Keep it Simple: Peter Nabicht on Liquidity and Simplicity of Market Structure
Today’s financial markets can be summed up in three words – global, fast, and complex. But as the market structure evolves, so must the regulatory structure that oversees it. John Lothian News has spoken with several industry experts to create this series on the evolution of financial market structure.
File Under “Dog Bites Man”: Exchange Monopolies and Dark Pools
An exchange chairman believes that all trading should take place on exchanges. In commenting on securities market structure, CME Group Chairman Terry Duffy criticizes fragmentation-especially the existence of dark pools-and touts the lack of fragmentation in futures trading. The concentration of trading activity on futures exchanges, as opposed to the fragmentation across different exchanges (as well as off-exchange venues) in equities is due to a major difference in the treatment of orders. In futures markets, exchanges own their order flow: hypothetically, if there was another exchange posting a better price in a particular product, CME would not be obligated to direct an order to that better-priced market. When exchanges own their order flow in this way, traders direct orders to the exchange where they expect to get the best price. This is typically the market where most traders are. This creates a centripetal force that causes all activity to tip to a single dominant exchange. That is why CME, Eurex, ICE, etc., have monopolies or near monopolies in the products they trade. (And yes, Terry, even though no one is stopping anyone from competing with you, this order flow effect means that no one can do so effectively, leaving you a de facto monopoly. Only LIFFE’s idiocy in its battle with Eurex in 1998 allowed the Germans to get trading in the Bund futures to tip their way.)
***** My new dog does not bite and does not bark. And she has a monopoly on our attention.
CME Group Named ‘North America Exchange of the Year’ and ‘Clearinghouse of the Year’ by Global Capital
CHICAGO, April 23, 2014 /PRNewswire/ — CME Group, the world’s leading and most diverse derivatives marketplace, today announced the company was named ‘North America Exchange of the Year’ and ‘Clearinghouse of the Year’ by Global Capital, a new Euromoney Institutional Investor publication incorporating the former Derivatives Week and EuroWeek.
***** A double win, though they did not monopolize the awards.
City of Providence, Rhode Island Public Retirement System and Single Stock Futures Exchange OneChicago, LLC Announce Dismissal of the High Frequency Trading Action as to OneChicago, LLC
The City of Providence, Rhode Island and OneChicago, LLC jointly announce that plaintiff has voluntarily dismissed OneChicago from the securities class action filed in the United States District Court for the Southern District of New York on behalf of the retirement system for the City of Providence, Rhode Island. The class action was filed on behalf of all investors who purchased and/or sold shares of stock in the United States between April 18, 2009 and the present on public stock exchanges or alternate trading venues.
***** OneChicago gets let of stupid lawsuit against anyone and everyone in the trading world.
Felix Salmon to Take On Web-Based Role at Fusion
By RAVI SOMAIYA, New York Times
Felix Salmon, a prominent writer on finance and other topics who announced this week that he was leaving Reuters, will join the cable network Fusion on Monday in a web-based role that runs across multiple media.
***** I thought Fusion was a drink.
Bill Daley to join hedge fund
By Stephen Foley in New York, FT
Bill Daley, the former White House chief of staff, is to join the hedge fund Argentière Capital, which was founded last year by leaders of JPMorgan’s disbanded proprietary trading division.
***** If you are not going to run for office, i.e. Governor of Illinois, then working for a hedge fund makes sense.
Indonesian Chicken Stocks Fall
A government policy aimed at protecting farmers is hitting the stock prices of Indonesia’s poultry companies, knocking almost $650 million off the valuations of three of the largest firms at a time when the Indonesia’s benchmark stock index is outperforming its peers.
***** We need a hardier broth here.
Yuan breaches key psychological support, hovers at 16-month low
The Economic Times
SHANGHAI: Yuan weakened past the key psychological support level of 6.25 per dollar late on Thursday, on increased corporate dollar demand and persistently bearish views of the Chinese currency, traders said
***** I was just fine at this level, with no psychological issues at all.
Coffee Prices Hit 26-Month High; Forecast for Brazil’s Drought-Stricken Coffee Crop Is Cut; Rising Cost Could Drip Down to Consumers
By Alexandra Wexler, WSJ
The coffee market is boiling over, with prices almost doubling year to date, and analysts say it is only a matter of time before consumers get burned. Arabica-coffee prices soared to a 26-month high in the futures market after a top merchant cut its forecast for Brazil’s drought-stricken crop. Brazil produces about one-third of all coffee and more than half of the world’s arabica beans, which are prized for their mild flavor and used in gourmet blends.
