First Read

Friday’s Follies
John Lothian

My older brother Scott, father of Ryan and Patrick of John J. Lothian & Company, Inc., had knee replacement surgery this week on his right knee. He had his left knee replaced several weeks ago. Evidently his doctor and hospital don’t believe in doing two knees in one operation.

Scott will not be having guests do his job while he is out recovering, though I am sure many would apply. He is a pharmacist at Northwestern Memorial Hospital.

The OIC had their annual Chicago press holiday party last night in the stylish Nellcote restaurant. It was a good turn out, but with dwindling press corps covering the markets they had to stretch the invitation list to include some former reporters who used to cover the space.

Last night was the last such party for Doris Frankel, who is retiring from Reuters after 35 years with the company. She is part of about 100 Reuters employees who are taking an early retirement buyout. Doris is a very good reporter and she will be missed.

Not at the OIC party, but someone who is also retiring is Phil Gocke. Phil is retiring from the Options Industry Council and OCC effective December 31 after eight years. Phil will be heard from again, I believe.

Due to the increasing volume of information and misinformation surrounding bitcoin and other digital currencies and payment systems, John Lothian News has put together a special report. Subscribers should expect it to hit inboxes Saturday morning. It will be posted to the John Lothian News site as well.

The CME Group’s London-based corporate communications and social media ace Allan Schoenberg’s MarketsWiki page now includes references to a profile about him by Communicate Magazine. It was not a bad profile, but I believe it did not mention his addiction to coffee.

Kelly Loeffler’s MarketsWiki page now includes reference to the fact she was considering running for the Republican nomination for the U.S. Senate from Georgia. She ultimately decided the time was not right, considering her company, ICE, was then just closing the deal for NYSE Euronext. Kelly, who is part owner in women’s professional basketball team in Atlanta, the Atlanta Dream, would be a welcome addition to Washington. Just not yet.

Speaking of ICE, their ICE Futures Canada reached a daily volume record of 51,805 contracts in Canola futures on December 4, 2013. The previous volume record was 49,165 contracts on June 9, 2010. Did you know canola is the third largest source of vegetable oil in the world?

McGladrey has hired Matt Reynolds to run a financial services consulting business. We will be interviewing him soon to find out more about what he is doing for McGladrey.

The CBOT Building this week opened up their new second floor lobby, with access via a first floor escalator. So far I like it as you have one place where people access the elevators, so you run into a lot more people on the escalators. The CBOT Building management will be holding an telecom and technology open house on Thursday, December 19.

Lastly, among my new followers on Twitter is none other than William O’Brien, the CEO of Direct Edge. His Twitter handle is @obrienedge. If you follow him, be prepared for the ongoing battle with the boys from Nanex. I like Bill’s proactive, aggressive, but polite posture on Twitter.

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The ICE man cometh
CNN Money
The New York Stock Exchange, an icon for two centuries, has just been acquired by an upstart exchange and clearinghouse company carrying the cool name of ICE (for IntercontinentalExchange). The company’s founder and CEO, generally a cool customer himself, is an electronic-trading entrepreneur and visionary, Jeffrey Sprecher, 58.
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***** Playing the part of Brian Dennehy is Jeff Sprecher.

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ICE Futures Canada Sets Daily Volume Record In Canola Futures
IntercontinentalExchange Group, the leading global network of exchanges and clearing houses, announced today that ICE Futures Canada reached a daily volume record of 51,805 contracts in Canola futures on December 4, 2013. The previous volume record was 49,165 contracts on June 9, 2010.
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****** Just in time for all the holiday cooking.

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CFTC Head Gary Gensler Toughens Wall Street Rules as Term Ends
Silla Brush and Robert Schmidt – Bloomberg
Gary Gensler is sending a message to Wall Street: I am not leaving Washington quietly. In his final weeks as chairman of the Commodity Futures Trading Commission, Gensler has had the agency issue more than a dozen advisory opinions that close loopholes or tighten rules that govern the largest financial firms and swaps traders. The opinions, which were not voted on by other commissioners, covered such issues as regulation of overseas derivatives trades and competition in the swaps market.
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***** He left a mark and it still hurts.

***DA: Now we will see how much of it will stick. The first position limits rule was thrown out by the courts. ISDA, SIFMA and the IIB filed suit this week challenging the cross-border rules (MarketsReformWiki link).

