First Read

A Bitcoin for Your Thoughts
John Lothian News Special Report

Rarely has there been a topic in the offices of John Lothian News that has raised debate, argument and conversation the way that Bitcoin has. What was once thought of as an internet-generated joke is now a topic covered by every mainstream media outlet around the world.

Coverage has intensified of late due to Bitcoin’s value, topping $1,200 earlier this month on the open market. So big has the issue become that the French and Chinese central banks have issued warnings against the use of Bitcoin and other virtual currencies by financial institutions and others. Fed Chairman Ben Bernanke even weighed in on this virtual currency in November while former Fed chair Alan Greenspan called it a bubble last Wednesday.

Which brings us back to the question that many are grappling with: What is it? And if you can determine that, how should it be regulated, taxed, or even traded? Is this the next asset class? Some may find potential there, while others still find it a joke or worse.

Our latest special report features a column from JLN publisher John Lothian about his thoughts on Bitcoin, a short primer on the aspects of Bitcoin, as well as some of the best articles we have found in recent weeks. This special report is designed to inform and perhaps, raise the debate and dialog further.

Read the Report:


CME in Final Stage of BOE Talks on Europe Exchange, CEO Says
Nandini Sukumar & Chanyaporn Chanjaroen – Bloomberg
CME Group Inc. is in the final stages of talks with the Bank of England to start a new European exchange and is confident it will be allowed to offer currency futures, according to its chief executive.

**JK – There is a running loop at the FCA of “Time is on my side” by the Rolling Stones.


Asia Beat: Swimming in the derivative seas
Jeremy Grant –
For an industry that talks incessantly about liquidity, it was only a matter of time before someone reached for the obvious metaphor and likened the global derivatives markets to the world’s oceans. Speaking at the gala dinner at this year’s Futures Industry Association Asia conference, Magnus Böcker, chief executive of SGX, used the backdrop of Singapore’s aquarium on Sentosa island – the world’s biggest – to suggest he and his rivals competed “harmoniously in the same derivatives sea”.

***JM: As soon as one of ‘em becomes a box jellyfish, the whole industry better gear up in a hurry.


New Research Finds HFT Improves Market Fairness – CMCRC
New research from the Capital Markets Cooperative Research Centre (CMCRC) has found that the presence of high-frequency traders improves market fairness by reducing end-of-day price dislocation. Professor Michael Aitken, CMCRC CEO, said that End of Day price dislocations whether they occurred by fair means or foul were troublesome for markets and that any market structure change which mitigates the incidence of such changes should be seen as a positive outcomes for the marketplace.

***DA: HFT as an antidote to LIBOR-style settlement manipulation. That’s a new angle.


NYSE’s Niederauer has no plans to lead another firm
The chief executive of the New York Stock Exchange says he has no plans to head up another large company. Duncan Niederauer, now the co-president of the IntercontinentalExchange Group, which recently acquired the Big Board for more than $8 billion, was speaking at an event organized by the Society of Business Editors and Writers at Baruch College on Thursday night in New York.

***JM: I hear making matchstick models of famous landmarks is pretty interesting.


Volcker on the Mind – Will it Deliver?
Woodbine Associates
Anticipating tomorrow’s scheduled vote on the “Volcker Rule” by federal regulatory agencies, Woodbine Associates, the capital markets consulting firm has released an opinion asserting that risk must be used as the primary metric to assess what constitutes proprietary trading.

***DA: Tomorrow is Volcker Rule decision day at the SEC, FDIC, CFTC and Treasury Dept. We will update and summarize the pages in MarketsReformWiki as fast as we can, but we hear the rule has mushroomed to about 1000 pages.


Madoff Victims, Five Years the Wiser
It was the first global Ponzi scheme — a slow-motion crime wave that began in the Manhattan offices of a stockbroker named Bernard L. Madoff, spread to wealthy enclaves in Palm Beach, Fla., and Southern California, and reached as far as the Persian Gulf. It carried a breathtaking price: $64.8 billion in paper wealth and at least $17.5 billion in cash losses. Those affected ranged from carpenter-union pensioners to French aristocrats.

