First Read

The Puzzling Behavior of the Nervous Co-Worker
Jon Matte
Today, with about a half hour to go until it was time to share the newsletter with John, Jim and Doug, John popped up on my chat screen. “ETA on newsletter?” Well, that’s odd, I thought… he never asks me this question. Doug showed up shortly after. Hey, how’s it going! …o…kay…

When Jim ALSO popped up in chat to ask if I were alive and what I was doing instead of working, that was when I remembered that Norway changes their clocks back to “standard” time a week before the USA does. So. Sorry the newsletter is so late today, and now you know why…

***** I somehow doubt we will get the newsletter an hour early next week.

***JM: Lies!


Huseyin Erkan to retire as chief executive of WFE
Philip Stafford – Financial Times
The chief executive of the World Federation of Exchanges is to step down after only two years in a position intended to turn the main trade association for bourses into a more active lobbyist.

***** I am surprised to see Mr. Erkan step down after moving the operation to London and gutting the staff. It is not a large organization, but I did expect his vision for it would have extended more than 2 years. There must be more to the story.


Comment: Solving the too-big-to-fail puzzle
Scott O’Malia – Financial Times
In the wake of the financial crisis, policy makers and regulators pledged to ensure banks are never again deemed to be too big to be allowed to fail. The International Swaps and Derivatives Association (ISDA) and a group of 18 large banks took a big step towards meeting that objective two weeks ago with an important new industry initiative that will weave together national bank resolution regimes and further protect global markets from the potential domino effect of failures brought about by systemic interconnection.

***** Only time and SOUS will tell. That is Stress Of Unusual Size.


Pat Kenny, vice president of client relations, CQG – Transition from the floor to electronic trading, where are the opportunities?

“Build those relationships because those relationships last forever.”

Dubbed “The Most Interesting Man in the World,” Pat Kenny, vice president of client relations at CQG, discusses his transition as a trader to his current role. After working as a water skiing instructor and bartender, Kenny found himself with an opportunity to become a runner on the floor of the Chicago Board of Trade. From there, Kenny took a position as a phone clerk and took customer orders. Eventually, he found his true passion of being involved with the sales side of the business. His experiences, combined with the network of several individuals helped lead Kenny to his current role at CQG. Kenny’s key message was that it’s not always what you know that may help lead to new opportunities, it’s also a matter of who you know that can help open up new doors and unlock different paths in your career.

Watch the video »


Disruption arrives for investment managers
Pauline Skypala – Financial Times
Technological change has famously disrupted publishing, music, photography and other industries. Mostly the results have been to the advantage of consumers, widening choice if not always reducing costs. Similar disruption threatens the financial industry.

***** That disruption is not a threat, it is an opportunity.


Someone Didn’t Get the Memo, and I Wouldn’t Want to be That Guy*
Streetwise Professor
Due to the five year gap in 30 year bond issuance, in mid-September the CME revised the deliverable basket for the June 2015 T-bond contract. It deleted the 6.25 of May, 2015 because its delivery value would have been so far below the values of the other bonds in the deliverable set. This would have made the contract more susceptible to a squeeze because only that bond would effectively be available for delivery due to the way the contract works. The CME issued a memo on the subject. Somebody obviously didn’t get it:

***** I wonder if this will ever come out who the trader was.


Drive to challenge exchanges on fees
Tim Cave – Financial News
European regulators are preparing to turn up the heat on stock exchanges over the fees they collect for market data. Market participants are being asked what they think of a “per user” pricing mechanism that could mean an end to charging more than once for the same information.

***** The next challenge from a new exchange should be on the simplicity of exchange fees.


Bridging the Week: Better Culture; Accountants; London Whale; Asset-Backed Securities; Collusive Activity; Cybersecurity
Gary DeWaal – Katten Muchin Rosenman
Promoting stronger cultures at financial industry firms was the theme of a workshop held at the Federal Reserve Bank of New York this past week. Also last week, the Inspector General of the Federal Reserve System acknowledged the FRB NY’s own supervisory weaknesses that caused it not to review trading activity early on in the Chief Investment Office at JPMorgan Chase that ultimately led to losses of over US $6 billion by the end of 2012—the so-called London Whale incident.


