John Lothian Newsletter: CME Said to Approach Deutsche Boerse for Merger Talks; Spanish exchange cedes market share as shorting ban ends; BlackRock Gains SEC Approval for Copper-Backed Fund

Feb 25, 2013

CME Group is said to have approached Deutsche Boerse to begin talks about creating a merger. Spain’s main stock exchange has seen a marked drop in volume since a short-selling ban was lifted at the start of this year. Investment company BlackRock gets a green light to start an exchange-traded fund for copper, which some say could disrupt the existing market for the metal.

First Read

Condolences to CQG’s Pat Kenny on the loss of his brother, Michael D. Kenny
Obituary by Chicago Tribune

***** Pat has now lost three brothers in three years; the latest to lung cancer. Condolences from the JLN team to Pat.


CME Rejected Settlement With Regulators
CME Group Inc. rejected a possible settlement with U.S. regulators over charges that former employees of the futures-exchange operator leaked data on customer trades, according to people close to the discussions.


CME Group Named “Best Futures Exchange” by Markets Media Magazine
CME Group today announced the company was named “Best Futures Exchange” by Markets Media’s 2013 Market’s Choice Awards, as voted by peers and customers. The inaugural awards held last night in New York recognized CME Group’s excellence in client service and education, technology design and execution, and diverse and innovative products.

***** CFTC’s votes for Best Futures Exchange didn’t make it into the count…


CFTC Suit Marks New Era
CME Group Inc. is set for a legal showdown with its regulator, a standoff that market experts say could become a regular event as new financial-market laws come into force.

***** With sequestration, the CFTC will be lucky to have a gun, let alone the bullets


SEC Boosts Tally of Enforcement Successes With Routine Actions
Joshua Gallu – Bloomberg
The U.S. Securities and Exchange Commission has been trying for four years to convince investors and critics that it’s back on the beat. As part of that effort, the agency has cited a record number of enforcement actions over the past two years — 734 in fiscal 2012 and 735 the year before — as evidence that an overhaul of its investigative forces has made the regulator smarter, faster and more effective.

***** The SEC neither admits nor denies these allegations.


This Really Is Astonishing About The Financial Transactions Tax
I am aware that Algirdas Semeta is a politician. But this series of untruths in a public place is really almost unprecedented. He’s talking about the new financial transactions tax that is to be implemented in 11 eurozone next year. Given that he’s the Commissioner responsible for it he does have to support it. But couldn’t he be rather more accurate with his factual declarations?


Achieving connectivity through the complete trade lifecycle
Dan Barnes – FOW
Imagine a series of concentric circles; in the centre is a matching engine at an exchange; in the next ring are the client connections direct to the matching engine; in the next is the surrounding ecosystem that encompasses all the other connections, market data and traffic that supports an exchange’s clients. “There is a huge war going on in that outer circle,” says John Lowrey, global head of Electronic Product & DMA Services at broker Marex Spectron and board member of connectivity provider MarketPrizm.

***** As a married man, I no longer try to connect when I’m on a Lifecycle.


Sparks fly over the role of market abuse tsar
Tim Cave – Financial News
Europe’s stock exchanges and alternative trading venues are often at each other’s throats and, at the World Exchange Congress this month, they stayed true to form. The divisive issue on that occasion was cross-market, cross-border surveillance, and who should take responsibility for it.

***** The spelling of “tsar” with a “t” makes it so much less offensive.


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

Capital Confirmation, which runs, 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 »


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


ICI Global to open Hong Kong office
Chris Flood –
ICI Global, a trade association for global fund managers, is to open an office in Hong Kong on May 1, a reflection of the rapid growth of the asset management industry in Asia.

***** Follow the money


Investors lower expectations of hedge funds
Harriet Agnew – Financial News
Hedge funds investors have lowered their expectations of returns from the sector, according to Deutsche Bank’s eleventh annual Alternative Investment Survey.

***** Past performance is not necessarily indicative of future expectations



***** Even if they’re not listed anymore, they’ll still have transparency.


Pearson to spend £200m on restructuring
Robert Budden, Chief Media Correspondent –
Pearson, the global education group that owns the Financial Times, has announced gross restructuring costs of £200m over the next two years as it seeks to free cash to invest in faster growing emerging markets and digital and services businesses.

