John Lothian Newsletter: Banks Consider New Corporate-Bond Trading Network; CME Group hears complaints, may tweak planned fee hikes; ASX System Error Forces Chi-X to Delay Start of Auction Product

Nov 25, 2013

First Read

Timothy Lothian Takes a Stand as an Eagle Scout
Yesterday my Boy Scout Troop and family held an Eagle Court of Honor for my son Tim. It was was quite an affair of family, friends, scouts, scouters and lots of memories. It was just like holding a wedding, but without the other side.

Part of the tradition in our Troop, when a Scout is so honored at an Eagle Court of Honor, is for the Eagle Scout to give a gift to the troop. In our troop, each Scout gives a flag to the troop which has significant meaning to him. Over the years we have had scouts give flags from American history, military arms (Army, Navy, Marines), political organizations (UN), local governments (Illinois, Elmhurst) and the like.

Tim decided he wanted to make a statement in support of people who have been previously discriminated in scouts, some of whom still are being discriminated against. He gave a LGBT flag to the troop.

This is not a statement of his sexual orientation, but rather a statement about what he believes, which is as he said, “People should not be discriminated against because of who they love.”

He gave a positive statement of his belief, not a complaint. He said progress was being made towards LGBT individuals and he hoped more would be in the future. He noted that the State of Illinois passed a same-sex marriage law the same day the flag we ordered arrived.

Tim spoke about his scouting experience earlier in the program and compared it to the poem from Robert Frost, “The Road Less Travelled.” He said he took the more difficult road, not getting the Eagle Rank at the age of 15 or 16, but rather at 17+.

He took the road less traveled in the selection of the flag he gave. He could have taken the easy road of some historic American flag. Instead, he took the road less traveled, the more difficult one and spoke up on behalf of people being discriminated against. A father could not be more proud.

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Thank you to SGX’s Magnus Böcker and Michael Syn
I want to thank Magnus Böcker and Michael Syn of SGX for editing JLN last week. I greatly enjoyed not being in a hospital and reading someone else edit my newsletter. I hope you enjoyed their Asian perspective on the news.
~John J. Lothian

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Kim Taylor

What’s in a name? CME’s Kim Taylor Says Extra Cost
JohnLothianNews.com
Clearinghouses are now considered systemically important to financial markets. But with that designation are new regulations and capital requirements. John Lothian News sat down with Kim Taylor of CME Clearing to talk about how a new requirement will raise costs for market participants. Commodity Futures Trading Commission (CFTC) regulation 39-33, passed on November 15, is a capital requirement that is set to be implemented by the end of the year. It calls for US-based clearinghouses to be designated as qualified central counterparties (QCCPs), which ultimately would give them more favorable capital requirements under Basel III but tough capital US guidelines.

Watch the video »

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CME Group hears complaints, may tweak planned fee hikes -broker
Reuters
CME Group Inc, the world’s largest futures exchange operator, may consider minor modifications to its plan to raise fees for traders in response to complaints from customers, a futures executive who met with company officials said on Friday.
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***DA: The only way to gauge willingness to pay (WTP) is to raise prices until you find the equilibrium. Maybe they will adopt the Kohl’s model, where you raise prices, but then always have a sale going on – “Order CME Data Services now through Feb. 28 and receive a 40 percent discount off MSRP.”

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A Trading Tactic Is Foiled, and Banks Cry Foul
FLOYD NORRIS – NYTimes.com
What country are you in? Where is your business located? In what country did your trade take place? Those were once questions whose answers were so obvious that no one asked them. Now they are questions that can drive financial regulators and tax collectors to distraction.
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***** Evolve or die. Pretty simple.

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Tweaking Reg SCI, 5 Points of Contention
By Ivy Schmerken – Wall Street & Technology
The SEC’s proposed Regulation SCI is intended to protect market technology from outages and technical glitches. But industry commentators contend the rule doesn’t include all market participants and underestimates the implementation costs. Here are five areas that market participants would like to change.
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***** I thought the part where all the traders had to have the Ironman heart power plant was excessive.

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MGEX Breaks AJC Daily Volume, Open Interest Record By Over 50 Percent
MGEX, a Designated Contract Market and Derivatives Clearing Organization, set a new daily volume record for Apple Juice Concentrate during yesterday’s trading session, shattering the previous record, set on August 29, 2013, by 53 percent.
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***** The last stand alone futures market continues to grow a new contract.

