
jlne.ws/YoICjM

Credit Suisse to redeem $1.5 billion in tier 1 capital
Reuters via Yahoo! News
ZURICH – Credit Suisse said on Wednesday it would redeem $1.5 billion in Tier 1 Capital notes next month as part of measures to manage its capital to comply with tougher regulation.
jlne.ws/YoIEs2

Pension funds push JPMorgan to split Dimon’s job
chicagotribune.com
Overseers of government worker pension funds pressed JPMorgan Chase & Co. to strip Chief Executive Jamie Dimon of his additional title of chairman after the London Whale fiasco, renewing a proxy battle the bank won only narrowly last year.
jlne.ws/YoICjO

JPMorgan Unit Asks Court to Toss Credit Union Regulator’s Suit
Bloomberg
JPMorgan Chase & Co.’s Bear Stearns unit asked a U.S. judge to throw out a regulator’s lawsuit accusing it of using misleading documents to sell $3.6 billion in mortgage-backed securities to four credit unions that later collapsed.
jlne.ws/YoIEs5

Bundesbank Completes Lehman Asset Sale, Aims to Avoid Loss
Bloomberg
Germany’s Bundesbank said it has completed the sale of assets it inherited after the collapse of Lehman Brothers Holdings Inc. and hopes to escape without a loss once insolvency proceedings are resolved.
jlne.ws/YoIEs6

Lessons in how to advise clients
Financial News
Natixis Global Asset Management is seeking new business from UK independent financial advisers by teaching them how to advise clients – while aiming to stay on the right side of regulators.
jlne.ws/YoIEIr

Clearing & Settlement

TriOptima eliminates JPY271.6 trillion notional in interest rate swaps from LCH SwapClear in record-breaking compression cycle
TriOptima announces today that it eliminated JPY 271.6 trillion (USD3 trillion) in cleared interest rate swap notional principal outstandings from LCH SwapClear, the largest ever triReduce compression cycle in JPY interest rate swaps. Since TriOptima began offering its triReduce early termination service in JPY in 2004, almost JPY1,600 trillion (USD18.3 trillion) in cleared and uncleared swaps have been eliminated.
jlne.ws/YoIEIu

SGX Clears Record Iron Ore Volume In January 2013
Announcement Of The 2012 SGX AsiaClear Award Winners – Launch Of AsiaClear Futures On 8 April 2013
jlne.ws/YoIEIw

Indexes & Products

Eurex Exchange lists four new MSCI index derivatives
jlne.ws/YoICAo

NYSE Liffe to list MSCI Europe Index on central order book
jlne.ws/YoIEIC

SIX reinforces its commitment to the Swiss market for structured products
jlne.ws/YoICAr

Technology

Cross River Fiber Expands Its NJ Fiber Optic Footprint to Mahwah, New Jersey
Cross River Fiber, a New Jersey-based, boutique dark fiber optic and telecommunications solutions provider, announces today that it has completed its latest 40+ mile fiber optic buildout in Northern New Jersey.
jlne.ws/XAo4Yv

Enforcement

Feuding Over Fund Collapse Drags On
KIRSTEN GRIND – WSJ.com
U.S. securities regulators last November suffered a major setback in their civil trial against money-market mutual-fund inventor Bruce Bent Sr. and his son, but the two sides are still going at each other.
jlne.ws/YoICAv

[ASIC] Ponzi scheme ‘mastermind’ handed record penalty
jlne.ws/YoIEYX

Self-managed super adviser sentenced on ASIC charges
jlne.ws/YoICQN

Environmental & Energy

China pushes forward with carbon tax plans
Business Green/Xinhua
The Chinese government has provided further details of its plans to introduce a carbon tax as part of a package of tax reforms that will also see new levies introduced on scarce resources and environmentally damaging activities.
jlne.ws/156wjPq

Iceland Looks to Export Power Bubbling From Below
The New York Times
Soon after work began here on a power plant to harness some of the vast reserves of energy stored at the earth’s crust, the ground moved and, along a six-mile-long fissure, began belching red-hot lava. The eruptions continued for nine years, prompting the construction of a stone and soil barrier to make sure that molten rock did not incinerate Iceland’s first geothermal power station.
jlne.ws/Xz6Z0R

Kerry comes out swinging on climate change
The Hill’s E2 Wire
John Kerry used his first major speech as secretary of State to make that case that failing to confront climate change means missing big economic opportunities — and worse.
jlne.ws/YcBUzx

Asia-Pacific

January Foreign Customer Trades On Tokyo Commodity Exchange Hit All-Time Record
The Tokyo Commodity Exchange, Inc announced today that the monthly volume of customer trades (sell & buy) that were originated overseas totalled 1,662,426 contracts in January 2013. It topped the all-time record set on August 2011 at 1,592,485 units.
jlne.ws/YoIEYY

Nomura Retail Assets Increase 4.9 Trillion Yen, Most in 10 Years
Bloomberg
Nomura Holdings Inc. said it added 4.9 trillion yen of retail assets in January, the biggest monthly gain in at least a decade, as individual investors purchased more stocks and mutual funds.
jlne.ws/YoICQR

NASDAQ OMX to Support the Philippine Dealing and Exchange Corporation’s Market Surveillance Endeavors
The NASDAQ OMX Group, Inc. (Nasdaq:NDAQ) and the Philippine Dealing and Exchange Corporation (PDEx) today announced that PDEx has selected NASDAQ OMX’s SMARTSOnline market surveillance system to monitor market activity across the fixed income market in the Philippines.
jlne.ws/YoIEZ3

South Korea’s Poisoned Chalice of Household Debt Restricts Park
Bloomberg
After a series of failed business ventures, Kwon Eui Moon decided to get rich in a more traditional way in South Korea by taking out a mortgage in 2002 and waiting for house prices to soar. They haven’t.
jlne.ws/YoICQY

Shanghai Stock Exchange, China Securities Index Co.: Announcement About Adjusting Constituent Universe Of Sse Enterprise Bond Index Etc.
jlne.ws/YoICQZ

Frontier Markets

Sri Lanka Exchange Considers Stock Float Rule to Lure Investors
Bloomberg
Sri Lanka’s stock exchange is considering a rule ensuring companies have a minimum amount of stock available for trade to lure foreign investors.
jlne.ws/YoIEZ9

BofA says BRICs are back as it recommends emerging bonds
Providence Business News
Bank of America Merrill Lynch said investors should buy emerging market bonds and equities as the so-called BRIC nations of Brazil, Russia, India and China post the biggest improvement in growth this year.
jlne.ws/YoIFMw

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