***DA: I used to refer to the Madoff scandal as a “victimless crime” due to the number of high-level investors who either should have known better, or knew that it was some kind of scam but they thought they were on the right side of the scam. It is important to note that there are some real victims who simply got duped by a seemingly trustworthy snake-oil salesman.


New IP Exchange Promises Transparency In Patent Pricing
When it comes to price transparency, the market in patents probably ranks somewhere below fine art, also a notoriously unregulated, high-value global market.

***JM: JLN Productions did a sharp video overview of IPXI’s first annual members meeting. Take a look!


Gary DeWaal’s Bridging the Week: December 2 – 6 and 9, 2013 (CFTC Cross Border Guidance, EC and LIBOR/EURIBOR, Goldman, Sachs’ Rogue Trader)
The controversial Volcker Rule and block trading will occupy the spotlight this upcoming week as the subject of an open meeting of the US Commodity Futures Trading Commission on December 10 (other US regulators will enact the Volcker rule this week too).


Blackstone responds to Jon Stewart
Dan Primack – CNN Money
Jon Stewart likens private equity execs to movie mobsters. But Blackstone says it really was the romantic lead.

***DA: So even if the firm’s intentions were noble, could the CDS trades be considered “insider trading”? This is a tricky business sometimes.



MarketsWiki Page of the Day
Cross-Border Regulation

MarketsWiki Recent Updates


H. Joseph Bourn; Bob Swarup; Kelly Loeffler; Paul A. Volcker

Companies, Organizations and Groups

CME Europe



Volcker Rule; Fiscal cliff


45,777,860 pages viewed, 7,714 articles, 169,416 edits
MarketsWiki Statistics

Lead Stories

ICE finds challenges in technology unit sale
Michelle Price and Tim Cave – Financial News
Early efforts by IntercontinentalExchange, the new owner of NYSE Euronext, to offload NYSE Technologies businesses have met a cool reception from potential industry purchasers, including Hong Kong Exchanges and Clearing, Nasdaq OMX, Markit and Deutsche Börse.

Deutsche Boerse says India is high priority in Asia strategy
Economic Times
Global exchange operator Deutsche Boerse and Eurex has said that India is a high priority in its Asian business development strategy and it is expanding alliances and education programmes with institutions there.

Watchdog warns of chaos in competing derivatives rules
Huw Jones | Reuters
Failure to thrash out a common supervision of the $640 trillion global financial derivatives industry will split markets and bump up costs for end users, a top regulator said on Monday.

CFTC chief said to win Volcker rule ban for foreign banks: Bloomberg
Commodity Futures Trading Commission chief Gary Gensler has convinced regulators to insert new language into the Volcker rule restricting foreign banks from evading the rule, Bloomberg reported on Friday.

Near a Vote, Volcker Rule Is Weathering New Attacks
Even as five regulatory agencies prepared to vote Tuesday on a regulation that seeks to rein in risk-taking on Wall Street — an effort known as the Volcker Rule — lawyers and lobbyists were gearing up for another round of attacks against it.

Glass-Steagall Fans Plan New Assault If Volcker Rule Deemed Weak
Phil Mattingly & Cheyenne Hopkins – Bloomberg
Five U.S. agencies will finish the Volcker rule tomorrow after more than three years of Wall Street resistance to its limits on trading and investing. Lawmakers and their allies who want to rein in big banks are ready to pounce if it isn’t strict enough.

Banks Poised to Reduce Rate-Swap Trading as Revenue Seen Reduced
Matthew Leising – Bloomberg
Dealer revenue from negotiating interest-rate swap transactions is poised to plunge about 45 percent as new rules boost trading costs, pressures that may prompt banks to participate less in the $633 trillion over-the-counter derivatives market, Tabb Group LLC estimates.

