First Read

Futures regulator dogged by questions on conflicts, governance
By Lynne Marek, Crain’s Chicago Business
Speaking to the Commodity Futures Trading Commission in April 2013, he said “friends” at a small Chicago-based company called AlphaMetrix had built a software system that would flag potential fraud before it endangered customers. The Chicago-based futures association, an industry regulator, had hired AlphaMetrix for the job, with the blessing of co-regulator and futures exchange operator CME Group. “Amongst all of the challenges and dead ends that the industry faces these days, this is a story that’s a good one,” Hehmeyer said at the time (see a PDF of the transcript).
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***** I see someone’s fingerprints all over this story.

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Losses From SNB Shock Set To Be In ‘Billions’
By Elena Logutenkova, FINalternatives
The $400 million of cumulative losses that Citigroup Inc., Deutsche Bank AG and Barclays Plc are said to have suffered from the Swiss central bank’s decision to end the cap on the franc may be followed by others in coming days.
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***** I am glad I am no longer a broker. One client with the wrong position could have cost me more than I even want to think about.

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How insecurity and preening kill corporate common sense
Lucy Kellaway, FT
Last week I had lunch with a man who used to be one of the most senior bankers in the UK. The trouble with business today, he complained over coffee, was that there was no common sense any more. Such sense, he insisted, had always been uncommon — but now was extinct.
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***** Interesting piece from the FT.

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Focused: What The Industry Knows About Transparency (Part 1)
JohnLothianNews.com

Back in November, the industry gathered for the annual FIA Expo event in Chicago. There, John Lothian News used an exhibitor booth (Thanks Cinnober!) as its studio to ask industry participants key questions about transparency issues in today’s markets.

Part 1: Where do we need to improve transparency in the markets today?

Watch the video »

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Oxfam presses Davos forum with wealth inequality claim
Chris Giles in London, FT
Campaigners sought to pile pressure on the rich and powerful travelling to the World Economic Forum in Davos this week, with a prediction that the wealthiest 1 per cent would soon own more than the rest of the world’s population put together.
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***** Get ready to hear a lot more about wealth inequality. Pitchfork production is set to zoom.

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Richest 1% Likely to Control Half of Global Wealth by 2016, Study Finds
By PATRICIA COHEN, NY Times
The richest 1 percent are likely to control more than half of the globe’s total wealth by next year, the charity Oxfam reported in a study released on Monday. The warning about deepening global inequality comes just as the world’s business elite prepare to meet this week at the annual World Economic Forum in Davos, Switzerland.
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***** Like I said.

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MarketsWiki

MarketsWiki Page of the Day
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MarketsWiki Recent Updates

People

John Lee; Alan Grigoletto; Chris R. Concannon

Companies, Organizations and Groups

Forex Capital Markets (FXCM); BATS Global Markets; GFI Group, Inc.; Warsaw Stock Exchange; MEFF; Optiver; London Stock Exchange Group plc