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Lead Stories

Hong Kong-Shanghai bourse venture delayed
Philip Stafford in London and Josh Noble in Hong Kong – Financial Times
Shares in the Hong Kong stock exchange and Chinese brokerages dropped sharply on Monday following fresh signs that a hotly anticipated cross-border trading link is still weeks away from launch.

SEC Rejects Non-Transparent ETFs in Setback for Industry
Mary Childs – Bloomberg
U.S. regulators rejected a proposal by NYSE Arca Inc. to allow trading of a new type of exchange-traded fund, the second setback this week to investment firms’ plans to expand ETFs beyond passive products.

Mifid II: Regulatory ‘typhoon’ on course for Europe
Steve Johnson – Financial Times
Wealth managers and private banks across Europe are about to be hit by a regulatory “typhoon” and are “burying their heads in the sand” about the consequences, according to a leading campaigner on costs and transparency.

Most European Banks Pass E.C.B. Stress Test
Jack Ewing – Dealbook – NY Times
The bulk of Europe’s biggest banks would be able to survive a financial crisis or severe economic downturn, the European Central Bank said on Sunday, concluding a yearlong audit of eurozone lenders that is potentially a turning point for the region’s battered economy.

Here Are the European Banks That Failed the Stress Tests
Viktoria Dendrinou – MoneyBeat – WSJ
Twenty-five European banks wouldn’t be able to survive a swath of economic and financial shocks, European regulators said Sunday as they announced the results of “stress tests” on 150 major lenders across the continent.

Europe’s bank test celebrations mask mounting challenges
Laura Noonan – Reuters
Investors were spared immediate pain on Sunday after the European Central Bank’s landmark banking health check did not force massive capital hikes amongst the euro zone’s top lenders.


Shareholders, Disarmed by a Delaware Court
Who will hold corporate executives and directors accountable for wrongdoing? Normally, regulators and prosecutors would be leading the charge. And while they have extracted big-dollar settlements from banks in the aftermath of the financial crisis, these supposed enforcers have been remarkably reluctant when it comes to pursuing high-level miscreants.

One regulator, different fines
Tim Cave – Financial News
The move to bring transparency to the swaps market is a global one, mandated by the governments of the world’s top 20 economies at a summit in 2009. In Europe, it is being handled by a continent-wide regulator. But when it comes to fines, every country in Europe seems to be doing its own thing.

Wealth managers fear being caught by banker bonus rules
Nick Paler – Investment Week
Wealth firms are growing concerned a regulatory crackdown on bonuses within the UK banking sector could end up impacting the investment management industry.

Long arm of the law stretches to cover swaps reporting
Tim Cave – Financial News
European regulators could soon get a bite to match their bark when it comes to the complex issue of trade reporting.

Esma gets tough on trade identifiers in new Emir fix
Esma has clarified how UTI generation should work in a new Q&A document. Confusion over this process has been widely blamed for comically low trade-matching rates

The Importance Of The SEC’s Rulemaking Agenda — You Are What You Prioritize: Remarks At The 47th Annual Securities Regulation Seminar Of The Los Angeles County Bar Association, SEC Commissioner Daniel M. Gallagher, Los Angeles, CA, Oct. 24, 2014

Remarks Before Los Angeles County Bar Association 47th Annual Securities Regulation Seminar, SEC Commissioner Kara M. Stein, Los Angeles, California, Oct. 24, 2014

Exchanges & Trading Facilities

Nasdaq Nordic joins weekly equity options trend
The Trade
Nasdaq has launched weekly equity options expirations for the largest Stockholm-listed stocks to cater for a growing demand of shorter-term exposure among investors.

LME taps China investors’ metals interest
Henry Sanderson – Financial Times
It is a tradition at the London Metal Exchange’s annual black tie dinner in the ballroom of the Grovesnor House Hotel to bet on the length of the speech. At 28 minutes this year’s not only surprised to the upside, it also came with an ominous warning.

Nasdaq Q3 Earnings Rise, Beat Estimates; Revenues Miss – Quick Facts
Nasdaq OMX Group, Inc. Friday reported third-quarter earnings which increased, as the stock exchange operator saw a drop in operating expenses that masked a revenue decline. Earnings topped analysts’ estimates, while revenues fell short.

