John Lothian Newsletter: D-Boerse To Wind Down Stock Platform On Manipulation Fears; Derivatives Entrepreneur Seeks To Launch Swaps Exchange; MF Global Funds Missing Days Before Bankruptcy

Feb 7, 2012

Deutsche Boerse is planning to shut down its First Quotation Board small-cap listing board, in response to challenges in keeping the market clear of fraud. The swaps market may see the creation of its first exchange, trueEX. New details about the MF Global disintegration reveal that the company was using customer money for days before the bankruptcy filing, and on its final day faced a margin call that was bigger than its net worth. In the regulatory arena, the CFTC is racing to complete new rules that require mutual fund registration when fund holdings include commodity positions; and the SEC prepares new proposals for the money-market… market…

Observations – Statistics – Commentary

Brokers face new threat in high-yield trading
By Philip Stafford – Financial Times
Brokers are set to face a new challenge to their dominance of fixed income trade trading from Tuesday with the launch of a new high-yield electronic platform that aims to cut out the banking middleman. The venue, owned by a small independent company called Vega-Chi, marks the first attempt to provide a facility for block trades – or large trades – in the high-yield and subordinated bond market.

**** Ummm, what are high yields?


CFTC May Adopt Mutual Fund-Registration Rules as Soon as Today
The U.S. Commodity Futures Trading Commission may complete rules as soon as today requiring registration by mutual funds when they have investments in commodities, according to a person briefed on the matter.

***** The most interesting area of the markets right now.


MF Global’s $310 Million Margin Call Exceeded Its Market Value
By Matthew Leising
Feb. 7 (Bloomberg) — MF Global Holdings Ltd., the futures broker that filed the eighth-largest bankruptcy in October, faced a $310 million margin call on its final day that exceeded its market value.

**** Yes, so this is like when you know you are toast.

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Grob: Why Brussels was wrong on the DB/NYSE deal
Steve Grob – FOW
Not much surprise at this week’s news that the EU Competition Commission has blocked the NYSE/Deutche Boerse deal, but the rationale for blocking the deal seems odd.


Profits, Losses Can’t Be in the Eye of the Beholder
Here are a couple of phrases a bank investor or executive doesn’t want to hear: “What sort of profit do you need today?” And: “We should mark these positions down because someone is going to spot this.” Those words, from traders at Credit Suisse Group AG during the credit crunch, epitomize the mindset that gave Wall Street a starring role in the drama of 2007-2008. They also highlight key shortcomings in the financial system that still need to be fixed.

**** Marked to the market, but whose market?


Medill Career Profile: Nicole Rohr
When Nicole Rohr (MSJ10) got to Medill, she realized that studying business reporting would be a great opportunity to learn more about the global economy while boosting her analytical skills. The result was a great job – as a web editor at Chicago-based J. Lothian & Co., Inc., a financially focused new media company.

**** Our own Nicole Rohr profiled on Medill’s website.


Nasdaq Data Center Introduces Computing Cabinets with Chimneys
Tom Steinert-Threlkeld – Securities Technology Monitor
Nasdaq OMX Group said it will upgrade the amount of power and speed available to customers using its Carteret, N.J., data center for executing trades. The operator of the Nasdaq Stock Market said it would immediately make available to its customers a chimney system that would increase by 70 percent the amount of computing power that can be installed in a rack of computing appliances.

***** Now we know where the IT staff can hang their stockings at Xmas time.


London City Job Openings More Than Double, Recruiter Says
Job vacancies at London’s financial- services companies more than doubled last month as medium-sized banks and fund managers sought staff, recruitment firm Astbury Marsden said.

