John Lothian Newsletter: NYSE Euronext, Russell Investments in Index Tie-Up; Direct Edge to seek Brazil bourse license in "weeks"; SEC’s Hired Gun on High-Frequency Trading Gets Permanent Role

Jan 16, 2013

Russell and NYSE Euronext team up to distribute index data, and they may extend that relationship in the future. Direct Edge says they’re intending to open a new exchange in Brazil. The SEC gives their HFT expert a real office chair in ongoing efforts to understand and regulate high-frequency trading’s marketplace effects.

First Read

New Restoring Customer Confidence Video
The seventh video in our Restoring Customer Confidence series deals with high frequency trading. 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»
HFT Rules: Three Part HFT Harmony

HFT Rules: Three Part HFT Harmony

High Frequency Trading (HFT) has been in the financial press a lot over the past several years. From the Flash Crash of 2010 to the collapse of Knight Capital in 2012, trading glitches and the negative impact of HFT on markets and investor confidence is well-documented. In this segment of the Restoring Customer Confidence series, Mayer Brown attorney Zachary Ziliak outlines the three sources that will address HFT and help restore customer confidence.

Ziliak says regulatory bodies will likely continue to address HFT guidelines, exchanges are imposing new fees on HFT practices and AT 9000, standards system for HFT practices, will help establish a higher bar for HFT participants.

Watch the video »

This video is sponsored by:


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?

The Restoring Customer Confidence video series answers that question by exploring potential solutions using expert interviews and simple animations.

John Lothian News interviewed more than a dozen professionals in the industry to get their ideas and solutions. As these ideas become practice, or as new concepts are adopted by the industry, we will continue to add them to the site.

Visit the video series page on over the next several weeks for new ideas and solutions.


CBOE’s Brodsky: No merger plans for now
Lynne Marek – Crain’s
Chicago options exchange company CBOE Holdings Inc. sees the benefits of industry consolidation, but it’s still taking a pass on a merger for now, CEO Bill Brodsky told reporters at an annual meeting with media.

**** My apologies to the CBOE for missing the media lunch, but I was out sick. And I am sick even more because it was Mr. Brodsky’s last one as CBOE CEO. See my recent video interview with him about his decision to step down as CEO and plans for the future.


Futurisation forces hundreds of traders to sit exams
Risk magazine
Hundreds of energy traders in the US are going back to school in order to obtain the series three futures trading licence offered by the National Futures Association (NFA) – one of the more benign side-effects of regulatory change, but one that has caused its fair share of confusion.

***** We broke this story on December 5.


HKEx seeks to be ‘gateway for China’
Josh Noble in Hong Kong –
Hong Kong Exchanges & Clearing on Tuesday marked a decisive break from decades of reliance on cash equities as it laid out a strategy to becoming the main gateway for domestic Chinese investors seeking greater access to the rest of the world.

***** I hope it is going to be a gate that works both ways.


Leo Melamed presented with Risk Magazine’s Lifetime Achievement Award

***** They should name it the Risk Magazine Leo Melamed Lifetime Achievement Award right now.


Orc expands its broker connectivity reach
Orc, a leading provider of technology and services for the global financial industry, today announced that UBS Securities (UBS) has extended its usage of the Orc Access solutions to meet increasing global demand for high-performance and robust access on APAC exchanges.


CME Clearing Named “Clearing House Of The Year” By Risk Magazine
CME Group today announced that CME Clearing has been named the Clearing House of the Year in Risk Magazine’s annual Risk Awards. The annual awards recognize excellence in risk management and derivatives markets across 29 categories.

***** Lots of CME tables at the Risk Magazine Awards dinner this year.


A look at the European Commodity Markets
Trayport’s Crombie Cryan examines the key trends and movements in the European commodity markets during 2012.


The next Treasury Secretary doesn’t trust Wall Street with his own money
Quartz via Yahoo! Finance
Jacob Lew, the White House chief of staff whom President Obama nominated to replace Tim Geithner as US Treasury secretary, is considered a change of pace for the department: He is known as a budget wonk and political fixer, not a financial-markets expert like Geithner.


