John Lothian Newsletter: CME Group to Eliminate 5pct of Workers Worldwide; FTT continues to drag on Italian equities trading; SEC's Piwowar takes a swing at 'broken windows' enforcement policy

Oct 15, 2014

First Read

Craig Donohue, executive chairman, OCC – Clearing Today and Tomorrow

“When we first came into the industry, clearing, I guarantee you, was not sexy at all.”

Craig Donohue, executive chairman of OCC, begins by giving a quick overview of OCC and highlighting its achievements with equity derivatives contracts and margin collateral. He then goes on to discuss challenges in industry, including the 2008 financial crisis and the G20 response to shifting more risk to central counterparties. Donohue also explains what a systemically important financial market utility is, and what challenges OCC and other SIFMUs face in the future.

Watch the video »


CME Group to Eliminate 5% of Workers Worldwide to Reduce Costs
Matthew Leising – Bloomberg
CME Group Inc., the world’s largest futures exchange, said it will cut about 150 employees, or 5 percent of its global workforce, to reduce costs.

***SR: This is just not the kind of story I like to see first thing in the morning.


A High-Speed Trader Looks to Slow Down Critics
Bradley Hope – WSJ
Jason Carroll helps run one of the most active trading firms in the world, accounting for more than 5% of U.S. stock transactions on most days. But to a chorus of critics, his Hudson River Trading LLC represents everything wrong with modern markets. Mr. Carroll is a high-frequency trader.


“Nine out of ten clients lost money”
Paul Murphy – Financial Times
We’re talking retail forex trading here — through legitimate, authorised forex trading houses, not fraudsters. Do places like the UK need hard leverage caps — like those imposed in the US — to cut the abuse of naive speculators?

***JM: Whoa, slow down there. These are the same numbers I’ve seen reported for non-FX futures traders ever since I took my first trade back in… 198iDontRemember. Same with the “individual investors learn little over time” part, too. This is not a leverage problem; this is a human nature problem.


ICE barley futures contracts
Andrea Hilderman – Grainews
Something that has been around for over 100 years can hardly be called new, however, the ICE Futures Canada barley contract might be seen that way. Since the first barley contact was established on what was originally the Winnipeg Grain Exchange, it has seen several changes to reflect prevailing market conditions, domestic legislation and global issues. Several iterations later, through world wars, continental barley markets and, most recently, the removal of the Canadian Wheat Board’s (CWB) monopoly powers over barley marketing, the barley futures contract still survives, but in a new and improved version.

***JM: The old version was barley breathing. C’mon, that was funny, laugh with me!


Huw Jones, LSE To Make Its Mark With Russell Deal?
Trading Places
Will they or won’t they? That’s the question everyone’s asking about the London Stock Exchange’s USD2.7 billion purchase of Frank Russell, the stock index to consultancy and asset management group.

***JM: Oh, well, regarding the asset management bit, I think that’ll make for a very nice rebate on the purchase as they chop it off and sell it back away.


Katten Litigation Seminar for the Financial Services Industry
Thursday, October 16, 8:30 AM – 1:30 PM
Harvard Club of New York City, 27 West 44th Street, New York
Join Katten partners and industry professionals at Katten’s Financial Services Litigation Symposium for a discussion on a wide range of litigation issues inherent in the financial services industry. For complete details, visit


Invitation: Israel economic snapshot
22 October 2014, 08:00 – 10:00 AM
Bloomberg, 731 Lexington Avenue
Bloomberg, Eurex Exchange and the Tel Aviv Stock Exchange are happy to invite you to a discussion on trading TA-25 Index Futures on Eurex Exchange. These events are an excellent opportunity to learn more about the potential of the economy in Israel and the opportunities it offers to traders. For complete details, visit


SEFCON V: One Year In – November 12, 2014, Grand Hyatt New York
The Wholesale Markets Brokers’ Association, Americas (WMBAA) will host its fifth annual SEFCON event on November 12. Register Here

Watch the video promo and register to join dealers, traders, exchanges and regulators for this once-a-year look at the state of the SEF world.

