NFA Election – Ernest Jaffarian reply to statements of James Koutoulas and John Roe
John Lothian News
From Ernest Jaffarian:
I find it necessary to speak to a number of mischaracterizations regarding the service of Doug Bry and myself on the NFA Board.
It was Doug Bry who originally suggested to me in 2011 that I pursue election to the NFA Board. He did so out of a deep concern for the needs of CTAs and their clients in the wake of MF Global. When the nominating committee chose to nominate the incumbent to a non-contested position on the ballot, he encouraged me to petition to be added to the ballot. It was then that I encouraged him to do the same and run against another uncontested candidate, Aleks Kins of Alphametrix. Doug Bry’s challenging the practice of non-contested elections was the first critical initiative in influencing the Board for the better. Had Doug not taken this initiative, there would have potentially been significant reputational damage to the NFA and CTA/CPO community.
The CTA/CPO community voted us onto the Board. We took the confidence that was placed in us extremely seriously.
In my opinion, no one has worked more aggressively to further the interests of the CTA/CPO community than Doug. Any suggestion that he has been ineffective is not only misguided but also inappropriate and completely untrue.
For the rest of the commentary from Ernest Jaffarian, click here
Predictions: What to Expect in 2016
Worry less about the banking system, but commodities, epidemics and climate volatility could be trouble
Look for breakthroughs, comebacks and new solutions to familiar problems: 17 prominent thinkers on the big developments that they anticipate or hope for
***** Not crowdsourced, but thinker-sourced.
Part of the infrastructure
OCC Newsroom, adapted from a Securities Lending Times article
The Options Clearing Corporation’s Scot Warren explores the role of central clearing and how it could be applied to securities lending in the future.
***** Talk about bringing light to the dark side.
Haim Bodek, Decimus Capital Markets – A Flash Course on Market Structure
“In the market there are edges that are permissible, and edges that are impermissible. It is the impermissible ones that you should care about. If it doesn’t smell right, leave.”
The 2014 publication of Michael Lewis’ Flash Boys ignited a firestorm of accusations and lawsuits regarding the tactics used by certain trading firms. It has also led to a robust national debate on market structure. Haim Bodek, a former algorithmic trader who now assists the Securities and Exchange Commission in whistleblower cases, frames this debate by explaining the regulation that created the current market structure. He goes on to explain how the market structure crisis is impacting market participants, as certain widespread industry practices are challenged. He says employees need to have an ethical compass, and be vigilant about practices in and around the firm.
Watch the video »
Bridging the Weeks by Gary DeWaal: December 21 – 31, 2015, and January 4, 2016 (MF Global; Blue Sheets; New Product Blues; Tag 50s; The Big Short)
Gary DeWaal, Katten, Muchin Rosenman LLP
Happy New Year and welcome to 2016. Last year ended quietly at financial service industry regulators worldwide. In the United States, counsel for Jon Corzine and the Division of Enforcement of the Commodity Futures Trading Commission traded very different views over Mr. Corzine’s responsibility for the collapse of MF Global in 2011. Meanwhile, the Financial Industry Regulatory Authority sanctioned one broker-dealer US $2.95 million for allegedly submitting inaccurate blue sheets, and another US $7.3 million for purportedly selling unregistered microcap stocks and anti-money laundering offenses in the face of red flags. I also reflect on the film The Big Short. As a result, the following matters are covered in this week’s edition of Bridging the Week
***** When will the music stop for Mr. Corzine?
MarketsWiki Page of the Day
MarketsWiki Recent Updates
Companies, Organizations and Groups
72,902,736 Pages viewed; 21,767 Pages; 195,603 Edits
China stock plunge triggers ‘circuit breaker’ trading halt
Gabriel Wildau in Shanghai – FT
Chinese shares plunged on the first trading session of the new year, with the Shenzhen market suffering its worst day in nine years and the blue-chip CSI 300 index slumping 7 per cent on weak manufacturing data, triggering newly minted circuit breakers.
