John Lothian Newsletter: FIA’s Walt Lukken Takes the ALS Ice Bucket Challenge; Lehman Brokerage Wants New Hearing in Dispute with Barclays; Protests and debate as Mifid II draws closer

Aug 21, 2014

First Read

FIA’s Walt Lukken Takes the ALS Ice Bucket Challenge; Responds to JLN
John Lothian News
The CEO of the Futures Industry Association responded to the ALS Ice Bucket Challenge I made to the readers of my newsletter. In doing so, he challenged the leadership of the FIA in the U.S. and in Europe, as well as some industry brass, to take the challenge.

***DA: In addition to being a tremendously good sport, Walt ups the stakes by naming quite a few industry people by name. You had better watch this video to see if your name is on the list. Otherwise, as an industry participant, John Lothian News has already called you out. Either way, prepare to get wet.


Peter Nabicht Takes the ALS Ice Bucket Challenge
The other day, I challenged my readers to take the ALS Ice Bucket Challenge. Among those to quickly reply was Peter Nabicht, Senior Policy Advisor to Modern Markets Initiative.
Here is the video of him taking the challenge:

***** Please send me your videos for our industry compilation video.


Shanghai day three: Alibaba and the Big D
Ray McKenzie
What is becoming most clear to me as I upload to my brain all that I am learning in Shanghai is that the futures industry model must change dramatically. I can’t see the current model remaining competitive or profiting much longer in its current fashion. Charging higher fees to smaller and smaller group of traders in a more and more heavily regulated and less volatile market does not bode well for increasing revenues.

***DA: Ray has had some great observations in his trip to Shanghai, and it is only day three. Though today’s installment starts out as a travelogue, it weaves into big data and the future of futures. Great read.


Matthew Rees, R.J. O’Brien – Three Old Words For New Generations of Futures Trading
Matthew Rees, chief relationship officer of R.J. O’Brien & Associates, discusses a different perspective of technology, and the importance of keeping the human element when building and maintaining relationships with customers. Rees mentions how there is a “sweet spot” when utilizing new communication tools and staying connected to the “traditional world”. He also gives a warning about how new technology could inadvertently isolate customers.

Watch the video »


Stock traders seek edge in pre-market twilight zone
Lionel Laurent – Reuters
On most weekday mornings over the past year, Paris-based financial trader David Sibi has turned on a computer program designed to try and beat the U.S. stock market before it even opens.


Will Regulators Ever Learn? Bans on Short Selling Don’t Work
Robert Litan – Washington Wire
Short-sellers are among the least popular people or institutions in finance. They are variously depicted as vultures, or worse: not only driving down prices of individual stocks, but also worsening financial panics when they arise.


CFTC and traders clash on cotton verdict
Gregory Meyer in New York – Financial Times
A notorious episode of wild cotton price swings was “orderly”, a US regulator has said, a conclusion at odds with many traders’ views of the 2011 affair. The assessment by the Commodity Futures Trading Commission has been invoked by lawyers for Louis Dreyfus Commodities, parent of the world’s leading cotton merchant, as it fends off a price manipulation lawsuit brought by the former head of cotton at Glencore.



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Lead Stories

Lehman Brokerage Wants New Hearing in Dispute with Barclays
Lehman Brothers Holdings Inc.’s brokerage is asking a U.S. court to reconsider its ruling affirming Barclays BARC.LN -0.11% PLC’s right to billions of dollars in disputed assets, saying the decision throws into question the integrity of bankruptcy sales. The trustee unwinding the brokerage, Lehman Brothers Inc., on Tuesday asked the Second U.S. Circuit Court of Appeals for a new hearing before the entire bench of judges rather than a three-judge panel.

Protests and debate as Mifid II draws closer
Anish Puaar and Tim Cave, Financial News
It has been a long and arduous summer in the City for much of Europe’s trading community. In May, a mammoth 800-page consultation paper caused a collective sigh of despair among the regulatory and public affairs teams of banks, brokers, exchanges, technology vendors and other practitioners.

Banks, funds agree on wider window for FX fix
Patrick Graham and Jamie McGeever – Reuters
Banks and asset managers are ready to support an extension of the one-minute window used to set currency market benchmarks, documents showed on Wednesday, but most are concerned by the risks involved and divided on how much of an extension.

