Michael Gorham, professor and director, Illinois Institute of Technology – How to Regulate When You Don’t Really Understand the Industry
“There’s a lot of problems out there; there’s global warming, there’s the whole Ukraine thing…and then there’s the issue of getting better regulators.”
Michael Gorham, professor and director of IIT Center for Financial Markets at the Illinois Institute of Technology, discusses the regulatory environment in the financial markets. Gorham explains problems regulators have in the industry today and why there are still many things in the industry that the regulators do not understand, such as the issue of Dodd-Frank. He also discusses disruptive and positive forces in today’s market structure, as well as the CFTC’s Technology Advisory Committee (TAC) and what key problems the TAC handles.
Aequitas says exchanges failing issuers and investors
John Bakie – The Trade
A new equities exchange in Canada set to launch early next year is hoping to shake up the sector’s business model by focusing on institutions and listed firms, not just in its home country, but globally.
***SR: The exchange plans to have a ‘speed bump’ similar to that of IEX. ‘Flash Boys’ strikes again?
ConvergEx rebuilds after US Department of Justice settlement
Philip Stafford – Financial Times
ConvergEx, the US brokerage, is overhauling its business after acknowledging that a settlement with US regulators for overcharging clients had damaged its reputation. In recent months it has changed much of its senior management team, merged its broking businesses and begun remodelling its off-exchange trading venues, its chief executive Eric Noll said.
***SR: The first step was to admit wrongdoing. Now for the slightly harder part…
Germany pushes new stock exchange segment for startups
A new platform is needed at the Frankfurt Stock Exchange that caters to Internet startups, German Economy Minister Sigmar Gabriel said at a technology summit on Tuesday. Speaking at the 8th Information Technology Summit in Hamburg, Gabriel said the exchange, known as Börse 2.0, would enable startups in urgent need of venture funding to access capital markets.
***JM: So will Börse 2.0 function like Web 2.0? Free to use, but you’ll need to provide a lot of personal data? And when you walk past the ketchup in the supermarket, your phone will trigger an ad, “Heinz stock is soaring – should we get you in here?”
CQG to Offer New Full Service Connectivity to Eris Exchange
CQG, Inc. today announced its planned connectivity to Eris Exchange, a US-based futures exchange offering capital efficient interest rate swap futures. The new offering will provide CQG customers with access to Eris’ Swap Futures for market data, analytics, and trade execution through an array of CQG trading platforms.
Oilman Nelson Bunker Hunt Dies at 88
Nelson Bunker Hunt, a Texas oilman who once tried to corner the silver market with one of his brothers only to see the move end in financial disaster, has died. He was 88.
As Many As 70% Of Buy-Side Investors Expect Their Futures Trading Volumes To Increase During Next 12 Months, Says TABB Group
With the derivatives markets working through new rules, market structure changes and a wave of uncertainty, many across the capital markets industry believe the futures markets will benefit. To learn more, TABB Group conducted a survey in September 2014 of more than 40 traditional asset managers (long only, mutual funds, pension funds and insurance companies), hedge funds, commodity trading advisors (CTAs) and proprietary trading firms on recent trends impacting futures exchanges and futures commission merchants (FCMs).
***JM: So when the time is right, more will trade. Now all we have to do is guess when conditions will become favorable. In 3… 2… 1… ok, not yet.
Why everybody is talking about chat
Anna Irrera – Financial News
For decades financial instant messaging has been dominated by Bloomberg, with traders at the world’s leading financial institutions using the firm’s chat tool to talk to each other and clients. But tighter budgets, increased regulatory scrutiny and privacy concerns have sent banks on a hunt for alternative tools, triggering the creation of a raft of new initiatives.
***JM: Wasn’t there something at the SEC last year or so about this? …oh, that was “Snapchat”, never mind…
MarketsWiki Page of the Day
Robert G. Pickel
MarketsWiki Recent Updates
Companies, Organizations and Groups
54,462,447 pages viewed, 8,055 articles, 186,601 edits
BGC launches hostile $675m offer for rival GFI
Philip Stafford – Financial Times
BGC Partners has launched a hostile $675m bid for rival US interdealer broker GFI Group after becoming frustrated with delays to a negotiated deal. The New York-based group will offer to buy the 86.5 per cent of shares in GFI it does not own in a deal that values GFI at a tender offer of $5.25 a share.
Bats Plans to Expand Stock Exchange Into Turkey
John Detrixhe – Bloomberg
Bats Global Markets Inc., which vies with London Stock Exchange Group Plc (LSE) for the title of biggest European equity market, is expanding into Turkey. Bats Chi-X Europe will open there on Nov. 3, according to a statement today from the company. Turkey is the exchange’s first foray into an emerging market.
