John Lothian Newsletter: Banks braced for billions in civil claims over forex rate rigging; Navinder Singh Sarao: reclusive trader or criminal mastermind?; Hacking Case Raises Question on Securities Fraud

Aug 18, 2015

First Read

Bits & Pieces
Doug Ashburn, JLN

First, a MarketsWiki Education update: today we are releasing a video that got the highest marks from the interns, college students and young professionals who attended the New York event in mid-July. The old NYSE dining room turned into a quiz show for 15 minutes, with former Goldman Sachs director Chris White as the emcee. He says many young people, afraid of asking a “stupid question,” miss out on some of the financial basics. Have a look below and test your financial literacy.

The plans for our London event are progressing nicely, and we expect to announce everything by the end of the week. We are 90-something percent sure we have a venue in the heart of the City’s financial district, and we have secured most of our speakers for the events, which will be held on the afternoons of October 14th and 15th. As soon as the ink dries on the plans and contracts, we will make the big announcement and then start pounding the pavement for attendees.

We had a staffing change a couple weeks ago, right in the middle of our education event in Chicago, and the announcement of said change sort of got lost in the shuffle. Nancy Ashburn has joined John J. Lothian & Co. as director of finance and administration. She began working for us part-time as an independent consultant back in 2013, when John was in the midst of back-to-back-to-back surgeries. She officially joined the firm at the beginning of August and, in addition to her accounting duties, she now coordinates all of our events and keeps things organized.

Paul-André Jacot update: We are awaiting the official tribute of Paul-André Jacot from the SFOA. Perhaps tomorrow we will have it.

Chris White, ViableMkts – De-Constructing Finance: Simplifying Wall Street

Chris White learned the ins and outs of the markets while at Goldman Sachs, but to do that, he needed to master the financial language. He takes the audience through a fun, interactive word game that helps teach some of the key terms that put you on the path to success. How many terms do you know?

Watch the video »

High-speed trading firm beats back allegations of manipulation
By LYNNE MAREK, Crain’s Chicago Business
Chicago high-speed trading firm Allston Trading has rid itself of two complaints against its trading practices: a federal case and a private arbitration case lodged against it. Allston, led by CEO Carlton Jones, is fending off complaints about its trading practices after a report earlier this year that the industry’s overseer, the Commodity Futures Trading Commission, was investigating Allston over alleged market manipulation.

***** Lynne Marek consistently gets high marks from our readers in terms of a high number of clicks on her stories. This one should be no exception.


Speaking In Code Part 3: Allison Funk on Overcoming Doubts as a Woman in Technology
TT Trade Talk by Katie Burgoon, EVP Global Human Resources
Today we’re continuing our summer blog series, “Speaking in Code,” which profiles some of the women here at Trading Technologies, focusing on the challenges and opportunities they’ve experienced in their careers in fintech. If you haven’t been following, I encourage you to read the introduction and the first spotlight featuring Diana Dumitru.

***** I am going to suggest a new merit badge for the Boy Scouts, code breaking.


Chariots of Fire champion hailed as a national hero in China; A statue has been unveiled for ‘The Flying Scotsman’ Eric Liddell, a religious and sporting hero in China after selfless acts in a WW2 internment camp
The Telegraph
A British Olympic hero whose story was illustrated in the film Chariots of Fire has been named by a Chinese city as a national hero. Eric Liddell, who was nicknamed The Flying Scotsman, famously won a gold medal at the 1924 Olympic Games in Paris.

****** One of my favorite movies of all time. Eric Liddell had character and faith, a powerful combination. He is now getting a statue in China.


