It’s over – a dinner conversation
Jim Kharouf and Doug Ashburn – JLN
“It’s over,” said one guest at the dinner table on Sunday.
He was speaking candidly about the futures industry and its prospects. Rather than facing a rebuttal from the other six industry professionals at the table, he ended up with three others on his side and three more willing to listen.
The argument went something like this. This is an industry with legacy business structures, especially at the FCM level which is being saddled with new regulations that sap critical capital from those firms, and increases costs on already cost-wary customers. Not only is regulation turning into strangulation, but we are facing an industry with few market opportunities, as long as the US Federal Reserve Bank and other central banks continue holding interest rates near zero. (And that looks likely for some time.)
And look at the capital requirements now being dictated by EU policies from European Market Infrastructure Regulation (EMIR) to Basel III capital requirements. To some, the punch bowl hasn’t been taken away, its been systematically drained and the empty vessel is being smashed over the head of every European banker. The simple question now is: What do we do now? Answer: Not much, just sit tight for now.
Another chimed in that hedge funds and CTAs, not to mention other key institutional players from the buy-side, are not participating in the markets as much, or sometimes not at all, given the low- or no-interest rate environment, the regulatory straitjacket and one other key missing ingredient: a lack of opportunity.
One could argue the financial industry may have hit the proverbial wall that many other industries have encountered. Perhaps the gentleman is right – gone are the days when speed provided a big edge, and volatility or trending markets provided real returns. As such, many of those firms that used to participate – such as banks which have seen commodities get clipped from operations and portfolios – have left or been barred from participating in the futures markets. Instead, they’ve jumped into physical markets, which may be trimmed from them as well. Beyond tepid markets and central bank policy, one wonders if traditional market participants have simply looked at all available asset classes and concluded that it’s simply easier to make money elsewhere.
There’s a lot more! Read the rest of this article on the JLN blog at jlne.ws/1fgLquA
CME Director Mark Cermak Passes Away
We are sad to report that CME Director Mark Cermak has passed away. He died Saturday of a massive heart attack. There will be a wake for him on Sunday, November 10 from 4 PM to 9 PM at Christ the King Catholic Church, located at 93rd and Hamilton in the Beverly area. A funeral mass will also be held on Monday, November 11 at the same location at 10 AM. Cermak was on disability leave from ABN AMRO, while fighting cancer, at the time of his death.
CFTC files fraud lawsuit against AlphaMetrix
The U.S. Commodity Futures Trading Commission sued AlphaMetrix LLC on Monday, accusing the liquidating Chicago-based firm of misappropriating at least $2.8 million and issuing false or misleading account statements to conceal fraud.
***** Remember two weeks ago when I said “this is huge.” I still mean it.
|SEFCON IV: Open for Business
Monday, November 18, 2013, Grand Hyatt Hotel, NY
The rules are out, the registrations are in, and the products are being made available to trade on swap execution facilities (SEFs).
Join dealers, traders, exchanges and regulators for this once-a-year look at the state of the SEF world. Highlights include:
SEFCON IV is sponsored by the Wholesale Markets Brokers’ Association, Americas.
Why Market Rigging Deserves Our Attention
Francesco Guerrera – WSJ.com
“It’s very bad.” The sober reply by the senior banker to a question about Wall Street’s regulatory woes immediately cast a shadow over our dinner. Until then, the focus of our encounter had been the Italian red wine swirling in our glasses. But as he began talking about interest-rate manipulation, possible mortgage malfeasance and foreign-exchange fixing, the mood grew darker.
***** Charles Amberson/Orson Welles once said, “The only truly honorable thing for a man to be is a yachtsman.” That is the only rigging a person should do.
High-speed trading ‘aids efficiency’, ECB says
Ralph Atkins in London – FT.com
Superfast computerised trading makes markets more efficient, according to research published by the European Central Bank that counters some popular criticisms of the new generation of dealers that operate in fractions of seconds.
***** That was so efficient I couldn’t even see it trade!
CFTC to Offer New Take on Speculation-Limits Rule Judge Rejected
Dave Michaels – Bloomberg
The top U.S. derivatives regulator will consider a reworked proposal to limit speculation blamed for price surges in energy, wheat and other commodities after Wall Street groups successfully challenged an earlier version.
