John Lothian Newsletter: CME Sued by CFTC for Disclosing Non-Public Information; Singapore Exchange pushes iron ore futures launch to April; Cargill joins Wall Street banks as swap dealer

Feb 22, 2013

CME Group and two former employees are on the receiving end of a CFTC lawsuit alleging that the company inappropriately disclosed private information regarding customer trades. Singapore Exchange delays the start of trading on their upcoming iron ore futures contract until April, to give customers more time to prepare. Commodity broker Cargill becomes the first major non-financial company to register with the NFA as a swaps dealer.

First Read

MSCI index futures to trade in Europe
Philip Stafford – FT.com
Institutional investors will be able to trade some of their key MSCI benchmark indices as futures in Europe after the index provider announced plans to list them on the region’s main derivatives exchanges.
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***** Europe and London are getting so interesting.

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LME Stands to Gain as EU Seeks OTC Derivative Transparency
Bloomberg
The London Metal Exchange, the world’s biggest industrial-metals marketplace, stands to gain as the European Union seeks greater transparency for over-the-counter derivatives, its deputy chief executive officer said.
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***** Yes, we have heard this story and the fat lady has not yet sung.

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Comment: Europe’s confusion on transparency
Rollo Burgess and Kamal Mohindra – FT.com
The bulk of attention to new European rules concerning derivatives trading has been focused on the imposition of mandatory clearing, but little on another key part of the debate: transaction reporting.
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***** Don’t worry, they will get there.

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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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Time to End the Unicorn Hunt
DTN / The Progressive Farmer
Noncommercial investors didn’t cause disproportionate commodity price spikes, a University of Illinois ag economist argues, and focusing on them distracts from the real question: are markets more efficient at price discovery?
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***** I am still amazed by the Tricorn.

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BSE Ties Up With S&P Dow Jones Indices
Ashutosh Joshi – WSJ
BSE Ltd., the operator of the Bombay Stock Exchange, Tuesday said it has tied up with S&P Dow Jones Indices for index partnership that will see the Indian exchange group renaming all of its indexes including the benchmark Sensitive Index.
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***** A page out of CBOE’s book.

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Kicking Corzine Out of the ‘Club’ Proved to Be Not So Easy
BEN PROTESS – NYTimes.com
Jon S. Corzine could be the Groucho Marx of Wall Street. The comedian vowed to avoid “any club that would accept me as one of its members.” Mr. Corzine, the former Democratic senator who ran MF Global until it collapsed in 2011, faced expulsion from a group to which he did not even belong.
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****** As expected, but with a thoughtful answer.

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Judge OKs framework for payment to MF Global creditors
Reuters
A bankruptcy judge on Tuesday approved the outline of a plan by liquidators and creditors of failed brokerage MF Global to repay the company’s creditors, a key step toward ending its $40 billion Chapter 11 proceeding.
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***** One step at a time.

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A Tax That Could Change the Trading Game
FLOYD NORRIS – NYTimes.com
To the dismay of the United States government — not to mention Wall Street — much of Europe seems poised to begin taxing financial trading as soon as next year. The idea is hardly new, but until now financial markets and institutions have been able to ward off any such tax in most major markets.
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***** There is a political element that wants to solve lots of problems by just having less trading. Taxing trading would accomplish that in their minds. However, it will create unintended consequences that they and the rest of us can’t even fathom.

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CNBC Buys ‘Nightly Business Report’ From Atalaya
By ELIZABETH JENSEN – NYTimes.com
“Nightly Business Report,” the pioneer public television series that has struggled in recent years, is getting a new, deep-pocketed commercial owner, the 24-hour business cable channel CNBC, a unit of Comcast’s NBCUniversal.
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****** I think we will have to start “Late Nightly Business Report.”

