John Lothian Newsletter: Deutsche Börse buys stake in UK start-up venue GMex; SGX Proposes Remote Membership For Clearing Of US Customers’ Swaps; CFTC Releases Enforcement Division’s Annual Results

Oct 25, 2013

First Read

Name Association Game
John Lothian
What do Edward Boyle (BOX), Terrence Duffy (CME Group), Jeromee Johnson (BATS), Walt Lukken (FIA) and dozens of other people (that I can’t list here, but you can see on the JLN blog at have in common?

They are all scheduled to speak at the upcoming Futures Industry Association EXPO in Chicago from November 6 to 7.

While I can’t get you in to hear the speakers, I can get you into the EXPO Hall, where you can see the exhibits and meet with many of these very same people. My friends at ORC have this FREE pass for the exhibit hall by registering here:


CFTC to Furlough Workers After Collecting $1.7 Billion
Matthew Leising – Bloomberg
The Commodity Futures Trading Commission, the main U.S. derivatives regulator that pried $1.7 billion in fines and other penalties from the firms it regulates during the past year, is furloughing workers because it doesn’t have enough money to pay them.

***** Gary Gensler seems to be using CFTC staffers as damsels tied to the railroad track in order to get someone to save them. More likely, it is the last insult to them from his tenure.


Cyber crime threatens global financial system
Philip Stafford –
When UK regulators oversee a test of the financial sector’s ability to deal with electronic threats next month, they will be assessing the effect of a major cyber attack on banks’ security systems.

***** TT’s Harris Brumfield has been privately warning about this for years. There is no transparency from financial institutions, particularly exchanges, about any real cyber crimes occurring.


Gary Katz

Options’ Glass is Half Full: Gary Katz Says Industry is Doing Well
Gary Katz, president and CEO of the International Securities Exchange (ISE), has seen the options markets change dramatically since he co-founded the all-electronic options exchange in 2000. His exchange launched ISE Gemini in August, representing the 12th US options exchange. Katz sat down with JLN editor-in-chief Jim Kharouf to talk about where the US equity options business is today, why almost flat volumes isn’t a bad thing, and how this industry can keep growing, even in a low volatility, low interest rate environment.
Watch the video »

**Don’t miss: Born Under a Good Sign: Gary Katz Says ISE Gemini Off to Fast Start »


CME Group Announces Record Trading Volume for WTI-Brent Crude Oil Spread Option
CME Group, the world’s leading and most diverse derivatives marketplace, today announced record daily trading volume for its NYMEX WTI-Brent Crude Oil Spread Option contract (BV) yesterday, October 23 of 25,474 contracts, compared to 19,400 on July 1, 2013, the last record for this contract.

***** How many options contracts on spreads are there? Can you name the top volume contracts?


ICE Futures Europe Sets Open Interest Record in Low Sulphur Gasoil Futures
IntercontinentalExchange, a leading operator of global markets and clearing houses, today announced that ICE Futures Europe reached an open interest record of 7,008 contracts in ICE Low Sulphur Gasoil futures on October 23, 2013. The previous volume record was 6,977 contracts on July 5, 2012.

***** And can you name all the Low Sulphur contracts?


Cinnober expands in Umeå — moving to new Utopia city mall
Cinnober, a global supplier of financial technology, is now an established actor in Umeå with expansion plans on the agenda. Since the company acquired Japanese Nomura’s development company in 2012, the need for a larger office has become more prominent. A rental contract has now been signed with the Baltic Group and, during the first half of 2014, moving boxes will start being shipped to the new, centrally-located city mall, Utopia.

***** The Cinnober moving boxes will be in all different colors, just because.


A managed futures smackback to the Bloomberg takedown
Dan McCrum | FT Alphaville
Hackles were raised across the managed futures industry this month by a Bloomberg exposé of high fees and poor performance. (One we used to riff on diversification as the asset management bait and switch).

***JM: I’m guessing FT Alphaville must’ve been in kind of a hurry yesterday, or maybe this wasn’t a very interesting subject for them. Their end-of-piece analysis was fine…ly-spun cotton candy.


Avoiding ‘Black Swans’ in the Software Testing Process
Jamie Oschefski – TabbFORUM
Technology firms that don’t follow and document strict, automated testing procedures are setting up themselves and their clients for failure. Here are 3 problems with the current testing and certification process.

***** By definition you can’t avoid a Black Swan, especially in testing. If you can anticipate a problem, it is not a Black Swan.



