John Lothian Newsletter: Banks Mull Bailing on Libor in Loans as ICE Adds Licensing Fees; TMX Confirms StrikeNET Buy to Link to U.S. Markets; US bank bonus curb hit by regulatory squabble

Aug 15, 2014

First Read

Summer Almost Over
John Lothian
My daughter started school today. She is a junior at York High School in Elmhurst and they have all the non-freshman starting today. The freshman start next week.

This is the first sign that summer is over, or beginning to be over. I am still trying to figure out what happened to July.

The sweet corn in the Midwest has come in and the Wisconsin sweet corn is incredible. If this is any indication of the quality of the feed corn crop, there are going to be some very happy livestock. This is a great crop.

In the U.S. we don’t consider summer to be over until Labor Day Weekend. We still have a couple of weeks until then. So get out and enjoy the last couple of weeks of summer, even if your kids, like mine, are back in school.


Ex-U.S. SEC chair named to serve on Wall Street regulatory board
Sarah N. Lynch – Reuters
Elisse Walter, a former regulator who twice served as head of the U.S. Securities and Exchange Commission, was appointed on Thursday to serve as a public governor to the board of Wall Street’s self-funded regulator.

***** Once a regulator, always a regulator


Fight Brews on Changes That Affect Derivatives
PETER EAVIS – Dealbook – NY Times
Tensions are building in an enormous market that nearly brought Wall Street to its knees in 2008. Financial regulators are pushing for an arcane but crucial modification to the contracts that stand behind the $700 trillion global market for derivatives.

***JK: Who doesn’t like a good brew? Banks apparently.


With Absence of Glitches, Confidence Rising in Market’s Structure
Scott Patterson – MoneyBeat – WSJ
The lack of a major market snafu this summer—so far—appears to have given a shot in the arm to confidence in the plumbing of the U.S. stock market, a new survey shows. A Tabb Group survey of market players and watchers, including the media, released Thursday found that 56% of respondents have “high” or “very high” confidence in the structure of the market—the computerized, laser-driven nuts and bolts that make it go—a big leap from 30% in April 2013 and 34% in August 2012.

***JM: Did we actually fix the leak in the roof, or is it just sunny outside today?


Nasdaq hardware breakdown causes ‘stuck’ orders
Nicole Bullock and Eric Platt in New York – Financial Times
Nasdaq suffered a hardware breakdown on Thursday which caused its flagship US equities exchange to fail to properly route trades with some investment firms.

***JM: What beautiful sunny weather we’ve had lately!


TFEX sees 257% jump in July derivatives volume
Futures & Options World
Thailand Futures Exchange (TFEX), part of the Stock Exchange of Thailand (SET) saw July trading leap a massive 257% year-on-year as clients switched on to the exchange’s new mini futures.

***** I love a massive leap in minis.


Macquarie forced to contact 160,000 clients over bad advice
Andrew White – The Australian
THE corporate regulator has warned there remain widespread shortcomings in the financial planning industry as it announced a dramatic escalation of its actions against Macquarie Group that will require the bank to offer to review advice given to every one of the firm’s 160,000 clients since 2004.

***** Thank goodness we all don’t have to do that. It would take me forever.


Cosgrove moves into ethanol trading after GFI
Alexander Osipovich –
After a three-decade career in energy brokerage, Michael Cosgrove has reinvented himself as an ethanol trader.

***JK: No one can say the man doesn’t know his energies.


50 Financial Twitter Feeds You Must Follow
Katie Martin – MoneyBeat – WSJ
The discussion of finance on Twitter is sounding more mature these days. Once simply a swirling pot of news, on-the-fly analysis, ridiculous market rumors and general snark, the social media site is now home to some of the fastest sophisticated analysis available on the web. If you know where to look, there are some very solid accounts owned by banks, investment firms and research houses tweeting out some of the same research on markets and economics as they email to their clients.

***** The Wall Street Journal is so Wall Street.



MarketsWiki Page of the Day
Markit Group Limited

MarketsWiki Recent Updates


Jourdan Brunson; Derek West

Companies, Organizations and Groups

Markit Group Limited; LME Clear




51,939,368 pages viewed, 8,016 articles, 185,173 edits
MarketsWiki Statistics

Lead Stories

Banks Mull Bailing on Libor in Loans as ICE Adds Licensing Fees
Jody Shenn and Matthew Leising – Bloomberg
Some banks may stop using Libor as a benchmark for interest rates on loans because of new licensing fees being charged by Intercontinental Exchange Inc., which this year took over administering the measure, according to the American Bankers Association.

