John Lothian Newsletter: Global exchanges line up for KRX stake; Barclays Dark Pool Trading Volume at Highest Since Suit; The ALS Ice Bucket Challenge is a Thing

Aug 19, 2014

First Read

The ALS Ice Bucket Challenge is a Thing
I Challenge You!
By John J. Lothian

Yesterday, Doug Ashburn challenged me to the ALS Ice Bucket Challenge. I am to either dump a bucket of ice water on my head, or to make a donation to ALS research. Doug did both, as I shared yesterday.

The Ice Bucket Challenge has become a thing. There is a good story about its impact in the New York Times in ‘Ice Bucket Challenge’ Has Raised Millions for ALS Association by Emily Steel.

You can’t argue with the success the Ice Bucket has had, with donations to the ALS Foundation up from $1.7 million to $13.3 million in about the two week period where it has been a thing, compared to a similar period last year.

I lost a good friend of mine to ALS. Jeff Partridge died at the age of 38 on May 10, 2000. Jeff was an incredible athlete, a natural at nearly every sport. We met when we played little league together in Wisconsin at about age 10.

For the rest of the story, visit the JLN blog at To jump right into “helping mode”, visit either David Setters’ giving page or the ALS Association home page. But either way, take the challenge, and send us your videos! We will compile them into a greatest hits video for all in the industry to see.


Day One in Shanghai
Ray McKenzie
John has asked me to write some thoughts on my first trip to Shanghai as I am here for a week of consulting with local futures industry organizations.

I have been to Hong Kong before but it was my first trip to Shanghai and I look forward to it with great anticipation.

For those of you who have been here before and are quite familiar with Shanghai no need to read further. But for those of you new to Shanghai my thoughts in the coming days may be of interest.


The Future of Best Execution
Steve Grob – Fidessa Fragmentation Index
I was chatting with a few work colleagues last Friday about best execution and derivatives. They confidently asserted that without real fungibility (i.e. the ability to trade the same instrument on different venues), price comparison is not possible and so any notion of best-ex was pretty meaningless.

By coincidence, I was later looking at the wording in the best-ex policy of my own broker (and yes, it was a slow afternoon). Interestingly though, it reminded me that best-ex is a much broader concept than just price comparison – it needs to take into account the liquidity, tradability and reputation of any venue, together with an assessment of my own sophistication/naivety.


TT’s Rick Lane to Host Reddit Chat
Rick Lane, CEO of Trading Technologies, will be a host for Reddit’s “Ask Me Anything” (AMA) on Tuesday 8/19 from 2-4pm CT. He’ll answer questions from the Reddit community about trading – which could cover topics like HFT, trading technology, visual programming, algorithmic trading, cloud technology, etc. Rick is looking forward to this session as it should give an opportunity for non-trading industry professionals to receive answers about the trading industry.

TT will be sharing the AMA link via the @Trading_Tech Twitter handle around 1:45pm tomorrow. You’ll need to create a Reddit login to participate.

***** Rick Lane is just too cool for school!


Systemic risks of e-trading demand new pre-trade risk controls
Charlie Woodward – The Trade
The increasing complexity of electronic trading systems pose fundamental risks to the stable functioning of financial markets and their participants, claims a new report, which proposes a set of pre-trade risk control best practices for tier I and II sell-side institutions.

***** I believe the increased complexity of the overall markets is an increased risk and we need a new generation of traders capable of managing those risks.


How to get ahead in the cloud
Futures & Options World
Markets dried out by central bank rate controls and illiquidity have led to tough choices about technology ownership within trading firms. “The enterprise software market has had to adapt to clients that don’t want to pay large sums of money to host systems themselves,” says Dan Retzer, chief technology officer for SunGard’s middle- and back-office automation platform, XSP. “Customers want to pay for what they use, for what they need, and to have flexibility in the future.”

***** The problem with the cloud is we all like sunny days.


Deutsche Börse Launches US Dollar Hedged Version Of HDAX
Deutsche Börse today launched the HDAX Hedged USD Index, which measures the performance of the underlying HDAX while eliminating foreign currency fluctuations. The HDAX Index measures all 110 stocks listed in the DAX, MDAX and TecDAX indices, representing more than 95 percent of Germany’s free-float market capitalization.

