John Lothian Newsletter: BATS Chi-X Europe links up with Swiss exchange; 'Flipped' Bankers Aid U.S. in Foreign-Exchange Probe; Doubts raised over global forex platform

Sep 15, 2014

First Read

Bits & Pieces
By John J. Lothian
On September 13, at 7:18 we lost a great gentlemen and long-time member of the New York Stock Exchange, Michael D. Robbins. Mike, whose broker number at the NYSE was 718, was a paid subscriber of this newsletter, something he proudly told me or wrote to me everytime we corresponded.

It was my great pleasure to get to know Mike in the course of developing and editing this newsletter over its many years. Mike was always a source of this historical NYSE perspective on many of the issues we have faced. He was a great representative of the NYSE during the trading floor era, having spent 45 years as a member and broker there.

He was a big supporter of the Boy Scouts, and would send me letters full of Boy Scout themed stamps.

In his later years he went on to become a contributor to Bloomberg News, often helping them write obituaries, he told me. Of course his coverage was broader than that and he contributed to a great piece and video about the 50th anniversary of President John F. Kennedy being shot and the impact on the NYSE: http://jlne.ws/1jrZLEL

When I last talked to Mike he told me he had a brain tumor that was making his life very difficult. He promised to talk to me more once he had the tumor issues resolved. I guess that talk will have to wait for awhile, now that he is in heaven.

My condolences to his family and friends, of which there are many.

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This weekend I went on an ordeal, actually I was an Ordeal Candidate for the Order of the Arrow for Boy Scouts. The Order of the Arrow is the Boy Scouts Honor Society. I passed my Ordeal and a now a member of the OA.

I had been nominated for the OA seven years ago, but could not do the Ordeal as I was travelling. When my son Robby was nominating this year, I was also nominated again. Now Robby is my son, but also my OA brother.

I had to spend Friday night camping outside in just a sleeping bag and plastic sheet, along with 150 other Ordeal candidates. I had to remain silent for a day, which is not easy to do. I had scant food ( a tortilla and orange or apple for breakfast and lunch ) and I had to do arduous labor. I helped put in some drain pipes in a stream under a path.

I was also supposed to reflect on what I was doing. My reflection is that I like to eat more, I am not crazy about arduous labor and a tent is a good thing to have.

***DA: Too bad we didn’t get to pick the day on which he was to remain silent. Hint: it would have been a weekday.

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Our London MarketsWiki World of Opportunity events are a month away. Please pass the word around to your younger colleagues, or those who are still searching to find their way way in our industry. You can sign up right from marketswikieducation.com or with this link

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Michael D. Robbins, Trusted NYSE Trader for 45 Years, Dies at 80
Laurence Arnold – Bloomberg
Michael D. Robbins, who combined a gregarious nature with ironclad discretion to become a prominent floor trader at the New York Stock Exchange and champion of its history and traditions, has died. He was 80.
jlne.ws/1wlKixZ

**** A truly great gentleman.

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Jamie Farmer, Managing Director, S&P Dow Jones Indices – Indexing 101
JohnLothianNews.com

“This is a big industry…but it’s very tight, very interconnected, very close. It’s unbelievable how many people you come in contact with again.”

Jamie Farmer, managing director of S&P Dow Jones Indices, gives a rundown on indices, beginning with the history of indexing and the creation of the Dow Jones industrial average. According to Farmer, the original purpose of indexing was for editorial value. Eventually, it expanded and evolved into what we know as the Dow Jones S&P Indices. Farmer also covers trends along with the growth and expansion of the financial industry. He concludes by discussing the importance of networking and how he was able to progress to his current position by building several relationships throughout his career.

Watch the video »

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CME on spot in finely balanced GFI battle
Philip Stafford – Financial Times
The battle for GFI Group, the US interdealer broker, has become one of the most absorbing stories of the summer. On one side is CME Group, the US futures exchange and the biggest beast in the market structure jungle. On the other is BGC Partners, a rival US interdealer broker. At present the duel is finely balanced.
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***** Has the CME Group been beat yet when they really wanted to buy something?

