John Lothian Newsletter: Eurex FX derivatives to launch 'by summer'; ATG to file for Brazil clearing house in March; Fed taper driving up volumes in futures market, says CME

Feb 5, 2014

First Read

Fed taper driving up volumes in futures market, says CME
Neil Munshi in Chicago –
The US Federal Reserve’s decision to reduce its asset purchase programme will help boost activity in futures markets, the chairman of CME Group said as the company reported a nearly 30 per cent rise in the volume of interest rate contracts in the fourth quarter.

***** You would think snowfall futures would be upticking too. Another 6 inches of snow out my front door this morning.


CME Group profit rises; interest-rate trading volume soars
Exchange-operator CME Group Inc reported higher quarterly earnings on Tuesday as trading in its flagship interest rate contracts surged 29 percent.

***** And the new fee increases had what impact?


As New CFTC Head, Timothy Massad Would Have to Play Enforcer
Institutional Investor
For the Commodity Futures Trading Commission, change is the only option. When Gary Gensler stepped down as chairman in December after five years at the helm, the U.S. regulator was entering a new phase, but with three of its five commission seats unoccupied. President Barack Obama has nominated Department of the Treasury assistant secretary Timothy Massad to replace Gensler, one of the most aggressive U.S. financial sector regulators in recent history. If confirmed, Massad will step into an enforcement role.

***** The question I have, is Mr. Massad willing to have a dialogue with the industry about the issues it faces. I expect the worst in terms of aggressive enforcement for the foreseeable future.


Sponsored Content
NYSE Liffe US MSCI Index Futures off to a strong start in 2014
MSCI futures listed on NYSE Liffe US broke many new volume and Open Interest records during 2013, with notional average daily turnover in excess of $1.9B. The growth story just keeps getting better, with January 2014 total volume up 90% year-over year.

  • January 2014 was a new record non-roll month for the MSCI futures complex, with over 680K lots traded corresponding to an ADV of 33K. Open Interest reached over 395K lots by month end, corresponding to $22.6B notional
  • The two benchmark contracts MSCI Emerging Markets and MSCI EAFE achieved new volume and OI records, underscoring their liquidity and central role in the marketplace at a time of exceptional global equity market volatility

For more information on our leading international equity futures benchmark contracts please contact NYSE Liffe US:

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CME Group Natural Gas Futures and Options Trading Volumes Surge in January
CME Group, the world’s leading and most diverse derivatives marketplace, announced today average daily volume for its natural gas futures and options complex increased by 30 percent last month compared to January 2013. This provided strong support for the launch of natural gas basis markets on CME Direct, CME Group’s electronic trading platform for listed and OTC energy markets.

***** Is this an all CME surging day?


Fidessa explores rise of futures algos
Fidessa group plc today announced it has secured the global distribution rights to new research from TABB Group, “Algos in Futures Markets: Shifting into High Gear.” The report examines the rise of the futures algo – touring the existing landscape and highlighting trends – against the backdrop of the increasing use of automated trading strategies across derivatives markets.


More Change Ahead for European Equities: Get Set for a New Buy-Side/Sell-Side Relationship
Rebecca Healey – TabbFORUM
Nearly two-thirds of European buy-side firms anticipate research eventually will be paid for from management fees. While this ultimately could create a more efficient payment for research process, the transition will create significant execution challenges for a resource-stricken industry, driving disruptive new business models, products and services that will fundamentally challenge incumbent firms and market structures.

***** How about a better research structure without the conflicts of interest on the order execution?


Home Run: Don Davis Talks About Peer-to-Peer Investments
The US financial crisis has wreaked havoc for the past several years on the mortgage lending business, not to mention many homeowners and debtors. It also has created opportunities for innovative firms that are looking for new ways to help homeowners and make a nice return at the same time. Don Davis, president of Novus Investments sat down with Jim Kharouf, editor-in-chief of John Lothian News, to talk about how his firm is profiting from the ongoing fallout from the mortgage crisis and the rise of peer-to-peer lending, at the Emerging Manager Forum in Miami in December.