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Iosco warns of risks of ‘weak’ cross-border dispute resolution
Sam Fleming – FT.com
Financial markets risk fragmentation and rising costs because of “manifest weaknesses” in the tools for resolving cross-border disputes, a senior watchdog has warned.
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***** Old watchdogs rarely get off the porch.

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Catherine Clay Named CEO of Livevol
Catherine Clay is the new CEO of Livevol, Inc., the leader in equity and index-options technology and services. Clay, who was previously the company’s chief strategy officer, will lead the company’s strategic initiatives for its options-analytics, market-data and brokerage businesses.
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***** We congratulate Catherine Clay, but wonder what happened to our friend and former CEO Paul Finnegan. The press release makes no mention of him.

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Cinnober’s chairman nominated to Guldklubban 2013
Cinnober
Nils-Robert Persson, the chairman of Cinnober Financial Technology for many years, has been nominated for the annual Guldklubban award, as a candidate from the Stockholm region. The nomination pertains to unlisted companies.
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***** Congratulations to a great gentleman.

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Does Chart Analysis Really Work?
Ewen Chew – MoneyBeat – WSJ
Stochastics, moving averages, standard deviations – fancy charting terms you may have heard of. But do they really predict price movements? Or are they mathematical mumbo jumbo?
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***JM: Technical indicators have great value, but not as predictors; it’s funny to me how people stay stuck on needing to predict, rather than react.

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Zombie Personal Finance Books of 2014
Suzanne Woolley – Bloomberg
“Stop it. Just stop it,” you said. “Stop with the personal finance books. Twelve ways to build my nest egg. Six ways to retire at 60. Sixty ways to retire at 6. What would the Buddha do with $5,000 and the right ETF? I can’t take it anymore.” Well, you know what? Neither can they.
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***** One way to sure wealth is a write a personal finance book. Hmm.

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Gary DeWaal’s Bridging the Week November 18 to 22 and 25, 2013 (Wash Trades’ Guidance, ESMA Cross Border Standards; Customer Funds at MF Global)
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Signs of Change in News Mission at Bloomberg
By AMY CHOZICK, NATHANIEL POPPER, EDWARD WONG and DAVID CARR – NYTimes.com
Bloomberg faces newsroom layoffs, a shift in emphasis back to financial news and skepticism from the business side that investigative journalism might not be worth the potential problems it could create for terminal sales.
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***** Journalism is not easy, but that is why the press is mentioned and protected by the Bill of Rights in the U.S. Constitution. Of course, then there is this thing about making money too.

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MarketsWiki

MarketsWiki Page of the Day
Singapore Exchange Limited
jlne.ws/9Bn27A

MarketsWiki Recent Updates

People

Paul Finnegan; Catherine Clay; Muthukrishnan Ramaswami

Companies, Organizations and Groups

IntercontinentalExchange Inc.; Bloomberg; Singapore Exchange Limited; Livevol

Products

Russell 2000 Volatility Index

Miscellaneous

Implied volatility; Job Postings; Bilateral agreements

Statistics

45,466,814 pages viewed, 7,712 articles, 168,815 edits
MarketsWiki Statistics

Lead Stories

Banks Consider New Corporate-Bond Trading Network
Katy Burne – WSJ.com
Executives at large banks are reviewing financial plans to invest in a new U.S. corporate bond trading platform that they would use to trade with each other and with clients, said people familiar with the matter.
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ASX System Error Forces Chi-X to Delay Start of Auction Product
Adam Haigh – Bloomberg
Chi-X Australia Pty, which had planned to offer investors a way of trading the equity market closing auction starting today, postponed the product after a system error at ASX Ltd. (ASX)
jlne.ws/1824O9Q

NetOTC offers to cut risks of off-exchange derivatives trades
Philip Stafford – FT.com
A new UK company planning to bring clearing house-style risk management to off-exchange derivatives trading wants to begin operations by next September after finalising a deal for its technology platform.
jlne.ws/1824Qi8

