First Read

Bits & Pieces
By John J. Lothian
Jim Kharouf, Doug Ashburn, Patrick Lothian and I are headed to London this weekend for next week’s MarketsWiki World of Opportunity Education Series. Afterwards Jim, Doug and I are headed to Paris to meet with Euronext then on to Frankfurt to participate in a media event at Deutsche Boerse. We will be gone a total of 10 days.

In the meantime, JLN Managing Editor Sarah Rudolph, along with Jon Matte and Jeff Bergstrom, will be managing the operations and this newsletter.

We are pleased to announce that Turquoise has become a Contributing Sponsor to the London series. The CME Group is our Premiere sponsor and will host the inaugural session in their offices at One New Change. The October 15 sessions will be head in the London Stock Exchange Group offices at 10 Paternoster Square. So far, we’ve had more than 100 people sign up for the sessions.

There is still room available for October 15th, where we have pioneers in our industry such as Hirander Misra, CEO of Global Markets Exchange Group and Charlotte Crosswell, who has led the creation and development of Nasdaq OMX NLX and Steve Grob from Fidessa, who is always looking far beyond the horizon. We also have Veronica Augustsson of Cinnober, Simon Puleston-Jones of IA Europe and Brendan Bradley of Eurex. And of course, many more.

It’s a great lineup and a great way to show young people just how diverse, interesting and broad our markets really are.

You can see the full speaker line-up, topics and sign up HERE

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Five Year Plan: DTCC’s Marisol Collazo Offers a Progress Report on Global Data Repository Issues
JohnLothianNews.com
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.

Watch the video »

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GFI in a bind with BGC proposal
Philip Stafford – Financial Times
The month-long stand-off between US interdealer brokers BGC Partners and GFI Group shows few signs of ending soon. BGC needs to make a decision about whether to go ahead with its proposed tender offer of $5.25 a share for its rival, which has been holding out.
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***** I am surprised there are not more bids.

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Inaugural Tech Table Tennis Tournament, T4Youth, Raises $50,000 for Chicago Tech Academy
T4Youth, Chicago’s only table tennis tournament for technology companies, announced today they have successfully donated $50,000 to the Chicago Tech Academy (ChiTech), including a $25,000 match from the Creating IT Futures Foundation. ChiTech is a four-year contract school dedicated to integrating technology into the high school curriculum for students in underserved neighborhoods.

Last Thursday, Killerspin House hosted 24 Chicago companies who competed in a round robin style table tennis tournament and in doing so demonstrated the Chicago technology communities’ passion for giving back. Members from ChiTech, including co-founder and director of strategic partnerships, Matt Hancock, the school director, Linnea Garrett, teachers, and students attended to accept the gift and share how CTA helps prepare its students for a future in entrepreneurship and technology.

The team from DRW Trading won first place, defeating opponent, Vibes Media, in the championship match up. Trading Technologies took third place and IMC Financial Markets took home fourth.
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***** No word on what strategy algo DRW used, but speed and accuracy were a factor.

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CME Group drops new trader scheme
William Mitting – Futures & Options World
CME Group will not renew its New Trader Incentive Programme when it expires at the end of the year, FOW has learned. The NTIP programme was introduced in 2011 and offers new traders a fee waiver on 50,000 trades if the trader executes more than 3,000 contracts in the first quarter and meets certain eligibility criteria.
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***** We don’t use words like “drops” the day after a bad day in the stock markets. Discontinued would be so much better.

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James McNulty, Chairman, NYSE Liffe – An Integrated Approach To Corporate Governance
JohnLothianNews.com

“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.

Watch the video »

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Bernanke Used Pseudonym in Emails During Crisis
Damian Paletta – WSJ
Edward Quince was arguably the most powerful person in the world in the fall of 2008, with the fate of financial markets resting on his high-stakes decisions. It turns out he didn’t actually exist. Mr. Quince was the pseudonym then-Federal Reserve Chairman Ben Bernanke used on emails when he was conferring with colleagues
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***** And Edward Quince can’t get a mortgage either.

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Donald Wilson, CEO of DRW Trading Group – Reminiscences (and Prognostications) of a Futures Operator
JohnLothianNews.com

“My focus was on combining the disciplines of trading and risk management with quantitative research and computer science.”

Donald Wilson, CEO of DRW Trading Group, gives his story of how he found his way into the financial industry, starting with his realization that he enjoyed mathematics and then discovering how to connect it with trading currency futures. Having no connections to the financial industry, Wilson was persistent in sending his resume out to firms until finally landing a job where he started by observing traders on the trading floor. Wilson also discusses DRW Trading Group, giving a brief history of the firm and its growth throughout the years, as well as giving insight on what he thinks the future holds for the financial industry. While regulatory change may seem to have created a burden on the industry, Wilson believes that there are still plenty of opportunities that can be created from new rule changes.

