First Read

The Rogue Incumbents of the NFA Board
By John J. Lothian

Until two years ago the elections for the board of directors of the National Futures Association was a pretty much a sure thing for the incumbents. However, when Doug Bry and Ernest Jaffarian ran as write-in nominees, after not getting the nod from the NFA Nominating Committee, they won election in an upset.

A year later James Koutoulas and John Roe ran in the CTA/CPO category as write-in nominees for the NFA board and also won election.

This time around Jaffarian and Bry got the nod from the Nominating Committee and are running as incumbents for re-election. But yet they find themselves pitted against candidates also nominated by the NFA Nominating Committee.

It is a rare thing to see such officially pre-ordained competition in the CTA/CPO category. But that is what has happened. Running against Bry and Jaffarian are two well-qualified candidates for the board.

Adam Cooper and Brendan Kalb are experienced and involved industry players representing Citadel and AQR respectively. They are eminently qualified to be on the board.

However, it is Bry and Jaffarian whom I am voting for and recommending other CTAs and CPOs vote for as well. I have nothing against Mr. Cooper or Mr. Kalb or the firms they represent.

You see, Bry and Jaffarian represent something very valuable for the customers and industry participants right now. They represent change and a healthy skepticism about the status quo. They make the powers that be at and behind the NFA, the entrenched powers of the status quo, uncomfortable. They made them uncomfortable enough that NFA staffers recommended well qualified candidates to run against them.

The powers of the status quo want us all to forget about MF Global, Peregrine Financial Group and more recently the AlphaMetrix black eye. The powers of change, which include Bry and Jaffarian, want to see a pro-active NFA that is more concerned about customers.

Bry and Jaffarian are turning the tide at the NFA Board and deserve more time to change the entrenched approach. They ran the first time because of the inadequate response to MF Global. One could argue there was an inadequate response to AlphaMetrix. They still have work to do and thus deserve more time. They have my vote. If you are a CTA/CPO, I hope they have yours.

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Canary in the Paper Mine?
By Doug Ashburn – John Lothian News
Six years ago, the failure of two hedge funds at Bear Stearns sent a small ripple through the commercial paper market. What started out looking like a temporary blip in the economic freight train ended with the failure of large swaths of the banking system, the biggest recession in 70 years, and an unprecedented policy response that continues to this day. Though the crisis had many causes – over-leverage at banks and investment banks, lax lending standards and an opaque derivatives market to name a few – it was a blowup in the commercial paper market that became the proverbial canary in the mine.
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***DA: Thus far the market is undeterred. Just like in 2007.

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CME Sues Ex-Executive Paulhac in Breach-of-Contract Case
David Voreacos and Christie Smythe – Bloomberg
CME Group Inc., the owner of the world’s largest derivatives marketplace, sued former Managing Director Laurent Paulhac for breach of contract, seeking to block him for a year from becoming chief executive officer of ICAP Plc’s swap-execution facility.
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***** When running a SEF becomes a lawsuit-worthy endeavor, you know SEFs are gaining traction.

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Obama nominates Sharon Bowen to CFTC
Reuters
President Barack Obama has chosen Sharon Bowen to fill a commissioner opening on the Commodity Futures Trading Commission, the White House said on Thursday.
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***** She is the acting chairperson of the SIPC, which is very interesting considering the futures industry looking at the insurance issue to protect customer funds. I believe she is also the first African-American CFTC Commissioner.

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Demoralised U.S. commodities watchdog waits for new leaders: Kemp
Reuters
The incoming chairman and new members of the U.S. Commodity Futures Trading Commission (CFTC) will inherit an agency that has been severely demoralised by overwork, defeats in court, infighting among the commissioners and severe criticism from the futures industry.
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***** Other than that though, things are hunky dory.

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OPRA Seeks Bidders for Service Contract, Casting Wide Net to Find Alternative Providers
Ivy Schmerken – Wall Street & Technology
The Options Price Reporting Authority, a computer system that consolidates and disseminates quotes from 12 US options exchanges to traders, brokers and data vendors, is looking for a new service provider.
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***** Must provide large amounts of bandwidth, storage and tenors.