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KCG Holdings CFO Steve Bisgay leaves
Jenny Strasburg, The Wall Street Journal – Financial News
KCG Holdings’s chief financial officer abruptly left Friday, the latest former Knight Capital Group executive to depart the Wall Street trading company created 14 months ago in the merger with Getco.
jlne.ws/Zmxi0b

***** There is nothing to see here, just move along.

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Bridging the Week: Exorbitant Fines; Lawyer Sued by CFTC; New CFTC Chairman’s Early Views; AML
Gary DeWaal – Katten Muchin Rosenman
Bad facts may make bad law. As a result, many lawyers are eagerly awaiting the outcome of a federal lawsuit by the Commodity Futures Trading Commission against a lawyer for purportedly aiding and abetting his clients’ unlawful off-exchange metals transactions. The CFTC also took the spotlight this week when its new chairman testified before the Senate Banking Committee, providing some initial views on what he thinks should be the agency’s priorities, as well as when its enforcement division brought and settled an administrative action against an introducing broker for not following its own anti-money laundering procedures.
jlne.ws/1wlLUrH

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Steve Brodsky, CEO, Spot Trading – My LIFFE: Markets Then and Now
JohnLothianNews.com

“I know this is the most dynamic industry out there…the creative renewal in this industry is like no other.”

During a time when LIFFE was battling for the Bund futures contract, Steve Brodsky, CEO of Spot Trading, remembered sitting in a meeting with Deutsche Börse and talking about how electronic trading was going to become a game changer for the marketplace. Those in the meeting proceeded to laugh. Today, electronic trading has become dominant in the financial industry, and the way futures contracts were traded changed significantly. Brodsky highlights the rise of electronic trading, from its unsure beginnings to today’s world, where high frequency trading has caught the attention of the financial industry and media. Brodsky also discusses the effects of regulation and gives his prediction of what the market structure of the future may look like.

Watch the video »

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MarketsWiki

MarketsWiki Page of the Day
Seth Merrin
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Statistics

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Lead Stories

BATS Chi-X Europe links up with Swiss exchange
European equity trading venue BATS Chi-X Europe has signed a partnership deal with BX Swiss (BX), Switzerland’s only independent exchange, in which the pair will work together on cross listings for exchange-traded funds and trade reporting.
jlne.ws/1qDszmj

‘Flipped’ Bankers Aid U.S. in Foreign-Exchange Probe
Christopher M. Matthews, Devlin Barrett and Emily Glazer – WSJ
U.S. investigators have turned multiple bank employees into informants in a far-reaching probe of possible manipulation of currency markets, and are preparing to seek criminal charges against individual traders as early as next month, according to people familiar with the investigation.
jlne.ws/Zmxixm

Doubts raised over global forex platform
Sam Fleming and Daniel Schäfer in London and Jamie Smyth in Sydney – Financial Times
A proposal to reform the foreign exchange market by creating a central platform looks unlikely to get off the ground after industry participants raised doubts about the practicality of the scheme.
jlne.ws/ZmxRah

Platforms could face GBP10m bill from tax changes branded as ‘horrible as FATCA’
Julia Rampen – Investment Week
Platforms could be hit with a GBP10m bill in order to make sure they comply with new EU tax rules, the Tax Incentivised Savings Association (Tisa) has warned.
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RPT-Investors team up to find path through risky dark pools
Lionel Laurent – Reuters
Stock investors who recognise the risks of trading in anonymous “dark pools” but are unwilling to spurn them have found an alternative: club together.
jlne.ws/1wlIdC8

HSBC to Pay $550 Million to End Mortgage-Related Suit
Dealbook – NY Times
HSBC agreed on Friday to pay $550 million to settle a lawsuit filed in 2011 by the Federal Housing Finance Agency, the federal regulator that oversees the government’s two mortgage finance companies, over troubled mortgage-backed securities sold in the lead-up to the financial crisis.
jlne.ws/1wlIipE

Regulatory

Industry welcomes finance commissioner role for EU
John Bakie – The Trade
The appointment of the UK’s Lord Jonathan Hill as the European commissioner in charge of financial stability, financial services and capital markets union earlier this week has been broadly welcomed by the industry.
jlne.ws/1qDsizW

Exchanges & Trading Facilities

Euronext announces RMB Bond listing by Bank of China and signs MOU
Euronext, the primary exchange in the Euro zone, is pleased to welcome the first offshore RMB denominated bond listing by Bank of China(BOC), on its regulated Euronext market. In addition Euronext has today signed a Memorandum of Understanding (MOU) with BOC to develop comprehensive strategic relationships between the two companies.
jlne.ws/1wlKygv

LME Signs Deal With China Construction Bank
Matthew Cowley and Ese Erheriene – WSJ
The London Metal Exchange and its parent company, Hong Kong Exchanges and Clearing Ltd., said on Monday that they are seeking to accelerate their expansion into Asia through a preliminary agreement with China Construction Bank Corp..
jlne.ws/1wlK5uH