Watch the video »


CBOE VIX Options, C2 Options Exchange Establish New Single-Day Volume Records
CBOE Holdings, Inc. today reported two new single-day volume records: Options on the CBOE Volatility Index established an all-time, single-day volume record of an estimated 2,367,764 contracts traded. Today’s record volume surpassed the previous record of 1,797,052 contracts traded on October 8, 2013. C2 Options Exchange set an estimated daily record of 662,195 contracts traded, surpassing the previous record of 623,314 contracts traded on April 19, 2013.

***** How many times do we have to run this headline?


Coffee connoisseurs boost high-end market
Emiko Terazono and Seb Morton-Clark –
Asa Gervich, a barista at the Stumptown Coffee Annex, grinds coffee beans in Portland, Oregon, on Saturday, Aug. 18, 2007. Now that Starbucks Corp., with more than 13,000 stores around the world, has popularized coffee as a gourmet beverage, coffee fanatics are taking their obsession to a new level with an attentiveness rivaling that of the wine industry©Bloomberg
After three consecutive years of declines, 2014 has brought some much needed relief to coffee growers in Latin America and Africa.

***** We have determined that with as much coffee JLN Managing Editor Sarah Rudolph drinks, she is now part Colombian.


CFA China | Shanghai CE Seminar: Options for Enhanced Yield and Risk-adjusted Returns in Times of Low Interest Rates
As investors struggle to cope with volatility and low interest rates, there is increased interest in tools that can be used to achieve the goals of managing portfolio risk, increasing income, and enhancing long-term risk-adjusted returns.

***** Sounds like a problem for everyone.


Open for Business: Tech Drives the Transition to SEFs

The Swap Execution Facility was given life by the Dodd-Frank Act.

After three years of meetings, rule proposals comments, and more meetings, the final SEF rules were published by the CFTC in mid-2013 and trading has commenced on 18 registered SEFs. John Lothian News attended SEFCON IV and interviewed a dozen of the leading SEF operators, regulators and other participants to bring you this three part series on SEF regulation, the changing market structure and the new technology required to make it all happen. Part three of the series explores the importance of technology in the rapidly changing SEF landscape. Mandatory execution on SEFs, along with clearing and data mandates, have necessitated a technology transformation in financial markets. While most of the pieces are in place, several questions remain.

Watch the video »



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Lead Stories

Eurex FX derivatives to launch ‘by summer’
Robert Mackenzie Smith – FX Week
Eurex is hoping to launch foreign exchange futures and options during the first half of 2014, according to a source familiar with the situation, as it continues to finalise its on-boarding process with its third-party settlement provider.

LSE hires Icap’s Hannah Gurga as new head of regulatory strategy
Anish Puaar – Financial News
The London Stock Exchange has hired a former Icap and UK Treasury official to lead its regulatory strategy team, Financial News has learned.

ATG to file for Brazil clearing house in March
Anna Irrera – Financial News
Americas Trading Group expects to file its application to operate a Brazilian clearing house by March, marking a major step in bringing competition to the country’s trading landscape.

FCA Sharpens Focus on Commodity Storage Reforms to Prevent Warehouse Hoarding
The UK’s Financial Conduct Authority has revealed that it has sharpened its focus over the storage of commodities, after a range of banks and financial firms were criticised by regulators, for controlling the flow of supply through sluggish deliveries from the warehouses which they also owned.

Morgan Stanley Reaches $1.25 Billion Mortgage Settlement
Morgan Stanley has agreed to pay $1.25 billion to the Federal Housing Finance Agency to resolve claims that it sold shoddy mortgage securities to Fannie Mae and Freddie Mac.

