John Lothian Newsletter: Europe’s MTF problem; LME Launches Real-Time Testing Platform For Trading Strategies; SEC Said Examining Hidden Electronic Bond Trading Prices

Mar 21, 2014

First Read

The Most Interesting Man in the World Does it Again


(Ted Koppel and Walt Lukken have lunch with “The Most Interesting Man in the World” Pat Kenny at FIA’s Boca Raton International Conference)

Pat Kenny has done it again. The man I called “The Most Interesting Man in the World” has been selected as Citizen of the Year in Fontana, Wisconsin where he lives and serves on the village board. He will honored at a lunch on May 7 at Abbey Spring Country Club in Fontana. If any of his colleagues at CQG, or industry friends (say Terry Duffy), would like details on the lunch and award ceremony, please contact me for details. Don’t ask Pat. This might be a secret.

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Spot Trading Launches Blog
Spot Trading continues to be one of the most innovative proprietary trading firms in the business. They are proving that by launching a blog where they will talk openly about their technology solutions. Visit spottradingllc.com/hello-world/ to check it out.

***** See Spot Blog. See Spot Write. Blog Spot Blog.

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Chicago Forward: Jobs for the Future
On March 25 at 6 p.m, Trib Nation presents “Chicago Forward: Jobs for the Future,” the second discussion in the Chicago Tribune’s “A new Plan of Chicago” initiative. Last fall, the Tribune launched a yearlong editorial program welcoming readers to share their ideas about the challenges that face Chicago and the ways to improve them. Leading influencers in business, labor and education, including Steven Koch, Paula Wolff and Jorge Ramirez, will join Tribune Editorial Board member Greg Burns to address how Chicago can achieve economic prosperity in both its commercial center and surrounding neighborhoods.

Tickets are $20 and can be purchased here: jlne.ws/1j84uRt

***** I am very interested in the future economic prosperity of Chicago, not just for the self-evident selfish reasons. We must do a better job of preparing young people for the jobs of tomorrow. This is one reason I am a big support of Boy Scouts of America’s STEM (Science, Technology, Engineering and Mathematics) initiatives. You will be hearing more about this from me in the coming months.

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High-Speed Trading Inquiry Is Going Nowhere Fast
Bloomberg View
New York Attorney General Eric Schneiderman has set himself the noble goal of making financial markets safer for the small investor. Unfortunately, his latest foray into the world of high-frequency trading will achieve little or nothing toward that end.
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***** There is always a need to examine the conditions of the playing field and make sure it as fair and as level as possible. The best markets are those with as many views of it as possible.

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“SPDR Woman” Honored
Financial Advisor
Kathleen Moriarty, a securities attorney for Katten Muchin Rosenman, won the Lifetime Achievement Award at the ETF.com Awards Wednesday. Nicknamed the “SPDR Woman” for her work on the world’s first ETF, SPY, the award reflects Moriarty’s 25 years of experience in the ETF industry, which includes writing the prospectus to the now-$160 billion SPDR S&P 500 ETF.
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***DA: Congrats to our friendly neighborhood SPDR Woman.

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Banks Are Boring on Social Media
Bryan Yurcan – Wall Street & Technology
A majority of consumers believe that banks’ use of social media is ineffective, according to findings from a poll released today by Carlisle & Gallagher Consulting Group. Fifty-two percent of those who responded said they believe the use of social media by banks is ineffective, while 87 percent reported banks are “annoying, boring or unhelpful” on social media.
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***** Talk to the compliance departments at the banks. They are the ones who handcuff the marketing and communications people.

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JLN/MarketsWiki 2014 Annual Survey – Please Give us 30 Seconds of Your Time
John Lothian News
You still have time to fill out our quick demographic survey and get in the running for your choice of an iPad Mini or a pair of Bose Quiet Comfort Noise-Canceling Headphones. The cost is a mere 30 seconds of your time. Answers will be kept confidential.
jlne.ws/1bOrYYC

***** If you won the right to be guest editor for a day, would you fill out our survey? I am willing to add that if we can get to 1000 responses.