***** We need a limit on the number of positions the CFTC can take on this issue.
NYSE Experiences Data Malfunction Days Before Twitter IPO
Sam Mamudi – Bloomberg
NYSE Euronext (NYX) experienced two technical malfunctions during the first 40 minutes of trading, three days before it handles Twitter Inc.’s initial public offering. All trades processed by the New York Stock Exchange and NYSE MKT were mislabeled on the industry’s main data feed as “sold” during the error, which was resolved at about 10:09 a.m. New York time today. NYSE Euronext also had trouble quoting shares, according to a statement.
***** We first read about this issue on Facebook.
Puny human analysts to be crushed by algorithmic steamroller
Dan McCrum | FT Alphaville
What’s the value of a good idea these days? We ask because Institutional Investor has dedicated several pages to considering the imminent death of human insight in finance, as the machines squish take over. (H/T to Climateer.)
***JM: I’m still waiting for Robbie the Robot to take over the cooking, and it’s been decades. Plus, “algorithms” is just a funny word for “software”, which, if you’ve been paying attention, is full of “defects”… I’m not exactly filled with dread, here.
CFTC Ability to Regulate Impaired by Lack of Funding
James West – Midas Letter
If you were of the opinion that the Commodity Futures Trading Commission was capable of regulating the $37 trillion with a staff of less than 600 and a budget of $200 million, what do you think of the same staff with the same budget being able to add the $600 trillion swaps market?
***** Gary Gensler wanted to prove he could be independent from the industry and that a regulator could be unbiased and without industry employment ambition. He has succeeded, but also succeeded in blocking support for greater funding for an organization which seems to be antagonistic towards the industry rather than collaborative to make the best markets possible.
Last Day to Help with Nicole Rohr’s CCFA Run!
Former JJLCO employee Nicole Rohr needs a boost to hit her charitable goal for her upcoming half marathon. A small amount of time to give a small amount of money can make a big difference! To help out, visit active.com/donate/vegasIL13/nvrohr. Plus, you can score homemade crafts; here’s Nicole’s message:
Do you think we can do it? Can we raise $1,000 for Crohn’s & Colitis Foundation (CCFA) in one day? Crazier things have happened.
Today is the last day for donations to my half marathon, and I still have 27% left to raise (roughly $1,000). As a special prize, anyone who donates $100 or more today will get a crocheted blanket from me. You can choose the colors!
Thank you to everyone who has been such an amazing support on this journey. I never thought I would be running 13.1 miles, and doing it for a cause so close to my heart!
MarketsWiki Page of the Day
44,914,462 pages viewed, 7,693 articles, 167,289 edits
Alphametrix Accused by CFTC of Misappropriating $2.8 Million
Andrew Harris – Bloomberg
Alphametrix LLC, a Chicago-based commodity pool operator, was accused of misappropriating $2.8 million belonging to pool participants in a lawsuit filed by the Commodity Futures Trading Commission.
Aquis gets UK green light to trade shares across Europe
Britain’s financial regulator has given the green light for operations to start at Aquis, a new pan-European share trading platform which aims to take on bigger rivals by offering subscription-based pricing modelled on the mobile phone market.
After a Decade, SAC Capital Blinks
BEN PROTESS and PETER LATTMAN – NYTimes.com
SAC Capital first sought to fend off a federal indictment. Then the hedge fund, run by the billionaire Steven A. Cohen, offered to pay about $700 million to settle. Finally, SAC suggested it plead guilty to only some of the criminal charges in the five-count indictment. But at every turn, the government refused.
Market gatekeeper to tighten London listing rules
David Oakley and Sam Fleming – FT.com
Regulators on Tuesday announced safeguards to listing rules on the London Stock Exchange to protect minority shareholders and repair the damage done to the reputation of the City after a number of controversial flotations.
CME Group wins designation as electronic swaps market
CME Group Inc received regulatory approval to operate a swap execution facility that will initially focus on commodity swaps, the biggest U.S. futures market operator said on Monday.