Bridging the Week – Hacking, Layering, Dark Pools; Manipulation, Position Limits and Fiduciary Duties
Gary DeWaal, Katten Muchin Rosenman LLP
Enforcement actions – both in the United Kingdom and the United States – dominated the most notable developments regarding financial services firms last week. In the US, a network of 32 persons were charged civilly by the EC and some defendants were also criminally indicted by the US Department of Justice for hacking into newswires, and trading on non-public information prior to the information’s public distribution. In the UK, five defendants were fined the equivalent of almost US $12 million for manipulative trading activity; while back in the US, an administrative law judge upheld FERC charges that BP Group companies manipulated natural gas prices in Houston, Texas, to benefit their trading position following a hurricane in 2008. As a result, the following matters are covered in this week’s edition of Bridging the Week

***DA: This Monday staple is running on Tuesday this week, and for a very good reason. We forgot.



MarketsWiki Page of the Day

Paul-André Jacot

MarketsWiki Recent Updates


Nancy L. Ashburn; Eugene Ludwig; Masaaki Shirakawa; Paul-André Jacot; Mary L. Schapiro; Alice Hackett; Timothy Coleman; Mark P. Wetjen; Bernard Dan; Gary Katz

Companies, Organizations and Groups

Promontory Financial Group; Derivicom; Citibank; London Metal Exchange; BP


66,734,243 pages viewed, 8,257 articles, 193,667 edits
MarketsWiki Statistics

Lead Stories

Banks braced for billions in civil claims over forex rate rigging
Emma Dunkley and Lindsay Fortado, FT
Global banks are facing billions of pounds-worth of civil claims in London and Asia over the rigging of currency markets, following a landmark legal settlement in New York.

Navinder Singh Sarao: reclusive trader or criminal mastermind?
Philip Stafford, Lindsay Fortado and Jane Croft, FT
Clad in a cheap, unbranded grey sweatshirt and matching tracksuit bottoms, Navinder Singh Sarao sat in silence in the dock of court number five at Westminster Magistrates’ court. But at the end of the hearing the 36-year-old British futures trader, with his shoulders raised and arms outstretched, shouted through the glass as he was being led back down to the cells: “I’ve not done anything wrong apart from being good at my job. How is this allowed to go on, man? I’ve done nothing wrong!”

Hacking Case Raises Question on Securities Fraud
The elaborate scheme described by the Justice Department and the Securities and Exchange Commission last week, which involved breaking into computer servers to obtain confidential information about impending corporate announcements, certainly looks like a classic case of insider trading. The defendants are accused of making millions of dollars in profits by using information to trade profitably.

Chinese Stocks Tumble 6.2% Amid Government Intervention Efforts
Mainland Chinese stock markets unexpectedly slumped again on Tuesday, with the primary index for the Shanghai market plunging by 6.2 percent.

Beijing Flounders on What It Has Done Best; Between slowdown and market turmoil, leaders appear to have lost some of their touch
As economic managers, Chinese leaders have been in a league of their own for the past quarter century.

China shadow banks appeal for government bailout
Gabriel Wildau in Shanghai, FT
The collapse of a state-owned credit guarantee company in China’s rust belt has again shone a spotlight on risk from bad debt and moral hazard in the country’s shadow banking system.

Nasdaq signs new exchanges for Smarts tech
Futures & Options World
Global exchange group Nasdaq has signed up the latest exchange clients for its market surveillance technology, Smarts, set to go live by the end of the year, as companies continue to ramp up compliance and monitoring functionality ahead of impending regulatory changes. Bolsa Mexicana de Valores, Borsa Istanbul and The Japan Power Exchange have signed up with Nasdaq for the market surveillance technology, the firm told FOW, and are set to go live with the tool before the end of 2015.


Dodd-Frank was a disaster: Bove—commentary
Dick Bove, in CNBC
When the Dodd-Frank Act was signed in the summer of 2010, I thought it would be impossible to find a worse piece of legislation in modern history. Looking back, I now believe that this judgment, dismal as it was, actually failed to capture how really bad this legislation was.

EU plans easier terms for bundled loans
Jim Brundsen,
The EU’s top financial services official is set to propose a substantial reduction in capital charges for the securitisation industry in an effort to jump-start a market seen as one of the main avenues for boosting lending across the 28-country bloc.