Fed spotted JPMorgan ‘Whale’ risks years before scandal: inspector
Jonathan Spicer and Michael Flaherty – Reuters
The Federal Reserve’s New York branch knew about risks JPMorgan Chase & Co was taking with its massive “London Whale” derivatives bets four years before they imploded, but it failed to act properly to head them off, the U.S. central bank’s inspector general said.
***JM: You know what they need, is a really good fine to set them straight.
J.P. Morgan Fined $92 Million By EU Over Cartels
Tom Fairless – WSJ
J.P. Morgan Chase & Co. was fined a total of more than EUR72 million ($92 million) by European Union regulators Tuesday for rigging a benchmark interest rate and operating a separate cartel for Swiss franc derivatives, marking the latest phase in an EU crackdown on alleged market abuse by financial institutions.
***JM: See? Works every time!
Eurex puts Asia at core of growth strategy
Jon Watkins – The Trade
Eurex has outlined a medium-term plan, putting expansion into Asia and the growth of its OTC clearing business at the forefront of its ambitions.
SEC Defends Practice of Steering Cases to Judges It Appoints – Law Blog
Jacob Gershman – WSJ
The Securities and Exchange Commission is increasingly steering tougher cases to hearings in front of the agency’s appointed administrative judges rather than taking them to federal court, according to a front-page report in Tuesday’s Wall Street Journal. The reason? Administrative proceedings, compared to jury trials, “offer a streamlined process with sophisticated fact finders,” says Andrew Ceresney, the SEC enforcement chief.
***JM: Also, we win a lot.
After JPMorgan Breach, a Greater Push to Fortify Wall Street Banks
Jessica Silver-Greenberg and Matthew Goldstein – Dealbook – NY Times
This summer’s huge cyberattack on JPMorgan Chase and a dozen other financial institutions is accelerating efforts by federal and state authorities to push banks and brokerage firms to close some gaping holes in their defenses.
SEC’s Aronow Joins Sidley Austin: Business of Law
Ellen Rosen – Bloomberg
For Geoffrey Aronow, this past summer was extraordinary in ordinary ways. For the first time in his career, the lawyer who most recently was the general counsel of the U.S Securities Exchange Commission had, by choice, nothing to do.
Municipal Securities Director John Cross to Leave SEC Next Month
Brian Chappatta – Bloomberg
John Cross, the first official to oversee municipal-bond regulation for the U.S. Securities and Exchange Commission, will leave the position next month to join the Treasury Department.
CFTC and Manitoba Securities Commission Sign Counterpart to Memorandum of Understanding to Enhance Supervision of Cross-Border Regulated Entities
Energy firms voice optimism over CFTC’s Massad
The new chairman of the US Commodity Futures Trading Commission is moving to fix regulatory problems afflicting energy firms and says he will listen closely to their input on the agency’s remaining Dodd-Frank Act rules.
Op risk still divorced from compensation – survey
A survey of operational risk management across the financial sector finds that op risk managers still have little input on pay and bonus decisions
Exchanges & Trading Facilities
Luis Téllez Kuenzler Announces His Resignation As Chairman And General Director Of The Mexican Stock Exchange
The Mexican Stock Exchange Group reports that during the session of the Board of Directors held today, Luis Téllez Kuenzler announced his decision to step down as Chairman and CEO, effective January 1st 2015, to pursue new projects.
London Stock Exchange Group Extends Strategic Relationship With Morocco
London Stock Exchange Group (LSEG) and Maroclear, the Moroccan Central Securities Depositary (CSD) today announced they have signed a cooperation agreement to expand the range of services LSEG provides to market participants in Morocco.
LME’s Edge Seen by Metdist’s Bagri Threatened If Changes
Agnieszka de Sousa – Bloomberg
The London Metal Exchange is in danger of losing its competitive edge if it changes the way it operates, according to Apurv Bagri, chief executive officer of Metdist Group, a closely held company that gained 130 million pounds ($210 million) from the bourse’s sale.
MarketAxess Reports Third Quarter 2014 Revenues of $64.2 Million, Pre-Tax Income of $28.3 Million and Diluted EPS of $0.46
“The third quarter results are solid in light of the summer seasonal slowdown, benign market environment and heavy new issue calendar. We are especially encouraged by the growth rates we see in Open Trading, high-yield and Europe,” said Rick McVey, Chairman and Chief Executive Officer of MarketAxess. “Market volatility is picking up as we start the fourth quarter, leading to an increase in bond trading activity.”
