John Lothian Newsletter: ICE wins race to run London gold fix; JPMorgan Spars With CME Over USD 375 Million; SEC Lets Eaton Vance Offer New Kind of ETF

Nov 7, 2014

First Read

The End of an Expo
Doug Ashburn and Jim Kharouf
Another FIA Expo has come and gone and, for us anyway, it was one for the ages. The tone of the conference was much more positive than recent years, with a more conciliatory CFTC, an industry that has seen green shoots amid recent volatility and a general feeling that we are emerging from a difficult era as a more dynamic and forward-looking industry.

We partnered with our friends at Cinnober to conduct a series of short video interviews with the industry on transparency – what is needed to improve it, what solutions are out there, and how will things shake out down the road in terms of transparency. These broadly designed questions were meant to draw a diverse set of answers, and our participants did not disappoint. Over the coming days we will be releasing three video compilations to correspond with the three questions.

Speaking of Cinnober, this week’s cover story in Swedish magazine Veckans Affärer (Business Week), featured CEO Veronica Augustsson in an article titled Hon styr världens börser (She Controls the World’s Stock Markets). If you read Swedish, or have good translation software available, click here and head to page 40.

In the wake of Expo, the industry appears to be “turning the corner” as one executive put it last night at the very successful “Great Chicago Steak Out” charity event by FIA Cares. Most of the Dodd-Frank regs are in place and companies are turning their attention back to building their business, instead of bracing for new rules. There’s still some important work on that end, of course, but eyes are now looking to 2015 – and beyond.


Hugh Vyvyan, Saracens Rugby Team – Transitions: Lessons on a career change

“You have to work incredibly hard to survive. That’s a fact of being a rugby player, and that’s a fact of life.”

Hugh Vyvyan, former player of the Saracens Rugby Team, discusses the importance of working as a team and what individuals need to do to better both themselves while contributing to their group, whether it be a sports team or financial firm. Vyvyan uses his own personal experiences with the Saracens team to illustrate how successful organizations focus more on its people rather than being driven by achieving results. Vyvyan noted how the Saracens organization did a complete overhaul on its philosophies by taking better care of its players and getting them to buy into a system where everyone contributes, whether or not their contributions were noticed during every game. However, all this begins with the individual. Hard work, making oneself well-rounded and becoming focused on the team first is what drives organizations to be great for years to come.

Watch the video »

***DA: If you want to hear how an organization becomes a winner, this is worth a watch.


Commodities concerns take centre stage in Chicago
Gregory Meyer in Chicago – Financial Times
This week Chicago hosted FIA Expo, a giant gathering of the futures industry. A kind of a geek fest for traders, it offered panels on topics like “Electronic Market Design” and vendor booths featuring both nanoseconds-fast computer switches and Lego play sets.

***DA: Plenty of discussion around a new position limits rule to replace the one vacated by a court in 2012. With commodities in freefall and Bart Chilton having moved to the other side, the issue does not appear to be center stage.


CME Group Announces Dr. Ben S. Bernanke as the 10th Annual Melamed-Arditti Innovation Award Recipient
CME Group’s Center for Innovation announced today that Dr. Ben S. Bernanke is the 2014 CME Group Melamed-Arditti Innovation Award recipient. Bernanke served two terms as chairman of the Board of Governors of the Federal Reserve System from 2006-2014 and leveraged his deep knowledge and academic experience to help create a blueprint for navigating the largest financial crisis of our time. CME Group will present the award at the seventh annual Global Financial Leadership Conference in Naples, Florida on Tuesday, November 18.

***DA: Great choice but, in a way, the irony is delicious. Every CME person I have talked to over the past five years has said the chief impediment to explosive growth is artificially low interest rates, the very thing Dr. Bernanke helped exacerbate during his tenure.


The Case for the Defense: Steve Grob Says the World Needs the Financial Markets
Financial markets have taken a beating by legislators, regulators and in the press over the past several years. But Steve Grob of director of group strategy for Fidessa Group, says that much of the criticism is unfounded. Jim Kharouf, editor-in-chief of John Lothian News, spoke with him about his defense of the financial industry.

