First Read

Bits & Pieces
Well, the boys are back from London. I am back from Omaha, and I think I got the better part of the bargain. Robby and his teammates won the division 3 championship of Omaha’s Slumpbuster Tournament. What a great Father’s Day present he gave me.

I will be on the road again soon, this time me headed to London for our Summer Intern Education Series. Do you have any interns in London? Sign them up at education.marketswiki.com.

Jon Matte claims to be taking driving lessons and that is why the newsletter has been late. Since he lives up the by the North Pole, I thought he was taking sled driving lessons. How tough can that be?

I was appalled by the comment last week from a London-based newsletter publisher at IDX about NLX’s Charlotte Crosswell’s multiple outfits she wore to the events. What anachronistic sexism? The only good news was that you did not have to pay premium prices for such stupid drivel.

I hope you have a great week!

~John J. Lothian

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CFTC moves to curb speculators face revision
Gregory Meyer in New York – Financial Times
A long-running effort to constrain speculation in commodities markets could face another round of revision. Almost five years after its first hearings on the issue, the US Commodity Futures Trading Commission has made the rare move of reopening public comment on position limits, or caps on the number of commodity trading contracts speculators may control.
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***** Now that we have a full contingent of CFTC Commissioners, will it be a thoughtful discussion or Ready, Fire, Aim?

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CME Group Announces Record Trading Volume for NYMEX Brent (BZ) and British Pound Futures (GBP/USD)
CME Group, the world’s leading and most diverse derivatives marketplace, today announced it reached trading volume records for both its NYMEX Brent (BZ) crude oil futures and British pound (GBP/USD) futures contracts yesterday, June 12, 2014. Trading volume for NYMEX Brent reached 112,446, compared to August 12, 2013, the last record day, when volume reached 104,839 contracts. Trading volume for British pound futures reached 337,633 contracts, compared to the previous record on May 7, 2010, of 307,280 contracts.
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***** I hope the heavy BP trading was not related to Doug Ashburn being in London.

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Intercontinental Exchange Announces Records In Sterling And MSCI EAFE Contracts
Liffe traded 2,858,857 Short Sterling futures contracts and 1,380,010 Short Sterling options contracts on June 13, 2014. The previous record for futures was 2,045,204 on February 12, 2014 and the previous record for options was 1,169,189 on November 12, 2008. Liffe US traded 77,471 MSCI EAFE futures contracts on June 13, 2014. The previous record was 73,587 on March 17, 2014.
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***** I like record volumes. They remind me of my youth.

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MarketsWiki World of Opportunity Summer Intern Series Goes to London
John Lothian & Co. is pleased to announce the MarketsWiki World of Opportunity Summer Intern Education Series is coming to London on July 1st and 2nd, 2014 with the generous support of the [[CME Group]].
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Spot Trading Named For Fourth Consecutive Year As One Of “Chicago’s 101 Best and Brightest Companies to Work For”
Spot Trading LLC, a leading proprietary trading firm, today announced that the National Association for Business Resources (NABR) is honoring the firm for the fourth consecutive year as one of “Chicago’s 101 Best and Brightest Companies to Work For”. Spot was once again the only trading firm to make the list of companies recognized for their innovative strategies and best practices in human resources.
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***** Some spots you just can’t get out.

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Andy Kessler: High-Frequency Trading Needs One Quick Fix
Andy Kessler – WSJ
In the “state your conclusion upfront department,” the Senate Permanent Subcommittee on Investigations has scheduled a hearing for June 17 titled “Conflicts of Interest, Investor Loss of Confidence, and High Speed Trading in U.S. Stock Markets.” They join the Securities and Exchange Commission, the FBI, the Justice Department, the Commodity Futures Trading Commission and, inevitably, Eric Schneiderman in uncovering what the New York attorney general calls “this new breed of predatory behavior.”
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***** Best Execution versus Best Price. What is a best execution? Easy to define sometimes.

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The Fix Is In: Regulatory Blunders, HFT, Investor Confidence and the Death of Investment Banking
Steve Wunsch – TABB Forum
Investment banking is on the ropes, and not just in equities; fixed income, commodities and currencies also are stumbling. Is there any relief in sight? No. This is what electronic trading was supposed to do.
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***** Let’s shoot the messenger.

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These CEOs Have Some Unexpected Hobbies: Stickers, Anyone?
Joann S. Lublin – WSJ
On average, American chief executives work more than 50 hours a week, according to a recent study co-led by Harvard Business School. For the rest of the time, they have hobbies.
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***** I used to have a hobby before I had kids. Then my kids became my hobby.