Trayport COO takes over after CEO Piggott leaves
Futures & Options World
The chief operating officer of Trayport, the Intercontinental Exchange-owned energy platform, has taken over leadership of the firm after its chief executive left that role last month just days after it was acquired by ICE. Kevin Heffron, the chief operating officer at Trayport since joining the firm in 2009, is continuing as COO and assumed leadership of the company last month, according to sources, after ICE told Trayport staff their long-standing chief executive Elliott Piggott had left, as first reported by FOW.
Well-Known Investor John Angelo Dies; He co-founded Angelo, Gordon & Co. investment house
By RYAN DEZEMBER – WSJ
John M. Angelo, who co-founded Angelo, Gordon & Co. and ran the New York investment firm for nearly three decades, died Friday after suffering from cancer. He was 74 years old.
Market performance for 2015 in figures
Michael Mackenzie and Joel Lewin – FT
With the final whistle blown on 2015 trading, here is the year’s scorecard for markets.
China’s Seven-Minute Selling Frenzy Shows Circuit-Breaker Risks
Kyoungwha Kim, Cindy Wang – Bloomberg
New measures to curb volatility risk doing the opposite
Stock investors rushed to sell after first trading halt
The sell orders piled up fast on Monday at Shenwan Hongyuan Group, China’s fifth-biggest brokerage by market value.
China’s Crash Course: How a Turbulent Year Derailed Reform
Shen Hong – WSJ
Despite a slowing economy, the events of 2015 have diminished Beijing’s appetite for change
China had one of the best-performing stock markets in the world in 2015. Yet it was a dismal year for Chinese markets.
Music shifts for credit investors in 2015
Eric Platt in New York and Gavin Jackson in London – FT
The music kept playing in credit markets in 2015, but the tune definitely changed.
The all-singing, all-dancing activist hedge fund
Stephen Foley – FT
Institutional investors have made great strides in holding boards to account, says Stephen Foley
If you need to shake off the post-holiday blues, take a listen to Get On Board, a fun little album by a New York hedge fund manager called Eric Rosenfeld.
Wasted Opportunity: Hedge Funds Falter; The money managers who charge some of the highest fees on Wall Street had another down year in 2015
By ROB COPELAND – WSJ
Hedge funds start the New Year with something to prove—again.
Alternative assets loom as best bet
John Authers – FT
At last, 2016 is here. It is now incumbent on this column to suggest what investors should do to position themselves for the next 12 months.
Record $475bn parked with Fed at year end
Eric Platt in New York – FT
The Federal Reserve’s most important tool for setting interest rates absorbed a record $475bn of money from financial institutions in its last monetary operation of 2015, in another sign that one of the central bank’s main methods of draining liquidity from the financial system is working.
Commodity exposure in 2016 requires care
Mohamed El-Erian – FT
Patient capital into distressed opportunities is ideal strategy
Having serially disappointed investors for a while, commodities could well offer investors one of the most compelling investment opportunities in 2016.
Former commissioner Daniel Gallagher named president of Patomak Global Partners
By ANDREW ACKERMAN – WSJ
Three months after stepping down from a top position at the Securities and Exchange Commission, Daniel Gallagher is joining a Washington-based consulting firm established after the financial crisis to help companies navigate the new regulatory maze.
Prepare for a Dodd-Frank Repeal Fight
Gabe Rubin – Morning Consult
The Republican quest to dismantle the 2010 Dodd-Frank financial regulation law during this Congress has been a tale of two chambers. The House focused its energies on incremental, implementable reforms. Senate Republicans laid out a major vision for overhauling financial regulation, with virtually no support from Democrats. This year will be different. The focus for both chambers will be about honing and touting a broader Republican vision. The target, not surprisingly, is Dodd-Frank.
Sebi issues modalities for stock exchange listing
Steers clear of dilution of fit and proper; some leeway as shareholders would be required to give self certification
Stock exchanges will be allowed to go for listing from April this year. On the first day of the year, the Securities and Exchange Board of India (Sebi) issued the final circular in which it steered clear of any dilution the “fit and proper”.