Regulator Compares Currency Investigation to Libor Case
Expect more bad news from banks about accusations of manipulation in the huge foreign exchange market. Allegations that traders colluded to rig prices in the foreign exchange market “are every bit as bad as they have been with Libor,” Martin Wheatley, chief executive of the Financial Conduct Authority, said at a parliamentary hearing on Tuesday, referring to the investigation into the manipulation of the London interbank offered rate.

Exclusive: Deutsche fires three New York forex traders – source
Deutsche Bank AG has fired three New York-based currency traders, in the latest sign that a probe over alleged manipulation of foreign exchange markets is gathering steam, according to a source familiar with the situation.

EC bank reforms would leave lenders unable to hedge
Matt Cameron, Lukas Becker –
Banks split up by a new European proposal would not be able to hedge common exposures such as mortgage prepayment risk because of limits placed on the derivatives they can use, dealers are warning.


CFTC Acting Chairman Wetjen To Testify Before The U.S. House Committee On Financial Services

Protecting The Financial Future Of Seniors And Retirees – SEC Commissioner Luis A. Aguilar, The American Retirement Initiative’s Winter 2014 Summit, Washington, DC

Federal Reserve Governor Daniel K. Tarullo: Volcker Rule – Before The Committee On Financial Services, U.S. House Of Representatives, Washington, D.C.

ASIC Statement On Senate Inquiry

ASIC Chairman Greg Medcraft will testify in person at the Senate Inquiry into ASIC. Contrary to inferences in the media today, this has always been the case.
FINRA Foundation Issues Five Dos and Don’ts That Can Help You Achieve Greater Financial Security

Exchanges & Trading Facilities

ICE Reports January 2014 Volumes
ICE’s January average daily volume (ADV) for global derivatives was 10.4 million contracts, a decrease of 8% compared to January 2013.

BOX Options Exchange Price Improvement Activity For January
Overall average daily trading volume on BOX in the month of January was 311,750 contracts, an 11% increase compared to the previous month.

NASDAQ OMX Reports Record Fourth Quarter 2013 Results
Fourth quarter 2013 net revenues were a record $520 million, up 23% from the prior year quarter. On an organic basis, assuming constant currency and excluding acquisitions, net revenues increased 5% year-over-year.

SGX AsiaClear volumes grow in January
Singapore Exchange (SGX) today said securities and derivatives trading volumes declined while its clearing activities grew in January.

ASX Group Monthly Activity Report – January 2014
The value of ASX-listed stocks, as measured by the All Ordinaries Index, fell 2.8% in January 2014. Declines were also observed in other major markets, including Japan down 8.5%, Hong Kong down 5.5%, Singapore down 4.4%, the US down 3.6%, the UK down 3.5%, and Germany down 2.6%.

ASX Compliance Monthly Activity Report – January 2014

TMX Group Consolidated Trading Statistics – January 2014: Toronto Stock Exchange, TSX Venture Exchange, TMX Select, Alpha, Montreal Exchange, NGX

Oslo Børs: Derivatives Trading Almost Doubles
January 2014 was the busiest January month for the derivatives market on Oslo Børs since 2008, measured in number of contracts. On average, 72,708 contracts were traded daily, as compared to a daily average of 39,249 in January 2013. December 2013 was also a busy month in the derivatives market, as the chart below shows.

January Turnover At Boerse Stuttgart Reaches EUR 9.7 Billion
2014 Kicks Off With Significant Rise In Trading Activity – All Asset Classes Post Strong Gains – Record Month For Equities Trading

Tokyo Commodity Exchange January 2014 Volume Averaged 81,932 Contracts Per Day, Up 4.3% Month-On-Month

Nasdaq Opens Test Centers Ahead of March Datafeeds Migration
Max Bowie – WatersTechnology
Nasdaq OMX has made test environments available in its Carteret, NJ and Ashburn, VA datacenters for clients to test live data in new versions of its market data feeds that the exchange will roll out next month.