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Bridging the Week: Fiduciary Obligations of Directors; Individual Segregation Confusion; BD Capital
Gary DeWaal – Katten Muchin Rosenman
Clues, not concrete developments, generally highlighted last week in the financial services industry worldwide as a myriad of regulators provided diverse views on various topics, including boards of directors’ responsibilities, capital requirements for US broker-dealers, position limits for speculative traders and market structure. However, in the UK, the Financial Conduct Authority announced a comprehensive augmentation of its client money and custody rules.
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***** Clues? At least we have Inspector DeWaal on the case!

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Lead Stories

Exclusive: Friedman could become Nasdaq CEO next year – sources
John McCrank and Greg Roumeliotis – Reuters
Nasdaq OMX Group Inc lured back former Chief Financial Officer Adena Friedman as co-president with the understanding that she will succeed Chief Executive Bob Greifeld, possibly as soon as next year, sources familiar with the matter said.
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Payments to Big Brokers Under Fresh Scrutiny – MoneyBeat
MoneyBeat – WSJ
Discount brokerages are in the spotlight again for a practice that generates hundreds of millions of dollars in revenue for them annually. Payment for order flow, where a brokerage sells its orders to a trading firm for a fee, has been an issue in the markets for decades, but it is under increasing scrutiny from the New York Attorney General and others lately.
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Exchanges line up to buy index operations as banks bail out
Tim Cave, Anish Puaar and Sarah Krouse – Financial News
Exchanges are stepping up their efforts to expand into indices and benchmarks to help them launch new derivatives products and profit from rising demand for passive investment.
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SEF trading hits new highs
Anish Puaar – Financial News
Trading of interest-rate swaps on new derivatives platforms created under Dodd-Frank hit its highest level since the introduction of new US rules in May, with Icap’s London-based venue now leading the way in market share.
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Exchanges turn multi-purpose to build revenues
Tim Cave and Anish Puaar – Financial News
The European trading landscape is increasingly littered with misnomers, and few are worse than “stock exchange”. Exchanges are less and less likely to trade only stocks, and the bigger they are, the less likely they are to remain purely exchanges.
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LME, Others Vie to Replace London Silver Fix
WSJ
Ten different groups are vying to replace the historic London silver fix, according to the London Bullion Market Association. The LBMA said Friday it will whittle these down in the coming days to a shortlist that will be invited to a meeting in London on June 20 where they will present their plans to the LBMA’s 76 members, which include banks, metals refiners and miners.
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Bond’s Liquidity Threat Is Revealed in Derivatives Explosion
Anchalee Worrachate and Liz Capo McCormick – Bloomberg
The boom in fixed-income derivatives trading is exposing a hidden risk in debt markets around the world: the inability of investors to buy and sell bonds.
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Cost of insuring against bank defaults back at pre-crisis levels
Tracy Alloway and Tom Braithwaite in New York – Financial Times
The cost of insuring against global bank defaults has plunged to its lowest level since the financial crisis in a sign that investors are willing to bet the industry has become safer.
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China bourse approves landmark securitisation deal
Financial Times
The Shanghai stock exchange has approved a deal to list a securitised product backed by bank loans, marking a major step for China’s fledgling securitisation market. China’s Ping An Bank is poised to list an asset-backed security (ABS) backed by small consumer loans totalling Rmb2.63bn ($423m), the exchange said over the weekend, the first time a credit-backed security will trade on a Chinese bourse.
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UBS Pursuit of Brazil High-Frequency Trading Brings No. 1
Cristiane Lucchesi – Bloomberg
UBS AG’s bet on high-frequency trading helped it overtake Swiss rival Credit Suisse Group AG in Brazil’s equity markets for the first time.
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Regulatory

Conflicts of interest a key concern for Finra
Jessica Meek – Risk.net
Regulators on both sides of the Atlantic are concerned about the risk of conflicts of interest, OpRisk Europe heard this week. Finra says it’s a key concern
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U.K. Prosecutor Raids Triple After Years of Bungled Cases
Suzi Ring – Bloomberg
The U.K. Serious Fraud Office tripled the number of raids it carried out in the last year, in a sign the agency is trying to rebuild its image as a tough prosecutor after years of collapsed cases.
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Sen. Brown to SEC: Stop Giving Banks a Pass on Wrongdoing
Andrew Ackerman – MoneyBeat – WSJ
A key Senate Democrat is criticizing the Securities and Exchange Commission for granting special waivers and reprieves to financial firms involved in significant misconduct.
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The heavy burden of regulatory settlements
Marcelo Cruz – Risk.net
Recent regulatory penalties and settlements have underlined the degree to which operational risk figures are influenced by a few tail losses – and the need for models to reflect this
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ESMA Calls For Improvements In Disclosures Related To Business Combinations
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[AMF Canada] Fund Facts – Helping consumers make better investment decisions
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[AMF Canada] Complaint Reporting System (CRS) – Firms have until July 30, 2014 to file their report
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Exchanges & Trading Facilities