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CME Group to launch energy, metal weekly options in April
Reuters
U.S. derivatives exchange operator CME Group Inc said on Thursday it will launch shorter-term weekly energy and metal option contracts beginning in April in a bid to boost trading volume.
jlne.ws/1l9MKoZ

***** Weeklies are the new black.

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CBOE RMC Presentation: “Rebalancing Using Options”
Matt Moran – CBOE Options Hub
At the 30th Annual CBOE Risk Management Conference (RMC) this week, the topic of “Asset Allocation Rebalancing Using Options” was covered by two expert speakers –
Dr. Christoph Gort, Partner, SIGLO Capital Advisors
Pav Sethi, Chief Investment Officer, CEO, Gladius Investment Group
jlne.ws/1l9MKp0

***** This is like deja vu for me all over again.

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Countdown to the Small Cap Tick Pilot
Paul Daley – TabbFORUM
The goal of the small cap large tick pilot ultimately is to increase liquidity, restore small cap IPOs and boost job creation. But the pilot is likely to reveal both winners and losers, and gauging its success may depend on where you fall.
jlne.ws/1l9MKp1

***** This is not be confused with the Small Tick Cap Pilot, or the Small Tick Pilot Cap.

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Exchange CEO Series – ICE Cover: Jeff Sprecher taking on “fierce competition” and hackers
JohnLothianNews.com
Exchanges have never faced more challenges and opportunities than they do today.
John Lothian News sat down with six exchange CEOs at the 2014 FIA Boca Conference to talk about their views on four main topics: competition, regulation, growth and technology. Here’s what Jeff Sprecher, CEO of the IntercontinentalExchange Group (ICE), had to say about each.
“It’s interesting to me that regulators today are trying to introduce more global competition when in reality, for those of us who are in the business, we realize that competition has never been more fierce and more global,” Sprecher said. “And frankly, we are all trying to look at the same opportunity set and trying to use our current positioning like never before.”

Watch the video »

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MarketsWiki

MarketsWiki Page of the Day
Eric T. Schneiderman
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MarketsWiki Recent Updates

People

William Ford; Eric T. Schneiderman; Dominique Strauss-Kahn

Companies, Organizations and Groups

Trading Technologies International; Warsaw Stock Exchange; General Atlantic; R.J. O’Brien & Associates; Financial Technologies (India) Ltd

Miscellaneous

Insider trading

Statistics

47,771,191 pages viewed, 7,855 articles, 180,706 edits
MarketsWiki Statistics

Lead Stories

Quick View: Europe’s MTF problem
Philip Stafford – FT.com
It has been because the rules emerging from the US Dodd-Frank act potentially give regulators extensive extraterritorial jurisdiction but also because the US has been much further ahead in its reform programme.
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LME Launches Real-Time Testing Platform For Trading Strategies
The London Metal Exchange (LME) has launched a real-time synthetic test environment for members and their clients. The new system, LMEstage, will help to ensure market integrity by providing a simulated live market environment in which users can test their trading strategies.
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SEC Said Examining Hidden Electronic Bond Trading Prices
Lisa Abramowicz – Bloomberg
The practice of dealers showing clients different prices for the same securities on electronic bond-trading platforms is drawing the scrutiny of the U.S. Securities and Exchange Commission, which is concerned that smaller investors are being penalized.
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Exclusive: Chatroom evidence questions BoE role in FX probe – sources
Reuters
British regulators are examining evidence relating to a 2012 meeting of currency dealers and Bank of England officials which potentially challenges the central bank’s assertion it had not condoned sharing details of client orders.
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WM/Reuters examines forex fix overhaul
Daniel Schäfer and Sam Fleming in London – FT.com
WM/Reuters plans to overhaul its foreign exchange fix, the pivotal financial benchmark at the centre of a global regulatory probe into allegations that traders are trying to manipulate the $5.3tn a day market.
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MtGox finds 200,000 missing bitcoins in old wallet
BBC News
Bankrupt Japanese firm MtGox said in a filing that it has found 200,000 lost bitcoins. The firm said it found the bitcoins – worth around $116m (GBP70m) – in an old digital wallet from 2011.
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Banned Trader Did BOE’s Job For It, but Too Well
Matt Levine – Bloomberg View
Market manipulation has been on my mind a lot recently so I guess it’s worth explaining what it is.
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Russell Wasendorfs ex-wife to pay $2.85 million
The Des Moines Register
Connie J. Wasendorf, ex-wife of imprisoned Iowa financier Russell Wasendorf, has reached a deal with attorneys seeking to claw-back some of the $215.5 million he stole from customers of his Cedar Falls-based futures brokerage. Under the settlement motion, which still must be approved by a judge, she would pay $2.85 million.
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Regulatory