Warsaw Stock Exchange Trading Session Continues Uninterrupted Following Evacuation Of Building

Nasdaq Announces End-Of-Month Open Short Interest Positions In Nasdaq Stocks As Of Settlement Date October 15, 2014

Direct Edge Regulatory Notice #14-05: Notice Regarding Integration Of BATS Global Markets Holdings, Inc. Data Agreement And Direct Edge Exchange Data Vendor Agreement, And Amendments To BATS U.S. Market Data Policies

TOM MTF Statistics Week 43 2014

Moscow Exchange To Launch MOEX Board Indicative Quotation System

Probiodrug AG celebrates its successful IPO on Euronext Amsterdam

Hedge Funds & Managed Futures

HFT outfit receives FCA approval
Tim Cave – Financial News
A fledgling UK high-speed trading firm has come under the umbrella of regulators for the first time, the latest in a string of similar moves ahead of new European rules forcing a higher level of oversight on the firms. Maven Securities, established by a trio of former traders from Optiver and Tibra Capital, received authorisation for its Maven Derivatives affiliate from the UK’s Financial Conduct Authority last month.

Bill Ackman and His Hedge Fund, Betting Big
William A. Ackman, the silver-haired, silver-tongued hedge fund mogul, gestured out the window of a 42nd-floor conference room at Pershing Square Capital Management in Midtown Manhattan. The view was spectacular, but Mr. Ackman’s arm extended not downward, toward the vibrant fall foliage of Central Park, but skyward toward the top of a glittering glass building just around the corner on 57th Street.

Hedge-Fund Manager’s Combative Style Pays Off
Rob Copeland – WSJ
Keith Meister takes things personally. The burly and at times combustible hedge-fund manager, tipped off that his expensive coup d’état of the board of corporate landlord CommonWealth REIT could be imperiled by a proposed last-minute tweak to Maryland state law, didn’t just send one of his 24 employees: He flew down to Annapolis himself

Venture capital catches a cure
Becky Pritchard – Financial News
Venture capital in the region has returned to rude health – with the buoyant market for listings that persisted for much of 2014 the best medicine

Private equity firms target push into mid-cap lending
Dan Dunkley – Financial News
Private equity firms and financial institutions are increasing their exposure to Europe’s mid-cap lending market by hiring debt specialists and building their operations.

Oil Speculators Bet Wrong as Rebound Proves Fleeting
Moming Zhou – Bloomberg
Hedge funds rushed back into oil too quickly, boosting bullish bets amid a rebound last week, only to then watch surging U.S. crude supplies push prices right back down to a two-year low.

Dos and don’ts for bankers setting out their stalls for private equity
Becky Pritchard – Financial News
For banks, private equity firms are very attractive clients. They are in constant need of advice – when they buy a business, when they dispose of parts of it or add others, and, best of all, when they sell it. For advising on a sale, a bank can be paid millions in fees, so competition for those mandates is fierce.

What Will Set Warren Buffett’s Company Apart When He’s Gone?
Anupreeta Das – MoneyBeat – WSJ
Warren Buffett likes companies that have wide “moats” – his term for competitive advantages – and has built Berkshire Hathaway Inc. into a gigantic conglomerate by buying or investing in companies protected by moats.

Private Equity Fight Club
Becky Pritchard – MoneyBeat – WSJ
Private equity is getting its own fight club. Well sort of. Unlike in the film, you will be able to talk about the existence of the club and there won’t actually be any bare knuckle boxing competitions.

Banks & Brokers

JP Morgan favours conditional orders to execute more blocks
John Bakie – The Trade
JP Morgan is the latest broker to refocus its electronic trading to help institutional investors execute more blocks with the introduction of a conditional order type.

Marex spectron grows commodities data
Commodities and financial broker Marex Spectron has expanded its market data offering with the addition of new content sets for fuels and metals

Deutsche Bank reserves further EUR1bn for litigation
Alice Ross – Financial Times
Deutsche Bank will set aside an extra EUR894m towards the numerous legal and regulatory issues it faces in its third-quarter results next week, the bank confirmed on Friday.