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Lead Stories

China stocks hit by margin lending curbs
Gabriel Wildau in Shanghai, FT
Shanghai’s stock market suffered its worst fall in more than six years on Monday with China’s biggest securities brokerages hit by a crackdown on margin lending, an engine of the frenzied rise in mainland shares in recent months.
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China Shares Fall Most in Six Years on Regulatory Crackdown; Chinese Regulators Target Margin Trading and Shadow Banking
By Daniel Inman and Jacky Wong, WSJ
A mountain of debt built up by Chinese investors eager to cash in on the soaring stock market crumbled on Monday, sending the stock market down 7.7%, its worst day in six years.
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China Brokers Face Double-Whammy as Margin Finance Curbed
By Bloomberg News
China’s biggest brokerages are getting squeezed on two fronts as regulators curb loans to equity traders.
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Nasdaq to Provide Trading Platform for Japan’s Biggest Derivatives Exchange; Exchange Operators in Japan Seek More Foreign Investors
By Eleanor Warnock, WSJ
TOKYO—Nasdaq, the world’s largest exchange company, will provide a new trading platform for Japan’s largest derivatives bourse, in a significant deal for a foreign financial technology operator and a step toward internationalizing Japan’s financial markets.
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Swiss franc turmoil hits retail currency traders
Phillip Stafford, Michael Mackenzie and Judith Evans in London and Alice Ross in Washington, FT
Tafadzwa, 39, a computer programmer in Harlow, near London, put his entire savings of £22,000 on Alpari, the foreign exchange trading platform that went bust on Friday in the market turmoil triggered by this week’s huge appreciation of the Swiss franc.
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Leucadia to give FXCM $300 mln to continue operations
Reuters
Leucadia National Corp will give $300 million to retail foreign exchange broker FXCM Inc to meet regulatory capital requirements, the two companies said on Friday.
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Swiss Franc Remains at Sky-High Levels; Swiss Stocks Regain Some Stability; Swiss Currency Hovers Around Parity With Euro
By Josie Cox
The Swiss franc remained pinned at sky-high levels on Monday, hovering around one-to-one against the euro after last week’s shock decision by the Swiss National Bank to allow its currency to climb.
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ECB May Deliver $635 Billion to Steer Euro Away From Deflation
By Alessandro Speciale and Andre Tartar, Bloomberg
Mario Draghi is likely to announce a 550 billion-euro ($635 billion) bond-purchase program this week and won’t skimp too much on the details, economists say.
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Banks and Congress blast Obama plan to tax Wall St and wealthy
Barney Jopson in Washington, FT
The banking industry and Republicans have criticised a White House proposal to increase taxes on Wall Street and the wealthy as President Barack Obama steps up efforts to seize the initiative on economic policy.
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Broker Alpari says exploring all options including sale after Swiss shock
Reuters
Retail currency broker Alpari UK, which last week said it had entered into insolvency after suffering losses stemming from the scrapping of the Swiss franc’s cap, announced it was considering all options including a sale.
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Goldman Sachs touts commodities muscle as rivals shrink
By Lauren Tara LaCapra, Reuters
Goldman Sachs Group Inc stuck with commodities trading while rivals have pulled back, and on Friday the bank felt vindicated.
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Ex-S&P exec sues U.S. SEC ahead of administrative charges
By Nate Raymond, Reuters
A former official at Standard & Poor’s sued the U.S. Securities and Exchange Commission on Friday to block the regulator from bringing administrative charges against her over credit ratings for commercial mortgage-backed securities.
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Regulatory

Swiss franc shock shuts some FX brokers; regulators move in
By Anirban Nag and Steve Slater, Reuters
The Swiss franc shock reverberated through currency trading firms around the world on Friday, wiping out many small-scale investors and the brokerages that cater to them and forcing regulators to take a closer look at the sector.
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Massad looks to streamline cross-border rules
Futures & Options World
Timothy Massad, chair of the Commodities Futures Trading Commission (CFTC), has said the US regulator is committed to continued ..
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Remarks of Chairman Timothy G. Massad before the Asian Financial Forum, Hong Kong
CFTC
But because the swap market was already global, many participants expect harmonization in regulation from the start. That is a good goal, though it may take time. To me, however, the glass is half full, not half empty. We are making good progress.
I can assure you that we in the United States want to continue to work with Asia to build that framework. We are aware that there are limits to the reach of any one country’s laws. We recognize the importance of harmonizing our rules with those of other nations where possible.
**No Link Available

Here’s What the Swiss Central Bank Just Did and Why It’s Such a Shocker
By Joe Weisenthal, Bloomberg
The Swiss National Bank shocked the world when it announced it would remove the cap it had in place to prevent the Swiss franc from rising too high against the euro.
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Self-Regulatory Organization (SRO) Rulemaking and National Market System (NMS) Plans