“The idea that there is a real economy on one side and a financial economy that is separate, isn’t really valid,” Grob argues. “The idea that the financial economy has been sent to the back of the classroom because its been beating up on the real economy is equally untrue.”

Watch the video »


CCP equivalence standoff becoming a ‘high-stakes game of chicken’
John Bakie – The Trade
Impatience is growing within the derivatives industry as US and European regulators continue to stall on reaching an agreement to recognise each others clearing regimes. Walt Lukken, chairman of the Futures Industry Association described the stalemate as a ‘high-stakes game of chicken’ at the trade body’s Chicago Expo, where the topic was highly disputed.

***DA: In this week’s keynote, Chairman Massad has demonstrated a willingness to swerve, but he seems to be working on assurances that he won’t be double-crossed.


The S.E.C. Should Copy the D.M.V.
THE S.E.C. and other federal regulators have levied over $125 billion in penalties on Wall Street since the global financial crisis of 2008. Yet few believe that these fines are enough to change behavior. For the largest financial institutions, a multibillion-dollar penalty can amount to a speeding ticket — another cost of doing business. Repeat offenders are the real problem, and financial penalties alone are no longer an effective deterrent.

***DA: Yes! The penalty for fraud on Wall St. should be that the offender is led like cattle through a really long line and talked down to by patronage employees. There will never be another repeat offender.


Post-Trade Views: Euronext’s Andrew Simpson on Interoperability and Open Access
Financial regulators began their overhaul a few years ago with several goals in mind, one of which was to make clearing and trading venues more open and transparent. But can cash securities and derivatives be shoehorned into the same set of rules? Andrew Simpson, head of post-trade services at Euronext, compares the regulatory objectives with the realities of the market.

Watch the video »


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Lead Stories

ICE wins race to run London gold fix with electronic platform
ICE Benchmark Administration will run the century-old London gold price benchmark, or “fix”, from the first quarter of 2015, the London Bullion Market Association said on Friday.

JPMorgan Spars With CME Over $375 Million
Matthew Leising – Bloomberg
JPMorgan Chase & Co. is locked in a debate with CME Group Inc. (CME) over whether the owner of the world’s biggest futures market is setting aside enough money to safeguard trades.

SEC Lets Eaton Vance Offer New Kind of ETF
Kirsten Grind – WSJ
The Securities and Exchange Commission delivered a win to the $2 trillion exchange-traded-fund industry Thursday night, approving a new type of fund structure that doesn’t have to disclose its holdings.

Hedge funds under threat from pension fund rethink
Nishant Kumar, Simon Jessop and Anthony Deutsch – Reuters
Pension schemes are starting to rethink their hedge fund investments in the face of high costs and poor returns, putting at risk the heady pace of capital flows into an industry with nearly $3 trillion of assets.

High-Speed Ad Traders Profit by Arbitraging Your Eyeballs
Doni Bloomfield – Bloomberg
The high-frequency trading pioneered on Wall Street has come to Madison Avenue. Arbitragers are buying millions of online ads and reselling them for a profit in the blink of an eye.

ADM’s new CEO is a real-life farm boy
Peter Frost – Crain’s Chicago Business
Each day when Juan Luciano speaks with his 80-year-old mother, she asks about the price of soybeans at the Chicago Board of Trade. Both have good reason to care about farm commodities.

Bart Chilton on High-Speed Trading, Market Regulation: Video
Bart Chilton, a senior policy adviser at DLA Piper LLP and a former commissioner at the Commodity Futures Trading Commission, talks about high-frequency trading and financial-market regulation. Chilton speaks with Matt Miller and Stephanie Ruhle on Bloomberg Television’s “Market Makers.” CME Group Inc. Executive Chairman Terrence Duffy also speaks.

