John Lothian Newsletter: HK plans retail investor dark pool ban; Fed extends comment period for new commodity rules; SEC Urged to Scale Back 'Crowdfunding' Rules

Feb 28, 2014

First Read

JLN/MarketsWiki 2014 Annual Survey – Please Give us 30 Seconds of Your Time
John Lothian News
We say “annual” but, quite frankly, it has been three years since we’ve conducted one, so the last one is getting a little, shall we say, stale. Please click the link below and answer five simple questions. 30 seconds of your time once every three years? It isn’t too much to ask, right? Besides, you might win a valuable prize.
jlne.ws/1bOrYYC

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Regulators should say who calls the shots
Gillian Tett – FT.com
When Jack Lew, US Treasury secretary, participated in last week’s Group of 20 meetings, he issued a familiar plea: there needs to be more co-ordination over how countries impose financial market regulations and oversee the activities of banks. He might as well have called on pigs to fly or bankers to become nuns.
jlne.ws/1jFiMG1

***** I think we should start www.regulatationconflictswiki.com. Or that is just a few pages on MarketsReformWiki.

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Gold Fix Study Shows Signs of Decade of Bank Manipulation
Liam Vaughan – Bloomberg
The London gold fix, the benchmark used by miners, jewelers and central banks to value the metal, may have been manipulated for a decade by the banks setting it, researchers say.
jlne.ws/1jFiK12

***** There is a difference between “may have been” and “has been,” but the gold market manipulation zealots will not care.

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Study Finds SEC Staff Sold Shares Before Cases Made Public
Dave Michaels – Bloomberg
People working for the U.S. Securities and Exchange Commission who owned stock in companies under investigation were more likely to sell shares than other investors in the months before the agency announced it was taking enforcement actions, according to a new academic paper.
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***** At least they are taking time away from some of their other bad habits to participate in the markets. Is there a rule against this? Then enforce the rule and let’s move on to the next SEC scandal.

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Vol Spike: CBOE Futures Exchange’s Jay Caauwe Introduces the Short-term Volatility Index
JohnLothianNews.com
In February 2014, the CBOE Futures Exchange began listing contracts on the short term volatility index (VXST) – a 9-day variant of its flagship 30-day VIX futures.

In an interview with John Lothian News Editor-At-Large Doug Ashburn, CFE’s Jay Caauwe discusses the launch of VXST, the rationale behind the listing of VXST futures and which participants and strategies will be prevalent.

Watch the video »

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SEF Trading: What Really Happened in Week 1?
Colby Jenkins – TabbFORUM
Volume estimates for the first week of trading on swap execution facilities displayed a high degree of disparity and divergence. TABB examines the numbers.
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Bondmatch targets trading boost
Anish Puaar – Financial News
BondMatch, the alternative bond market owned by IntercontinentalExchange, has added new services to its platform to help users increase their chances of trading amid growing demand for new ways to tap into liquidity.
jlne.ws/1jFiMG8

***** Competition in electronic bond trading is heating up.

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Yale Says ‘Alpha Is Not Dead’ as It Defends Investment Model
Michael McDonald – Bloomberg
Yale University, the world’s second-wealthiest school with a $20.8 billion endowment, said it can still beat market returns, known as generating alpha, as it seeks to stand out from other investors.
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***** My favorite Yale story. Two men are standing next to each other taking care of business in a restroom after having been drinking beer. The first man walks away and washes his hands, the second man just walks away without washing his hands. The first man says, “at Harvard they taught us to wash our hands after we peed.” The second man says, “at Yale they taught us not to pee on our hands.” Yale has always believed it was exceptional.

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Pimco’s Gross Defends Competitive Culture
WSJ.com
Bill Gross isn’t changing his style—and his bosses say they are fine with that. The co-founder of bond behemoth Pacific Investment Management Co. on Thursday defended its competitive culture, saying in an interview that the trading floor can’t thrive on “sweet talking” alone but that the firm is still a family of sorts.
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***** I am trying to get the Bill Gross’ “sweet talking” in his high pitched voice out of my head.