Jorge Alegria

CEO Jorge Alegria on the Growth Potential for MexDer

Jorge Alegria, CEO of the Mexican Derivatives Exchange (MexDer), has seen his share of change since joining the exchange in 2003. The exchange has partnered with CME Group to offer its products on the CME Globex platform and vice versa. It also is set to launch its new derivatives trading platform in March. Alegria also sees an opportunity in its bond contract and the possible addition of commodities. In this interview with John Lothian, he also outlines the regulatory reforms in Mexico and their impact on the derivatives market.

Watch the video »

JLN Managed Futures

Observations and Commentary
It is mid-January, and the “winter blues” have set in. Temperatures have dipped well below freezing, friends and colleagues have succumbed to the nasty flu making the rounds and, worst of all, 2012 performance numbers have come in for the alternative investment sector. To put it mildly, we’ve had better years. But, as always, there are bright spots. Assets continue to grow. Emerging managers and new products are still attracting new interest. Besides, periods of underperformance are part of the non-correlation formula. It is a marathon, not a sprint.

Next Up for CTA Expo: New York
CTA Expo
Registration is now open for the fourth CTA Expo New York, April 25, 2013 at the CME Group Building (NYMEX Building). CTA Expo New York is a one day conference consisting of speakers and panels combined with a concurrent schedule of thirty minute presentations by individual traders and funds and industry workshops.

**DA: For conference demographic information, Frank and Bucky have put together an information packet.

The Altegris CTA Challenge is Off and Running
The starting gun has been fired in Altegris’ inaugural CTA Challenge. 27 CTAs, from emerging $100k programs to managed futures heavyweights with $10 million minimums are squaring off in this year-long competition which will allow market participants to compare risk-adjusted returns and performance-based analysis.

**DA: “Evaluating performance is more than just a positive rate of return.”


MarketsWiki Page of the Day
Melissa Jurgens

MarketsWiki Recent Updates


Zachary Ziliak; Melissa Jurgens

Companies, Organizations and Groups

GlenStar Properties LLC; Chicago Board Options Exchange; Russell Global Indexes; NYSE Euronext; CME Group, Inc.


High-frequency trading


33,705,844 pages viewed, 7,328 articles, 152,240 edits
MarketsWiki Statistics

Lead Stories

NYSE Euronext, Russell Investments in Index Tie-Up
Jacob Bunge and Ben Fox Rubin – Dow Jones
Russell Investments and NYSE Euronext (NYX) signed a deal Tuesday that will see the exchange company take over broadcasting of Russell stock-index data, while exploring other joint ventures.

Direct Edge to seek Brazil bourse license in “weeks”
Guillermo Parra-Bernal – Reuters
Direct Edge Holdings LLC, the fourth-largest U.S. stock exchange operator, plans to apply for a license to operate a Brazilian bourse in “a matter of weeks,” a senior executive told Reuters on Tuesday.

SEC’s Hired Gun on High-Frequency Trading Gets Permanent Role
The U.S. Securities and Exchange Commission has promoted its computer-trading specialist, boosting his office’s effort to scrutinize rapid-fire trading’s impact on equity markets.

HKEx to Add Closing Auction; Sell Stakes in OTC Clearer
Eleni Himaras – Bloomberg
Hong Kong Exchanges and Clearing Ltd. (388) plans to reintroduce a closing auction for its cash equities market, Chief Executive Charles Li told reporters today. The world’s No. 1 bourse operator by value will sell off stakes in an over-the-counter derivative clearing subsidiary.

FIA EPTA Broadly Welcomes Proposed German HFT Legislation
FIA European Principal Traders Association said it supports the overall direction and objectives of Germany’s proposed regulation on high-frequency trading. FIA EPTA looks forward to working with the German authorities to improve the proposals, for example with regard to the authorisation requirement, with an aim to create effective and efficient legislation.

More Money for MF Global Customers in the Works
DTN / The Progressive Farmer
The trustee managing MF Global’s bankruptcy submitted a proposal to bring customers up to 93% whole late last week. Meanwhile, the CFTC extended the comment period for futures market reforms.


Promontory’s Friend Rejoins OCC as Bank Regulator’s Top Counsel
By Jesse Hamilton – Bloomberg
Amy Friend, a former Senate Banking Committee lawyer who helped craft the Dodd-Frank Act, is rejoining the Office of the Comptroller of the Currency as the agency’s top counsel, the agency said today.