Trading Led by Funds as Collusion Probes Roil Market: Currencies
David Goodman – Bloomberg
Fund managers and electronic traders for the first time account for more than half the $5.3 trillion-a-day currency market as regulators investigate at least 11 dealers for alleged collusion on benchmark rates.

Spectre of Dodd-Frank haunts non-US persons
Dan Barnes – FOW
Software tools can help firms track order flow rerouted by US derivatives rules, but the shifting patterns will make investment a risky proposition for the moment

The scandal at the Vatican bank
Rachel Sanderson –
On June 28 this year, Italian police arrested a silver-haired priest, Monsignor Nunzio Scarano, in Rome. The cleric, nicknamed Monsignor Cinquecento after the E500 bills he habitually carried around with him, was charged with fraud and corruption, together with a former secret service agent and a ­financial broker. All three were suspected of attempting to smuggle E20m by private plane across the border from Switzerland.

Sweden, Ahead of the Times
Trade Talk – Trading Technologies
Somewhat unique among monarchies, instead of a family motto upon accession to the throne, the sovereign of Sweden will adopt a personal motto. This often serves as a national motto as well, and is printed on their 1 krona coins.

Dubai’s main bourse delays market open due to technical fault | Reuters


SEC extends interim CDS portfolio margin rule
Joe Rennison –
The Securities and Exchange Commission (SEC) has extended a temporary rule allowing cleared single-name and index credit default swaps (CDSs) to be margined together, disappointing buy-side firms that want to see a final – and level – framework in place. As things stand, buy-side firms can use so-called portfolio margining, but only if they post more collateral than a clearing house requires of futures commission merchants (FCMs).

National Futures Association: FCM and FDM Risk Management Reporting Requirements – Proposed Amendments to NFA Financial Requirements Section 8 Regarding Information Requests

National Futures Association: Registration Requirements, Procedures and Fees – Proposed Technical Amendments to NFA Registration Rule 201 Regarding Registration Requirements and Procedures and NFA Registration Rule 203 Regarding Registration Fees

National Futures Association: Risk Disclosure Statement for Securities Futures Contracts – Proposed Amendments to NFA’s Interpretive Notice Entitled Compliance Rule 2-30(b): Risk Disclosure Statement for Securities Futures Contracts

Remarks At The 2nd Annual Institute For Corporate Counsel, SEC Commissioner Daniel M. Gallagher, New York, NY, Dec. 6, 2013

Exchanges & Trading Facilities

CME Readies Non-Display Data Fees
Faye Kilburn – WatersTechnology
CME Group has notified customers of changes to its market data license agreement for 2014, including plans to introduce new fees for certain types of non-display data usage, Inside Market Data has learned.

SIX Swiss Exchange lures India to the Alps
Business Standard
SIX Swiss Exchange, Switzerland’s principal stock exchange, is vying with Indian companies and investment bankers to raise capital through its platform.

Euronext Introduces Equity Options On OCI N.V.
Euronext N.V., a wholly owned subsidiary of IntercontinentalExchange Group, Inc., will introduce options on the shares of OCI N.V.. The options will be available as of Friday 13 December on the derivatives market of Euronext Amsterdam.

Oslo Has The Most Active Capital Market In The Nordic Region
Among the Nordic stock exchanges, Oslo Børs has the most new listings and the most active capital market. The Danish company Napatech became the tenth company so far this year to list its shares on Oslo Børs when it rang the stock exchange bell at nine o’clock this morning, and more companies – both Norwegian and international – are heading for a listing.

