Brazil’s regulator gives a thumbs up to ICE to start bond-trading platform Cetip. Moscow’s new exchange has hired a former LSE executive as its head of sales. As the US goes after S&P for bad product calls in 2008, many are wondering why other rating agencies who did similar things are being left alone. In today’s First Read, take a look at JLN’s new interview with Sanjeev Joshipura, president of Commodity Markets Council, who talks about how Dodd-Frank rules will impact his membership base.
Sanjeev Joshipura of the Commodity Markets Council on Dodd-Frank in 2013
Sanjeev Joshipura, president of Commodity Markets Council, talks about how Dodd-Frank rules will impact his membership base. Joshipura talks with JLN editor-in-chief Jim Kharouf about the future of the controversial position limit rule, which was vacated by a US District Court on September 28, 2012. A new position limit rule is expected from the Commodity Futures Trading Commission (CFTC), which will include a cost-benefit analysis. CMC is also focused on the CFTC’s reauthorization this year and the continuation of EMIR regulations. Joshipura also talks about US and EU regulatory harmonization and the challenges facing that goal.
ISE Partners with IndexIQ on first physically backed commodity ETP
By Sarah Rudolph – JLN
Shortly after announcing that its new product development efforts would focus on ETFs — and naming the product development team “ISE ETF Ventures” — the International Securities Exchange (ISE) revealed its first partnership for physically backed commodity exchange traded products (ETPs). ISE is partnering with IndexIQ, an asset management firm, to launch and promote new ETPs based on physical commodities.
“I am very bullish on securitizing physical commodities,” Kris Monaco, the head of the ISE ETF Ventures team, said in an interview with JLN. “I think it’s a strong trend that will continue, and it will benefit investors and also help the users of the commodities themselves. The products can benefit people looking to hedge their exposure, whether on the producer or the user side.”
The exchange cannot mention the specifics of the products because of the quiet period associated with the product filing. However, Monaco said the new product will be a physically-backed commodity trust, which holds the physical commodity much as the “GLD” trust holds physical gold. This differs from most other commodity products in the U.S. that hold futures or swaps based on an underlying commodity.
***** The battle over commodity index investing continues.
Mexico Revamps Infrastructure to Compete on the Global Stage
By Alice Botis – Advanced Trading
As Brazil is positioning itself as the regional hub, and MILA — an integration of the exchanges in Chile, Colombia and Peru — pushes the Andean region forward, it’s understandable that some see Mexico as the middle ground between its neighbors. But the country is undergoing rapid change and is becoming a driving force in its own right within Latin America.
**** More thought leadership from Fidessa.
New Restoring Customer Confidence Video
The tenth video in our Restoring Customer Confidence series deals with insurance funds. Each week we will post a new idea answering the question – how do you restore customer confidence and bring traders back?
|Restoring Customer Confidence||More ideas»|
Protection Fund: Slip it to SIPC
If there is one solution to restoring customer confidence in futures that has been talked about more than any other, it would be the creation of a customer or insurance fund. Securities customers have the Securities Investor Protection Corporation (SIPC), so why can’t futures customers use SIPC as well? That’s the idea from Neal Wolkoff, Of Counsel at the law firm of Richardson & Patel and longtime exchange executive, who argues that not only does it make rational sense, but using SIPC could be the easiest and most cost effective way to protect futures customers. This approach differs from others who have touted some type of insurance protection fund just for the futures industry.
About the Restoring Customer Confidence video series
Visit the video series page on MarketsWiki.tv over the next several weeks for new ideas and solutions.
Why NYSE’s ICE Age Has Arrived
How is it that an exchange operator less than two decades old acquiring one more than two centuries old – and roughly three times its size? The year-end numbers from NYSE Euronext and Intercontinental Exchange tell the story.
**** A new age of frozen cliches has arrived.
CFTC’s challenge to FERC jurisdiction over futures market manipulation
Philip McBride Johnson – FOW
So, the Commodity Futures Trading Commission (CFTC) has formally challenged a proceeding brought by the Federal Energy Regulatory Commission (FERC) against an energy trader for allegedly manipulating the price of energy futures contracts on the New York Mercantile Exchange (NYMEX).
***** Get off of my turf, you FERC!!!
Libor Scandal Spotlight Falls on ‘Rain Man’
DAVID ENRICH – WSJ.com
Many anonymous traders are implicated in the tall stack of documents regulators published this week detailing Royal Bank of Scotland Group PLC‘s attempts to rig the lending benchmark known as Libor. But only one trader is cited by name: a 33-year-old so brainy yet socially awkward that colleagues nicknamed him “Rain Man.”