**** It is halftime in London.


What’s not to love? Managing IRS examination issues for depository institutions
Nobody loves an IRS examination, but by anticipating key areas of IRS attention and understanding IRS positions, your institution can be better prepared to respond should an examination occur. Join the McGladrey Financial Institutions Team on Tuesday, Feb. 14, for a webcast designed to help you identify IRS audit issues and to better understand how to prepare for a successful resolution. The webcast will provide the latest updates on key issues, including:
* OREO expenses including selling costs
* Non-accrual Loans
* Charge-offs and other-than-temporary impairment (OTTI) write downs
* Information reporting matters
* Procedural matters including taxpayer exam rights

Attendees will be able to earn 1 hour of CPE credit, which will be distributed within 60 days of the seminar for those who qualify.

Event details:
Tuesday, Feb. 14, 2012
2 – 3 p.m. Eastern Time
Cost: Complimentary

Visit for details and to register.


MarketsWiki Page of the Day
Michael Roseman


MarketsWiki Recent Updates


William Speth; Vivian Maese; William Bauman; Michael K. Roseman; Ellen Resnick; Harvey Flax; Russ Chrusciel; Travis Rodock

Companies, Organizations and Groups

ShoreBank Corp.; The Trend Exchange; Xetra International Market; TARP Oversight Panel; The Capital Market Authority of Egypt




19,141,681 pages viewed, 6,676 articles, 136,554 edits
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Lead Stories

Deutsche Boerse To Wind Down Stock Platform On Manipulation Fears
By Jacob Bunge and Ulrike Dauer Of DOW JONES NEWSWIRES
German exchange operator Deutsche Boerse AG is overhauling rules governing its platform for trading shares of small companies, after a surge in market frauds over the last three years. The exchange group aims to discontinue its lowest-tier venue for share listings and enforce stricter transparency standards for issuers on related markets, after steps taken last year did not go far enough to halt predatory practices.

Derivatives Entrepreneur Seeks To Launch Swaps Exchange
NEW YORK (Dow Jones)–A pioneer in the multitrillion-dollar credit derivatives market is seeking regulatory approval for what could be the first exchange catering to privately traded derivatives or “swaps,” instruments that currently trade off-exchange.

MF Global Trustee: Funds Missing Days Before Bankruptcy
By Dan Strumpf and Jacob Bunge Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)–The trustee overseeing the liquidation of MF Global Holdings Ltd.’s (MFGLQ) brokerage said Monday that a shortfall of customer funds at MF Global started five days before the company failed, growing in size until it filed for bankruptcy protection.

EU Transaction Tax Is ‘Undesirable,’ Dutch Central Bank Says
The Dutch central bank said it opposes the introduction of a European financial transaction tax that it estimated would cost the nation’s lenders, pension funds and insurers about 4 billion euros ($5.2 billion) and hurt economic growth.

IMF warns China on eurozone fallout
By Jamil Anderlini in Beijing – Financial Times
Economic growth in China could drop by half this year in the event of a sharp recession in Europe, the IMF predicted on Monday in a report that underscored the importance of global trade to the world’s second largest economy.

Rate Probe Keys On Traders
Investigators in a world-wide probe of how crucial interest rates are set are focusing on a small number of traders suspected of trying to influence other bank employees to manipulate the rates, according to people familiar with the situation.

MF Brokerage Trustee Traces $105 Billion in Cash Movement
By Tiffany Kary and Linda Sandler – Bloomberg
Feb. 6 (Bloomberg) — The $1.2 billion in MF Global Inc. customer funds estimated to be missing began to flow out of the brokerage on Oct. 26, five days before its collapse, as its computers and employees failed to keep up with margin calls and demands for collateral, according to a trustee’s investigation.

Challenges for MF Trustee
A bankruptcy trustee investigating MF Global Holdings Ltd. said he faces huge challenges getting back an estimated $1.2 billion in customer funds drained from the securities firm before it collapsed.

Environmental Trading News

ICE, EEX Battle to Supply 10 Billion Euro Carbon Platforms
ICE (ICE) Futures Europe, the biggest exchange for greenhouse gas trading, and European Energy Exchange AG in Germany will battle to provide platforms selling carbon allowances to airlines and other emitters.

