Bits and Pieces
The latest news from John Lothian is that he has been on his feet and walking around a bit after his back operation on Tuesday. I’m guessing that means they will let him out of the hospital in a few days, after which he will go to a rehab center. Very good news.
Also, we received a dispatch from Jim Kharouf, who is at the annual OIC conference in Austin. He caught up with Jeromee Johnson of BATS and asked him about the controversy over Michael Lewis’ book “Flash Boys,” and Lewis’ accusations against the exchange (below).
BATS takes a swing at Flash Boys and options growth
Jim Kharouf – John Lothian News (JLN)
BATS Global Markets has been in the spotlight lately, which has many at the exchange wondering why it had to be the one that was closest to Brad Katsuyama’s trading terminal in New York.
In the wake of the thunderstorm caused by Michael Lewis’ book “Flash Boys,” and accusations that named BATS as the exchange that was part of the “rigged stock market” claim, Jeromee Johnson, BATS’ vice president, head of BATS Options market, says such charges are flat out wrong. Lewis tells the story of Katsuyama, now president and CEO of IEX exchange, how his cash equity orders would route first to BATS and then to other stock markets while he was at Royal Bank of Canada. Such orders would often tip off high frequency traders of a larger order, at which point they would beat Katsuyama’s orders to other stock exchanges and then sell them back to him at higher prices.
That caused Katsuyama and others to call foul, blaming stock exchanges and HFT firms, a charge that Johnson says is simply false.
(Read the rest of the article at http://jlne.ws/1iBbDZR )
London Metal Exchange yet to blossom under HKEx ownership
Josh Noble in Hong Kong and Xan Rice in London – FT.com
Charles Li, the charismatic chief executive of Hong Kong Exchanges & Clearing, is a fan of colourful metaphors. When asked why the purchase of the London Metal Exchange had yet to boost the company’s bottom line in 2013, Mr Li told analysts not to rush a pregnancy.
****SR: The LME’s warehousing problems continue, and things move slowly in China, but Hong Kong just launched its first futures contracts for zinc, copper, and aluminum.
Anova’s Persico uses millimeter waves to speed up high-speed trading
Lynne Marek – Crain’s Chicago Business
Glass, it turns out, slows the speed of light. It’s not an important lag if, say, you’re binging on “House of Cards.” But it is a very big deal in the world of high-speed financial trading, where a delay of a millisecond can be too long. Mike Persico, founder and CEO of Chicago-based Anova Technologies LLC, works in this world.
***SR: Uh oh! He “makes high speed trading even speedier”?? Michael Lewis is not going to have anything good to say about this.
Fidelity, Scottrade deny clients anti-HFT choice
Eamon Javers – CNBC
The popular brokerage firms Fidelity Investments and Scottrade have sent letters to clients declining to route stock trades through IEX, the new trading platform featured in Michael Lewis’ book “Flash Boys” as the antidote to high-speed trading, according to documents reviewed by CNBC.
***SR: The Flash Boys fallout is not going away anytime soon.
***DA: But at least we are beginning to expose what is arguably the real problem. Hint – it’s not HFT so much as preferential order routing.
Exclusive: Faulty technology triggered CME trading outage – chairman
The worst-ever trading outage on the world’s most important agricultural markets was triggered when sophisticated technology tripped over a trading halt in a single market, the executive chairman of exchange operator CME Group Inc told Reuters. The April 8 outage stopped electronic trading in 31 agricultural markets that influence global prices for food staples such as wheat, corn and pork, and sent a flood of traders into CME’s normally deserted open-outcry futures pits to execute transactions.
***SR: Remember back before we had technology? Those were the days.
Robin Hood tax has roots in 17th century
Alex Barker in Brussels – FT.com
For all the political fuss over the eurozone’s planned financial transaction tax, it is likely to resemble a levy Britain has imposed for more than 300 years: stamp duty.
OIC, Saxo Bank Sign Content Sharing Agreement And Announce Options Education Roadshow
The Options Industry Council (OIC) and Saxo Bank, the online trading and investment specialist, have signed a content sharing agreement making OIC’s renowned equity options educational materials available to Saxo Bank’s global client base.
