John Lothian Newsletter: SEC Blesses CBOE Stock Exchange’s Deal For National Stock Exchange; Fed Forecasts Pose Risk For Soft Interest-Rate Futures Volume; European Banks Prepare More Job Cuts

Jan 6, 2012

The U.S. SEC gives a thumbs-up to CBOE Stock Exchange’s plan to take over the National Stock Exchange.  The Federal Reserve’s plan to make an advance timetable for its actions is creating concern that without uncertainty from meeting to meeting, trade in interest-rate futures will suffer.  In Europe, more banks are preparing to shed more jobs; and Hungary, after failing to raise enough money on its own, is now interested in an IMF loan to help pay its bills. Today’s top box contains an article by JLN editor Sarah Rudolph on the CBOE BuyWrite Index.

Observations – Statistics – Commentary

CBOE BuyWrite Indexes Growing, With Interest from Pension Funds and Institutional Investors
Sarah Rudolph – John Lothian News

The Chicago Board Options Exchange recently compiled the 2011 year-end returns for its BuyWrite and PutWrite indexes, which were higher by percentage change than some of the biggest U.S.-based stock indexes. JLN Options spoke with Matt Moran, vice president, business development for the CBOE, on the growth of the indexes since the BXM, the first and most well known options benchmark index, was introduced in 2002.

The CBOE BXD index was up 7.9%, BXY 7.1%, PUT up 6.1% and BXM up 5.7%, compared to gains of only 2.5% in the S&P 500 Total Return Index, and a loss of 0.003% in the SPX, for example. (A complete list follows this article, and of course more information is available on the CBOE web site.)

The buy-write and put-write benchmark indexes are becoming popular at a time when stock and commodity indexes were flat or down. Benchmarking against the BXM index involves the relatively simple strategy of selling a listed SPX option against a portfolio of S&P 500 stocks. According to Moran, the covered call buy-write strategy is often the first strategy individual investors use.

Covered calls have grown in popularity over the past few years, as individual and institutional investor search for alternatives to stocks, which have been sluggish, and interest rates and fixed income products, which continue to be low. The goal today is a steadier return on stocks, Moran said.

For the rest of the article, visit the JLN Options website at


OptionWorks 2011 FX Year in Review
John C. Nelson is a local options guru and former member of the MarketsWiki development team. His OptionWorks volatility report appears weekly in JLN FX. OptionWorks 2011 FX Year in Review, a 24-page report containing FX option market related data and calculations, is now available for purchase and download. JLN subscribers may use the coupon code “JLNFX2011YIR” to receive $20 off the $69 price.


Cloud over US futures not lifting soon
FALLOUT from the collapse of MF Global may cloud futures markets transactions well into 2012 as federal regulators, CME Group and the producers and agribusinesses that are still suffering losses from their hedging accounts struggle to find out what happened.


Instinet Market Structure Research: Seven Global Market Structure Trends to Watch for in 2012
Press Release
As 2011 drew to a close and we at Instinet pondered what’s to come for traders, it seemed that 2012 would not so much see an emergence of entirely new trends but instead a continuation of many of the same developments from the past few years. The environment is unquestionably challenging. There are, however, some pockets of opportunity in which competition will be fierce. In what follows, we offer you our thoughts on what we believe will be the most important global market structure trends of 2012.


On Eve of $41 Billion MF Global Bankruptcy Filing, Jon Corzine Was Château Shopping in France
By Vanity Fair
In an exclusive report from three of Vanity Fair’s premier business writers—contributing editors Bryan Burrough, William D. Cohan, and Bethany McLean—the February issue delivers a sprawling account of the personal and professional battles of Jon Corzine, the former Goldman Sachs C.E.O. and ex-politician whose helming of MF Global resulted in a notorious $41 billion filing for bankruptcy and a $1 billion loss in firm equity. According to the piece, for the fiscal year that ended in March 2011, MF Global recorded day-one gains of $85 million on the former New Jersey governor’s risky trades on European sovereign debt and other assets, thanks to an accounting ploy. Because there were barely any expenses associated with such trades, the gains were almost pure profit. “Corzine would later tell investors that he made a $6.3 billion bet on sovereign debt, but the company’s filings made it look like he had a much bigger long position at the end of June 2011—$11.4 billion, offset by ‘short’ positions of almost $5 billion,” Vanity Fair reports. One analyst says: “If those trades had not been there, MF Global would have been forced to sell or go out of business.”