MarketsWiki Page of the Day
Laurent Paulhac

MarketsWiki Recent Updates


Roland Bellegarde; Larry Harris; Atsushi Saito; Chitra Ramkrishna; Laurent Paulhac

Companies, Organizations and Groups

Global Markets Exchange Group International LLP; Deutsche Börse Group; Japan Exchange Group; ICAP


44,590,280 pages viewed, 7,690 articles, 166,700 edits
MarketsWiki Statistics

Lead Stories

Deutsche Börse buys stake in UK start-up venue GMex
Philip Stafford –
Deutsche Börse, Europe’s largest exchanges operator by market value, has made its first foray into hybrid fixed income trading with the purchase of a minority stake in Global Markets Exchange Group, a new UK start-up venue.

SGX Proposes Remote Membership For Clearing Of US Customers’ Swaps
Singapore Exchange (SGX) is consulting the market on a new remote membership class, which will enable futures commission merchants registered with the US Commodity Futures Trading Commission (CFTC) to clear swaps for existing and new US customers through SGX’s derivatives clearing house, SGX Derivatives Clearing.

CFTC Releases Enforcement Division’s Annual Results
The Commodity Futures Trading Commission (CFTC) today announced that it filed 82 enforcement actions in fiscal year 2013 (FY 13), bringing the total over the past three fiscal years to 283, nearly double the number of actions brought during the prior three fiscal years

HK exchange eyes reforms to catch IPOs
Paul J Davies in Hong Kong –
The head of the Hong Kong stock exchange has called for a market consultation on alternative shareholder rights after the city missed out on the $60bn-plus listing of Alibaba .

Fed Proposes a Rule to Help Big Banks Stay Liquid in Times of Crisis
During the financial crisis of 2008, the big banks fell dangerously short of cash, forcing them to take out enormous government loans to survive the tumult. To help prevent another giant cash squeeze, federal regulators on Thursday proposed a rule that requires big banks to hold a set amount of assets that they can quickly turn into cash.

An interview with Alan Greenspan
Gillian Tett –
A couple of years ago I bumped into Alan Greenspan, the former chairman of the US Federal Reserve, in the lofty surroundings of the Aspen Institute Ideas Festival. As we chatted, the sprightly octogenarian declared that he was becoming interested in social anthropology – and wanted to know what books to read.


Standardisation needed in Sef reporting conventions
Michael Watt – FX Week
One of the core principles behind swap execution facilities (Sefs) – the new breed of trading platforms that opened for business under the US Dodd-Frank Act on October 2 – was to create greater transparency in the swaps market. But just three weeks after they began trading, most Sefs already admit that a lack of consistency in reporting conventions among platforms has created a confusing and fragmented picture of activity on Sefs.

NFA Notice to Members I-13-33
Information regarding NFA’s upcoming move to new office space in New York

The Financial Conduct Authority outlines how it will regulate crowdfunding
Consumers who want to invest in small or start-up businesses via crowdfunding platforms will receive clearer information about the business in which they are investing, under proposed new rules published today by the FCA.

CP13/13 – The FCA’s regulatory approach to crowdfunding (and similar activities)
This CP is one of a series of consultation papers that will determine our approach to the regulation of consumer credit activities – this will include responsibility for regulating ‘loan-based crowdfunding’, also known as peer-to-peer lending platforms.

Accounting World, Still Resisting Sunlight
The accounting business has sometimes had an attitude of — how shall I put it? — contempt for those who would regulate it. The people who run the major firms know best, and regulators should yield to their superior judgment. Nowhere is that clearer than when regulators penalize partners of big firms.

New Zealand’s Financial Markets Authority AFA Update: Issue # 16 – Guidance Note: Discretionary Investment Management Services

Exchanges & Trading Facilities

U.S. Sens. Brown, Warren: LME Should Implement Tougher Warehouse Rules
Tatyana Shumsky –
Two U.S. senators called for the London Metal Exchange to adopt stricter rules for its warehouse network, in a letter sent to the exchange’s owner and reviewed by The Wall Street Journal.

CBOE Holdings Declares Fourth Quarter 2013 Dividend
CBOE Holdings, Inc. announced today that its Board of Directors has declared a quarterly cash dividend of $0.18 per share of common stock payable on December 20, 2013, to stockholders of record at the close of business on November 29, 2013.