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Members Of The Exchange Council Of Eurex Deutschland Elected
The electoral committee of Eurex Deutschland has today announced the result of the Exchange Council election. The following candidates were elected as the individual representatives:
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***** How many of them do you know?

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Cinnober nominated to be on DI’s “Career Companies 2014” list
Cinnober was recently nominated to be on the leading Swedish business newspaper Dagens Industri’s annual ranking of Sweden’s 100 most exciting companies in which to pursue a career.
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***** When I think of most exciting, translated into Swedish, I think of Cinnober.

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Cross-border chaos dogs derivatives rules
Philip Stafford – FT.com
One of the constants lurking in the background of the G20 mandate to overhaul derivatives markets is how differing local regulatory interpretations of the same mandate would mesh together.
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***** The word of the day is “harmonize.” Sing along now.

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Scott O’Malia

CFTC’s Scott O’Malia Calls for a Plan of Action on Swap Data
JohnLothianNews.com
New Dodd-Frank rules have allowed regulators their first look into swap data repositories, but the quality of swap data is not always up to par. In fact, it has been c
alled “a mess” by CFTC Commissioner Scott O’Malia, who also chairs its Technology Advisory Committee. O’Malia sat down with John Lothian News editor-at-large Doug Ashburn at SEFCON IV to discuss the commission’s data challenges and his “call to action” in early 2014.

Watch the video »

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MarketsWiki

MarketsWiki Page of the Day
Volcker Rule
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MarketsWiki Recent Updates

People

Bob Swarup; Kelly Loeffler; Edward F. Condon; Allan Schoenberg

Companies, Organizations and Groups

Paul A. Volcker; New York Fed; Standard Chartered Bank; Global Markets Exchange Group International LLP; Aquis Exchange Ltd

Miscellaneous

Fiscal cliff; Volcker rule; Economics; Corporation

Statistics

45,727,652 pages viewed, 7,714 articles, 169,408 edits
MarketsWiki Statistics

Lead Stories

CME eyes 1Q for delayed launch of London exchange
Reuters
CME Group says the delayed launch of its first overseas bourse could come in London in the first quarter of 2014, as the top U.S. futures market operator intensifies its focus on overseas growth.
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SEC official calls for review of ‘Reg NMS’ equity market rules
Reuters
A set of rules designed to fuel competition in the equity market and improve prices should be reexamined to ensure it has not created negative consequences for investors, a top U.S securities regulator said Thursday.
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Deutsche Bank quits commodities, but keeps index funds
Reuters
Deutsche Bank, which is quitting trading in most raw materials markets, will retain its near $9 billion commodities index fund business, a strategy industry experts said helps the German bank profit from fees and maintain ties with some of the largest investors.
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Traders in FX Probe Face FCA Taping of Lawyer Interviews
Suzi Ring & Keri Geiger – Bloomberg
Banks under investigation for currency rate-rigging were told to record all questioning of employees and hand them over to investigators, as the U.K. markets regulator seeks to prevent interference with the probe, according to four people with knowledge of the case.
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Volcker rule to create grey area for regulators
Tom Braithwaite and Gina Chon in Washington and Alex Barker in Brussels – FT.com
The US “Volcker rule”, which bans banks from proprietary trading, will leave a grey area for regulators to police as they see fit, according to a senior Treasury official.
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France fights for its stock exchange
The Economist
FRENCH moneymen were in Beijing in November talking up their financial wares to the people who have the cash these days. Whether the Chinese will snap up French stocks, bonds and asset management as readily as they do Hermès scarves remains to be seen. In fact, Paris’s very future as a financial centre is in doubt.
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Swiss banks prepare to bow to U.S. demands, grudgingly
Reuters
Switzerland’s private banks have until Monday to decide whether to bow to U.S. pressure and ditch the centuries-old culture of secrecy that has made the Alpine state a global vault for the world’s rich.
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IRS not fully ready for law against offshore tax evasion: watchdog
Reuters
The Internal Revenue Service has spent 19 months and more than $8.6 million getting ready to enforce a new law against offshore tax evasion that takes effect next year, but the agency is still not prepared, a watchdog group said on Thursday.
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Wall Street’s Hedges Have Been Inspected Before
Michael Rapoport – MoneyBeat – WSJ
If U.S. regulators approve the “Volcker rule” in its current form, they’re expected to pay close attention to banks’ use of hedges, to make sure the banks are really using them to limit risk rather than to make a profit. They’ll be far from the first to give hedges such scrutiny, however.
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Banks Listen In to Trader Talk
WSJ.com
On trading floors, declaring “I want Chinese take-away” doesn’t seem so innocent anymore. This is the kind if statement that, when repeated several times, might crop up in a new form of surveillance being employed by some financial firms as they try to police rogue traders following a string of scandals.
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***JM: I confess that this is just the kind of thing that would make me invent non sequitor phrases and say them a lot for no reason.