David Grim Named Deputy Director Of SEC’s Division Of Investment Management

SEC Names Gregg E. Berman As Associate Director Of The Office Of Analytics And Research

DTCC Sends New Comment Letter On CFTC Action
Letter Addresses Part Of An Arbitrary, Inconsistent Rulemaking Process That Is Counter To Dodd-Frank Commitment To Transparency

[France] AMF appoints Martine Charbonnier and Guillaume Eliet as Managing Directors

Exchanges & Trading Facilities

IntercontinentalExchange Receives Regulatory Approval for Customer Portfolio Margining; Expands Capital Efficiencies for Buy-Side Clearing
IntercontinentalExchange, a leading operator of global markets and clearing houses, announced today that ICE Clear Credit, the largest North American credit default swap (CDS) clearing house, has received regulatory approval to provide portfolio margining relief for buy-side clearing of CDS.

Russell Indexes and NYSE Euronext Announce Global Alliance and RussellTick Distribution Agreement
Russell Indexes, a leading global index provider and NYSE Euronext, one of the world’s premier exchange operators and technology innovators, today announced a global alliance which will span three distinct NYSE Euronext business lines and multiple geographies, as well as several facets of Russell’s global index business.

Warsaw Stock Exchange Among Europe’s Top Five Markets By Value Of IPOs In 2012

Direct Edge Trading Notice #13-03: Introducing The Edge Attribution Incentive Program And EdgeBook Attributed Fees

[CBOE] Including TradeID on OCC Matched Trade Record

Multi-Class Broad-Based Index Spread Orders

Direct Edge Trading Notice #13-04: Market Holiday Reminder – Martin Luther King, Jr. Day

Hedge Funds & Managed Futures

Mariner Hedge Fund to Take Over Concordia’s Operations
Mariner Investment Group, the $10.2 billion hedge fund founded by William Michaelcheck, said it agreed to take over the business operations of Concordia Advisors. Terms weren’t disclosed.

The Dow Jones Credit Suisse Hedge Fund Index Finished Up 1.48% in December

Thomson Reuters Eikon to Provide Unique View of Agricultural Oilseed Markets with Exclusive NOPA Distribution Agreement
Thomson Reuters and the National Oilseed Processors Association (NOPA) today announced an agreement for Thomson Reuters to serve as the exclusive distributor of NOPA’s monthly soybean crush data via Thomson Reuters Eikon, the company’s flagship financial markets desktop.

Jupiter boosted by 19% net inflow rise
Mike Foster – Financial News
Jupiter Fund Management benefited from a rise in risk appetite among investors and recorded a strong rise in net inflows in the last three months of 2012.

Investments Office continues to push private equity
Yale Daily News
The Yale Investment Committee approved a slight increase in the endowment’s exposure to private equity for the 2013 fiscal year, according to a December report.

FINRA Foundation Issues Five Tips to Keep Your Finances From Going Off a Cliff

CFTC Commitments Of Traders Reports Update

Banks & Brokers

Goldman backs down on bank bonus delay
Reuters via Yahoo! News
LONDON – Goldman Sachs has scrapped plans to delay paying bonuses to its bankers in Britain to exploit an income tax cut for top earners after Bank of England Governor Mervyn King criticized the move.

DealBook: JPMorgan Board Votes to Release ‘London Whale’ Report
New York Times
An internal report details a bungled derivatives bet, and related management missteps, that cost the bank more than $6 billion.

Megan Kenney leaves Credit Suisse
Harriet Agnew – Financial News
The European head of capital services at Credit Suisse, who was named in the FN100 Most Influential Women list in 2011, has left the bank to join a hedge fund start-up, according to sources familiar with the situation.

NASDAQ OMX Partners With Deutsche Bank And Imarex FS To Introduce FX Trading And Clearing Solution
NASDAQ OMX Nordic, part of NASDAQ OMX Group, announces a partnership with Deutsche Bank and Imarex FS to offer market participants access to an integrated trading and clearing service for FX products. This allows clients of NASDAQ OMX’s Norwegian clearing house, NOS, to trade FX products through Deutsche Bank’s leading FX trading platform.

Ex-Deutsche Bank trading star joins French broker
Tim Cave and Matt Turner – Financial News
One of the most senior traders to leave Deutsche Bank as part of the German bank’s cost-cutting drive last autumn has resurfaced at Exane BNP Paribas, Financial News has learnt.