Sebi permits ETFs to invest in Gold Monetisation Scheme
However, total exposure of gold ETFs has been capped at 20% of total assets under management
The Securities and Exchange Board of India (SEBI) today allowed gold exchange traded funds (ETFs) to invest in the recently-launched gold monetisation scheme.
Self-Regulatory Organization (SRO) Rulemaking and National Market System (NMS) Plans
- DTC: Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Add a Fee to Be Charged to Transfer Agents of DTC-eligible Issues Subject to a Corporate Action (Release No. 34-76802; File No. SR-DTC-2015-012; December 30, 2015); see also Exhibit 5
- NYSE: Notice of Filing and Immediate Effectiveness of Proposed Rule Change Adopting New Rules to Reflect the Implementation of Pillar, the Exchanges New Trading Technology Platform (Release No. 34-76803; File No. SR-NYSE-2015-67; December 30, 2015); see also Exhibit 5
- Phlx: Notice of Filing and Immediate Effectiveness of Proposed Rule Change Regarding Order Exposure (Release No. 34-76801; File No. SR-Phlx-2015-99; December 30, 2015); see also Exhibit 5
Shanghai-Hong Kong stock connect disappoints in 2015, regulatory changes needed to ensure their success
South China Morning Post
The Shanghai and Hong Kong stock connect failed to live up to market expectations, but the appetite of the stock exchange and brokers for more connect schemes in 2016 has not been sated although they are seeking a lineup of regulatory changes to make these cross border schemes a success.
Exchanges & Trading Facilities
Message From The President & CEO Tokyo Commodity Exchange
Last year, Japan’s economy started a gradual recovery with improved employment and income. This was in spite of slowing economic growth in Europe, China and other emerging economies. Commodity markets were moderately active following increased volatility starting late last summer stemming from an anticipated economic slowdown in China.
Tokyo Financial Exchange Trading Volume In December 2015 And Year 2015
Trading Volume in December 2015
The trading volume of Three-month Euroyen futures in December was 177,398 (+ 1.5% MoM /+ 54.2% YoY) and its average daily volume was 8,448. See the TABLE 1 for the composition of the trading volume.
Dalian Commodity Exchange Sets Extended Warehouses For Corn Futures
To facilitate futures delivery and further improve the quality of market services, Dalian Commodity Exchange (DCE) issued a notice on December 23, announcing that it has revised the “Measures of Dalian Commodity Exchange for Management of Designated Delivery Warehouses” and the “Detailed Rules of Dalian Commodity Exchange for Delivery”, allowing the designated delivery warehouses for the corn futures to set extended warehouse areas. The revised rules will come into effect starting from the C1701 Contract.
Reminder of Application Period for Listing Committee Candidates
The Listing Nominating Committee of The Stock Exchange of Hong Kong Limited (the Exchange), a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEx), reminds potential candidates for its Listing Committee that the period for submitting applications for nomination to the committee will close on 15 January 2016.
Clinton Says January Tax Proposals Will ‘Go Beyond’ Buffett Rule
Jennifer Epstein – Bloomberg
Democratic presidential front-runner Hillary Clinton will unveil proposals this month that will “go beyond the Buffett Rule” to raise the effective tax rates paid by the wealthiest Americans, she said Saturday.
Mike Oxley, Congressman Behind Anti-Fraud Law, Dies at 71
Nancy Moran – Bloomberg
Mike Oxley, the former U.S. congressman who co-sponsored the landmark Sarbanes-Oxley Act requiring corporate executives to vouch for company financials in the wake of the Enron and WorldCom accounting scandals, has died, age 71.
Hedge Funds & Managed Futures
A Painful Year for Contrarian Trades
A Wealth of Common Sense
There’s been something of a bull market in people who consider themselves a contrarian investor in recent years. People took notice of those who called the tech bubble in the late-1990s, the the real estate bubble in the mid-2000s or the bottom of the stock market in early 2009. Everyone would now like to think that they’re greedy when others are fearful and fearful when others are greedy.
Financial Markets Were Flat in 2015. Thank Goodness.