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Weekend Reading: Skipping the Wall St. ‘Wolf’
ERIC OWLES – NYTimes.com
Martin Scorsese’s film about Jordan Belfort is set join a long list of Wall Street movies that are focused more on frat-boy antics than financial wizardry.
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***** Amazingly, my experience in the financial markets looks nothing like the trailer for this movie.

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Gary DeWaal’s Bridging the Week: December 16 -20 and 23, 2013 (Comparability Determinations; Double Dipping Leads to Fines, Bribery Controls)
If March is the month that comes in like a lion and leaves like a lamb, than this December has been the exact opposite. With so little happening the first few weeks of December it seemed lamb-like. However, regulators and litigants seem to have been in a hurry to put everything on the table prior to going on their holidays the last two weeks of this month, and thus December seems to be ending with the roar of a lion.
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Things you didn’t know about reindeer
AP
Reindeer are featured on Christmas cards and in movies worldwide this time of year, galloping across the sky with Santa’s sleigh in tow. But on Europe’s northern fringe, the migratory mammals are part of everyday life all year round as they roam the fells of Lapland – the Arctic homeland of the indigenous Sami people of Norway, Sweden, Finland and northwest Russia.
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***JM
: They’re a road hazard on the way from home to Hammerfest, the town north of here by three hours’ drive that holds the “local” hospital. Haven’t seen a one with a red nose yet, though.

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MarketsWiki

MarketsWiki Page of the Day
Sharon Y. Bowen
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MarketsWiki Recent Updates

People

Jonathan B. Werts; Matthew Ardizzone; Michael T. Burke; David Mudie; Melinda Schramm; Ryan T. McNally; Sharon Y. Bowen; George H. Rohrs, Jr.

Companies, Organizations and Groups

IEX Group; The Price Futures Group, Inc.

Statistics

46,039,329 pages viewed, 7,726 articles, 170,091 edits
MarketsWiki Statistics

Lead Stories

CME Seeks to Broaden Cash Options in Clearinghouse Default Rules
Matthew Leising – Bloomberg
CME Group Inc. (CME), concerned that a new U.S. rule undermines the use of Treasuries as collateral at clearinghouses, is proposing a workaround that would make greater use of client cash.
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***** I am sure glad all the new regulations from the CFTC are so easy to understand.

CFTC Extends Some Swaps Rules to Overseas Firms
WSJ.com
The Commodity Futures Trading Commission extended some of its swaps rules to overseas firms late Friday, marking the latest push by the agency to assert its authority abroad. In a move likely to renew criticism the U.S. is bidding to become the de facto global financial regulator, the CFTC voted 3-1 to apply many of its key swaps rules to overseas firms that will also fall under their home country regulations.
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***** Has the term “Regulatory Imperialism” been coined yet?

***DA: For “everything you wanted to know about substituted compliance” please visit this page in MarketsReformWiki jlne.ws/1cN1gJZ

U.S. permits some foreign swaps rules, EU still unhappy
Reuters
The United States granted foreign banks a reprieve on Friday from some of its new rules for risky derivatives, putting itself on a collision course with overseas regulators who want more reliance on home-country rules.
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***** Of course they want regulatory arbitrage.

Trading tax hurts bid to keep Euronext in French hands
Reuters
France’s unloved financial transaction tax is hampering its efforts to persuade local institutions to buy stakes in Paris stock exchange operator Euronext and keep it under French influence after its expected spin-off next year.
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***** Applying a financial transaction tax anytime is bad, but at this particular time is worse.

Record Activity in Dark Pools Boosts European Equity Volumes
Tim Cave – MoneyBeat – WSJ
Trading volumes in European equities are likely to have risen by nearly a fifth this year, with record levels of activity taking place in off-exchange venues called dark pools as institutional investors rediscovered an appetite for European stocks.
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***** There is good news and bad news. This is the latter in my book.

