John Lothian Newsletter: Group overseeing data processor agrees to Nasdaq's fixes; Muted start for European derivatives rules; Investors Test New Swaps Trading Platforms

Feb 14, 2014

First Read

A Market Education
John Lothian
Leo Melamed knows how to hold a room’s attention. Last summer at our Intern Education Series, Leo led off the first event’s list of speakers. He had everyone’s complete attention as he told his story.

We wanted those young people – interns at firms around LaSalle Street at exchanges, clearinghouses, brokerage firms, prop trading groups, regulators and more – to hear Leo Melamed in person at least just once.

We captured the event on video, so now you can see what they saw.

(For the rest of the post, see )


Leo Melamed’s History of Chicago Markets (Part 1)
Leo Melamed, Chairman Emeritus at CME Group, gives a detailed history of Chicago’s financial industry. In Part One of his presentation, Melamed highlights his meeting with former Chicago Mayor Richard J. Daley. While discussing plans to construct a building for the International Monetary Market (IMM), Melamed told the former mayor that he would move the “financial center of gravity” out of New York at least 10 feet. Melamed also spoke about the opportunities the financial industry had to offer and how the industry embraces competition.

Watch the video »

Leo Melamed’s History of Chicago Markets (Part 2)
Leo Melamed, Chairman Emeritus at CME Group, gives a detailed history of Chicago’s financial industry. In Part Two of his presentation, Melamed discusses his meeting with Nobel Prize-Winning Economist Milton Friedman and his proposal to introduce foreign exchange futures to the markets.

Watch the video »


#FollowFriday: MarketsWiki Education on Twitter
To prepare for our upcoming World of Opportunity events this summer, MarketsWiki Education is now on Twitter. Students and others interested in joining the financial industry are encouraged to follow @MarketsWikiEdu. We hope to engage and interact more with students who have attended last year’s events and look forward to meeting the students and others planning to attend this year’s events.


CME Group Inc. Names Slate of Director Nominees
CME Group today announced its slate of candidates for its board of directors for election at the company’s annual meeting to be held Wednesday, May 21, 2014.

***** Terry, Gill, Leo and Jack are all renominated, among others. Ray Cahnman of Transmarket Group is running as a B-2 candidate.


CFTC leadership change eases strains
Gina Chon in Washington and Michael MacKenzie in New York –
Under new leadership, the US Commodity Futures Trading Commission is easing tensions with European regulators and mollifying industry worries in a marked change from its recent past. Since taking over the CFTC at the beginning of this year, acting chairman Mark Wetjen has taken advantage of his temporary time at the helm to lessen some of the waves made by his predecessor, Gary Gensler.

***** Mark Wetjen is not Gary Gensler. That is all you have to know.


S.E.C. Close to Naming New Senior Official
After months of deliberation, Mary Jo White is finalizing her inner circle. Her likely pick, according to people briefed on the matter, is Stephen Luparello, a former regulator turned corporate lawyer.

***** Get ready for the revolving door stories.


OneChicago Launches OCX.Weekly Futures
Innovative Next-Day Settlement Of Stock Upon Expiration Futures Product Driven By Demand From Large Institutional Equity Holders

***** Wake me up when the innovation is over.


NYSE Liffe Sets Daily Volume Record In Short Sterling Futures
IntercontinentalExchange Group, the leading global network of exchanges and clearing houses, today announced that NYSE Liffe reached a daily volume record of 2,055,972 contracts in Short Sterling futures on February 12, 2014. The previous highest volume was 1,985,457 contracts on January 22, 2014.

***** Yes, you can short short sterling and you are not long.


The real titans of finance are no longer in the banks
Gillian Tett –
If the mighty J Pierpont Morgan were reincarnated in New York today, who might he be? Jamie Dimon, the man who is now chief executive of JPMorgan, the bank that shares the great man’s name? Or might Morgan prefer to return as Stephen Schwarzman or Leon Black, respectively the heads of Blackstone and Apollo, two gigantic private equity firms?

***** He would be J. Pierpont Morgan.


The Making of a Rap Tribute to the Galleon Group
What rhymes with Raj Rajaratnam? In 2000, Turney Duff was a trader at the Galleon Group, a now-defunct hedge fund. The firm was riding high – these were the days before Mr. Rajaratnam, its founder, was convicted of insider trading.


