In Other Reading
This week’s issue of The New Yorker (dated Oct. 13, 2014) is called “The Money Issue.” Among other things, it has a 13-page story about the insider trading scandal at S.A.C. Capital Advisors that gets into all the details of the affair, from the background of Mathew Martoma, who was found guilty of perpetrating “the most lucrative insider trading scheme ever” to the culture of the company to why the authorities couldn’t manage to charge the company’s founder, Stephen A. Cohen, with any wrongdoing. If you’re interested in getting into the weeds of the story, it is worth a read. The New Yorker is subscription only, but here is a link to their web site
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.
Three More Firms Sign For Duco, Patrick Thornton-Smith Now CMO
Duco today announced that three further customers signed for Duco Cube in September. All three firms are well-known service providers with extensive global clients in the cash equity, derivative and fixed income markets.
***JM: Congrats, Patrick, on the new job! Glad to see the “Former John Lothian Newsletter Guest Editor” rule (“Guest editors here generally go on to be appointed to new and exciting roles”) is still very much in effect!
James McNulty, Chairman, NYSE Liffe – An Integrated Approach To Corporate Governance
“What I’d like to do today is talk to you about taking your career right now and rolling it forward 30 years.”
James McNulty, chairman of NYSE Liffe, breaks down the relationship between corporate boards and shareholders. He compares the conflicts that can arise between the two parties, strategies to create compromises and each of the roles both sides have. McNulty also touches on success strategies and establishing short and long term success. He also shows an example formula for creating a common language and metrics for the governing board. McNulty concludes by saying that when things become difficult, the strongest possible governance is desired in order to gain the confidence of the market.
Single Dealer Platforms: Are Their Days Numbered?
Matt Hopgood – Wall Street & Technology
Today, clients are not really consolidating their trading through preferred single suppliers; they will always hunt for the best price, best service, and most trusted supplier in any given market.
SIP Vote Looks Like Good Old Fashioned Chicago Politics
Mark Melin – Value Walk
Dead exchanges voting in an election, last minute horse trading and ignoring government voting guidelines. Sound like Chicago politics? It is, but this vote is taking place for control of a key piece of stock market plumbing known as the “SIP.”
***JM: I’ll leave the “P” word alone, but I think it’s pretty funny that they asked exchanges to vote on which of their own services to use.
Five Year Plan: DTCC’s Marisol Collazo Offers a Progress Report on Global Data Repository Issues
In 2009, global regulators agreed to develop a framework to monitor and store market data. Five years later, while much progress has been made, there is still a long way to go. Marisol Collazo, head of DTCC’s U.S. data repository, tells us what is happening now, and what the market can expect over the next 18 months.
No Smoke, No Mirrors: The Dutch Pension Plan
MARY WILLIAMS WALSH – NY Times
Imagine a place where pensions were not an ever-deepening quagmire, where the numbers told the whole story and where workers could count on a decent retirement. Imagine a place where regulators existed to make sure everyone followed the rules. That place might just be the Netherlands.
***JM: I’m reluctant to do much holding up of other countries as shining examples (living as I do in a country that frequently gets held up that way when it’s not really as cut-and-dried as it seems), but there’s something to be said for not sweeping bad stuff under the rug for two generations forward to find.
French bank, Twitter team up for money transfers via tweets
Leila Abboud and Eric Auchard – Reuters
One of France’s largest banks is teaming up with social network Twitter Inc. this week to allow its customers to transfer money via tweets.
***JM: Glad to hear they didn’t pick Snapchat…
Bridging the Week: LME Warehouses, QCCP Drama, Bitcoins, One Day Stay, Unregistered Offerings, Where’re the Laptops?
Gary DeWaal – Katten Muchin Rosenman
London Metal Exchange-approved warehouses and other foreign matters took the spotlight this past week in developments related to the financial services industry, including a surprise disclosure regarding a contentious international issue by the new Commodity Futures Trading Commission chairman. In addition, the International Swaps and Derivatives Association announced the agreement of 18 systemically important global banks to delay by one day their right to take certain adverse actions against one another in connection with OTC transactions when their swap counterparty is in imminent collapse and their fate is being resolved by a national regulator. And has anyone seen some missing Securities and Exchange Commission laptops?