Oslo Børs: Nibor In Millennium

Record Week For Listings On NASDAQ OMX Stockholm

Moscow Exchange To Offer Discount Fees For Equity Trading

EEX Exchange Council Welcomes The Introduction Of The New “T7” Trading System – Migration To PEGAS Completed

CNSX Markets Inc. Successfully Completes “Project One” Upgrade, Simplifies Exchange Access, Reduces Costs For Dealers and Vendors
Move Increases Visibility And Investor Access For Canadian National Stock Exchange Issuers

TOM MTF Statistics Week 49, 2013

Hedge Funds & Managed Futures

‘Upstairs’ Trading Draws More Big Investors
Bradley Hope –
Some of the world’s biggest investors are changing the way they trade in U.S. markets in response to what they say are rising risks for institutions of their size. The strategies include conducting more “upstairs trades,” in which deals are executed among big institutions, bypassing the broader market, as well as other sophisticated order-routing techniques designed to avoid pitfalls that have become increasingly apparent to investment managers.

Surge in issues at risk from fund manager ‘fatigue’
Richard Partington – Financial News
The newly awakened market for initial public offerings in Europe is already at risk of flagging because of fund manager fatigue, small allocations of the best issues and recent underperformance of several newly floated companies, bankers and investors warn.

Who moved my fees?
Mike Foster – Financial News
One of the best-ever selling business books was one by Spencer Johnson named Who Moved My Cheese? Asset managers should write a follow-up named Who Moved My Fees?

Managers turn to mind over money for profits
Harriet Agnew – Financial News
The hedge fund industry is facing an existential crisis. It is nearing a fifth consecutive year of underperforming the S&P 500 index, coming under pressure to justify its high fees and fighting off competition from low-cost alternatives. Improvements in technology and better access to information have levelled the playing field.

Hedge Fund Lions’ Den live
Margie Lindsay –
The first episode of Hedge Fund Lions’ Den – a six-part series following the fortunes of three emerging managers trying to convince three hedge fund lions to invest in their products

Of markets and mayhem
Lauren Silva Laughlin; graphics Nicolas Rapp – Fortune
Once upon a time, an ordinary investor — call him Joe — would take some of his retirement savings and put it into a giant brand-name mutual fund that advertised in the Sunday paper. The fund would take that money and buy shares in brand-name American companies — “large caps,” the jargon went. Joe would then dutifully put some of his nest egg in a bond fund — and, maybe, on a flier, invest a small chunk in a tech fund that held pieces of the top 100 names on the Nasdaq. (It was 1999 — everybody was doing it.)

Fund sees Brazilian fraud as next big thing in emerging markets
Joe Leahy in São Paulo –
Global investors may be growing wary of emerging markets as the US prepares to scale back its monetary largesse next year, but one fund has hit on what it hopes could be a boom industry – Brazilian fraud.

John Paulson’s Hedge Funds Report Gains in November
Rob Copeland – MoneyBeat – WSJ
John Paulson‘s hedge funds posted November performance gains that, for one of the funds, marked its best month in three years, according to an investor update. The $2.4 billion Paulson Recovery Ltd. fund, established in 2008 to take advantage of the U.S. economic recovery, had its strongest month since December 2010, returning 9.9% in November, the firm wrote in a monthly update.

CFTC Commitments Of Traders Reports Update

Banks & Brokers

JPMorgan in talks with U.S. Attorney over Madoff warnings: WSJ
The U.S. Attorney’s Office in Manhattan is looking into why JPMorgan Chase & Co did not file a suspicious activity report about Bernard Madoff before he was arrested for running a multibillion-dollar Ponzi scheme, the Wall Street Journal reported on Friday, citing people close to the probe.

JPMorgan Tracked Business Linked to China Hiring
Federal authorities have obtained confidential documents that shed new light on JPMorgan Chase’s decision to hire the children of China’s ruling elite, securing emails that show how the bank linked one prominent hire to “existing and potential business opportunities” from a Chinese government-run company.

Ex-Barclays boss Diamond targets Africa for banking return
Bob Diamond, the former boss of Barclays, is set to return to banking by listing a shell company in London in the next few weeks to invest in the African financial sector, a source familiar with the matter said.