Euronext Commodities Exceed 1 Million Lots
Press Release
Euronext today announced that for the first time since its separation from Liffe, Euronext open interest commodities exceeded 1 million lots on 11th September 2014. This is a 16% increase year on year.
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Euronext Ups ’15 Data, Non-Display Fees
Faye Kilburn – WatersTechnology
European exchange group Euronext has notified customers of changes to its market data licensing agreement, dubbed the Euronext Market Data Dissemination Agreement, including new fees for use and redistribution of real-time and delayed data from its Amsterdam, Brussels, Lisbon, Paris and London markets.
jlne.ws/1qDx5Bp

Eris Swap Futures Expand Into Other Regions & Asset Classes
Ivy Schmerken – Wall Street & Technology
Eris Exchange licensed its swap futures methodology to the Montreal Exchange while setting a record for daily volume in its domestic swap futures contracts, buoyed by new buy-side entrants.
jlne.ws/1wlIi92

Alibaba worried about Facebook IPO as considered Nasdaq versus NYSE
Jessica Toonkel and John McCrank – Reuters
Alibaba Group Holding Ltd could have sold nearly $2 billion worth of stock without lifting a finger. All it had to do was list its shares on Nasdaq.
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TOM MTF Statistics Week 37, 2014
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TMX Datalinx Launches Same Day Short Sale Trading Information
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Hedge Funds & Managed Futures

A Fireside Chat With Charlie Munger
Jason Zweig – MoneyBeat – WSJ
Among investors and admirers of Berkshire Hathaway Inc., Charles T. Munger is famous as the laconic foil to the company’s chairman, the voluble Warren Buffett. At the annual shareholders’ meeting in Omaha each spring, Mr. Buffett speaks in long paragraphs; Mr. Munger speaks in zingers and, most often, simply says: “I have nothing to add.”
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How to Raise Billions in a Matter of Weeks
Juliet Chung – MoneyBeat – WSJ
What does it take to raise scads of money, quickly? A halo of limited capacity on the part of a hedge-fund and the prospect of fat returns don’t hurt.
jlne.ws/1qDreff

How micro funds weathered the rotation into large caps
Laura Dew – Investment Week
The illiquidity and low volatility of micro-cap stocks has helped managers at the very bottom of the cap scale dodge the impact of this year’s rotation into larger companies, buyers suggest.
jlne.ws/1qDqAhN

Two Sigma Hires Jon Hitchon as Chief Operating Officer
Matthew Leising – Bloomberg
Jon Hitchon, the former co-head of hedge fund financing at Deutsche Bank AG (DBK), will join Two Sigma as chief operating officer starting Oct. 1. Hitchon will work out of the New York headquarters of the $21 billion hedge-fund firm, Perrin Wheeler, a Two Sigma spokeswoman, said in an e-mailed statement.
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MOVES-Schroders names Henriette Bergh as head of Europe product
Reuters
Asset manager Schroders PLC appointed Henriette Bergh as Head of Europe product and Manager solutions, excluding the UK.
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Seeking Cash for Bigger Bets, Ackman Nears Public Offering of a Fund
Alexandra Stevenson – Dealbook – NY Times
Tapping into a surge of demand for activist hedge funds, the investor William A. Ackman is expected to set in motion plans to raise billions of dollars outside the United States.
jlne.ws/1wlIh56

Artemis begins offer period for Weldon and team’s trio of US funds
Dan Jones – Investment Week
Artemis has opened the offer period for three of the five funds it intends to launch for the former Threadneedle US equities team led by Cormac Weldon and Stephen Moore.
jlne.ws/1tV0ODr

Miton completes Darwin acquisition
Dan Jones – Investment Week
Miton Group has completed its acquisition of David Jane’s Darwin Investment Managers for an initial consideration of GBP1.35m.
jlne.ws/1qDqBSV

M&G’s Rhodes: Why my fund has underperformed this year
Anna Fedorova – Investment Week
M&G’s Global Dividend fund has had a setback in performance this year as a number of stocks disappointed with dividend cuts, but manager Stuart Rhodes remains convinced the companies can increase payouts from here.
jlne.ws/ZmyL6O

CFTC Commitments Of Traders Reports Update
jlne.ws/1o6sKCs

Banks & Brokers

Santander’s Botin Pledges to Continue Father’s Work
Jeannette Neumann – WSJ
In Ana Patricia Botín first official appearance as chairwoman of Banco Santander SA she vowed to build on the work of her father, the bank’s former chairman who died last week.
jlne.ws/Zmwsk1

Morgan Stanley shrinks managed mutual fund program
Jed Horowitz – Reuters
Morgan Stanley remains the world’s biggest seller of managed accounts, in which customers pay a fee rather than trade-based commissions to have their assets managed, but it is phasing out a program that lets them choose among more than 300 actively managed mutual funds for their investments.
jlne.ws/1wlId5d

