John Lothian Newsletter: Gibson-Smith to step down as LSE chairman; CME starts review of electronic livestock trade hours; Time called on the London gold fix

Jul 17, 2014

First Read

You’re up!
Jim Kharouf
John is taking the next couple days off as well as next week and like a good manager, simply told the rest of us to do the editing job. As you can see, it takes three of us and that’s without a guest editor. Speaking of which, Jeremie Bacon, president of Orc Americas, will be our guest editor next week.

We’re also nearing the opening of our MarketsWiki Summer Intern Series, which starts at 3:30 pm on July 29th at Illinois Institute of Technology, 565 W. Adams in Chicago. Great venue and a great list of speakers for opening day. For info and the sign up form, please visit our website HERE

And you can say, yeah, yeah, I’ll get to it. But don’t delay!


Execution Equalizer: Christian Hauff Talks Trade Execution Quality and TCA
While electronic platforms and trade algorithms have made for more efficient markets, some buyside participants believe it comes at a cost, and the cost is execution quality. Christian Hauff, co-founder and CEO of Quantitative Brokers says these same modern tools can help the buyside obtain better execution, as well as better transaction cost analysis (TCA).

Watch the video »


Oil Futures Trading In Troubled Waters
Streetwise Professor
A recent working paper by Pradeep Yadav, Michel Robe and Vikas Raman tackles a very interesting issue: do electronic market makers (EMMs, typically HFT firms) supply liquidity differently than locals on the floor during its heyday? The paper has attracted a good deal of attention, including this article in Bloomberg.

**JK – Let’s hear it for the pits! You three, we’re glad you’re still there.


Fink Says Federal Regulatory Process Needs Transparency
Mary Childs – Bloomberg
BlackRock Inc.’s Laurence D. Fink, chief executive officer of the world’s biggest money manager, said the regulatory process for identifying systemic risks in the financial markets needs to be more transparent.

**JK – Always interesting to hear about transparency from a firm called BlackRock.


The 10 most endangered jobs in 2014
Some of the jobs are threatened by longer term trends, such as newspaper reporters, who have a hiring outlook of -13%. According to the report, “Layoffs and furloughs in the industry are commonplace.” Other industries, though, can become endangered with the sudden invention of a new technology.

**JK – #4 is Newspaper reporter. My parents are so proud I chose this profession.


Wall Street Techs Take Secrets to Next Job at Their Peril
Chris Dolmetsch and Tiffany Kary – Bloomberg
The plan was for Kang Gao to do his exit interview with Two Sigma Investments LLC, a $21 billion quantitative hedge fund in New York, and jump to Citadel LLC, a rival firm in Chicago. Gao never got that chance.

***JM: As long as this stays as an issue of “he walked out with our files” and doesn’t drift into “he reinvented his idea at another firm,” then I’ve got no problem with the prosecution. A firm can own IP, but not the experience one takes to a new job…


World Of Opportunity Chicago 2014: Chris Hehmeyer (Promo)
Our MarketsWiki World of Opportunity Summer Intern Education Series in Chicago is quickly approaching. Chris Hehmeyer, CEO of HTG Capital Partners, will be discussing the future of pricing, and how it will be more accessible to the public.

For more information on the event and how to register, click here.

Watch the video »


Compliance Training Goes From Mindless to Competitive With Game Mechanics
Becca Lipman – Wall Street & Technology
The New York startup True Office, is helping financial firms do the impossible: Make compliance training interesting, engaging, and more effective. The secret weapon? Video game mechanics.

***JM: Woohoo, I’m a level 35 Compliance Warlock!


MIT Invents A Shapeshifting Display You Can Reach Through And Touch
We live in an age of touch-screen interfaces, but what will the UIs of the future look like? Will they continue to be made up of ghostly pixels, or will they be made of atoms that you can reach out and touch?

***JM: Reach out and touch the profits. Hope I am around to see “grab trading” arrive…



MarketsWiki Page of the Day
Jump Trading

MarketsWiki Recent Updates


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Lead Stories

Gibson-Smith to step down as LSE chairman
Philip Stafford – Financial Times
Chris Gibson-Smith is to step down as chairman of the London Stock Exchange Group next year after more than 11 years in the role, he announced at the group’s annual shareholder meeting on Wednesday.

CME starts review of electronic livestock trade hours, may be cut
The Chicago Mercantile Exchange has started a review of electronic trading hours in its cattle and hog contracts, it said on Tuesday, and trade sources said talks have focused on reducing hours to keep the contracts attractive.