***** Dang, that’s the same thing that we want to do.


MGEX to Host Workshop at Wild Oats Grainworld 2013
MINNEAPOLIS – MGEX, a Designated Contract Market (DCM) and Derivatives Clearing Organization (DCO), will host a Wheat Market Outlook and Hedging Seminar in conjunction with the Wild Oats Grainworld 2013 conference on Tuesday, February 26 at 2:15 p.m. The 3-day conference begins on Sunday, February 24, 2013 in Winnipeg, Manitoba.

***** I have to remember to bring my sowing kit.



MarketsWiki Page of the Day

MarketsWiki Recent Updates


Colin Heffron; Martin E. Zweig; Thomas R. Kadlec

Companies, Organizations and Groups

Minneapolis Grain Exchange, Inc.; Intellectual Property Exchange International, Inc.; Cargill; Scoach Europe AG


35,352,452 pages viewed, 7,408 articles, 155,212 edits
MarketsWiki Statistics

Lead Stories

CME Said to Approach Deutsche Boerse for Merger Talks
By Nandini Sukumar – Bloomberg
CME Group Inc. (CME), the world’s largest futures exchange, has approached Deutsche Boerse AG to consider beginning talks on a merger, according to four people familiar with the situation.

Spanish exchange cedes market share as shorting ban ends
Tim Cave – Financial News
The Spanish exchange Bolsas y Mercados Españoles has experienced a sharp erosion in its market share since the start of the year, following the lifting of a short-selling ban that has served to stimulate activity on alternative venues.

BlackRock Gains SEC Approval for Copper-Backed Fund
BlackRock Inc. won U.S. regulatory approval for an exchange-traded fund backed by physical copper, which some industrial users said may disrupt the market for the metal.

McGraw-Hill’s S&P Has Until April for U.S. Suit Response
Karen Gullo – Bloomberg
McGraw-Hill Cos. (MHP)’s Standard & Poor’s unit and the Justice Department both want more time to prepare written arguments in the first federal court case against a ratings service for grades related to the credit crisis.

Current Employees Star in S&P Suit
As ammunition against Standard & Poor’s Ratings Services, the Justice Department packed its fraud lawsuit with vivid details about more than 25 employees who allegedly put triple-A ratings on shaky bundles of subprime mortgages—or dithered on downgrading the securities as the housing market was collapsing.

Tobin tax lawmaker softens stance for some instruments
Michelle Price – Financial News
Anni Podimata, the Greek member of the European Parliament who oversaw the institution’s text on the FTT, said she did not support exempting pension funds wholesale, but added: “I think we need to be quite cautious on specific instruments that are used by pension funds and examine the possibility of exempting some.

Dodd-Frank revision set to bring data sharing a step closer
Michelle Price – Financial News
The Depository Trust & Clearing Corporation, the US post-trade infrastructure company, has said it is hopeful that Congress will proceed with the removal of a key clause in the Dodd-Frank Act which threatens to frustrate the G20 reform programme.

Heinz Options Traders Stay in Hiding
The case of the mystery traders continues. The investors who turned a “highly suspicious” $90,000 investment in H.J. Heinz & Co. options into a $1.7 million profit after last week’s announcement of the ketchup-maker’s sale failed to show up at a key court hearing on Friday, clearing the way for a judge’s order freezing the investors’ assets to stand.

Getco racks up $25m loss on client business
Tim Cave – Financial News
Getco has yet to turn a profit from its client execution business, which marked a big departure for the high-frequency trading and marketmaking firm when it was established five years ago.

BoE mulls bonus lock-in for bankers
Giles Turner – Financial News
The Bank of England’s Financial Policy Committee, chaired by the Bank’s governor Sir Mervyn King, is considering locking in all bonuses paid to banking executives until they leave their firms, according to a source familiar with the situation.

Red Bull-Fed Brokers Stand as John Thomas Draws Scrutiny
Nicholas Gwiazda, 24, saw his ticket to Wall Street in a Craigslist ad for a junior broker job at John Thomas Financial Inc.


Watchdogs would feel sequester’s bite
Peter Schroeder – The Hill’s On The Money
The federal government’s Wall Street watchdogs will feel the pinch of sequestration if Washington lawmakers cannot strike a deal by March 1 to avoid the across-the-board cuts.

SEC Pressed Citi for More Details on Brokerage Joint Venture
The Securities and Exchange Commission asked Citigroup Inc. to defend its disclosure and valuation of a brokerage joint venture with Morgan Stanley months before Citi was forced to take a roughly $3 billion write-down on the business that helped pave the way for the departure of Vikram Pandit as chief executive.