MarketsWiki Page of the Day
Shanghai Stock Exchange
MarketsWiki Recent Updates
Companies, Organizations and Groups
54,187,469 pages viewed, 8,052 articles, 186,447 edits
ConvergEx CEO says firm’s dark pools being remodeled
John McCrank – Reuters
ConvergEx Group LLC is revamping its two alternative trading systems, or “dark pools,” due in part to expectations of tighter industry regulations, Eric Noll, chief executive of the brokerage and trading services provider, said on Friday.
ICE Clear Europe resubmits Emir application
Philip Stafford – Financial Times
ICE Clear Europe is likely to be one of the last clearing houses to be authorised in Europe under new tougher rules after the UK group made a significant change to its application.
New derivative rules ‘offer asset managers nothing’
Chris Flood – Financial Times
Asset managers have voiced opposition to plans by the world’s biggest banks to rewrite derivative contract rules to prevent a repeat of the problems caused by the Lehman Brothers collapse in 2008.
***SR: The article brings home yet again the complexities involved in creating the new swap rules.
Ex-Fed Chair Bernanke: wanted to stop AIG default, not punish firm
Emily Stephenson – Reuters
Former Federal Reserve Chairman Ben Bernanke said on Friday on that prior to the 2008 bailout of American International Group, he was concerned that the insurer “was on the brink of default” and not about punishing AIG.
U.S. and UK to test big bank collapse in joint model run
Randall Palmer and Douwe Miedema – Reuters
Regulators from the United States and the United Kingdom will get together in a war room next week to see if they can cope with any possible fall-out when the next big bank topples over, the two countries said on Friday.
Traders predict further job losses
Darren Lazarus – Financial News
Nearly three-quarters of traders who work at investment banks and brokers believe we have not seen the end of job cuts that have been carried out across the industry over the past few years, according to a Financial News survey.
EU plans to revive lifeless carbon market
Christian Oliver in Brussels and Pilita Clark in London – Financial Times
Traders believe market sentiment is poised for a boost in the coming weeks, expecting signals from Brussels that EU leaders will try to resuscitate the Emissions Trading System, the world’s biggest cap-and-trade market, and redeploy it on the frontline of the battle against climate change.
Twelve Firms Expressed Interest in Running Gold Fix Replacement
Nicholas Larkin – Bloomberg
At least 12 firms have expressed interest in running a replacement for the century-old gold fixing benchmark, the London Bullion Market Association said.
***SR: CME Group Inc. and/or Thomson Reuters have been expected to run the gold fix, after taking over the silver fix. Now a little competition in the mix?
Investment funds will come under new regulatory focus – Carney
Investment funds will come under increased focus from global financial regulators, the head of a worldwide push to prevent a repeat of the financial crisis said on Sunday.
CFTC’s Giancarlo barred from meeting Sef bigwigs
Joe Rennison – Risk.net
Chris Giancarlo, one of three recently appointed commissioners at the US Commodity Futures Trading Commission (CFTC), is barred by conflict of interest rules from meeting with former employer GFI Group as well as any board members of the Wholesale Markets Brokers’ Association Americas (WMBAA), where Giancarlo was also a member.
CFTC Advocates International Harmonisation of NDF Rules
Profit & Loss
The Commodity Futures Trading Commission (CFTC) has given its most public indication yet that it will look to harmonise its approach to regulating FX NDF products with its European counterparts
CFTC Aims to ‘Stay on Top’ of Bitcoin Developments
Profit & Loss
US regulators at the Commodity Futures Trading Commissioner tentatively acknowledged the potential long-term impact of Bitcoins on financial markets
Fed, CFTC officials back standard stress tests for CCPs
Kris Devasabai – Risk.net
CCPs should be subject to standardised stress testing to help determine loss absorbency provisions, regulators tell IIF conference
Canadian securities regulators provide an update on early warning reporting system project
The Canadian Securities Administrators (CSA) today published CSA Notice 62-307 Update on Proposed Amendments to Multilateral Instrument 62-104 Take-Over Bids and Issuer Bids, National Instrument 62-103 Early Warning System and Related Take-Over Bid and Insider Reporting Issues and National Policy 62-203 Take-Over Bids and Issuer Bids (“CSA Notice 62-307”), which provides an update to market participants on the status of proposed amendments to the early warning reporting regime (the Draft Amendments).