Chi-X Australia Halts Equity Trading Due to Technical Fault
Adam Haigh – Bloomberg
Chi-X Australia Pty. halted its stocks trading platform for the remainder of today after a technical fault.
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LME New Clearing House Looks at Expanding Collateral to Warrants
Reuters
The London Metal Exchange’s (LME) new clearing house – in the midst of testing ahead of a September launch – is looking into expanding types of allowed collateral to include warehouse warrants.
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Oslo Børs – Millennium Exchange: Release 8 Goes Live On Monday 16 June 2014
Oslo Børs is pleased to confirm our decision to Go Live with Millennium Exchange Release 8 for the Equities- and Fixed income markets on Oslo Børs, Oslo Axess, Nordic ABM and the Burgundy markets as of start of trading Monday 16 June 2014.
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BATS sets integration test dates for Direct Edge clients
The Trade
To help all Direct Edge members meet their mandated recertification of their preferred order-entry protocols for its EDGA and EDGX exchanges, BATS Global Markets has announced four weekends when firms will be able to test their systems with the new matching engine platforms that power the BZX and BYX exchanges.
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TOM MTF Statistics Week 24, 2014
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OneChicago Holiday Notice – Independence Day July 4th
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Hedge Funds & Managed Futures

Pension Funds, Dancing a Two-Step With Ratings Firms
NY Times
Pension fund investors lost billions of dollars trusting the rosy credit ratings stamped on troubled mortgage securities before the 2008 crisis. In its aftermath, they have spent years and many dollars suing Moody’s and Standard & Poor’s, the main purveyors of those dubious grades.
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Jeff Skoll’s Ex-Money Manager Opens Private-Equity Firm in Omaha
Margaret Collins – Bloomberg
From offices in Omaha and Silicon Valley, Stephen George took Jeff Skoll’s fortune and helped create a family office that invested like a private-equity firm, taking bets on technology, healthcare and clean energy.
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Schroders plays down acquisition talk
Joe McGrath – Financial News
Schroders has denied that it will need to make acquisitions to achieve its ambitious US growth targets, pledging instead to hire more staff in insurance sub-advisory, multi-asset and distribution to bolster its North American business.
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Q&A with Franklin Templeton’s institutional head: ‘We are increasing headcount’
Andrew Pearce – Financial News
A year on from being named as Franklin Templeton’s head of institutional for UK and Ireland, Jill Barber talks team growth plans, product launches and her approach to the role.
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Vanguard’s Europe veteran to retire
Andrew Pearce – Financial News
Vanguard’s chief investment officer for Europe will step down from his role at the end of the year, bringing to a close a 27-year stretch at the asset manager.
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Number of asset managers to halve by 2030 – KPMG
Reuters
Half of the firms in the global asset management industry will be gone by 2030 as new technology, demographic shifts and changing social habits transform the industry, consultants KPMG said in a report.
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Underperformance Rife Among Active Mutual Fund Managers
UK Investors Would Be 1.44% P.A. Better Off Switching To A Passive Tracker Fund
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Wadhwani advocates defensive hedge fund position
Margie Lindsay – Risk.net
Sushil Wadhwani’s route to hedge funds took him through academia into Tudor Investments where he learnt the basics about running a hedge fund and gained the confidence to start his own business
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USS IM cajoles hedge funds to behave better
Margie Lindsay – Risk.net
As the hedge fund industry continues to attract institutional money, greater emphasis is being placed on corporate governance by investors who want to see more transparency around directorships
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Hedge funds ‘biding their time’ to file Euribor suits
Luke Smolinski – Risk.net
US hedge funds have expressed interest in suing investment banks over the manipulation of benchmark interest rates such as Euribor and Libor, but will not take action until more evidence is revealed, according to people familiar with the matter.
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Managers target insurers’ asset pool
Joe McGrath View Social links for Joe McGrath – Financial News
Europe’s asset management bosses have set their sights on winning insurance clients, investing in talent and infrastructure in the hope of attracting new revenue.
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Pension schemes urged to hedge against tail risk before volatility returns
Peter Davy – Financial News
Pension funds should be taking advantage of low volatility and recent stock market gains to hedge against the risk of extreme events hitting their funding positions, according to leading investment advisers.
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CFTC Commitments Of Traders Reports Update
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Banks & Brokers