CBOT Pit Traders Testify Volume, Profits Fell After Rule
Andrew Harris – Bloomberg
Three Chicago Board of Trade corn pit traders told an Illinois judge that their trading volume and profits have fallen since a change in end-of-day settlement pricing was imposed last year. The traders are part of a group of 20 who sued the CME Group Inc.-owned exchange seeking to block the shift in determining final prices, from reliance upon just the last minute of floor trading to a blended method incorporating electronic-platform trading results.
CME Group chairman defends grain-rule change in trial
CME Group Inc Executive Chairman Terrence Duffy on Monday defended a controversial decision to consider electronic trades when settling grain prices as “the right thing to do,” as a trial over the move entered its second day.
Timeline of the growing currency probe
Emily Cadman – FT.com
At least six authorities across the globe – the European Commission, Switzerland’s markets regulator Finma and the country’s competition authority Weko, the UK’s Financial Services Authority, the Department of Justice in the US and the Hong Kong Monetary Authority – are investigating whether traders in some of the world’s biggest banks colluded to manipulate benchmark rates in the foreign exchange market.
HKEx Welcomes First Offer Of RMB Sovereign Bonds Through Its Facilities
Hong Kong Exchanges and Clearing Limited welcomes the decision by the Ministry of Finance of the People’s Republic of China to list renminbi-denominated sovereign bonds again on its Stock Exchange, and for the first time use the Exchange’s facilities for a public offer of its bonds.
Corzine Seeks Dismissal of MF Global Suit
Joseph Checkler – WSJ.com
Jon S. Corzine wants a judge to dismiss the amended lawsuit against him and other former MF Global Holdings Ltd. executives, saying it is filled with “disparaging characterizations” of old facts.
Nasdaq hit with delay over clearing approval
Tim Cave – Financial News
Swedish regulators have delayed the approval of Nasdaq OMX’s European clearinghouse as being “fit-for-purpose” under new derivatives regulation, bringing relief for dealers who feared a green light would have effectively accelerated the introduction of new clearing rules.
Amid Transformation of Corporate Bond Market, Fragmentation, Frustration Pervasive
Anthony Perrotta – TabbFORUM
Change is coming to the fixed income markets. But the corporate bond market is not homogenous, and a single e-trading protocol will not suffice in the long run. Meanwhile, disintermediation of the dealers is a recipe for disaster.
Chairman Gary Gensler Statements Of Support – Customer Protection
[NFA] Notice to Members I-13-34: Reporting Requirements for Veterans Day
EDHEC-Risk Institute Disagrees With EFAMA On ESMA Guidelines And Reiterates Its Call For Greater Index Transparency
The European Fund and Asset Management Association recently ventured that the European Securities and Markets Authority had exceeded its powers and mandate by issuing “quasi-regulation (…) on topics which were not previously regulated at EU level.” EDHEC-Risk Institute, which, like EFAMA, has contributed to the consultation process that led to these guidelines, takes exception to this language
Exchanges & Trading Facilities
CME Group Volume Averaged 11.1 Million Contracts Per Day In October 2013, Up 12 Percent From October 2012
CME Group, the world’s leading and most diverse derivatives marketplace, today announced that October 2013 volume averaged 11.1 million contracts per day, up 12 percent compared with October 2012. Total volume for October 2013 was more than 255 million contracts, of which 86 percent was traded electronically.
ICE Reports October Daily Futures Volume
IntercontinentalExchange, a leading operator of global markets and clearing houses, today reported futures volume for October 2013. ICE’s average daily volume (ADV) for futures and options was 3.36 million contracts, a decrease of 1% from the prior October. Year to date through October, average daily volume decreased 1% over the prior year to date period to 3.40 million contracts.
BATS Global Markets October Highlights: U.S. Antitrust Clearance Of Direct Edge Merger; Europe ETF, Trade Reporting Launches
BATS Global Markets (BATS) today reports October market share and activity, which includes U.S. Department of Justice clearance for the BATS-Direct Edge merger, and the launch of BATS Chi-X Europe’s pan-European listings business and BXTR pan-European Trade Reporting Service.
SGX derivatives trading and clearing volumes grow
Singapore Exchange (SGX) today said derivatives trading and clearing activities grew in October from a year earlier while securities trading declined. Record-high open interest was achieved in the derivatives market during the month.