Regulators, Divided Over ‘Volcker Rule,’ Weigh Going It Alone
Scott Patterson – WSJ.com
Bank regulators are considering passing the ‘Volcker rule’ without the blessing of the Commodity Futures Trading Commission, which has been pushing for 11th-hour changes ahead of a year-end deadline to finalize the regulation, according to people familiar with the process.
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Aquis Exchange poised for debut
Anish Puaar – Financial News
Aquis Exchange, Europe’s newest alternative equity market, is set to launch this week with 11 customers, in a bid to shake up trading tariffs across the region.
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Trade associations put FTT concerns to EU
Tim Cave – Financial News
Financial sector trade bodies “extremely worried” by the potential impact of the proposed EU financial transaction tax have presented a report to policymakers and officials in Brussels.
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New U.S. derivative rules leave Asia markets vulnerable
Reuters
Several Asian and U.S. banks are working around new U.S. regulations on derivatives trading aimed at preventing a repeat of the 2008 financial crisis – moves that are legal but leave markets in the region exposed to a risky liquidity shortage, traders and bankers say.
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Banks’ regulatory challenges boost demand for interim managers
Vanessa Kortekaas – FT.com
Banks’ efforts to handle a growing burden of regulation have helped drive a record demand for interim managers in the UK’s financial services sector, according to research.
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Swiss voters reject proposal to limit executives’ pay
Reuters
Swiss voters rejected a proposal on Sunday to cap the salaries of top executives at 12 times that of a company’s lowest wage, heeding warnings from industry leaders that the measure could harm the country’s economy.
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Too big to manage or too badly managed to be big?
Ben Wright – Financial News
There can’t be too many people who don’t realise that the investment banking industry is in a fair old pickle right now.
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‘Zero-loyalty environment’ blamed for financial malpractice
Alexander Campbell – Risk.net
Focusing on short-term personal rewards and ignoring long-term institutional risks contributed to the financial crisis – but it was a rational response to the pressures on bank employees, a seminar at the London School of Economics (LSE) heard yesterday.
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Regulatory

New SEC members offer differing views on enforcement
Reuters
The two newest members of the U.S. Securities and Exchange Commission on Friday offered opposing views about how their agency should exert its enforcement power, with one urging restraint and the other advocating a strict crackdown on lawbreakers.
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U.S. judge throws out SEC lawsuit over ‘suspicious’ Onyx trading
Reuters
Two traders have won the dismissal of a U.S. Securities and Exchange Commission lawsuit accusing them of insider trading in Onyx Pharmaceuticals Inc as the company considered a takeover bid from rival Amgen Inc. The decision by U.S. District Judge Paul Oetken in Manhattan, made public Friday, marked a setback in what has become an increasingly common tactic by the SEC of freezing the accounts of unknown traders engaged in suspicious trading activities.
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UK’s Financial Conduct Authority Proposes New Rules On Dealing Commission For Investment Managers
The Financial Conduct Authority (FCA) has today proposed improvements to the rules and new guidance over investment managers’ use of client commissions. These changes will ensure that charges paid by consumers for executing trades and related services – known as dealing commission – are fairer and more transparent.
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ASIC Goes Live With New Surveillance System – First Derivatives
First Derivatives, a leading provider of software and consulting services to global investment banks, brokers, hedge funds and exchanges, today announces the successful implementation of its market surveillance system at the Australian Securities and Investments Commission (ASIC).
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NFA Notice to Members I-13-37: Reporting Requirements for Thanksgiving Day
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Remarks At The American Bar Association Business Law Section’s Federal Regulation Of Securities Committee Fall Meeting, SEC Commissioner Kara M. Stein, Washington, DC, Nov. 22, 2013
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Remarks To The Los Angeles County Bar Association Securities Regulation Seminar, SEC Commissioner Michael S. Piwowar, Los Angeles, California, Nov. 22, 2013
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Federal Reserve Governor Daniel K. Tarullo, At The Americans For Financial Reform And Economic Policy Institute Conference, Washington, D.C. November 22, 2013, Shadow Banking And Systemic Risk Regulation
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Exchanges & Trading Facilities