Now that SEFs have been operational for a year, it is time to take a fresh look.

Watch the video »



MarketsWiki Page of the Day
Edwin Marcial

MarketsWiki Recent Updates


Benjamin Fussien; Maurice R. Greenberg; Kenneth C. Griffin; Edwin Marcial

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American International Group Inc.; Bursa Malaysia Bhd.; Ziliak Law, LLC; Euronext


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Lead Stories

FTT continues to drag on Italian equities trading
Tim Cave – Financial News
Trading in Italian equities declined again in August, according to the latest figures showing the impact of the country’s financial transactions tax, which come as talks on an EU-wide FTT reach a crucial phase.

U.S. SEC’s Piwowar takes a swing at ‘broken windows’ enforcement policy
Sarah N. Lynch – Reuters
A top U.S. Securities and Exchange Commission official said on Tuesday the agency’s the “broken windows” enforcement strategy, of pursuing violations big or small, hinders its ability to set priorities and maintain robust, healthy markets.

***SR: That strategy may work better in criminology than in financial regulation. Then again, it had its problems in New York City, too.

Tougher shadow bank rules ‘only the start’
Sam Fleming and Harriet Agnew – Financial Times
Participants in the shadow banking sector were warned on Tuesday that tougher rules being imposed by international regulators were likely to be only an initial step towards more oversight.

Dark Pools Face More Enforcement Actions, SEC Lawyer Says
Dave Michaels and Greg Farrell – Bloomberg
The U.S. Securities and Exchange Commission plans to bring more enforcement cases against dark pools and private trading venues whose opaque rules and incentives may harm investors, one of the agency’s senior attorneys said.

Goldman mounts LIA defence
Chris Wright – Euromoney Magazine
Regular readers of Euromoney will recall the colourful and angry filing that the Libyan Investment Authority made against Goldman Sachs (followed by another against Société Générale) earlier this year. Goldman has remained resolutely silent on the subject, declining every opportunity to comment. But now, Euromoney has obtained a copy of Goldman’s defence before the High Court of Justice Chancery Division in London.

Fellow Economists Express Skepticism About Thomas Piketty
Justin Wolfers – NY Times
The craze for the French heartthrob economist has been called Pikettymania. His research has been called “Nobel Prize-worthy,” and it was met by a rapturous reception among laureates like Robert Solow, Joseph Stiglitz and Paul Krugman.

***SR: Wow, a heartthrob economist. Is that a first?

Fed Is Silent on Doomsday Book, Its Blueprint for Fighting A.I.G. Crisis
It’s called the Doomsday Book — though by now, officials at the Federal Reserve Bank of New York probably regret they ever came up with that catchy nickname. It’s a collection of legal opinions that describe and delineate the Federal Reserve’s ability to fight financial crises, along with a variety of related documents. And the Fed would really prefer to tell the public nothing more than that.

***SR: Come on – we want to know about the zombies!

SNB fights to block public gold vote
Delphine Strauss – Financial Times
Switzerland’s central bank is flexing its muscles to defend its cap on the Swiss franc. Its battle to fend off deflation – in which it sees the exchange rate as its chief weapon – is already complicated by the slide in the euro that followed European Central Bank easing. Now the SNB is fighting on a new front: to block a populist motion that would force it to almost treble the proportion of reserves held in gold.

***JM: Heaven forfend we pick something to fix that’s actually broken. Or, y’know, “based in reality”…


E.U. Deal Would Lift Veil on Banking Secrecy
European Union finance ministers committed on Tuesday to lifting the veil on personal banking and financial information by 2017 — but they were forced to offer Austria an extra year in order to reach a deal.

Nobel Laureate Jean Tirole Calls for Tough Rules for Banks
Ben Moshinsky – Bloomberg
Jean Tirole, winner of the 2014 Nobel Prize in Economic Sciences, said banks that benefit from government support should face tough regulation.

