John Lothian Newsletter: Euronext Said to Plan Sale of Up to 30% Stake Before IPO; Yellen Wins Backing of Senators to Lead Fed; EU bank trading plan stops short of U.S. Volcker Rule

Jan 7, 2014

First Read

Disaster Recovery is Staying Warm
John Lothian

John J. Lothian & Company, Inc. has been in disaster recovery mode the last couple of days, working from home, as the cold weather which has enveloped a large swath of the U.S. Midwest has made it dangerous to go outside. We should be back to normal tomorrow with a return to the CBOT Building. In the meantime, Jon Matte, who lives by the North Pole in Norway, is just laughing at us.

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Euronext Said to Plan Sale of Up to 30% Stake Before IPO
Nandini Sukumar – Bloomberg
IntercontinentalExchange Group Inc. plans to sell as much as 30 percent of Euronext NV before the operator of the Paris and Amsterdam exchanges goes public this year, three people with knowledge of the matter said.

***** Getting an anchor tenant for the offshoot company is a good idea.


OCC Completes Executive Leadership Transition Plan, Expands Management Team
OCC announced today it has completed its executive leadership transition plan. Effective immediately, Craig S. Donohue assumes the role of Executive Chairman, with Michael E. Cahill becoming President and Chief Executive Officer

***** The end of an era, and the beginning of a new one.


Dan Hubsher

Flex Time: Object Trading’s Dan Hubscher on Shedding Operational Complexity
From a flurry of new regulations and rapid changes in market structure to constant updates from exchanges, simple, flexible infrastructure has never been more important in the trading world. John Lothian News spoke with Dan Hubscher of Object Trading on the topic of shedding operational complexity and what they found from their most recent research.

Watch the video »


Steven Cohen Appears Oblivious to Insider Trading Law
By William D. Cohan – Bloomberg
All this litigation has left SAC’s reputation in tatters. It now manages only Cohen’s considerable fortune, estimated by the Bloomberg Billionaires Index at $8.7 billion (without deducting his agreed-upon fine), and no longer manages outsiders’ money. In 2008, SAC had more than $16 billion in assets. This can hardly be the future Cohen envisioned. A Frontline documentary, “To Catch a Trader,” to air Jan. 7 on PBS stations, makes clear that Cohen has no one but himself to blame.

***** I wonder if they will get Robert Wagner to play the part of Steven Cohen in the the television show takeoff.


Wall Street Bitcoin Fans Try to Make Real Money From Virtual
Carter Dougherty – Bloomberg
After developing a fascination with digital currencies, Jonathan Silverman left his job managing funds at Morgan Stanley in May to take a job trading the virtual stuff instead.

***** Some may call this risk taking. Others may call this making a career mistake.


CME Group and Chevron launch new spatial programming standard
Anh Nguyen –
Energy company Chevron and derivatives marketplace owner CME Group are part of a consortium that has launched a new spatial programming standard.

***JM: Anybody who reads “In a spatial computer, programs execute in space, rather than in time sequence” and nods, is either a rare breed of human, or is just stretching their neck. I’m not nodding, but it’s an interesting enough subject (what little I could find on Google) that I was late producing the newsletter’s story list today.


Analysis: Corruption scandal complicates Turkish rate policy as lira slides
A corruption scandal shaking Turkey’s government may delay for many more months a tightening of monetary policy that would stabilize inflation and stop the lira from plumbing record lows.

***** I made $200 in 2013 on my pocket change foreign currency holdings from my trips overseas during the last view years. Needless to say, my Turkish Lira was not among the contributors to that gain.

*****Also, take a look back at our Special Report on Turkey from last summer:


CME Group relocates backup data center to New York
CME Group Inc, the world’s largest futures exchange operator, said on Monday it moved its primary backup data center to New York from Chicago last month to make its backup facilities more secure and reliable.

***JM: Guess they figure the door’s frozen shut, nobody’s going to break in to steal anything…



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Lead Stories

Yellen Wins Backing of Senators to Lead Fed
The Senate confirmed Janet L. Yellen as the chairwoman of the Federal Reserve on Monday, marking the first time that a woman will lead the country’s central bank in its 100-year history.

SGX seeks to build on strong derivatives volumes
Anish Puaar – Financial News
Commodity and equity-based derivatives are expected to lead further growth at the Singapore Exchange, its head of derivatives has said, after the bourse reported strong volumes in a number of contracts in 2013.

EU bank trading plan stops short of U.S. Volcker Rule
Banks in the European Union face limits on taking market bets with their own money under a draft EU proposal that represents a central plank of attempts to prevent a repeat of the financial crisis of 2007 to 2009.

Ashmore becomes first to gain access to invest directly in China
David Oakley, Investment Correspondent –
China has taken a significant step towards opening its multitrillion-dollar capital markets to the outside world by giving a western asset management group freedom to invest in its domestic stocks and bonds.

JPMorgan officials not to be penalized in Madoff deal – WSJ
JPMorgan Chase & Co officials will not be penalized as part of a settlement the bank is negotiating with federal authorities to resolve suspicions that it ignored signs of Bernard Madoff’s Ponzi scheme, the Wall Street Journal reported, citing people close to the talks.