Neil Irwin – NY Times
Name a financial asset — any financial asset. How did it do in 2015? The answer, in all likelihood: Meh.
Hedge Fund Lutetium Plans to Liquidate, Return Investor Cash
Laura J Keller – Bloomberg
Lutetium Capital LLC, a hedge-fund firm that invests in distressed securities, is liquidating its two credit funds and returning all of the money it was managing to investors by next month, according to co-founder Michael Carley.
Seneca Capital latest hedge fund to close to outsiders
Mary Childs – FT
Seneca Capital has become the latest hedge fund to remove external investors, as volatility and investor pressure in 2015 took its toll on parts of the sector
Are Your Investments Ready for the New Year? FINRA Offers 6 Tips for 2016
The Financial Industry Regulatory Authority (FINRA) wants investors to start 2016 on the right financial foot and is offering several suggestions to help investors step back and take stock – literally and figuratively – of their investment portfolios.
Brevan Howard’s $20bn flagship fund falls for second year
Miles Johnson, Hedge Fund Correspondent – FT
Brevan Howard’s $20bn flagship fund is down for a second year in a row in a further blemish to the trading record of one of the largest hedge funds in Europe.
U.K. Bond Investors Seen Enduring Another Mediocre Year in 2016
Eshe Nelson – Bloomberg
Gilts returned 0.2% in 2015, after earning almost 15% in 2014
BOE seen on hold until end of 2016 as economic growth slows
U.K. government bonds eked out a positive return in 2015 and investors shouldn’t expect much more from 2016.
Banks & Brokers
BGC PARTNERS UPDATES ITS OUTLOOK FOR THE FOURTH QUARTER OF 2015
BGC Partners, Inc.
GFI Groups’ Results Will Be Consolidated with Those of BGC
BGC Partners’ results will include the consolidation of those for BGC’s majority-owned division, GFI Group Inc. (OTC: GFIG) (“GFI Group” or “GFI”), a leading intermediary and provider of trading technologies and support services to the global OTC and listed markets.
New EU authority budgets for 10 bank failures in four years
Laura Noonan – Banks
The new EU authority that took over the job of winding up failing banks on January 1 has budgeted enough money to wind up 10 banks over the next four years, a tender sent to financial services firms shows.
Edward Jones shakes up US mutual funds industry
Stephen Foley in New York – FT
A new entrant in the US mutual fund industry pulled in more money in 2015 than powerhouse brands including Fidelity, BlackRock and American Funds.
Goldman’s Lloyd Blankfein is feeling well amid cancer fight
Claire Atkinson – NY Post
Goldman Sachs Chairman and CEO Lloyd Blankfein may, in fact, be immortal.
Clearing & Settlement
LCH-Clearnet US chief plays the innovation game
The Banker (Registration Required)
The ‘market infrastructure’ industry, which provides all the endless plumbing and platforms necessary for the functioning of the over-the-counter (OTC) derivatives market, has been an area of immense change in the past few years. The term often conjures images of worthy but dull operations, dutifully building the services required by regulators and doing the unseen work that keeps the market running smoothly. However, it is also an area of huge innovation, from the smallest tech firm to large, established service providers.
What Banks Should Be Doing With Blockchain in 2016
Blockchain and old constructs, such as clearing houses and private exchange networks (eg SWIFT, CCP, FIX, DTCC) are like oil and water: They will not mix well because one is based on centrally trusted intermediaries, and the other is based on exchanging intermediaries for peer-to-peer trust. It is easier to start implementing blockchain solutions in new segments, without internal integrations.
FX clearing to accelerate in 2016
ForexClear’s Gavin Wells sees the drive towards greater capital efficiency gathering pace As the first margin requirement threshold for non-centrally cleared derivatives increases the cost of capital beginning in September 2016, the drive towards greater capital efficiency in the FX industry will gather momentum, says Gavin Wells, global head of LCH.Clearnet’s ForexClear. “In 2016, the need for capital efficiencies will increasingly be at the forefront for the industry,” says Wells.