Global Regulation Seen As Leading Factor In Making Or Breaking Boutique Asset Management Firms, Says TABB Group
More than 40% of global asset managers surveyed informed TABB Group that onerous, labour-intensive and time-consuming regulations are the main factor that could make or break a boutique asset management firm’s ability to expand their footprint geographically or product range. As a result, traditional business models are being threatened but new opportunities are emerging.

French regulator finds market manipulation using Emir data
Duncan Wood –
Europe’s derivatives reporting regime needs work, but the AMF has already used the data to identify market manipulation, which is now being investigated

CFTC’s Giancarlo set to revive energy advisory committee
Alexander Osipovich –
The US Commodity Futures Trading Commission (CFTC) is poised to resuscitate a long-dormant advisory committee designed to provide the agency with input from the energy industry.

Call for position-level data to monitor hedge fund risk
Luke Smolinski –
UK financial regulators do not have access to the most accurate hedge fund statistics, according to financial academics, echoing concerns from a series of Bank of England officials and reports that data collected on hedge funds gives regulators a “limited” and “incomplete” picture of the systemic risk they pose.

National Campaign Will Target Those Most At Risk Of Investment Fraud, Says UK’s Financial Conduct Authority

Steven Maijoor, ESMA Chair, Delivers Keynote Speech At CNMV Conference La Nueva Financiera Regulacion In Madrid

Remarks To The Securities Enforcement Forum 2014, SEC Commissioner Michael S. Piwowar, Washington, D.C., Oct. 14, 2014

Exchanges & Trading Facilities

LME wins battle but its warehouse campaign will be long
Andy Home – Reuters
The London Metal Exchange (LME) has won an important battle in the campaign to overhaul its dysfunctional physical delivery system.

Euronext hires ex-Goldman dark pool chief Socratis Ayiomamitis
Tim Cave – Financial News
Euronext, the newly-independent European exchange operator, has hired the former chief operating officer of Goldman Sachs’s European dark pool to help drive its cash equities strategy.

CME Layoffs Hit Technology Group Hardest
Greg MacSweeney – Wall Street & Technology
A majority of the layoffs due to the CME Group’s recently announced restructuring will come from the technology group, according to the exchange operator.

CME Group Refocuses for Future Growth
Press Release
As part of its recently announced restructuring, CME Group said today it will reduce the company’s global workforce this week by roughly 5 percent or about 150 positions. The majority of eliminations will come from technology, with the balance of positions coming from corporate and administrative functions.

Brokerage lobby urges conflict be resolved before Wednesday vote
A brokerage lobby urged on Tuesday that long-standing concerns about a conflict of interest in voting to approve an operator for a key data processor for the U.S. stock market be resolved before a scheduled vote on Wednesday.

TMX Group: The MiG Report September 2014

Euronext Brussels Welcomes Belgium’s First Public Pandbrieven Issued By Belfius

BM&FBOVESPA Will Have New Trading Hours For Contracts That Reference Commodities, As Of October 20, 2014

Moscow Exchange: End Of Derivatives Market Interim Clearing Session Moved To 14:10 MSK On 15 October

Hedge Funds & Managed Futures

Wall St sheds light on Bill Gross reign after Pimco departure
Michael Mackenzie and Tracy Alloway – New York – Financial Times
During the multi-decade bull market for bonds, Pimco established itself as an investor powerhouse in fixed income and one whose business was coveted by Wall Street. Now, as Pimco seeks to reassure investors and battles huge client outflows following the departure of Bill Gross to Janus Capital, Wall Street professionals paint a picture of a firm that exulted in its size and power and was not shy about throwing around its weight.

Market Swoon Bruises Some Hedge Funds
Rob Copeland – WSJ
The recent turmoil in financial markets is upending some of the biggest hedge-fund trades of the year.