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MarketsWiki

MarketsWiki Page of the Day
Scoach Europe AG
jlne.ws/ZujHSX

MarketsWiki Recent Updates

People

Thomas R. Kadlec; John Walls; Kurt M. Johnson; Sergey Kucher; Catherine Clay; Vincent Cicco

Companies, Organizations and Groups

CQG; Scoach Europe AG

Miscellaneous

LIBOR; Five Minutes with Dax Rodriguez; Convertibles; Convertible securities; Structured products

Statistics

35,200,768 pages viewed, 7,408 articles, 155,191 edits
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Lead Stories

CME Sued by CFTC for Disclosing Non-Public Information
Silla Brush – Bloomberg
CME Group (CME) Inc., owner of the world’s largest futures exchange, and two former employees were sued by the U.S. Commodity Futures Trading Commission for disclosing material non-public information on customer trades.
jlne.ws/11ZppxG

Singapore Exchange pushes iron ore futures launch to April
Reuters via Yahoo! Finance
The Singapore Exchange has pushed to April the launch of its iron ore futures contract, to give clients and member firms more time to prepare for the new product, the exchange said on Friday.
jlne.ws/11Zpq4x

Cargill joins Wall Street banks as swap dealer
Reuters via Yahoo! News
WASHINGTON – Commodities trader Cargill Inc has registered as a swap dealer with the U.S. derivatives regulator, a sign that new financial-stability rules have started impacting firms well outside Wall Street. Cargill is the first major non-financial company to acquire the status of “swaps dealer” on the registry of the National Futures Association
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CME says it will fight CFTC action in court
Crain’s Chicago Business
The top U.S. derivatives regulator charged CME Group and two former employees with disclosing non-public information about customer trades.
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CFTC Chairman Gensler Questions Long-Term Viability of Libor
Bloomberg
U.S. Commodity Futures Trading Commission Chairman Gary Gensler questioned the long-term viability of benchmark rates such as Libor, saying underlying markets on which they rely may be permanently disrupted.
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EU Adds Swiss Franc-Denominated Rates to Antitrust Probe
Bloomberg
European Union antitrust regulators are investigating collusion between banks to manipulate benchmark lending rates denominated in Swiss francs, building on earlier probes linked to the yen and the euro, EU Competition Commissioner Joaquin Almunia said today.
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Monti’s Austerity Pushes Italians Toward Parliamentary Upheaval
Bloomberg
Elisa Dalbosco says she lost her job when it came time for her former employer, a refugee shelter in northern Italy, to either hire her with a permanent contract or let her go.
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German business morale jumps at fastest pace in over two years
Reuters via Yahoo! Finance
German business morale surged at its fastest pace in over two years in February, pushing higher for a fourth consecutive month and pointing to a solid recovery in Europe’s largest economy after a dismal end to 2012.
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Bankia to reveal loss of more than E19bn
Miles Johnson in Madrid – FT.com
Bankia will next week reveal an annual net loss of more than E19bn, the largest in Spanish corporate history, as the nationalised lender that last year became the symbol of the country’s financial crisis speeds up its plan to close branches and sell assets.
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Regulatory

Europe kicks off repository debate
Philip Stafford – FT.com
Europe may face the controversy around key infrastructure to reform derivatives markets in coming weeks after the region’s regulators published proposals on fee structures for trade repositories.
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CFTC Staff and IOSCO Board Level Task Force to Host Public Roundtable to Discuss IOSCO Consultation Report on Financial Benchmarks
The staff of the Commodity Futures Trading Commission (CFTC) and the International Organization of Securities Commissioners (IOSCO) will hold a public roundtable on Tuesday, February 26, 2013, from 1:00 p.m. to 4:00 p.m., to discuss the IOSCO Consultation Report, “Financial Benchmarks,” which was published in January 2013.
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SEC Announces 2013 Examination Priorities
The Securities Exchange Commission today published its examination priorities for 2013, which cover a wide range of issues at financial institutions, including broker-dealers, clearing agencies, exchanges and self-regulatory organizations, investment companies, hedge funds and private equity funds, and transfer agents.
jlne.ws/11ZpsJF

Twelve Angry Central Bankers
New York Times via Yahoo! Finance
A proposal to toughen rules on money-market funds, issued by the regional banks of the Federal Reserve, would make the banking industry safer, an economist writes.
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AMF applies ESMA guidelines on ETFs and other UCITS issues
jlne.ws/11Zpql5

[AMF France] AMF recommendation 2012-16 – Financial statements 2012
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[AMF Canada] Information regarding registration as Advising Representatives and Associate Advising Representatives
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Exchanges & Trading Facilities