ASIC Facilitates Foreign Companies Offering Securities
Exchanges & Trading Facilities
Euronext Appoints Head Of Exchange Traded Funds & Investment Funds
Euronext today announced the appointment of Benjamin Fussien as Head of Exchange Traded Funds (ETFs) & Investment Funds at Euronext. His role will be to drive further growth in Euronext’s ETF business, which already is a leading venue for ETF listing and trading in continental Europe
FESE urges markets to focus on investors
John Bakie – The Trade
European capital markets should be more focused on serving the needs of investors and listed companies rather than intermediaries, a report by the Federation of European Securities Exchanges (FESE) has concluded.
TOM MTF Statistics Week 41, 2014
Mexican Stock Exchange Releases Monthly Financial Report For September 2014
Hedge Funds & Managed Futures
Bill Ackman’s Pershing Square fizzles on IPO
It has been a bad stock market debut for activist investor Bill Ackman’s Pershing Square fund. Shares in the hedge fund manager’s newly-listed vehicle fell 5.1 per cent to $23.73 as they began trading in Amsterdam.
Shunning Wall Street Norms, Blackstone to Spin Off Its Advisory Group
William Alden – Dealbook – NY Times
For decades, it has been a deeply held belief among many of Wall Street’s giants that a multiplicity of business lines is superior to a more streamlined model. But the Blackstone Group, the world’s largest private equity firm, has cast a vote against conventional wisdom, saying on Friday that it would spin off its divisions that provide advice on corporate transactions.
Blackstone’s Move Could Set Off a Trend
Jeffrey Goldfarb – Dealbook – NY Times
It’s the end of the beginning for Blackstone. The merger advisory business that Stephen Schwarzman and Peter G. Peterson used as a cornerstone to build their buyout firm three decades ago is being spun off.
Pimco’s assets under management drop five percent in third quarter
Jennifer Ablan – Reuters
Pacific Investment Management Co., whose co-founder Bill Gross stunningly departed on Sept. 26, said late Friday that the Newport Beach, Calif.-firm had assets under management of $1.876 trillion as of Sept. 30, a 5 percent drop in the third quarter.
Pimco’s Mather says bond investors must revise return expectations
Bond investors need to revise their expectations of the returns they can make in the years ahead, said Scott Mather, one of three Pimco managers who run the firm’s Total Return Fund following the shock exit of co-founder Bill Gross last month.
Cost-conscious Danes focus attention on investment fees
Mark Cobley – Financial News
Asset managers looking to sell funds to the Danish market should expect pension funds there to negotiate hard on fees. Cost control is central to the Danish model.
Asset managers cheer FSB retreat on Sifi plans
Kris Devasabai – Risk.net
FSB will propose new framework for identifying non-bank, non-insurer Sifis, with a second consultation paper due before the end of the year
TABB Group Research finds that Boutique Asset Managers continue grappling with regulatory hurdles
According to the third annual edition of research undertaken by research and advisory firm TABB Group at SunGard’s request, regulation is the greatest threat to success for boutique asset management firms. Growing complexity has led to 42% of participants in 2014 citing regulation as the major focus for firms, from just 17% in 2013 – highlighting the significant challenges boutiques now face.
Do not shop in the bargain aisle for hedge funds
Miles Johnson – Financial Times
With many pension funds facing deficits, and needing investments that will generate high returns, the promise of hedge funds has an obvious appeal. The problem is, like the star chef, the small number of hedge funds that have made staggering amounts of money for their investors over several decades already have too many clients and are closed for business.
Banks & Brokers
Bank Execs Try to Push Beyond ‘Too Big To Fail’ – MoneyBeat
Ryan Tracy – MoneyBeat – WSJ
J.P. Morgan Chase & Co. Chief Executive James Dimon and other big bank executives think they are moving beyond the perception their firms are “too big to fail.”