***** Nice new product with complexity removed, or added?



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Lead Stories

Global exchanges line up for KRX stake
Song Jung-a in Seoul and Jeremy Grant in Singapore – Financial Times
US exchange operator CME Group, Deutsche Börse of Germany and Standard & Poor’s have expressed interest in buying a stake in Korea Exchange (KRX) as part of their efforts to expand into Asia, South Korea’s bourse operator said.

Barclays Dark Pool Trading Volume at Highest Since Suit
Richard Partington – Bloomberg
Barclays Plc saw the volume of U.S. shares traded at its dark pool rise to the highest since it was sued by New York for allegedly lying to customers of the venue.

Possibility of ‘Brexit’ threatens London’s prospects
Martin Arnold – Financial Times
By this time of year, wealthy bankers in the City of London have usually jetted off to their summer holiday destinations. Tuscany, Provence and the Balearic Islands beckon. For all its charm, Dublin seems unlikely to top many of their lists.

Investors Raise Their Shields Against Russia-Ukraine Conflict
Ira Iosebashvili – WSJ
Investors are scrambling to reduce their exposure to the potential economic fallout from continuing fighting in Ukraine, unsettling already-fragile markets.


Fed Economists Criticize SEC Money-Fund Restrictions
Andrew Ackerman – MoneyBeat – WSJ
Federal policy makers are warning a central plank in the Securities and Exchange Commission’s plan to rein in risks posed by the $2.6 trillion money-market mutual-fund industry will inadvertently encourage investor stampedes rather than quell them.

Sanctions compliance a struggle for banks
Nick Kochan –
Sanctions compliance is no longer a backwater: a combination of growing use, more active enforcement and harsher fines for non-compliance means that no internationally active bank can ignore its importance

In Five Years, a Federal Prosecutor Has Taken On Terrorism, Corruption and Cuomo
The interview on public radio this April, a long-planned event to discuss a range of topics, seemed like a garden-variety appearance for Preet Bharara, the top federal prosecutor in Manhattan.

Exchanges & Trading Facilities

NASDAQ OMX’s Bob Greifeld talks R&D, private markets and what IR wants
Tim Human, Neil Stewart – IR Magazine
Following a big acquisition last year, NASDAQ OMX is now the world’s largest IR service provider. CEO Bob Greifeld answers questions on its future plans for the IR industry

CFTC Staff Issues No-Action Letter for the Chicago Mercantile Exchange, Inc.
The U.S. Commodity Futures Trading Commission’s (Commission) Divisions of Clearing and Risk and Swap Dealer and Intermediary Oversight (Divisions) today issued a no-action letter stating that the Divisions will not recommend that the Commission take enforcement action against: (1) the Clearing House of the Chicago Mercantile Exchange, Inc. (CME Clearing), (2) certain clearing members of CME Clearing, or (3) depositories holding customer funds for such clearing members, in connection with the execution and submission to the Commission of a modified version of the template acknowledgment letter in Appendix A to Commission Regulation 1.20.

Hedge Funds & Managed Futures

Pimco hires ex-Moore Capital senior portfolio manager Fahmi
Pimco said on Monday it hired Mohsen Fahmi, formerly of Moore Capital Management, as managing director and generalist portfolio manager focusing on global fixed income assets.

Former SAC Capital Advisors President Conheeney leaves firm
Svea Herbst-Bayliss – Reuters
Thomas Conheeney, who was president of Steven A. Cohen’s SAC Capital Advisors during the years the hedge fund was being investigated for insider trading, has stepped down from the position at successor organization Point72 Asset Management, Point72 said on Monday.

Argentina ‘Holdout’ Hedge Fund Plans London Outpost
Vivek Ahuja – MoneyBeat – WSJ
Aurelius Capital Management LP, one of the U.S. hedge funds whose long-running legal battle over bond repayments tipped Argentina back into default last month, is to open an office in London.