BlackRock sees assets under management rise 10 percent
BlackRock Inc (BLK.N) said on Wednesday that its assets under management had increased 10 percent in the third quarter.

Calpers Gets More Aggressive With CLOs
Dan Fitzpatrick – MoneyBeat – WSJ
Even as the California Public Employees’ Retirement System retreats from hedge funds, its staff is contemplating a push into another aggressive set of investments.

Bridgepoint reaches first close for EUR3.5bn fund
Alec Macfarlane – Financial News
European mid-market private equity firm Bridgepoint has reached a first close for its fifth fund – the largest buyout vehicle currently in the market focused on deals on the continent.

Wilbur Ross Said to Seek Up to $2 Billion for Next Fund
Sabrina Willmer and David Carey – Bloomberg
WL Ross & Co., run by 76-year-old turnaround financier Wilbur Ross, is seeking as much as $2 billion for its next private-equity fund.

Russian fintech venture capital firm raises second fund
Anna Irrera – Financial News
Russian fintech venture capital firm Life.Sreda has launched its second fund to invest in foreign start-ups.

Ashmore remains bullish about emerging markets despite AUM drop
Andrew Pearce – Financial News
Emerging markets manager Ashmore Group insisted that market fundamentals remained “supportive” despite a fall in assets under management.

Future Fund lifts 2014 return to 14.3pc
Richard Gluyas – The Australian
THE Future Fund is forecasting more modest returns as global economic policies return to more normal settings.

Mercuria Closes Acquisition Of J.P. Morgan Chase Physical Commodities Business

Banks & Brokers

Another Scandal Hits Citigroup’s Moneymaking Mexican Division
Michael Corkery and Jessica Silver-Greenberg – Dealbook – NY Times
The accusations read like a pulp thriller: Citigroup employees in Mexico are suspected of pocketing millions of dollars in kickbacks from vendors. And bodyguards for bank executives bought audio recordings of personal phone calls and created shell companies to disguise their fraud.

Senior JPMorgan Currency Trader in London Has Left the Bank
Chad Bray – Dealbook – NY Times
A senior currency trader at JPMorgan Chase in London has left the bank after he was placed on paid leave last year amid regulatory inquiries into potential manipulation of the foreign exchange market by currency traders.

Deutsche’s female appointments ‘just the beginning’
Sarah Krouse – Financial News
The co-chief executive of Deutsche Bank has defended the German lender’s efforts to bolster its ranks of senior female executives, acknowledging criticisms over the length of time change has taken but arguing that the firm had pursued more than “cosmetic” change.

Citigroup Consumer Chief Plans to Leave
Christina Rexrode and Amy Guthrie – WSJ
Citigroup Inc.’s Manuel Medina-Mora, head of consumer banking and chairman of the company’s troubled Mexico unit, is preparing to leave in coming months, according to people with knowledge of the situation. The details of Mr. Medina-Mora’s possible departure haven’t been finalized and could change, but people familiar with the bank’s thinking say he will leave or announce his departure by early next year.

Record mortgage settlement pushes Bank of America into third-quarter loss
Bank of America Corp (BAC.N), the second-largest U.S. bank, reported a quarterly loss applicable to common shareholders, largely due to a huge mortgage settlement with the U.S. government.

Challenges Old and New for Jamie Dimon
Antony Currie – Dealbook – NY Times
Jamie Dimon is back in the saddle after battling cancer – just in time for the JPMorgan Chase boss to face challenges old and new.

Managed account growth drove profit at Wells Fargo wealth unit
Sales of mutual funds and other managed accounts by Wells Fargo & Co’s more than 15,000 retail brokers drove a 22 percent gain in net income at the bank’s “wealth, brokerage and retirement” segment in the third quarter.

Neonet Expands Liquidity Access With Aquis Exchange
Neonet, the independent agency broker and execution specialist, today announced that it is providing access for clients to Aquis Exchange, the subscription-based European equities exchange.