  • BATS: Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Clarify the Use of Certain Data Feeds 1 Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”), and 2Rule 19b-4 thereunder, notice is hereby given that, on January 7, 2015, BATS Exchange, Inc. (the “Exchange” or “BATS”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I and II below, which Items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested person (Release No. 34-74074; File No. SR-BATS-2015-04; January 15, 2015); see also Exhibit 5
  • CBOE: Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Delay the Implementation Date of Rule Change SR-CBOE-2014-040 (Release No. 34-74067; File No. SR-CBOE-2015-004; January 15, 2015)
  • EDGA: Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Clarify the Use of Certain Data Feeds 1 Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”), and 2Rule 19b-4 thereunder, notice is hereby given that, on January 7, 2015, EDGA Exchange, Inc. (the “Exchange” or “EDGA”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I and II below, which Items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested person (Release No. 34-74076; File No. SR-EDGA-2015-02; January 15, 2015); see also Exhibit 5
  • EDGX: Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Clarify the Use of Certain Data Feeds 1 Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”), and 2Rule 19b-4 thereunder, notice is hereby given that, on January 7, 2015, EDGX Exchange, Inc. (the “Exchange” or “EDGX”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I and II below, which Items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested person (Release No. 34-74072; File No. SR-EDGX-2015-02; January 15, 2015)
  • NASDAQ: Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Membership Application (Release No. 34-74078; File No. SR-NASDAQ-2015-004); see also Exhibit 5 and Exhibit 3
  • NASDAQ: Notice of Filing and Immediate Effectiveness of Proposed Rule Change Regarding the Extranet Access Fee (Release No. 34-74077; File No. SR-NASDAQ-2015-002); see also Exhibit 5
  • NYSE: Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Add a Price Protection Mechanism to Prevent the Automatic Execution of Incoming Market Orders and Marketable Limit Orders Outside a Specified Parameter and Eliminate Liquidity Replenishment Points and the Gap Quote Policy (Release No. 34-74063; File No. SR-NYSE-2015-01; January 15, 2015); see also Exhibit 5
  • NYSE Arca: Notice of Filing of Amendments No. 1 and No. 2 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment Nos. 1 and 2, to List and Trade Shares of the iShares Interest Rate Hedged 0-5 Year High Yield Bond ETF, iShares Interest Rate Hedged 10+ Year Credit Bond ETF, and the iShares Interest Rate Hedged Emerging Markets Bond ETF Under NYSE Arca Equities Rule 8.600 (Release No. 34-74058; File No. SR-NYSEArca-2014-114; January 15, 2015)
  • NYSEMKT: Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Add a Price Protection Mechanism to Prevent the Automatic Execution of Incoming Market Orders and Marketable Limit Orders Outside a Specified Parameter and Eliminate Liquidity Replenishment Points and the Gap Quote Policy (Release No. 34-74064; File No. SR-NYSEMKT-2015-02; January 15, 2015); see also Exhibit 5
  • OCC: Notice of Filing of Advance Notice Concerning Extended and Overnight Trading Sessions (Release No. 34-74073; File No. SR-OCC-2014-812; January 15, 2015)
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    Recovery and Resolution Directive, including feedback on CP14/15 and final rules
    UK FCA
    This Policy Statement reports on the main issues arising from Consultation Paper CP14/15 on the [Bank] Recovery and Resolution Directive (RRD). It also publishes final rules to transpose the RRD into the UK regulatory regime for the investment firms and certain group entities that we regulate prudentially and that fall within the scope of the RRD.
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    GoConnect Limited: half-year results 31 December 2014
    ASIC
    ASIC has welcomed the announcement of a $4.3 million impairment charge to goodwill assets by ASX-listed, GoConnect Limited, to be reflected in its results for the half-year ended 31 December 2014.
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    Member obligations under NFA Bylaw 1101 and Compliance Rule 2-36(d) with respect to CPOs/CTAs exempt from registration
    NFA
    CFTC rules require any person that currently claims an exemption from CPO registration under CFTC 4.13(a)(1), 4.13(a)(2), 4.13(a)(3), or 4.13(a)(5), an exclusion from CPO registration under Regulation 4.5, or an exemption from CTA registration under 4.14(a)(8) to annually affirm the applicable notice of exemption within 60 days of each calendar year end. Pursuant to the CFTC’s rules, persons that fail to file the affirmation notice by March 2, 2015 will be deemed to have requested a withdrawal of the exemption and, therefore, may be required to be registered.
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    Exchanges & Trading Facilities

    Swiss exchange eyes corporate bond market
    Philip Stafford, FT
    SIX Swiss Exchange is to join the growing battle in Europe to trade large blocks of corporate bonds and help unblock a growing liquidity drought in the market.
    jlne.ws/1uiCAbO

    Hedge Funds & Managed Futures

    Swiss Franc Trade Is Said to Wipe Out Everest’s Main Fund
    By Katherine Burton, Bloomberg
    Marko Dimitrijevic made a smart bet in December. The hedge fund manager, wagering the Swiss franc would fall, profited after voters there rejected a plan to have the central bank hold a fifth of its assets in gold.
    jlne.ws/1ABcIVa

    It’s Time to End Financial Advisers’ 1% Fees; Low-Cost Online Advisers Are Challenging Traditional Advisers
    By Jonathan Clements
    Will the other shoe drop? For the past decade, fund investors have eschewed actively managed funds, those that aim to beat the market. Instead, they have poured money into passively managed index funds, which seek to replicate the performance of a market average.
    jlne.ws/17YujiT

    TPG raises initial $5bn for latest buyout fund
    Henny Sender, FT
    TPG Capital is poised to announce it has raised an initial $5bn for its latest buyout fund, securing backing from long-time investors including the pension schemes of the State of Oregon and the State of Washington.
    jlne.ws/1CrZImW

    Traders With 5 Billion Euros in Put Options Hit Jackpot on Franc
    By Anchalee Worrachate and Vassilis Karamanis, Bloomberg
    When the Swiss National Bank decided to remove its cap on the franc today, it handed a winning lottery ticket to some traders of currency options.
    jlne.ws/1G93xnc