Wells Fargo Bets on Charlotte Trading After BofA Flees
The first of 900 Wells Fargo employees moved last month into a new space on two floors of a 48-story tower in Charlotte , North Carolina.

Banks shun exotic elements in their bonus pots
Reuters via Yahoo! News
LONDON – Fears of a backlash from shareholders and regulators are preventing major European banks from copying Credit Suisse and paying bonuses in exotic instruments such as specially created derivatives.

Why is JPMorgan’s board unchanged after London Whale?
CNN Money
Despite criticism, the “London Whale” trading loss has yet to result in a single change to JPMorgan Chase’s board of directors.

Morgan Stanley Said to Defer All Bonuses to Top Bankers, Traders
Morgan Stanley , the sixth-largest U.S. bank by assets, is deferring 100 percent of bonuses for some senior bankers and traders, according to a person briefed on the matter.

Natixis puts finishing touches to infrastructure JV
Mark Cobley – Financial News
French bank Natixis, which in recent months has set out plans to bring in institutional investors as partners to co-lend to infrastructure projects, has put the finishing touches to its first such partnership – hiring an asset manager to run the vehicle and signing off on its first three deals, worth E134m.

Wells Fargo hires HSBC veteran in European push
Reuters via Yahoo! Finance
Wells Fargo & Co said on Tuesday it hired an HSBC Holdings Plc veteran to lead its banking operations in Europe, the Middle East and Africa as it continues to expand its international operations.

Credit Suisse Hires Barclays’s Aldridge to Head Sales Group
Credit Suisse Group AG hired Steve Aldridge as head of global currencies and emerging-markets electronic sales in Europe, Middle East and Africa.

Clearing & Settlement

Liquidity Alliance launched to address global collateral crunch
The financial crisis in 2007/2008 prompted regulators to make risk avoidance their top priority which they then backed with a portfolio of new legislation. The consequence of the Dodd-Frank Act, EMIR, CRD IV and other regulations will be to leave the financial services industry short of liquidity and collateral at a time when new capital rules make banks unwilling to lend.

TriOptima eliminates $84 trillion in OTC derivatives notional principal outstandings in 2012; $322 trillion terminated since triReduce portfolio compression launched
TriOptima announces today that it eliminated $84 trillion in OTC derivatives notional principal outstanding in 2012: $80.5 trillion in interest rate swap notionals and $3.5 trillion in credit default swap (CDS) notionals. Of the $80.5 trillion, almost $72 trillion in reduced interest rate swap notionals were the result of ongoing efforts by LCH SwapClear, its member institutions and TriOptima to reduce outstandings in the clearinghouse.

LCH.Clearnet shores up RepoClear
Suzi Ring – Financial News
LCH.Clearnet has restructured part of its fixed-income clearing business, which will result in members taking on more liability in the event of a major default. The move is part of chief executive Ian Axe’s push to bolster risk management at the company ahead of new rules which are set to make clearing houses more systemically important institutions.

Indexes & Products

Mutual Fund Companies Readying Active ETFs
ETF Trends via Yahoo! Finance
2013 could be the year that actively managed exchange traded funds finally take off. Two major catalysts are about to come together to get this sector off the ground early on this year.


Cologix Launches Standard Connections Product Across its North American Data Center Platform
Cologix, a network neutral interconnection and colocation company, announced today the platform-wide launch of its Standard Connections product.

Chaikin Analytics Launches Research and Analytics iPad Workstation
Chaikin Analytics LLC, a provider of institutional-grade stock analytics to asset managers and self-directed investors, today announced the launch of Chaikin Analytics for iPad, an investment analytics workstation built specifically for the iPad and iPad Mini.

MKS Selects smartTrade’s Liquidity Management System For Precious Metals Pricing
smartTrade Technologies today announced that MKS (Switzerland) SA (MKS) has selected smartTrade’s Liquidity Management System (LMS) to handle its physical customer pricing. The system will provide end-to-end market connectivity, pricing configuration and distribution, order management and smart order routing.

TMX Atrium Upgrades Infrastructure Across London To 10Gbps
TMX Atrium, provider of smarter infrastructure solutions for the financial community, today announced that it has enhanced its ultra-low latency connectivity infrastructure across Europe. The 10-gigabits-per-second (Gbps) capacity has been added in response to anticipated customer demand for flexible and scalable connectivity to multiple markets across London and Europe and into Russia.