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ADM picks location for Chicago headquarters
Alejandra Cancino – chicagotribune.com
Agriculture giant Archer Daniels Midland Co. said on Thursday it is relocating its global headquarters from Decatur to the former United Building in downtown Chicago.
jlne.ws/1jFiOhh

***** The bar in the United Building will now be serving “ethanol” martinis.

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MarketsWiki

MarketsWiki Page of the Day
Forex Capital Markets (FXCM)
jlne.ws/1o9mzeR

MarketsWiki Recent Updates

People

Eric Vincent

Companies, Organizations and Groups

Forex Capital Markets (FXCM); OCC; Ospraie Management; European Energy Exchange AG; European Commodity Clearing AG (ECC)

Products

CME Group Australian Dollar; CME Group British Pound; CME Group Brazilian Real

Statistics

StatsGoOnThisLine
MarketsWiki Statistics

Lead Stories

HK plans retail investor dark pool ban
Philip Stafford in London – FT.com
Hong Kong is proposing banning retail investors from “dark pools”, seeking to tighten its oversight of the controversial trading venues while simultaneously attract more international investors to its markets.
jlne.ws/1jFiKhm

Fed extends comment period for new commodity rules
Reuters
The U.S. Federal Reserve gave market parties 30 more days to comment on its plan to submit Wall Street banks to greater restrictions in dealing physical commodities, the central bank said on Thursday.
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SEC Urged to Scale Back ‘Crowdfunding’ Rules
Andrew Ackerman – WSJ.com
Startups and entrepreneurs are criticizing proposed “crowdfunding” rules designed to ease their ability to reach large numbers of investors online, warning the current restrictions will deter smaller companies from using the financing technique.
jlne.ws/1jFiKhp

Five takeaways from Hong Kong’s dark pool consultation
Michelle Price in Hong Kong – Financial News
Hong Kong’s securities regulator yesterday joined the growing league of watchdogs looking to clamp down on private share-trading platforms, with the publication of a long-awaited regulatory proposal to increase the transparency and controls surrounding these so-called “dark pools”.
jlne.ws/1jFiMWu

British Regulator Pursuing Charges Against 3rd Person in Libor Case
JENNY ANDERSON – NYTimes.com
Britain’s markets regulator issued the third notice in as many weeks that another individual is in its cross-hairs in its wide-ranging investigation into the manipulation of important interest rate benchmarks, including the London Interbank Offer Rate, or Libor.
jlne.ws/1jFiKhq

State Street Enters Fray as Corporate-Bond Broker
Katy Burne – WSJ.com
As Wall Street banks pull back from some corporate bond trades with clients, other large financial institutions are looking to step in.
jlne.ws/1jFiKhu

Spain is launching the privatization of Bankia, selling 7.5% of its stake
Jeannette Neumann – WSJ.com
Spain launched the privatization of its largest bailed-out lender, Bankia SA, BKIA.MC -0.88% marking a turning point in the country’s revamp of its banking industry.
jlne.ws/1jFiKhx

Berlin attacks EU’s easing of austerity demands
Peter Spiegel in Frankfurt – FT.com
The German and Finnish finance ministries have issued a stinging rebuke of Brussels’ attempt to ease austerity demands on struggling eurozone countries, saying such flexibility improperly provided France and Spain with additional time to cut their budgets to meet EU deficit limits.
jlne.ws/1jFiMWy

Mt. Gox Files for Bankruptcy
NYTimes.com
Mt. Gox, the troubled exchange for the virtual currency Bitcoin, filed for bankruptcy protection on Friday and said that it might have lost 750,000 of its customers’ coins, essentially all of them, in a hacking attack.
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Regulatory

ESMA official responds to liquidity fears
Joel Clark – Euromoney magazine
ESMA has had frequent discussions over the definition of liquidity during the past three years and is mindful of the need to monitor the impact regulations such as Mifid II could have on liquidity on the FX markets, its executive-director tells the Association for Financial Markets in Europe.
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Proposed Amendments to NFA’s Articles of Incorporation for Changes to the Structure of NFA’s Board of Directors and Executive Committee
jlne.ws/1jFiKxU

Statement Of Dissent By CFTC Commissioner Scott D. O’Malia, Fiscal Year 2014 Spending Plan
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Statement Of Dissent By SEC Commissioner Scott D. O’Malia, Fiscal Year 2015 Budget Submission
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Building AML Regulatory Platforms For The Big Data Era
Vamsi Chemitiganti – Wall Street & Technology
Big data technologies can help financial services firms comply with a myriad of regulations, including US anti-money laundering requirements.
jlne.ws/1jFiKxX

National regulators to consult on additional insurer reporting requirements
Louie Woodall – Risk.net
Europe’s national regulators are gearing up to consult insurers on reporting requirements that go beyond those mandated by Solvency II, which stakeholder groups warn may undermine the goal of harmonised regulatory reporting across the European Union (EU).
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Canadian Securities Regulators propose changes to the accredited investor and minimum amount investment prospectus exemptions
jlne.ws/1jFiKy0