***** Nice! Where’s Wapner?
Finance holds fast to tooth fairy faith
Gary Silverman in New York – FT.com
I used to believe in the tooth fairy, and I’m not ashamed to admit it. Whenever one of my baby teeth fell out, I would put it under my pillow and the next day there would be a coin in its place. That fairy was as good as gold, or whatever alloys were favoured at the US Mint.
**** Rating services and the tooth fairy. I love a good yarn.
Comment: Competition best to rebuild trust
Eric Pritchett – FT.com
Amid all the criticism of the fragmented US equity markets and the complexity that has driven away long-term investors, too much attention is being paid to the role of the major exchanges.
***** A robust debate is brewing.
Futures Magazine acquired by The Alpha Pages
The Alpha Pages, LLC recently acquired Futures Magazine and its digital properties, including Futuresmag.com, ResourceInvestor.com and all related e-newsletters from Summit Business Media. The Alpha Pages is a new media firm focused on alternative investments. The firm was founded and is led by Kristin Fox and Jeff Joseph, two seasoned alternative investment industry veterans.
**** Best of luck to Ginger Szala and her new partners on taking over Futures Magazine. We were sad to see Dan Collins leave Futures Magazine a few weeks ago.
Another Trading Floor Bites The Dust
Melanie Rodier – Wall Street & Technology
After 156 years, the trading floor of the Kansas City Board of Trade is to shut down, marking another step in the sweeping move to electronic trading.
***** Careful, grain dust can be volatile.
Israel’s Fischer King: a central banker’s legacy
Amotz Asa-El – MarketWatch
Last decade’s financial meltdown and the Great Recession that followed have left the global economy strewn with villains, fallen idols and anti-heroes, from Alan Greenspan and Lehman Brothers to subprime lenders and Bernard Madoff to the entire economies of Greece and Spain. What the mayhem did not produce is a hero.
JLN Managed Futures
Lillian Nicola Asset Management Announces the Launch of the LNAM Managed Forex Strategy
Gate 39 Media
Lillian Nicola Asset Management is proud to announce the launch of the LNAM Diversified Forex Strategy, a discretionary, directional trading methodology which enters and disposes of currency pairs within the spot forex market to capture price trends lasting anywhere from 2 weeks up to 6 months within these markets. The program utilizes a trading approach based upon the tenets of chaos theory, Elliot Wave theory, fractal geometry and price momentum.
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Brazil approves ICE electronic platform
Samantha Pearson in São Paulo – FT.com
Brazilian regulators have approved IntercontinentalExchange’s plans to create an electronic bond-trading platform in Brazil as the US-based group looks to tap growing demand for corporate debt in the Latin American country.
Moscow Exchange hires ex-LSE exec for key sales role
Tim Cave – Financial News
Russia’s nascent national bourse has hired a former London Stock Exchange executive to lead its international sales effort, as it looks to challenge the LSE and other European exchanges for domestic Russian listings, Financial News has learned.
S&P as Sole U.S. Target has Wall Street Asking About Moody’s
Matthew Leising – Bloomberg
The Justice Department decision to sue Standard & Poor’s has investors asking why Moody’s Investors Service and Fitch Ratings weren’t targeted for awarding the same top grades to troubled mortgage bonds and other debt securities.
McGraw-Hill Defense Seen as Diversion Against U.S. Fraud Claims
Jody Shenn & Matthew Leising – Bloomberg
Standard & Poor’s news release responding to the government’s lawsuit over its mortgage-bond grades complained that the ratings company is being sued for “not predicting full magnitude of housing downturn despite failure of virtually everyone to do so.” That’s far from an accurate representation of the case brought this week by the Justice Department, based on allegations in the government complaint.
CBOE Group says in talks with SEC to settle regulatory probe
CBOE Group Holdings Inc said Friday it is in talks with the Securities and Exchange Commission to settle a previously disclosed probe into its self-regulatory compliance.
Broker ICAP finds no sign of wash trades linked to Libor
Luke Jeffs | Reuters
Brokerage ICAP said it had found no signs of telltale “wash trades” used by banks to reward brokers for their help rigging interest rates, in the firm’s latest move to distance itself from the Libor scandal.
Interdealer Brokers Emerge as Key Enablers in Libor Scandal
Interdealer brokers, the middlemen who line up buyers and sellers of securities for banks, are emerging as key enablers in the Libor scandal after three firms paid a total of $2.6 billion for rigging global interest rates.
The Fed Gets a Bubble Cop
PETER EAVIS – NYTimes.com
Watch out, Wall Street. The Federal Reserve, a primary banking regulator, is trying harder to spot speculative excesses. In a speech on Thursday, governor Jeremy C. Stein, who joined the Fed last year, focused on parts of the financial markets that show signs of overheating.