EEX Launches CO2 Products For Airline Industry
Press Release

Spain Needs $466 Million in Carbon Credits to Meet Kyoto Limit
Spain may need to buy at least 355 million euros ($466 million) of carbon emissions permits to meet its obligations under the Kyoto Protocol, Agriculture Minister Miguel Arias-Canete said.

For more environmental trading news, subscribe to the Environmental Markets version of the John Lothian Newsletter edited by Jim Kharouf.
Visit to subscribe.

Exchange & ECN News

BATS Exchange Receives SEC Approval for Innovative Market Maker Program
Press Release
KANSAS CITY, Mo. – February 6, 2012 – BATS Global Markets, a global operator of stock and options markets, today announced it had received approval from the U.S. Securities and Exchange Commission (SEC) to implement its new Competitive Liquidity Provider (CLP) program.

NYSE Liffe U.S. Names Harvey Flax Business Manager, GCF Repo Index Futures
Press Release
NEW YORK, Feb. 6, 2012 – NYSE Liffe U.S., the innovative U.S. futures exchange of NYSE Euronext (NYX) today announced that Harvey Flax has been appointed to the newly created position of Business Manager, GCF Repo IndexTM futures. Mr. Flax will be responsible for leading the launch and development of the DTCC GCF Repo IndexTM futures products trading exclusively on NYSE Liffe U.S. and cleared on NYPC. Based in New York, he will report to Lynn Martin, Chief Operating Officer, NYSE Liffe U.S.

Powernext Gas Spot: New Volume Record
Press Release

February 2012 InBOX
This is the February issue of InBOX, your news source from inside the BOX Options Exchange. This monthly publication will provide convenient summaries of recent developments at BOX.

TMX Group Equity Financing Statistics – January 2012

Vienna Stock Exchange Monthly Statistics – January 2012
Press Release

Vienna Stock Exchange Monthly Statistics Report Derivatives Markets – January 2012
Press Release

ADEX Monthly Statistical Bulletin January 2012
Press Release

Banks, Brokers & Dark Pools

ICAP taps MF Global team to launch Aussie commodities
By Luke Jeffs – Reuters
LONDON, Feb 6 (Reuters) – British broker ICAP has hired a three-strong team of brokers from defunct trading firm MF Global to tap growing demand for agricultural products and soft commodities in Australia, a market with significant growth potential.

ICAP enters Australian Agricultural and Soft Commodities Broking Market
Press Release
Sydney, 6 February 2012 – ICAP, the world’s leading interdealer broker, announces that it is entering the Australian agricultural and soft commodities market in February with a new team. The team of three brokers, led by Gary Booth, was formerly at MF Global.

Goldman Courts Rivals For Stake In Trading Tech Group As Spin-Out Looms
By Liz Moyer and Jacob Bunge Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)–Goldman Sachs Group Inc. (GS) is preparing to spin off its REDI Technologies electronic trading software group and has approached rival banks in recent weeks to gauge their interest in taking a stake in the new company, people familiar with the matter said.

MTS And Newedge Launch Agency Cash Management (ACM) Platform For Tri-Party Repo Market
Press Release
Transparent, electronic platform offers investors access to low-risk, secured money market investments

DealBook: UBS Profit Falls on European Debt Crisis
New York Times
UBS, the largest Swiss bank, said Tuesday that fourth quarter profit had slumped 76 percent from a year earlier, as new money coming in to its wealth management unit failed to make up for a loss in investment banking.

Lazard takes 4Q loss as revenue plunges
Associated Press via Yahoo! Finance
Investment bank Lazard Ltd. reported a loss for the fourth quarter on Monday as revenue from financial advisory and asset management services plunged.

Macquarie tips 25% profit fall, to buy back shares
Market Watch
SYDNEY (MarketWatch) — Macquarie Group Ltd. Tuesday forecast a worse-than-expected 25% fall in annual profit and said it shut derivatives businesses in Europe, the U.S. and Asia as tough market conditions continue to plague the world’s investment banks.