“Eurex Mobile App” Offers Comprehensive Data And Information – Mobile Application For iOS And Android Available Free Of Charge As Of Now
Effective immediately, Eurex, a Deutsche Börse Group company, is offering all members and interested parties its “Eurex Mobile App”, downloadable on its website and in the Apple and Google online stores. This new application gives investors and interested people an efficient tool to stay up to date at all times on Eurex Exchange derivatives and current market developments via their smartphones. The app is available in English as well as Chinese.

Hedge Funds & Managed Futures

Ackman’s Pershing Square L.P. Fund Rose 3.8% Last Month
Rob Copeland – MoneyBeat – WSJ
While Bill Ackman’s short bet against Herbalife Ltd. may get most of the attention, the hedge-fund manager scored big last month thanks in part to his investment in alcoholic-beverage maker Beam Inc.

Bill Gross Bond Fund Posted $3.5 Billion January Outflow
Min Zeng – MoneyBeat – WSJ
Investors pulled $3.5 billion net cash out of Bill Gross’s Total Return Fund at Pacific Investment Management Co. in January, the smallest amount since May, when the outflow started.

Market for Patents Was Softer in 2013, Firms Say
Technology companies have for years been stockpiling patents as an aggressive defense against lawsuits. But patent prices and transfers were down significantly in 2013, according to data from a patent brokerage company and an intellectual property valuation and investment firm.

Swiss Investment Fund Acron Wants to Expand Footprint in Brazil
Swiss real-estate investment firm Acron AG is looking to expand in Brazil having landed its first deal with the acquisition of the landmark Hotel Gloria in Rio de Janeiro.

Banks & Brokers

ICAP hit by rule changes to Swap market
Philip Stafford –
ICAP, the world’s largest interdealer broker, cautioned that trading in the final quarter had been slower than expected.

Pimp my IPO: equity deals get souped-up treatment
Richard Partington and Matt Turner – Financial News
An eye-catching initial public offering can grab all the headlines, but it’s the tools put to work in the background that are getting many capital markets bankers excited.

US Brokerage Biz Keeps UBS Happy, Bob McCann Gives The Swiss A Billion Dollar Year
Something big happened at UBS Wealth Management Americas last year–billion dollar big. No, it’s not another legal fine. The Swiss bank’s US brokerage business, headed up by former Merrill star Bob McCann, hit its $1 billion dollar annual pretax operating profit goal.

JPMorgan to pay $1.45 mln to settle sex-based harassment suit
JPMorgan Chase & Co will pay $1.45 million to settle a government lawsuit that charged the company maintained a sexually hostile environment for women in an Ohio mortgage center more than four years ago.

A Loeb Hopes to Bank on His Name
One recent morning, Jamie Kempner sent an email to 5,998 rich and powerful friends to tell them he was quitting his job on Wall Street to join the family firm. The note was more than a courtesy: Mr. Kempner also wants their business.

Bank Of America Merrill Lynch Appoints Koris International As Investment Advisor

Clearing & Settlement

CME Group Margins: Performance Bond Requirements: Natural Gas Outrights- Effective Wednesday, February 5, 2014

Indexes & Products

May You Live in Volatile Times
David Reilly – MoneyBeat – WSJ
Ah, volatility, you’re back. Equity markets were notably serene in 2013. Now, as fears about emerging markets and tapering roil stocks, the Chicago Board Options Exchange Volatility Index, known as the VIX, closed above 20 on Monday.

New Index Fixes The ‘Broken Link’ Between FTSE 100 Director Performance Pay And Company Performance


TradeMonster Launches Live Scanner on Mobile
Becca Lipman – Wall Street & Technology
TradeMonster announced today its custom options market scanner tool is now available on mobile platforms.

Bank Of America’s ‘Why Stop There?’ Cloud Strategy
Chris Murphy – Wall Street & Technology
Why do we need different boxes for servers, storage, and network switches in the datacenter? They’re all just computers, says David Reilly, who is the global technology infrastructure executive for Bank of America. Why can’t companies fill their datacenters with white-box computers stuffed with x86 chips and a ton of memory, controlled by software that can make that box an in-memory storage device today, a software-defined switch tomorrow, and a server next week?