Threadneedle hires Chris Wagstaff as institutional marketing head
Mike Foster – Financial News
Chris Wagstaff, former trustee director to the Aviva Staff Pension Scheme, has been appointed head of institutional marketing at Threadneedle Investments.

Profits quadruple at Guy Shahar’s DSAM Partners
Vivek Ahuja – Financial News
Profits increased three-fold in the year to the end of March at the hedge fund set up by a former Goldman Sachs trading co-head and FN Rising Star.

Pound to exit Jupiter after 20 years as Global Energy shuts
Dan Jones – Investment Week
Jupiter Asset Management’s Derek Pound is to leave after 20 years of service as the group shuts its Global Energy fund, Investment Week can reveal.

Banks & Brokers

BofA’s Montag Becomes Sole COO as Darnell Seeks Transfer
Hugh Son – Bloomberg
Bank of America Corp. (BAC)’s Thomas K. Montag, the lender’s top-paid senior manager, will become sole chief operating officer as co-COO David Darnell takes a new title so he can move to Florida.

Santander’s Steve Bhatti on managing op risk at a diverse bank
Jessica Meek –
Steve Bhatti, chief operational risk officer at Santander North America, certainly has his hands full. From 700 retail branches to private banking to the money transfer business, he has plenty to oversee. He talks to OpRisk about dealing with different op risk profiles, vendor risk management and more

Deutsche Bank hires two IT chiefs to tackle control flaws
Tom Braithwaite in New York – Financial Times
Deutsche Bank has hired two technology executives as part of an effort to deal with more scrutiny from regulators, including over control failings identified by the Federal Reserve Bank of New York.

Clearing & Settlement

Eurex and LCH.Clearnet seek OK for inflation swaps
Tom Osborn –
CCPs hope to roll out inflation swap clearing early in 2015, but some dealers worry a mandate will follow

Russia Depository Fills Information Roles
Michael Shashoua – WatersTechnology
National Settlement Depository has named Alina Akchurina to run collateral management systems and hired Intesa Bank’s Svyatoslav Berezin as information security director

DTCC/SWIFT Ranks First In TABB Group’s New Comprehensive Global Quarterly Ranking Of LEI Infrastructures
Exclusive Legal Entity Identifier Ranking Measures 14 Providers On Data Validity Aggregated By – WM Datenservice, London Stock Exchange, Dutch Chamber of Commerce And Takasbank Also Recognized

World’s Largest Clearing Project Goes Live In Brazil – Derivatives Is The First Of BM&FBOVESPA’s Four Clearinghouses To Be Integrated
Press Release
Brazil’s BM&FBOVESPA has announced that it has successfully launched the first phase of its comprehensive post-trade integration project, which will see the migration of the exchange’s four existing clearinghouses onto a single platform. The derivatives market is now up and running on the platform provided by Cinnober Financial Technology. The second stage of BM&FBOVESPA’s project, for the equities market, is now underway, with a planned launch in 2015.

Indexes & Products

New type of ETF promises to shrink spreads
Yakob Peterseil –
With the launch of their ‘international’ range of ETFs, iShares and Euroclear are creating a new type of ETF issuance inside an established structure. If their hopes pan out, all ETFs will look like this three to five years from now.

Exchanges Sector In Midst Of Disruptive Forces And Innovation – Euronext Joins FTSE Mondo Visione Index


No Rush to Upgrade OMSs Among Sell-Side Firms
Becca Lipman – Wall Street & Technology
A new Tabb Group study finds that investment banks and brokers are foregoing order management system (OMS) upgrades in exchange for aggressive cost cutting.

SEC Reforms: What Floating NAVs Mean for Money Market Funds & Accounting Software
James Sanford – Wall Street & Technology
The SEC just passed a rule that changes the way money market accounts are valued, but it’s not just investors that will be impacted. It could also change the way accounting software keeps track of capital gains and losses.

CloudFX Announces The Launch Of CloudSelect-The Most Advanced Cloud Services Brokerage (CSB) Platform
CloudSelect Is An Advanced Anything As A Service Brokerage Platform, The Industry’s First Open Standards, Cloud Service Management (CSM) Platform

Algo-Logic Systems Launches High Performance Second Generation 100G Top-Of-Rack (TOR) Switch For Datacenters Altera And Algo-Logic Systems collaborate To Deliver Industry Leading Top-Of-Rack Switching For Rack-Scale Datacenter Deployments.