ICAP launches Singapore coal derivatives trading
By Jeremy Grant, FT
ICAP, the world’s largest interdealer broker, has opened a coal derivatives trading desk in Singapore in a move that highlights the growing importance of the Asian city-state as a commodities trading hub amid robust Chinese demand for coal.

Deutsche Bank and others face off with Esma over Mifid II
By Yakob Peterseil,
Deutsche Bank, Societe Generale and UBS object to revealing profit margins on structured products as part of a push to expand disclosure

Saudi Arabia Said to Seek Ministry Responses on Market Opening
Matthew Martin and Sarmad Khan – Bloomberg
Saudi Arabia, home to the biggest Arab stock exchange, is seeking feedback from government ministries on the proposed opening of its bourse to direct foreign investment, three people familiar with the matter said.

Reigniting the Order Type Debate: Haim Bodek Explains the Real Issues with ‘Undocumented’ Order Type Features
TABB Forum
Despite a commendable wave of recent order type filings and disclosures, says Haim Bodek, confusion still exists, and the spate of filings offers minimal disclosure on the order type interactions central to potentially abusive order handling asymmetries. To provide a framework for analyzing the current pipeline of order type rule filings, Bodek summarizes the core claims of his whistleblowing contribution to the controversy and answers the critical question: ‘What are “undocumented” order type features and order matching engine practices?’

BofA in $16.5 billion deal with U.S. over mortgage bonds: source
Bank of America Corp is expected to pay more than $16.5 billion to end investigations into mortgage securities that the bank and its units sold in the run-up to the financial crisis, in a deal that could be announced as early as Thursday, a person familiar with the matter said.

US hedge funds hope to bridge European cultural divide
Miles Johnson, Hedge Fund Correspondent – Financial Times
In Henry James’s late 19th century novel The American, a brash businessman travels to France in search of a wife only to leave defeated by the baffling social mores of the Parisian aristocracy. A century later a group of US hedge funds now targeting European companies are hoping the cultural divide will prove easier to bridge.

G20 edging towards deal on ‘bail-in’ bond cushion for banks
Government leaders are expected to agree in November that the world’s top banks must issue special bonds to increase the amount of capital which can be tapped in a crisis instead of calling on taxpayers to come to the rescue, industry and G20 officials said.

Survey Says: Investors Have No Idea How Well the Stock Market Is Doing
Steven Russolillo – MoneyBeat – WSJ
If the stock market keeps moving to new highs and no one notices, does the rally even count?

Swiss Private Banks: Not a Pretty Picture
John Letzing – MoneyBeat – WSJ
Swiss banks are being dragged into a far less pleasant era. Those that have managed to stick around, anyway.

Bedbug Scourge Comes to Pimco – MoneyBeat
Erik Holm and Kirsten Grind – MoneyBeat – WSJ
A bunch of bloodsucking parasites have invaded Pimco. The New York offices of Pacific Investment Management Co., the massive asset management firm, are being fumigated this week after bedbugs were found there.

Patent trolls as the new rentier class
Izabella Kaminska – Financial Times
According to the Merriam-Webster dictionary, a rentier is a person who lives on income from property or securities. From the point of view of Marxist rentier capitalist theory, a rentier is also a parasite who adds no value to society, but instead survives solely due to his ability to extract rents (tribute) from productive people.


Indian Govt drafts rules to give more powers to commodity futures market regulator
The finance ministry has put out draft rules to give the Forward Markets Commission (FMC), the commodity market regulator, more powers over intermediaries in the commodity derivatives market. The rules propose giving wider powers to the regulator to check violations by market intermediaries. They empower the regulator to inspect the books of accounts and electronic records of the intermediary for effective regulation.

Exclusive: Funds could face market curbs after lobbying backfires
Huw Jones – Reuters
Fund managers may face tougher scrutiny by global regulators than planned after their intense lobbying against a first proposal backfired, industry sources and G20 officials said. A global G20 task force is rethinking its initial approach which involved targeting the biggest funds, and could opt for a more intrusive method that would affect more funds by limiting their market activities during periods of turbulence, the sources told Reuters.