Sallie Mae files with SEC to split into two companies as planned
Sallie Mae Corp, the largest U.S. student loan provider, filed regulatory documents on Friday that will enable it to split into two companies, a move it first announced in May to try to win better stock market valuation for its private student-lending business.

Schedule slips and costs rise on rate hedge payouts
Alexander Campbell –
UK banks are speeding up the payment of compensation to small businesses mis-sold interest rate hedging products (IRHPs), but will still miss the May 2014 deadline, the UK Financial Conduct Authority (FCA) has confirmed.

ABN Amro to Add Commodity Staff in Asia as Demand Increases
Chanyaporn Chanjaroen – Bloomberg
ABN Amro Group NV, the state-owned Dutch bank that’s expanding overseas, plans to add commodity staff next year in Asia where its trade-finance business is growing as China increases consumption of energy and metals.

Clearing & Settlement

LCH.Clearnet ramps up Australian business
Tim Cave and Michelle Price – Financial News
LCH.Clearnet, the international clearing house majority-owned by the London Stock Exchange Group, is ramping up its operations in Australia ahead of new rules that are set to boost clearing volumes in the country.

EMCF and EuroCCP get final approval to merge
Anna Irrera – Financial News
Europe’s two largest cash equities clearing houses have completed a landmark merger, which is expected to deliver long-awaited post-trade cost savings in the region.

Traiana Facilitates Reporting of Common UTIs
Nicholas Hamilton – WatersTechnology
The post-trade and risk management vendor is using its Harmony network to allow counterparties to exchange unique trade identifiers and ensure they report the same codes to trade repositories

Indexes & Products

Mutual funds look to gain ETF foothold
Arash Massoudi and Tracy Alloway in New York –
“To know your enemy, you must become your enemy” is an oft-quoted dictum for military and corporate strategists. Mutual funds providers trying to grab a slice of the fast-expanding market for exchange-traded products are taking the tactic to heart.

Has George Osborne Just Reinvigorated ETFs in the U.K?
Sarah Krouse and Joe McGrath – MoneyBeat – WSJ
There are 480 exchange-traded funds domiciled in Luxembourg. There are 424 in Ireland and 278 in France. Even Hungary and Romania each have one. The U.K.? Zero.

Taking the leap onto fund platforms
Peter Davy – Financial News
The UK’s Retail Distribution Review, which bans the payment of commission to financial advisers, is changing the way exchange-traded funds are sold, with fund platforms benefiting the most. But there is still a long way to go, as many European fund supermarkets are not ready to trade in ETFs, unlike their US counterparts.

Deutsche Bank swaps ETFs to physical
Mike Foster – Financial News
Deutsche Bank is switching 18 of its most popular exchange-traded funds from swap-based to physical structures, in response to client demand.

Data Vet Raw Departs FTSE
Faye Kilburn – WatersTechnology
Tony Raw has left his role as managing director of index provider FTSE International, Inside Market Data has learned.

BlackRock ETP Landscape: US And European Equities Lead Flows

Moscow Exchange Indices Monthly Review: November 2013

Component Change Made In STOXX Balkan 50 Equal-Weight Index


Technology Complexity: An Early-Warning System to Prevent Costly Fails
Joanne Kinsella – TabbFORUM
The pressing need for real-time predictive analytics solutions to spot potential business-impacting technology events before they cause too much damage continues to rise. This is where the combination of Case-Based Reasoning and Complex System Analysis to provide an early-warning system proves to be a true game changer.

***JM: I’m totally stumped as to how CBR is going to predict failure from design and implementation defects; and from the outside it seems like those are often the problems bringing down trading platforms. What am I missing?