Time called on the London gold fix
Neil Hume and Xan Rice – Financial Times
The near-century old gold fix could soon be history after the four banks that run the global benchmark said they were seeking an independent party to take over the twice-daily fixing process.

New silver price is ‘improvement’ on fix
Xan Rice – Financial Times
The unfortunate name will disappear. So too will the private teleconference, as well as the ownership by a handful of banks that have run the London Silver Fix – the global benchmark price – since 1897. And the cloak of secrecy over the trading volumes will be lifted.

Goldman seeks commodities edge as rivals retreat
Gregory Meyer and Neil Hume – Financial Times
Goldman Sachs’ commodities business, known for its muscular trading operation, is rapidly expanding in a plainer and less politically charged area even as listless markets and increased regulation force rivals to beat a retreat.

Top Justice Official Tells Banks Lawsuits May Be Coming
Andrew Grossman – MoneyBeat – WSJ
The Justice Department official leading the high-stakes talks with the nation’s largest banks over soured mortgage securities suggested Wednesday that lawsuits could be coming against institutions that don’t offer to pay large enough settlements and admit past misconduct.

Druckenmiller Says Fed Policy Underappreciates Risk
Katherine Burton – Bloomberg
Stan Druckenmiller, the hedge-fund manager with one of the best track records over the past three decades, said the Federal Reserve’s policy of keeping interest rates near zero for so long is baffling and risky.

The Beginning of the End for Bundled Commissions?
Rebecca Healey – TABB Forum
How research is provided by the sell side, quantified by the industry and paid for by the buy side looks set for even further change in the UK. But will this champion a new era of fair, transparent and competitive financial services, or risk throwing the future of the UK’s profitable asset management industry to the wind?


Trade reporting fines on the horizon
Jon Watkins – The Trade
Regulators are set to clamp down on widespread trade reporting breaches across Europe as a six-month grace period since the rules were introduced expires, according to industry sources.

U.S. SEC set to take aim at costly mutual funds, bad brokers
Suzanne Barlyn – Reuters
A U.S. Securities and Exchange Commission official offered a sneak peek on plans for examining brokerages in 2015, indicating it would likely focus on sales of expensive mutual funds and have a “laser like focus” on problem brokers and firms.

FCA and ESMA align to fight for tough new unbundling rules
John Bakie
UK regulator the Financial Conduct Authority (FCA) has toughened up its stance on using dealing commissions to pay for research, following support for its new rules in MiFID II.

Esma clearing draft prompts new focus on frontloading
Fiona Maxwell –
Banks may seek to insert new termination clauses in contracts with some clients, as they prepare for an 18-month frontloading window to open

SEC heralds new auditor focus with EY lobbying fine
Alexander Campbell –
The US Securities and Exchange Commission’s $4 million fine for auditor EY for prohibited lobbying on its clients’ behalf emphasises the regulator’s focus on “gatekeepers”, including accountants, lawyers and internal compliance officers as well as auditors.

Exchanges & Trading Facilities

ICE Brent Crude Benchmark Sets New Daily Volume Record
Intercontinental Exchange, the leading global network of exchanges and clearing houses, today announced that ICE Brent Crude futures achieved a daily volume record of 1,526,965 contracts on July 15, 2014. The previous daily volume record was 1,451,481 on July 11, 2014.

Liquidnet H1 volumes boosted by continental Europe focus
The Trade
Institutional block trading network Liquidnet has seen record European trading volumes in the first half of 2014 after focusing on building its presence in continental Europe.

LSE’s core returns to the fore
Tim Cave – Financial News
Traditional equity businesses returned to the fore at the London Stock Exchange during its first quarter as a “resurgent” IPO market helped to drive the group’s revenues up by a fifth.

TFEX To End Silver Futures From Night Session Of July 31, 2014
Thailand Futures Exchange PCL (TFEX), under the Stock Exchange of Thailand group, has received an approval from the Securities and Exchange Commission, allowing the exchange to remove silver futures from its trading board, effective from the night session of July 31, 2014. Trading of silver futures will remain operating until the end of afternoon session of that date.

BME And Bolivia’s Stock Exchange To Upgrade Trading Platforms Of Bolivia Exchanges – BME’s Commitment To Latin America Remains Strong

Irish Stock Exchange Reports Strong Growth In Trading Volumes In H1 2014

Hedge Funds & Managed Futures

BlackRock Results Top Expectations
Michael Calia – MoneyBeat – WSJ
BlackRock Inc. said its second-quarter profit and revenue jumped as assets under management surged, helping the firm’s results top analysts’ expectations.