Report Pegs Volcker Costs at Up to $4.3 Billion
MoneyBeat – WSJ
The Volcker rule is projected to cost major U.S. banks up to $4.3 billion, due largely to the lost value of investments in certain debt instruments, a federal bank regulator said Thursday.
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We’re too soft on corporate crimes: ASIC
The Australian
THE corporate regulator says Australia is soft on financial crime compared with other nations and has called on the federal government to overhaul penalties.
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Former Aide to S.E.C. Leaders Joins Consulting Firm
BEN PROTESS – NYTimes.com
Myron Marlin, a former top aide to the chairwoman of the Securities and Exchange Commission, has joined a prominent consulting firm in Washington.
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Canadian Securities Regulators Propose New Crowdfunding Exemptions
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AMF launches on-line sales site for exam preparation manuals
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[AMF Canada] Securities Regulators seek comment on proposed changes to OM exemption and two new proposed reports of exempt distribution
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The UK Pensions Regulator And The Financial Conduct Authority Publish Joint Regulatory Guide
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ESMA Launches Discussion Paper On Central Securities Depositories Regulation
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EC Response To ESMA On Classification Of Financial Instruments
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Exchanges & Trading Facilities

LME launches new algorithmic testing platform
Anna Irrera – Financial News
The London Metal Exchange has launched an algorithmic testing platform, as it seeks to ensure market stability as electronic trading volumes grow.
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Five things on LSE’s new intra-day auction
Tim Cave – Financial News
The London Stock Exchange is planning to hold a new auction period in the middle of its trading day, in an attempt to win back larger orders from off-exchange venues.
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Nominations For Directors – NZX Limited
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Hedge Funds & Managed Futures

Further tensions revealed at top of Pimco
Stephen Foley in New York – FT.com
One of three men lined up to be deputy to Bill Gross, the chief investment officer of Pimco, quit on the day his appointment was due to be announced after becoming disillusioned with the famed investor’s stewardship of the bond fund management group.
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Pimco replaced by TCW Group as subadvisor of $1.3 billion fund
Reuters
Pacific Investment Management Co. has been replaced by TCW Group Inc. as the subadvisor of a $1.3 billion bond fund offered by Columbia Management Investment Advisers LLC.
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Top SAC Capital Portfolio Manager to Start Own Hedge Fund
WSJ.com
One of Steven A. Cohen’s most-trusted portfolio managers is planning to strike out on his own, according to people familiar with the matter, the highest-profile departure from the hedge-fund firm since it was tarnished by an insider-trading scandal.
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33% of Hedge Funds Switched Service Providers in 2013
Ivy Schmerken – Wall Street & Technology
Dissatisfaction with quality of service is the most common reason cited by hedge funds for changing their fund administrators, according to a Preqin study.
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Your Very Own Black Swan Strategy
A Wealth of Common Sense
Following the 2007-09 financial crisis, many investors decided they needed insurance on their portfolio to protect against the possibility of another “black swan” event. It’s hard to believe that this was ever the case considering where the markets stand at the moment, but investors tend to have a very short memory.
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The difficulty of pricing up a private equity firm
Becky Pritchard – Financial News
Six weeks in court, several sets of lawyers and millions in legal fees – all to answer one relatively simple question: how much is a private equity firm worth?
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Banks & Brokers