Geopolitics and The Future of Europe: A Conversation with Ron Wexler and Ian Bremmer
In a world where politics and markets increasingly intersect, smart investors look beyond today’s economic data to analyze future market conditions. Nowhere are these issues more pressing than in Europe. To provide a snapshot of Europe’s current geopolitical and economic climate, we spoke to Ian Bremmer, President of Eurasia Group, and Ron Wexler of Citadel’s Global Equities group.


EU Proposal Could Have ‘Seismic Impact’ on Research, Analysts Say
Alexandra Scaggs – MoneyBeat – WSJ
European regulators are weighing new rules that would overhaul the way investors pay for stock research. That change could lead to a serious shake-up, says Greenwich Associates.

Regulator calls for more discussion on unbundling
John Bakie
Unbundling research and commission payments should only be attempted after a full political discussion at the European level, according to a senior French regulator.

Esma sharpens focus on best execution
Walter Hemmens and Tim Cave – Financial News
Differences between European Union members in how they ensure banks and brokers achieve the best trading results for their clients are still too great, the head of the EU’s financial watchdog has said.

“Europeans are the problem” in CCP oversight standoff
Clearing house representatives tell FIA conference that EU’s decision to withhold approval for US regime “has nothing to do with risk management concerns”

CFTC Staff Issues Time-Limited No-Action Relief to Allow Southwest Airlines and its Counterparties Additional Time for Public Reporting of Long-Dated Brent and WTI Crude Oil Swap and Swaption Contracts Executed by or with Southwest Airlines

FINRA Investor Survey Reveals Strong Support for Additional Regulatory Protections
FINRA’s survey of 1,000 adults revealed that 92 percent of investors agreed (62 percent strongly agreed and 30 percent somewhat agreed) that it is important to have a regulatory “cop on the beat” to protect investors and police the markets.

***JM: You asked people if it was important to have regulated markets??? Were you really not sure if most people think some kind of control is a good idea, or do you just like to ask people questions you already know the answers to?

ESMA: Vacancy Notice – Administrative Assistant (Deadline: 07/12/2014)

Exchanges & Trading Facilities

Oslo Børs to launch new dark pool
Oslo Børs is pleased to announce that we will launch a Dark Pool, North Sea, during the first half of 2015. North Sea will allow our members to execute larger orders, at mid-price, in a dark pool, in an exchange regulated environment.

CBOE Futures Exchange confirmed today that it will launch futures trading on the CBOE/CBOT 10-year U.S. Treasury Note Volatility Index next week, on Thursday, November 13, 2014.

TMX quarterly profit misses estimates
TMX Group Ltd, the operator of Canada’s biggest stock exchange, reported weaker-than-expected quarterly profit hurt by lower trading revenue from its BOX options exchange and cash markets.

ISE Holdings Reports Business Activity for October 2014
ISE Gemini reported record monthly ADV (1,007,614 contracts) and market share (5.3%). ISE Gemini surpassed one million contracts in 12 of the 23 trading days in October.

BOX Options Exchange Price Improvement Activity For October

September 2014 FIF Market Share Report – Executive Summary

Vienna Stock Exchange Monthly Statistics – October 2014

Monthly Summary Bulgarian Stock Exchange October 2014

ASX Compliance Monthly Activity Report – October 2014

Irish Stock Exchange Monthly Market Statistics For October 2014

TSX Markets: Top 20 Largest Consolidated Short Position Report – October 31, 2014

BM&FBOVESPA Publishes October Market Performance

Hedge Funds & Managed Futures

Pimco cuts fees
Dan McCrum – Financial Times
A good catch from FundFire, on an offer of reduced fees for 12 months to a client thinking about leaving Pimco. The fee structure was revealed in an memo to the San Luis Obispo County Pension Trust (SLOCPT) by its consultant Wurts & Associates, which has recommended that clients terminate their relationship with Pimco following the departure of chief investment officer Bill Gross for Janus.

Glory To The New Bond King
Matt Schifrin – Forbes
Bill Gross’ spectacular fall from the top of the bond market has put tens of billions in play at a time when minuscule yields demand a fixed-income superstar. A brilliant, battle-scarred billionaire, Jeffrey Gundlach, stands ready to be coronated.