Chief Information Officer Thomas Bayer to Leave SEC
The Securities and Exchange Commission today announced that its Chief Information Officer Thomas Bayer is planning to leave the agency in October.

Securities Commission Malaysia Invites Comments On Proposed Regulatory Framework For Equity Crowdfunding
Crowdfunding News Today
The Securities Commission Malaysia (SC) today published a consultation paper seeking public feedback on the proposed regulatory framework for equity crowdfunding (ECF). ECF is a new form of fundraising that allows start-up or other smaller enterprises to obtain capital through small equity investments from relatively large numbers of investors, using online portals to publicise

Exchanges & Trading Facilities

Euronext launches equity options on Euronext N.V.
Automated Trader
Euronext has announced that trading in equity options on Euronext N.V. shares will start on the Amsterdam derivatives market as of Thursday 28 th August.
The new options will be listed in the Spotlight Options section, Euronext’s special segment dedicated to the development of new option classes requested by market participants.

Euronext Announces Two New Senior Appointments In Its Post Trade Business
Amsterdam, Brussels, Lisbon, London and Paris – 21 August 2014: Euronext today announced two senior appointments for its post tradebusiness activities.

Euronext makes clearing hires ahead of futures push
Joe Parsons – FOW
Euronext has made two high-profile post-trade appointments to boost its senior management team as the European exchange group gears up to expand its derivatives business. Euronext said it has hired as head of post-trade Andrew Simpson, formerly of clearing house EuroCCP and Swiss exchange SWX. Euronext also said on Thursday it has hired Hugo Rocha to run sales for Interbolsa, the Euronext division that handles the settlement of Portuguese securities.

ASX Limited Full-Year Result To 30 June 2014
Highlights relative to the prior corresponding period (FY13 pcp):

ASIC Publishes Eighth Market Supervision Report
ASIC today published its eighth report on the supervision and surveillance of Australian financial markets and market participants.

OneChicago Holiday Notice – Labor Day 2014

Hedge Funds & Managed Futures

Hedge fund exit requests rise in August
Investor requests to pull out money from hedge funds rose in August, according to data released on Wednesday, an increase typically seen at this time of year.

Hedge Funds and the problem of structure
by Dan McCrum, FT Alphaville
Not the hedge fund structure, a fee schedule masquerading as an asset class, that is old hat. What we mean is the problem that arises once your pension fund has hired staff to invest in alternative assets.

Nervous Hedge Funds Turn Defensive on Concerns Over Asset Prices
Laurence Fletcher – WSJ
Some hedge funds are cutting back on their riskier positions because of fears that certain assets may have become overpriced and concerns about the conflicts in Ukraine and Iraq. Nervous funds have reduced their bets that equities will keep rising, have increased wagers on falling bond prices and have bought protection for their portfolios in case the crises escalate further, according to investors and money managers.

UBS O’Connor Hedge Fund Sells U.S. REITs in Second Quarter
Margaret Collins and Devin Banerjee – Bloomberg
UBS O’Connor LLC, the $5.6 billion hedge-fund unit within Switzerland’s biggest bank, sold most of its stakes in U.S. real estate investment trusts during the second quarter after the companies delivered some of the highest stock-market returns in the past year.

[Video] Wells Fargo’s ‘Big Hairy Audacious Goal’ to Boost Asset-Management Business
Paul Vigna – MoneyBeat – WSJ
With the refi boom over, and the mortgage business drying up, Wells Fargo is being forced to pivot and find opportunity elsewhere. The bank has an audacious goal – it’s literally called the “Big Hairy Audacious Goal” – to ramp up its asset-management business from a $500 billion business to a $1 trillion business. Geoffrey Rogow sat down at the MoneyBeat desk this morning to talk about it.

Equity income funds face threat from ‘social unrest’
Julia Rampen – Investment Week
Angry workers and tax-hungry governments pose the biggest risks to equity income investors, Henderson Global Investors’ Ben Lofthouse has said.

Greater clarity needed on European IRS clearing obligation
The Trade
Industry bodies have raised concerns over the impact of European plans to migrate interest rate swaps (IRS) to central clearing.