High-tech regulators fight sophisticated abuse
Tom Osborn – Financial News
Regulators are turning to increasingly sophisticated software in the fight against market abuse, using everything from social media analysis tools to “big data” filtering software designed for traders to detect illicit behaviour such as insider trading.

SEC’s Walter: Equity offerings up post-crisis
Market Watch
WASHINGTON – For the first time since the financial crisis, the amount of money raised in public debt and equity offerings is rising, Securities and Exchange Commission Chairman Elisse Walter said Friday.

SEC Enforcement Chief Sees Priority Shifting From Crisis Cases
George Canellos, the Securities and Exchange Commission’s acting enforcement chief, said his unit is at an “inflection point” in redefining priorities previously focused on conduct related to the 2008 credit crisis.

Fears grow of post-crisis reform economic impact
Michelle Price – Financial News
The worries were raised as official EU economists on Friday predicted the euro-zone economy will shrink for the second year in a row in 2013.

Public enemy or easy target?
William Wright – Financial News
A few weeks ago, I heard the chairman of the FSA talking about “rebuilding trust” and read that its mission is to regulate the industry in a way that is “effective, risk-based and proportionate”. Same old, same old you might think.

Derivatives rules leave corporates unprepared
Suzi Ring – Financial News
Corporations using derivatives to hedge their business operations are being warned they are ill prepared for the demands of new trading rules which begin next month and will be largely operational by the summer.

Backlash over FINRA probe goes badly for broker so far
Suzanne Barlyn – Reuters
Wall Street brokers who dig in their heels when regulators ask for details about business dealings conducted outside of their brokerages play a risky and often career-ending game.A battle waged by one former broker against the Financial Industry Regulatory Authority (FINRA) shows how quickly the tactic can go wrong.

Making The Markets Safe For Informed Risk-Taking By SEC Chairman Elisse Walter

Remarks At “The SEC Speaks in 2013” By SEC Commissioner Daniel M. Gallagher

Remarks At The SEC Speaks In 2013 By SEC Commissioner Troy A. Paredes

Addressing Market Instability through Informed And Smart Regulation By SEC Commissioner Luis A. Aguilar

ASIC updates guidance on responsible lending to include new laws

Autorité Des Marchés Financiers Applies ESMA Guidelines On ETFs And Other UCITS Issues

Exchanges & Trading Facilities

MGEX Sees AJC Options Activity, Record Volume and Open Interest Day
MINNEAPOLIS – MGEX, a Designated Contract Market (DCM) and Derivatives Clearing Organization (DCO), today announces record daily Apple Juice Concentrate (AJC) volume for yesterday’s trading session. Open interest for the AJC contract has also reached a record. This activity comes ahead of the next AJC webinar taking place on February 28.

[CBOE] Trader E-News

[CBOE] System Status Alerts – RSS Feeds

Program Trading Averaged 27.4 Percent of NYSE Volume during Feb. 11-15

Irish Stock Exchange Welcomes Government’s Move To Address IPO Challenge

TOM MTF Statistics Week 8, 2013

Luxembourg Stock Exchange And Altus To Cooperate On A Fund Market Infrastructure

Warsaw Stock Exchange Awards Polish Capital Market Leaders For 2012

Hedge Funds & Managed Futures

U.S. Approves $6.8 Trillion in Pension Funds for Cleared Swaps
Matthew Leising – Bloomberg
The U.S. Labor Department said $6.8 trillion in pension funds can be invested in cleared swap transactions as long as certain conditions are met.

New Hedge Fund Deposits to Triple in 2013, Deutsche Bank Says
Hedge fund assets worldwide may increase 11 percent to $2.5 trillion by year-end, according to the survey by the Germany ’s largest bank.

Hedge funds grow nervous after credit rally
Reuters via Yahoo! Finance
Hedge fund managers who profited from a huge rally in credit since last summer are seeking ways to protect themselves against a sharp market sell-off if investor confidence evaporates.

The sky’s the limit for Vinci
Harriet Agnew – Financial News
Brazilian asset manager Vinci Partners has made its first overseas investment. After interviewing 80 managers, it has teamed up with Paul Tudor Jones’ Tudor Investment Corporation to invest in a start-up firm headed by Nigel Whittaker, formerly Tudor’s head of emerging markets corporate credit.

Regulators and issuers gear up for European RMBS register
Farah Khalique and Matthew Attwood – Financial News
A new data warehouse promising to bring transparency to the pools of loans underpinning asset-backed securities and restore confidence in the market is seeing a surge in interest.