UBS Cuts 2011 Bonus Pool 40% as Investment Bank Posts Loss
UBS AG, Switzerland’s biggest lender, cut its 2011 bonus pool by 40 percent as its investment bank posted the second consecutive quarterly loss.

Europe’s Banks Reluctant to Lend to Companies in Need of Cash
LONDON — European governments are not the only ones struggling with debt. So are some of the region’s companies.

UBS Investment Bank Head Kengeter To Forego 2011 Bonus
FOX Business
UBS AG’s (UBS) investment bank unit head Carsten Kengeter will forego his 2011 bonus, the bank’s chief executive Sergio Ermotti said Tuesday.

TD Ameritrade Names New Executive Appointments
Business Wire
OMAHA, Neb.–(BUSINESS WIRE)–TD Ameritrade names Tom Bradley new President of Retail Distribution.

Regulatory News

The SEC News Digest
The SEC News Digest provides daily information on recent Commission actions, including enforcement proceedings, rule filings, policy statements, and upcoming Commission meetings.

SEC to propose new rules for money-market funds: report
(Reuters) – The Securities and Exchange Commission (SEC) will unveil proposals aimed at stabilizing money-market funds in the event of another financial panic, the Wall Street Journal reported on Tuesday, citing people familiar with the matter.

SEC’s Gallagher wants more oversight of brokers
By Sarah N. Lynch | Reuters
WASHINGTON (Reuters) – Congress made a mistake when it stripped away most of the Securities and Exchange Commission’s authority to police the holding companies of broker-dealers for risks, according to the SEC’s newest commissioner.

Financial sector must change, says Sants
By Brooke Masters, Chief Regulation Correspondent – Financial Times
Britain’s banks, insurers and brokers must change their attitude if the UK’s shift to a “twin peaks” model of two “proactive, judgment-led” regulators is to take effect smoothly and efficiently, the chief executive of the Financial Services Authority has warned.

SEC Charges Smith & Nephew PLC with Foreign Bribery
Press Release
Washington, D.C., Feb. 6, 2012 — The Securities and Exchange Commission today charged London-based medical device company Smith & Nephew PLC with violating the Foreign Corrupt Practices Act (FCPA) when its U.S. and German subsidiaries bribed public doctors in Greece for more than a decade to win business.

Fidessa Explores Challenges And Opportunities Of Best Execution In Australia – Third White Paper In Series On Australia Looks At How Firms Can Turn Regulatory Burden Into Competitive Edge
Press Release
Fidessa group plc (LSE: FDSA), provider of high-performance trading, investment management and information solutions for the world’s financial community, has today announced the publication of the third in its series of white papers looking at issues raised by the new market integrity legislation in Australia. Entitled Beauty and the Best – the perils and opportunities of Best Execution in a multi-market structure, the paper examines different ways in which equity brokers might approach the new obligation for Best Execution, and how their buy-side clients will be affected.

Hong Kong Regulator Says It Should Have the Right to Redress Investors
Hong Kong’s securities regulator, whose attempt to ban New York-based hedge fund Tiger Asia Management LLC last year from trading was blocked by a court, said it should have the right to redress investors.

ASIC releases third market supervision report

A Termination Tempest in a Teapot
New York Times
A hedge fund tries to exercise a put option on a stock after a brief trading halt and its counterparty says “no.” Should that be a matter for the courts?

Investments – Indexes – Managed Futures – Managed Funds

Tail-Risk Hedges on Volatility Lure Money Even After Stocks’ January Surge
Funds that profit from swings in stock prices are attracting record amounts from investors as money managers seek protection from extreme volatility, even as equities have their best start to the year since 1994.