***** Starbucks, please tell me you are hedged!
David Knox: ‘You might think I’m completely bonkers’
By Richard Partington, Financial News
With the highly-competitive market for research undergoing a period of regulatory upheaval, it might not seem like the time to launch a research boutique.
***** No one is completely bonkers. Bonkers is a work in progress.
Kinetic Partners Develops Cayman Islands Team To Respond To Growing Awareness Of Zombie Funds
Kinetic Partners, the global financial services advisory firm, has today announced the promotion of Jess Shakespeare to Member in the Cayman Islands. Jess becomes a Member within the corporate recovery and forensic & dispute advisory team.
***** I can’t wait for the cable television show about the Walking Dead Zombie Funds.
CFO Job Listing
Holding Company in financial services industry is seeking a Controller/CFO for several of its underlying firms.
This position is responsible for the financial and compliance reporting for several public reporting and private funds that we manage. The CFO is also responsible for the financial reporting for several of our firms (Asset Management/Futures Introducing Broker).This is a hands on position that involves both supervision of staff, preparation of monthly financials and analysis of financial data. This position offers a competitive salary and benefits package.
Reviews monthly financial statements prepared by fund administrator prior to distribution to investors
Manages SEC reporting including preparation and filing of Form 10-K, 10-Q, and other periodic regulatory reports
Prepares monthly financials, reconciles intercompany activity, performs financial analysis
Coordinates annual audits/interim reviews with outside auditors and year-end tax reporting with 3rd party preparers
• Accounting Degree/CPA Required
• Minimum of 5+ years experience
• Minimum of at least 1 – 3 years of management/leadership experience preferred
• Experience working within financial services industry/fund accounting preferred
• Strong Excel skills
Contact me at firstname.lastname@example.org for details.
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SGX and ICE signal hopes for closer ties
By Jeremy Grant in Singapore, FT
The prospect of closer ties between two of the biggest exchange groups in the US and Asia has emerged after the chief executives of SGX, the Singapore exchange, and IntercontinentalExchange (ICE) both said they could collaborate with each other on business in Singapore.
Singapore exchange losing out to regional competitors
By Jeremy Grant in Singapore, FT
Singapore’s equity market is looking increasingly unloved. Last year the city-state’s stock exchange suffered the indignity of being overtaken in terms of trading volume by its Thai counterpart, knocking Singapore into second place in southeast Asia for the first time. More recently it was also overhauled by Japannext, a relatively small trading platform that competes with the Tokyo bourse.
Neonet Securities Names Aquis’s Haynes as New Chairman
By Nandini Sukumar, Bloomberg
Neonet Securities AB, a Stockholm-based broker offering electronic trading for banks and funds, named Alasdair Haynes as its new chairman.
Investors starting to look at commodities again
By Neil Hume, Commodities Editor, FT
After several tough years, investors are once again starting to warm to commodities. That is the view of one of the sector’s most successful hedge fund managers.
Bank Cutting Commodities Trade Severs Link With Equities
By Isaac Arnsdorf
Banks’ pullback from commodities trading is weakening the link between raw materials and equities and helping to re-establish supply and demand as the main factor in setting prices, United Nations researchers say.
El-Erian Says Gross Is One of World’s Best Investors
By Mary Childs
Mohamed El-Erian, who quit Pacific Investment Management Co. in January amid reports of clashes with Bill Gross, said the legendary bond manager is still one of the world’s great investors.
SGX posts third-quarter net profit of $76 million
Revenue: $166 million, down 13% from a year earlier
Operating profit: $88 million, down 23%
Net profit: $76 million, down 22%
Earnings per share: 7.1 cents, down 22%
Interim dividend per share: 4.0 cents
Magnus Bocker, CEO of Singapore Exchange, said, “We recorded third-quarter net profit of $76 million on revenue of $166 million following a challenging quarter for our securities business. For the nine-month period, revenue was unchanged at $514 million while net profit was 2% lower at $243 million.