GSAM remains confident despite UK revolving door
Sophie Baker and Mike Foster – Financial News
Paul Trickett, head of Goldman Sachs Asset Management’s global portfolio solutions group, has left the firm. He is the latest in a number of personnel changes at GSAM in the UK over the past year.

HSBC to Shut India-Focused Hedge Fund
Dow Jones
HSBC Global Asset Management is winding down its India-focused hedge fund, the company said on Friday.

Money Managers Shorting Gold in Record Numbers
Wall Street Journal Blogs
Money managers held a record number of bets on lower gold prices on the main U.S. gold exchange, according to data released Friday by the Commodity Futures Trading Commission.

Argentina Bets on Skeptical U.S. Judges to Avoid Crisis
Argentina’s 12-year fight to shake off its 2001 financial crisis is in the hands of U.S. judges who assailed its “continual disregard” for creditor rights and refused to overturn lower court orders the nation repay billions of dollars in debt it defaulted on when its economy buckled.

Foreign Investors Return to Greece
Foreign investors are returning to Greece as fears of an exit from the euro zone recede, signaling a possible turning point in the country’s three-year-long debt crisis.

Banks & Brokers

BGC Partners Announces the Acquisition of the Business of Sterling International Brokers Limited
BGC Brokers L.P., an entity within the BGC Partners, Inc. group (BGCP) today announced it has acquired the business and certain assets of Sterling International Brokers Limited, a London-based broking firm specializing in Sterling and other major currency transactions.

Libor scandal no threat to Deutsche Bank co-chief Jain: sources
Deutsche Bank co-chief executive Anshu Jain will likely not be sacked as a result of the investigations into the bank for manipulating Libor interbank rates, three people with knowledge of the matter told Reuters.

DealBook: A JPMorgan Deal Maker Is Returning to the Law
New York Times
James Woolery, co-head of North American mergers and acquisitions at JPMorgan Chase, will join the Cadwalader, Wickersham & Taft firm as deputy chairman. That will leave Chris Ventresca as sole head of the JPMorgan unit.

UBS’s Sales of Credit-Linked Structured Notes Decline by 94%
UBS AG ’s sales of credit-linked notes plunged 94 percent in 2013 after the Swiss bank sold more than twice as many securities as any other issuer last year.

UBS Name Former ICAP COO Yallop U.K. Group Country CEO
UBS AG , Switzerland’s biggest bank, named Mark Yallop to the newly created position of U.K. group country chief executive oficer, responsible for all the lender’s operations in the country.

Deutsche Bank Chairman Wants to Change Management Bonus Criteria -Report
Dow Jones
Deutsche Bank AG’s supervisory board chairman Paul Achleitner wants to make the management’s compensation dependent on the bank’s public reputation and the satisfaction of its customers and employees, Welt am Sonntag reports Sunday.

RBS India to cut jobs as winds down retail operations
Reuters via Yahoo! Finance
REUTERS – Royal Bank of Scotland will cut staff in India as a part of its plan to wind down its retail and commercial operations in the country, it said in a statement, without specifying how many employees would be affected.

RBS Plans To Sell Investment-Bank Assets
Dow Jones
The Royal Bank of Scotland Group PLC is planning to reduce the size of its investment banking arm through assets sales worth as much as £30 billion, or 10% of its current size, as the partly state-owned bank tries to head off government pressure to close down the division, the Sunday Telegraph reports without naming sources.

Bringing Light to Children Through Education: GS Wins Special Philanthropy Award

Clearing & Settlement

CME Group Clearing Advisory: COMEX Options Expiration Operational Procedures for the Trading Floor and Clearing Members (HX, OG, SO) Effective Monday, February 25, 2013

CME Group Clearing Advisory: NYMEX Options Expiration Operational Procedures for the Trading Floor and Clearing Members (OB, OH, I, ON) Effective Monday, February 25, 2013

CME Clearing – New Product Advisory: 5-Year

CME Clearing – New Product Advisory: Singapore Fuel Oil 380 cst (Platts) vs. European 3.5% Fuel Oil Barges FOB Rdam (Platts) Futures And BALMO Futures

Indexes & Products

Active ETFs Stuck in Limbo at SEC
ETF Trends via Yahoo! Finance
While the Securities and Exchange Commission has lifted its ban on derivatives use in actively managed exchange traded funds, we may not see a deluge of new active ETFs strategies anytime soon.