Update: SBI Securities Adopts MarketPrizm Low-Latency Feed As Asia Brokers Face Latency Demands
Giulia Lasagni – WatersTechnology
Japanese online brokerage SBI Securities has gone live with low-latency provide normalized feeds of market data from the Japan Exchange Group’s TSE FLEX platform and proprietary trading system SBI Japannext delivered via London-based market data and trading infrastructure services vendor MarketPrizm, as part of an initiative to implement lower-latency datafeeds to support and strengthen its smart order-routing operations.

Fincad Preps Out-of-the-Box Analytics
Faye Kilburn – WatersTechnology
Canadian derivatives valuation and risk management software provider Fincad is developing a suite of four out-of-the-box applications, dubbed Fincad Solutions, on top of its F3 analysis platform to enable a broader range of front-, middle- and back-office users to leverage its derivatives pricing and risk calculation analytics.


SEC Halts Texas-Based Oil and Gas Investment Scheme
The Securities and Exchange Commission today announced charges and an emergency asset freeze against the perpetrators of a Texas-based Ponzi scheme involving purported investments in oil and gas projects.

Ex-SAC Trader Seeks to Use Cohen Testimony
Steven A. Cohen, the founder of SAC Capital Advisors, is not likely to testify at the insider trading trial of Mathew Martoma, a former trader at the hedge fund, but Mr. Martoma wants to use some of the testimony that Mr. Cohen gave in a related investigation.

Supreme Court of Canada dismisses McLean appeal of BCSC order
The Supreme Court of Canada has dismissed Patricia McLean’s appeal of a 2010 British Columbia Securities Commission order. The order in question made the sanctions approved by the Ontario Securities Commission (OSC) as part of a 2008 settlement agreement with McLean effective in British Columbia.

Ex-Goldman Trader Sentenced to 9 Months in Prison
A federal judge in Manhattan on Friday sentenced Matthew Taylor, a former Goldman Sachs trader, to nine months in prison for covering up an $8.3 billion unauthorized trade at the firm.

UPDATE 1-Ponzi schemer Petters’ 50-yr sentence upheld, ‘final con’ rejected
Minnesota businessman Thomas Petters has failed to persuade a federal judge to reduce his 50-year prison term for running a $3.65 billion Ponzi scheme.

NASDAQ OMX Stockholm Orders Medivir AB To Pay A Fine

Environmental & Energy

As Keystone ruling nears, Canada short on time for climate plan
Canada is running out of time to offer U.S. President Barack Obama a climate change concession that might clinch the controversial Keystone XL oil pipeline, as the country’s energy industry continues to resist costly curbs on greenhouse gas emissions.

Quebec Carbon Credits Sell for Lowest Price in First Auction
Quebec sold a third of the carbon-emission allowances offered in its first cap-and-trade auction this week and the permits cleared at the lowest possible price.

NZ to tweak carbon market
Spot permits in New Zealand’s emissions trading scheme closed Friday at NZ$4.10 ($3.35), unchanged from last week as a much-awaited government announcement on changes to the scheme proved to contain little to move prices, traders said.


HKEx Announces Appointment to its Audit Committee
The Board of Directors of Hong Kong Exchanges and Clearing Limited (HKEx) today (Monday) approved appointment of Michael Lee as an additional member to its Audit Committee with immediate effect.

HKEx: Employees’ Share Award Scheme

OSE-FX Trading Schedule from Christmas to Beginning of the Year

Frontier Markets

MCX, brokers seek to restore faith in futures market
Business Standard
The Multi Commodity Exchange (MCX)’s oversight committee convened a meeting of leading brokers to deliberate upon restoring confidence in the commodity futures market, which was shaken by the Rs 5,600-crore payment crisis at one of its group companies, the National Spot Exchange Ltd (NSEL).

ADX Begins Mock Session For New Trading Platform
Abu Dhabi Securities Exchange (ADX) announced recently that it has begun testing the new trading system “X-stream”, a high performance exchange trading system that offers multiple functionalities and maximum flexibility to cater to the needs of ADX.

Tehran Stock Exchange Weekly Digest – 4 December

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