Nasdaq first-quarter earnings helped by recent deals
Transatlantic exchange operator Nasdaq OMX Group Inc (NDAQ.O) on Thursday reported a higher first-quarter profit, helped by increased revenue from recent acquisitions.
Fake trader used investors’ money as ‘personal piggy-bank’, court told
By Miranda Prynne, The Telegraph
Currency trader oversaw Ponzi fraud in which he squandered more than £1million on hedonistic lifestyle of drinking and gambling
A currency trader used investors’ money as his own “personal piggy-bank” and squandered more than £1million in casinos and exclusive nightclubs, a court heard. Alex Hope, 25, allegedly masterminded a £5.6million Ponzi fraud to fund his hedonistic lifestyle and love of gambling.
British Financial Regulator Adds 2 Senior Advisers
By CHAD BRAY, New York Times
LONDON – The Financial Conduct Authority of Britain has added a former head of Britain’s Competition Commission and a former executive at Goldman Sachs and Lehman Brothers Holdings to its ranks as it looks to increase its expertise.
On Brink of Expansion, Liquidnet Hires Bob Garrett as Head of Technology
Ivy Schmerken, Wall Street & Technology
As Liquidnet expands into fixed income, Garrett will focus on integrating the pending acquisition of Vega Chi into its ATS technology.
Swaps and futures: two sides of the same coin
Philip McBride Johnson, FOW
A large part of existing futures regulation could have been adapted to monitor swaps, says former CFTC chairman, Philip McBride Johnson
The Dodd-Frank Act of 2010 has been blamed for many things. Suffocating regulation is often cited. A new bureaucracy and scores of new restrictions. The CFTC, the SEC, the Fed and brand new agencies have been charged with taming the swaps behemoth. In the “too-little-too-late category,” I offer another.
New York Financial Regulator Uses Dodd-Frank to Sue Auto Lender
By RACHEL ABRAMS, New York Times
By his own admission, even New York’s top financial regulator did not know he could use the Dodd-Frank law to enforce consumer protections until very recently. Benjamin Lawsky, New York’s superintendent of financial services, is using a provision of the Dodd-Frank financial overhaul law.Eric Thayer/ReutersBenjamin Lawsky, New York’s superintendent of financial services, is using a provision of the Dodd-Frank financial overhaul law.
Once he did, however, Benjamin M. Lawsky, the state’s superintendent of financial services, put the power to use. On Wednesday, Mr. Lawsky’s office filed a lawsuit against a subprime auto lender in New York, accusing it of violating certain provisions of the Dodd-Frank financial overhaul act.
Regulators Must Co-Evolve With Technology and the Industry
By David Lauer, KOR Group
FINRA’s recent proposal to charge for dark pool volume data is the latest example of regulators’ failure to embrace data openness and transparency. If regulators want to instill more confidence in their abilities and leverage public insights, everything should be open and visible.
SIFMA Comments on SEC Staff Analysis on Money Market Fund Reform
New York, NY, April 23, 2014- SIFMA today submitted a comment letter to the Securities and Exchange Commission (SEC) in response to the SEC Staff Analysis of Data and Academic Literature Related to Money Market Fund Reform. SIFMA’s letter was submitted jointly by SIFMA’s Asset Management Group and Private Client Group.
Sebi eases rules for market making in illiquid equity cash segment
The Economic Times
MUMBAI: Capital market regulator Securities and Exchange Board of India (Sebi) on Wednesday eased rules for market making in illiquid equity cash segment. The move is aimed at encouraging stock exchanges to offer this scheme for the cash segment, which will help retail investors gain exit from illiquid stocks.
FCA appoints two new senior advisers focused on competition and investment banking
David Saunders and Gunner Burkhart have been appointed as senior advisers at the Financial Conduct Authority (FCA).
Mauri Osheroff to Retire After Nearly 40 Years at SEC
The Securities and Exchange Commission today announced that Mauri L. Osheroff, associate director for regulatory policy in the Division of Corporation Finance, is retiring on April 30 after nearly 40 years at the SEC.
ISDA AGM: What does the future hold for the OTC markets?
Regulation and how the derivatives industry is coming to terms with this new market order was the central theme of the recent ISDA AGM in Munich, says Jim Bennett, Sapient Global Markets.