Blackstone pays 3.6 bln euros for Catalunya Banc mortgage portfolio
U.S. investment fund Blackstone paid 3.615 billion euros ($5 billion) for a portfolio of home loans belonging to Spain’s bailed-out Catalunya Banc, the lender said on Thursday, confirming an earlier Reuters story.

UPDATE 1-Bank of England says some investment funds less liquid than they look
David Milliken – Reuters
Investment funds focused on emerging economies or high-yield debt may be unable to return investors’ money promptly if turmoil hits markets, the Bank of England’s financial stability chief warned on Thursday.

eVestment’s Latest Hedge Fund Asset Flows Report: Hedge Fund Asset Flows Still Up, But Slowing – Event-Driven Strategies, Large Funds Big Winners

Banks & Brokers

Bank of America’s Settlement Negotiations Hit a Snag
MICHAEL CORKERY – Dealbook – NY Times
Once again, Bank of America’s troubled past is clouding its present and future. After months of negotiations, a possible settlement with the Justice Department is in jeopardy over a disagreement on the bank’s liability for the suspected mortgage misdeeds of its Countrywide Financial and Merrill Lynch units, people briefed on the matter said.

Brokers Move Up Wall Street’s Ranks
Corrie Driebusch – WSJ
When Nicholas Pepe worked for UBS AG’s investment bank in the 1990s and early 2000s, bankers tended to look down on retail brokers, disparaging the job as “akin to a used-car salesman,” he says. Now Mr. Pepe, 54 years old, is a broker himself at UBS Wealth Management Americas, and he senses the view has changed.

ICAP CEO Says Some Parts of Brokerage Market Facing Drought
Richard Partington – Bloomberg
ICAP Plc Chief Executive Officer Michael Spencer said parts of the brokerage market will continue to grapple with the worst “drought” in at least 30 years.

TriOptima success masks ICAP’s revenue drop
Jon Watkins
ICAP’s post-trade and risk management arm, TriOptima, has seen double-digit revenue growth over the past three months, where the firm’s other operations have fallen.

Tullet appoints new chief executive officer
The Trade
Interdealer broker Tullett Prebon is set for a change at the top after naming Nomura’s former European head, John Phizackerley, as its CEO.

New Tullett CEO John Phizackerley taking on a business with challenges
Sarah Spikes – Financial News
The incoming chief executive of interdealer brokers Tullett Prebon, John Phizackerley, is joining a world stuffed with big personalities – and big challenges.

Icap revenues fall as broking struggles to find its voice
Anish Puaar – Financial News
Growth in post-trade services continue to prop up Icap’s revenues amid continuing declines for the interdealer broker’s traditional voice broking business.

JPMorgan Chase Profit Drops 8% In Slow 2Q
JPMorgan Chase said net income fell in the second quarter to $6 billion. The nation’s largest bank reported second quarter earnings were down from last year as net income fell $500 million from last year. Earnings per share were $1.46 on revenue of $25.3.

Profits Sink At BofA As Litigation Eats Into Results
Bank of America said income and revenue fell in the second quarter as expenses related to legal issues continued.

Handful of non-EU banks to make European stress tests debut
Laura Noonan – Reuters
A handful of global banks are bracing themselves for their first results from Europe’s bank stress-testing regime, which will tell them in October whether they have enough capital to withstand future crises.

‘Fake’ Law Firm Letters Make a Fresh Appearance
Max Colchester – MoneyBeat – WSJ
British lender? Want to get your money back? Try a letter from a solicitor with a strange sounding name. In the last week a minor scandal erupted in the U.K. over the sending of threatening letters to indebted customers from law firms that were actually part of the banks.

Clearing & Settlement

Sef challenges remain despite busy June
Joe Parsons – Futures & Options World
The new breed of US swap trading systems face numerous challenges in the coming months despite the so-called swap execution facilities (Sefs) seeing record volumes last month. The Futures Industry Association’s (FIA) swap execution facility (Sef) tracker said there was a significant uptick of over-the-counter (OTC) derivatives in June after months of relatively slow trading in the aftermath of execution reforms that took effect in February.

Indexes & Products

Exchange-Traded Products Hit Record Assets in Europe
Chiara Albanese – MoneyBeat – WSJ
European investors are developing a taste for passive funds. Rather than picking individual stocks or selecting individual fund managers, many investors are piling into investment products that are traded on exchanges like a regular stock but that mirror the performance of an index based on shares, currencies, commodities or interest rates.