Gaia Adds Numerix Analytics for EMIR Requirements
Jake Thomases – WatersTechnology
Paris-based Gaia Transparence, an open source software provider, has embedded analytics from Numerix, a provider of analytics for derivatives valuations, within its Position Builder solution for collateral management, margin requirements and credit value adjustment (CVA).

Instinet Launches MAKE Algorithm for Institutional Traders
Ivy Schmerken – Wall Street & Technology
The new algorithm provides buy-side traders with the same sophisticated liquidity tactics used by market makers, while reducing exposure to signaling and other predatory techniques.

Gaia Transparence and Numerix Partner to Create Best of Breed Solution for EMIR Collateral, Margin and Trade Repository Requirements


SEC Announces Fraud Charges Against Two Wall Street Traders Involved in Parking Scheme
The Securities and Exchange Commission today announced charges against two Wall Street traders involved in a fraudulent “parking” scheme in which one temporarily placed securities in the other’s trading book to avoid penalties that would affect his year-end bonus.

Statement On Life Partners Verdict, Andrew Ceresney, Director, SEC Division Of Enforcement

[AMF Canada] Matter of Henri Lemieux and Financière Hélios Capital – Service of hearing notice

[AMF Canada] Use of privileged information – Further proceeding against Patrice Live

[AMF Canada] Illegal practice in insurance of persons – AMF lays charges against Robert Lemieux

[AMF Canada] COOP Harmonie Plus – Fines against Nicholas Viau

Investor Alert: BCSC issues warning about G.W. Trust and Transfer and possible “Recovery Room” scheme directed at Morgan Dragon Development Corp. investors


Big Four’s Chinese Affiliates May Mull Workarounds
Kathy Chu and Michael Rapoport – MoneyBeat – WSJ
A judge’s ruling against the Big Four accounting firms’ China affiliates is sparking a debate about whether some of their business could move to Hong Kong.

Thai Bourse Gears Up Domestic Roadshows To Expand Investor Base

HKFE Announces Revised Margins For China Life, Esprit Holdings And Ping An Futures

Tokyo Financial Exchange: Further Strengthening Of Revitalization Of Back-Month Delivery Contracts n Three-month Euroyen Futures

Frontier Markets

Analysis: Emerging markets buffeted by bipolar world
Ailing emerging markets are caught between a rock and a hard place – Washington and Beijing to be more precise.

Lazard expands Middle East asset management with ex-ING Dubai team
Lazard Asset Management (LAM) said it would expand its Middle East operations by hiring the former regional asset management team of ING Group NV, which resigned from the Dutch firm in Dubai earlier this week.

A Minty fresh concept, but beware catchy terminology
Financial News
Eagles, civets, tigers – in the early 20th century this could have been a respectable menagerie. Now, appropriated by economists 100 years on, they represent just a handful from the lexicon increasingly used to express big predictions on the global economy.

Trading On Dubai’s Main Stock Exchange Suspended
Gulf Business
Trading on Dubai Financial Market (DFM) was suspended because of a system malfunction

Mohamed Alabbar Rings Opening Bell To Mark Listing Of Emaar’s 2016 Sukuk On NASDAQ Dubai

Egyptian Exchange Management Defines An Initial Idea Of Stock Split Standards For Listed Companies To Be Discussed In Its Coming Board Meeting

Egyptian Exchange Management: Stock Split Of Shares Par Value Has No Influence On Share Holders Rights

Lahore Stock Exchange Has Launched An Online Trading Competition

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CME to permanently close most trading pits

CME to permanently close most trading pits

First Read $40,626/$300,000 (13.5%) Anonymous ++++ Hits & Takes John Lothian & JLN Staff Without fanfare or amplification from its executives, the CME Group shut the books on most -- but not all -- of its floor trading history Tuesday afternoon with the...

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