Incight, LLC Launches Financial Video Aggregator to Search, Collect and Share the Latest Market News
Incight is next generation technology making valuable market information from multitudes of respected content sources mobile for view anytime. Financial videos are plotted on interactive price charts and heat maps to show dynamic market activity.
MarketsWiki Page of the Day
MarketsWiki Recent Updates
Companies, Organizations and Groups
48,631,484 pages viewed, 7,944 articles, 182,369 edits
Euronext launches world’s first index based Exchange for Physicals
Euronext, a wholly owned subsidiary of IntercontinentalExchange Group, today announced that it will be the world’s first regulated market to launch a complete centrally cleared solution to facilitate the trading of Exchange for Physicals (EFP) on index futures. The service will be available in a first instance on CAC 40 and AEX-Index Futures and is expected to be fully operational in the first quarter 2015.
Singapore exchange struggles to grow as rivals thrive
A dearth of big-name share listings of overseas firms and a multibillion-dollar penny-stock crash have hampered the growth ambitions of Singapore’s stock exchange as Asian rivals flourish, analysts say.
Fixnetix buys back 25% stake from ICE
Philip Stafford – FT.com
IntercontinentalExchange’s plans to dismantle much of NYSE Euronext’s IT services business has begun after Fixnetix, a UK trading technology company, bought back the 25 per cent stake it sold to NYSE two years ago.
CME Group Inc. Reports Solid First-Quarter 2014 Financial Results
CME Group Inc. today reported revenues of $777 million and operating income of $454 million for the first quarter of 2014. Net income attributable to CME Group was $267 million and diluted earnings per share were $0.79. Excluding the items noted in the reconciliation, adjusted earnings per share would have been $0.831.
MCX CEO Manoj Vaish resigns
Manoj Vaish, who assumed charge as the managing director (MD) and chief executive officer (CEO) of Multi Commodity Exchange of India (MCX) on 1 February, has resigned.
Here Are the European Banks Slapped With Fines by U.S. Regulators
MoneyBeat – WSJ
The list of the continent’s lenders that have been caught up in similar investigations by U.S. regulatory agencies in recent years is long and not particularly distinguished.
In Bitcoin Debate, Larry Summers Sides with the History of Change
Michael J. Casey – MoneyBeat – WSJ
Larry Summers has a warning for bitcoin’s naysayers: ignore change at your own peril. The former Treasury Secretary isn’t fully endorsing digital currencies, but he has taken a hard look at them and sees huge potential to strip out costs from an inefficient, cumbersome global financial system.
Intrade Co-Founder Opens Fantasy Sports Site
WILLIAM ALDEN – NYTimes.com
The online betting and prediction market Intrade shut down last year after discovering financial problems and running afoul of regulators. But now, a co-founder of Intrade, Ron Bernstein, is hoping he will have better luck in a different arena: fantasy sports.
BOE’s Haldane Offers Few Clues on Monetary Policy
Jason Douglas – MoneyBeat – WSJ
Andrew Haldane, the Bank of England’s big thinker on financial stability, takes up a new role setting interest rates as the central bank’s chief economist in June but his views on monetary policy are largely unknown.
Tough Judge Richard Sullivan’s Rulings Are in the Spotlight
Of the 50 federal judges in Manhattan, few seem to strike more fear into defense attorneys and their Wall Street clients than U.S. District Judge Richard Sullivan.
A.G. Schneiderman Announces Unprecedented Steps By News Distribution Firm To Curb Preferential Access For High-Frequency Traders
Attorney General Eric T. Schneiderman today announced that PR Newswire, a leading news distribution and reporting firm, has agreed to require its direct data feed recipients to certify that they will not engage in high-frequency trading when using direct feeds of the information PR Newswire distributes on behalf of its clients.
CFTC urged to ‘slow down’ on packaged trades
Kris Devasabai – Risk.net
The Commodity Futures Trading Commission (CFTC) should “slow down” in its efforts to bring packaged trades consisting of multiple legs onto swap execution facilities (Sefs) according to Lisa Cavallari, director of fixed-income derivatives trading at Russell Investments.