Finex ETF launches on London Stock Exchange

Athens Exchange: Changes In FTSE/ATHEX Index Series

S&P Dow Jones Indices Announces Changes To The S&P/TSX Canadian Indices

Changes In The Athex Index Series

Changes In FTSE/ATHEX Index Series


MDX Technology And Exegy Partner In Response To Customer Demand For High Performance Market Data Into Excel


ASIC cancels Melbourne liquidator’s registration and bans him from managing corporations

ASIC accepts undertaking from Sydney liquidator

Environmental & Energy


Asian banks win record share of debt deals
Michael Stothard, Capital Markets Correspondent –
The market share of Asian banks arranging corporate bonds for European and US companies has risen to an all-time high, in a sign of the growing power of eastern financial institutions on global capital markets.

Goldman Said to Plan Cutting Tokyo Office Space to Reduce Costs
Goldman Sachs Group Inc. is in talks with its Tokyo landlord to cut office space as it seeks to reduce expenses, said two people with knowledge of the matter.

China to relax rules on foreign investment under RQFII – Xinhua
Reuters via Yahoo! Finance
BEIJING – China will soon relax rules for qualified foreign investors when they channel their offshore yuan holdings into China’s securities market, the official Xinhua news agency said on Sunday.

UK, China central banks to discuss currency swap line
Reuters via Yahoo! Finance
LONDON – The Bank of England said on Friday it would discuss setting up a reciprocal three-year yuan-sterling swap line with the People’s Bank of China to finance bilateral trade and investment.

HKFE Announces Revised Margins For China Merchants Bank Futures

HKEx: Admission Of Haitong Securities Company Ltd To List Of Designated Securities For Short Selling

Osaka Securities Exchange SPAN Parameter Updated – March 04, 2013 – March 08, 2013

Frontier Markets

Africa investment boom sees beyond conflict-driven headlines
Reuters via Yahoo! News
LONDON – Turmoil in Tunisia? Conflict in Mali? Fraught elections in Kenya? Investment in Africa is thriving regardless. African investment funds have grown nearly five times in value in the past six years and are attracting new forms of capital, from local pension money to sovereign wealth funds.

Birla to Vie With Billionaire Ambani for Setting Up Indian Banks
Indian billionaires Kumar Mangalam Birla and Anil Ambani may set up banks in the world’s second- most populous nation after rules for procuring licenses were eased to allow new entrants.

Latin America Is High-Profit Region for Global Firms -Survey
Dow Jones
A majority of multinational companies say Latin America is their most profitable emerging-market region, which bodes well for future investment in countries such as Mexico, according to a survey by Frontier Strategy Group, a firm that works with senior business executives that target emerging markets.

Morgan Stanley Goes On Another Russian Shopping Spree
The one sector of the Russian economy foreign investors love most is retail. Especially high end retail floating in the outskirts of Moscow, billionaire capital of the world. And what self-respecting Moscovite with a Benz and an Audi in the garage doesn’t love the cool, colorful gear by Russian designer Kira Plastinina? Morgan Stanley likes the sector so much, they bought an entire mall.

Egypt Seeks Up to $1 Billion From Debut Sukuk: Islamic Finance
Egypt plans to raise as much as $1 billion by June from the sale of its first Islamic bonds as the government anticipates a return to political stability will soften the blow of five credit rating cuts.

Market Regulators Meet in the DIFC
In Dubai, last week, the Dubai Financial Services Authority (DFSA) hosted a meeting of the region’s securities regulators, the Africa and Middle East Regional Committee (AMERC) of the International Organisation of Securities Commissions (IOSCO).

Lord Mayor Of London Visits The Egyptian Exchange To Discuss Means Of Cooperation

Palestine Securities Exchange Co. Annual Report For The Year 2012

Qatar Exchange Launches Sponsored Access & Liquidity Provider Activities

We visit more than 100 financial news websites daily (Would YOU do that?)

The Spread

Volatility ETFs Aren’t Flashing Signs of Market Fear

Observations & Insight The FIA is seeking fintech startups for its annual fintech showcase, the Innovators Pavilion, at the Futures and Options Expo in Chicago November 14-15. All selected fintech startups will participate in a pitch competition and one will be...

Past JLN Newsletters

SEC charges 11 in ‘massive’ crypto Ponzi scheme

SEC charges 11 in ‘massive’ crypto Ponzi scheme

First Read Hits & Takes John Lothian & JLN Staff Here is your mood brightener of the day from a story in The New York Times by Farnaz Fassihi and Michael Levenson. The lead paragraph reads: The secretary general of the United Nations warned on Monday that...

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