Regulatory

Britain to close hedge fund tax loopholes
Reuters
The British government said it plans to close tax loopholes used by hedge fund managers as it seeks to show it is forcing the rich to share the burden of tough austerity measures.
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Is the price of margin protection too high?
FOW
On October 30 2013, the Commodity Futures Trading Commission set out safeguards for buy-side clients’ collateral from being used by brokers to support their own or other clients’ funding shortfalls.
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Sefs battle with confirmations after CFTC relief expiry
Robert Mackenzie Smith – Risk.net
A second no-action relief period that exempted Sefs from issuing confirmations expired on November 29, leaving forex traders unsure whether Sefs can handle the requirement
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Europe looking ‘dysfunctional and extreme’ over Esma equivalency procedure
Aaron Woolner – Risk.net
Chaotic implementation of the equivalency process by Europe’s financial regulator combined with the increasingly unpredictable actions of the European Commission has left Europe looking “dysfunctional and extreme”, according to a leading Singapore-based derivatives lawyer.
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“Seeing Capital Markets Through Investor Eyes” – Commissioner Luis A. Aguilar, U.S. Securities And Exchange Commission, Washington, D.C., Dec. 5, 2013
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Looking At Proxy Advisory Firms From The Investor’s Perspective, Commissioner Luis A. Aguilar, U.S. Securities And Exchange Commission, Proxy Advisory Firm Roundtable, Washington, D.C., Dec. 5, 2013
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Opening Statement At The Proxy Advisory Services Roundtable, Commissioner Michael S. Piwowar, U.S. Securities And Exchange Commission, Proxy Advisory Firm Roundtable, Washington, D.C., Dec. 5, 2013
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[FCA] Statement on the monthly update of the interest rate hedging products redress scheme
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Canadian Securities Regulators Seek Comment on Proposed Changes to Registration Rules for Dealers, Advisers and Investment Fund Managers
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Notice to Members I-13-38
Guidance on the annual affirmation requirement for those entities that are currently operating under an exemption or exclusion from CPO or CTA registration
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Exchanges & Trading Facilities

Budapest Stock Exchange migrates securities trading to Deutsche Borse Xetra system
The Budapest Stock Exchange migrated its electronic securities trading to Deutsche Börse’s Xetra trading system on Friday.
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Members Of The Exchange Council Of The Frankfurt Stock Exchange Elected
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London Metal Exchange’s bared teeth warn warehouses off steep rent rises
Reuters
The London Metal Exchange has showed its teeth to guard industrial users of materials like aluminium against steep rises in charges by owners of warehouses in its global storage network. Warehousers say this tough new stance is scary enough to work.
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LME wants aluminum warehousing suits heard in New York
Reuters
The London Metal Exchange asked a panel of U.S. judges on Thursday to assign a federal court in Manhattan to handle a series of antitrust lawsuits that allege the world’s largest metal exchange, two of Wall Street’s biggest banks and big commodity merchants conspired to raise the price of aluminum.
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LME faces minefield in releasing data to boost transparency
Reuters
The London Metal Exchange (LME) faces a tough job as it gears up to provide more data about long and short positions, including delivering what many investors crave – information on flows of speculative money that move markets.
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Evaluated Pricing Head Blance Leaves SIX
Nicholas Hamilton – WatersTechnology
Ian Blance has left SIX Financial Information after almost four years as head of its evaluated pricing business, and has returned to independent consulting. Mirko Silvestri fills Blance’s former role at SIX.
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Montreal Exchange Achieves New Open Interest Records On BAX And OBX
TMX Group Limited today announced that Montreal Exchange (MX) achieved a new open interest record on the Three-Month Canadian Bankers’ Acceptance Futures (BAX)*, reaching 866,569 contracts on December 4, 2013. The previous record was set on August 4, 2011 with open interest of 796,862 contracts.
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Burgundy – Introduction Of Two New Automatch Segments For Exchange Traded Products
Oslo Børs Burgundy is expanding its offering in the Swedish market, and will add two new retail segments for Exchange Traded Products.
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BM&FBovespa loses appeal in dispute over Bovespa acquisition
Reuters
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NASDAQ OMX November 2013 Volumes
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Moscow Exchange Monthly Market Report: November 2013
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CBOE Holdings to Present at J.P. Morgan SMid Cap Conference on December 11
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TSX Markets Top 20 Largest Consolidated Short Position Report – November 30, 2013
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Program Trading Averaged 29.8 Percent Of NYSE Volume During Nov. 25-29
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Hedge Funds & Managed Futures