US citizens braced for austerity impact
Stephanie Kirchgaessner in Washington – FT.com
From long delays at the nation’s airports to huge potential lay-offs of government workers to less accurate weather forecasts, Americans may soon feel the pinch of austerity. Despite political manoeuvring by Republicans and the White House to find a solution to the so-called “sequester”, there are no serious proposals to avoid the $1.2tn in automatic spending cuts that are expected to take effect on March 1.
E*Trade Fired 40 Employees This Week Amid Cost Cuts
E*Trade Financial Corp. (ETFC) fired at least 40 employees this week and 200 over the past 90 days, with Chief Operating Officer Gregory Framke and two high-ranking trading executives among those departing the company, according to people familiar with the personnel moves.
Structured Note Rules May Fail to Resolve Confusion Over Pricing
A move to improve pricing transparency for U.S. structured notes may be undercut by the tendency for issuers to use their own models and assumptions to value the complex products.
Finance Firm Debacle Shows Light Touch Failed – Watchdog Is Looking For The Regulation Sweet Spot, Writes Financial Markets Authority’s Sean Hughes
[Japan] FSA publishes the status of Loans held by all banks as of end- September 2012, based on the Financial Reconstruction Act
Exchanges & Trading Facilities
Global banks connect to London Stock Exchange’s International Board
HSBC is now providing liquidity and client access in Singapore-listed stocks via London Stock Exchange’s newly-created International Board. The bank is quoting prices in a number of the 38 most liquid stocks listed on Singapore Exchange (SGX), via its London Stock Exchange membership, during UK market hours.
London Stock Exchange at Angolan capital markets event
London Stock Exchange Group (LSEG) executives were in Luanda on Thursday 7 February, to meet local politicians, market specialists, companies and investment banks at an event organised by LSEG and UK Trade & Investment (UKTI). Delegates discussed how Angola can develop its capital markets infrastructure by drawing on London’s experience as an international financial centre, as well as capital-raising opportunities for Angolan firms.
IntercontinentalExchange Announces Launch of Cetip | Trader in February; Addition of ICE Link Services
IntercontinentalExchange, a leading operator of global markets and clearing houses, and Cetip S.A., Latin America’s largest private fixed income depository, announced that the jointly developed fixed income trading platform Cetip | Trader is expected to launch on February 25, 2013. This follows a successful beta test that started in August and final regulatory approval from the Brazilian securities regulator Comissao de Valores Mobiliarios (CVM) today.
Oslo Børs: Current Trading Hours To Be Continued
After having analyzed the possible impact of the reduced trading hours for the past six months, both in looking at the quality of the order book and in speaking with our members, Oslo Børs has decided to extend the trial period and maintain the current trading hours for a new six months.
SIX Financial Information Establishes Evaluated Pricing Valuation Team In Europe
NYSE Euronext to Present at the Credit Suisse 14th Annual Financial Services Forum
Program Trading Averaged 27.9 Percent of NYSE Volume during Jan. 28-Feb. 1
Hellenic Exchanges Monthly Statistics Bulletin – January 2013
Hedge Funds & Managed Futures
K.K.R.’s Earnings Rise 22% on Investment Gains
MICHAEL J. DE LA MERCED – NYTimes.com
Improving markets lifted the fortunes of Kohlberg Kravis Roberts in the fourth quarter, as the investment firm reported a 22 percent rise in profit. K.K.R. said on Thursday that it earned $347.7 million for the quarter, as all of its businesses showed strong gains. For the year, the firm reported earnings of $2.1 billion.
Notz Stucki Expects to Beat Hedge-Fund Investments Gains
Notz Stucki & Cie, a Swiss money manager trying to stem shrinking assets, expects to beat last year’s gain in hedge-fund investments even as it reduces allocations to alternative funds.
‘Longevity’ Bond Market May Spring to Life
Katy Burne – Dow Jones
Insurers are weighing a new strategy for coping with the cost of baby boomers living longer than expected: issuing bonds. Banks began shopping at least two “longevity” bonds to potential investors in recent weeks, the biggest spurt of activity the fledgling market has seen. One is expected to close in late March.
KKR’s Asset Sales Deliver Record Cash
KKR & Co. said the fourth quarter was its strongest quarter yet as a publicly listed alternative asset manager as exits from private equity investments delivered a record amount of cash for itself and its investors.
First State reshuffles top team in Europe
Mark Cobley – Financial News
The European managing director of £103bn fund manager First State Investments is to leave the company amid a reshuffle of its senior team.