TMX Group Consolidated Trading Statistics – October 2013: Toronto Stock Exchange, TSX Venture Exchange, TMX Select, Alpha, Montreal Exchange, NGX
Trading volume on Toronto Stock Exchange in October 2013 increased 6% compared to September 2013, and increased 4% year-over-year. Volume on TSX Venture Exchange increased 14% in October 2013 compared to the previous month, but decreased 16% compared to October 2012. TMX Select trading volume increased 6% in October 2013 compared to the previous month, and increased 44% compared to October 2012. Alpha trading volume in October 2013 increased 3% compared to September 2013, but was down 45% compared to the same month a year earlier.
Trading On Warsaw Stock Exchange: October 2013
The value of session trading in equities on the Main Market was PLN 21.8 billion in October 2013, an increase of 36.2% year on year. The average value of trading per session was PLN 947.8 million. The incremental value of session trading in the first ten months of 2013 increased by 18.2% year on year from PLN 158.3 billion to PLN 187.1 billion.
NYSE Euronext posts 21 pct rise in third-quarter profit
NYSE Euronext reported a 21 percent rise in third-quarter net income on Tuesday, as revenues at its cash trading and listings business increased.
CME earnings up on higher trade volume, lower tax rate
CME Group Inc, the largest U.S. futures exchange operator, on Monday said quarterly profits jumped amid increased trading of its flagship interest rate contracts and a reduced tax rate.
ISE and ISE Gemini to List Options on Twitter on November 15
The International Securities Exchange today announced that ISE and ISE Gemini options markets will list options on Twitter beginning Friday, November 15. The options listing date is contingent on a successful completion of Twitter’s initial public offering with shares to begin trading on Thursday, November 7.
NYSE says correcting some trades marked as sold
NYSE Euronext, operator of the New York Stock Exchange and NYSE MKT, said it was correcting trades that had been incorrectly marked as sold on the two exchanges during early trading on Monday, though all systems were functioning normally.
Goldman cautions on London Metal Exchange rule proposals
The London Metal Exchange’s proposals to cut queues to get metal out of the warehouses could increase price volatility and reduce transparency as more metal moves off the exchange, Goldman Sachs said in a research note.
CME alters Oct 29 NYMEX natural gas settlement price
Hedge Funds & Managed Futures
Pimco Total Return loses title as world’s largest mutual fund
Bill Gross’s Pimco Total Return Fund had outflows of $4.4 billion in October, stripping it of its status as the world’s largest mutual fund on lagging performance this year, data from Morningstar showed Monday.
Some Big Banks Intend to Continue Working with SAC Capital
Justin Baer – MoneyBeat – WSJ
Some pillars on Wall Street are standing by SAC Capital Advisors LP, the hedge-fund firm that agreed to plead guilty to criminal insider-trading charges.
Hedge fund titan Cohen to come under outside monitor’s purview
Steven A. Cohen is going to have a government minder as he winds down his SAC Capital Advisors hedge fund after it agreed on Monday to plead guilty in a nearly decade-long insider trading investigation.
Iosco report exaggerates hedge fund leverage, critics claim
Luke Clancy – Risk.net
The International Organization of Securities Commissions (Iosco) has come under fire for a new survey that suggests UK hedge funds are, on average, 37 times geared – a figure based on a methodology that overstates derivatives exposure, critics say.
Ackman’s fund roars back in October, now up 8.5 percent for year
Hedge fund manager William Ackman’s fund came roaring back in October and is now up 8.5 percent for the year, helping erase the memories of bruising losses only a few months ago.
Vanguard picks ETF ace to run $750 billion bond group
Vanguard Group, the No. 1 U.S. mutual fund company, said on Monday that Gregory Davis, a major force behind the launch of bond exchange-traded funds, will become the chief of its fixed-income group, which has $750 billion in assets.
Hedge funds wrong footed by sugar price tumble
Many hedge funds positioned themselves for losses in raw sugar, ramping up bets on price rises just as a slide in futures was kicking off, but began to bail out of cotton before a tumble in values accelerated.
Russell Investments shakes up managers as Rahman departs
Joe McGrath – Financial News
Russell Investments, the consultant and asset management group, has changed the managers on its Russell OpenWorld fund range following the departure of portfolio manager Faisal Rahman.