Can the state take China’s mobile payments market in 2016? Experts think not
South China Morning Post
The state’s reach into the mobile wallets of Chinese consumers is proving short. The bank-card settlement monopoly China UnionPay in December made its first direct foray into mobile payment after years of struggling to secure a share of the industry’s profits as a clearing house.
Indexes & Products
Global ETF industry grabs record cash in 2015: BlackRock
BY TREVOR HUNNICUTT – Reuters
Investors poured $347 billion into exchange-traded funds globally during 2015, fund-manager BlackRock Inc (BLK.N) said on Sunday, setting a new record for the industry.
Five Key Takeaways from 2015 ETF Flows
It’s time for the annual reading of the exchange-traded fund flow tea leaves. ETFs took in a grand total of about $238 billion in 2015—just shy of their annual record of $243 billion set last year. No other investment vehicle came even close to this number. It is more than the flows into index funds, active mutual funds and hedge funds combined. Here are five things from this year’s flows that we found most interesting.
The Rieger Report: 500 Index Sectors – Final 2015 Results
Indexology – S&P Dow Jones Indices
The S&P 500 Bond Index sectors creates the opportunity to examine sector performance on both the stock and bonds issued by the companies in the S&P 500 Index. The 2015 results: As expected corporate bonds were less volatile than their equity counterparts but they still suffered from the energy and materials onslaught.
Why Bitcoin Matters
by Jon Evans – Tech Crunch
The most epochal financial transaction of this century, to date, occurred on May 22, 2010. It did not involve Wall Street, or the City of London; it took place in Jacksonville, Florida. It did not feature collateralized debt obligations, or credit default swaps. It was a purchase of two Papa John’s pizzas, in exchange for a payment whose present value currently exceeds US $4 million.
The Final Days of the Bitcoin Foundation?
Olga Kharif – Bloomberg
Bruce Fenton, executive director at the Bitcoin Foundation, opened its Dec. 15 board meeting with a sense of urgency: “We need additional funds if we wish to retain employees.” The numbers didn’t look good. In two years, the foundation had seen at least $7 million evaporate. As of Nov. 30, its total assets stood at $12,553.06.
London – A Progression from FinTech to EdTech
While progress is being made in the higher education levels, there is an increasing need to address the lack of interest and understanding of technology among the school going kids. “Catch ’em young” as they say, unless children are sensitized to computers and technology at a young age, they grow distant and a considerable portion of them find themselves alienated from the tech driven world as they grow up.
3 Lessons From The Graveyard of FinTech Start-ups
There are rules every start-up abides by, and the FinTech arena has its own special set. These new companies simply must understand the start-up game as well as the legal quandaries specific to finances. Taking a walk through the FinTech graveyard provides educational, eye-opening, and sometimes fun new information.
For the FCA, 2015 was the year when fines got more personal
By Bernard Goyder – Financial News
The UK’s financial services regulator fined twice as many people in 2015 amid moves to instill greater accountability among senior managers.
However, the FCA confirmed on December 31 that it had abandoned a proposed review into culture and pay in banking. A spokesman for the regulator said: “We have decided that the best way to support these efforts is to engage individually with firms to encourage their delivery of cultural change”.
Sebi asks two firms to repay investor money
Press Trust of India
Markets regulator Sebi has ordered two firms – Sunplant Constructions and Krutibibha Corporation – to refund the money they had raised illegally from investors.
Crédit Agricole Agrees to Pay Penalty of $99 Million to U.S. Department of Justice
By INTI LANDAURO – WSJ
The Swiss unit of French bank Crédit Agricole SA on Thursday said it has agreed to pay a $99 million penalty to the U.S. Department of Justice as part of a nonprosecution agreement over its conduct toward U.S. taxpayers.
Swiss bank Lombard Odier to pay $100 million to resolve U.S. tax probe
Swiss private bank Lombard Odier said it would pay $99.8 million under a non-prosecution agreement with U.S. authorities to settle an investigation into allegations it helped wealthy American clients evade taxes.