Self-Regulatory Organization (SRO) Rulemaking and National Market System (NMS) Plans
NASDAQ OMX BX: Notice of Filing and Immediate Effectiveness of Proposed Rule Change Regarding NASDAQ Last Sale Plus (Release No. 34-75709; File No. SR-BX-2015-047; August 14, 2015); see also Exhibit 5

Statistics; Statistical Review 2010 – 2015
FINRA is responsible for regulating every broker and brokerage firm doing business with the U.S. public

Monthly Disciplinary Actions August 2015

Exchanges & Trading Facilities

CME forex futures open interest reach record high
CME Group Inc (NASDAQ:CME), the world’s leading and most diverse derivatives marketplace announced today that for the first time, the number of Large Open Interest Holders (LOIH) in FX futures is now over 1,000, up 16% since the end of 2014.

CME Group out to tempt European market-makers
Financial News (subscription required)
CME Europe is to introduce a new incentive programme for market-makers in FX futures in a bid to boost liquidity in the contracts, a move that comes as large exchange operators in the region increase their presence in the forex markets.

Intercontinental Exchange Poised for Long-Term Growth
Its targeted cost synergies, improved liquidity and spree of acquisitions should make way for compelling long-term growth. The successful transition of NYSE derivatives trading and clearing operations to ICE futures and clearing exchanges in Nov 2014 created an excellent clearing model, which is expected to grow substantially in the future. The transition also made ICE the second-largest global exchange with over 60% accretion in market capitalization. This has also enhanced the company’s revenues since then. The top-line improvement is expected to be sustained over the remainder of 2015, which in turn, should boost ICE’s listing and technology revenues.

Aquis to trade Spanish stocks from Thursday
The Trade News
Subscription-based European equities exchange Aquis is to begin trading Spanish blue-chip stocks.

Hedge Funds & Managed Futures

Clients of Carlyle Hedge Fund Seek to Pull Out Nearly $2 Billion; New redemption requests are nearly half of Claren Road’s $4.1 billion in assets
Investors are preparing to pull roughly half their money from Claren Road Asset Management LLC, the latest blow for Carlyle Group LP’s hedge-fund firm.

Carlyle considers shutting $4bn credit hedge fund
Stephen Foley in New York, FT
Carlyle is considering shutting its $4bn credit hedge fund Claren Road after investors asked to pull almost half of their money out.

Overvalued equities can keep rising
Christophe Donay, FT
Central banks’ informal policy style puts floor under asset prices
Equity valuations in the US and Europe are back to levels last seen during the emergence of the dotcom bubble and ahead of the 2008-09 financial crisis. Surely this cannot continue? A new take on the evolution of central bank policies suggests it can.

Banks & Brokers

Dallas Fed picks former Goldman Sachs banker as new president
Shawn Donnan in Washington, FT
The Dallas Federal Reserve has ended speculation and appointed former Goldman Sachs executive Robert Steven Kaplan as its next president, putting another non-economist in line to take a seat on the US Federal Reserve’s policy-setting committee.

Bank of America Stiffs Shareholders
Joe Nocera, NY Times
The year 2009 was rough for the Bank of America and its chairman and chief executive, Ken Lewis. On Jan. 1, the bank closed its $50 billion purchase of Merrill Lynch, a deal Lewis had hastily negotiated the previous September, as the financial world appeared close to collapse.

Instinet to accept hard dollar research payments
By Anna Irrera, Financial News
Nomura’s agency broker Instinet has secured UK regulatory approval to accept hard dollar research payments from clients, as it readjusts for European rules aimed at changing the way asset managers reward their brokers.

Piper Jaffray makes a Chicago stand
By LYNNE MAREK, Crain’s Chicago Business
Another financial firm is shouldering its way into Chicago’s middle-market field.

Morgan Stanley wealth management focusing on most-profitable clients for intl business
Aug 18 Morgan Stanley’s U.S.-based wealth management business is cutting the number of its foreign accounts to focus on its most profitable customers, a person familiar with the bank’s thinking said.

Former forex traders challenge Citi over dismissal
Lindsay Fortado and Katie Martin, FT
Four former Citigroup traders look set to be the first of the dozens of people fired over the forex-rigging scandal to challenge their dismissals in court.