This was reflected in the various panel discussions and the chatter on the conference floor and through the exhibition hall.
Exchanges & Trading Facilities
Shanghai Stock Exchange To Act As Official Distributor And Licensor Of Deutsche Börse Market Data In Mainland China
Deutsche Börse: Deutsche Börse and Shanghai Stock Exchange (SSE) today announced a partnership in which SSE via its wholly owned subsidiary China Investment Information Services (CIIS) will act as the official distributor and licensor of Deutsche Börse market data products in mainland China.
A signing ceremony attended by Deutsche Börse Executive Board Member Hauke Stars and Bo Que, Vice President of Shanghai Stock Exchange, was held today in Suzhou, China to celebrate the new partnership.
SIX Swiss Exchange introduces new index with 20 SPI stocks that show highest historical dividend-payments and most solid profitability.
Today, SIX Swiss Exchange launched the SPI Select Dividend 20 Index. It includes those 20 stocks from the SPI Index which show the highest historical dividend-payments and the most solid profitability.
IFC Recognises SGX’s Support in Commitment to Develop Asia’s Capital Markets
Washington, D.C./Singapore, April 24, 2014—IFC, a member of the World Bank Group, today recognized the support of Singapore Exchange (SGX) in its initiatives to foster the development of offshore and onshore capital markets in Asia.
Hedge Funds & Managed Futures
Aluminium production reaches new high
By Xan Rice, FT
Global aluminium production reached a new high in March despite cuts to capacity by the biggest manufacturers.
Henderson attracts £3bn as investors bet on European recovery
By Norma Cohen, FT
Henderson has reported net inflows to its funds of £3bn during the first three months of this year, as retail investors sought exposure to recovering European equities markets.
Will China drop gold next?
Craig Stephen, WSJ MarketWatch
Investors have done well in the past with a simple strategy of buying what China was buying. So earlier this year, things were looking up for gold when it was revealed that China had swept past India to become the world’s biggest buyer in 2013.
NG KONG (MarketWatch) — Investors have done well in the past with a simple strategy of buying what China was buying. So earlier this year, things were looking up for gold when it was revealed that China had swept past India to become the world’s biggest buyer in 2013.
Einhorn hedge fund warns of ‘tech bubble’
Juliet Chung, WSJ
David Einhorn‘s Greenlight Capital lost 1.5% in the first quarter, the New York hedge fund said Tuesday in an investor letter, in which it warned about “our second tech bubble in 15 years.”
Greenlight said it lost money on its bets against Keurig Green Mountain and Chipotle Mexican Grill, among other wagers, while making money on Micron Technology.
Tough Sell for Chinese Pork Producer’s I.P.O.
By UNA GALANI, New York Times
The WH Group’s chopped initial public offering still looks unappetizing. The Chinese pork producer is slashing the size of its Hong Kong fund-raising to as little as $1.3 billion from a previous target of at least $3 billion. But its reluctance to accept a lower price means the I.P.O. remains a tough sell.
SPANISH STOCK MARKET ADMITS FIRST DISCOUNTS TO TRADING
5 Discount Call+ series and 4 Discount Put+ series on the IBEX 35®
BNP Paribas is the first issuer of these types of product in the Spanish stock market
Today marks the start of the first Discounts on the Spanish stock market through the Warrants, Certificates and other products segment of the SIBE Smart Platform. This is a new type of investment product that offers sideways to bullish exposure (Discount Call+) or sideways to bearish exposure (Discount Put+) to the performance of an underlying asset.
Banks & Brokers
E*Trade Profit Boosted by Higher Revenue From Commissions and Fees; Online Brokerage Also Sees 13% Gain in Net Revenue
By Julie Steinberg, WSJ
E*Trade Financial Corp. ETFC -0.69% posted a higher first-quarter profit as the online brokerage firm reported more daily client trades and higher revenue from commissions and fees.
Deutsche Bank under pressure by investors to raise capital
By Daniel Schäfer in London and Alice Ross in Frankfurt, FT
Deutsche Bank is facing pressure from investors to raise capital amid fears the bank is still not robust enough to cope with a tougher regulatory environment and a slump in global debt markets.