DealBook: MF Global Inquiry Turns to Its Primary Regulator
Federal authorities investigating the collapse of MF Global have expanded their inquiry to include the CME Group, the operator of the main exchange where the firm conducted business.


MF Global Fight Unites Onetime Rivals
Emily Lambert – Forbes
Chicago and New York futures traders have had a prickly relationship over the years. Despite mergers that put the cities’ futures exchanges under the same corporate roof, it’s not hard to get a trader or broker in one city to privately criticize the ethics and morals of their counterpart in the other city.

**** New York and Chicago traders working together.  What is next, Bart Chilton getting a pet cheetah?


High frequency trading doubles in Nordic markets
Market Watch
High-frequency traders are continuing to build their presence on European stock markets with new data from Nasdaq OMX revealing that the firms doubled their trading activity on the operator’s Nordic markets during 2011.


Meddling in credit swaps poses sizeable stability risks
By Henny Sender – Financial Times
The costs of credit protection on the big US banks have come down from their peak levels five weeks ago, reflecting the belief that the probability of a European meltdown, with all the contagion that would imply, has diminished. That means concerns around the potential shocks that could come from the credit default swap market have also receded – at least temporarily. But the potential for future shocks is still there.


NYSE Liffe Commodities Monthly Update, December 2011 [PDF]
Press Release
Below is a summary of activities in our core commodity contracts for December 2011. Please follow the link to detailed slides with charts for each product:


JLN Interest Rates Newsletter

Fed Forecasts Pose Risk For Soft Interest-Rate Futures Volume
Trading in futures contracts linked to U.S. interest rates could decline following a decision by the Federal Reserve to publish an explicit timetable for when it expects to take action.

Fed Boosts Transparency With Decision to Reveal Rate Forecasts
Bloomberg Businessweek
A decision to reveal forecasts for the federal funds rate starting this month represents the biggest step toward openness since Bernanke took office in 2006 promising greater transparency, according to Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. and a former Fed board economist. The central bank didn’t even start announcing changes in interest rates until 1994.

Q+A: Why the Fed is publishing interest rate forecasts
The Federal Reserve will begin this month to publish policymakers’ forecasts for interest rates, including when interest rates, which are currently near zero, will rise. The move, announced on Tuesday, could give the sluggish economic recovery a bit more lift by better aligning bets in financial markets with the consensus view at the central bank.


MarketsWiki Page of the Day
Lisa Rosen


MarketsWiki Recent Updates


Jessica TitlebaumJane CroessmannChristopher K. HehmeyerEdward DassoEmily AhearnRichard RosenblattJoseph GawronskiScott BurrillJames F. LubinTom RiceRichard CordrayLisa Rosen

Companies, Organizations and Groups

Ballista Securities LLCCitadel Execution ServicesCQGNational Futures AssociationNumeriXCBOE Futures ExchangeGHCO PartnersU.S. Consumer Financial Protection Bureau


Digital optionsDodd-Frank Wall Street Reform and Consumer Protection ActFund of funds


17,789,787 pages viewed, 6,636 articles, 135,210 edits
MarketsWiki Statistics

Lead Stories

SEC Blesses CBOE Stock Exchange’s Deal For National Stock Exchange 
The Securities and Exchange Commission has approved the planned takeover of the National Stock Exchange Inc. by the CBOE Stock Exchange LLC, which is partly owned by the Chicago Board Options Exchange.

Fed Forecasts Pose Risk For Soft Interest-Rate Futures Volume
By Howard Packowitz Of DOW JONES NEWSWIRES
CHICAGO -(Dow Jones)- Trading in futures contracts linked to U.S. interest rates could decline following a decision by the Federal Reserve to publish an explicit timetable for when it expects to take action.

European Banks Prepare More Job Cuts
New York Times
A number of European banks are planning new job cuts in response to the Continent’s debt crisis.