TMX Atrium Enhances London To Moscow Latency – Offering Ultra-Low Latency Access Via Stockholm


Federal Court in Nevada Orders Charles Leroy Timberlake and Trans Global Investments, LLC to Pay $340,000 to Settle Commodity Pool Fraud Charges
The U.S. Commodity Futures Trading Commission (CFTC) today announced that it obtained a federal court order requiring defendants Trans Global Investments, LLC (Trans Global), a Nevada company and unregistered Commodity Pool Operator (CPO), and its President, Charles Leroy Timberlake, a Texas resident, to pay $200,000 in restitution and a $140,000 civil monetary penalty to settle CFTC charges of commodity pool fraud.

Analyst Sentenced to 4 Years in a Turbulent Insider Case
For two years, John Kinnucan waged a nasty battle with the Justice Department, mocking F.B.I. agents and threatening prosecutors as they investigated him for insider trading. On Tuesday, the government secured a victory in its war with Mr. Kinnucan when a judge sentenced him to four years and three months in prison.

FSA bans and fines insurance broker Harbinder Panesar £212,237 for misappropriating money from his business and selling worthless policies
The Financial Services Authority (FSA) today banned insurance broker, Harbinder Panesar, from working in the financial services industry and fined him £212,237.

[BCSC] Securities regulator alleges fraud, illegal distributions and breach of a cease trade order

Environmental & Energy

UN climate chief praises nations for passing domestic CO2 law
Thomson Reuters Point Carbon
Individual nations need to continue to pass domestic legislation to cut emissions of gases blamed for warming the planet if a global climate deal is to emerge in 2015, the U.N.’s climate chief Christiana Figueres said Monday.

US climate diplomat says emissions deal in nations’ ‘core interest’
The Hill’s E2 Wire
The State Department’s top climate change official says any hope of crafting a global greenhouse gas emissions accord means finding a recipe that countries view as consistent with their “core interests.”

Black Carbon Twice as Dangerous as 2007 Estimate, Scientists Say
The black carbon produced by diesel engines is nearly twice as damaging to the planet as estimated in 2007 and trails only carbon dioxide as the most dangerous climate pollutant, according to an article published online today in the Journal of Geophysical Research: Atmospheres.


Thai Futures Exchange’s Stock Futures Hit Record High After Position Limit Adjustment
The Thailand Futures Exchange PCL (TFEX), under The Stock Exchange of Thailand group, revealed that trading volume of stock futures hit an all-time high after expanding its stock futures’ position limit to be proportional to the listed shares of the underlying stocks on January 14.

Bank of America Names Slater, Toh Co-Heads of Asia Commodities
Bank of America Corp. appointed Michael Slater and Colin Toh co-heads of Asia Pacific commodities, said an internal memo obtained by Bloomberg News.

China Securities Regulatory Commission (CSRC) Chairman Visits HKEx And CESC
China Securities Regulatory Commission (CSRC) Chairman Guo Shuqing visited Hong Kong Exchanges and Clearing Limited (HKEx) and China Exchanges Services Company Limited (CESC), HKEx’s joint venture with Shanghai and Shenzhen’s stock exchanges, today (Tuesday).

Morgan Stanley to Cut Jobs in Asia – Analyst Blog
Morgan Stanley ( MS ) has announced its plans to reduce its Asian workforce by 15%. As per Bloomberg , the company plans to lay off employees in its Asian Investment banking division.

Monetary Authority Of Singapore Takes Civil Penalty Enforcement Action Against Mr Loh Ah Lay Richard For Insider Trading

HKEx Market Statistics 2012

Shenzhen Stock Exchange Issue And Enforce Standards For Public Condemnation On Companies Listed On SME Board
Recently, Shenzhen Stock Exchange officially release

Frontier Markets

Saratoga Seeks Consumer Deals With $480 Million War Chest
The Indonesian private-equity firm co-founded by tycoon Edwin Soeryadjaya plans to invest about $480 million, mainly in consumer-related companies, ahead of a planned initial public offering this year.

Morgan Stanley’s India COO Said to Leave Bank
Morgan Stanley ’s chief operating officer in India , Nina Nagpal, has left the bank along with 13 other employees in the country, three people with knowledge of the matter said.

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