And the special Credit Suisse wealth topic this year is…
Paul Murphy – Financial Times
Inequality. Obviously. The CS annual Wealth Report is now in its fifth year. Click the pyramid to read.

Clearing & Settlement

US agency aims to grow tri-party clearing
Tracy Alloway in New York – Financial Times
The Fixed Income Clearing Corporation will announce on Wednesday it is seeking regulatory approval to expand its safeguarding of trades in a crucial $1.6tn segment of the financial system known as the tri-party repo market.

Banks back cross-margining by clearing firms
Luke Jeffs – Futures & Options World
Two of the largest futures banks have backed moves by Europe’s clearing houses to introduce cross-margining, a new technique that could radically reduce the cost of clearing for banks. Speaking at FOW Derivatives World CEE in Warsaw, clearing experts from Citigroup and Nomura said cross-margining services by clearing house are a positive step.

Morgan Stanley To Join Eurex Clearing’s Securities Lending CCP – Admission Process Expected To Be Finalized Within Weeks
Eurex Clearing, Europe’s leading clearing house and part of Deutsche Börse Group, announced that Morgan Stanley, one of the leading global investment banks, will become a clearing member of the Securities Lending CCP. Both partners aim to have finalized the process by the end of October.

ICMA’s European Repo Council Reports Successful Migration Of The European Bond Markets To T+2
The International Capital Market Association (ICMA) and the ICMA European Repo Council (ERC) report that the initial feedback from members and operations working groups indicates that that the transition to settlement at T+2 for the European fixed income markets has been largely successful with few issues.

CME Group – Clearing: Product Modification Summary: Henry Hub Natural Gas Minimum Price Increment

CME Group – Clearing: Minimum Price Increment Change, Settlement DPL and BTIC Listing (USD-Denominated Ibovespa Futures)

Indexes & Products

Barclays index business auction hits snag: sources
Barclays Plc’s auction of its index business, which includes the widely used Barclays U.S. Aggregate Bond Index, has hit a snag, after would-be buyers realized some crucial bond pricing data that does not belong to the British bank will not be part of the package, two people familiar with the situation said.

Downtown Josh Brown on Smart Money Being Stupid
Eric Balchunas – Bloomberg
Joshua Brown, CEO of Ritholtz Wealth Management, is known for a lot of things — television appearances, tweeting as @downtownjoshbrown to his 86,000 followers, a widely read blog and his story of going from a commission-based broker to a fee-based adviser. It’s a story captured perfectly in the name of his website:

VIX Options Avg. Daily Volume Is Up 50% in October
Matt Moran –
Interest in volatility products and management of volatility and tail risk has increased this month. Last week the futures on the CBOE Volatility Index registered an all-time record high for one-week volume with 1,661,153 contracts. As shown in the chart below, average daily volume for VIX options so far in October is about 50% higher than in September.

NYSE Group Announces Enhanced Methodology For The NYSE Arca Biotechnology Index
Now Includes 30 Companies Representing A Cross-Section Of The Biotechnology Industry

Xetra/Börse Frankfurt: SPDR Thomson Reuters Global Convertible Bond UCITS ETF Launched On Xetra – ETF Tracks The Global Market For Convertible Bonds For The First Time


OptionsCity Supports Access to Brazilian Exchange
OptionsCity Software, a global provider of electronic trading solutions for professional futures and options traders, today announced that the firm has completed certification through CME Group’s Global Partnership for trading on BM&FBOVESPA, Brazil’s largest equities and derivatives exchange.

Barchart Launches New Website Featuring Data Feed Solutions, Software and Enterprise Data Management
The launch of Barchart’s new website, specifically focused on the needs of institutional clients, includes all of our latest services—and introduces brand new EDM solutions with AWS capabilities.