Europe’s ticking time bomb: Credit default swaps
By Charles P. Wallace – CNN Money
FORTUNE — Warren Buffett once famously described credit default swaps as “financial weapons of mass destruction.” Now these complex insurance policies are once again posing a menace to America’s too-big-to-fail banks. The last time around, CDS on U.S. subprime mortgage bonds nearly brought down insurer AIG (AIG), requiring an $85 billion bailout from the U.S. Treasury. This time, the problem is European sovereign debt.

Europe’s debt crisis: ‘No clear end in sight’
CNN Money
Last year was supposed to be the make or break year for Europe’s debt crisis. Neither happened.

Hungary Pledges to Seek Quick Deal With I.M.F.
New York Times
The government said it would consider all proposals to shore up its financial markets, but would accept only those it deemed in the national interest.

European Parliament – Reinforced Economic Union: MEPs Call For Roadmap Towards Eurobonds
Press Release

Iceland’s Hardardottir Committed to Euro
Iceland’s Finance Minister Oddny G. Hardardottir said she’s committed to the island nation adopting the euro as the bloc will emerge stronger from its debt crisis amid tightening fiscal ties and discipline.

MF Global trustee tussles with regulators: report
(Reuters) – MF Global’s bankruptcy trustee, Louis Freeh, has refused to turn over some documents to the Commodity Futures Trading Commission (CFTC), which is investigating what happened to an estimated $1.2 billion in missing customer funds, the Wall Street Journal said.

MF Global’s Collapse: Rating Agencies’ Role Being Investigated By Congress
(Sarah N. Lynch) – Congressional investigators have launched an inquiry into the work of credit rating firms that examined MF Global Holdings Ltd’s risky bets on European government bonds and whether they overlooked crucial information in their evaluations.

Freeh Files New MF Global Creditors List
By Patrick Fitzgerald – WSJ
Louis Freeh, the former Federal Bureau of Investigation director overseeing MF Global Holdings Ltd., has filed an updated list of the holding company’s top 50 unsecured creditors.

Environmental Trading News

E.U. Toughens Stance in Airline Carbon Dispute
New York Times
The European Commission said airlines that refused to participate in its carbon trading system could be banned from E.U. airports.

Polish Lawmakers to Seek Softening of EU Carbon Rules as of 2013
A group of Polish lawmakers wants the European Union to soften its emissions-trading system rules as of next year to protect the region’s economic growth and competitiveness amid a lack of international carbon curbs.

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

Deutsche Boerse Holders See 40% Chance Of NYSE Tie-Up
By Ulrike Dauer and Jacob Bunge Of DOW JONES NEWSWIRES
With the European Union’s antitrust verdict just a month away, several of Deutsche Boerse AG’s biggest shareholders are losing confidence in the German exchange operator’s ability to pull off its planned tie-up with NYSE Euronext.

NYSE Euronext #1 Globally in IPO Proceeds Raised in 2011
Press Release
New York, January 5, 2012 – NYSE Euronext (NYX), raised more proceeds from Initial Public Offerings (IPOs) than any other global exchange group in 2011, with $33 billion in total global proceeds raised from 104 IPOs. In the U.S., for the fifth consecutive year, NYSE Euronext led the market for IPOs and total proceeds raised with 89 IPOs. Additionally in the U.S., NYSE gained 16 listing transfers from Nasdaq. In Europe, NYSE Euronext had 44 new listings, with approximately E150 million in proceeds raised.

LSE Monthly Market Report – December 2011
Press Release
London Stock Exchange Group (LSE.L) sits at the heart of the world’s financial community, offering international business unrivalled access to Europe’s capital markets. In December a total of 24.4 million trades were carried out across the Group’s electronic equity order books with a combined value of £128.1 billion (E151.8 billion), down 11 per cent on December 2010 (£143.8 billion).

OneChicago Announces Trading Volumes for December 2011
Press Release

TMX Group – Consolidated Trading Statistics December 2011
Press Release

Appointment To PLUS Derivatives Exchange Limited
Press Release
On 29 December 2011, PLUS Markets Group plc (“PLUS” or the “Company”) announced the appointment of VJ Angelo as a consultant to PLUS Derivatives Exchange Limited, a subsidiary of the Company.