NYSE MKT Issues Short Interest Report

NYSE Group Inc. Issues Short Interest Report

NASDAQ Announces Mid-Month Open Short Interest Positions In NASDAQ Stocks As Of Settlement Date October 15, 2013

Program Trading Averaged 28.0 Percent Of NYSE Volume During Oct. 14-18

Hedge Funds & Managed Futures

Asset managers post outflows after big investors grew cautious
Investors pulled billions of dollars out of several large asset managers in the third quarter, the firms said on Thursday, reflecting increasing caution among institutional clients.

K.K.R. Profit Buoyed by Rising Markets
Rising markets have proved good for Kohlberg Kravis Roberts and its holdings. The private equity firm disclosed on Thursday that its third-quarter profit rose 23 percent, to $601.8 million, from the period a year earlier as it collected bigger fees from its investments.

The challenge of achieving returns from private equity
Ayesha Javed – Financial News
Private equity has not always met the return expectations of investors, particularly during the financial crisis.

Norway’s oil fund to ramp up property holdings
Richard Milne in Oslo –
The world’s largest sovereign wealth fund is aiming to ramp up hugely its property investments as it seeks to increase its holdings of real assets.

Banks & Brokers

Ghost of Libor Lingers for UBS
Michelle Price – MoneyBeat – WSJ
For some banks, the ghost of the Libor will simply not be put to rest. Ten months after Swiss bank UBS agreed to a $1.5 billion fine for its part in the benchmark-rigging scandal, the bank was confronted this morning with a further, if comparatively minor, investigation on the matter: its stock exchange disclosure.

Bank of America to eliminate up to 4,000 mortgage jobs
Bank of America Corp said on Thursday that it was cutting up to 4,000 mortgage jobs as fewer borrowers refinance, and fewer home loans go bad.

US Equity Wholesaler Business Enters New Competitive Era
According to new research from TABB Group, “US Equity Market Structure: Retail Wholesalers,” the retail wholesaler business model is sought after by seven new entrants competing to replace the five firms that overcame and adapted to the past decade’s rapid market structure changes.

Lazard profit jumps 81 pct as asset management revenue rises
Investment bank Lazard Ltd reported an 81 percent rise in quarterly profit, driven by higher revenue from asset management and financial advisory businesses.

Barclays found liable in $300 mln Black Diamond dispute
British bank Barclays Plc breached a derivative agreement with a Black Diamond Capital Management unit and must return an estimated $297 million in collateral to the hedge fund, a divided New York state appeals court ruled on Thursday.

The UK At The Heart Of A Renewed Globalisation – Speech Given By Mark Carney, Governor Of The Bank Of England At An Event To Celebrate The 125th Anniversary Of The Financial Times, London, 24 October 2013

GFI Group Inc. Announces Third Quarter 2013 Results; Declares Quarterly Cash Dividend

Clearing & Settlement

State Street Global Exchange Joins LCH.Clearnet’s SwapClear
State Street Global Exchange announced today that it is now clearing over-the-counter interest rate swaps using LCH.Clearnet Ltd.’s, SwapClear service. The announcement comes shortly after SwapExSM, State Street’s electronic trading platform for interest rate and FX derivatives, was provisionally registered as a swap execution facility (SEF) by the CFTC in September. SwapEx began trading on October 8, 2013.

First Net Settlement Service To UK Funds Market Goes Live, Delivered By Calastone And Barclays
Smith & Williamson And Capita Asset Services Go Live On Calastone And Barclays’ System To Automate Their Funds Settlement Process

Deutsche Boerse to seek dismissal of Clearstream case in U.S.
Deutsche Boerse on Thursday said it would ask a U.S. court to dismiss claims against its Clearstream unit from relatives of a 1983 bombing of the U.S. Marine Corps barracks in Beirut.


Trade Talk: In a Real FIX
Trading Technologies
The wonders of modern technology are miraculous. Who wasn’t amazed by the news of Voyager I’s departure from the solar system into interstellar space? This feat seems incredible with current technology, let alone with propulsion, guidance and communication systems designed and built almost 40 years ago. With the scientific and engineering capabilities of the modern world, what technology problem can no longer be solved through the concerted efforts of smart engineers? Let me offer one: financial systems interoperability.

Northern Trust Launches iPad App For Wealth Management
Zarna Patel – Wall Street & Technology
Northern Trust has launched an iPad version of their wealth management site, Private Passport, which allows users to view performance, exposure and risk information.

Iberian Gas Hub Selects Trayport’s GlobalVision Exchange Trading System
Trayport, a leading provider of energy trading solutions to traders, brokers and exchanges worldwide, today announced that it has signed an agreement with Sociedad Promotora Bilbao Gas Hub, S.A. for the launch of the trading platform to be used by Iberian Gas Hub.