Why Securities Data is Master in The Race to FATCA Compliance
Steve Engdahl – Wall Street & Technology
In a matter of weeks, the deadline for FATCA compliance will pass. The July 1st finishing line, which once seemed a distant prospect, is fast approaching, and most banks are gearing up for their final sprint. While our last blog looked into how banks might drive revenue opportunities from FATCA in the future, the immediate concern for data managers is the practical steps they should take right now to be ready.
New Zealand’s Financial Markets Authority: Cultural Shift In Financial Services Underway As Once-In-A-Generation Financial Markets Conduct Act Takes Effect
Presentation By Rob Everett To The Australian And New Zealand Ombudsman Conference 2014
AMF Index – Financial awareness up slightly among Quebeckers
Frustration Rises Over Crowdfunding Rules
Unhappy with results so far of the two-year-old Jumpstart Our Business Startups Act, some Republican lawmakers are pushing for changes that could weaken investor protections. They argue that entrepreneurs find some of its provisions too burdensome.
Financial Stability Oversight Council To Meet May 7
On Wednesday, May 7, Secretary Jacob J. Lew will preside over an open session of the Financial Stability Oversight Council. The Council will vote on its annual report, which will describe the activities of the Council, outline significant financial market and regulatory developments, analyze potential emerging threats to financial stability, and make relevant recommendations. In addition, the Council will consider adopting enhancements to its existing transparency policy and bylaws for its Deputies Committee.
Exchanges & Trading Facilities
ICE to extend gasoil futures beyond Jan 2015, change spec
The InterContinentalExchange confirmed it will extend its gasoil futures contract beyond January 2015 and will switch its specification to low sulphur, starting in February.
LME Welcomes Technology Team In-House
The London Metal Exchange (LME) today welcomes its previously outsourced technology team in-house. The insourcing of IT is an indication of the function’s increasing importance to the LME and the integral part it will play in the delivery of strategic initiatives, including the launch of LME Clear in September 2014.
MGEX April 2014 Top Volume Day In The Record Books
MGEX, a Designated Contract Market (DCM) and Derivatives Clearing Organization (DCO), reports yesterday’s trade volume placing in the record books. Total volume came in at 15,898 contracts traded, number 23 on the daily Exchange volume records. Total electronic volume came in at 14,843 contracts traded, number 12 on the daily electronic volume records.
ICE Unit Managing Benchmarks Named Swap-Rate Standard to Libor
Nandini Sukumar – Businessweek
A unit of IntercontinentalExchange Group Inc. won the right to administer ISDAfix, a benchmark used to set rates in the $426-trillion swaps market, as regulators seek to reform the gauge and investigate whether banks manipulated it.
[JEG] Trading Overview in April 2014
Japan Exchange Group announced a trading overview (preliminary estimates) in April 2014.
NZX Q1 2014 Revenues And Operating Metrics
NYSE margin debt falls in March from Feb record high
Vicente Olmos, New Chairman Of The Valencia Stock Exchange Replacing Angel Torre
Manuel Ardanza, New CEO Of The Bilbao Stock Exchange
Arantza Tellería, New Head Of Internal Audit Replacing Vicente Olmos
Financial Results Of The WSE Group In Q1 2014 – Robust Start To The Year For Warsaw Stock Exchange
Direct Edge Trading Notice #14-16: EDGA and EDGX Fee Schedule Changes Effective May 1, 2014
BME To Distribute A Supplementary Dividend To Its Shareholders, 8% Higher Than Last Year´S – Ordinary General Shareholders’ Meeting Of BME
Hedge Funds & Managed Futures
Profit at Carlyle Falls 18% as Real Estate Investments Underperform
Private equity may be a booming business, but that was not enough to lift the Carlyle Group’s earnings in the first quarter.
Bill Gross: Expect Lower ‘Neutral’ Rates in the New Normal
Paul Vigna – MoneyBeat – WSJ
In the new normal, a world of excessive leverage and slower growth, a “neutral” interest-rate policy will by necessity produce lower rates than in previous business cycles, Pimco’s Bill Gross wrote in his monthly commentary, and understanding that is the key for investors of all asset classes.