Clearing & Settlement

A green light doesn’t mean go for swaps clearing
Financial News
Just because 20 of the world’s most powerful people want something to happen does not mean it will happen.

Industry requests exemption from EMIR central clearing obligations
Insurance Asset Risk
Insurers that use derivatives for hedging should be exempt from the central clearing obligations under the European Markets Infrastructure Regulation (EMIR), according to trade federation Insurance Europe. In response to the European Commission’s EMIR consultation paper, the federation cited insufficient opportunities for long-term investors, such as insurers and pension schemes, to transfer non-cash collateral with central counterparties (CCPs).

Bank-Wise Analysis of Blockchain Activity
Let’s Talk Payments
Interest in blockchain has been coming in from every corner of the world with major ones being banks and technology providers. Banks’ interest in bitcoin blockchain is seeing a huge uptick with the exploration of potential use cases for the distributed ledger system (blockchain technology).

Indexes & Products

New Deka equity index ETF launched on Xetra; ETF tracks euro-zone companies recognised for sustainability
Deutsche Boerse
Xetra/Börse Frankfurt: A new equity index ETF issued by Deka Investment GmbH has been tradable on Xetra and Börse Frankfurt since Tuesday.

How much China is in your fund?
Investment News
While the Chinese economy grew 7.0% in the second quarter, signs of slower growth in July and actions by the Chinese government to devalue the yuan have caused investor concerns. Many investors obtain direct exposure to China through diversified emerging market mutual funds and ETFs.

Rapid Growth in the Smart-Beta Index ETF Space
ETF Trends
In the exchange traded fund industry, a growing number of money managers and new fund sponsors are turning to alternative or smart-beta indexing methodologies to gain an edge in an increasingly competitive market. According to Mark Makepeace, who runs the FTSE Russell index group, smart beta strategies make up about 60% to 70% of requests for new products from clients

FTSE 100 Semi Annual Equally Weighted Index Licensed For First ETF
Press Release
FTSE Russell, the global index provider, today announces that it has licensed the FTSE 100 Semi Annual Equally Weighted Index to Deutsche Asset & Wealth Management, who have created the first ETF linked to the benchmark. The db x-trackers FTSE 100 Equal Weight UCITS ETF listed on London Stock Exchange on 14 August.

Trade-weighted broad dollar index
Business Insider
The US dollar has been on a tear. This is a fairly uncontroversial statement that asserts the US dollar has been rising in value against other currencies. But there are a few ways to measure this increase, and in a note to clients on Monday, Ellen Zentner at Morgan Stanley wrote that the only index of the dollar’s value that matters for the US economy and Federal Reserve policy is the Fed’s own broad trade-weighted dollar index.


TNS Opens up Japanese Market to Global Trading
Transaction Network Services (TNS) has established a new connection into the co-location service of JPX, Japan’s main bourse. Under the agreement, TNS is offering high speed, reliable, cost-effective connectivity services to the JPX Co-location Service via its secure link into the arrownet-Global Service.

How your entire financial life will be stored in a new ‘digital vault’
The Telegraph
A new digital database will put every detail of people’s financial affairs in one place – and the Government, financial services industry, Google and Microsoft are all understood to be involved

FX technology bets to drive dealer market shares
by Paul Golden, Euromoney
The jury is out on whether the rise of tech-savvy non-banks means FX banks should adopt either a full service, market champion model or a simplified, limited service provider model, or something in between.

U.S. Transfer of Internet Oversight Is Delayed
In a climate of international mistrust over how the government of the United States handles Internet data, the Commerce Department on Monday said it would delay by at least a year its plan to cede authority over the global address system for the web.


Citigroup Affiliates to Pay $180 Million to Settle Hedge Fund Fraud Charges
he Securities and Exchange Commission today announced that two Citigroup affiliates have agreed to pay nearly $180 million to settle charges that they defrauded investors in two hedge funds by claiming they were safe, low-risk, and suitable for traditional bond investors. The funds later crumbled and eventually collapsed during the financial crisis. Citigroup Global Markets Inc. (CGMI) and Citigroup Alternative Investments LLC (CAI) agreed to bear all costs of distributing the $180 million in settlement funds to harmed investors.