Canada’s TMX Confirms StrikeNET Buy to Link to U.S. Markets
Don Curren – WSJ
Canada’s TMX Group Ltd. confirmed Thursday it is buying StrikeNET, a unit of high-frequency trading firm Global Trading Systems LLC, to launch a microwave network linking markets in Toronto, New York and Chicago. The acquisition by the operator of the Toronto Stock Exchange was first reported by The Wall Street Journal on Aug. 5.

US bank bonus curb hit by regulatory squabble
Gina Chon in Washington – Financial Times
A US proposal requiring executives of the world’s largest banks to defer compensation to prevent the kind of risk-taking that spurred the financial crisis has become bogged down in regulatory infighting, which has caused a critical Dodd-Frank financial reform mandate to languish for the past three years.

Pershing Square sues U.S. over Fannie Mae, Freddie Mac
Jonathan Stempel and Svea Herbst-Bayliss – Reuters
Pershing Square Capital Management LP, the hedge fund firm run by William Ackman, has sued the U.S. government, claiming that its stripping of Fannie Mae’s and Freddie Mac’s profit illegally short changes investors in the mortgage companies’ common stock.

Traders Lured to Bet on Power Overloads Worth Billions
Lynn Doan and Jonathan N. Crawford – Bloomberg
Payouts that reached almost $2 billion in the first quarter are attracting traders to the transmission-rights markets run by regional U.S. power-grid operators. The rights are wagers on where power lines may overload, choking the flow and forcing higher-cost electricity to be substituted.

Latest EU reporting rules pass without a hitch
Anish Puaar – Financial News
The latest wave of derivatives reporting rules in Europe have been well handled by market participants, with many stating that lessons have been learnt from the shambles that followed the initial deadline in February.

Concerns Remain Ahead of New Silver Benchmark Debut
Ese Erheriene And Francesca Freeman – WSJ
With the unveiling of London’s shiny, new silver benchmark Friday, metal producers and traders are hoping to head off lingering concerns about the credibility of the market. But as the price-setting process undergoes the first major overhaul in more than a century, there are signs the revamped process isn’t quite ready.

The Ponzi Scheme Within Bernie Madoff’s Ponzi Scheme
Paul Vigna – MoneyBeat – WSJ
Investigations trying to unwind the machinations of Bernie Madoff’s Ponzi scheme in 2009 were surprised to find what appeared to be another Ponzi scheme inside it, and the father-and-son team that were running that scam this week pleaded guilty. MarketWatch’s Sitel Patel joined the MoneyBeat show with details.

Spiderwoman Brings Hope to Winklevoss Twins’ Bitcoin ETF
Christopher Condon – Bloomberg
Tyler and Cameron Winklevoss are fighting for approval from regulators for their proposed bitcoin exchange-traded fund. They stand a chance because Spiderwoman is on the case.


Banks horse-trade on ringfence fine print
Sam Fleming, Sharlene Goff and Martin Arnold – Financial Times
Some of Britain’s biggest banks are expecting to secure concessions from the regulator over the new ringfencing regime, in an example of the industry’s fightback against tougher regulation.

Smaller banks see regulatory relief after U.S. elections
Emily Stephenson – Reuters
All but the biggest U.S. banks could see relief from some financial reforms after the November elections even if control of the U.S. Congress remains divided between Democrats and Republicans.

Corporate treasurers find opportunity amid regulation
Kimberley Long – Euromoney Magazine
Squeezed budgets, tangled systems and regulations are still holding back corporate treasurers as they search for ways to make their operations easier and cost effective.

Time running out to prepare for Mifid II changes
Meredith Gibson & Helen Pykhova –
Operational risk practitioners must prioritise reading up on the Mifid II rules, which promise radical changes in the way banks are governed and regulated across Europe

Firms Elect Two Industry Governors to FINRA Board of Governors, Two New Public Governors Appointed
The Financial Industry Regulatory Authority (FINRA) announced the results of voting that took place at its 2014 Annual Meeting today in Washington, DC. In accordance with FINRA By-Laws, firms elected two Governors, one from among the small firms and one from among the large firms. FINRA also named two new public Governors to its Board of Governors. Governors are appointed or elected to three-year terms and may not serve more than two consecutive terms.

FINRA Warns Investors of Viral Disease Stock Scams
The Financial Industry Regulatory Authority (FINRA) issued a new Investor Alert called Viral Disease Stock Scams: Don’t Let Them Infect Your Portfolio warning investors of promotions touting stocks in companies that claim to provide products that protect against the spread of viruses or other harmful diseases. FINRA is aware of several potential investment scams involving companies that claim to be involved in the development of products that will prevent the spread of viral diseases.