Home is where the heart is, sovereign rating edition
Dan McCrum | FT Alphaville
To the many sticks used to bash the credit rating agencies for their role in the (near) downfall of the financial system, we can now add a new one: home bias.

Concerns grow for future of Tel Aviv exchange
John Reed in Jerusalem –
Plans by Israel’s Delek Group to list shares abroad have added to longstanding concerns for the future of the Tel Aviv stock exchange, following similar moves by other companies.


SEC Names Michael Osnato as Chief of Enforcement Division’s Complex Financial Instruments Unit
The Securities and Exchange Commission today announced that Michael J. Osnato, Jr. has been named chief of the Enforcement Division unit that conducts investigations into complex financial instruments.

Statement on Co-operative Bank enforcement investigation
The Financial Conduct Authority (FCA) has confirmed it will be undertaking enforcement investigations into events at the Co-operative Bank.

SEC whistleblower retaliation protection ambiguous, lawyer warns
Jessica Meek –
Retaliation protection for whistleblowers under the US Securities and Exchange Commission’s (SEC) whistleblower programme is unclear and may lead to problems for potential whistleblowers and the SEC itself, one legal expert has warned.

ESMA Publishes A Final Report Of Draft Technical Standards Under Article 10a(8) Of Markets In Financial Instruments Directive (MiFID) On The Assessment Of Acquisitions And Increases In Qualifying Holdings In Investment Firms

Exchanges & Trading Facilities

BATS Global Markets Reports New Market Share Records in Spain and Europe DRs
BATS Global Markets (BATS) today reports new monthly market share records in Europe – 9.8% in Depositary Receipts (FTSE RIOB) trading and 15.8% in Spain’s IBEX 35 – while remaining the largest stock exchange in the region.

ASX Group Monthly Activity Report – December 2013

HKEx Monthly Market Highlights – December 2013

HKEx On-Floor & Off-Floor Trading Statistics

TMX Group Consolidated Trading Statistics – December 2013

NZX December 2013 Shareholder Metrics

Key figures SIX Swiss Exchange and SIX Structured Products Exchange (formerly Scoach Switzerland): Year 2013

Ljubljana Stock Exchange: Monthly Statistical Report December 2013

TSX Markets Top 20 Largest Consolidated Short Position Report – November 30, 2013

Hedge Funds & Managed Futures

Old Mutual Adds Zoe Cruz to the Board
Joe McGrath – MoneyBeat – WSJ
FTSE 100 fund manager Old Mutual scored a double whammy this morning, adding Zoe Cruz, once the most powerful woman on Wall Street, as a non-executive director in a move that means its board is now 30% female.

Hedge Funds Raise Gold Wagers as Yamada Sees $1,000: Commodities
Elizabeth Campbell and Debarati – Bloomberg
Hedge funds raised their bullish gold bets to a six-week high, splitting with analysts at Technical Research Advisors LLC and Goldman Sachs Group Inc. who are predicting more declines after last year’s rout.

FI trading revenues expected to slide further – poll
Kris Devasabai –
Fixed-income trading revenues fell sharply in the third quarter of 2013, and readers expect the going to be even tougher this year. Fifty-eight per cent of respondents to a recent poll think fixed-income trading revenues will be lower in 2014, while 20% expect profits to be roughly flat.

CFTC Commitments Of Traders Reports Update

Banks & Brokers

For U.S. Banks, Hard Yards Begin Now
Francesco Guerrera – MoneyBeat – WSJ
U.S. banks have been the “good bad team” of the stock market in 2013. For those who don’t follow sports, the term refers to a team that is capable of beating inferior rivals but can’t really prevail against stronger opposition. (Topical examples include the Kansas City Chiefs of the National Football League and Manchester United in English soccer.)

Tale Of Two Bankers: Bob McCann, Sergio Ermotti Are Reinventing Wall Street
THERE IS AN ADAGE ON WALL STREET: “IT’S BETTER TO BE LUCKY THAN GOOD.” And if ever there was a banker with luck on his side it’s Sergio Ermotti, the suave, impeccably dressed global chief executive of Switzerland’s UBS.

Bank of America Merrill Lynch shuts European power, gas desk
Bank of America Merrill Lynch has closed its European power and gas desk following low demand for power and gas hedging and regulatory changes, a company spokesperson said on Tuesday.

HSBC Names Bardin Davis Asia-Pacific Head of Resources, Energy Group
Cynthia Koons – MoneyBeat – WSJ
HSBC Holdings PLC has named Bardin Davis as head of its resources and energy group for Asia Pacific, according to an internal memo seen by The Wall Street Journal, as the bank continues to build up its capability in the resources sector.

Credit Suisse Restates Results as It Winds Down Some Businesses
ZURICH—Credit Suisse Group AG restated accounts stretching back to the beginning of 2011 on Tuesday, reflecting its efforts to shift some unwanted businesses into new so-called nonstrategic units.

