John Lothian Newsletter: Germany, France seek to revive transaction tax plan; CME Group and ASX in talks over clearing link; EU lawmakers delay money market, benchmark rules

Feb 18, 2014

First Read

Brand New: Craig Donohue takes the reins at OCC
In January, Craig Donohue returned to the financial industry as the new executive chairman of the OCC, the world’s largest clearing house. Donohue, who stepped away from the financial markets after 25 years and the CEO post at the CME Group, spoke with Jim Kharouf, editor-in-
chief of John Lothian News about why he took the job, governance issues at the organization as well as where the OCC may be heading next.

Watch the video »


In Case You Missed It – JLN Managed Futures
John Lothian News
Though yesterday was a holiday in the U.S. market, we opted to publish our twice-a-month managed futures newsletter. It begins with our video interview with Mark de Souza of County Cork, LLC, and then dives in to a complete roundup of news about CTAs and managed funds.


Swaps Pioneers Recall Wild West History as Trading Goes Digital
Matthew Leising – Bloomberg
Once, the market for interest-rate swaps fit in your pocket. The year was 1982, when Thomas Jasper, the former Salomon Brothers Inc. banker who helped co-found the International Swaps & Derivatives Association, realized the time was right to open trading to speculators.

***DA: In case you are behind on SEF news, please visit the newly updated SEF page in MarketsReformWiki. It features a rundown of the rules, no-action letters, guidance, a summary table of all swaps made available to trade (MAT), and our recent three-part video series on SEF regulation, market structure and technology. Swing by the page, then tell your friends about it.


Eurex’s welcome transparency
Philip Stafford –
Absence of news, finding reasons for the rise or fall of a stock price can be a very difficult thing. With so many actors seeking different outcomes, sometimes offering precise reasons is close to impossible. Furthermore, as a stock market reporter a decade ago, I learnt that traders could also come up with post-event explanations at remarkable speed.

***DA: The key to good financial analysis is to be vague enough that you can be right no matter the outcome. Also, it helps to add qualifiers.


NYSE’s New York City Footprint May Shrink
Bradley Hope – WSJ
The New York Stock Exchange, an institution that has long been at the heart of downtown Manhattan’s identity, is considering a reduction of its presence there as its new parent company cuts jobs and moves positions out of the city.

***DA: The new owners are reducing NYSE’s physical presence in a lot of places.


Fidessa aims to take advantage of US swaps trading reform
Philip Stafford –
Fidessa is looking to exploit impending changes to US swaps trading as the UK trading technology company looks to its fast-growing derivatives business to underpin growth.

***DA: Right firm, right technology, right place, right time. Right?


FX Traders Facing Extinction as Computers Replace Humans
Ambereen Choudhury and Julia Verlaine – Bloomberg
A widening probe of the foreign-exchange market is roiling an industry already under pressure to reduce costs as computer platforms displace human traders.

***DA: Old FX traders never die, they just fade the benchmark settlement.


Trader stress hormones may exacerbate financial market crises
Financial markets may be more vulnerable to traders’ stress levels than previously thought, according to a scientific study which found that high levels of the stress hormone cortisol can induce risk aversion.

***DA: Risk aversion during times of stress? Can’t have that, can we?

***JM: Maker’s Mark: Bringing stability to financial markets since 1958…


Comment: Now or never for Europe’s exchanges
Philippe Carré –
European businesses are in a bit of a bind. The eurozone, with the exception of Germany, is depressed and the continent’s businesses need to invest to compete with their rivals in America and Asia.


A Conversation About Young Wall Streeters
Kevin Roose followed eight young Wall Street workers as they navigated the world of spreadsheets and suits. Think of the book as “Liar’s Poker,” updated with iPhones and heightened anxiety about the global economy.

***DA: And they had to add a digit due to bonus inflation. Now it’s “a billion dollars, no tears.”


Gary DeWaal’s Bridging the Week: February 10 to 14 and 18, 2014 (Mandatory Swaps Execution – or Not; What is a Derivative?; MF Global Redux)
Mandatory trading of certain interest rate swaps on swap execution facilities or designated contract markets has begun in the US, beginning the final steps in this country to achieve the September 2009 G-20 stated goal to have all standardized swaps cleared and centrally executed. However, package transactions involving multiple legs where only a portion may involve a swap required to be mandatorily executed on a SEF or DCM received a last minute reprieve last week from this requirement from the CFTC.



MarketsWiki Page of the Day
ICE Futures Canada

MarketsWiki Recent Updates


Steffen Köhler; Leigh Faber; Peter Reitz; Robert Krause; Craig S. Donohue

Companies, Organizations and Groups

ICE Futures Canada; Banco Central do Brasil




MarketsWiki Statistics

Lead Stories

Germany, France seek to revive transaction tax plan
Germany and France will lead a face-saving bid this week to revive a flagging project to tax financial transactions in 11 euro zone countries and allay fears it could hamper economic recovery.

