First Read

Bits and pieces from IDX
Jim Kharouf – JLN
If this year’s International Derivatives Expo (IDX) in London reflects one thing, it is that regulation continues to dominate the conversation. Phupinder Gill, CEO of CME Group sounded the alarm at the exchange leader’s panel about regulatory arbitrage.

He said that futurization of swaps and margin requirements for non-US entities trading on futures markets is pushing that order flow out of US exchanges and back over to European bourses and elsewhere.

And that is just one of many issues that are cropping up for firms who are dealing with capital and reporting requirements.

So what is an FCM, bank, broker or trading firm to do? IDX’s exhibit hall is loaded with vendors that are offering any number of risk management and post-trading services. Contango Markets unveiled its tool to reconcile post trade swaps, while any number of vendors are pushing compliance functionality on their trading software. Others are trying to reduce clearing costs in a variety of ways. Other firms such as OpenGamma and Sungard, for example, are trying to help clearing member firms cut clearing costs and provide capital allocation tools.

David Hardy, chairman of GCSA, is pushing an insurance product for clearing houses, that would ultimately help clearing member firms reduce the amount of capital needed in the default fund.

In short, firms continue to look for two things – reporting and compliance technologies to meet requirements, and ideas, discussions and products that will ultimately free up capital.

If Gill is correct about the regulatory arbitrage issue, firms may be looking for the next technology that gives them the regulatory edge.

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IDX Beat: futures industry regenerates
Philip Stafford – Financial Times
From the start, the futures industry’s willingness to embrace new ideas from the US was a conscious dissent from tradition. But this year’s International Derivatives Expo, which began on Tuesday, highlighted a new state of affairs – that the industry has reached respectability, to the point where it is now part of the established order.
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***** Someone please take the punch bowl away from Phil Stafford. I think he has had enough.

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IDX 2014: Negativity over HFT needs to be reversed, argue exchanges
COOConnect
Regulators need to be better educated about the benefits of high-frequency-trading (HFT), according to a panel comprised of the chief executive officers at some of the world’s leading exchanges.
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***** What is high frequency trading? Let’s start with a definition we can all agree on. From there we can define what is positive and what is negative.

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CFTC Chairman Massad Announces the Appointment of Aitan Goelman as Director of Enforcement
U.S. Commodity Futures Trading Commission (CFTC) Chairman Timothy Massad today named Aitan Goelman as the agency’s Director of the Division of Enforcement. Mr. Goelman is a former federal prosecutor with more than 20 years of experience litigating both criminal and civil matters.
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***** He is a “fine” choice.

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A Legislative Assault on the Financial Stability Oversight Council
Dealbook – NY Times
Two new bills are pending in the House that relate to the Financial Stability Oversight Council and its ability to designate which parts of the financial system are “too big to fail” and thus in need of greater regulatory scrutiny. Both show how political the entire issue has become.
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****** There is not even stability on the role of the Financial Stability Oversight Council. The FSOC VIX is skyrocketing.

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MarketsWiki World of Opportunity Summer Intern Series Goes to London
John Lothian & Co. is pleased to announce the MarketsWiki World of Opportunity Summer Intern Education Series is coming to London on July 1st and 2nd, 2014 with the generous support of the [[CME Group]].
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IDX 2014: Exchanges warn financial institutions on cyber-threats
COOConnect
Market participants need to be better communicate with each other about how to mitigate the risks of cyber-attacks. “A lot of market participants do not talk about cyber-threats because of confidentiality reasons but this needs to change,” said Jeffrey Sprecher, chairman and chief executive officer (CEO) at Intercontinental Exchange (ICE)
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***** Agreed. We need to talk about this problem.

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tradeMONSTER CTO Sanjib Sahoo Receives 2014 InfoWorld Technology Leadership Award
tradeMONSTER, a leading web-based brokerage co-founded by renowned options traders Jon and Pete Najarian, announced today that IDG’s InfoWorld Technology Leadership Awards recognized tradeMONSTER’s CTO Sanjib Sahoo in the “technology creation/enhancement” category for his vision, leadership and novel approach in creating tradeMONSTER’s patent pending mobile platform.
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***** Yahoo! for Sahoo!

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Sponsored Content
Foreign Exchange Industry Conference (FXIC),
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Readers of John Lothian Newsletters are invited to apply for a complimentary pass to the event. Please write “JLN” in the Comment box on the event’s registration page.

Registration and full agenda  HERE.