Repository Story: Jonathan Thursby Discusses CME Group’s SDR Services
The Dodd-Frank Act in the U.S. and EMIR in Europe introduced new data reporting requirements. Exchanges like CME Group have long been experts in processing and disseminating data to market participants. But regulatory reporting of swap data brings its own challenges. John Lothian News Editor-at-Large Doug Ashburn spoke with Jonathan Thursby, executive director and chief operating officer of data repository services at CME Group, about its repositories in the U.S. and Europe, and their philosophy and approach to repository services.

Watch the video »



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Lead Stories

Group overseeing data processor agrees to Nasdaq’s fixes -source
The committee that oversees the data processor that was at the center of a three-hour trading halt in Nasdaq-listed stocks in August agreed on Thursday to implement fixes demanded by the exchange, according to a source familiar with the situation.

Muted start for European derivatives rules
Philip Stafford –
The introduction of a key part of sweeping new rules policing the European derivatives market has had a muted start with many market participants still unprepared for their introduction.

Investors Test New Swaps Trading Platforms
U.S. investors are testing new platforms for swaps that could redraw decades-old Wall Street boundaries and over time lower trading costs. The testing comes ahead of a Monday deadline, whereby many interest-rate swaps must be traded openly under Commodity Futures Trading Commission rules stemming from the 2010 Dodd-Frank financial law. Certain credit swaps will fall under the same rules on Feb. 26.

ICE Trade Vault Europe Provides Update On First Day Of Trade Reporting
On the first day of trade reporting, ICE Trade Vault Europe, ICE’s European Trade Repository, processed around 4.5 million trades across energy, agricultural commodities, metals, credit, interest rates and equity derivatives. Trades and positions relating to over 300 market participants were successfully reported either directly or via delegated reporting.

Trends in the exchange space: TOM, The Order Machine sees more growth ahead | Financial Industry & Algorithmic Trading News
Automated Trader
TOM, The Order Machine, a Dutch-based exchange, has been growing briskly since it was formed in 2009 and it now handles some 30% of trading in the Dutch options market. Automated Trader Editor Adam Cox recently caught up with TOM’s chief executive officer, Willem Meijer, to hear about what’s fueling the growth and the changing dynamics of the exchange space.

Robots won’t make you rich (for long)
Karl Smith | FT Alphaville
We commented yesterday on a column by Martin Wolf that considers how the economy will change as robots become ever more intelligent. The rise of the machines will indeed present society with multifaceted challenges; super-rich robot owners, however, are unlikely to represent one of them. The fear of exploding inequality from robots is widespread.

Cyber threat real for hedge funds
Andrew Ducat –
Cyber-attacks are seldom out of the news, but media interest is typically focused on the more sensational, high-profile cases involving government and security agencies. Attacks on financial institutions are much less publicised. That was until November’s Waking Shark II exercise carried out by the Bank of England.


SEC Takes Steps to Stem Courtroom Defeats
The Securities and Exchange Commission, faced with a recent run of courtroom defeats, is shaking up the way it prepares for trials. Mary Jo White, who took charge of the SEC in April, has restructured the agency’s trial unit in recent months, according to people familiar with the matter. The goal in part is to allow investigators and litigators to work closer together as a case develops, the people said.

Democrats Push Regulators for Another Volcker Tweak
MoneyBeat – WSJ
The banking industry’s push to exempt a group of debt investments from the Volcker rule won a nod of support this week from senior Democrats in the House.

NFA Notice to Members I-14-07: Additional Reporting Requirements for Forex Dealer Members

FINRA Board Approves Rule Prohibiting Conditioning Settlements of Customer Disputes on a Customer’s Agreement Not to Oppose Expungement

UK’s Financial Conduct Authority Finds Annuity Market Not Working For Consumers – Competition Market Study Launched

Exchanges & Trading Facilities

SGX Iron Ore Derivatives: A Record-Breaking January
SGX Iron Ore Swap, Futures and Options (Derivatives) kicked off 2014 with record-breaking volumes and open interest across the board. January saw the largest monthly volumes and open interest for SGX Iron Ore Derivatives, driven by record monthly volume and open interest in both SGX’s Iron Ore swaps/futures and Iron Ore options.