CME Group Statement in response to CFTC Complaint
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ISE Elects Hauke Stars To Board Of Directors
The International Securities Exchange (ISE) today announced that Hauke Stars was elected to ISE’s Board of Directors. Mrs. Stars, who was recently named Member of the Executive Board and Chief Information Officer of Deutsche Börse AG, will begin serving her term with the ISE Board of Directors effective immediately.
jlne.ws/11ZpsJS

BME’s Net Profit In 2012 Reached E135.5 Million, Down 12.7% From 2011
In 2012 Revenue Totalled E296.2 Million – Operating Costs Were Down 2.4% In The Fourth Quarter And Up 0.6% In 2012, Clearly Below Inflation
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Boerse Stuttgart Extends Trading Hours To 22.00 Hours CET
jlne.ws/11Zpt09

Warsaw Stock Exchange Group Financial Results for 2012 – Strategy of Revenue Diversification Brings Positive Results
The revenues of the Warsaw Stock Exchange Group increased to a record-high level of PLN 273.8 million in 2012, an increase of 1.9% compared to 2011 driven by the WSE’s acquisition of the Polish Power Exchange (PolPX), Poland’s only licensed energy exchange, in 2012. As a result of PolPX consolidation as of March 2012, the revenues of the WSE Group from the commodity market increased from PLN 2 million in 2011 to PLN 62.6 million in 2012.
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Warsaw Stock Exchange Formally Accepts UTP System – The Warsaw Stock Exchange Has Formally Accepted The Universal Trading Platform (UTP) From NYSE Technologies
jlne.ws/11Zpt0d

CME Group: To Our Customers: Potential for Modified Delivery and Settlement Procedures for CME Livestock & Dairy Contracts
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MIAX Options Exchange System Issue – Improper Classification Of Certain Options As Long-Term Options
jlne.ws/11Zpt0e

Penny Pilot Classes Listed On MIAX Options Exchange
jlne.ws/11Zpt0m

CBSX Order Origin Code Recordation Requirements
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Restrictions on Transactions in Adjusted Gold Fields Limited (GFl1)
jlne.ws/11Zpr8x

Restrictions on Transactions in Adjusted Gold Fields Limited (GFl1)
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TMX Group Top 20 Largest Consolidated Short Position Report – February 15, 2013
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Share Of Investors in Financial Instrument Trading On Warsaw Stock Exchange In 2012
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Hedge Funds & Managed Futures

Ex-Goldman Traders’ Benros Hedge Fund Shut as Brummer Pulls Out
Bloomberg
Benros Capital Partners LLP, a London hedge fund founded by former Goldman Sachs Group Inc. traders, is shutting down after less than two years as shareholder Brummer & Partners AB pulled its investment.
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Carlyle Buys Hedge Fund Vermillion in Commodities Expansion
Bloomberg
Carlyle Group LP , the second-largest buyout firm, bought commodities hedge-fund manager Vermillion Asset Management LLC, adding $2.2 billion in commodities assets as the firm expands beyond private equity.
jlne.ws/VtxYL3

HSBC shuts Duggal’s India hedge fund after outflows
Reuters via Yahoo! Finance
HSBC’s asset management arm is to shut down an India-focused hedge fund run by high-profile manager Sanjiv Duggal, in spite of strong returns last year, after cash withdrawals from investors.
jlne.ws/11Zprp3

Brevan Howard Alumnus Edwards to Start Asian Stock Hedge Fund
Bloomberg
Tristan Edwards, a former trader at Brevan Howard Asset Management LLP, has raised seed investment for a hedge fund in Singapore that will invest in Asian stocks based on a short-term trading strategy.
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Bill Gross Says Bonds Advance This Week for Wrong Reason
Bloomberg
Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., said Treasuries gained this week for the wrong reason.
jlne.ws/11ZptgX

New Dow Jones Credit Suisse Hedge Fund Index Commentary Offers Insight into January Hedge Fund Performance
The Dow Jones Credit Suisse Hedge Fund Index finished up 2.07% in January. A new monthly commentary offers insight into hedge fund performance through the month of January.
jlne.ws/11Zprpj