Slow start to AXS Australian dollar OTC derivative clearing
By Justin Lee,
Dealers have been slow to move on to ASX’s clearing house with just $124 billion cleared in the year since its launch

Banks & Brokers

Goldman gives junior bankers 20% pay rise
Tom Braithwaite in New York – Financial Times
Goldman Sachs is increasing salaries for junior bankers in the US by about 20 per cent in an increasingly frenetic war to attract and retain young graduates.

JP Morgan targets hedge funds and SWFs in new sales push
Matt Turner and Sarah Krouse, Efinancial News
JP Morgan has set up a dedicated equities salesforce in London to serve its hedge fund clients and sovereign wealth funds, as part of the bank’s push to become a top three cash equities house globally.

Raymond James cements return to profit
Investment Week
Advisory and wrap business Raymond James Investment Services has consolidated its return to profit, generating almost £235,000 in 2013.

Clearing & Settlement

LCH.Clearnet appoints Marcus Robinson head of SwapClear Australia
LCH.Clearnet, the global clearing house, has announced that Marcus Robinson has been appointed Head of SwapClear Australia, to support the growing demand for on-the-ground, robust interest rate derivative (IRD) clearing solutions. He has relocated to Sydney.

LCH.Clearnet Appoints Robinson to Head SwapClear Australia
By James Rundle, WatersTechnology
LCH.Clearnet has announced the appointment of Marcus Robinson, who will fill the role of CEO for SwapClear Australia.

Indexes & Products

Barclays offers choice of risk in Euro Stoxx 50 note
Suzi Hampson –
Barclays is offering US investors two versions of a product based on the Euro Stoxx 50 – one with capital protection and another that puts capital at risk in return for higher potential gains

ETF providers take on pension and sovereign wealth challenge
David Wigan –
Pension and sovereign wealth funds are not traditionally big investors in ETFs because of concerns over cost, flexibility and restrictions on buying listed securities. But that may be about to change as providers look to woo big institutional investors.

A range of investable indices to meet client needs in alpha and beta generation
By Bruno Neukirch, Delphine Qiao, Societe Generale,
As part of Societe Generale’s series of Meet the Experts presentations, Bruno Neukirch and Delphine Qiao discuss the SG Index platform.


Broadridge Pegs Perry as New President of Global Sales, Marketing and Client Solutions
Dan DeFrancesco – WatersTechnology
Broadridge Financial Solutions announced the hiring of Christopher Perry as its new president of global sales, marketing and client solutions.

Perseus Offers Global Trading Access and Risk Compliance for
Eris Exchange
All asset class network and High Precision Time™ for Interest Rate Swap Futures goes live
Chicago, IL and New York, NY – 21 August, 2014 – Perseus Telecom, a leading provider of high-speed global connectivity, High Precision Time™ and Market-to-Market networks, announced today trading access and time verification is now available for Eris Exchange Swap Futures accessible at Equinix data centres in Chicago, London and Tokyo.

Dimensional Fund Advisors signs for Calastone global fund transaction network service
Global asset manager Dimensional Fund Advisors has moved to streamline fund administration for its Australian and New Zealand clients by extending its global relationship and implementing Calastone’s global fund transaction network service.

New SunGard Study Reveals Growing Focus on Innovation, Optimization and Service among Wealth and Trust Executives
SunGard has completed a study, Vision for Growth: Striking a Balance between Innovation, Optimization and Service, which reveals that wealth management and trust organizations are increasingly emphasizing technology innovation, optimization of operations, and enhanced services as major components of their growth strategies.

Broadridge Bags Thomson Reuters’ Perry
Christopher Perry, former global managing director of the risk segment in Thomson Reuters’ financial and risk division, is to join financial technology and investor communications service provider Broadridge Financial Solutions next month as president of global sales, marketing and client solutions.


U.S. fines Berkshire over stock deal, Buffett admits mistake
Jonathan Stempel – Reuters
Warren Buffett’s Berkshire Hathaway Inc agreed to pay an $896,000 fine to settle U.S. government accusations that it violated antitrust rules by failing to report a transaction that boosted its stake in building products company USG Corp.

Bank of Scotland unfairly double billed customers says judge
Investment Week
Bank of Scotland has been unfairly double billing customers who fell behind on their mortgages, a High Court judge in Belfast has ruled.