Lloyds Banking Executive Named New Boss of Troubled Portuguese Lender
Raphael Minder and Chad Bray – Dealbook – NY Times
The Bank of Portugal has appointed a new leader to run the ”good” bank created after the bailout of the Portuguese lender Banco Espírito Santo, after the unexpected resignation on Saturday of its top management.
jlne.ws/1wlIjd0

Societe Generale to carve out proprietary trading unit
Tim Cave – Financial News
Societe Generale has established a separate French subsidiary to house its proprietary trading activities, in the latest sign that European banks are accelerating efforts to ring-fence or spin off the trading divisions.
jlne.ws/1wlIPrE

Meet John McFarlane: the new chairman of Barclays
Philip Georgiadis – Financial News
John McFarlane, who for the last two years has been on a mission to turn the insurer Aviva into a “leaner more agile beast,” is to take the chairmanship at Barclays – itself in the throes of shrinking its investment bank.
jlne.ws/1wlIODU

UK bank adviser pay catching up with traders
Daniel Schäfer in London – Financial Times
Senior advisory bankers’ pay in London has risen almost on to a par with traditionally higher-earning traders, underlining the shifting fortunes of these distinct businesses within investment banks.
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Bankrate reveals SEC probe, says CFO resigns
Reuters
Bankrate Inc, which runs financial information websites, said U.S. regulators were investigating its financial reporting during 2012 and that Chief Financial Officer Edward DiMaria had resigned.
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Clearing & Settlement

ASIC Grants First Trade Repository Licence
ASIC has granted an Australian derivative trade repository (ADTR) licence to DTCC Derivatives Repository (Singapore) Pte Ltd (DDRS).
jlne.ws/ZmyMYl

TeraExchange Enhances Bitcoin Offering – Launches New Platform and Price Index
forexmagnates.com
A leading Swap Execution Facility (SEF) has extended its product offering to include virtual currencies. TeraExchange has created a Bitcoin derivatives exchange as interest in the instrument continues to expand. The move strengthens the position of virtual currencies as they pitch for recognition as a tradable asset class.
jlne.ws/1qDxdRk

New clearing model emerges as costs rise
Jon Watkins – The Trade
Rising fees set by clearing brokers have spurred a new model aimed at smaller buy-side firms who are looking for a cost-efficient way to clear their derivatives trades.
jlne.ws/1qDrT0q

Indexes & Products

Chinese ETFs shut to new investment
Josh Noble in Hong Kong – Financial Times
There are plenty of comeback stories on Wall Street. Many are watching whether the Nasdaq Composite can complete what the once unthinkable: a return to the technology bubble closing peak of 5,048.62 attained more than 14 years ago.
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Quarterly Changes To The NASDAQ Q-50 Index
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Xetra/Börse Frankfurt: New Source ETF Launched In XTF Segment On Xetra – First ETF With Access To JPX-Nikkei Index 400
jlne.ws/Zmyd0G

Technology

Victor Technologies and ACTIV Financial Announce Partnership For Real-Time Risk Analytics
Victor Technologies LLC, a financial analytics provider that specializes in risk management and listed derivatives pricing, today announced that the company is partnering with ACTIV Financial, a global provider of real-time, multi-asset financial market data and solutions, to offer its enterprise-grade Market Volatility Feed (MVF) as part of ACTIV’s market data platform.
(via email)

Victory Networks Bows US Feed Handlers
Max Bowie – WatersTechnology
Chicago-based low-latency data and trading infrastructure provider Victory Networks is taking the wraps off a set of low-latency feed handlers for the US equities, futures and equity options markets, dubbed SpeedEdge, which the vendor says will offer an affordable and high-performance solution for market participants, while also underpinning the development of a suite of derived analytics in the future.
jlne.ws/1qDvk7g

Canada’s Securities Depository Now a Pre-LOU, Part of Global LEI System
Becca Lipman – Wall Street & Technology
Canada’s national securities depository, clearing, and settlement service was endorsed as a Pre-LOU ahead of the Oct. 31 trade reporting deadline.
jlne.ws/1wlIhSp

Environmental & Energy

World’s biggest development banks pledge to scale up climate finance
Jessica Shankleman, BusinessGreen
Six of the world’s largest development banks, including the European Investment Bank (EIB) and the World Bank, have underlined their commitment to delivering climate finance ahead of a major United Nations Summit due to be held in New York later this month.
jlne.ws/1whYKXP

Drowned tropical forests add to climate change
Paul Brown, Climate News Network
Big dams built in the tropics to produce hydroelectricity have long been highly controversial – and data gathered in Laos by a French team studying methane emissions confirms that dams can add to global warming, not reduce it.
jlne.ws/1tOGpne

***LB: Also in this story “The world’s largest dams are responsible for 4 percent of the human contribution to climate change.”