CME Group Receives Commodity Business Award for Commodity Exchange of the Year
CME Group, the world’s leading and most diverse derivatives marketplace, today announced that it has been honoured with the Commodity Business Award for Commodity Exchange of the Year, 2013.
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CME Group Announces 2014 Annual Meeting Date
CME Group today announced that its 2014 Annual Meeting of Shareholders will be held at 3:30 p.m., Central Time, on Wednesday, May 21, 2014, in the Auditorium at CME Group, located at 20 South Wacker Drive, Chicago, Illinois.
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Magnus Billing, President Of NASDAQ OMX Stockholm, Elected Member Of The FESE Board
NASDAQ OMX announces that Magnus Billing, President of NASDAQ OMX Stockholm, has been elected member of the board of the Federation of European Securities Exchanges for a period of three years.
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NASDAQ Private Market Expands Senior Leadership Team
NASDAQ Private Market, LLC (NPM) announced today two new appointments to its senior leadership team: Carine Schneider will head NPM’s Equity Management Solutions and Cyndi Rodriguez will serve as Chief Legal Officer.
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NZX Dairy Futures Market Prospers
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TOM MTF Statistics Week 47 2013
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Hedge Funds & Managed Futures

Two top asset management women bow out
Mike Foster – Financial News
Anne Healy, one of Financial News’ 100 top women in European financial markets, is resigning as UK and Ireland senior managing director at US-based MFS Investment Management. Meanwhile, Penny Green, who appeared on the FN list of 100 influential women in 2011, has confirmed she is stepping down as chief executive of the Superannuation Arrangements of the University of London.
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Analysis: Why hedge funds still manage to seduce
Reuters
Hedge fund investor Hugh Culverhouse Jr. says the $2.25 trillion industry was an easier place for wealthy individuals to make money a decade ago. Funds were smaller, returns were higher and managers did more to cultivate the support of those well-heeled individuals and families because large institutions like pension funds had yet to embrace the industry.
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John Paulson’s Funds Clock Strong Returns in 2013
Maureen Farrell – MoneyBeat – WSJ
So far 2013 has been a comeback year for John Paulson. The hedge-fund manager, best known for his huge win betting against the housing market ahead of the financial crisis, boasted year-to-date returns between 15% and 45% for every fund except gold among his $19 billion of assets under management, according to a source familiar with the fund’s performance.
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Half female asset management staff subjected to sexism
Chris Newlands and Madison Marriage – FT.com
Almost a third of female asset management staff have suffered sexual harassment at work and more than half have endured regular sexist behaviour, destroying the notion that fund management represents the softer side of financial services.
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***JM: I missed the memo about asset management being a “softer side” of anything. I’m not even sure what that means; is one “soft” if one refuses to mistreat a class of fellow humans?

How Technology Can Uncork Content Bottlenecks for Asset Managers
Doug Winters – Wall Street & Technology
From customer relationship management software to high frequency trading algorithms, the finance industry has become one of the world’s more automated industries. But technology that enhances one-on-one client experience has remained elusive. This is particularly apparent in the asset management industry, where a bottleneck at the point of content creation is slowing down the pace at which entire firms can scale in a business model that still relies heavily on human interaction.
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Australia’s Lend Lease to Launch China-Focused Retail Property Fund
WSJ.com
Sydney-based property and infrastructure firm Lend Lease Group LLC plans to start a China-focused retail property fund next year, as it looks to benefit from the country’s economic growth.
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‘Chocfinger’ ambitions soured by tough cocoa market
Emiko Terazono – FT.com
In the world of cocoa, there are few who know more about the market than the man dubbed “Chocfinger”. So it was a shock to many in the commodities market when the London-based trading house Armajaro, co-founded by Anthony Ward, the canny trader known for his audacious trades in the cocoa market, had to be rescued earlier this month.
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Omers’ Redman confounds the critics
Dan Dunkley – Financial News
When the Canadian province of Ontario’s $60 billion pension fund unveiled plans to build a European buyout team in 2009, many in the market were sceptical.
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CFTC Commitments Of Traders Reports Update
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Banks & Brokers

J.P. Morgan’s Top Lawyer: ‘At What Point Does This Stop?’
Dan Fitzpatrick – MoneyBeat – WSJ
Days after signing his name to a $13 billion settlement with the Justice Department, J.P. Morgan Chase & Co. general counsel Stephen Cutler took several shots at U.S. regulators during a public appearance Friday.
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$13 Billion, Yes, but What Took So Long?
GRETCHEN MORGENSON – NYTimes.com
After weeks of pre-deal chatter about its $13 billion settlement with JPMorgan Chase, the Justice Department finally nailed it down last week. And for the first time, the department provided a glimpse of the investigatory findings upon which the settlement was based.
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Goldman’s not-so-great currency caper
Tracy Alloway | FT Alphaville
Alternate title – Did Goldman Sachs lose $1.3bn in currency trades in the third quarter, or not? It might seem like there’s a simple answer here, but as is so often the case in finance, there isn’t.
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Big Investment Banks Still Need to Cut
DOMINIC ELLIOTT – NYTimes.com
Big has been bad for shareholders in investment banks. That’s according to a report published by the consulting firm McKinsey this week. The 13 largest investment banks made an average return on equity of just 8 percent last year — below the 10 percent achieved by the next 200. Given banks’ double-digit cost of capital, the bulge bracket is still frittering away shareholders’ money. More cuts are needed.
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Spain’s Popular sells property management unit to U.S. funds
Reuters
Spain’s Banco Popular said on Monday it had agreed to sell its property management unit to U.S. based investment firms Kennedy Wilson and Varde Partners, though it will retain a minority stake in the business.
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Clearing & Settlement