[TMX] Top 20 Largest Consolidated Short Position Report – December 31, 2011
Press Release

ASX Group Monthly Activity Report – December 2011
Press Release

NZX Shareholder Metrics December 2011
Press Release

Irish Stock Exchange Statistics December 2011
Press Release

TOM Annual Overview 2011
Press Release

CME Group Inc. Announces Date of Fourth-Quarter, Year-End 2011 Earnings Release, Conference Call
Press Release

NYSE Euronext Announces Date for Fourth Quarter and Full-Year 2011 Earnings Release and Conference Call
Press Release

NASDAQ OMX Commodities Welcomes INTL FCStone (Europe) Ltd.
Press Release

Banks, Brokers & Dark Pools

Swiss Bank Chief Vows Not to Resign Over Currency Trades
New York Times
Philipp M. Hildebrand, head of the Swiss central bank, said he regretted the trades that have clouded his reputation but maintained he broke no laws or regulations.

Bank of China, Mizuho Eye RBS Bank Assets
Bank of China and Japan’s Mizuho Financial are among the banks eyeing parts of the Royal Bank of Scotland , sources told Reuters on Friday, as the process begins to trim the investment banking arm of the government owned UK bank.

Citigroup Said to Halt Talks on Sale of OneMain Lending Unit
Citigroup Inc., the third-biggest U.S. bank by assets, ended talks to sell its OneMain consumer-lending unit after failing to reach agreement with bidders, according to a person with direct knowledge of the talks.

Total ICAP Electronic Broking Volumes on BrokerTec and EBS Platforms reach a record US$828.3bn in 2011, up 11% on 2010
Press Release

Pay Jumps 25% for Brazilian Investment Bankers Ready to Defect
Brazilian investment bankers defecting to competitors won pay increases of as much as 25 percent in 2011 amid a shortage of experienced executives in Latin America’s largest economy.

CIBC Leads Canadian Banks for Mergers, Ousting Goldman Sachs
CIBC led Canada’s investment banks in advising on Canadian mergers last year, ousting foreign firms such as Goldman Sachs Group Inc. and Morgan Stanley from the top-three spots for the first time in at least a dozen years.

Knight Appoints Peter J. Hoffman As Senior Managing Director, Institutional Client Development
PR Newswire via Yahoo! Finance

Evercore Hires Former BofA Banker Egan Antill for Metals Clients
Evercore Partners Inc. hired former Bank of America Corp. investment banker Egan Antill, an adviser to metals companies such as OAO Severstal and Alcoa Inc.

Direct Edge Regulatory Notice #12-01: Market Making Rules And Obligations
Press Release

Direct Edge Market Maker Program Launching On January 17, 2012
Press Release

Tullett Prebon Hires Simon Underhill As Head Of Options On Base Metals Desk
Press Release

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.

Illinois Federal Court Imposes $140,000 Civil Monetary Penalty On Foreign Currency Firm, FXOpen Investments Inc., For Acting As An Unregistered Retail Foreign Exchange Dealer
Press Release

Federal Court Orders CFTC Defendant Larry Benny Groover To Pay $2.69 Million For Defrauding Customers In Forex Ponzi Scheme
Press Release

Politics As Usual For Wall Street Regulation in 2012
As exhausted investors and concerned citizens return from their holiday breaks to begin their assessment of what 2012 holds for both the financial markets and the inside-the-Beltway political culture that is charged with overseeing these markets, there seems little about the New Year to be “happy” about.

CFTC Commences 90-day Review of NADEX’s Proposed Political Event Derivatives Contracts
Press Release
Seeks Public Comment on the Proposed Contracts

ASX Compliance Monthly Activity Report – December 2011
Press Release

New Charges Possible in Insider Case Against Gupta
Federal prosecutors say they are likely to file a new indictment against Rajat K. Gupta, possibly adding new criminal charges in the insider trading case against the former head of McKinsey & Company.