WorldWideMarkets Online Trading announces new London office and FCA approval to become a UK Forex Broker
Fast growing multi-asset brokerage, WorldWideMarkets Online Trading Ltd., offers trading in spot Forex and CFDs through its new UK-based FCA-regulated business.
Goldman loses four Asia prime brokerage execs to rivals- sources
By Nishant Kumar, Reuters
At least four mid-level executives are leaving Goldman Sachs Group’s (GS.N) Asia prime brokerage unit to join rival banks, people familiar with the matter said, just as the regional hedge fund industry is starting to pick up.
Clearing & Settlement
Settlement time for U.S. trades closer to being shortened
By John McCrank, Reuters
The Depository Trust & Clearing Corporation, which processes all U.S. stock and fixed income trades, said on Wednesday it supports shortening the settlement cycle for U.S. equities, corporate and municipal bonds, and unit investment trust trades.
Colt Connects Europe’s Largest Pan-European Cash Equities Clearing House – Pan-European Clearing Houses Of EuroCCP And EMCF Choose Colt To Connect Their Key Offices
Colt, the leading information delivery platform, has connected the offices of clearing houses EuroCCP and European Multilateral Clearing Facility (EMCF) as they combine to form Europe’s largest pan-European clearing house EuroCCP NV. As a long term trusted provider of network services to EuroCCP, Colt was ideally positioned to connect these two renowned clearing houses to ensure business as usual when regulators gave the go ahead for this high profile transaction.
Indexes & Products
An unsung, diverse index that just beat the Dow
For large companies that compete with $100 billion market-cap competitors that weren’t even publicly traded five years ago, being nimble is essential. It’s the quality of talent that’s going to make the difference between companies that are successful and those that are on the downside of the ever-increasing turnover in the Fortune 500.
BlackRock Starts ETF in Brazil to Follow S&P 500 Index
The ETF will be the first listed in Brazil linked to the performance of stocks trading outside the country, BlackRock spokeswoman Melissa Garville said in an e-mailed statement. The ETF, to be called the iShares S&P 500 FIC FI Investimento no Exterior, will start trading April 29, according to a separate statement from the exchange operator, BM&FBovespa SA.
Tradier Gets $3M Funding to Expand API, Developer Base
By Max Bowie, WatersTechnology.com
Cloud-based brokerage platform and supporting data, trading and analytics application hosting environment provider Tradier has raised $3 million in new funding from Devonshire Investors-the private investment arm of Fidelity Investments’ owners, the Johnson family-and its founders, to support plans to broaden the platform and increase its takeup among third-party application developers.
GEN-I Selects Trayport®’s GlobalVision Trading Gateway To Drive Growth
London, 24 April 2014 Trayport, a leading provider of energy trading solutions to traders, brokers and exchanges worldwide, today announced that GEN-I, trgovanje in prodaja elektricne energije (GEN-I) are using GlobalVision Trading Gateway through a Software as a Service (SaaS) delivery model, for power trading in Central and Eastern Europe (CEE).
SWIFT Launches New Reference Data Directory For Financial Institutions And Corporates – New Bankers World Online Service Consolidates Reference Data And Financial Information From Multiple Sources Creating One Comprehensive Source Of Financial Data
SWIFT announces the launch of a new version of its Bankers World Online directory, an online query tool which has been significantly upgraded to provide more data coverage, a wider breadth of financial information (including data from Reuters, Dun & Bradstreet, and Moody’s), and new intuitive features and functionalities. The service is part of the SWIFTRef portfolio, an industry-wide platform for global payments reference data.
Lombard Risk Appoints Groetch as Director for the Americas
By Marina Daras, Waters Technology
Lombard Risk Management has appointed John Groetch as its new regional sales director for the Americas.
Groetch will be responsible for driving Lombard Risk’s growth strategy in the region as the firm aims to build up its regulatory reporting, collateral management and compliance solutions.
Numerix Expands Academic Partnership Program with the University of Chicago
Master of Science Financial Mathematics Students Gain Hands-on Experience with Numerix Software
New York, NY – April 23, 2014 – Numerix (www.numerix.com), the leading provider of cross-asset analytics for derivatives valuations and risk management, today announced that the University of Chicago has joined the Numerix Academic Partner Program. As aspiring quantitative, mathematics and financial engineering professionals learn foundational skills for pricing, modeling and managing complex financial instruments, the Academic Partner Program enables students to gain invaluable real-world experience through the utilization of Numerix’s cutting edge derivatives software.