Are commodities traders ‘too big to fail’?
FT.com
When the banking industry’s top lobby group commissioned a report on commodity trading houses the idea was to show trading houses like Glencore Xstrata, Vitol or Cargill were “too big to fail” and therefore needed to be regulated in a similar manner to the banks.
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Is BlackRock too big to fail?
Sheila Bair – Fortune
Hark. Do you hear it? That sound of ringing bells coming from the nation’s capital as we enter the holiday season? Is it Salvation Army Santas taking to the street corners? Church campaniles playing “Carol of the Bells?” Or maybe angels getting their wings a la the Christmas classic It’s a Wonderful Life?
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Investors, Dismayed by Losses at Sears, Pull Money From Hedge Fund
RANDALL SMITH – NYTimes.com
The storied investing empire of Edward S. Lampert is shrinking. David Geffen, the entertainment mogul, got out in 2007. Members of the Ziff family cashed out more recently, between 2011 and earlier this year. And more investors are heading for the exits, discouraged by the declining fortunes of Mr. Lampert’s signature stake in Sears Holdings.
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Irish pension reserve seeks single buyer for private equity portfolio
Michael Wursthorn, Dan Dunkley and Laura Kreutzer – Financial News
Ireland’s National Pensions Reserve Fund is seeking a single buyer for slightly more than $1 billion in global private equity assets as the pension fund shifts its focus toward domestic investments, said several people with knowledge of the matter.
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Banks & Brokers

U.S. judge weighs penalties after Bank of America fraud verdict
Reuters
A U.S. judge is considering an alternative that could result in Bank of America Corp paying much less than the $863.6 million the government is seeking as a penalty for the sale of defective mortgages before the financial crisis.
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Morgan Stanley gives brokers incentive to find clients’ outside money
Reuters
Morgan Stanley is offering its brokers an unusual pay incentive over the next two years to convince certain clients to disclose assets held outside the firm, according to the firm’s 2014 compensation plan unveiled this week.
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JPMorgan warns 465,000 card users on data loss after cyber attack
Reuters
JPMorgan Chase & Co is warning some 465,000 holders of prepaid cash cards issued by the bank that their personal information may have been accessed by hackers who attacked its network in July.
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Clearing & Settlement

DTCC Helps Firms Comply With TMPG’s Best Practices For Margining Of Agency MBS Transactions
The Depository Trust & Clearing Corporation (DTCC) is helping firms comply with recommendations established by the Treasury Market Practices Group (TMPG) related to the margining of agency mortgage-backed securities (MBS) transactions.
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EuroCCP, EMCF Complete Merger Transaction
WatersTechnology
Cash equities clearing houses EuroCCP and EMCF have completed the transaction to combine the two firms, following regulatory approvals, with the changes in name taking effect from early 2014.
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CME Group Clearing: USD Interest Rate Swap Futures-Delivery Process, December 2013
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Indexes & Products

Benchmark regulations force governance rethink
Sarah Krouse – Financial News
Banks and other firms that produce indices in-house may be forced to rejig the governance of those products under proposed European benchmark regulations, a change that could force a greater reliance on independent index providers.
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US bond ETPs caught in tapering mire
Sarah Krouse – Financial News
Net inflows into fixed-income exchange-traded products in Europe have outpaced those into US products this year, as concerns about looming Fed tapering weighed on investor sentiment across the pond.
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SEC targets ‘protected’ and ‘guaranteed’ fund names
Yakob Peterseil – Risk.net
After criticising the use of the term “principal protected” in structured notes, the SEC turns to ETFs and mutual funds that promise protection from loss in their names
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CORRECTED-Macquarie index aims to be lead indicator of food inflation
Reuters
Macquarie Commodities Research has created a new global agricultural commodity index designed to indicate the future level of food inflation, it said on Wednesday.
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STOXX Launches iSTOXX Global ESG Select 100 Index
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Semi-Annual Review Of The OMX Iceland 6 Index
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S&P Dow Jones Indices Announces Changes To The S&P/TSX Canadian Indices – A Spinout For The S&P/TSX Venture Composite And Venture Select Indices
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Technology