Bankers (quietly) call for transparency on listing adviser fees
Lucy Burton – Financial News
When kitchen appliances retailer AO World paid Rothschild GBP12 million for work on its London listing in March, the equivalent of 1% of its GBP1.2 billion market capitalisation, there were two big surprises for the market.
ABN’s global head of trading to leave
Luke Jeffs – Futures & Options World
The global head of trading at ABN Amro Clearing is set to leave the Dutch firm as it seeks to rationalise its trading units, marking the latest high-profile trading departure from a large broker.
J.P. Morgan CEO: Cybersecurity Spending to Double
Emily Glazer – WSJ
J.P. Morgan Chase & Co. Chairman and Chief Executive James Dimon said the bank would double spending on cybersecurity over the next five years, his first public remarks following the data breach that hit the nation’s largest bank this summer. Mr. Dimon was speaking in his first public appearance since July, when he disclosed that he had been diagnosed with throat cancer.
Deutsche clampdown on bad behavior prompts exodus of traders
Daniel Schäfer – Financial Times
Deutsche Bank is losing some of its strongest financial performers amid a clampdown on bad behavior by traders, as the lender faces ongoing probes by global regulators into allegations of attempts to rig markets.
Trading Activity Likely to Buoy Banks
Saabira Chaudhuri And Justin Baer – WSJ
For the first time in more than a year, the biggest U.S. banks likely won’t see quarterly results dragged down by their trading businesses. Global markets, quiet for most of the year, began to stir in the third quarter amid prospects that interest rates would rise in the U.S. and fall in Europe.
ING US equity income specialist joins FOUR Capital
Nick Paler – Investment Week
FOUR Capital Partners is to expand its fund range with the launch of a US mandate run by new hire, and ex-ING manager, Adour Sarkissian.
European banks raise more capital before ECB stress test: report
Euro zone banks have raised 35 percent more capital ahead of the European Central Bank’s (ECB) latest stress test than they had set aside before the 2011 review, according to a report published by law firm Linklaters.
Goldman Sachs Declares Preferred Stock Dividends
Clearing & Settlement
Things fall apart; the central clearing parties cannot hold
John Dizard – Financial Times
In future, taxpayers will not bail out failing banks, says John Dizard, but clearing houses
Clearstream’s September 2014 Figures Clearstream Maintains Record Levels In Assets Under Custody – Double Digit Growth In Collateral Management And Investment Fund Streams – Philip Brown: “Regulatory Readiness Is Now A Major Priority”
Industry faces “Clearing Cliff” – lawyers
William Mitting – Futures & Options World
The industry faces a “Clearing Cliff” if the European Commission does not grant recognition to non-EU clearing houses by December 15, top international lawyers have warned.
Indexes & Products
US ETF giant WisdomTree plans UK market debut
Dan Jones – Investment Weeks
WisdomTree, one of the largest passives providers in the US, is to launch its first ETFs in the UK by the end of the year as part of its push into Europe.
US ETFs to take aim at China’s onshore bond market
U.S. investment firms are readying the first line of exchange-traded funds designed to give American investors access to China’s swelling onshore bond market, which has been largely closed off to foreigners.
Xetra/Börse Frankfurt: Four New iShares ETFs Launched On Xetra – ETFs Offer Access To Strategy Indices On MSCI World
This Week VXST Index Rose 58.4% and VIX Index Rose 46%
Matt Moran – VIX Views
This week the CBOE Short-Term Volatility Index rose 58.4%, the CBOE Volatility Index rose 46%, and the S&P 500 Index fell 3.3%.
The Evolution of Technology Due Diligence for Hedge Funds
Grigoriy Milis – Wall Street & Technology
Due diligence is no longer a matter of keeping pace with regulations and technology standards. Now hedge funds are expected to enhance infrastructure ahead of regulatory guidelines.
CTA, UTP Revisit Consolidated Tape Fees
Faye Kilburn – WatersTechnology
The Consolidated Tape Association (CTA) and the Unlisted Trading Privileges (UTP) Plan, which together oversee the collection and distribution of the consolidated tapes of quote and trade data for US equity markets, have proposed new fee policies for the Tape A, B and C feeds of data on stocks listed on the New York Stock Exchange, NYSE Arca, NYSE MKT and other regional exchanges, and Nasdaq, respectively, which includes new non-display and higher per-quote fees, but reduced per-device rates.