The Stress Test Results in One Chart
MoneyBeat – WSJ
In the stress tests, the Federal Reserve examined how the biggest U.S. banks would fare in various economic scenarios, an exercise required under the 2010 Dodd-Frank financial overhaul. Below are the Fed’s estimates for the minimum capital ratios the banks would see in the “severely adverse” economic scenario.
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Deutsche Bank fails to end four U.S. lawsuits over soured mortgages
Reuters
Deutsche Bank AG has failed to win the dismissal of four U.S. lawsuits seeking to force it to pay damages or buy back troubled home loans it had packaged into residential mortgage-backed securities prior to the 2008 financial crisis.
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Banks Pull Out All the Stops for Ultra-Rich Clients
WSJ.com
Every bank catering to the wealthy touts its high-end services. But several lenders are taking the hand-holding business to a new level.
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Upstart banks betting on expansion in commodities
Gillian Carr – Risk.net
As banking industry’s top commodity players retreat, others are increasing their activity and growing their commodities business
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Banks risk getting caught in the middle
Matt Turner – Financial News
If your buyside clients consider you a specialist bank, you’re in luck. A generalist provider, not so much.
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Clearing & Settlement

DTCC did not anticipate client ‘avalanche’, says Broderick
Fiona Maxwell, Duncan Wood – Risk.net
Sandy Broderick, chief executive of the DTCC’s repository service, says “our major failure” was not being ready for a late surge of clients that left thousands of accounts in a queue when Europe’s derivatives reporting rules took effect last month
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Clearstream’s February 2014 Figures: Clearstream’s Assets Under Custody Increase By 6 Percent Year-On-Year And Reach EUR 12.1 Trillion Record
Continued Growth Across All Business Areas: In Custody, Settlement, Global Securities Financing Including Collateral Management And Investment Funds Services – Jeffrey Tessler: “Figures Show Early Customer Support Of Our T2S Strategy”
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Luxembourg Stock Exchange To Move To T+2 Settlement Cycle In October
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Indexes & Products

Stoxx Names Former Banker Andreetto Sales Head
Max Bowie – WatersTechnology
European index provider Stoxx has hired Matteo Andreetto as global head of sales, based in London, with responsibility for the strategic positioning of the vendor’s indexes, and for leading sales activities with sell-side and buy-side clients.
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Bloomberg to Provide Subscribers with Markit’s PMI Indicators
Bloomberg announced today that it has entered into a distribution agreement to integrate Markit’s Purchasing Managers’ Index data into the Bloomberg Professional service. Markit’s PMI surveys are leading indicators of business and economic conditions and influence a wide range of global markets. Conducted in more than 30 nations, these surveys are viewed as the most timely and internationally comparable economic datasets.
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Technology

Fidelity Investments Reduces Global Datacenter Footprint By 20%
Greg MacSweeney – Wall Street & Technology
It’s no secret that financial services organizations are at a crossroads when it comes to their datacenter strategies. Saddled with high-cost facilities across the globe, most institutions have started to consolidate datacenters to reduce costs and increase efficiency.
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Zenium Technology Partners Announces Matt Pullen As Managing Director
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First Derivatives to deliver next-generation apps
First Derivatives, a leading provider of software and consulting services to the capital markets industry, today announced consulting services to deliver next-generation financial applications to the industry.
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Enforcement

CFTC Charges Dallas-based Steven Lyn Scott with Solicitation Fraud, Misappropriation, and Registration Violations in Connection with a Forex Commodity Pool Scheme
The U.S. Commodity Futures Trading Commission (CFTC) filed an enforcement action March 19, 2014 against Defendant Steven Lyn Scott (a/k/a Stevon Lyn Scott) of Dallas, Texas, charging him with solicitation fraud, misappropriation of customer funds, and registration violations in connection with operating a fraudulent commodity pool scheme.
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QE, “Cake”, And Why The ex-Credit Suisse Trader Got Fined
Tommy Stubbington – MoneyBeat – WSJ
Buy low, sell high. That’s what traders are meant to do, right? But a former Credit Suisse bond trader has just been banned and fined $1.1 million by the U.K.’s Financial Conduct Authority for doing–or at least attempting to do–that, in October 2011.
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Wyly brothers’ ex-lawyer settles SEC fraud case, admits errors
Reuters
A former lawyer for the wealthy Texas investors Samuel and Charles Wyly agreed to pay nearly $795,000 and admit to wrongdoing to resolve regulatory charges that he assisted the brothers in a multi-year $550 million fraud, according to court papers filed on Thursday.
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UK’s Financial Conduct Authority Winds Up A Boiler Room
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New Zealand’s Financial Markets Authority Files Criminal Charges Following Investigation Into Viaduct And Mutual
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Environmental & Energy