Regulatory Update 2014: Insights From The Australian Securities And Investments Commission – A Speech By Peter Kell, Deputy Chairman, Australian Securities And Investments Commission, To The Insurance Council Of Australia (ICA), 28 February 2014
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UK’s Financial Conduct Authority Confirms Tough New Rules For £200bn Consumer Credit Market
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Exchanges & Trading Facilities

London Metal Exchange Rebuts Rusal’s Challenge on Metals Storage Plan
WSJ.com
Lawyers for the London Metal Exchange said a challenge by United Co. Rusal to a planned overhaul of its warehousing network is motivated by commercial interests. The LME, Europe’s largest metals bourse, said the Russian company “stands to benefit from the status quo” and that its challenge is “entirely without merit.”
jlne.ws/1jFiNd9

In metal warehouse overhaul, pressure shifts from LME to regulators
Reuters
A series of public and private meetings between the London Metal Exchange and its staunchest critics in the United States has revealed a small but significant shift in a years-long crisis over the exchange’s warehousing policy, sources said.
jlne.ws/1jFiKOn

HK Exchange Chief Trails Global Peers in Compensation
Michelle Yuan – MoneyBeat – WSJ
The head of Hong Kong Exchanges and Clearing, Charles Li, received an eye-popping pay raise last year, but he may be forgiven for a moment of pique: the man who led the bold takeover of London Metal Exchange two years ago still earns considerably less than his global peers.
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SMX Acquisition Provides Growth Opportunity For IntercontinentalExchange
Trefis
jlne.ws/1jFiNdd

Listing – GTT is first major listing in Paris in 2014
Euronext, a wholly owned subsidiary of IntercontinentalExchange Group, today celebrated the successful listing of GTT, the world leader in cryogenic membrane containment systems used in the shipbuilding industry for the transport of liquefied natural gas
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Moscow Exchange: Results Of The Exchange Council Meeting – Algorithmic Trading In Russia
At a meeting held 26 February the Exchange Council, a consultative and advisory body of Moscow Exchange, approved the Exchange”s priority projects for 2014 and took the decision to create a working group to promote algorithmic trading in Russia.
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BME To Submit To The General Shareholders´Meeting The Distribution Of EUR0.65 Supplementary Dividend – It Increases Ordinary Dividend By 3%
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Hedge Funds & Managed Futures

Outflows sting Pimco
Sarah Krouse in New York – Financial News
Investors pulled EUR35.6 billion from Pimco in the fourth quarter, capping a tumultuous year for the bond giant in which assets under management fell 10%.
jlne.ws/1jFiNty

A rising tide lifts Man Group
Mike Foster – Financial News
A rising tide lifts all the boats – even shares in struggling Man Group, which leaped 12% today on news of a return to profits in the year to December.
jlne.ws/1jFiKOz

BlackRock names former NYSE Euronext executive as treasurer
Reuters
BlackRock Inc, the world’s largest money manager, has named former NYSE Euronext executive Philippe Matsumoto as treasurer and head of corporate insurance, the New York-based company said on Thursday.
jlne.ws/1jFiKOB

Head of Citadel’s European Arm Departs
Rob Copeland – MoneyBeat – WSJ
Hedge-fund firm Citadel said Thursday that the chief executive of its European arm and head of global macro investing would retire next month.
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Norway SWF to debate fossil fuel-free investments
Richard Milne in Oslo – FT.com
Norway is to debate whether the world’s largest sovereign wealth fund should stop investing in oil, gas and coal companies.
jlne.ws/1jFiKOC

Japan’s public pension fund assets rise to record $1.26 trln
Reuters
Japan’s public pension fund, the world’s largest, reported a 4.73 percent return on investments in the October-December quarter, thanks to gains in Japanese stocks and an increase in the value of its foreign assets due to the weakness of the yen.
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Eagle Alpha raises $1.5 million put up from individuals at the buy-side and sell-side in New York, London and Hong Kong
Eagle Alpha has raised US$1.5 million to fund product development and drive sales and marketing efforts. The financial backing, put up from individuals from the sell-side and buy-side, proves the value of Eagle Alpha’s tools to the industry.
jlne.ws/1jFiNtG

Terra Firma looking to raise EUR2bn European fund
Ayesha Javed at SuperReturn in Berlin – Financial News
Terra Firma is targeting a May launch for a EUR2 billion European buyout fund, as it prepares for a retrial on its ill-fated EMI investment later in the summer, according to people close to the matter.
jlne.ws/1jFiNtN

Winton Capital CEO Tony Fenner-Leitao resigns
Ben Wright and Vivek Ahuja – Financial News
Tony Fenner-Leitão, chief executive of Winton Capital Group, Europe’s fourth-largest hedge fund by assets under management, has resigned and will be replaced in the role by the firm’s founder and executive chairman David Harding, the company said Friday.
jlne.ws/1jFiNK4