Whistleblower tip-offs soar in the UK
Caroline Binham and Sam Fleming in London – FT.com
Conscience, fear and the possibility of financial reward have spurred whistleblowers to offer information to regulators, raising the number of tip-offs to new highs. The tough regulatory penalties emerging from the Libor scandal, as well as better incentives for whistleblowers, have encouraged more people to report potential wrongdoing to UK and US financial regulators, researchers have found.
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***** It used to be whistleblowers were sore.

Bourses to have 18 months to adapt to new Brazil rules-watchdog
Reuters
Bourses and clearinghouses will have 18 months to adapt to new rules in Brazil’s financial exchange industry that will be implemented in June, securities industry watchdog CVM said on Friday, in a step aimed at fostering competition and transparency in domestic financial markets.
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Deutsche Bank to Pay $1.9 Billion Over Troubled Mortgage Securities
MATTHEW GOLDSTEIN – NYTimes.com
Deutsche Bank agreed on Friday to pay about $1.9 billion to settle claims that it misled Fannie Mae and Freddie Mac over the quality of home loans bundled into mortgage-backed securities, becoming the latest big bank to reach a settlement with federal housing regulators.
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Banks Mostly Avoid Providing Bitcoin Services
Robin Sidel – WSJ.com
Companies trying to cash in on the newfangled bitcoin craze are having trouble getting old-fashioned bank accounts. Lenders are leery of dealing with virtual-currency companies because of concerns that the businesses could run afoul of anti-money-laundering laws or be involved in illegal activities, banking executives say.
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Bloomberg’s Miller Bitcoin Gift Stolen
Sam Ro – Business Insider
Bloomberg TV’s Matt Miller is currently experiencing the “12 Days Of Bitcoin,” a series for the business news television station. On Friday, Miller learned an important lesson. It was an experience that everyone should remember before they start moving their money into the digital currency.
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***** See our Special Report on Bitcoin from a couple of weeks ago.

Regulatory

U.S. SEC to press ahead with updating company disclosure rules
Reuters
U.S. regulators said Friday they plan to update the rules that dictate what public companies must disclose to investors, in an effort to simplify filings and lower compliance costs for small companies.
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CFTC Staff Issues Time-Limited No-Action Letter from Certain Entity-Level Internal Business Conduct Requirements for Certain Swap Dealers and Major Swap Participants Established under the Laws of Australia, Canada, the European Union, Japan, and Switzerland
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***** I love the late Friday press releases from the CFTC.

CFTC’s Division of Market Oversight Issues Time-Limited No-Action Relief from Certain Requirements of Part 45 and Part 46 of the Commission’s Regulations, for Certain Swap Dealers and Major Swap Participants Established under the Laws of Australia, Canada
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CFTC Staff Issues Time-Limited No-Action Letter on the Applicability of Oral Recording Requirements for Certain Members of Swap Execution Facilities
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CFTC’s Division of Market Oversight Provides Conditional Time-Limited No-Action Relief to Australian-Based Trading Platform Yieldbroker Pty Limited
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CFTC Approves Comparability Determinations for Six Jurisdictions for Substituted Compliance Purposes
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CFTC Approves Limited-Purpose Swap Dealer Designation for State Street Bank and Trust Company
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CFTC’s Division of Clearing and Risk Issues Time-Limited No-Action Letter for Singapore Exchange Derivatives Clearing Limited and Its Clearing Members
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Joint Statement Of CFTC Chairman Gensler And Commissioners Chilton And Wetjen
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Statement Of Dissent By CFTC Commissioner Scott D. O’Malia – Comparability Determinations For Australia, Canada, The European Union, Hong Kong, Japan, And Switzerland: Certain Entity And Transaction-Level Requirements
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ASIC: Australian Banks Achieve Positive ‘Substituted Compliance’ Outcomes From The CFTC
ASIC has today welcomed the US Commodity Futures Trading Commission’s (CFTC) 20 December 2013 announcement on substituted compliance.
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Notice to Members I-13-44: Important Notice Regarding Applicability of CFTC No-Action Letter 13-51 Regarding Consolidation of Pool Annual and Quarterly Reports by Pools and Wholly Owned Subsidiaries
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SEC Issues Staff Report on Public Company Disclosure
The Securities and Exchange Commission today issued a staff report to Congress on its disclosure rules for U.S. public companies, as part of agency’s ongoing efforts to modernize and simplify disclosure requirements and reduce compliance costs for emerging growth companies.
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ASIC Helps Develop IOSCO Report On The Regulation Of Retail Structured Products
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ESMA Closed For Public Holidays From 24 December 2013 To 2 January 2014
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ESMA Has Published A Consultation Paper On Revision Of The Provisions On Diversification Of Collateral In ESMA’s Guidelines On ETFs And Other UCITS Issues
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EBA Publishes draft Final Technical Standards For The Identification Of The Geographical Location Of Credit Exposures
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Exchanges & Trading Facilities