ESMA Adds CCP.A To List Of Registered CCPs Under EMIR

ESMA Closed On 15 August For Public Holiday

Exchanges & Trading Facilities

Former ECON chair appointed to LSE board
Charlie Woodward – The Trade
The London Stock Exchange Group (LSEG) has announced that ex-Liberal Democrat Member of the European Parliament, Sharon Bowles, has joined its board as a non-executive director.

***** Once a liberal democrat, always a liberal democrat.

LBMA Silver Price Launches New Era in Pricing Precious Metals
Press Release
CME Group, the world’s leading and most diverse derivatives marketplace, and Thomson Reuters, the world’s leading source of intelligent information for businesses and professionals, have launched the new LBMA Silver Price mechanism in partnership with the London Bullion Market Association (LBMA).

Moscow Exchange rolls out new OTC products
Futures & Options World
Moscow Exchange has said cash-settled USD/RUB FX futures will be launched on its main over-the-counter derivatives market on August 18. The exchange said the new instrument is designed to allow market participants to hedge against exchange-rate risk. Contracts can be concluded with any expiration date and any underlying asset size.

Moscow Exchange Broadens Range Of Standardised OTC Derivatives Market Instruments

NZX Gender Diversity 2nd Quarter 2014 Statistics

Hedge Funds & Managed Futures

Passive providers under pressure to cut fees as Fidelity reignites price war
Anna Fedorova – Investment Week
Passive fund providers are under renewed pressure to reduce the cost of investing in their funds, following a move by Fidelity Worldwide Investments to cut fees on its index tracker range.

Brevan Howard Cuts Risk After Losses, Returns to Roots
Laurence Fletcher – WSJ
Brevan Howard Asset Management LLP’s flagship $26.5 billion hedge fund has more than halved its risk levels this year and moved back toward interest rate trading, the specialty of its founders, during a testing 2014.

Berkshire Hathaway shares cross $200,000 mark
Julia Rampen – Investment Week
Shares in Warren Buffett’s firm Berkshire Hathaway have reached a new high of $200,000 each.

Why Warren Buffett Never Split Berkshire’s Stock
Steven Russolillo – MoneyBeat – WSJ
One share of Berkshire Hathaway’s Class A stock is so expensive that it could pay for an entire college education. Or two houses in Omaha, Neb. Or roughly 40,000 large Blizzards at Berkshire-owned Dairy Queen. So why on earth hasn’t Warren Buffett split his company’s stock?

BlackRock hires manager for $20bn equities role
Joe McGrath – Financial News
BlackRock has hired a former executive at JP Morgan Asset Management to co-head the group’s $20 billion global equity fund unit.

Blockbuster Movies Fuel Big Wins for Hedge-Fund Investors
Gregory Zuckerman And Ben Fritz – WSJ
When it came to Lions Gate Entertainment Corp. and MGM Holdings Inc., Carl Icahn yelled “cut” too early. Box-office hits including “The Hunger Games,” “The Hobbit” and “22 Jump Street” have revived the once-struggling movie studios, rewarding a handful of hedge funds with billions in paper profits.

Hedge Funds Give Quarterly Snapshot of Their Portfolios
On Thursday, some of Wall Street’s most prominent investors offered the world a peek at their portfolios.

Canary Wharf bond investors hit by error
Matt Turner – Financial News
Investors in a pre-crisis Canary Wharf Group securitisation received an unwelcome surprise last month – an error in documentation meant the bonds would be paying out less than previously advertised.

Why the LGPS should not move to a passive investment strategy
Campbell Fleming – Financial News
The active versus passive debate continues. In mid-July we submitted Threadneedle’s response to the Department for Communities and Local Government consultation regarding the Local Government Pension Scheme (LGPS).

Banks & Brokers

Edward Jones Sponsors Program to Train Future Brokers
George Rosa Acosta – Bloomberg
Edward Jones, the 92-year-old St. Louis brokerage, is looking to head off a projected shortfall of financial advisers by sponsoring training classes at U.S. universities.

Citi adds derivatives head to new-look equities team
Giles Turner – Financial News
Citigroup has promoted a Sydney-based trader to the new role of head of equity derivatives in Europe, following a summer of churn within its global equities business.

Nomura hires ex-Credit Suisse exec for new equities trading role
Lucy Burton – Financial News
Nomura has created a new senior role within its equities unit, hiring a former stock flow trading head from Credit Suisse to the position, as the bank continues to build its global equities business.