16 Life Lessons From Top Hedge Fund Managers
Business Insider
The hedge fund industry is full of some of the brightest people in the world who are immensely successful in trading and investing. While they can definitely offer some valuable advice about investing, they are also full of bits of wisdom about life in general.
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Banks & Brokers

BGC Partners Reports Fourth Quarter and Full Year 2012 Financial Results
“BGC’s fourth quarter revenues improved by 19.4 percent year-over-year, driven by the continuing success of Newmark Grubb Knight Frank,” said Howard W. Lutnick, Chairman and Chief Executive Officer of BGC. “Our Real Estate Services segment’s quarterly revenues more than doubled to $148.7 million year-on-year, while its pre-tax distributable earnings grew by 32.6 percent to $12.6 million.
jlne.ws/11ZprFy

Getco Names John DiBacco as Head of Equities Trading
Bloomberg
Getco LLC, the closely held high- frequency trading company that’s acquiring Knight Capital Group Inc. , named former UBS AG manager John DiBacco as global head of equities trading.
jlne.ws/11Zptxg

Citigroup shuffles stock trading executives
Dow Jones Newswires
Citigroup yesterday shuffled the leadership of its stock trading divisions as two high-ranking officials plan to leave their posts, according to an internal firm memo.
jlne.ws/11ZprFA

Citigroup Toughens Executive Bonus Rules
New York Times
After criticism of its pay practices, the bank will make compensation partly dependent on the company’s competitive performance.
jlne.ws/11ZprFE

BofA hires Slowey as EMEA prime broking head: memo
Reuters via Yahoo! News
LONDON – Bank of America Merrill Lynch has hired Martina Slowey as its EMEA head of prime brokerage, according to an internal memo seen by Reuters. Slowey replaces Charlotte Burkeman, who is considered one of the industry’s young rising stars and whose departure was revealed by Reuters last month.
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Italy Court OKs State Loans to World’s Oldest Bank
CNBC
A court in Rome ruled on Thursday the Italian government’s plan to lend 3.9 billion euros to troubled lender Banca Monte dei Paschi di Siena can go ahead, a source close to the matter told Reuters. The Rome administrative court will make its decision public on Friday, said the source, who asked not to be named.
jlne.ws/11Zptxp

Goldman Sachs Sells 75% Stake in Reinsurance Company Ariel -FT
Dow Jones
Goldman Sachs Group Inc. has sold a 75% stake in Bermuda-based Ariel Reinsurance to undisclosed investors, and is retaining a 25% stake, the Financial Times reported Thursday, citing people familiar with the deal.
jlne.ws/11ZprFO

Goldman Has No ‘Direct Access’ to Heinz Account Information
Bloomberg
Goldman Sachs Group Inc. told the U.S. Securities and Exchange Commission that it doesn’t have “direct access” to information about the beneficial owner behind transactions in an account in which the SEC said suspicious trading of H.J. Heinz Co. occurred.
jlne.ws/11ZptNH

The UBS Rogue Trader’s Old Supervisor Got A Big Promotion At GETCO
Business Insider
John DiBacco, who was terminated by the Swiss bank for a failure to supervise after Adoboli’s crimes came to light in September 2011, was hired by Getco last March and has since been promoted to run its global equities business.
jlne.ws/11ZprFP

Clearing & Settlement

 

Indexes & Products

Tradeweb Introduces Inter-Dealer Trading To Its iTraxx Marketplace – Increases Transparency And Deepens Liquidity In Market For European CDS Indices
Tradeweb Markets, the leading global provider of fixed income marketplaces, has enhanced its electronic iTraxx credit default swap index platform in Europe, enabling both sell-side and buy-side clients to access the same bids and offers from liquidity-providing dealers.
jlne.ws/11ZprW4

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

SGX: STI & FTSE ST Index Series Rebalancing In March
jlne.ws/11ZprW7

Moscow Exchange Added To FTSE Mondo Visione Exchanges Index
jlne.ws/11ZptNK

S&P Dow Jones Indices Announces Changes To The S&P/TSX Canadian Indices
S&P Canadian Index Services will make the following changes in the S&P/TSX Canadian Indices:
jlne.ws/11ZprWa