Nasdaq Price System May Take Years for Structured Note Progress
Kevin Dugan – Bloomberg
Nasdaq OMX Group Inc. said it may take years for its Mutual Fund Quotation Service to make “measureable progress” in getting banks to list daily values for their structured notes.
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Exchanges post stellar share price gains
Tim Cave – Financial News
The value of the world’s largest stock exchanges reached a five-and-a-half-year high at the end of November, as efforts to diversify and a fervent trading and merger environment provided a welcome boost to share prices.
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Improving FX Market’s Order Book Quality On The Moscow Exchange
From 20th January 2014, Moscow Exchange is introducing a minimum 25 RUB commission on orders under 50 lots on the FX Market.
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NYSE Euronext Announces 2015 Holiday Calendar and Early Closings
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Moscow Exchange: December-January FX Market Trading Hours
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TOM MTF Statistics Week 51 – Daily Volume Record
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Hedge Funds & Managed Futures

Hedge funds lose out to equities, again
Reuters
For hedge funds that made money this year there was only one strategy that really mattered – latching onto the stockmarket rally.
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High-speed trader Infinium Capital reduces portfolio -president
Reuters
Infinium Capital Management has started reducing its trading portfolio “across the board” to provide units that are performing well with resources, the president of the high-speed U.S. trading firm said on Friday.
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***** Infinium is just one of the proprietary trading firms that is cutting back.

End of year report card 2013: asset management
Joe McGrath – Financial News
Financial News looks back on the asset management industry’s achievements this year – including Aberdeen Asset Management’s acquisition of Swip and the strong sales at Old Mutual after it hired Richard Buxton – and where it could do better in 2014.
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Investment Strategy Rises From Obscurity
DAVID GELLES – NYTimes.com
When the billionaire Carl C. Icahn took control of CVR Energy last year, critics thought the dog had finally caught the car.
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For a Hedge Fund Pioneer, a Tiger Fund Burning Bright
MATTHEW GOLDSTEIN – NYTimes.com
Julian Robertson, the billionaire investor and an early pioneer of the hedge fund industry, is again proving to be a top picker of new talent.
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Quants turn to AI for market insights
Kris Devasabai – Risk.net
A new breed of hedge funds are applying artificial intelligence techniques to trade the markets, with some success
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Funds Hold Record Net Long Position in Natural-Gas Futures/Options — Update
David Bird – WSJ.com
Commodity fund managers and other speculative investors are holding their biggest-ever bets on rising natural-gas futures, having doubled their holdings this week, data released Friday by the Commodity Futures Trading Commission show.
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CFTC Commitments Of Traders Reports Update
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Banks & Brokers

More Swiss banks to close, UBS investigator predicts
Nick Kochan – Risk.net
Many more Swiss banks are likely to close from next year as US authorities continue to investigate tax evasion, says the former head of the US Internal Revenue Service (IRS) investigation into UBS.
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Four banks could quit Hungary soon – cenbank chief
Reuters
Four major foreign banks could quit Hungary, with their departure coming much faster than expected, the country’s central bank governor Gyorgy Matolcsy said on Friday, without naming the banks.
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Goldman Real-Estate Play Skirts Volcker Ban
Craig Karmin and Justin Baer – WSJ.com
The Volcker rule prohibits banks from owning more than 3% of a hedge fund or private-equity portfolio. So why did Goldman Sachs Group Inc. tell would-be investors that it would contribute up to 20% in a new fund that makes loans backed by office buildings, hotels, shopping centers and other properties?
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Broker Bambi Holzer Barred From Securities Industry
WSJ.com
Bambi Holzer, a financial broker to Hollywood’s rich and famous who racked up dozens of customer complaints, has been barred from the securities industry, according to a settlement with Wall Street’s self regulator.
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Data brokers outpace regulators as they mine new technologies
Emily Steel in New York – FT.com
Companies that create data dossiers on consumers are tapping new technologies to unearth ever more intimate information despite intensifying regulatory scrutiny of the multibillion-dollar data broker industry.
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TradeStation Expands European Product Range With Instruments on NYSE Liffe Futures
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Clearing & Settlement