MarketAxess SEF Complies with Impartial Access
Ivy Schmerken – Wall Street & Technology
Changing its technology in reponse to the CFTC’s guidance of Nov. 14, MarketAxess said it’s now providing open and impartial acess to its SEF for all market participants. MarketAxess is the first SEF to publicly state that it made changes to its SEF following the guidance issued on Nov. 14.
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OTC Clear Has Smooth Soft Launch
OTC Clearing Hong Kong Limited, a subsidiary of Hong Kong Exchanges and Clearing Limited established to provide clearing services for over-the-counter derivatives, announces that its soft launch of business was completed smoothly today.
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All Pain, No Gain: The CFTC’s Rule on CCP Qualifying Liquid Resources
Streetwise Professor
Matt Leising had a nice article a few days back about the CFTC’s rule that does not treat US Treasury securities as “qualifying” liquid resources for CCPs. Instead, under new regulation 33-33 they must obtain “prearranged and highly reliable funding.” Based on Fed rules, this means that a CCP must get committed line of credit from banks. This imposes a substantial cost on CCPs, because under new Basel III rules, committed lines impose a large capital charge on the issuing banks. For purposes of calculating capital, the banks have to assume that the lines are fully drawn. This capital cost will be passed onto CCPs.
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Ucits derivatives use hamstrung by collateral rules
Matt Cameron – Risk.net
Large asset managers have called on European regulators to revise rules that prohibit Ucits funds from using received cash collateral to meet central counterparty (CCP) margin requirements – a restriction they say will constrain legitimate use of derivatives by the funds.
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NASDAQ OMX Commodities Announces Launch Of Trade Reporting And Clearing Link From EFETnet To NASDAQ OMX
NASDAQ OMX Commodities is pleased to announce the introduction of a new trade reporting and clearing link from EFETnet to NASDAQ OMX.
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Indexes & Products

Tokyo Stock Exchange: ETF License Application For JPX-Nikkei Index 400
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Tokyo Stock Exchange: Free Float Weight For JPX-Nikkei Index 400
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Deutsche Börse: Unscheduled Component Changes In MDAX And SDAX
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Technology

GC Pause-Free Java Applications Through Orchestrated Memory Management
Cinnober is a leading, independent supplier of trading, clearing and surveillance technology to the financial industry, including exchanges, clearinghouses and banks. The company has previously published several white papers on latency, as well as about the benefits of using Java as a high-performance language for mission-critical financial applications
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Trayport And Trayport Contigo Win Industry Awards.
Trayport, a leading provider of energy trading solutions to traders, brokers and exchanges worldwide, announced today that it and its subsidiary Trayport Contigo have won two key awards – Excellence in Trading Operations and Technology and Excellence in CTRM Software at the Commodity Business Awards.
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Quincy Microwaves ICE, Eyes Lower Latency
Faye Kilburn – WatersTechnology
Oakland, Calif.-based low-latency connectivity and market data provider Quincy Data will next year begin distributing US and European futures data from IntercontinentalExchange via its Quincy Extreme Data service, to support the low-latency arbitrage strategies of hedge funds, proprietary trading firms and banks.
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Calypso Technology Expands Offices In Santiago, Chile
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Enforcement

Ex-Credit Suisse Executive Sentenced in Mortgage Bond Case
RACHEL ABRAMS and PETER LATTMAN – NYTimes.com
A former top executive at the Credit Suisse Group was sentenced to two and a half years in prison on Friday for inflating the value of mortgage bonds as the housing market collapsed.
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U.S. seeks to add Wells Fargo exec as fraud defendant
Reuters
The U.S. government on Friday sought permission to add Wells Fargo & Co executive Kurt Lofrano as a defendant in its year-old lawsuit accusing the bank of fraud.
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NFA Regulatory Actions: Marc R. Silverman
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[AMF Canada] Late insider trading reports – André Audet pleads guilty
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Environmental & Energy