Links Commodities Choose Trayport For European Rapeseed Oil Markets
Trayport, a leading provider of energy trading solutions to traders, brokers and exchanges worldwide, today announced that Links Commodities are now using Trayport’s GlobalVision Broker Trading SystemSM (BTS) for the FOB Dutch Mill NOFOTA rapeseed oil paper contract and to aid some physical trading.
Northern Trust Selects SunGard’s Asset Arena Control Center to Help Streamline Processes and Reduce Risk
European Commission And Data Industry Launch EUR2.5 Billion Partnership To Master Big Data
Low-Latency Specialist Metamako Sets Up European Operations With Covington
[AMF Canada] Mass e-mail solicitation – Warren English and Méga International Business imposed hefty penalty
[AMF Canada] Financière Hélios Capital – Service of Decision by Bureau
Environmental & Energy
Big Water Users Should Pay Higher Price: Nestlé Chairman
Corinne Gretler, Bloomberg News
People who use more water should pay more for it, according to Peter Brabeck-Letmathe, chairman of Nestlé SA, the maker of Perrier bottled water.
EU raids ethanol groups in energy price fixing probe
Alex Barker, Financial Times
Brussels has stepped up its probe into price fixing in energy markets, raiding several companies in two European countries involved in producing and trading the biofuel ethanol.
***LB: Also in this story “The action follows raids in May 2014 on the offices of Platts, a commodity price reporter, and the oil majors BP, Shell and Statoil, seeking evidence of price manipulation. The Commission did not identify the companies it raided on Tuesday.”
Juncker blow as EU Parliament votes out Bratusek
Megan Darby, RTCC (Responding to Climate Change)
European lawmakers last night voted overwhelmingly to reject Alenka Bratusek as vice president of the “energy union”.
***LB: Also in this story “The former Slovenia prime minister was ousted by 112 votes to 13, after failing to impress at a parliamentary hearing on Monday.”
Asian Market Hubs Move Into Gold Trading
BIMAN MUKHERJI in Hong Kong and ESE ERHEREINE in London – WSJ
Asians buy most of the world’s gold, but nearly all of it trades in London. Now, with Western investors souring on the metal, the region is making a bid for some of the action.
Regulators tell firms no capital gains tax on Hong Kong-Shanghai stock scheme: sources
Michelle Price and Saikat Chatterjee – Reuters
Some key regulators involved in setting up a landmark stock trading link between Hong Kong and China have told market participants they expect the scheme to be free of any capital gains tax, people with knowledge of the discussions said.
BNP Paribas launches product to fix Stock Connect blooper
Simon Osborne – The Trade
BNP Paribas has announced the launch of a broker-custodian offering to help investors and asset managers access the Shanghai-Hong Kong Stock Connect.
ECB Weighs First Step to Buying Yuan for Foreign Reserves
Stefan Riecher and Jeff Black – Bloomberg
The European Central Bank will discuss next week whether to begin laying the groundwork to add the Chinese yuan to its foreign-currency reserves, according to two people with knowledge of the matter.
Malaysia mega-merger seeks central-bank approval
Rob Hartley – Euromoney Magazine
Malaysia gears up for consolidation in its financial sector as the three-way deal moves ahead. The three-way merger of CIMB Group, RHB Capital and Malaysia Building Society (MBSB) has taken a leap forward after the firms applied to the Malaysian central bank for approval on the deal.
Lawyers in Argentine debt dispute to meet with mediator next week
Nate Raymond – Reuters
A court-appointed mediator said Friday he would hold a meeting next week between lawyers for Argentina and creditors suing the country in a longstanding dispute over defaulted debt.
ADX Releases Smart App
Abu Dhabi Securities Exchange (ADX) announced today at GITEX 2014 the launch of its first smart mobile app. The Mobile Application provides investors with enhanced services and the opportunity to experience the latest technologies ADX offers with real-time quotes, news & announcements and tools that keep investors up-to-date with market activities.