Barclays Keeps The Capital Flowing For Stock Offerings
Telis Demos – MoneyBeat – WSJ
When investment banks slim down, one department often seems to get a pass: Stock underwriting. Case in point: Barclays.
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J.P. Morgan Bankers to Spend More Time with Family (Offices)
Emily Glazer – MoneyBeat – WSJ
J.P. Morgan & Co. recently announced two of its investment bankers will focus on family offices as those firms look to do more direct investments and seek new ideas, according to people familiar with the matter and a company memo reviewed by the Wall Street Journal.
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Clearing & Settlement

Swap futures no threat to brokers – Icap Sef chief
Tom Osborn – Risk.net
Swap futures are no threat to volumes in the interdealer over-the-counter market, because exchanges are marketing them primarily to end-users as a lighter-margin alternative to the traditional swap product, according to a senior executive at Icap.
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Eurex calls for capital relief on segregated accounts
Cecile Sourbes – Risk.net
Regulators should provide a capital incentive for the use of segregated accounts in derivatives clearing, because they reduce risk if a member defaults, according to Matthias Graulich, global head of clients and markets at Eurex Clearing. The argument is that segregated collateral can be ported away from a stricken clearing member more easily, shrinking the amount of risk for which the firm is responsible.
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Feel the pressure: BoE adds to stress of clearing houses
Dan Barnes – Financial News
Procyclicality may not be a word that’s often used in polite conversation – but it is a bad thing. It is a term used by the Bank of England in its review of clearing houses, published in May, and it refers to the tendency of players in a stressed market to behave in ways that make the stress worse.
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Indexes & Products

ING Launches NL20 Index Sprinters
Today TOM proudly announces that ING Bank has started offering Sprinters based on the NL20 Index. The products will be tradable as of 16 June 2014 and will offer the possibility to profit from leveraged participation in the price movement of the NL20 Index. More information can be found on https://www.ingsprinters.nl/.
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China ETF Hedging Costs at Record Low on Stimulus Wagers
Belinda Cao – Bloomberg
The cost of hedging against losses in the largest Chinese exchange-traded fund in the U.S. has fallen to a record low on optimism that government stimulus will help sustain growth in the world’s second-biggest economy.
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ETF strategy waits to gain in currency
Peter Davy – Financial News
While investors have been ploughing money into exchange-traded products over the past few years, niche exchange-traded funds that specialise in currency strategies have proved an exception to the rule.
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Thai Bourse Announces SET Indices Semi-Annual Review Results
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Technology

Where Are We Now? The Era of Trade Surveillance Automation
Becca Lipman – Wall Street & Technology
The history of trade surveillance tools may not sound interesting, but Bill Nosal, head of strategic product management, SMARTS, NASDAQ OMX, begs to differ. At the Wall Street & Technology Analytics Edge event, Nosal wove a story of surveillance that demonstrated the leaps and bounds the industry has made in the last two years. The steep innovation curve surveillance is still climbing.
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Who’s Who at SIFMA Tech 2014
Faye Kilburn – WatersTechnology
This year a varied range of new faces from Big Data players to communications and cloud services providers will exhibit at the annual SIFMA Technology exhibition, along with some of the more familiar names in the industry. So if you’re unsure how to spend your time at the SIFMA show this year, consult our guide to the key exhibitors to see which will be worth your while.
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Enforcement