BlackRock’s bond funds have biggest monthly inflows since 1998
Jessica Toonkel – Reuters
BlackRock Inc’s bond funds posted record monthly inflows of $5.2 billion in October, the most investors have poured into the firm’s bond funds since May 1998, according to data provided to Reuters from Morningstar.

Asset manager Gluskin Sheff’s profit slips as costs rise, fees drop
Canadian asset manager Gluskin Sheff + Associates Inc reported a lower quarterly profit on Thursday, as expenses rose and performance fees fell during a volatile quarter.

Ex-Goldman star Thornton joins PineBridge as chairman
Judith Evans – Financial Times
PineBridge Investments, a fund manager with about $71bn under management, has appointed former Goldman Sachs banker and China expert John Thornton as its new chairman.

Towers Watson investment head: Fund managers deserve higher pay
Julia Rampen – Investment Week
Asset managers deserve to be paid up to a third of the alpha they generate, Towers Watson’s EMEA head of investment has suggested.

Banks & Brokers

Goldman Names New Head of Enterprise Technology Investment Banking
Michael J. de la Merced – Dealbook – NY Times
Goldman Sachs has given one of its senior technology bankers the expanded title of global head of enterprise technology investment banking, according to an internal memorandum reviewed by DealBook on Thursday.

Barclays hires 5 executives in Asia Pacific investment banking team
Barclays Plc said it appointed five senior executives to strengthen its investment banking division in Asia Pacific.

Bank of America Takes $400 Million Legal Charge for Currency Inquiry
Michael Corkery and Ben Protess – Dealbook – NY Times
Bank of America is nearing a deal with federal regulators to settle an investigation into the bank’s suspected manipulation of the currency market, the latest sign that Wall Street is bracing for another crackdown on its misbehavior.

BGC’s All-Cash Tender Clearly Represents Superior Value For GFI Shareholders
BGC Partners, Inc., a leading global brokerage company primarily servicing the financial and real estate markets, today responded to the recommendation by the Board of Directors of GFI Group Inc. to reject BGC’s $5.25 per share all-cash tender offer in favor of a clearly inferior management-sponsored $4.55 all-stock deal.

Clearing & Settlement

Sef execution of package trades to be postponed
The Commodity Futures Trading Commission (CFTC) is to postpone the migration of the most complex package transactions into swap execution facility (Sef) trading after recognising that US swap market participants are not prepared to execute them on the trading venues.

CME raises initial margins for natural gas

Indexes & Products

UK ETF trading activity hits record high in October
Anna Fedorova – Investment Week
The London Stock Exchange (LSE) has seen record ETF trading in October as investors turned to passive vehicles for tactical exposure.


U.S. regulator to take action against Mondelez and Kraft -filing
Anjali Athavaley – Reuters
The Commodity Futures Trading Commission will take formal action against Mondelez International Inc and Kraft Foods Group Inc over trading involving December 2011 wheat futures contracts, Mondelez said in a filing on Thursday.

U.S. judge declines broker guilty plea in IBM insider trading case
Joseph Ax – Reuters
A former stockbroker pleaded guilty on Thursday to his role in an insider trading scheme centered on a technology company acquired by International Business Machines Corp in 2009.

Former Moore Capital trader pleads guilty to insider dealing
In a case brought by the Financial Conduct Authority (FCA) Julian Rifat a former senior execution trader at Moore Capital Management LLC has today pleaded guilty to an indictment reflecting 8 instances of insider dealing. Profits from the dealing exceeded GBP250,000.

SEC Charges Allen Park, Mich. and Two Former City Leaders in Fraudulent Muni Bond Offering for Movie Studio Project
The Securities and Exchange Commission today announced fraud charges against the City of Allen Park, Mich., and two former city leaders in connection with a municipal bond offering to support a movie studio project within the city.

SEC Charges California Lawyer and Two Massachusetts Men Behind Scheme to Manipulate Stock of Sports Ticket Broker
The Securities and Exchange Commission today charged an attorney in Orange County, Calif., and two men in Massachusetts behind a pump-and-dump scheme that defrauded investors in a Boston-based ticket brokering business.