Don’t Make Poison Pills More Deadly
LUCIAN A. BEBCHUK – NYTimes.com
Under a publicly announced agenda for 2013, the Securities and Exchange Commission is to examine the rules governing when shareholders must disclose the acquisition of a significant position in a public company. An unintended and harmful effect of such a change may be that it will help companies adopt so-called low-threshold poison pills – arrangements that cap the ownership of outside shareholders at levels like 10 or 15 percent. The S.E.C. should be careful to avoid such an outcome in any rules it may adopt.
Banks & Brokers
Deutsche Bank Said to Fire 10 Energy Traders as Banks Retrench
Deutsche Bank AG fired between 10 and 12 European power and natural gas traders in London as it cuts staff trading physical commodities, two people with knowledge of the matter said.
Monte Paschi says no more derivatives losses
Reuters via Yahoo! News
SIENA, Italy – Italy’s Monte dei Paschi said there were no more derivatives losses beyond the 730 million euros it has disclosed, which have rattled financial markets and become a campaign issue ahead of parliamentary elections.
ECB’s Draghi defends his oversight of Monte Paschi
Reuters via Yahoo! News
FRANKFURT – European Central Bank President Mario Draghi denied suggestions on Thursday that he had been lax in his oversight of the scandal-hit Monte dei Paschi when he was governor of the Bank of Italy.
UBS Owes Nothing to ‘Tax Cheats’ Who Sued, Court Rules
UBS AG owes nothing to former U.S. clients who filed a “travesty” of a lawsuit against the Swiss bank over penalties and interest they paid to the Internal Revenue Service for offshore accounts, an appellate court ruled.
JPMorgan adds Morgan Stanley, Credit Suisse advisers
Reuters via Yahoo! Finance
JPMorgan Chase & Co’s private wealth management unit said on Thursday it added two veteran advisers from Morgan Stanley Wealth Management and one from Credit Suisse AG’s U.S. private banking group.
HSBC to Close Some Client Accounts in Sanctioned Mideast Nations
HSBC Holdings Plc’s Middle East unit will stop personal banking services to some customers with links to countries subject to EU and U.S. sanctions, a move that affects account holders with Syrian and Iranian nationalities.
Barclays CEO’s Ethics Talk Drowns Out Silence on Profit
Barclays Plc Chief Executive Officer Antony Jenkins’s pledges to shred the legacy of his predecessor and fix the lender’s culture are distracting from the difficulty he has in reviving profit at Britain’s biggest investment bank.
Barclays Investment Bank Said to Defer Managing Director Bonuses
Barclays Plc will cap cash bonuses at 65,000 pounds for staff at its investment bank and defer awards for senior managers, according to a person with knowledge of the plans.
Clearing & Settlement
China names ICBC as yuan clearing bank in Singapore
Reuters via Yahoo! Finance
BEIJING – China has named Industrial and Commercial Bank of China, the world’s biggest bank, as the clearing bank for offshore yuan business in Singapore.
Clearstream’s January 2013 Figures
In January 2013, the value of assets under custody held on behalf of customers registered an increase of 3 percent to EUR 11.3 trillion (compared to EUR 11.0 trillion in January 2012). Securities held under custody in Clearstream’s international business increased by 1 percent from EUR 5.89 trillion in January 2012 to EUR 5.92 trillion in January 2013 – while domestic German securities held under custody increased by 5 percent from EUR 5.1 trillion in January 2012 to EUR 5.3 trillion in January 2013.
CME Group Clearing Advisory: CME’s Updated LSOC Phase 2 Schedule and Principles
CME Clearing – Performance Bond Requirements – Coal, Ethanol, Freight, Metals, NGLs, Refined Products, and Petroleum Spread Outrights; Natural Gas Inter-Commodity Spread Credits – Effective Tuesday, February 12, 2013
CME Clearing – Performance Bond Requirements – FX outrights – Effective Friday, February 8, 2013
CME Group Clearing Advisory: NYMEX Options Expiration Operational Procedures for the Trading Floor and Clearing Members (OS) Effective Friday, February 8, 2013
Indexes & Products
ETF gold run comes to an end
Suzi Ring – Financial News
Gold exchange-traded products ended a five-month run of net inflows last month, surrendering $1.2bn, as increased risk appetite saw investors shift to equities.
Schwab ups stakes in commission free ETF wars
Shanny Basar – Financial News
The ongoing fee wars in exchange-traded funds got a boost yesterday from the 800-pound gorilla among discount brokerages.