Global Warming Fight Advances With First Steps on Treaty
Bloomberg
Diplomats from almost 190 nations endorsed a set of measures on global warming, laying the groundwork for a treaty to be adopted in 2015 that would limit pollution by all nations for the first time.
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Warsaw climate talks set to reach deal to agree targets on emissions cuts
The Observer
Marathon talks on a new global agreement on climate change looked likely to end on Saturday night in a partial deal that would require all countries to come forward with targets on curbing their greenhouse gas emissions within a little over a year.
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Deals at Climate Meeting Advance Global Effort
The New York Times
Two weeks of United Nations climate talks ended Saturday with a pair of last-minute deals keeping alive the hope that a global effort can ward off a ruinous rise in temperatures.
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Asia-Pacific

SGX And China Securities Regulatory Commission Establishing Direct Listing Framework
Singapore Exchange (SGX) and the China Securities Regulatory Commission (CSRC) today announced they will establish a Direct Listing Framework for companies from China to list in Singapore.
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Bureaucrats seek to pick winners with $1 billion ‘Cool Japan’ Fund
Reuters
Japan’s industry bureaucrats once guided the nation’s world-beating drive to export cars and electronics. Now that Toyota and Sony have been household names worldwide for decades, the government wants to make sure the rest of the world buys Japanese sake, sashimi and anime.
jlne.ws/1824OXp

Taxing times for Singapore as corporate strategy faces scrutiny
Reuters
Tiny Singapore does not look at first sight like one of Apple Inc’s priority markets: it has no official Apple Store and doesn’t even rate a mention in the company’s latest annual report.
jlne.ws/1824RCH

OTC Clear: Building out a new asset
Charles Li Direct – HKEx
Today marks an important milestone for HKEx, as we have officially launched our over-the-counter (OTC) derivatives clearing house, OTC Clear. The launch may not attract much attention locally or internationally, but it does represent an important step for us in fulfilling our long-term strategy to diversify into more asset classes and develop Hong Kong as a comprehensive financial centre.

JCCH: Japan Commodity Clearing House SPAN Parameter Update effective Dec. 2
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Thai Bourse Opens Investment Info Center “SET IC” In Northeastern Thailand
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SGX Bull Charge raises more than $3 million
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Sunrise Brokers joins SGX as derivatives trading member
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Frontier Markets

JSE Now Offers Quanto Currency Futures For Euro/Dollar Exposure
In a move to encourage more private investors to embrace currency derivatives, the Johannesburg Stock Exchange is expanding its Quanto derivatives range to include a currency contract based on the Euro/Dollar exchange rate, the world’s most actively traded currency pair.
jlne.ws/1824Uy8

South Africa: A better member of the EM acronym club
John Dizard – FT.com
Many, if not most, South African traded equities are overpriced, but the country is in a better position to get through a global liquidity drought than other members of emerging markets acronym clubs. I have a hard time taking terms such as “Brics” seriously, conflating, as they do, countries such as South Africa and China. You would think that with such overstaffing in the financial sector, it would not be necessary to create shortcuts around serious thought.
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MCX-SX is well ring-fenced from NSEL crisis: Sebi
The Economic Times
Sebi Chairman UK Sinha today allayed fears of crisis at the parent group of MCX-SX spilling over to the bourse saying that the troubled Financial Technologies- promoted stock exchange is ring-fenced from other group firms.
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KSE to have separate platform for SMEs
DAWN.COM
The country’s capital market will have a separate platform for small and medium enterprises in the next 12 months and efforts are underway to allow access to alternate financing options for budding entrepreneurs, said Nadeem Naqvi, CEO Karachi Stock Exchange on Friday.
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Tehran Stock Exchange Weekly Digest – 20 November
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Miscellaneous

Audit Board Finds Flaws in Reviews by Deloitte
FLOYD NORRIS – NYTimes.com
The regulator of accounting firms in the United States said on Friday that Deloitte & Touche, for the second consecutive year, had failed to correct deficiencies in its audit procedures to its satisfaction.
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