Prop shops to rival dealer market-makers on broker Sefs
Joe Rennison – Risk.net
Rules that require swap execution facilities (Sefs) to offer impartial access are set to bring years of over-the-counter market tradition to an end, by allowing hedge funds, proprietary traders and asset managers into the clubby, interdealer portion of the market.
jlne.ws/1jFiKOD

Private equity hiring change is skin-deep
Ayesha Javed – Financial News
Private equity firms have been a little sensitive about their image in recent years. Too many cases of buying up companies, increasing their leverage, then making an embarrassing loss have not given financial engineering a good name.
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CalPERS Board Committee Chairs And Vice Chairs Chosen
The California Public Employees’ Retirement System (CalPERS) Board of Administration has elected the following chairs and vice chairs of key board committees:
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Banks & Brokers

J.P.Morgan Hands Debt Capital Markets Chief New Role
Gillian Tan – MoneyBeat – WSJ
J.P.Morgan Chase & Co. has named its co-head of global debt capital markets Andy O’Brien to a new role, global head of loan capital strategy for banking, according to an internal memo seen by The Wall Street Journal.
jlne.ws/1jFiL4S

Meet the Force Behind the Scenes in the $2.4 Trillion ETF Market
Bloomberg
Reginald Browne tilts his 6-foot-5-inch frame forward to reach a chirping phone. “What do you want, what do you need?” he asks. It’s his standard greeting for just about anyone who calls, Bloomberg Markets magazine will report in its April 2014 issue.
jlne.ws/1jFiL4T

UBS and Deutsche secure bragging rights in UK ECM frenzy
Nick Kostov – Financial News
UBS and Deutsche Bank have emerged as the winners in what has been by far the busiest week for UK equity markets this year, with both banks securing roles on two of the largest deals.
jlne.ws/1jFiNKh

ICAP Marketing Bonds in Euros as Yields Fall to Eight-Month Low
Abigail Moses and Katie Linsell – Bloomberg
ICAP Group Holdings Plc (IAP) is marketing 300 million euros ($409.5 million) of notes as corporate bond yields fell to the lowest since June in Europe.
jlne.ws/1jFiL4U

Clearing & Settlement

European Commodity Clearing Welcomes Morgan Stanley As New Clearing Bank
European Commodity Clearing (ECC) welcomes Morgan Stanley & Co. International plc, London, as a new Clearing Member. The firm is the first clearing bank to be admitted on ECC in 2014. There are now a total of 21 Clearing Members admitted on the clearing house.
jlne.ws/1jFiL4V

Euroclear Reports A Record EUR 24.2 Trillion In Assets Under Custody, A 7% Increase In Settlement Volumes, 12% Growth In Collateral Outstandings And 17% Growth In Overnight Cash Deposits
jlne.ws/1jFiL4X

Indexes & Products

Invesco faces regulatory investigation
Joe McGrath – Financial News
Invesco, the parent company of UK subsidiary Invesco Perpetual, has said the Financial Conduct Authority’s enforcement division is conducting a review of its compliance procedures between May 2008 and November 2012.
jlne.ws/1jFiO0y

SEC writes to banks on ETN concerns
Yakob Peterseil – Risk.net
The US Securities and Exchange Commission (SEC) is calling on banks to revamp what they tell investors about their exchange-traded notes (ETNs) and asking them pointed questions about how they sell, lend and redeem the products, in a confidential letter sent earlier this month to participants in the $22 billion ETN industry.
jlne.ws/1jFiO0C

NASDAQ OMX Global Indexes Named “Most Innovative Index Provider”- Chosen By The Readers Of ETF Express
jlne.ws/1jFiL52

Technology

The Adventure of the Missing Algos
Trade Talk
I was amused by the recent flurry of media releases proclaiming the adoption of algorithmic trading in derivatives markets. Pay no attention to the man behind the curtain, could this be important new information that somehow leads us to enlightened trading? Or is it the case there is nothing more deceptive than an obvious fact? The latter are the words of one well-known sleuth, whose Watson would likely retort, “No kidding, Sherlock,” or something roughly comparable.
jlne.ws/1jFiO0H

KVH To Support 3VR’s Japanese Market Launch
3VR’s Next Generation Video Solutions To Provide Real-Time Customer Insights And Security Intelligence For Banking, Retail, Government, Infrastructure And Hospitality
jlne.ws/1jFiLlo