Clearing & Settlement

Markit venture is first casualty of US swap flop
Markit has told Risk it is closing its pre-trade credit-checking hub with immediate effect, citing slack trading volume on US swap execution facilities (Sefs) and particularly the failure of large-scale limit order book trading to take off. The decision had been rumoured for weeks.

Indexes & Products

ROBO-STOX Opens London Stock Exchange Trading
London Stock Exchange today welcomes the first global robotics and automation ETF to its markets.

New social media index includes fast-entry IPO rule
Index provider Solactive has created a social media index for Vontobel that includes a rule allowing for extraordinary adjustments in the event of new social media IPOs that meet the entry conditions

Tokyo Stock Exchange: New ETFs And ETNs Included In Real-Time Dissemination Of “TSE Indicative NAV”

ETF Quarterly Statistics: 3rd Quarter Of 2014
This Report Provides Detailed Figures Regarding The Performance Of SIX Swiss Exchange’s ETF Segment In The Third Quarter Of 2014


Cinnober To Provide Exchange Technology As A Service To A New Marketplace
Press Release
Cinnober, the global provider of exchange and clearing technology, has signed an agreement with a marketplace regarding service delivery of turnkey solutions covering the marketplace’s full transaction cycle, including technology for trading, clearing and surveillance. The delivery will be supplied as a managed service and the customer has requested anonymity during the pre-launch period.

OpenGamma Names Mark Beeston as Chairman; Appoints Former SunGard CEO Cristobal Conde as Non-Executive Director
OpenGamma, a leading provider of OTC market structure risk management and analytics solutions, today announced that Mark Beeston has been appointed as Chairman of the Board of Directors. OpenGamma also appointed Cristobal Conde, former CEO of SunGard, to its board.

European fintech investments soar
Anna Irrera – Financial News
Venture capital investment in European fintech companies surged in the first three quarters of the year, driven by growing investor and customer demand.

Fix market data protocol spec nears completion
Standards body FIX Trading Community is finalizing the specification for a FIX Protocol-based market data standard that incorporates elements of Nasdaq’s ITCH Protocol, though FIX does not plan a wholesale adoption of ITCH semantics, as originally planned.

New eXtremeDB Financial Edition Version 6.0 Ramps Up Database System’s Speed, Scalability And Development Simplicity
Access To Vector-Based Functions Via SQL And Python Boosts Programming Speed And Productivity. Distributed Query Processing And RLE Compression Tackle Big Data In Capital Markets Analytics – Update


Ex-fund manager spared prison for assisting U.S. insider trading probes
Joseph Ax and Nate Raymond – Reuters
A former portfolio manager who became a key cooperator in a broad U.S. government crackdown on insider trading avoided prison on Friday at her sentencing in New York federal court.

Ex-Bank of New York Mellon employee pleads guilty to insider trading
Joseph Ax – Reuters
A former Bank of New York Mellon Corp employee on Friday pleaded guilty to insider trading based on tips from a former Merck & Co Inc employee about potential pharmaceutical mergers.

SEC Sanctions Florida-Based Auditor for Circumventing Rules
The Securities and Exchange Commission today sanctioned a Florida-based auditor for violating federal laws and regulations requiring lead audit partners to periodically rotate off their audit engagements with a publicly traded company in order to preserve the integrity of the financial reporting process.

Federal Court Orders California Resident Ryan A. Nassbridges and his California Companies to Pay over $18 Million in Civil Monetary Penalties in a Commodity Pool Precious Metals Scheme

CFTC Obtains Default Judgment against Texas-Based Financial Robotics, Inc. for Fraudulent Forex Scheme
The U.S. Commodity Futures Trading Commission (CFTC) announced that Judge Lee H. Rosenthal of the U.S. District Court for the Southern District of Texas entered an Order of default judgment and permanent injunction against Defendant Financial Robotics, Inc., a Texas corporation.

NFA Regulatory Actions: Success Bullion USA LLC and Chris Jann

ABN AMRO Clearing Sydney Pty Ltd Pays $40,000 Infringement Notice Penalty

Environmental & Energy

Keystone Foes Energized as Price Pinch Oil Sand Allure
Jim Snyder, Bloomberg News
Falling oil prices have energized opponents of the proposed Keystone XL pipeline.