Why Leading Global Asset Managers Want to FIX Their Post-Trade
Ignatius John – Wall Street & Technology
There is a sea of change underway in the world of investment management, specifically as it relates to the part of the trade-life cycle known as post-trade. A back office function with seemingly fixed costs, the post-trade process has received little attention as asset managers have historically pursued other areas of portfolio management and trading to implement innovative technologies.
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Enforcement

Archer Daniels Settles Corruption Case, to Pay More Than $36 Million
WSJ.com
Archer Daniels Midland Co. has agreed to pay more than $36 million to settle charges under the Foreign Corrupt Practices Act that it failed to prevent bribes by its subsidiaries in Germany and Ukraine, the Securities and Exchange Commission said Friday. The SEC said the subsidiaries paid more than $21 million to bribe government officials through intermediaries in order to receive value-added tax refunds.
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***** Just wait until they meet their new alderman in Chicago.

SEC Charges Woman and Stepson for Involvement in ZeekRewards Ponzi and Pyramid Scheme
The Securities and Exchange Commission today announced charges against a woman and her stepson for their involvement in a North Carolina-based Ponzi and pyramid scheme that the agency shut down last year.
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ASIC Accepts Enforceable Undertaking From National Australia Bank
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ASIC Accepts Enforceable Undertaking From UBS
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B.C. man agrees to sanctions for illegally distributing securities
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2013/101 Directors of B.C. mining company settle with BCSC
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Asia-Pacific

London Metal Exchange competes with Bohai for mainland’s affections
Enoch Yiu | South China Morning Post
While mainland China is trying to push a home-grown commodity exchange to expand overseas, it appears the London Metal Exchange, owned by Hong Kong Exchanges and Clearing (HKEx), faces a tough battle to attract mainland investment and support.
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Thai Bourse Rolls Out 2014 Plan To Build Quality, Reform Thai Capital Market; Becomes ASEAN’s Leader In Key Areas In 2013
The Stock Exchange of Thailand (SET) announces its three-year (2014-2016) strategy on “Energizing the industry for sustainable growth,” which in 2014 aims to build a quality-focused capital market culture, become a key Greater Mekong Sub-region (GMS) connector, and enhance infrastructure and capability to cope with any uncertainty, while proceeding with plans for its new derivatives trading system to go live by mid-2014.
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SGX reports 2Q results on 22 January
Singapore Exchange (SGX) is reporting second quarter results for Financial Year 2014 (FY2014) after the market closes on 22 January 2014.
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Shanghai Stock Exchange Makes All-round Amendments To “SSE Guidance For Real-time Supervision On Abnormal Trading Of Securities”
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Frontier Markets

Senior Delegation To Visit London To Promote Palestine Investment Opportunity – National Export Body (PalTrade) And Palestine Stock Exchange To Lead Mission January 2014
The leaders of Palestine’s Export and investment community are visiting London on 16 and 17 January 2014 to reinforce trade links between the UK and Palestine and attract investment to the nation’s flourishing stock market.
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Bursa Malaysia Securities Reprimands, Fines And Suspends Hussein Bin Abdullah For Engaging In Manipulative Dealing Activities
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HH Sheikh Maktoum Bin Mohammed Bin Rashid Al Maktoum Commends HE Abdullah Mohammed Saleh For His Unrelenting Dedication As Governor Of DIFC
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Tehran Stock Exchange Weekly Digest – 18 December
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