NY judge agrees feeder fund clients are not Madoff customers and can’t get payouts
Washington Post
NEW YORK – A federal judge has affirmed a bankruptcy court ruling that thousands of clients of funds that invested money with jailed financier Bernard Madoff do not qualify for payouts that reimburse Madoff customers. The decision made public Thursday by Judge Denise Cote (koht) agreed with a judge’s finding last year. It said the clients don’t qualify because they did not hold accounts in their …

Investments – Indexes – Managed Futures – Managed Funds

Hedge fund with $100 million in Kentucky retirement funds fails
Lexington Herald-Leader
FRANKFORT – A hedge fund in which Kentucky Retirement Systems invested $100 million has failed and will close in coming months.

Hedge funds get an ‘F’
New York Post
Hedge funds, which are supposed to outperform stocks and bonds in up and down markets, have failed again. Overall, hedge funds lost roughly 4 percent in 2011, marking the $1.7 trillion industry’s second-worst year on record, according to data to be released today by hedge fund tracker Hennessee…

John Ho’s investment strategy pays off
By Henny Sender in Hong Kong – Financial Times
Janchor Partners, the Asia-focused hedge fund set up by John Ho, the former Asian head of The Children’s Investment Fund, has achieved another year of positive performance at a time when many of his rivals are losing money.

Credit Suisse’s Sohn Said to Plan Hedge Fund This Year
Albert Sohn, the former head of securitized products at Credit Suisse Group AG, plans to start a hedge fund this year within the bank’s asset-management unit, according to a person familiar with the matter.

Van Eck Names Imaru Casanova Senior Gold Analyst
Business Wire via Yahoo! Finance
Van Eck Global today announced that Imaru Casanova has joined the firm’s investment team as Senior Gold Analyst.

Ex-MF Global CFO tapped for Fidelity unit board
Reuters via Yahoo! News
BOSTON (Reuters) – An exclusive group of funds at Fidelity Investments is seeking shareholder approval to extend the brief tenure of a former executive of MF Global Holdings Ltd on a board that oversees billions of dollars in assets, according to regulatory filings. Independent trustees for Strategic Advisers Inc, a unit of Fidelity, had appointed Amy Butte Liebowitz, a former MF Global chief financial officer …

Self-Indexing-Cause For Cheer Or Concern? via Yahoo! Finance
ETFs were originally developed to track the indices that active managers found so hard to beat. Now, in a drive to cut costs in an increasingly competitive market, some ETF managers are seeking to “self-index”, creating and calculating their own benchmarks. Should investors in passive funds welcome this development or be wary?

Pimco Attracts $60 Billion as New Funds Offset Total Return Woes
Pacific Investment Management Co. won $60 billion in net deposits last year despite redemptions from Bill Gross’s Total Return fund as investors put money into stock funds and products designed to weather falling markets.

Litman Gregory Masters Alternative Strategies Fund Reaches $100 Million in Total Net Assets in Two Months After Launch
Business Wire
LARKSPUR, Calif.–(BUSINESS WIRE)–Litman Gregory Fund Advisors, LLC, an affiliate of fee-only investment advisory firm Litman Gregory Asset Management, today announced that the Litman Gregory Masters Alternative Strategies Fund (MASFX) surpassed $100 million in total net assets in two months after the fund was launched on September 30, 2011.

Blackstone / GSO Senior Floating Rate Term Fund and Blackstone / GSO Long-Short Credit Income Fund Announce …
Business Wire
NEW YORK–(BUSINESS WIRE)–Blackstone / GSO Senior Floating Rate Term Fund and Blackstone / GSO Long-Short Credit Income Fund today announced that John R. O’Neill has resigned as a trustee of each Fund, effective January 5, 2012. Mr. O’Neill is resigning to pursue a potentially conflicting business opportunity.