Chicago’s CME Group to cut board of directors, but remains biggest
Lynne Marek – Crain’s Chicago Business
Chicago-based futures exchange company CME Group Inc., which has the biggest board of directors among large publicly traded companies, will cut its director group by 17 percent this year. Nonetheless, it will remain No. 1 in terms of board size.

Exchange Data Revenues Run Gambit of Gains and Losses
Giulia Lasagni – WatersTechnology
Major exchanges reported a mixed bag of fourth-quarter financial results, with some reporting spectacular gains as a result of acquisitions and new initiatives, and others reporting lower revenues from data sales as a result of fewer subscriber numbers.

Oslo Børs’ Millennium 8 Rollout Adds Auction, Iceberg Features to Boost Liquidity, Protect Trading Strategies
Giulia Lasagni – WatersTechnology
Norwegian exchange Oslo Børs is rolling out an updated version of its Millennium trading platform that exchange officials say will introduce technical changes designed to increase trading in less liquid stocks while enhancing trading capabilities for strategies such as iceberg orders.

Eris Exchange: February News
Eris Swap Futures Open Interest Continues to Surge; UBS Executes First Buy-Side Trade; New Trader Resource Page; Portfolio Optimization and Analytics; Streaming Schedule for Eris Standards

BM&FBOVESPA Announces Results For The Fourth Quarter Of 2013
Both Adjusted Expenses And Capital Expenditure Are Within The Budget Range For 2013 – Share Buyback Of R$530.6 Million In 2013 (43.9 Million Shares); And R$370.4 Million In January 2014 (37.0 Million Shares) – New Share Buyback Program Of Up To 100 Million Shares

Toronto Stock Exchange Mandates Majority Voting To Further Enhance Corporate Governance

FESE European Equity Market Report – January 2014 Figures – Now Available

Hedge Funds & Managed Futures

Norwegian Central Banker Urges Oil Fund to Shift Investments
Norway’s central bank governor said Thursday the nation’s massive sovereign-wealth fund should be allowed to increase exposure to assets such as equities and infrastructure and trim back on bonds to find a better balance between improving returns and hedging against risk.

In Surprise Move, Terra Firma Shakes Up Renewable Energy Team
Terra Firma, the European private equity fund founded by the British financier Guy Hands, is shaking up its management ranks.

MD trio handed reins of $2bn Terra Firma fund
Ayesha Javed – Financial News
Terra Firma has handed responsibility for its latest $2 billion fundraising to three managing directors, following the departure of Damian Darragh.

Buffett to Graham: Parting Like Friends, With Benefits?
MoneyBeat – WSJ
Warren Buffett’s more-than-40-year business relationship with the Graham family could be coming to an end. But it’s not clear what assets the famed investor will get as a potential parting gift.

Ines De Dinechin to depart Lyxor
Sarah Krouse – Financial News
Ines de Dinechin, the chairman of Lyxor Asset Management who was previously named as one of Financial News’ most influential women in finance, is to leave the firm after two years at its helm.

Presentation Of Latest EDHEC-Risk Institute Research At The EDHEC-Risk Europe Days Conference In London, March 25-26, 2014

Banks & Brokers

The Nine Banks That Have Busted U.S. Sanctions
David Enrich – MoneyBeat – WSJ
Getting busted for violating U.S. sanctions has become something of a rite of passage for European banks. Here are the other big banks that have been similarly penalized by OFAC in recent years for doing business with companies that do business in countries like Iran that are subject to U.S. sanctions.

Banks in London Devise Way Around Europe’s Bonus Rules
Since the 2008 crisis, regulators around the world have tried to rein in bonuses, worried that big payouts encourage excessive risk-taking by bankers and traders. But the bank giants operating in London — including Goldman Sachs, Bank of America Merrill Lynch and Barclays — are seeking to outflank the new restrictions.

Insight: Wells Fargo edges back into subprime as U.S. mortgage market thaws
Wells Fargo & Co, the largest U.S. mortgage lender, is tiptoeing back into subprime home loans again.

Exclusive: World Bank aims to boost lending by 50 percent over 10 years
The World Bank hopes to boost its lending by 50 percent over 10 years by cutting costs, loosening a restriction on how much it can lend, and charging richer nations higher fees for some services, several people familiar with the matter said.