Clearing & Settlement

Traiana enhances cross-asset matching solution
Chris Hall – The Trade
The pre- and post-trade solutions business of inter-dealer broker ICAP has revamped its post-trade cross-asset allocation, matching and confirmation service for both buy- and sell-side firms.

Indexes & Products

Billionaire Paulson Keeps Stake in Biggest Gold ETF
Debarati Roy – Bloomberg
Billionaire hedge fund manager John Paulson stuck with his holding in the biggest exchange-traded product backed by gold as prices rose on demand for a haven.


NFA revokes registration of floor trader Joel W. Himel
National Futures Association (NFA) has revoked the registration of Joel W. Himel of Vernon Hills, Ill. Himel is a floor trader at the Chicago Board of Trade (CBOT). A designated Subcommittee of NFA’s Membership Committee issued the Final Order revoking registration because Himel has failed to respond to allegations from NFA.

Atlanta accountant settles insider-trading charges with SEC
Sarah N. Lynch – Reuters
An Atlanta-based accountant agreed on Thursday to pay a fine to settle a civil insider-trading case in which U.S. regulators accused him of trading in and sharing confidential information about a restaurant stock ahead of a tender offer announcement.

Ex-manager at indicted money exchange pleads guilty to U.S. charges
Joseph Ax – Reuters
A former manager at indicted digital currency exchange Liberty Reserve pleaded guilty on Thursday in New York to federal charges of conspiracy and operating an unlicensed money transmitting business.

SEC Charges N.Y.-Based Brokerage Firm With Overcharging Customers in $18 Million Scheme
The Securities and Exchange Commission today charged New York-based brokerage firm Linkbrokers Derivatives LLC for unlawfully taking secret profits of more than $18 million from customers by adding hidden markups and markdowns to their trades.

Judge Allows SAC Capital Insider-Trading Lawsuit to Proceed
Michael Calia – WSJ
A federal judge in Manhattan has allowed a class-action lawsuit against hedge-fund chief Steven A. Cohen’s SAC Capital Advisors LLC to continue, according to documents released Thursday.

U.S. jury gives SEC quick win in fraud case against Boston adviser
Stuart Gittleman and Suzanne Barlyn – Reuters
A Boston federal jury took two hours to decide that a local investment adviser had fraudulently lured his former brokerage customers to his new firm, the U.S. Securities and Exchange Commission said late on Wednesday.

U.S. SEC widens probe of Cynk Technology to include auditor -WSJ
U.S. regulators are investigating the auditor of Cynk Technology Corp, the social media company that was briefly worth more than $6 billion in June before its shares plummeted, the Wall Street Journal reported, citing people close to the probe.


China graft crackdown drives money into Australia
More wealthy Chinese are moving their money out of China to invest in Australia’s property market as a corruption crackdown in the world’s second biggest economy gathers momentum, property consultants and lawyers said.

Foreign investors back on the Thai way
Simon Osborne – The Trade
Foreign investors reverted to being net buyers of Thai equities in July, with net purchases of US$437 million. That reversed the situation from June, where foreigners were net sellers.

Alibaba – Crouching Tiger, Hidden Losses?
Ned Levin – MoneyBeat – WSJ
Long-swirling questions about the quality of accounting at Chinese companies have once again come to the fore, this time as e-commerce giant Alibaba Group Holding Ltd. prepares for its mega U.S. listing. On Friday, a television and film production company recently acquired by Alibaba disclosed “possibly non-compliant” accounting practices that took place prior to Alibaba’s takeover, according to an announcement accompanying a suspension in the trading of the company’s shares in Hong Kong.

SGX welcomes Japfa Ltd to Mainboard

HKFE Announces Revised Margins For CITIC Pacific Futures

Frontier Markets

Johannesburg Stock Exchange Sees Strong Revenues in First Half of 2014
Adil Siddiqui – Forex Magnates
Africa’s largest financial trading exchange, the Johannesburg Stock Exchange (JSE), has reported strong operating metrics for the first half of 2014. The multi-asset trading venue saw group revenue increase 9% to $82 million.

JSE Delivers Pleasing First Half Of 2014 – Appoints New Company Secretary And Executive Director

Malawi Stock Exchange Weekly Trading Report, Week Ending 15 August, 2014

MCX Weekly Market Report August 08, 2014 To August 13, 2014

John Lothian Newsletter

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How Ken Griffin rebuilt Citadel’s ramparts

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