New Source ETF launched on Xetra 
Press Release
ETF tracks volatility of US blue chips

Platts Launches World’s First-Ever Daily Manganese Ore Price Assessment – Full Value-Chain Price Transparency To Aid Steel Mills, Processors, Exporters & Market
Press Release

Dow Jones-UBS Commodity Indexes December 2011 Performance Report
Press Release

Dow Jones-UBS Commodity Indexes End 2011 Lower As December Prices Fall On Concerns About Europe And China, Weather
Press Release

UBS Announces Monthly Changes To The UBS Next Generation Internet Index
Press Release

Replacement Of Companies In BSE Indices
Press Release

Technology News

5:15 Capital Management Selects SunGard’s Front Arena for Portfolio Management, Valuations and Risk Analytics
Press Release
5:15 Capital Management, LLC has selected SunGard’s Front Arena for trade processing, valuations of OTC derivatives, risk management and portfolio analytics. Front Arena is a cross-asset solution that provides trade capture, real-time profit and loss, position control and risk management capabilities for hedge funds and other alternative investment managers and financial institutions.

Michael Gooch Joins Board
PR Newswire via Yahoo! Finance
NEW YORK , Jan. 5, 2012 /PRNewswire/ — Group, Inc. announced today that Michael Gooch , Chairman and Chief Executive Officer of GFI Group Inc., has been named to the firm’s Board of Directors. This is the second strategic recent announcement regarding Board composition, adding to the appointments of Mr. Michel Daher and Mr. Henri J. Chaoul to the Board.

E*TRADE Launches Mobile Deposit for iPhone
Business Wire via Yahoo! Finance
E*TRADE Financial Corporation today announced that E*TRADE Securities LLC has introduced mobile deposit for iPhone, enabling customers to electronically deposit chec

Media News

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

Asia Hedge Funds Face Attrition Amid Most Closures Since ’08
Asia’s hedge-fund industry is set to shrink in 2012 after a year in which growth stagnated, performance faltered and managers struggled to raise capital.

ConvergEx Group Delivers ADR Direct Technology for Korean Stocks
PR Newswire via Yahoo! Finance
NEW YORK , Jan. 5, 2012 /PRNewswire/ — ConvergEx Group, a leading technology company, today announced that customers can use its patented ADR Direct technology to trade ordinary shares in Korea and convert those shares to ADRs.

Press Release

HKEx Trading Statistics For December 2011 – On-Floor & Off-Floor Trading Statistics
Press Release

HKEx Monthly Market Highlights – December 2011
Press Release

Green Futures Joins HKMEx – Exchange Adds Pioneering Chinese Futures Brokerage As Broking Member
Press Release

Thai Futures Exchange To Admit New Members
Press Release

Dalian Commodity Exchange President & CEO 2012 New Year Speech
Press Release

Frontier Markets

Egypt Foreign Currency Reserves Plunge as Bond Yields Soar to Record High
Reserves declined to $18.1 billion from $20.2 billion in November, the bank in Cairo said today on its website. They stood at $36 billion a year ago, before the start of the revolt that ousted President Hosni Mubarak . Central bank support has helped cushion the impact of political turmoil on Egypt’s pound.

MARK MOBIUS: Invest In Frontier Markets Before They Grow Into Emerging Markets
Business Insider
While emerging markets were considered a niche or “exotic” investment when I started investing in the late 1980s, many investors are now familiar with them and I’m seeing more and more investors turning to emerging markets as a way to diversify their portfolios.

DFSA Enters Into Memorandum of Understanding With Central Bank of Cyprus
Press Release
Dubai, UAE, 5 December 2011: The Dubai Financial Services Authority (DFSA) recently entered into a Memorandum of Understanding (MoU) with the Central Bank of Cyprus.

Malawi Stock Exchange Annual Market Perfomance Report-2011
Press Release

Malawi Stock Exchange Weekly Market Report – Week Ending 6 January 2012
Press Release

MCX Weekly Market Report: December 30, 2011 – January 05, 2012
Press Release

Miscellaneous News

Harvard Business School to Launch New Program for Financial Executives
Business Wire via Yahoo! Finance
Harvard Business School will offer Leadership in Financial Organizations, a new executive education program for senior executives of global financial institutions. The program will take place in England and at Harvard Business School in Boston on July 9-12, 2012.

Broker who touted subprime mortgages kills himself
Miami Herald
Cliff Popper was in the midst of a federal fraud trial, accused of defrauding investors across the country of more than $100 million.

John Lothian Newsletter

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