Federal Court in Florida Freezes Assets of Emini Experts LLC, Capital Trading Concepts LLC, Dante S. Giovannetti, and Relief Defendant Capital Futures LLC in Ongoing Fraud Scheme
The U.S. Commodity Futures Trading Commission (CFTC) today announced that The Honorable Paul G. Byron of the U.S. District Court for the Middle District of Florida, Orlando Division, on October 30, 2014, entered a restraining Order freezing assets and prohibiting the destruction or concealment of books and records of Defendants Emini Experts LLC (Emini), Capital Trading Concepts LLC (Capital Trading), and Dante S. Giovannetti, all of Orlando, Florida, and Relief Defendant Capital Futures LLC (Capital Futures).

CFTC Releases Annual Enforcement Results for Fiscal Year 2014

Environmental & Energy

Election brings carbon tax closer to Oregon
Timothy Cama, The Hill
Environmentalists think Oregon has enough Democrats in its state Senate to institute a failed carbon tax.

White House would ‘consider’ Keystone bill
Justin Sink, The Hill
The White House said Thursday it would “consider” a rider approving construction of the Keystone XL oil pipeline if it was offered in legislation that was able to pass both houses of Congress.

How the GOP could shake up U.S. energy policy
Bruce Kennedy, CBS News
What’s next for America’s energy policies and initiatives in the wake of the massive political changeover in Washington?


Japanese portfolio flows support weaker yen but raise default risk
Solomon Teague – Euromoney Magazine
Long-awaited changes announced last week to the composition of Japan’s state pension fund portfolios, combined with increasing flows into foreign – predominantly US dollar – assets from retail investors and the insurance sector, should weaken the yen, but could be storing up problems in the long term.

First private banks join Asia structured product platform
Credit Suisse and Julius Baer become first banks to sign to Melbury multi-dealer structured products platform which will be launched in January next year

A Pimco Bet on China Debt, Via Credit-Default Swaps
Anjani Trivedi – WSJ
In the months before Pacific Investment Management Co. founder Bill Gross quit in September, the firm had increased its bullish bets on the Chinese economy.

Vietnam makes rare push into bond markets
Elaine Moore and Robin Wigglesworth – Financial Times
Vietnam is selling a rare new government bond as a rally in Vietnamese debt pushes the country’s borrowing costs to record lows.

SGX welcomes MS Holdings to Catalist

Stock Exchange of Thailand: Ten Thai Companies Added To MSCI Indexes Effective From November 26

HKEx: Appointment Of Director

Frontier Markets

Investment Firm Raises New $2.1 Billion Fund for Latin America
Vinod Sreeharsha – Dealbook – NY Times
The investment firm Advent International said on Thursday that it had completed raising a new $2.1 billion private equity fund for Latin America, a sign of investor confidence in the region.

Nigeria’s Currency Falls to Record Low
Josie Cox in London and Patrick McGroarty in Johannesburg – WSJ
Nigeria’s currency plunged to record lows Friday after emergency measures by the central bank failed to reassure investors concerned that falling oil prices could derail Africa’s top economy and crude producer.

NASDAQ Dubai And MCDR Sign Collaboration Agreement To Support Dual Listings By Egyptian Companies
NASDAQ Dubai and Misr for Central Clearing, Depository and Registry (MCDR) today signed a collaboration agreement to establish technical links, which would benefit companies wishing to dual list their shares on the Egyptian Exchange and NASDAQ Dubai.

MCX Weekly Market Report, Oct 31, 2014 – Nov 6, 2014

Malawi Stock Exchange Weekly Trading Report For Week Ending 07 November, 2014

Malawi Stock Exchange Monthly Market Performance Report-October, 2014

John Lothian Newsletter

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Past JLN Newsletters

How Ken Griffin rebuilt Citadel’s ramparts

How Ken Griffin rebuilt Citadel’s ramparts

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