HKEx to Introduce its First Asia Commodities Contracts for Trading on 1 December
Hong Kong Exchanges and Clearing Limited (HKEx) will introduce its first Asia Commodities contracts – London Aluminium Mini Futures, London Zinc Mini Futures and London Copper Mini Futures – for trading on Monday, 1 December 2014, subject to market readiness.
WSE plans to improve small-cap market
Kamila Wajszczuk – WBJ
The Warsaw Stock Exchange will take measures to improve the quality of the small-cap NewConnect market, CEO Pawel Tamborski told ISBnews.
TSX Markets Top 20 Largest Consolidated Short Position Report – October 15, 2014
Hedge Funds & Managed Futures
Pension plans urged to take more risk
Risk managers should be helping pension plans add exposure safely, argues Jane Buchan, founder and chief executive of fund-of-hedge-funds firm Paamco Pension plans need to take more risk to hit their return targets, a large fund-of-hedge-funds manager has warned.
BlackRock overhauls scenario analysis approach
The world’s largest asset manager has added forward-looking scenario analysis to its risk management toolkit – a response to the increasing importance of event risk BlackRock has revamped its approach to scenario analysis this year, in response to the increasing importance of event risk, according to the firm’s chief risk officer, Ben Golub.
Hedge Funds Take Another Hit as Spinoff Stocks Fizzle
Liz Hoffman And Rob Copeland – WSJ
Corporate slim-downs aren’t the moneymakers they once were for investors.
Ford Motor says will drop Pimco Total Return Fund from its 401k plan
Ford Motor Co said on Tuesday the company will drop the Pimco Total Return Fund from its 401k plan as a result of the sudden departure of Bill Gross.
Wall Street Seeks Edge From Operational Alpha
Ivy Schmerken – Wall Street & Technology
As regulatory demands push costs higher, and while automated trading decreases fees, banks and brokers are looking at the middle and back office to gain operational alpha — a new trend in capital markets.
Which Hedge Funds Avoided the October Bloodbath? – Focus on Funds
Johanna Bennett – blogs.barrons.com
It’s been a bad month for hedge funds. Market turmoil, as well as the hammering of Fannie Mae (FNMA) and Freddie Mac (FMCC) after a federal court ruling and the demise of drug maker AbbVie’s (ABBV) acquisition of Shire (SHPG) led to a bloodbath for the industry. In fact, according to the Wall Street Journal, an array of multibillion firms suffered large losses in the industry’s worse period since 2011.
M&G cuts fees on multi-asset Episode funds
Dan Jones – Investment Week
M&G is to cut the annual management charge (AMC) on two of its Episode multi-asset funds by 5bps next month.
Ex-Miton man Sullivan launches Coram Asset Management
Hannah Smith – Investment Week
Former Miton fund manager James Sullivan is to launch a fund management business within RC Brown Investment Management.
Banks & Brokers
European Central Bank Stress Tests Could Shake Bank Ratings, S&P Says
Pedro Nicolaci da Costa – MoneyBeat – WSJ
Standard & Poor’s has warned that if the European Central Bank’s upcoming bank stress tests reveal new fragilities in certain European financial institutions, ratings downgrades could follow.
Citibank Buys Commodities Books From Deutsche
Sarah Kent – WSJ
Citigroup Inc. has bought Deutsche Bank AG ‘s metals- and energy-trading books, according to people familiar with the situation, as the American banking giant expands its investment in the commodities business.
Dimon: Cancer Hasn’t Changed What I Want to Do
J.P. Morgan Chase & Co. Chairman and Chief Executive Officer James Dimon sees himself teaching or helping a charity after he leaves the role of banking titan.
E*Trade Financial profit jumps 83 pct as market activity surges
Discount brokerage E*Trade Financial Corp reported a better-than-expected 83 percent jump in third-quarter profit on Tuesday as trading activity surged and it set aside less money to cover bad loans.
J.P. Morgan Continues to Play the Host at LME Week – MoneyBeat
Sarah Kent – MoneyBeat – WSJ
J.P. Morgan isn’t done with commodities. Notwithstanding a high-profile push to sell its physical commodities business this year, the Wall Street bank was one of a handful of hosts to hold court during the annual LME week gathering of the metals and mining industry in London this week, a clear sign it intends to remain engaged in the sector.
Clearing & Settlement
Traiana Launches Harmony CCP Connect For Equities And Completes First Trade
Traiana, the leading provider of post-trade and risk solutions, announces today the launch of Harmony CCP Connect for Equities and the successful completion of its first trade. Some of the largest equity broker dealers, including Credit Suisse, J.P. Morgan and Instinet, will automate the central clearing of their OTC equity trades via Harmony CCP Connect and will use the interoperable solution initially to match and clear equity contract for difference (CFD) related hedging trades at their preferred clearinghouse.