Senators want more time for climate rule comments
Timothy Cama and Laura Barron-Lopez, The Hill
We need more time: A slim majority of the Senate sent the Environmental Protection Agency (EPA) a letter Thursday asking for more time to comment on its major climate rule to limit carbon pollution from power plants.
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Asia-Pacific

UK To Be First Non-China State To Issue Renminbi Bond
Tim Worstall – Forbes
George Osborne has announced that the UK is to be the first Western, or non-China, state to issue a renminbi bond. This is part and parcel of his design to make the City of London the pre-eminent offshore trading center for the currency as the restrictions on non-domestic use are gradually weakened.
jlne.ws/1qDqKWv

Hong Kong Plans Yuan Repos to Meet Demand for Shanghai’s Stocks
Fion Li and Justina Lee – Bloomberg
Hong Kong is setting up a 10 billion yuan ($1.6 billion) intra-day repurchase facility and seeking to relax a cap on yuan purchases by the city’s residents before local investors gain access to Shanghai’s stock market.
jlne.ws/1wlKVrm

China appoints Bank of China as yuan clearing bank in Paris
Reuters
China’s central bank said on Monday it had appointed Bank of China, the country’s main foreign exchange lender, as the yuan clearing service bank in Paris – the latest move to expand the offshore yuan market.
jlne.ws/1wlIBRk

Hong Kong-Shanghai stock connect: believe the hype
Aaron Woolner – Risk.net
Investors are excited about greater access to China’s cash equity markets but the corporate bond and commodity derivative sectors are the real prize
jlne.ws/1qDxp2Q

Foreign trading in Thailand in black for 2014
Simon Osborne – The Trade
Foreign investors were net stock buyers in Thailand during August, bringing their aggregate purchases for the first eight months of the year to a net positive tally of US$63 million. From January through to June, foreigners had been net sellers of Thai equities.
jlne.ws/1qDskHQ

China commodity finance costs spike after Qingdao fraud
Xiao Wang – Risk.net
Rising costs and delays in issuing letters of credit driving SMEs out of the market but global and local banks are still active in the business
jlne.ws/1qDxF1X

Zhengzhou Commodity Exchange Reversed Futures Delivery Rules
jlne.ws/1wlJMjN

Shenzhen Securities Information Co., Ltd., China Southern Asset Management Co., Ltd. and Beijing SINA Internet Information Service Co. Ltd.: Big Data Series Indices Issued
jlne.ws/1wlJMQE

HKEx Completes Second Round Market Rehearsal For Shanghai-Hong Kong Stock Connect
jlne.ws/ZmypNx

Frontier Markets

Hong Kong sukuk boosts Islamic credentials
Rob Hartley – Euromoney Magazine
The debut issue of a five-year $1 billion sukuk this week is a statement of intent from Hong Kong that it is serious about Islamic finance, sending a strong signal to rival financial centres.
jlne.ws/1qDqRBw

Niche no more as Islamic bond issuance swells
Matt Turner and Lucy Burton – Financial News
Global issuance of sukuk, or Islamic bonds, has hit the second highest level on record in the year to date, with volumes standing at close to $30 billion.
jlne.ws/1wlIR2z

Kenyan Banks Face Risk Due to Threat of Sanctions on South Sudan
Charles Wachira – Bloomberg
Kenyan commercial banks operating in South Sudan may be affected by possible United Nations sanctions against anyone who undermines current peace talks in Africa’s newest nation, according to the country’s central bank.
jlne.ws/1wlKGwH

Chairman Of The Egyptian Exchange Closes Working Visit To New York To Increase Foreign Investment Into The Egyptian Market – NASDAQ OMX Celebrates Visit Of EGX Chairman By Ringing Of Bell Ceremony
jlne.ws/ZmypwS

Namibian Stock Exchange (NSX) Renews Trading Technologies Contract With JSE
jlne.ws/ZmyctB

Cyprus Stock Exchange’s Monthly Bulletin For August 2014
jlne.ws/ZmydOf

Nigerian Stock Exchange Weekly Report – Week Ending 12 September, 2014
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Miscellaneous

Peter Thiel: Competition Is for Losers
Peter Thiel – WSJ
What valuable company is nobody building? This question is harder than it looks, because your company could create a lot of value without becoming very valuable itself. Creating value isn’t enough—you also need to capture some of the value you create.
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