U.S. to sue Citigroup over faulty mortgage bonds -sources
Reuters
The U.S. Department of Justice is preparing to sue Citigroup Inc on charges that the bank defrauded investors on billions of dollars worth of mortgage securities in the run-up to the financial crisis, after talks to resolve the probe broke down, people familiar with the matter said on Friday.
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Citigroup and U.S. Deadlocked in Settlement Talks
MICHAEL CORKERY – Dealbook – NY Times
Talks between the Justice Department and Citigroup to settle a civil investigation into its sale of shoddy mortgage investments have deteriorated in recent days, as the sides are deadlocked on how much money the bank should pay.
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SEC charges four in California with insider trading
Reuters
The U.S. Securities and Exchange Commission on Friday charged four San Francisco-area men with insider trading in Ross Stores Inc stock options, and one of the four with insider trading in stock options of a company that was later bought by Oracle Corp.
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UPDATE 1-French fin min sees progress towards more equitable U.S. fine for BNP Paribas
Reuters
France’s finance minister said on Sunday that talks between BNP Paribas and U.S. authorities over a potential fine for the bank for breaching U.S. sanctions had progressed towards a “more equitable” level.
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Ex-Goldman trader alleges arbitrators pre-judged pay dispute ruling
Reuters
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Ex-Goldman Director Gupta’s Last Days of Freedom
ANITA RAGHAVAN – Dealbook – NY Times
On Tuesday, Rajat K. Gupta, the former managing director of the consulting firm McKinsey & Company who was convicted of insider trading, is scheduled to report to a minimum-security prison camp in Massachusetts, spending the next two years not far from his one-time friend and partner in crime, Raj Rajaratnam.
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Fund founder Rajaratnam’s brother faces U.S. insider trading trial
Reuters
In 2011, former billionaire and hedge fund manager Raj Rajaratnam was convicted for insider trading and sentenced to 11 years in prison. When his younger brother goes to trial on Tuesday in his own insider trading trial in New York, he hopes for a better fate.
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Environmental & Energy

Keystone XL vote coming soon
Laura Barron-Lopez and Timothy Cama, The Hill
Made you look: There will be a vote on the controversial Keystone XL pipeline next week, but not the one you think. The Senate Energy and Natural Resources Committee will vote on legislation that would approve the pipeline, not the entire chamber.
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***LB: Also in this story “The pro-Keystone bill will likely easily pass out of committee, but getting it to the Senate floor is a whole other ballpark.”

Canada pushes for Keystone pipe approval
Ed Crooks, Financial Times
Canada is in talks with the US on renewable energy and other plans to curb greenhouse gas emissions in an effort by Ottawa to secure White House approval for the Keystone XL oil pipeline.
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Why Elon Musk Just Opened Tesla’s Patents to His Biggest Rivals
Ashlee Vance, Bloomberg Businessweek
Annoyed, frustrated and exasperated, Elon Musk has decided to give Tesla Motors’ patents away.
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Asia-Pacific

Japan’s Third-Largest Pension Fund Cautious on Change
Eleanor Warnock – MoneyBeat – WSJ
Some investors and policy makers are hoping a possible move by Japan’s largest pension fund to buy more domestic shares will also prompt a wider trend among the nation’s pensions to invest more in the stock market. The mere mention of a revised allocation of assets at the fund sent share prices soaring recently.
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Frontier Markets

CBRE: Middle East SWFs To Spend $180 Billion on Real Estate Abroad
Nicolas Parasie – MoneyBeat – WSJ
Middle Eastern investors led by the region’s sovereign wealth funds are likely to pour an additional $180 billion in commercial real estate around the globe in the next decade alone, according to property consulting and research firm CBRE.
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Too much of a good EM thing is just right
James Mackintosh – Financial Times
It took exactly a year for emerging market bond investors to make back their losses from last May’s taper tantrum. After losing 12 per cent in short order when Ben Bernanke raised the prospect of ending bond buying by the US Federal Reserve he chaired, the eventual calming in long-term US rates helped bulls return to the market.
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Indonesia joins EM rush to issue euro debt
Robin Wigglesworth – Financial Times
Developing countries are rushing to issue debt in euros at the fastest pace on record to take advantage of Europe’s ebullient bond market, with Indonesia the latest to prepare a debut or return to the eurozone bond market.
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Africa attracts growing interest from ETF providers
Deborah Fuhr – Financial News
A burgeoning middle class and recent rule changes that make it easier to sell foreign financial products are increasing Africa’s attraction as a market for exchange-traded funds.
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India-focused hedge funds up 17% on Modi election victory
Justin Lee – Risk.net
Hedge fund investment to rise on the back of decisive election victory by India’s Bharatiya Janata Party with US firms tipped to increase their holdings significantly soon
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The Saudi Stock Exchange Becomes An Affiliate Member To IOSCO, Strengthening International Links
Effective May 20th, 2014 the Saudi Stock Exchange (Tadawul) was granted Affiliate Membership with the International Organization of Securities Commissions (IOSCO), an international body that promotes high standards amongst regulators and leading stock exchanges around the world.
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The Egyptian Exchange (EGX) Monthly Statistical Report May 2014
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Nigerian Stock Exchange Weekly Report For The Week Ended June 6, 2014
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