Watch the video »

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Lead Stories

Deutsche Boerse set for wide-ranging cooperation with SSE -sources
Reuters
German exchange operator Deutsche Boerse is set to unveil a wide-ranging cooperation with the Shanghai Stock Exchange (SSE), three sources familiar with the plans said.
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Europe delays full foreign exchange derivatives reporting
Philip Stafford – Financial Times
Europe is to postpone standard reporting of all foreign exchange derivatives trades for more than two years after national regulators were unable to agree what types of deals counted under new rules.
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CFTC calls on Europe for clearing recognition
Luke Jeffs – Futures & Options World
Commodity and Futures Exchange Commission chair Tim Massad has issued his strongest worded statement on a regulatory impasse that has emerged between the US and Europe by calling on Europe to recognise US clearing houses.
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No Winner Yet in Battle for Nasdaq Service as Thesys Lags Behind
Sam Mamudi – Bloomberg
The battle for control of a critical data service responsible for distributing stock prices for U.S. companies like Apple Inc. remains unresolved. This week’s vote by the committee that oversees the primary way prices for corporations listed on the Nasdaq Stock Market are distributed ended without agreement on which company would run the service, according to people familiar with the matter.
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High Frequency Trading Firms Talk Relevance and Need
Jon C. Ogg – 247wallst.com
Many investors have grown to hate the world of high frequency trading firms. Other investors accept them, and some even praise them. A group called the Modern Markets Initiative, or the MMI, has introduced the “Principles for Effective Modern Markets.” The MMI is an electronic markets advocacy organization and the principles are meant to be “a framework designed to guide the critical, ongoing review of (our) financial marketplace and its impact on investors.”
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A.I.G. Had No Better Offer, Bernanke Testifies in Trial
Aaron M. Kessler – Dealbook – NY Times
Ben S. Bernanke, a former chairman of the Federal Reserve, was not the most cheerful of witnesses on Thursday as he took the stand in the lawsuit over terms of the 2008 bailout of the insurance giant American International Group.
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High Frequency Trading: A Level Playing Field for Investors?: Video
Bloomberg
Former CFTC Commissioner Bart Chilton discusses the high frequency trading environment with Mark Crumpton on “Bottom Line.”
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Regulatory

US SEC needs new standards for investing in private deals -panel
Sarah N. Lynch – Reuters
U.S. regulators should revisit 1980s-era rules designed to prevent people with limited financial literacy from investing too much of their nest eggs in risky private stock deals, an advisory panel said on Thursday.
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Fed Should Delay Parts of Volcker for Some Funds, Sifma Says
Yalman Onaran – Bloomberg
Wall Street’s main lobbying group asked the Federal Reserve to extend the deadline for complying with some provisions of the Volcker Rule limiting banks’ investments in private-equity and hedge funds.
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Arab Bank: The tyranny of KYC
Euromoney Magazine
The fine handed out to Arab Bank for allegedly financing Hamas poses fundamental questions for the banking industry. Just what should a bank know about its client, and when should it know it? And who should penalize them when they fail to know what they should?
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SEC Staff Issue Risk Alert and FAQs on Customer Sales of Securities
The Securities and Exchange Commission today announced publication of a Risk Alert and FAQs to remind broker-dealers of their obligations when they engage in unregistered transactions on behalf of their customers.
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Supervisors push banks to rethink booking models
Catherine Contiguglia – Risk.net
Banks are being pressed to disperse their risk more widely, rather than centralising it in one or two hubs, says Citi’s chief risk officer for Europe
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Regulation: Sweden’s unfinished finish
Philip Moore – Euromoney Magazine
The country’s financial regulators are playing hardball on minimum regulatory capital requirements, mostly because of mortgage risk weights. Analysts argue that the Riksbank is using the wrong tool for the job and might even be damaging the economy as a result.
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‘Revolving door’ in full swing at top regulators
Michael Hegarty – Risk.net
Research by OpRisk shows the extent of the ‘revolving door’ – senior managers moving from the finance industry to the regulators and back again, prompting serious questions about regulatory independence
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Opening Statement Chairman Timothy G. Massad Before The Global Markets Advisory Committee Open Meeting
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Statement Of Commissioner Mark Wetjen Before The Global Markets Advisory Committee Open Meeting
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Opening Remarks At Investor Advisory Committee, SEC Chair Mary Jo White, Oct. 9, 2014
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Exchanges & Trading Facilities