Cross-Asset Universal Product Identifier: The Solution the Industry Is Looking For?
Jim Bennett – Wall Street & Technology
A UPI will enable a holistic approach to identifying all trades and positions. While such an idea sounds great in theory, historical attempts at achieving global agreement have fallen short.

Xignite Partners with FactSet to Bring Global Fundamental Data to the Cloud
Xignite, Inc., the leading provider of cloud-based financial market data, today announced a partnership with industry-leading data provider FactSet to integrate FactSet’s global fundamental data (including company financials and estimates) into the Xignite Market Data Cloud platform. Through this partnership, Xignite will now offer a comprehensive global view that is unique within the financial market data cloud industry.


SEC Announces Insider Trading Charges Against Former Financial Analyst at Pharmaceutical Company
The Securities and Exchange Commission today announced insider trading charges against a Massachusetts man who allegedly tipped his friend with nonpublic information about potential acquisition targets of the pharmaceutical company where he worked.

UK hedge fund founder denies $600m fraud
Caroline Binham, Legal Correspondent – Financial Times
The founder of a London hedge fund “robbed Peter to pay Paul” as part of a scam that lost $600m of investor’s money, prosecutors alleged on the first day of his fraud trial.

Environmental & Energy

Can Europe wean itself off Russian gas?
Christian Oliver and Henry Foy, Financial Times
The night shift at Agropolychim, Bulgaria’s biggest fertiliser plant, received a fax at 4.30am on January 6 2009 warning that their gas supply was going to be cut off immediately.

European firms in Russia say they fear being ‘sacrificed’ in Ukraine standoff
Timothy Heritage, Reuters
European companies in Russia warned on Tuesday they were being hurt by a Russian embargo on food imports as well as EU sanctions and risked being “sacrificed” in the standoff over Ukraine.

Poland leads opposition to EU energy deal
Henry Foy, Christian Oliver and Pilita Clark, Financial Times
Poland and other eastern European countries are prepared to scupper the EU’s landmark climate change deal next week if they do not receive greater guarantees about their future energy costs.


Osaka to expand contract months for Nikkei 225 options
Simon Osborne – The Trade
The Osaka Exchange (OSE) has said that it plans to introduce an expanded range of options contracts on the Nikkei Stock Average (Nikkei 225) to add to its other contracts.

CIMB to expand Asian execution capabilities amid flurry of hires
Simon Osborne – The Trade
Asian brokerage firm CIMB Securities has added significant numbers of staff to its Asian operations as it expands locally. It now also sees opportunities in Europe and North America.

UK takes first orders for debut renminbi bond
Elaine Moore in London and Josh Noble in Hong Kong – Financial Times
Britain has attracted orders of nearly Rmb6bn (GBP600m) for its debut government bond denominated in China’s currency as the UK becomes the first western country to issue debt in renminbi.

Thai Bourse Market Report For September 2014

Ninth China International Oils And Oilseeds Conference To Kick Off

Frontier Markets

Africa’s Largest Fund Manager Hires Dolamo as Resources Head
Franz Wild – Bloomberg
South Africa’s Public Investment Corp., the continent’s biggest fund manager, hired Stanlib Ltd.’s Sholto Dolamo to head its resources team.

How will EMs be affected by commodity price declines?
Matthew C Klein – Financial Times
Credit Suisse has a new report out on the winners and losers of the recent rout in global natural resource prices. While everyone has been paying attention to the remarkable decline in the value of oil, agricultural commodities and industrial metals have also become a lot cheaper recently

The Egyptian Exchange (EGX) Monthly Statistical Report September 2014

John Lothian Newsletter

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Past JLN Newsletters

How Ken Griffin rebuilt Citadel’s ramparts

How Ken Griffin rebuilt Citadel’s ramparts

First Read $33,626/$300,000 (11.2%) Charlie Carey ++++ Trading Technologies Announces Matching Program to Benefit GoFundMe Campaign for MarketsWiki Education Video Series and John Lothian News As a pioneer of electronic trading, we at Trading Technologies value our...

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