ETP providers build out currency products
Farah Khalique – Euromoney Magazine
Exchange-traded product (ETP) provider ETF Securities launches its first range of currency basket ETPs in Europe on the Deutsche Boerse this week, as European investors become more familiar with the asset class and providers concoct increasingly sophisticated products.

Bloomberg-Rebranded UBS Indexes Continue Availability on Rimes BDS
Max Bowie – WatersTechnology
Managed benchmark data services provider Rimes Technologies has added Bloomberg index data from Bloomberg to the range of data sources available via its Benchmark Data Service, which provides cloud-based data collection, validation, transformation, storage and distribution for buy-side clients.

Xetra/Börse Frankfurt: New Issuer Boost ETP Launches Four Leveraged Exchange-Traded Notes On Xetra


Catch Me if You Can: Risk Hidden in Plain Sight
Mitchel Kraskin – Wall Street & Technology
The digital revolution hasn’t yet reached all four corners of the enterprise. Paper-based data and manual workflows are hotspots for risk and are ripe for modernization.

Options Partners with Orchestrade to Deliver A Fully Managed Platform for Cross-Asset Trading
Options, the leading private financial cloud provider for the global capital markets industry, today announced that it has partnered with Orchestrade Financial Systems to deploy its fully integrated position keeping, operations and risk management software to the Options platform. The partnership sees the IaaS provider offer clients a flexible, fully managed and hosted platform for cross-asset trading.

Asset Control Hires SunGard Exec to Manage New Asian Hub
Nicholas Hamilton – WatersTechnology
Asset Control is consolidating its regional Asian offices into a single hub in Singapore and has hired Franck Peltier, a former SunGard Asia chief operating officer (COO), as managing director for Asia-Pacific (APAC).


SEC Announces Charges in Scheme to Secretly Enable Lawbreakers to Run Microcap Company
The Securities and Exchange Commission today announced fraud charges against four individuals and a microcap company for concealing from investors that two lawbreakers ran the company.

Environmental & Energy

Europe mulling energy efficiency target below Juncker’s 30% ‘minimum’
The European commission is considering an energy-saving goal for 2030 of less than 30%, according to a document seen by Reuters, setting it at odds with designated commission president Jean-Claude Juncker.

EU study finds green economy can boost jobs
The Recycler
The study from the European Environment Agency (EEA) found that both jobs and innovation could grow from a resource-efficient, green economy.

China Clarifies its Plans on Setting a CO2 Emissions Peak
Andrew C. Revkin, The New York Times
With climate treaty negotiations expected to intensify next year, China is signaling that it may soon set the timetable for hitting an eventual peak in its emissions of carbon dioxide, the most important human-generated greenhouse gas.


Exclusive – Red flags: Alibaba’s Ma and Ma’s private equity firm
When a fast-growing private equity firm co-founded by Jack Ma sought funding from institutional investors for the first time in early 2013, almost all had one major concern, its chairman said: was the firm independent from Ma, the influential executive chairman of Alibaba Group Holding, China’s e-commerce giant.

Asian market volumes struggle in H1
The Trade
Equity trading volumes in the first half of 2014 have been lacklustre across Asia’s core markets, in sharp contrast to other parts of the world. Australian trading turnover during H1 2014 reached AU$421.77 billion, down 11.4% from AU$476.3 billion in the same period last year.

Frontier Markets

UCX suspends trade within 18 mths of launch
Business Standard
Within 18 months of commencing operations, IT People-promoted Universal Commodity Exchange (UCX), India’s sixth nationwide commodity futures trading platform, has suspended trade in all commodities, with immediate effect.

Islamic finance: UK sukuk makes a modest bang for a catalyst
Chris Wright – Euromoney Magazine
The UK sovereign has completed its first sukuk, with considerably more fanfare than scale: the deal raised just £200 million of five-year funds. But the modest scale was intentional – total orders topped £2.3 billion – and the issue was much more about a statement of intent than any need for funds.

Long-only hedge funds hold key to emerging markets
Alexandra Coupe –
Addressing common institutional approaches to long-only emerging markets allocations, hedge funds are less volatile and produce higher returns than mutual funds or ETFs

Tel Aviv Stock Exchange Dials Mobile Data App
Giulia Lasagni – WatersTechnology
The Tel Aviv Stock Exchange has launched a mobile application designed to provide investors with a selected and user-friendly view of trading data.

BRICS set up bank to counter Western hold on global finances
Leaders of the BRICS emerging market nations launched a $100 billion development bank and a currency reserve pool on Tuesday in their first concrete step toward reshaping the Western-dominated international financial system.

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