Feds forge $8 million settlement with ex-leaders of failed First Chicago Bank
By Steve Daniels, Crain’s Chicago Business
Most of the bank-failure carnage of the Great Recession is in the past, but the bills are only now coming due. Federal bank regulators are beginning to nail down settlements with former directors and officers of some of the area’s 40-plus failed banks. Biggest so far: an $8 million pact, finalized in June, with leaders of failed First Chicago Bank & Trust, at its peak a $1.3 billion-asset lender with ambitions to forge a far larger franchise and the audacity to repurpose the name of what once was Chicago’s largest commercial bank.

Environmental & Energy

ICAP Energy Launches Global Coking Coal – First Contract Completed And Cleared On CME
ICAP Energy, the energy business of ICAP plc, announces today that it has successfully launched a global Coking Coal desk.

EU regulators seek to close car emissions testing loopholes
By Barbara Lewis, Reuters
* Nitrogen oxides a bigger issue than CO2
* Vehicles would be tested on roads, not in laboratories
* “Real-world” testing rules to be unveiled by year-end
EU regulators are preparing draft legislation that will require vehicle fuel use to be tested on roads rather than in laboratories, looking to close loopholes that allow car makers to exaggerate fuel-saving and emissions credentials.


“Three-step Delivery” Tested in Practice
To further address the problem of uncertain place of receipt for the buyer in futures delivery, on July 11 Dalian Commodity Exchange (DCE) revised and improved the one-step delivery process by introducing the new system of “three-step delivery”, which is implemented from the contracts of August. On August 19, DCE’s four products of blockboard, fiberboard, coke, and LLDPE reported successful physical delivery of 252 contracts for August, marking the first physical delivery in the form of “three-step delivery” after DCE’s recent revision to the delivery system with the effectiveness of the new system tested.

Further Quotation Rate Acceleration And Charging Fee Slash In Shenzhen Market, Service And Market Efficiency Improved – Total Charging Fee Reduced By 180 Million Yuan, Quotation Rate Doubled

Investors snap up China stocks ‘priced for financial crisis’
By Julia Rampen, Investment Week
Global investors have been snapping up cheap Chinese stocks as signs of a banking collapse recede, but economic data remains mixed. The MSCI China index returned 17.5% in the three months to 12 August, compared to 6.4% from the MSCI Emerging Markets index.

SGX welcomes Pteris Global to Catalist
Singapore Exchange (SGX) is pleased to welcome the listing of Pteris Global Limited on Catalist under the stock code “UD3”.

Frontier Markets

[Video] Indonesia – not so fragile now
Financial Times
A year on from the coining of the phrase ‘the fragile five’, Indonesia has come a long way. Edwin Gutierrez, senior investment manager with Aberdeen Asset Management, tells James Kynge, the FT’s emerging markets editor, that the country has addressed its financial vulnerability.

Bond Sales in Africa Losing Allure
Matt Day – WSJ
Cracks are forming in Africa’s debt boom. African governments are on pace to issue a record amount of bonds in 2014 for a second consecutive year, jumping at the opportunity to borrow at low interest rates to fund infrastructure and other spending.

Dubai’s International Financial Centre in Bid to Lure Hedge Funds
DUBAI–Dubai’s financial hub is growing up. Since it was established a decade ago, the Dubai International Financial Centre has become the number one choice in the Middle East for many of the world’s leading banks, law firms, asset managers and insurers from where to conduct their regional businesses.


Treasury Wine Decanted
Treasury Wine Estates TWE.AU -2.44% isn’t letting the small matter of circling buyout firms crimp its style. As TPG and a consortium led by KKR KKR 0.00% check the vintners’s books, Chief Executive Michael Clarke told analysts he’s in the market for luxury wine acquisitions in the U.S. It’s enough to make investors a little nervous. The U.S. is a thorn in Treasury’s side. It destroyed thousands of gallons of expired Beringer-brand wine there last year amid a glut of low-end vintages, prompting calls to sell the division.

A Brief History of Bank of England Dissents
Just like Christmas dinners, monetary policy meetings at central banks are often pictured as gatherings full of suspense, conflict and heated debates.

John Lothian Newsletter

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How Ken Griffin rebuilt Citadel’s ramparts

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