CME Group and ASX in talks over clearing link
Dan Barnes – Financial News
The CME Group is in talks to develop a clearing partnership with the Australian Securities Exchange, as the US futures giant looks to push into the Asia Pacific over-the-counter derivatives market.

EU lawmakers delay money market, benchmark rules
European Union lawmakers have delayed new rules to regulate money market funds used by big companies to park billions of euros after they clashed over how tough the changes should be.

Transaction tax would cost UK savers 3 billion pounds
A planned tax on financial transactions in 11 euro zone countries would cut the value of household savings in non-participating Britain by 4.4 billion euros (3 billion pounds), a report for the UK financial sector said on Tuesday.

Ex-ICAP Brokers Likely Face Charges
British fraud prosecutors are likely to file criminal charges against three former ICAP PLC brokers for their alleged roles in the manipulation of benchmark interest rates, according to people familiar with the case.

The Libor Network Widens as SFO Pursues Fresh Criminal Charges
Phillipa Leighton-Jones – MoneyBeat – WSJ
Just over a month ago, we brought you a new interactive graphic that mapped the network of institutions and individuals embroiled in the wide-ranging Libor-rigging investigation spanning 11 countries and four continents. That network just got wider.

Call for Brent benchmark reform
Neil Hume in London –
The head of the world’s biggest oil trading company has called for immediate and far-reaching reform of Brent, the oil marker for more than half of the world’s internationally traded crude oil supplies.

Bitcoin’s Crisis Is Turning Point for Currency
Francesco Guerrera – MoneyBeat – WSJ
After weeks marked by technological breakdowns, regulatory issues and general questions over its viability, bitcoin is in the midst of the worst crisis since it was proposed in a white paper in 2008. The turmoil is a watershed.


OECD agreement promises Fatca for all
Alexander Campbell –
A proposed agreement on automatic sharing of tax data between governments, released by the Organisation for Economic Co-operation and Development (OECD), promises to extend the data exchanges included in the US anti-tax-evasion law Fatca to all participating governments – but the full details of how the process will work will not be decided until later this year.

ESMA Issues Q&A On Application Of AIFMD

Exchanges & Trading Facilities

London Metal Exchange to expand data access to spur computer-driven trading
The London Metal Exchange (LME) will expand direct access to data feeds from its electronic trading system, aiming to boost computer-driven trading, the exchange said on Monday.

BM&FBOVESPA Trading Hours – BM&F Segment

ASX Ltd Half-Year Edited Media Transcript

Warsaw Stock Exchange Awards Polish Capital Market Leaders For 2013

TOM MTF Statistics Week 7, 2014

Hedge Funds & Managed Futures

Private Equity Investors Push Fees to Record Lows
Ayesha Javed – MoneyBeat – WSJ
Investors in private equity funds are wielding their influence in negotiations with fund managers to push management fees to record lows, according to figures from Preqin.

Hedge fund investor appetite for Europe surges
Harriet Agnew – Financial News
After three years of turning their back on Europe, hedge fund investors are showing a dramatic resurgence in appetite for the region and want to put money to work, according to a new survey.

Wall Street Bond Dealers Renounce Treasuries That Lure Pimco
Cordell Eddings – Bloomberg
The world’s biggest bond dealers are showing almost no confidence in the best annual start for Treasuries (BUSY) since 2008.

EBA Launches Discussion On The Impact On The Volatility Of Own Funds Of The Accounting And Prudential Changes In The Treatment Of Defined Benefit Pension Plans

CFTC Commitments Of Traders Reports Update

Banks & Brokers

Goldman retreats from bond platform
Tracy Alloway and Michael Mackenzie in New York –
Goldman Sachs has quietly retreated from its electronic bond trading platform, in a move that highlights the challenges investment banks face in revamping their struggling fixed-income trading businesses.

Major banks’ commodities revenue slid 18 pct in 2013 -report
Commodities revenue at the top 10 investment banks dropped 18 percent in 2013 in a third year of declines due to weak investor interest and low volatility, a consultancy said on Tuesday.

Goldman names new Russia investment banking co-heads -memo
U.S. investment bank Goldman Sachs has appointed two heads of investment banking in Russia, according to an internal memo seen by Reuters.

Banks review rules on forex traders betting own money
Daniel Schäfer in London –
Lenders including Deutsche Bank, Royal Bank of Scotland and UBS are reviewing rules on currencies traders making bets with their own money, in another sign of how investigations into the forex market is prompting a crackdown on trading floors.