ETFGI: And ETPs In Europe Reach A New All-Time High Of $389 Billion At The End Of January 2013
ETFs And ETPs In Canada Reach A New All-Time High Of $56.7 Billion US Dollars At The End Of January 2013
ETFGI: ETFs And ETPs In Asia Pacific (Ex Japan) Reach A New All-Time High Of $94.6 Billion US Dollars At The End Of January 2013
ETFGI: ETFs And ETPs Listed In The United States Reach A New All-Time High Of $1.42 Trillion At The End Of January
TRADE ME GROUP LIMITED To Be Added To NZX 10 Index
Bloomberg PolarLake Unveils Its Managed Service For EDM – Swedbank Leads Industry With Adoption Of A Next Generation EDM Model
Today, Bloomberg PolarLake announced that its managed service model for enterprise data management (EDM) is available and currently deployed for Swedbank, Sweden’s largest bank by number of customers.
‘Viking Raider’ gets suspended jail term
Richard Milne, Nordic Correspondent – FT.com
Jón Ásgeir Jóhannesson, the Icelandic businessman who owned Hamleys and House of Fraser before his retail group Baugur collapsed at the height of the financial crisis, has been sentenced to a year in jail for tax fraud.
Hedge fund execs charged in alleged $311M swindle
Associated Press via Yahoo! News
Federal prosecutors in Philadelphia say a jailed German billionaire and another hedge fund executive defrauded institutional investors of more than $300 million.
Environmental & Energy
RGGI States Propose Lowering Regional CO2 Emissions Cap 45%, Implementing a More Flexible Cost-Control Mechanism
RGGI Press Release
After a comprehensive two-year program review, the nine Northeastern and Mid-Atlantic states participating in the Regional Greenhouse Gas Initiative (RGGI), the nation’s first market-based regulatory program to reduce greenhouse gas emissions, today released an updated RGGI Model Rule and Program Review Recommendations Summary. The Updated Model Rule will guide the RGGI states as they follow state-specific statutory and regulatory processes to propose updates to their CO2 Budget Trading Programs.
**RKB — Additional coverage below; including commentary from pleased members.
U.S. Northeast Cap-and-Trade Group Plans Permit Reduction
Regional Greenhouse Gas Initiative Inc., the nonprofit that administers the U.S. Northeast’s carbon-dioxide emissions program, proposed reducing the number of available permits by 45 percent to drive up prices.
States’ Group Calls for 45% Cut in Amount of Carbon Emissions Allowed
The New York Times
The Regional Greenhouse Gas Initiative, the country’s first regional system for capping carbon emissions and creating a market in carbon allowances, proposed a fundamental change on Thursday to increase electrical utilities’ incentive to cut emissions from fossil-fuel plants by raising the cost of compliance.
China Brokers Seen Joining $2 Trillion Structured-Product Market
China is preparing to let local brokerages sell structured products for the first time, allowing them to benefit from surging demand for complex investments tied to equities, currencies and other assets, according to lawyers involved in the market.
Hong Kong Local Brokers Oppose After-Hours Futures Plan
Hong Kong Exchanges & Clearing Ltd.’s plan to begin after-hours futures trading in the city is fueling concern it will force small brokerages to close and lead to further concentration of market share.
A Message From Tokyo Grain Exchange President And CEO Keiji Hatano
On February 8th, 2013, following close of the day session, all trading on the Tokyo Grain Exchange will be discontinued and from the 12th, the rice futures contract will be migrated and opened at the Osaka Dojima Commodity Exchange and soybeans, azuki (red beans), corn and raw sugar will be migrated and be traded at Tokyo Commodity Exchange, Inc. We would like to show our gratitude to all our participants in cooperating with migration of the agricultural markets.
S.Korea Funds Record Largest Outflows Since 2009, Citigroup Says
South Korean mutual funds recorded the largest outflows since 2009 last week amid “disappointing” earnings, according to Citigroup Inc.
Shenzhen Stock Exchage Issue 2012 Work Report On Self-discipline And Supervision
Shanghai Stock Exchange: Public Bidding Invitation For 24th SSE Joint Research Plan
Shenzhen Stock Exchange Complete The 9th Round Of Business Rules Rationalization
The First ETBS Listed On Bursa Malaysia
Bursa Malaysia welcomed Exchange Traded Bonds and Sukuk’s (ETBS) debut listing on the stock exchange today. The listing came after a month of subscription period which began on 8 January 2013, during which time the retail sukuk was open for public/retail investment till book closing on 25 January 2013.
MCX Weekly Market Report February 01, 2013 – February 07, 2013
Malawi Stock Exchange Weekly Trading Report
Third Meeting Of The Financial Stability Board Regional Consultative Group For Sub-Saharan Africa
Tel-Aviv Stock Exchange Weekly Review 3-7 February 2013