***LB: Also in this story “At $75, a government analysis said producers may be discouraged from developing Canada’s oil sands without pipelines like Keystone.”

UN climate change draft sees risks of irreversible damage
Alister Doyle, Reuters
Climate change may have “serious, pervasive and irreversible” impacts on human society and nature, according to a draft UN report due for approval this week that says governments still have time to avert the worst.

E.U. Greenhouse Gas Deal Falls Short of Expectations
James Kanter, The New York Times
The deal reached early Friday by the European Union to cap its greenhouse gas emissions was meant to increase pressure on the rest of the world to achieve a landmark accord on climate protection next year, the bloc’s leaders said.


Tax conundrum may explain Stock Connect’s absence
Simon Osborne – The Trade
For the Shanghai-Hong Kong Stock Connect, 27 October 2014 had been the start date that had been anticipated by many in the industry. Despite the authorities having trumpeted its introduction for six months and systems testing having been completed, October has come and will now pass without the Stock Connect having gone live.

Troubles in China Rattle Western Banks
Enda Curran – WSJ
When Chinese property developer Agile Property Holdings Ltd. said this month that its chairman was taken into custody by authorities, the disclosure was a shock to Western banks that lent the company money.

Sydney expected to get yuan clearing bank soon
Jeanny Yu – South China Morning Post
Beijing is set to accelerate plans to boost the international use of yuan by concluding pacts with key regional trading partners Australia and Singapore.

Thai Exchange Ready For Digital Era With Expansion Of Online Smart-Listing Service

FIA Japan Newsletter November 2014 Edition Released

Tokyo Commodity Exchange: Circuit Breakers In And After November 4th,2014

Frontier Markets

NSEL crisis: Govt mulls Board changes for merged entity
After ordering merger of crisis-hit NSEL with parent firm Financial Technologies to help affected investors get their dues, the government is starting a process to assess compensation amounts and is also considering a proposal to make changes to the Board of the merged entity.

DGCX Lists Two MSCI INDIA INDEX Futures Contracts
Further expanding its equity suite and its emerging market portfolio, the Dubai Gold and Commodities Exchange (DGCX) today announced the launch of two Futures contracts based on the MSCI India Index.

Global turbulence triggers flight from EM equities
Elaine Moore – Financial Times
Investors removed $9bn from stocks and shares across Africa, Latin America, eastern Europe and Asia in October, according to figures from the Washington-based Institute of International Finance, which tracks all cross-border investment into developing countries by non-residents.

U.S. court hearing over Citi processing of Argentine bond payment delayed
Nate Raymond – Reuters
A U.S. judge has delayed by a week a December hearing to consider whether Citigroup Inc should be allowed to process an interest payment by Argentina on bonds issued under its local laws following its 2002 default.

CEO Of Qatar Stock Exchange Participates In 2014 WFE Annual Meetings Held In The Korean Capital, Seoul
Mr. Rashid bin Ali Al Mansoori, CEO of Qatar Stock Exchange, arrived last night in the Korean capital Seoul to participate in the 2014 annual meetings of the World Federation of Exchanges (WFE), which begins there today in the presence of representatives of 60 WFE member exchanges and market operators responsible for the functioning of key components in the financial world.

DGCX Lists Two MSCI INDIA INDEX Futures Contracts – Launch Strengthens DGCX’s Emerging Market Product Offering

DFM Company Net Profit Up 246% To AED 621 Million In The First 9 Months Of 2014

EGX Chairman Participates In The 54th WFE General Assembly & Committee Meeting


Right financial officer for the right era
Harriet Agnew and David Oakley – Financial Times
A new man for a new era. That seems to be the mantra of a series of British companies that are looking to replace their finance directors. From the UK’s biggest online-only fashion retailer Asos to drug company Shire, chief financial officers are moving companies and sectors as they seek new challenges – or are asked by boards and investors to do so.

Hey big spender of hedge fund expenses
John Kenchington – Financial Times
The UK was gripped by an outpouring of public outrage in 2009 as the widespread misuse of the parliamentary expenses system by its politicians was exposed. They had been up to all sorts, including fraudulent cases that resulted in jail time. But the greatest public anger was reserved for those cases that were remarkable for sheer wanton excess.

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