Sebi slaps Rs 30-lakh penalty on Anand Rathi
Penalty for transferring of client money towards payment to commodity broking wing
The Securities and Exchange Board of India (Sebi) announced a Rs 30 lakh fine on a leading financial services entity, Anand Rathi (AR), for breaching the stock broker regulations. Sebi said AR had repeatedly withdrawn funds from a designated client bank account to make payments not to a client but to its own group company, the commodities brokerage wing. In doing so, it had failed to exercise due skill and care in conduct of business, breaching the statutory requirements under the Sebi Act.
Environmental & Energy
What Cuba Can Teach Us About Food and Climate Change; After the Cold War
BY RAJ PATEL – New Republic
The Studebakers plying up and down Havana’s boardwalk aren’t the best advertisement for dynamism and innovation. But if you want to see what tomorrow’s fossil-fuel-free, climate-change-resilient, high-tech farming looks like, there are few places on earth like the Republic of Cuba.
Russia’s oil output hits record high despite price slump
AFP via Yahoo
Russia pumped a record 534 million tonnes of crude oil in 2015 even as it reeled from a fall in oil prices caused by a supply glut, energy ministry data showed Saturday.
Coal: The king is dead
LEX – FT
Even if the climate deal slips, technology will help bury Peabody and other producers
Fetch your pencil and ruler. After governments agreed in Paris to start cutting overall greenhouse gas emissions before 2050, there is enough information to chart any pure-play coal producer. Coal is the most polluting energy source. So, mark one dot at the current share price, another at zero for 2050, and connect them. Voila!
China says to step up checks on individuals’ forex buying
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BEIJING: China’s foreign exchange regulator said on Thursday it will step up checks on individuals’ foreign currency buying, in its latest step to curb capital outflows.
The Guardian view on the foreign press in China: expelling the messenger
By putting a French journalist on a plane for telling the truth, China is shutting itself off. The outside world must not be intimidated, but stand up and protest
It is not a new charge that authoritarianism has grown in China since president Xi Jinping came to power in 2013. Mr Xi’s strongman style has sometimes been compared to that of Mao Zedong. Under him, China has not only reasserted itself on the international stage, it has cracked down on all forms of domestic dissent. Now, Mr Xi’s government is turning the screws on the international media.
China Factories Haven’t Fought Off Overcapacity, Weak Demand; Caixin Media gauge of activity has been in contraction for 10 months straight
By MARK MAGNIER – WSJ
A private measure of China’s manufacturing sector slipped in December as factories continue to battle overcapacity and weak demand.
Nigeria’s Economy, Entrepreneurship and Banking
Entrepreneurs occupy a central position in any market economy. They serve as the spark plug in the economy’s engine, activating and stimulating all economic activities. The economic success of nations worldwide is the result of encouraging and rewarding the entrepreneurial instinct.
It is time we pulled ‘I’ out of Brics and India must walk alone: Uday Kotak
The Economic Times
Emerging markets in general may be at the receiving end of adverse global developments — from the US Federal Reserve raising interest rates to the collapse in commodity prices — but that’s potentially a blessing for India which benefits immensely from some of these trends, said Uday Kotak, executive vice-chairman of Kotak Mahindra Bank.
New York sues to get DraftKings, FanDuel to return money
Jonathan Lemire – Associated Press
New York’s attorney general has filed a lawsuit asking FanDuel and DraftKings to give back all the money they made in the state, the latest salvo in an ongoing clash with a pair of increasingly popular daily fantasy sports websites.
Economists Take Aim at Wealth Inequality
By NELSON D. SCHWARTZ – NY Times
When pundits and presidential candidates talk about inequality and the tiny sliver of the population whose fortunes have soared, they often drop names like Warren Buffett, Bill Gates, Sheldon Adelson and Mark Zuckerberg.
‘Indigestion’ hits diamond companies
James Wilson, Mining Correspondent – FT
Too much supply and too little demand weighs on groups
De Beers was hoping its “Live your love today” campaign would entice Chinese consumers to buy diamond jewellery this holiday season.