Investors have “no incentive” to use swap futures, says Wallin
“If we were short of collateral, we would consider a futurised interest rate swap – but we’re not,” says Alliance Bernstein’s Wallin Real money investors have “no incentive” to ditch over-the-counter derivatives in favour of swap futures unless they face serious collateral constraints, according to James Wallin, a senior vice president at Alliance Bernstein.
Indexes & Products
Raymond James to offer commission-free ETFs to investment advisers
Ashley Lau – Reuters
Raymond James Financial Inc is preparing to offer exchange-traded funds free of transaction fees, ratcheting up its competition for assets against similar programs in place at Charles Schwab Corp and TD Ameritrade Holding Corp.
Thomson Reuters Launches First-Of-Its-Kind Starmine Quality Earners APAC Ex-Japan Income Index
Innovative Index Uses Proprietary Starmine Quantitative Model To Deliver Outperformance, High Dividend Yields And Low Volatility Opportunities To ETF Issuers
Nasdaq Lists First Trust Eurozone AlphaDEX(R) ETF – Alternative Strategy To Active Management When Seeking Alpha
First Trust Global Portfolios LTD Lists New ETF On Euronext
Victory taps rodriguez for biz dev
Chicago-based market data and trading infrastructure, connectivity and co-location provider Victory Networks has hired former Livevol president Dax Rodriguez as head of business development, responsible for expanding business relationships, contributing to sales and marketing activities, and setting strategic business plans.
CME Rule 575 Market Abuse Solution Identifying Disruptive Activity Launched Ahead Of FIA Expo
R3COGNITION, London’s leading financial IT development powerhouse, has launched an innovative CME Rule 575 IT solution. Its market abuse solution enables derivatives trading organisations to pinpoint the disruptive practices prohibited by the new CME rule that came into force on 15 September 2014. R3COGNITION is launching its solution to the North American market at the 30th Annual Futures & Options Expo in Chicago.
Chief Data Officers: Organization Strategy & Cultural Change
Andrew Waxman – Wall Street & Technology
Chief data officers are new to the financial services C-suite, but they are facing a number of challenges, including the need for new data governance and execution strategies, staffing, and new organizational structures to enable cultural change.
Environmental & Energy
Divestment campaign urges customers to boycott banks which support fracking and fossil-fuel industry
Tom Bawden, The Independent
Customers of Britain’s biggest banks are threatening to close their accounts unless the institutions cut all ties with coal, tar sands, fracking and other fossil-fuel industries as part of a new campaign launched today.
HSBC, Barclays and RBS come under pressure to ditch fossil fuel investments
Jessica Shankleman, BusinessGreen
The UK’s five biggest banks have come under pressure to scale back investment in the fossil fuel industry, over concerns that oil and coal assets could become devalued in the event of a global deal to tackle climate change.
Divest MPs’ pension fund from fossil fuels, says Caroline Lucas
Adam Vaughan, theguardian.com
MPs should follow in the footsteps of the Rockefeller family, Glasgow University and churches around the world by pulling their pension fund investments out of fossil fuels, according to Caroline Lucas.
Exclusive: Investors seek more time to prepare for Hong Kong-Shanghai stock tie-up
Michelle Price – Reuters
Some of the world’s biggest banks and asset managers have asked the Hong Kong securities regulator for more time to prepare for a landmark China stock trading link due to uncertainty over the rules of the scheme, according to a letter seen by Reuters.
China overseas direct investment seen rising 10 percent a year
Gerry Shih and Matthew Miller – Reuters
China’s overseas direct investment is projected to rise at least 10 percent annually for the next five years, a trend that will soon make the country a net capital exporter, a senior commerce ministry official said on Wednesday.
Nigeria’s finance minister pledges fiscal restraint
Kanika Saigal – Euromoney Magazine
In candid remarks, Nigeria’s finance minister Ngozi Okonjo-Iweala sounds an upbeat note on exercising control in government spending in the run-up to the 2015 general election. However, outstanding structural reforms and declining oil demand pose risks for growth.
Malaysia Singled Out For Consistent Improvement
Malaysia has retained its 4th position in the CLSA Limited (CLSA) Asian Corporate Governance Association (ACGA) Corporate Governance Watch 2014 Report and obtained higher scores improving from 55 to 58 points, closing the gap with the top scorer.
BSE Shareholders Approve BSE-USE Merger