Fuld Advises on Deal to Buy National Stock Exchange
Bradley Hope – WSJ
A little-known company called OpenMatch Holdings LLC agreed to buy the 130-year-old National Stock Exchange in a deal in that was advised by former Lehman Brothers Holdings Inc. CEO Richard Fuld, according to people familiar with the plans.
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TeraExchange Completes First Bitcoin Derivatives Trade On Regulated Exchange
TeraExchange announced today the first bitcoin derivative transaction to be executed on a regulated exchange. The initial trade was completed between digitalBTC, the world’s first bitcoin-focused company to commence trading on a major stock exchange, and a hedging counterparty.
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Susquehanna latest broker to back TOM
Futures & Options World
Susquehanna International Securities has become the latest major trading house to join The Order Machine, the trading platform locked in competition with European exchange Euronext.
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Corrigendum: IOSCO Securities Market Risk Outlook 2014-15
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Nasdaq Announces End-Of-Month Open Short Interest Positions In Nasdaq Stocks As Of Settlement Date September 30, 2014
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SIFMA Recommends Full Market Close On October 13 In The US, UK And Japan In Observance Of The Columbus And Sports Day Holidays
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Russian Corporate Eurobonds To Start Trading On Moscow Exchange
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Hedge Funds & Managed Futures

MOVES-Neuberger Berman names Sarah Butcher as vice president
Reuters
New York-based investment firm Neuberger Berman Group LLC announced its expansion in Canada with the appointment of Sarah Butcher as vice president.
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Big U.S. firms boost equity weightings in 401(k) target-date funds
Jessica Toonkel – Reuters
In changes that have raised the potential investment risks in many 401(k) retirement accounts, several major fund companies are increasing the stock allocation of their target date funds, which are used by many of those with such plans.
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Fund managers line up for high-yielding energy company subsidiaries
David Randall – Reuters
The hunt for dividend yield is pushing U.S. fund managers into an unproven new offshoot of the alternative energy industry.
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Bill Gross, in His ‘Second Life,’ Strikes a Gloomy Note
William Alden – Dealbook – NY Times
William H. Gross, the co-founder of the mutual fund giant Pimco who abruptly quit last month to join a much smaller mutual fund company, has in the past peppered his market commentary with upbeat and zany humor.
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Jupiter director Keith Marsden leaves following Rathbones deal
Andrew Pearce – Financial News
Jupiter Asset Management’s head of central client services has left the firm after seven years, following the sale of its private client business to Rathbones.
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Private Equity Investors Open to Longer-Term Deals
Simon Clark – WSJ
Canada Pension Plan Investment Board is “open to conversations” with private-equity firms about partnerships to buy and hold companies for longer than the traditional five-year investment period, said Neal Costello, a London-based manager at the C$227 billion ($203 billion) pension fund.
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Banks & Brokers

KCG’s new European chief to continue sellside push
Tim Cave – Financial News
The new European chief executive of KCG Holdings is to continue the electronic brokerage’s push to capture business from other sellside institutions under pressure to outsource elements of their trading operations.
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Citi promotes two in multi-asset group reshuffle
Tom Osborn – Risk.net
Citi has made two internal promotions within its multi-asset group – the division responsible for cross-asset structuring and product development – according to an internal memo seen by Risk.
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FCA forex probe to accuse banks of control failings
Caroline Binham, Daniel Schäfer and Martin Arnold in London – Financial Times
The UK’s financial regulator has accused six banks of system and control failures in their foreign exchange businesses as its probe over the alleged rigging of global currency markets heads towards a showdown.
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OCC Reports Second Quarter Trading Revenue Of $6.4 Billion
Insured U.S. commercial banks and savings associations reported trading revenue of $6.4 billion in the second quarter of 2014, up $0.2 billion, or 4 percent, from $6.2 billion in the first quarter, the Office of the Comptroller of the Currency (OCC) reported today in the OCC’s Quarterly Report on Bank Trading and Derivatives Activities. Trading revenue in the second quarter was $0.7 billion, or 10 percent, lower than the $7.1 billion recorded in the second quarter of 2013.
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Clearing & Settlement