Hedge Fund Clients of Eze OMS Gain Access to Markit TCA
Ivy Schmerken – Wall Street & Technology
Markit will integrate its TCA product into Eze OMS, so that hedge fund and asset manager clients can assess pre-trade estimates alongside open orders in the trading blotter.
Banks & Brokers
ICAP currency trading touches six-year low
Philip Stafford – FT.com
Currency trading at ICAP, the world’s largest interdealer broker, fell to its lowest monthly level in more than six years as a drop off in volatility and uncertainty over the trajectory of US monetary policy led to a slump in foreign exchange markets.
Deutsche Bank chief named in legal probe
Alice Ross in Frankfurt – FT.com
Jürgen Fitschen, Deutsche Bank’s co-chief executive, has been named as a suspect in a probe into whether the bank’s board members gave incorrect evidence in court, as a decade-long dispute with media empire Kirch Group continues to cast a shadow over the lender.
Swiss finance minister calls for tighter leverage rules
James Shotter in Zürich and Patrick Jenkins in London – FT.com
Shares in UBS and Credit Suisse, Switzerland’s two largest banks, fell sharply on Monday after the Swiss finance minister said that the country’s leverage rules, already among the toughest in the world, should be tightened further.
HSBC Chief Clarifies Help on Forex Probe
Max Colchester – MoneyBeat – WSJ
Nothing much to see here. He didn’t say as much, of course, but that was essentially the message from HSBC HoldingsHSBA.LN -1.22% PLC Chief Executive Stuart Gulliver when asked whether the bank had suspended traders in relation to a growing probe into alleged manipulation of foreign exchange rates.
Bank of America wins dismissal of lawsuit on AIG disclosures
Bank of America Corp has won the dismissal of an unusual lawsuit in which shareholders accused it of concealing a $10 billion fraud case brought by American International Group Inc.
Carlyle Hires Warburg Pincus’s Kewsong Lee
Ryan Dezember – WSJ.com
An architect of some of Warburg Pincus LLC’s largest buyouts is headed to rival Carlyle Group in a rare instance of a prominent deal maker moving between top-tier private-equity firms.
Goldman Sachs to Present at the Bank of America Merrill Lynch 2013 Banking & Financial Services Conference
‘Veterans on Wall Street’ Announces Keynote Speakers for Third Annual Conference
Clearing & Settlement
Javelin Capital Markets: The gate-crasher
Peter Madigan – Risk.net
The countdown to mandatory trading on swap execution facilities started last month when Javelin Capital Markets became the first Sef to file a product list with US regulators. Its chief executive, Jamie Cawley, tells Peter Madigan why market participants have nothing to fear
ISDA Submits Letter On Over-the-Counter Derivatives Trade Reporting In Singapore
Indexes & Products
Tradeweb: iTraxx Spreads Tighten Steadily Through October While Selling Dominated Cash Credit Markets
CDS: Spreads on the iTraxx main index have been tightening steadily throughout the month with only a few exceptions – the most notable one occurring between October 3 and October 9, when mid spreads peaked at 101.7 basis points.
Deutsche Börse: Unscheduled Free Float Adjustment In MDAX
ICAP Futures And Options Joins Traiana Harmony Network
Traiana, the leading provider of pre-trade risk and post-trade processing solutions, announces that ICAP Futures and Options, the financial futures business of ICAP plc, has selected Traiana’s Harmony Network for its client connectivity layer. This now brings the total number of futures commission merchants (FCMs) on the Harmony Network for Exchange Traded Derivatives (ETDs) to 13.
Corvil Announces New Operational Performance Monitoring Solutions for Unified Communication, Database Systems, and Web Delivered Applications
Corvil, a provider of Operational Performance Monitoring (OPM) for the world’s leading enterprise businesses, today announced general availability of a new range of solutions aimed at monitoring the performance and health of mission critical enterprise applications and services.
Hawaiian Investment Manager Goes Mobile with IPC
Timothy Bourgaize Murray – WatersTechnology
The Honolulu-based firm Scotty D Group has moved its traders to IPC’s Unigy Pulse Mobile solution, complementing its existing connectivity provided through IPC Network.