Church praises pastor arrested in $30M insider-trading ring
By Michelle Celarier, NY Post
Baptist fundamentalists from the former Soviet Union are praying for one of their own — a Pennsylvania pastor indicted last week for being part of a massive Ukrainian insider-trading ring.

Citigroup to pay investors $180M in hedge fund fraud settlement
By Michelle Celarier, NY Post
Citigroup’s long and sordid history with hedge funds ended Monday when it agreed to pay $180 million to end a Securities and Exchange Commission probe into two hedge funds that blew up during the financial crisis.

N.J. hedge fund manager cleared of Carter’s insider trading charges
A retired New Jersey hedge fund founder was acquitted on Monday on charges that he illegally traded in shares of children’s apparel maker Carter’s Inc in a rare defense trial win in an insider trading case. A federal jury in Atlanta cleared Steven Slawson, co-founder of Titan Capital Management, of all 34 counts he faced including for securities fraud, wire fraud and conspiracy, his lawyer said.

Environmental & Energy

US shale industry faces crackdown on methane gas leaks
Barney Jopson in Washington and Ed Crooks in New York, FT
An oil derrick in the Bakken shale area of North Dakota©AP
The US shale industry will face a crackdown on greenhouse gas leaks under regulations being prepared by the Obama administration to curb a harmful side-effect of the fracking boom.

U.S. Is Set to Propose Regulation to Cut Methane Emissions
The Obama administration is expected to propose as soon as Tuesday the first-ever federal regulation to cut emissions of methane, a powerful greenhouse gas that contributes to global warming, by the nation’s oil and natural-gas industry, officials familiar with the plan said on Monday.

Arctic Drilling Approval Threatens Obama’s Climate Legacy
By Katherine Bagley – InsideClimate News
The Obama administration’s final approval of Royal Dutch Shell’s drilling for oil in Alaska’s Chukchi Sea provoked an angry reaction on Monday from environmentalists who had come to consider President Obama a champion in the fight against climate change.

U.S. Is Set to Propose Regulation to Cut Methane Emissions
By Coral Davenport – The New York Times
The Obama administration is expected to propose as soon as Tuesday the first-ever federal regulation to cut emissions of methane, a powerful greenhouse gas that contributes to global warming, by the nation’s oil and natural-gas industry, officials familiar with the plan said on Monday.


Playing Chinese markets is as simple as ‘follow the leader’
Some foreign investors have found a new and simple way to make money from China’s dysfunctional stock markets – by dispensing with market research and playing “follow the leader” instead.

Stanford Is Giving This Chinese Investor $200 Million; Zhang Lei’s Hillhouse Capital is investing money for at least six of the 10 wealthiest U.S. universities
By MIA LAMAR in Hong Kong and TIMOTHY W. MARTIN in New York, WSJ
Zhang Lei is fast becoming a big man on campus.

Alibaba Arm’s ‘Fortune’ App Helps Rookie Chinese Buy Funds
Bloomberg Business
Alibaba Group Holding Ltd.’s finance affiliate unveiled a wealth-management app on Tuesday to help less well-heeled Chinese buy into hundreds of funds and track stocks from Hong Kong to the Nasdaq off their smartphones. Ant Fortune complements the PayPal-like Alipay and other services proffered by Zhejiang Ant Small & Micro Financial Services Group, a conglomerate controlled by Alibaba co-founder Jack Ma.

Frontier Markets

Turkey’s lira hits historic low after central bank leaves rates unchanged
By Reuters
The Turkish lira hit its weakest-ever level against the dollar on Tuesday after the central bank left interest rates unchanged despite a tumble in the lira due to political uncertainty.

John Lothian Newsletter

We visit more than 100 websites daily for financial news (Would YOU do that?)

“John Lothian and Company… our industry intelligence.”

Rick Lane

CEO, Trading Technologies

Past JLN Newsletters

Pin It on Pinterest

Share This Story