Towers Watson’s Ford calls for less stock-picking and more strategy
Mark Cobley – Financial News
Chris Ford, who became global head of investments at Towers Watson in February, after leading the firm’s London-based European business for three years, is a self-confessed tech geek. This doesn’t just mean handing out iPads for delegates at Towers Watson events. It also feeds into the strategic advice his firm is giving to its clients: pension funds and other institutions that control more than $2 trillion between them.
Banks & Brokers
Credit Suisse executives clashed on tax probe
Gina Chon in Washington and Kara Scannell in New York – FT.com
The former head of Credit Suisse’s private bank for the Americas told government investigators he had clashed with superiors about the bank’s disclosures to a tax evasion probe, said people with direct knowledge of the situation.
Trading divisions struggle to slim
Tim Cave – Financial News
As any dieter will tell you, the multitude of ways to lose weight have one thing in common: they are easy to start but a lot harder to stick to. Investment banks face a similar predicament.
What Bank of America’s Accounting Mistake Can Teach the Market
MAYRA RODRIGUEZ VALLADARES – NYTimes.com
The fact that Bank of America neglected to correctly account for certain structured notes that it inherited when it took over Merrill Lynch should not have surprised the market. And it raises the question of what other bad news may be coming from the big banks.
Morgan Stanley Earns a ‘D’ From Glass, Lewis on Executive Pay Practices
MoneyBeat – WSJ
Morgan Stanley drew another harsh report card from one of the major proxy-advisory firms, which handed the investment bank a “D” grade for linking its executive-pay practices to its performance and recommended shareholders vote against the re-election of a board member.
Raymond James hires two advisers from Wells Fargo
Raymond James Financial Inc’s brokerage unit said on Wednesday that it hired two advisers from Wells Fargo & Co to open a new Santa Barbara office of Raymond James & Associates.
Barclays poaches technology chief from Australia’s CBA
Britain’s Barclays Plc said it had poached a senior banker from Commonwealth Bank of Australia (CBA) to fill its vacant post to head operations and technology.
JP Morgan scratches seven-year itch with Heritage deal
Nick Kostov – Financial News
Almost seven years after being mandated by Heritage Oil to secure a “substantial” corporate transaction, JP Morgan is on the verge of selling the company.
Lloyds Shows Why Boring is Beautiful
Margot Patrick – MoneyBeat – WSJ
The U.K. government could be forgiven for feeling happy that at least one of its charges in the financial sector is showing fresh signs of health.
BGC Partners Seeks To Expand Its Latin American Presence With Agreement To Acquire Premier Mexican Inter-Dealer Broker Remate Lince, S.A.P.I. de C.V.
Clearing & Settlement
End-users say non-cleared margin rules will hit hedging
Peter Madigan – Risk.net
Bilateral margin rules for non-cleared over-the-counter derivatives are designed “to make the world safe for banks, but not safe from banks,” according to Bruce Fox, the head of derivatives at US insurer Genworth Financial.
DTCC says phased Asia trade reporting process smoother than in Europe
Viren Vaghela – Risk.net
Seventy firms are reporting their over-the-counter derivatives trades in Singapore and Australia one month after the second wave of reporting kicked in but firms are still facing difficulties maintaining compliance with local secrecy provisions.
Clearing costs creep up for clients
Joe Rennison – Risk.net
Futures commission merchants (FCMs) are raising the cost of clearing and accompanying services such as collateral transformation as the business struggles to make money, some clients claimed at Risk’s OTC Derivatives Clearing Summit in New York yesterday.
Indexes & Products
Risk In Focus: A Round Table
isk management received a renewed wave of attention after the 2008-2009 financial crisis, and as the markets continue to sail through uncharted waters, it remains a hot topic. The Journal of Indexes chatted with various experts on the issue, touching on subjects like volatility, diversification and tail risk.
Credit Suisse’s Greg King joins ETF firm Global X
Credit Suisse AG’s former head of exchange-traded products, Greg King, has joined New York-based ETF sponsor Global X Management Company LLC to head product development and strategic ventures, the company said on Thursday.