MTS Licences Lyxor For MTS Spain Government Bond Index
jlne.ws/11ZprWb

Technology

AOptix and Anova Technologies to Deliver Ultra-Low Latency Wireless Communications Network to Financial Markets
AOptix, a technology innovation company that leverages optics to transform wireless communications, and Anova Technologies, a company which builds dedicated low latency networks for the global trading industry, have formed a strategic partnership to deliver ultra-low latency wireless communications networks specifically for the financial industry.
jlne.ws/11ZprWg

Webinar Recording: RTD Tango QUANT – Trading Solution for Complex Quantitative Challenges
jlne.ws/11ZprWl

Thomson Reuters And Chartwell Compliance To Offer Compliance Solutions To Small And Mid-Market Us Financial Services Providers
jlne.ws/11ZpscB

Enforcement

FINRA Hearing Panel Dismisses Two of Three Causes of Action in Complaint Against Charles Schwab & Company
The Financial Industry Regulatory Authority (FINRA) announced today that a FINRA hearing panel has dismissed two of three causes in a February 2012 complaint against Charles Schwab & Company. The panel concluded that the amended language used in Schwab’s customer agreements to prohibit participation in judicial class actions does violate FINRA rules, but that FINRA may not enforce those rules because they are in conflict with the Federal Arbitration Act (FAA).
jlne.ws/11Zpu4f

Consumer Bureau Said to Warn Banks of Auto Lending Suits
Bloomberg
The U.S. Consumer Financial Protection Bureau has told at least four banks that it may sue them over vehicle loans and interest-rate markups by auto dealers that appear discriminatory, according to three people briefed on the matter.
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Former Hogan and Partners stockbroker sentenced to jail for $7.5 million fraud
jlne.ws/11Zpu4l

[SIX] Fine for Weatherford International Ltd.
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Canadian Securities Regulators’ Enforcement Report Highlights Fraud [CSA]
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Environmental & Energy

 

Asia-Pacific

UBS to Trade Equity Swaps in China in Structured-Product Push
Bloomberg
UBS AG won regulatory approval in China to trade derivatives involving local equities, paving the way for the bank to offer onshore structured products directly tracking stocks.
jlne.ws/11ZpscJ

Thailand Futures Exchange’s Stock Futures Volume Triples To Above 30,000 Contracts Per Day
jlne.ws/11ZpukL

Trading costs lower in 2012
Singapore Exchange (SGX) today said trading costs for large-cap and mid-cap stocks were significantly lower in 2012 than pre-June 2011 levels, following SGX’s initiatives to enhance market liquidity. SGX’s 2012 Securities Market Quality Indicators Report released today also showed price volatility eased during the second half of 2012 and was markedly lower than the first half of the year.
jlne.ws/ZmOHjR

Video – The Five Biggest Lies on Wall Street
SHEN HONG – WSJ.com
SHANGHAI—In the five years since it joined a long queue of companies applying for government approval to list on the Shenzhen Stock Exchange, Zunyi Titanium Co.’s fortunes have plummeted.
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SGX welcomes Oxley Holdings to Mainboard
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Shanghai Stock Exchange: Notice Of Issuing
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Frontier Markets

Bursa Malaysia Securities Publicly Reprimands Can-One Berhad And Fines Seven Directors A Total Of MYR350,000
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Malawi Stock Exchange Weekly Trading Report
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MCX Weekly Market Report February 15, 2013 – February 21, 2013
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Lahore Stock Exchange Is Organizing A “Roundtable Listed Companies” On Monday, February 25, 2013
The Lahore Stock Exchange is facilitating the capital formation process through primary market regulatory functions and also by providing a liquid, fully automated and well regulated secondary market.
jlne.ws/11Zpstg

Miscellaneous

A Titan’s How-To on Breaking the Glass Ceiling
By JODI KANTOR – NYTimes.com
Before Sheryl Sandberg, the chief operating officer of Facebook, started to write “Lean In,” her book-slash-manifesto on women in the workplace, she reread Betty Friedan’s “The Feminine Mystique.” Like the homemaker turned activist who helped start a revolution 50 years ago, Ms. Sandberg wanted to do far more than sell books.
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