Enforcement

CFTC Charges Melody Nganthuy Phan Of California And Her Companies, My Forex Planet, Inc., Wal Capital, S.A., And Top Global Capital, Inc., With Operating A Fraudulent $3.7 Million Off-Exchange Forex Scheme – The CFTC Also Charges Melody Nganthuy Phan With Fraud By An Unregistered Commodity Pool Operator
jlne.ws/1jFiLls

Societe Generale to pay $122 million to resolve U.S. mortgage lawsuit
Reuters
Societe Generale has agreed to pay $122 million to settle a lawsuit by a U.S. regulator accusing the bank of misleading Fannie Mae and Freddie Mac in the purchase of mortgage-backed securities.
jlne.ws/1jFiLlu

Ex-Madoff aide pleads ignorance, naivete at U.S. fraud trial
Reuters
Ponzi scheme. Treasury bond. The Standard & Poor’s 500 index. The collapse of Lehman Brothers. Those were among the subjects that Annette Bongiorno said on Thursday she did not understand, despite spending more than 40 years as one of the key employees at Bernard Madoff’s investment firm.
jlne.ws/1jFiO0L

Lawyers for ex-Jefferies trader go on offensive at fraud trial
Reuters
Lawyers defending Jesse Litvak at the former Jeffries Group Inc trader’s federal fraud trial on Thursday accused the firm of firing him and then helping prosecutors out of concern that it might otherwise lose a major client.
jlne.ws/1jFiO0M

[AMF Canada] Administrative penalties against Duncan Ross Associates Ltd., its chief compliance officer and former president
jlne.ws/1jFiQWc

Environmental & Energy

EU manufacturers resume fight for carbon market shake-up
Reuters
European manufacturers’ lobby IFIEC Europe on Thursday launched an attack on the EU’s Emissions Trading System (ETS), opposing current reform plans and calling for drastic changes to prevent a flight of investment abroad.
jlne.ws/1ke0QVH

EU carbon permit backloading to start March 12, Britain first
Reuters
Britain will be the first to cut the supply of EU carbon permits on March 12 under the bloc’s backloading plan, exchanges ICE Futures Europe and EEX said on Thursday.
jlne.ws/1mJm50b

Global carbon market to reach record volumes by 2016
Climate Spectator/Thomson Reuters Point Carbon
In 2014, the value of the globally-traded carbon market will rise by two thirds from 2013 reach $US88bn, ($US53bn in 2013), with volume increasing by 3 per cent to 9.6 Gt CO2e, according to analysis by Thomson Reuters Point Carbon.
jlne.ws/1jEpHiN

Asia-Pacific

PSE seeks early adoption of broker anonymity rule
The Philippine Star
The Philippine Stock Exchange (PSE), the operator of the country’s stock market, is looking to fasttrack the implementation of the broker anonymity rule.
jlne.ws/1jFiQWh

China falls out of love with cash
Patti Waldmeir and Simon Rabinovitch in Shanghai – FT.com
China is rapidly ditching the centuries-old habit of paying its bills with trunkloads of cash, and making the shift to virtual forms of payment faster than any other country on earth.
jlne.ws/1jFiLlz

Hong Kong’s Securities And Futures Commission Proposes To Strengthen Regulation Of Alternative Liquidity Pools
jlne.ws/1jFiQWn

Osaka Securities Exchange: Disciplinary Action on Transaction Participant: SMBC Nikko Securities Inc.
jlne.ws/1jFiQWp

Exchange Provides Information on New Listing Applications received since the New Sponsor Regulation Took Effect on 1 October 2013
jlne.ws/1jFiQWr

HKEx: Listing Nominating Committee Seeks Listing Committee Candidates
jlne.ws/1jFiOh4

Frontier Markets

Emerging bond and stock funds shed almost $5 billion
Reuters
Emerging bond and equity funds suffered outflows of almost $5 billion over the past week, bringing their combined year-to-date losses to over $37 billion, banks said on Friday, citing data from EPFR Global.
jlne.ws/1jFiOh6

Bursa Malaysia Securities Publicly Reprimands Hytex Integrated Berhad For Breach Of Main Market Listing Requirements
jlne.ws/1jFiOha

Bursa Malaysia Securities Publicly Reprimands SAAG Consolidated (M) Berhad [In Liquidation] And Fines Five Directors A Total Of Rm175,000
jlne.ws/1jFiRcI

Malawi Stock Exchange Weekly Trading Report- 28th February, 2014
jlne.ws/1jFiOhe

Miscellaneous

Nailing the Private-Equity Firm Interview
Melissa Korn – MoneyBeat – WSJ
Landing an interview with a private-equity firm is no easy feat for a first-year banking analyst. Surviving the interview process may be even tougher.
jlne.ws/1jFiOhg

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