Libor scandal: Probe widens to individuals; German regulators press Deutsche Bank for shake-up over Libor
Alice Ross in Frankfurt –
Deutsche Bank faces fresh pressure from regulators to make senior management changes over the Libor scandal, after extracts from an interim report by the German watchdog on the bank’s role in the affair leaked in the local media.

Cantor Fitzgerald Europe Expands Credit Fixed Income Team
Cantor Fitzgerald Europe, a leading global financial services firm, today announced the continued expansion of its European Credit fixed income team with the appointment of Franz Bucher as Managing Director in London. Mr. Bucher will focus on High Yield, Distressed Debt and Special Situations, and on expanding Cantor’s presence in German-speaking markets.

Newedge Appoints Eric Shi as Head of China Commodities
Newedge, a global leader in multi-asset brokerage and clearing, today announced that Eric Shi rejoins the firm’s Energy desk as Head of China Commodities.

Clearing & Settlement

Back Office Real-Time Risk Analysis in High Demand
Becca Lipman – Wall Street & Technology
Classic back office tools are starting to leverage real-time data functionality. Supportive data intensive applications are quickly becoming a necessity.

Japan dealers stop back-loading to CCPs due to de minimis uncertainty
Viren Vaghela –
Dealers in Japan are no longer back-loading older trades with US persons to clearing houses due to uncertainty around whether trades will fall within the $8 billion de minimis bucket that counts towards registering as a swap dealer with the Commodity Futures Trading Commission (CFTC).

Ann Shuman To Join DTCC As Deputy General Council
Respected Industry Executive Will Be Responsible For Legal Activities For Key Business Areas

CME Group Margins: Performance Bond Requirements: USD-Denominated Ibovespa Index (IBV) Outrights- Effective Tuesday, January 7, 2014

Indexes & Products

Bond ETFs Grabbed Money Last Year Even as Bond Mutual Funds Suffered
Chris Dieterich – MoneyBeat – WSJ
A down year for the bond market drove investors from traditional bond mutual funds, but money kept flowing into bond exchange-traded funds. Old-fashioned fixed income mutual funds saw withdrawals of $85.4 billion in 2013, while fixed-income ETFs took in $27.5 billion, according to data released Monday from asset manager BlackRock Inc.

Dow Jones-UBS Commodity Indices Market Attributes Report – December 2013

S&P GSCI Commodity Index Market Attributes Report: Commodities Market Performance In December 2013 And Year-End

Tokyo Commodity Exchange Revision Of Rules For EFP And EFT Transactions

BM&FBOVESPA Announces The 3rd Preview For Ibovespa And Other Indices, Valid From January To April 2014


Trial to Begin for Martoma, Ex-SAC Trader Who Cut No Deal
Prosecutors never thought their insider trading case against Mathew Martoma would go to trial.

SAC Trader’s Co-Workers Were Deposed
The criminal insider trading case against Mathew Martoma, the former SAC Capital Advisors portfolio manager, was built in part on interviews and depositions by federal authorities with several of his former colleagues at the hedge fund, according to a recent court filing.

Ex-UBS bank executive to enter plea in tax fraud case
A former high-ranking UBS banker charged with helping Americans dodge taxes through secret Swiss bank accounts is expected to plead not guilty on Tuesday to tax fraud conspiracy in federal court in Florida.

Spain’s Princess Cristina named as suspect in corruption probe
Tobias Buck in Madrid –
Spain’s royal family suffered a fresh blow on Tuesday, after the king’s younger daughter was named as a formal suspect in a long-running corruption probe that has tormented senior members of the royal house for more than two years.

Environmental & Energy

Group of ministers urges EU to set 2030 goal for renewable energy
Ministers from Germany, France and six other countries have called for the European Union to set a 2030 goal for renewable energy use, in opposition to their British counterpart who advocates a sole greenhouse gas emissions target.

**RKB — The letter is dated Dec. 23 and signed by ministers from Austria, Belgium, Denmark, France, Germany, Ireland, Italy and Portugal.

China to Boost Spending on Water Conservation Projects in 2014
China’s central government will boost spending on projects to conserve water this year as the world’s most-populous nation grapples with ways to ensure adequate supply of the vital resource, an official said.

Dirtiest Coal’s Rebirth in Europe Flattens Medieval Towns
Europe’s appetite for cheaper electricity is reviving mines that produce the dirtiest type of coal, threatening to boost pollution and raze villages that have survived since medieval times.


Chinese Investors Refocus on Domestic Assets
Chinese investors are shying away from overseas markets in favor of domestic assets, even though many funds invested abroad delivered double-digit returns last year.

Few Specifics Mean China Banks Could Stay in the Shadows
Bob Davis and Lingling Wei – MoneyBeat – WSJ
China sent its clearest signal so far about how it wants to handle its growing debt problem: very carefully.

Tokyo Commodity Exchange: Message From The President & CEO

Consultation On Establishing An Effective Resolution Regime For Financial Institutions In Hong Kong Launched

Frontier Markets

Algorithm trading in micro, mini contracts to resume
Business Standard
After a year of suspension, the Forward Markets Commission (FMC) has allowed the introduction of algorithmic (algo) trading in micro and mini contracts, to attract participation from small traders. Some conditions have been specified.

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