SwapClear Announces U.S. $34 Billion Cleared in Client Business in January 2012;
Press Release
LCH.Clearnet Limited’s (LCH.Clearnet’s) market-leading interest rate swap (IRS) clearing service, SwapClear, today announced that in January it cleared U.S. $34 billion in total notional client business across seven of the 17 currencies currently available. These volumes bring the total client notional outstanding to $288 billion. During this period, SwapClear also cleared $28 trillion of total notional business.

Glencore and Xstrata agree $90bn deal
By Javier Blas, Kate Burgess and Tom Burgis – Financial Times
Glencore and Xstrata on Tuesday announced an all-share merger that would create a $90bn giant, combining the world’s largest commodities trading house with one of the biggest miners of thermal coal, copper, nickel and zinc.

When Hedge Funds and Mutual Funds Collide
As planners increase the allocation to alternatives in their clients’ portfolios, the hedge fund industry continues to find ways to bring its once-rarefied services to the retail investor.

Sorting Out Exchange-Traded Products
The fund industry sprouts exchange-traded products (ETPs) like weeds on a warm spring day. This makes it very hard to differentiate one from another. There needs to be better classification tools. Fund companies and index providers must step up their efforts to agree on standard definitions and educate investors about these differences.

Taking a Page From Buffett for His Own Path
At the grand opening of a Steak ’n Shake Signature in Midtown Manhattan last month, Sardar Biglari, the fast-food chain’s chief executive, tried his best to look happy. Tall and well dressed, with slicked-back hair and a Chopard watch, Mr. Biglari seemed every bit the young Wall Street tycoon as he joined his employees in a ribbon-cutting cheer

New ComStage ETF launched on Xetra

IndexIQ Announces January 2012 Performance of Its IQ Hedge Family of Investable Benchmark Hedge Fund Replication Indexes
Business Wire via Yahoo! Finance

FactRight LLC Strengthens Management Team with Appointment of Two Key Industry Executives
Business Wire
CHICAGO–(BUSINESS WIRE)–FactRight, a provider of independent research of alternative investments, added two to their management team. Greg Mausz was named chief operations officer and Shawn Smith director of risk management.

Chicago hedge fund sues Petters legal firm, Petters execs in civil racketeering case
Pioneer Press
Ritchie Capital Management, a Chicago-based hedge fund that says it lost hundreds of millions of dollars in the Petters Ponzi scheme, is suing Petters’ outside legal firm, Minneapolis-based Fredrikson & Byron.

Technology News

GFI Group to provide the RHB Banking Group with FENICS Professional
Press Release
New York, February 7, 2012 – The RHB Banking Group, a leading Malaysian Bank, has licensed FENICS Professional from GFI Group, Inc. The bank has deployed FENICS Professional version 12.1 which includes the new functionalities: FENICS SM Sales, FENICS Trader and the latest version of FENICS SM Exotic Maths Models.

Broadridge Selected by Bloomberg Tradebook for New Self-Clearing Model
Press Release
LAKE SUCCESS, N.Y., Feb. 7, 2012 — Broadridge Financial Solutions, Inc. (NYSE: BR) today announced that Bloomberg Tradebook has selected Broadridge’s consolidated business process outsourcing (BPO) solution to support their equity and option clearance and settlement business.

Brady Extends Into Physical Power Trading
Press Release

Brady’s Latest Acquisition Extends Its Energy Footprint
Press Release

Panopticon Provides Enhanced Front End For CEP In Financial Services
Press Release

Media News

Lehman Bust Left Goldmanite Derman, Das Reading Spinoza, Twain
Writing books on finance is one thing; reading them is another.

ANDREW LO: I Read 21 Books About The Financial Crisis And They Explained Nothing
Business Insider
Ever thought you would have to read 21 books to get to the bottom of what caused the financial crisis? Lo, a leading expert on hedge funds and financial engineering, has written a paper (h/t NPR ) for the Journal of Economic Literature describing his experience reading 21 books on the crisis – nine by journalists, 11 by academics and one by a former Treasury Secretary.