Carbon taxes are as necessary as they are unpopular
The Economist
IT TAKES a particular kind of environmental policy to irk industrialists and greens alike. In its short life the Carbon Price Floor (CPF), a tax on pollution that was frozen by the chancellor of the exchequer on March 19th, has done precisely that. Holding down the unloved levy—for four years from 2016—will cut energy costs for businesses and householders. But it leaves Britain’s climate policy in a mess.
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Energy boom to aid U.S. urban manufacturing jobs to 2020: report
Lewis Krauskopf – Reuters
Energy-intensive manufacturing employment will increase by more than 1 percent a year in the United States through 2020, with 72 percent of those jobs going to metropolitan areas, according to a report released on Thursday.
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WH to unveil new methane strategy this month
Juliet Eilperin – The Washington Post
The White House plans to press ahead with more executive actions to curb greenhouse gas emissions in the coming weeks, including a government-wide strategy aimed at cutting methane emissions, according to top Obama advisers.
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Asia-Pacific

Hot-Rolled Coil Futures Debut in Shanghai to Complement Rebar
Bloomberg
Hot-rolled coil futures make their debut today on the Shanghai Futures Exchange as China pushes to expand its commodities trading from raw materials to steel products.
jlne.ws/1eXormx

Hong Kong Regulator Says Shareholding Principle Is ‘Deep Rooted’
Kana Nishizawa and Jonathan Browning – Bloomberg
Hong Kong’s stock market regulator said the city’s rules on shareholder voting are “deep rooted,” after Alibaba Group Holding Ltd. failed to win approval for a proposed governance structure.
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China bears face investment challenge
Josh Noble in Hong Kong, Ralph Atkins and Delphine Strauss in London – FT.com
Like their furry namesakes, China bears are often sent into hibernation – whether by improving economic data, government stimulus measures, a rising currency, or bulging foreign exchange reserves. But as spring arrives, the bears are back out in force.
jlne.ws/1l9MMgr

HKEx: Exchange to Change Some of its Connected Transaction Rules
The Stock Exchange of Hong Kong Limited (the Exchange), a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEx), published today (Friday) its consultation conclusions on the following proposed changes to the Listing Rules (the Rules) set out in the consultation papers of 26 April 2013 on: Proposed changes to the connected transaction Rules; and Proposed changes to align the definitions of connected person and associate in the Rules.
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Dalian Commodity Exchange: Notice On Collecting Annual Membership Dues For 2014
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Frontier Markets

Argentina’s Yields Lure Back Bond Buyers
WSJ.com
Bargain-seeking investors are piling into high-yielding Argentine bonds despite the country’s history of economic mismanagement and financial turmoil. But they are prepared to retreat quickly, displaying a lack of confidence in Argentina’s long-term prospects.
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An accelerating taper
Business Standard
The United States Federal Reserve Board’s Federal Open Market Committee is clearly gaining confidence in the US economy’s performance. Its latest statement, issued on Wednesday, hints at an advancement of its schedule in relation to raising interest rates. This potentially presents both good news and bad news for global financial markets.
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Africa-focused buyout firm opens London office with ex-TPG partner
Becky Pritchard – Financial News
A private equity firm led by brewing scion John Coors has opened a London office with the hire of former TPG partner Dag Skattum.
jlne.ws/1l9MMgx

Ex-UBS equities head Yassine Bouhara to set up African venture
Giles Turner – Financial News
Yassine Bouhara, a former UBS executive who co-led the bank’s equities team at the time of its 2011 rogue trading scandal, is to set up a brokerage and advisory business focusing on Africa.
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MCX Weekly Market Report – March 14, 2014 – March 20, 2014
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Malawi Stock Exchange Weekly Trading Report – 21st March, 2014
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FSB RCG MENA Meeting 20 March 2014
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Amnon Neubach – TASE Chairman Of The Board Of Directors
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John Lothian Newsletter

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