Non-EU CCP approval delay could arrive too late
Jon Watkins – The Trade
Plans by European regulators to confirm in December a six-month delay to the approval process for non-EU clearing houses is causing concern around the impacts of an eleventh hour decision.
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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. After December 15, EU financial institutions that are members of non-EU clearinghouses could face huge increases in capital requirements to clear at those CCPs rendering it uneconomic for them to do so.
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Bucharest Stock Exchange: Transition To The T+2 Settlement Cycle, As Well As Migration To The New System Of Cooperation Between Trading And Post-Trading Systems, Were Successfully Completed By The Romanian Capital Market
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CME Group – Clearing: BPS/GPS ACH Credit/Debit Statement Identifiers
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Indexes & Products

Chart o’ the Day: Which ETFs are we buying this year?
Joshua M Brown – thereformedbroker.com
BlackRock’s latest monthly report on flows in the exchange traded product (ETP) space has some great information in it. The headline is that, through September, inflows for all ETPs totals $124.2 billion, putting us within reach of 2013’s full-year intake of $190.2 billion.
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Vanguard winning global ETF battle in 2014
Joe McGrath – Financial News
Vanguard had the five best-selling exchange-traded products globally in the first nine months of the year, racking up some $23.6 billion of inflows between the funds.
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Technology

Citadel’s New CIO Builds on a Strong IT Foundation
Greg MacSweeney – Wall Street & Technology
Citadel has a long history with cutting-edge technology. Joseph Squeri, the firm’s CIO, is happy to leverage its technology platform for newer projects.
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Buy Side Vets Research Providers with Standardized Questions
Ivy Schmerken – Wall Street & Technology
Buy-side concerns over insider trading led Castine Consulting and Integrity Research to launch a cloud-based platform that standardizes due diligence questionnaires posed to research providers.
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ITRS Geneos Adds Advanced Monitoring Capabilities for Bloomberg’s Real-Time Market Data Feed
ITRS Group Ltd, the leading global provider of performance monitoring and management technology, has announced today the launch of an interface that provides advanced monitoring for Bloomberg’s real-time market data feed, called B-PIPE.
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Enforcement

CFTC Orders Former CBOT Floor Broker Kent Woods to Pay $200,000 Penalty and Charges Introducing Broker Futures International LLC and Chief Operating Officer Amadeo Cerrone with Trade Practice Violations and Supervision Failures
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SEC Charges Current and Former E*TRADE Subsidiaries With Improperly Selling Penny Stocks Through Unregistered Offerings
The Securities and Exchange Commission today announced an enforcement action against current and former brokerage subsidiaries of E*TRADE Financial Corporation that failed in their gatekeeper roles and improperly engaged in unregistered sales of microcap stocks on behalf of their customers.
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ASIC: Former Hanlong Managing Director Extradited, Charged With Insider Trading
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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.
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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.
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***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”.
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***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.”

Asia-Pacific

Complexity and cost could derail stock “through train”
William Barkshire – South China Morning Post
The Shanghai-Hong Kong Stock Connect is undoubtedly a major development in terms of the opening up of mainland financial markets and Hong Kong Exchanges and Clearing (HKEx) should be congratulated on its work to deliver an exciting market innovation.
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Hong Kong’s buoyant turnover meets turbulence
Simon Osborne – The Trade
Hong Kong’s total securities market turnover in September was HK$1,593 billion compared to HK$1,516 billion in August. Equities turnover of HK$1,113 billion increased by 8.4% from August to September.
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U.K. Treasury to Sell Debut Renminbi Bond
Ben Edwards and Chiara Albanese – WSJ
The U.K. government moved a step closer on Thursday to becoming the first country other than China to issue bonds in China’s yuan.
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TOCOM Announces Settlement Price Calculation Time Period
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Tokyo Stock Exchange: The Council Of Experts Concerning The Corporate Governance Code [The Fourth Council]
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Hong Kong’s Securities And Futures Commission Obtains Disqualification Order Against Former Executive Director Of Tack Fiori International Group Limited
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Hong Kong’s Securities And Futures Commission: Market Misconduct Tribunal Bans Tiger Asia And Bill Hwang From Trading Securities In Hong Kong
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Frontier Markets

India: in depth
Euromoney Magazine
India needs a litany of reforms to unshackle its stalled capitalist project. Euromoney speaks with the country’s central bank governor Raghuram Rajan about his reformist battle and investigates the outlook for the banking system.
jlne.ws/1rkokXp

Argentina: Can Kirchner hold out?
Jonathan Gilbert – Euromoney Magazine
Argentina’s long-running and complicated default saga has enthralled emerging market bond investors. A dramatic finale is not expected any time soon.
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Malawi Stock Exchange Weekly Trading Report – 10th October, 2014
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MCX Weekly Market Report – October 3, 2014 To October 09, 2014
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