    Banks & Brokers

    Société Générale splitting chairman and chief’s roles
    Martin Arnold in London, FT
    Société Générale has split the roles of chairman and chief executive as required by European law, appointing the Italian economist Lorenzo Bini Smaghi to chair the French bank’s board of directors while Frédéric Oudéa continues as chief.
    jlne.ws/1CrZzQp

    Goldman Traders Are Making Way Less Than They Used To
    By Akane Otani and Joe Weisenthal, Bloomberg
    The glory days may be over for Wall Street traders. Goldman Sachs just reported its lowest annual trading revenue since 2005. The bank made $1.16 billion from trading the fixed-income, currency, and commodity (FICC) markets in 2014—a 31 percent decline from a year earlier.
    jlne.ws/1sURrYY

    One Financial Markets Unaffected by Events in Switzerland
    Business Wire
    One Financial Markets is pleased to confirm that it was not adversely affected by the impact of the shock SNB announcement last Thursday which resulted in unprecedented volatility in all markets linked to CHF. “The statements from Alpari and others about insolvency and significant losses will enhance our position in the industry as one of the most secure FCA regulated brokers.” The award winning London-based online broker was able to inform its clients that, despite last week’s extreme volatility, prudent management of its trading book has resulted in no significant losses.
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    JP Morgan swoops for Goldman MD of 24 years
    The Trade
    JP Morgan has swooped to hire a Goldman Sachs stalwart to become its new global head of equities technology. Lakith Leelasena joined JP Morgan at the end of last year as global head of equities technology (GIM) after nearly a quarter of a century with Goldman, most recently as a managing director.
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    Julius Baer shares regain lost ground with 6% advance
    James Shotter in Zürich, FT
    Shares in Julius Baer rose 6 per cent on Monday morning after the Swiss private bank said it had not made losses last week after the Swiss National Bank’s decision to scrap its currency ceiling against the euro.
    jlne.ws/1wltAN4

    Scott Carter, Top Deutsche Bank Prime Brokerage Exec, to Step Down; Carter Will Be Replaced By Marcelo Pizzimbono
    By Rob Copeland And Eyk Henning
    Scott Carter, a top executive in the Deutsche Bank AG unit that lends to hedge funds, is stepping down from his post, according to a memo and people familiar with the matter.
    jlne.ws/1GjdO03

    Clearing & Settlement

    Derivatives watchdogs expected to agree swaps rules reprieve
    By Michelle Price, Reuters
    Derivatives watchdogs are expected to agree a new timeline for the introduction of margin requirements for swaps transactions after strong resistance from the international banking industry, Europe’s top securities regulator said.
    jlne.ws/14XfkUa

    Indexes & Products

    MSCI Paves Way for Overseas Listings to Enter Indexes
    WSJ
    MSCI will allow shares of companies trading outside their home markets to enter their native country indexes, a move which is likely to funnel billions of dollars in capital flows toward companies that lack a domestic listing, such as Alibaba. But the index provider declined to include Russian companies among those which would be assessed for entry, citing investor concerns. Stocks that will be included in MSCI’s indexes will be announced in November.
    jlne.ws/1ygvNPm

    S&P 500 earnings face dollar headwind
    FT.com
    Sliding metals and crude oil prices are not the only headwind for US corporate profits as the quarterly earnings season heats up this week. A sharp increase in the US dollar against both the euro and Japanese yen is expected to crimp profits for some of the country’s largest companies, with some strategists on Wall Street warning the currency’s gain and low energy prices could constrain quarterly S&P 500 earnings growth to just 3 per cent.
    jlne.ws/1ygwGHA

    Technology

    A College Degree Alone Won’t Save You From Being Replaced by a Machine
    By Akane Otani, Bloomberg
    Going to college pays off in many ways—but going to graduate school pays off even more. Advanced degree holders reap bigger financial rewards than peers with four-year degrees—a trend that has become more pronounced over the past 15 years.
    jlne.ws/1IXU1kO

    Enforcement

    CFTC Orders Summit Energy Services, Inc. to Pay $140,000 Civil Monetary Penalty and Cease and Desist from Acting as an Unregistered Commodity Trading Advisor
    CFTC
    The U.S. Commodity Futures Trading Commission (CFTC) today entered an Order requiring Summit Energy Services, Inc. (Summit Energy), a Delaware corporation with its principal place of business in Louisville, Kentucky, to pay a $140,000 civil monetary penalty for acting as an unregistered Commodity Trading Advisor (CTA).
    jlne.ws/1BsWV06