Those Millions on Facebook? Some May Not Actually Visit
On the first page of Facebook’s prospectus for its sale of stock to the public, it pegs the number of its “monthly active users” at a whopping 845 million people. The social networking site arrives at an even more astounding number when it comes to “daily active users”: 483 million people.

Reports Economic Calendar

USDA Today

CBOE Events Calendar

Economic Release Calendar
The Economic Release Calendar (PDF) is a schedule of government, academic and industry economic releases, provided as a service to CME customers.

Asia-Pacific News

China Sunshine Funds Miss Hedge Slump to Triple Assets
Wealthy Chinese investors are turning to “sunshine” private trusts, the prototypes of hedge funds in the communist nation, as the property market cools, stocks slump and bank-deposit rates fail to match inflation.

Theoria Capital Management Pte Ltd. extends their use of Orc for high-frequency trading on Asian markets
Press Release
Hong Kong, Sydney and Tokyo – Tuesday, February 7, 2012 – Orc Group AB (SSE: ORC), a leading provider of technology and services for the global financial industry, today announced that the Singapore-based fund management company Theoria Capital Management Pte Ltd. (Theoria Capital) has added Orc Liquidator to their existing Orc infrastructure to further support their increasing trading needs in Asia.

UBS In Process Of Laying Off 35 Staff In Asia Pacific Region – Sources
FOX Business
Swiss bank UBS AG (UBS) is laying off around 35 people in the Asia Pacific region, two people familiar with the situation said Tuesday, as one of the region’s most lucrative investment banks aims to shed staff to cut costs amid shrinking revenue globally.

Thai Futures Exchange Announces Broker Ranking For January
Press Release

Shanghai Stock Exchange Specifies Narrative Information Disclosure In Annual Reports
Press Release

Frontier Markets

Kuwait edges towards bourse sell-off
By Camilla Hall in Kuwait and Simeon Kerr in Dubai – Financial Times
The pigeons fluttering above the heads of Kuwait’s stock traders make one thing clear: the bourse, one of the oldest in the region, needs modernisation. Kuwait’s government plans to improve the service, relevance and efficiency of the market through a privatisation process that will see ownership shift from the state to corporate and retail shareholders.

Qatar seeks to lure asset managers
By Simeon Kerr in Dubai and Tom Gara in Abu Dhabi – Financial Times
The Qatar Financial Centre has hired a veteran leader of the UK financial services industry to help lure asset managers, who are growing increasingly concerned about looming regulatory changes in Dubai.

Money flows back into emerging markets
By Robin Wigglesworth – Financial Times
Money has poured into emerging markets this year, with funds dedicated to the asset class enjoying their best start to a year since 2006 amid continued investor wariness over developed markets.

Dubai Group Said to Seek Up to 10-Year Delay in $6 Billion Restructuring
Dubai Group LLC, an investment company owned by the emirate’s ruler, offered to repay creditors over five to 10 years as it seeks to restructure $6 billion of bank debt, a banker familiar with the proposal said.

Merrill Lynch Wealth Hires HSBC, Barclays Bankers in Mideast
Merrill Lynch Wealth Management hired bankers from HSBC Holdings Plc and Barclays Plc in the Middle East as the unit of Bank of America Corp. boosts its operations in the region.

DGCX January 2012 Volumes Jump 95% From 2011
Press Release
Dubai Gold and Commodities Exchange (DGCX) got off to a strong start in 2012 with January volumes rising 95% from the same month last year to hit 475,942 contracts, valued at $ 19.32 billion.

Palestine Exchange Investor Monthly Newsletter Issue #22, January 2012
Press Release

Miscellaneous News and SFO Magazine Announce 2011 STAR Awards Winners
PRWeb, the financial social-networking site for active traders and investors, and SFO magazine, the official advocate for personal investing, announced the winners of the 2011 Superior Trading And Resource (STAR) Awards, an awards program that honors companies and individuals in the financial industry for outstanding vendor and author achievement.

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