Credit Suisse replaces radical bonus scheme
Martin Arnold –
Thousands of Credit Suisse bankers will be offered a swap out of a radical bonus scheme that was designed to transfer risk from the bank to employees but fell foul of new capital rules.

Indexes & Products

Nasdaq OMX files with SEC to permit listing and trading of non-transparent ETFs
ETF Strategy
The Nasdaq OMX Group has filed with the US Securities & Exchange Commission (SEC) for a proposed rule change to permit the listing and trading of exchange-traded managed funds (ETMFs).

Impact Of Corporate Action Of Vodafone Group Plc On NASDAQ OMX Indexes

Xetra/Börse Frankfurt: New SPDR Bond Index ETF Launched On Xetra – ETF Tracks Corporate Bonds Denominated In Pounds Sterling

Methodology Of The Moscow Exchange Indices Calculation Has Been Registered


Trading-software maker Fidessa posts lower full-year profit
Trading-software maker Fidessa Group Plc reported a 2 percent drop in full-year profit as further consolidation, restructuring and closures in the financial sector continues to restrain growth.

This is Why Data Startups Are Disrupting Financial Analysis
Ivy Schmerken – Wall Street & Technology
A new wave of financial technology startups is making data analysis easier and more accessible to users. Seeking to disrupt the old business models of traditional financial analysis platforms, these new Web-based software startups are more open, collaborative, visually intuitive and cloud-based.

ICBC (London) Plc. Selects AxiomSL To Deliver ESMA EMIR Transaction Reporting
Single Integrated Platform Delivers PRA, FCA And BOE Regulatory And Reporting Requirements

Holding Slovenske Elektrarne Selects Trayport’s GlobalVision Trading Gateway To Drive Growth

London Stock Exchange Group (LSEG): Hellenic Exchanges Group Selects UnaVista Solution For EMIR Trade Reporting

Environmental & Energy

EU Leaders Said to Delay Decision on 2030 Carbon Target
European Union leaders intend next month to agree on a timeline for developing energy and climate targets for 2030, delaying a final decision on the policies, according to two people with knowledge of the matter.

Iran plans carbon emissions trading market, official says
Iran plans to set up a carbon trading market to reduce industrial emissions of climate-warming gas, an official from Iran’s Fuel Conservation Organization (IFCO) told oil ministry news service Shana.

Australia to review renewable energy target
Australia will review its mandatory renewable energy target (RET), the government said Monday, sparking concerns among green groups that a weaker target could pave the way for new coal plants and increased pollution.


Institutional investors back HKEx’s circuit breaker plan
Enoch Yiu | South China Morning Post
Some institutional investors are supporting the Hong Kong stock exchange’s decision to consider introducing circuit breakers to prevent computer-based high-frequency trading programs from causing market disruptions or distortions.

Nobel Winner’s Frank Advice to China’s Leadership
A. Michael Spence won the Nobel Memorial Prize in Economic Science in 2001 for esoteric research on how people make decisions when critical information is hard to obtain. But by that time, after more than a decade and a half as an academic dean at Harvard and Stanford, many of Mr. Spence’s colleagues had begun referring to him as a “former economist.” Mr. Spence, who turned 70 last year, begs to differ: He learned to become a better, “older” economist, he countered.

China’s PBOC Uses Repos for First Time in 8 Months
MoneyBeat – WSJ
China’s central bank used a tool it hasn’t touched in eight months to lock up cash Tuesday, the second week it has drained money flowing back into the financial system after the Chinese New Year holiday. But liquidity remains ample after the country’s bank lending jumped more than expected in January.

Japan’s Financial Services Agency: A New Member To The Panel For Vitalizing Financial And Capital Markets

HKEx Welcomes First International ETF On Mainland China’s Onshore Bond Market

Thai Bourse Market Report For January

Frontier Markets

Russian private equity firms set out on fundraising trail
Becky Pritchard – Financial News
Three Russia-focused private ­equity firms are raising new funds amid a challenging fundraising environment, according to people familiar with the matter.

Nasser Alsowaidi Opens The “Market Maker Conference 2014”
Abu Dhabi Securities Exchange (ADX) Organizes The Conference With More Than 300 Participants

RBS Approved To Issue Letters Of Credit For DME Trading Direct From Singapore

Lahore Stock Exchange Decided To Auction Two Trading Right Entitlement Certificates (TRECs) Of Expelled Brokers

CEO Of Qatar Investment Authority Outlines The Key Focusses Of The Fund

Nigerian Stock Exchange Weekly Report For February 14, 2014

John Lothian Newsletter

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CEO, Trading Technologies

Past JLN Newsletters

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