Deutsche Bank hires JPMorgan’s Germany head
Deutsche Bank has hired Karl-Georg Altenburg, head of investment banking in Germany, Austria and Switzerland for JPMorgan, as its co-head of investment banking and corporate finance for Europe, Middle East and Africa.

Lloyds Bank Names TSB Chairman
Ed Ballard –
Lloyds Banking Group PLC said Friday it has appointed Will Samuel as Chairman of TSB Bank PLC ahead of its planned flotation on the London Stock Exchange this year.

Clearing & Settlement

Tradeweb Completes First Swap Trade By An FCM On Behalf Of A Client
Tradeweb Markets, the leading global provider of fixed income and derivatives marketplaces, announced that it has completed the first swap trade by a Futures Commission Merchant “On Behalf Of” a U.S.-based asset manager on a swap execution facility.

DTCC users unable to access data after repository is overwhelmed
Fiona Maxwell –
A tidal wave of interest rate trade data overwhelmed the service run by the Depository Trust & Clearing Corporation (DTCC) after new European reporting rules came into effect on Wednesday, leaving users unable to check information that had been sent on their behalf.

Development of LME Clear proves a test of mettle
Mark Pengelly –
A change of ownership and an evolving regulatory landscape have thrown up big challenges for the London Metal Exchange in its quest to clear its own trades. Trevor Spanner, the chief executive of LME Clear, speaks to Mark Pengelly about the project


TradeStation Expands TradingApp Store to Tap Virtual Supply of Ideas, Strategies and Tools
Ivy Schmerken – Wall Street & Technology
The retail multi-asset broker is launching a new TradeStation TradingApp Store that offers over 650 products including strategies, indicators and other tools, created by third-party software developers, traders and other professionals.

Financial services, retail groups form cyber partnership
U.S. banks and retail groups announced on Thursday that they are joining forces to work on cybersecurity, a sign they are trying to move past recent squabbles over who is to blame for data breaches.

Thomson Reuters Investor Day 2014

Environmental & Energy

Despite Costs, Most Americans Want Action on Climate Change, Report Finds
Yale Environment 360
A large majority of Americans — 83 percent — say the U.S. should make an effort to reduce global warming, even if those efforts have economic costs, according to a new report from the Yale Project on Climate Change Communication.

Republican rank-and-file back carbon regulation
Climate Progress
While 57 percent of Democrats — and just 19 percent of Republicans — believe climate change should be a high or very high priority for Congress or President Obama, there were areas of something that somewhat resembled partisan agreement.

**RKB – Climate Progress blogs on Yale survey that begins our Lead Stories section.

Singapore Taps Voluntary Carbon Market With Energy-Efficient Projects
Ecosystem Marketplace
Despite its status as a leading Asian economy, Singapore has lagged behind its neighbors in developing carbon offsets. But the sale of two energy efficiency projects could pave the way for more to come in this densely-packed, high-tech country. The first project replaced five chillers, and saved an estimated 2,169 tCO2e, through improved cooling installations at New Tech Park, while the second saves a similar amount – 2,397 tCO2e per annum – replacing inefficient light bulbs with LED lights at Jurong Town. The Jurong Town project refitted more than 86,000 LED in 588 residential building corridors, staircases and communal areas.


Tokyo Commodity Exchange: Appointment Of Committee Members
The Tokyo Commodity Exchange, Inc, announced that the Board of Directors appointed new members to fill the vacancies in the Audit Committee, Compensation Committee and Self-regulatory Committee at the meeting today.

Dalian Commodity Exchange: Notice On Conducting Simulation Tests For The Trading System Of The Polypropylene Futures Product

Dalian Commodity Exchange Council Approves Contract, Detailed Rules Of PP Futures

Frontier Markets

MCX Weekly Market Report – February 07, 2014 – February 13, 2014

Malawi Stock Exchange Weekly Trading Report -14th February, 2014

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First Read $46,041/$300,000 (15.3%) ++++ Hits & Takes John Lothian & JLN Staff We have a new and improved version of The Spread today. We have overhauled our approach to this video series and have the whole JLN team contributing to it. Suzanne Cosgrove has...

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