S&P Dow Jones Indices Market Attributes: Europe Index Dashboard
First Derivatives launches Delta Tools for Calypso
First Derivatives, a leading provider of software and consulting services to the capital markets industry, announces the launch of Delta Tools for Calypso for managing and controlling the industry leading Calypso platform used widely by financial institutions for cross asset trading, risk and processing.
Markit Names Eisen to Lead Collaboration Services
Faye Kilburn – Waters Technology
Markit has appointed Andrew Eisen head of Markit Collaboration Services, the vendor’s open messaging network initiative that allows financial professionals to communicate and share information across any messaging platform.
Thomson Reuters profit beats on cost-cutting
Thomson Reuters Corp reported higher-than- expected quarterly earnings on Wednesday, bolstered by cost-cutting, and its shares rose about 2 percent.
SEC Charges Utah-Based Retirement Plan Administrator With Defrauding Investors
The Securities and Exchange Commission today announced fraud charges and an asset freeze against a Utah-based retirement plan administrator who defrauded investors in self-directed individual retirement accounts (IRAs), causing them to lose millions of dollars of savings.
U.K. Bans Former UBS Trader
Ed Ballard – WSJ.com
The U.K.’s financial regulator has banned former UBS AG trader John Hughes for failings related to the $2.3 billion unauthorized trading losses racked up by Kweku Adoboli. Mr. Hughes has been banned from performing any function in any regulated activity in financial services, the Financial Conduct Authority said Thursday.
Wyly calls ex-lawyer’s SEC settlement ‘deal with the devil’
Texas tycoon Samuel Wyly said Wednesday his former lawyer cut a “deal with the devil” in agreeing to testify against him in the U.S. Securities and Exchange Commission’s fraud trial accusing him of concealing stock trades in offshore trusts.
Environmental & Energy
Alstom studies GE offer, leaves door ajar for Siemens
James Regan and Benjamin Mallet, Reuters
Cash-strapped French engineering group Alstom said on Wednesday it would study a $16.9 billion offer from General Electric for its energy arm but left the door open for a rival bid from Germany’s Siemens.
***LB: Also in this story “GE remained ahead in the race to secure assets which would boost its position in producing steam turbines for power stations and technology for electricity grids.”
ANALYSIS-France caught between nuclear cliff and investment wall
Michel Rose, Reuters
France must decide in the next few years whether it wants to continue its nuclear-driven energy policy at a cost of up to 300 billion euros ($415 billion) or if it wants to embark on an equally costly route towards using other fuels.
***LB: Also in this story “That may leave France with no other choice than hastily building coal or gas-fired plants to back up the expansion of renewable power, supplies of which can fluctuate depending on weather conditions and time of day.”
Will sanctions bite?
Mike Peacock , Reuters
Financial markets may view the latest sanctions against Russia as feeble, but the reaction from Moscow – Vladimir Putin threatened to reconsider Western participation in energy deals and his foreign minister, Sergei Lavrov, said they were the work of weak politicians – suggests otherwise.
Tokyo Commodity Exchange: Final Settlement Price Of Crude Oil for April 2014 Contract
Hong Kong’s Securities And Futures Commission: Futures Trader Convicted Of False Trading
Stressed investors seek periphery debt havens
Ralph Atkins in London – FT.com
Have crisis-hit eurozone economies become havens for stressed investors? Even a few months ago, the idea would have seemed ridiculous – to many it probably still does. Yet a rally since late last year in debt markets of countries such as Spain, Italy and Portugal has prompted suspicions that the region is benefiting from a global shift in sentiment.
MCX discontinues gold, silver contracts expiring 2015
Leading commodity bourse MCX on Wednesday said it discontinued six futures trading contracts in gold and silver expiring in 2015, effective Tuesday, due to procedural problems.
Regulation greatest barrier to African derivatives exchanges
Luke Clancy – Risk.net
Initiatives to establish derivatives exchanges are underway in several African countries including in Kenya, Nigeria and Zambia but hurdles include technology, regulatory and knowledge gaps
Malayan Banking Berhad To List Program On TOKYO PRO-BOND Market
With Free Web Courses, Wharton Seeks Edge in Traditional Programs
Melissa Korn – WSJ.com
Nearly two years into its grand experiment with massive open online courses, University of Pennsylvania’s Wharton School is feeling bullish.