Thomson Reuters Launches Accelus Conflicts Compliance
Thomson Reuters, the world’s leading source of intelligent information for businesses and professionals, today announced a strategic partnership with TerraNua, a provider of conflicts management and compliance automation technology, to help compliance managers at both buy side and sell side institutions streamline employee supervision and code-of-conduct management.


SEC Charges Stryker Corporation With FCPA Violations
The Securities and Exchange Commission today charged a Michigan-based medical technology company with violating the Foreign Corrupt Practices Act (FCPA) when subsidiaries in five different countries bribed doctors, health care professionals, and other government-employed officials in order to obtain or retain business.

Environmental & Energy

Canada says falling short of emissions reduction target
Canada acknowledged on Thursday that it will miss its target for greenhouse gas emissions by a wider margin than expected unless it takes further action to offset emissions in the oil industry.

Britain calls for EU to set tougher climate goal
The European Union needs to cut greenhouse gas emissions by 50 percent from 1990 levels by 2030 to avoid the worst effects of climate change, according to a British government paper, likely to fuel debate on whether deeper cuts are affordable.

EU, U.S. carbon emissions on downward trend: Wynn
Both European Union and U.S. carbon emissions have fallen sharply over the past five years, but working out whether that will continue requires teasing out short-term and one-off factors, and pinpointing lasting efficiency gains.


China PBOC Unveils Prime Interest Rate for Commercial Bank Loans
China’s central bank Friday said it has introduced a new prime lending rate, which it said would help push forward interest rate liberalization. The new bank lending rate, officially known as the “loan prime rate,” would be the rate on loans extended to the best customers of Chinese commercial banks.

SGX and Shanghai Futures Exchange to Collaborate on Commodity Derivatives
Singapore Exchange (SGX) and the Shanghai Futures Exchange are cooperating in the development of the commodity derivatives markets in both China and Singapore.

Hong Kong Needs Debate on Share-Class Rules, Exchange’s Li Says
Fion Li – Bloomberg
Hong Kong needs a debate on how to handle “innovative companies,” including whether to allow them to have multiple share classes, said Charles Li, head of the city’s stock exchange, after initial-offering talks with Alibaba Group Holding Ltd. broke down last month.

Loeb’s Third Point Cautious About Abenomics’ ‘Third Arrow’
Kana Inagaki – MoneyBeat – WSJ
One of the big foreign hedge funds that have been bullish about Prime Minister Shinzo Abe’s visions of renewed Japanese economic growth is now raising a cautionary flag about the so-called “third arrow” of his economic program.

Mizuho CEO set to survive mob scandal, resume reform push
The head of Mizuho Financial Group looks set to survive the revelation of bank loans to mobsters, a move that could revive his recently flagging efforts to improve corporate governance at Japan’s second-largest bank by assets.

Dalian Commodity Exchange: Egg Futures Break Shell To Make China’s First Livestock Futures Product
After the trading of the egg futures on Dalian Commodity Exchange (DCE) was approved at end of September, DCE is now actively preparing for the listing, which marks the upcoming “birth” of China’s first livestock futures product.

Dalian Commodity Exchange Solicits Opinions On Fireboard And Plywood Futures Contracts And Relevant Rules

Frontier Markets

EM currency notes finding buyers even after rout
Yakob Peterseil –
Structured notes linked to emerging market (EM) currencies are finding buyers, even as the currencies remain volatile following the rout during the second and third quarters of this year. The temptation is coming largely from attractive prices in the forwards market, sources say, as well as clients’ long-term bullishness on EM economies compared to developed markets such as Europe.

Return-Hungry Investors Tap ‘Frontier’ Markets
Erin McCarthy –
Stock investors are looking for new frontiers. Faced with sluggish growth in developed markets and a recent bout of volatility in emerging markets, fund managers are heading toward riskier countries like Pakistan and Nigeria in the hope of bigger returns.

Brazil congratulates itself for auction with one bidder
Joe Leahy in São Paulo –
For most auctioneers, the appearance of only one buyer is usually seen as a disappointment. After all, what kind of auction is it when there is no bidding to drive up prices? Not so in Brazil.

MCX Weekly Market Report – Week October 18, 2013 – October 24, 2013

John Lothian Newsletter

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Past JLN Newsletters

How Ken Griffin rebuilt Citadel’s ramparts

How Ken Griffin rebuilt Citadel’s ramparts

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