Transit Networks Selects Volta’s Great Sutton Street Data Centre For Third Cloud Delivery Centre
New BM&FBOVESPA App For BlackBerry
SunGard Develops Service To Help Protect Trading Firms From Trio Of Risks
SEC Halts Ponzi Scheme Involving New Zealand Companies
The Securities and Exchange Commission today announced an emergency asset freeze to halt a Ponzi scheme involving U.S. and New Zealand-based companies peddling sham investment opportunities ranging from a bank trading program to kidney dialysis clinics.
New Zealamd’s Financial Markets Authority: Charges Laid Against Directors Of OPI Pacific Finance
The Financial Markets Authority (FMA) has laid charges against four directors of OPI Pacific Finance Limited (in receivership and in liquidation).
SAC: A Textbook Case of Corporate Prosecution
JAMES B. STEWART – NYTimes.com
SAC Capital’s guilty plea to insider trading and $1.2 billion fine may represent a sweeping victory for Preet Bharara, the United States attorney, and his team of prosecutors, and vindication for their multiyear investigation of one of the country’s most successful hedge funds. But the decision to indict a company, and to spare, at least for now, its founder and billionaire manager, Steven A. Cohen, has already ignited criticism.
Madoff Secretary Saw ‘Smug’ IT Guys After Private Meeting
Erik Larson – Bloomberg
Two computer programmers accused of aiding Bernard Madoff’s $17 billion Ponzi scheme, and extorting the con man in the process, were seen by his secretary looking “smug” as they left a closed-door meeting with Madoff two years before his 2008 arrest, prosecutors say.
Environmental & Energy
EU this week to OK talks on helping carbon market, official says
Officials of EU member states are almost certain to agree on a mandate this week to begin talks with the European parliament on a proposal to prop up carbon prices, an EU official said on Monday.
Kyoto Veterans Say Global Warming Goal Slipping Away
The only three living diplomats who have led the United Nations global warming talks said there’s little chance the next climate treaty will prevent the world from overheating.
OECD – Organisation for Economic Co-operation and: Carbon taxes and emissions trading are cheapest ways of reducing CO2, OECD says
Carbon taxes and emission trading systems are the most cost-effective means of reducing CO2 emissions, and should be at the centre of government efforts to tackle climate change, according to a new OECD study.
Japan FSA relaxed about spike in JGB liquidity swap trades
Alex Davis – Risk.net
Despite market players reporting a threefold increase in the number of Japanese government bond (JGB) linked liquidity swap deals between domestic players and international banks in 2013, the Japanese financial regulator says it has no plans to intervene beyond its usual monitoring of firm’s liquidity positions.
Zhou Xiaochuan, China’s Central Banker, Leads Push to Overhaul Economy
Bob Davis and Lingling Wei – WSJ.com
With mandatory retirement looming and little to lose politically, China’s central banker, Zhou Xiaochuan, used a Communist Party session last November to vent about the lethargic pace of economic reform.
Thai Bourse To Hold “SET In The City” Investment Fair In Bangkok Late November
Shenzhen Stock Exchange Market Bulletin 04 November, 2013 – Issue 22
Egyptian Exchange looks to the future
Michelle Price – Financial News
The Egyptian Exchange has had a tumultuous three years since the outbreak of the Arab Spring in January 2011 but the bourse is not letting two revolutions and sustained civil unrest keep it down. Yesterday, the EGX said in a statement that it was looking to join the industry race for the global derivatives market with the potential creation of an Egyptian futures market.
Emerging markets IPOs creep back to London
Richard Partington – Financial News
Emerging market companies are staging a return on the London Stock Exchange after a quiet year for flotations from developing countries so far.
Bid to set up commodity exchange without BSEC approval
The Daily Star
Bangladesh Securities and Exchange Commission yesterday asked its supervision and regulation of intermediaries (SRI) department to look into the idea of running a new commodity exchange for jute in Bangladesh.
NASDAQ Dubai Academy Courses Will Provide Capital Markets Overview, Plus Advice On IR And PR Programmes
Dubai Financial Market PJSC: Results Of Board Of Directors’ Meeting