Wall St regulator FINRA charges Wedbush with market access violations
Sarah N. Lynch – Reuters
Wall Street’s self-funded regulator on Monday charged brokerage firm Wedbush Securities with having shoddy risk controls, a flaw that in turn allowed thousands of traders to flood U.S. markets and execute manipulative trades.

Standard Chartered Said Near Deal With Lawsky on Controls
Greg Farrell – Bloomberg
Standard Chartered Plc (STAN) is close to agreeing to pay as much as $300 million to resolve claims by New York’s banking regulator it didn’t flag suspicious transactions after promising to do so in a 2012 accord, a person with knowledge of the matter said.

PwC settles with New York regulator over work with Bank of Tokyo-Mitsubishi
Karen Freifeld – Reuters
PricewaterhouseCoopers has agreed to pay $25 million and its regulatory advisory unit will be suspended from certain consulting work for New York-regulated banks for two years after being accused of improperly altering a report to regulators on sanctions compliance at Bank of Tokyo-Mitsubishi UFJ Ltd.

Ex-Rabobank trader pleads guilty in Libor case
Aformer senior trader at Rabobank pleaded guilty on Monday to participating in a scheme to manipulate the yen Libor rate, becoming the second employee of the Dutch-based lender to admit guilt in a US probe into alleged manipulation of interest rate benchmarks worldwide.

SEC Charges Former Bank Executive and Friend With Insider Trading Ahead of Acquisition
The Securities and Exchange Commission today charged a former bank executive in Massachusetts and his friend with insider trading in advance of the bank’s acquisition of another financial institution.

FinCEN issues an advisory on the FATF-identified jurisdictions with AML/CFT deficiencies and an advisory on promoting a culture of BSA/AML compliance

ASIC: Healthzone Directors Charged With Market Manipulation

Environmental & Energy


Tweaks to China’s derivatives markets spawn new products
Simon Osborne – The Trade
Banks in China have launched structured currency option products denominated in renminbi in the wake of the authorities taking a more accommodative regulatory stance on renminbi derivatives.

China options market faces margin and settlement challenges
Justin Lee, Xiao Wang –
Equity index options set for launch later this year, but China authorities expected to retain T+1 settlement system which may inhibit options trading

Tokyo Cheapest For Illiquid Securities – CMCRC
The Capital Markets Cooperative Research Centre (CMCRC) has released new analysis on relative costs of trading in Asia Pacific markets, showing Tokyo to be the cheapest place to trade illiquid securities.

Hong Kong’s Securities And Futures Commission Reprimands And Fines Hung Lai Ping For Managerial And Supervisory Failures

SET: Thailand Focus 2014 Reaffirms Strength And Confidence Among Foreign Funds

FirstRand Lists Gold Bond On JSE

Frontier Markets

Second Singapore firm becomes DME member
Joe Parsons – Futures & Options World
Straits Financial has become the second Singapore-based futures commission merchant (FCM) to become a clearing member of the Dubai Mercantile Exchange (DME). The addition of Straits as a clearing member of the DME comes as an increasing number of Singapore-based derivatives brokers are expanding their geographic reach.

Internal models versus standard formula: South Africa’s experience
Clive Davidson –
Thanks to onerous costs and Solvency II’s tight deadline, many insurers are pulling out of the internal model approval process and opting instead for the standard formula. Clive Davidson draws a parallel with similar events in South Africa and asks whether there could be negative implications for smaller firms


Strategies for calling time on long hours
Emma Jacobs – Financial Times
Grant Freeland began to worry about the amount of hours he put in at work when a number of talented consultants in his Boston office left. They were burnt out and desperate to have a life outside work. Serendipitously, he was contacted by Leslie Perlow, professor of leadership in organisational behaviour at Harvard Business School. She had a question that he too wanted answering: could consultants, at the beck and call of clients’ demands, ever have anything approaching a work-life balance?

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