    Former Swiss banker found guilty in WikiLeaks trial, avoids jail
    Reuters
    A former Julius Baer banker was found guilty on Monday of breaching Swiss banking secrecy laws by handing over data about offshore clients to WikiLeaks, but will avoid jail time.
    jlne.ws/1uiKeTy

    Environmental & Energy

    The Price of Fines — Energy Journal
    By Christopher Harder, WSJ
    Plunging oil prices have generally been seen as bad for oil companies like BP PLC, but the oil major may try to take advantage of them when it goes on trial tomorrow over how much it must pay the U.S. for the 2010 explosion of the Deepwater Horizon rig, which led to the largest offshore oil spill in U.S. history.
    jlne.ws/1BUmiGW

    World just had hottest year on record
    Pilita Clark, Environment Correspondent, FT
    Last year was the hottest on record, two US government agencies confirmed on Friday, in what scientists said was yet more clear evidence of global warming.
    jlne.ws/1yz4v8G

    Asia-Pacific

    Swiss action turns up heat on the Chinese yuan
    By Craig Stephen, MarketWatch
    The surprise move by Switzerland to scrap its currency ceiling against the euro EURCHF, +1.46% last week is a reminder there can be unexpected collateral damage from central banks waging currency wars. As markets digest last week’s turmoil, expect focus to turn to other fault lines on the global currency map.
    jlne.ws/17YuB9y

    China’s forex sales point to capital outflows
    By MarketWatch
    China’s banks recorded net sales of 118.4 billion yuan ($19.07 billion) of foreign exchange in December despite another big trade surplus during the month, suggesting renewed capital outflows amid concerns over the economy and the yuan.
    jlne.ws/1yyUdWe

    Hong Kong Regulator Alleges Misleading Research; SFC Pursues Actions Against Moody’s, Citron
    By Enda Curran And Rick Carew
    Hong Kong’s securities regulator is turning up the heat on what it considers to be misleading stock research.
    jlne.ws/1IXYFPN

    Two-Day Asian Financial Forum 2015 Opens
    MarketWatch
    The Asian Financial Forum (AFF), one of the leading annual events in the global financial calendar, opened today at the Hong Kong Convention and Exhibition Centre (HKCEC). Organised by the Hong Kong SAR Government and the Hong Kong Trade Development Council (HKTDC), the two-day forum will examine the theme of “Asia: Sustainable Development in a World of Change” with over 100 distinguished speakers from around the world, including Xiao Gang, Chairman of China Securities Regulatory Commission; Professor Paul Krugman, Nobel prize-winning economist; and Jiang Jianqing, Chairman of Industrial and Commercial Bank of China Limited.
    jlne.ws/1xL1T0L

    To Calm Its Markets, China Helps Guide a Sell-Off
    By Neil Gough, NY Times
    Stocks in China plunged 7.7 percent on Monday, the largest one-day sell-off since the 2008 financial crisis. But China’s top securities regulator, Xiao Gang, showed no sign of concern as he addressed a financial forum here.
    jlne.ws/1EhuUGW

    Frontier Markets

    India poised to mandate rupee interest rate swap clearing
    Risk.net
    jlne.ws/1ui1Edf

    Banks stage quiet retreat from Moscow
    Financial News
    Banks are cutting back on investment bankers or giving those in Russia new responsibilities abroad as part of a discreet retreat from the country, where investment banking revenues dropped by three quarters last year.
    jlne.ws/1ui1H8R

    DGCX Gold Volumes Grow 14% In December
    Mondovisione
    Gold trading volumes on the Dubai Gold and Commodities Exchange (DGCX) reached 41,945 contracts in December, registering a significant growth of 14% year-on – year. In December 2014, DGCX volumes witnessed a growth of 25% from the same period last year, recording total monthly volume of 962,438 contracts valued at $ 27.84 billion. The Exchange’s average daily volume (ADV) grew 19% year-on-year reaching 45,830 contracts in December 2014.
    jlne.ws/1ui1ZwD

    Miscellaneous

    The Price of Privilege
    By LANDON THOMAS Jr., NY Times
    They were alike in many ways, Thomas Strong Gilbert Sr. and the son to whom he gave his name and who, prosecutors say, would eventually kill him. Graduates of elite boarding schools and Princeton University, the two men were handsome, gifted athletes who — on the surface at least — seemed to be navigating the exclusive glide path of wealth, social position and success that has long defined life inside America’s upper crust.
    jlne.ws/1xo8NK9

    Body found at California desert resort is missing AIG exec -police
    Reuters
    A body found on the grounds of a California desert resort hotel has been identified as that of a missing AIG executive who failed to turn up for meetings last week, the sheriff’s office said on Friday.
    jlne.ws/1CsaRUC

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