Making Sense of the Multi-Flavors of XBRL
Frederic Chapus – Wall Street & Technology
XBRL will be the first step toward the semantic Web, where the exchange and analysis of financial information will not require any manual intervention.
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Sapient Global Markets Empowers Trading Firms with Launch of Automated, Standardized End-of-Day Reporting Service
Sapient Global Markets, a division of Sapient, today announced the launch of its Close of Business Service. CoBS is a fully managed end-of-day reporting service for capital and commodity markets firms which will reduce end-of-day reporting costs while improving overall risk control and profit predictability.
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Enforcement

SAC Witness Concedes Omission on Illicit Data
MICHAEL J. DE LA MERCED – NYTimes.com
For days, Jon Horvath has testified at the insider trading trial of his former boss, a onetime top hedge fund executive, that he was pressured to obtain confidential corporate information to do his job. But on Thursday, Mr. Horvath, a former analyst, conceded that he never explicitly told his superior, Michael S. Steinberg of SAC Capital Advisors, that the data he had obtained about Dell Inc.’s financial results in 2008 was illicit insider information.
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FINRA Orders J.P. Turner to Pay More Than $700,000 in Restitution for Unsuitable Sales of Leveraged and Inverse ETFs and for Excessive Mutual Fund Switching
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Ex-Dell employee avoids prison for help in insider trading probe
Reuters
A former Dell Inc supply manager who cooperated with government insider trading investigations, including a probe of a portfolio manager at SAC Capital Advisors, avoided prison on Thursday as a result of his cooperation.
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Madoff Fumed at SEC Letter
WSJ.com
Bernard L. Madoff didn’t like the letter he got from the Securities and Exchange Commission in 2004 asking for a clearer picture of his firm’s operations, jurors were told Thursday. “He went on a whole rant about how Washington didn’t run things, New York ran things,” testified Frank DiPascali Jr., a top Madoff lieutenant.
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Environmental & Energy

Large Companies Prepared to Pay Price on Carbon
The New York Times
More than two dozen of the nation’s biggest corporations, including the five major oil companies, are planning their future growth on the expectation that the government will force them to pay a price for carbon pollution as a way to control global warming.
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Big Oil Braces for 10-Fold Surge in Carbon Emission Costs
Bloomberg
International oil producers are bracing for carbon emission costs to soar to almost 10 times current prices in Europe, the world’s largest greenhouse gas market, as governments around the world escalate efforts to curb climate change.
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Work Together When Washington Can’t: New Partnerships Will Lead Fight Against Climate Change
Tom Seyer on Huffington Post
Last month, I joined business and policy leaders at the Climate Solutions Annual Dinner in Portland to talk about what’s next in the fight against climate change. I came away inspired to focus even harder on solutions, but also with a renewed faith in state and regional action as the way forward on climate.
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Asia-Pacific

Dalian Commodity Exchange: Risk Control Systems Based On Product Characteristics, Market Rules For “2 Boards” Futures
Reasonable risk control systems are an important guarantee for stable operation and effective functioning of the futures market. An official of the agricultural products business division of Dalian Commodity Exchange (DCE) said recently in an interview that according to the product characteristics of the “two boards” and the operation rules of the futures market, DCE has set a rigorous risk prevention system, which is effective and will ensure the smooth operation of the “two boards” futures.
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China widens bad banks’ asset options
Simon Rabinovitch in Shanghai – FT.com
China has given its new provincial “bad banks” a wider channel for selling assets, in an effort to strengthen their ability to handle non-performing loans.
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Dalian Commodity Exchange: In-warehouse Time Shortened For “Two Boards” Delivery
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Japan’s Financial Services Agency Publishes English Translation Of Annual Supervisory Policy For Financial Instruments Business Operators, Etc. For Program Year 2013
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Frontier Markets

JSE targets January as launch date for first coal futures exchange
Mining Weekly
The Johannesburg Stock Exchange (JSE) is targeting January 20 as the launch date for the country’s first coal futures market, which will allow local coal producers and buyers the opportunity to lock in a certain price for future delivery of coal – while also giving speculators exposure to fluctuating coal prices.
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MCX Weekly Market Report – November 29, 2013 To December 05, 2013
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Malawi Stock Exchange Weekly Trading Report – Week Ending 06th December, 2013
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