SunGard Named Technology Provider of the Year at Americas Derivatives Awards
SunGard has been named “Technology Provider of the Year” at Global Capital’s first Americas Derivatives Awards for its ability to provide outstanding innovation in technology solutions for the derivatives markets. The award winners were announced at the gala reception and dinner on April 22 in New York.
S.E.C. Settles With Ex-Nvidia Employee in Insider Trading Case
By MATTHEW GOLDSTEIN, New York Times
The former Nvidia employee who the authorities contend supplied inside information about the chip maker’s earnings to a group of hedge fund traders and analysts has reached a settlement with securities regulators, the regulators said on Wednesday.
Exclusive: Three employees at Marubeni’s grain unit in China detained
By James Topham and Niu Shuping, Reuters
Three employees at one of Marubeni Corp’s (8002.T) grain trading unit in China have been detained, Chinese customs said on Thursday, a move prompted by allegations of tax evasion on soybean imports.
SEC Issues Stop Order to Prevent Northern California Company From Issuing Stock Under Amended Registration Statement
The Securities and Exchange Commission today issued a stop order to prevent a Northern California-based company from issuing stock after including false and misleading information in its amended registration statement for an initial public offering (IPO).
SEC Charges Former Stock Promoter With Defrauding Investors in Florida Real Estate Venture
The Securities and Exchange Commission today filed fraud charges against a former Florida-based stock promoter currently serving a two-year prison sentence for lying to SEC investigators.
SEC Charges Technology Company Insider in California With Tipping Confidential Information Exploited by Hedge Funds
The Securities and Exchange Commission today filed insider trading charges against a former accounting manager at Nvidia Corp. who tipped a friend with confidential company information that set in motion a chain of tipping and illegal trading among a network of hedge fund traders who reaped millions of dollars in illicit gains.
Environmental & Energy
Maintenance Window on EEX Spot Natural Gas 24/7 Market on PEGAS Trading in EEX Natural Gas Products from 09 May 2014 to 10 May 2014
Australia inflation swap market moribund despite price rise expectations
Seven years ago inflation swaps dominated the Australian inflation market but now the market has become illiquid with most activity on physical inflation-linked bonds. Why has the market made a 180 degree turn and is this the end of the inflation swap market in the region?
Tokyo Commodity Exchange Circuit Breakers In And After May 2014
Circuit breakers in and after May 1st, 2014 will be handled as follows for the time being; provided, however, that the Exchange might change the Initial CB Trigger Levels, CB Expansion Amounts, and number of expansion, etc., when it deems necessary.
IFC Recognises SGX’s Support In Commitment To Develop Asia’s Capital Markets
Washington, D.C. & Singapore, Apr 24, 2014 (ACN Newswire via COMTEX) — IFC, a member of the World Bank Group, today recognized the support of Singapore Exchange (SGX) in its initiatives to foster the development of offshore and onshore capital markets in Asia.
Indian election uncertainty curbs corporate forex hedging
by Justin Lee, Risk.net
Corporates limit hedging of rupee exposure until Indian election outcome is known despite 2013 currency volatility
GrainCorp bidder ADM not of good character, says Hockey
By ANDREW WHITE and ADAM CREIGHTON, The Australian
JOE Hockey has risked inflaming debate about the $3.4 billion takeover bid for GrainCorp, saying he blocked US grains giant Archer Daniels Midland because it was “not of good character’’.
Options for collateral options
By : Alexandre Antonov and Vladimir Piterbarg, Risk.net
When collateral can be posted in multiple currencies, pricing even the simplest derivatives involves optionality, which is often tackled numerically. But by conditioning on a risk factor to make variables independent, this can be simplified. Alexandre Antonov and Vladimir Piterbarg show this is both quicker and more accurate than more obvious methods
BitBeat: Will Bitcoin Traverse the Final Frontier?
by Paul Vigna and Michael J. Casey, WSJ MoneyBeat
Spend any time around bitcoiners, and you will hear a lot of big ideas. So it’s not at all surprising that one group of bitcoiners is talking about putting bitcoin into space.