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MarketsWiki Page of the Day
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jlne.ws/1isNgug

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Lead Stories

DERIVATIVES: ICE’s Sprecher sees risk amid VIX lows
Helen Bartholomew – Capital City | IFRe
Historically low volatility could be lulling investors into a false sense of security, senior exchange officials warned this morning at the annual International Derivatives Expo in London. “It feels like there is something about to happen,” Jeffrey Sprecher, chairman and chief executive of the InterContinental Exchange, told delegates at the event this morning on a panel of exchange leaders.
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DERIVATIVES: CFTC ‘tired’ of exemptions for cross-border conflicts
Christopher Whittall – Capital City | IFRe
Derivatives clearing firms caught in the crossfire between US and European regulations should move their businesses to avoid jurisdictional conflicts rather than ask for regulatory relief, an audience at the International Derivatives Expo heard today in London.
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Former Rabobank trader pleads guilty to Libor manipulation
Reuters
A former Rabobank NV trader on Tuesday pleaded guilty for his role in manipulating the Yen Libor benchmark interest rate, the U.S. Department of Justice said.
jlne.ws/1l5JYLQ

Bank of America Mortgage Settlement Is Said to Be Deadlocked
Dealbook – NY Times
Bank of America and the Justice Department have reached an impasse in negotiations over a multibillion-dollar settlement deal, raising the stakes in an investigation into the bank’s role at the center of the mortgage crisis.
jlne.ws/1u41sNS

Gold price benchmark open to manipulation-London Metal Exchange CEO
Reuters
The global gold price setting benchmark or “fix” is open to manipulation, said the head of the London Metal Exchange (LME), which is competing to offer an alternative to the silver fix when the system is disbanded in August.
jlne.ws/1n5CVWi

Ross’s $678 Million Gain Leaves Irish Bank Chasing Growth
Joe Brennan – Bloomberg
As U.S. billionaire Wilbur Ross exits Bank of Ireland Plc with a 500 million-euro ($678 million) profit, he leaves a financial industry struggling to grow.
jlne.ws/1n5EDH4

Hollande taps bank economist to steer economic policy
Reuters
Francois Hollande has chosen a senior economist at a U.S. bank as his new top economic advisor, an official in the French president’s office said on Tuesday, as France tries to sustain a sputtering economic recovery.
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Regulatory

EU-US split here to stay, exchange heads fear
Tom Osborn – Risk.net
European and US derivatives regulation will remain split for years to come, potentially limiting competition and threatening liquidity, according to the heads of two major exchanges.
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Trade bodies unite for Mifid II response
Tim Cave and Anish Puaar – Financial News
Fourteen trade bodies have joined forces to provide feedback on a revised version of the Market in Financial Instruments Directive, as concerns mount over the timeframe the industry has been given to consult on the new rulebook.
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Former CFTC General Counsel: US Swaps Reform a Mixed Bag of Outcomes
Timothy Bourgaize Murray – WatersTechnology
Terry Arbit, former deputy general counsel for legislative and intergovernmental affairs at the Commodity Futures Trading Commission (CFTC) and now partner at Norton Rose Fulbright, gave attendees at this morning’s Waters Breakfast Briefing a first-hand account of how the Dodd–Frank sausage was made, and the consequences it portends going forward.
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Boards of Directors, Corporate Governance And Cyber-Risks: Sharpening The Focus, SEC Commissioner Luis A. Aguilar, “Cyber Risks And The Boardroom” Conference, New York Stock Exchange, New York, NY, June 10, 2014
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The Technology Challenge – Speech By Martin Wheatley, CEO, The UK Financial Conduct Authority, At Lansons, London.
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ESMA Chair, Steven Maijoor, Delivers Keynote Speech At IBA 25th Annual Conference On The Globalisation Of Investment Funds In Paris
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ESMA: Call For Candidates For The Commodity Derivatives Consultative Working Group
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SIFMA Statement From Prudential Banking Conference
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ISDA Research Study: Central Clearing In The Equity Derivatives Market
Press Release
The approval of the first central counterparties under the European Market Infrastructure Regulation has focused attention on how a clearing determination will be applied across the European Union. This paper outlines the composition of the equity derivatives market and the extent of central clearing today, as well as the criteria that should be assessed when determining whether a clearing mandate should apply in the EU.
jlne.ws/1l5QB0H

Exchanges & Trading Facilities

MarketPrizm & CME Group to provide DMA to SGX
Automated Trader
MarketPrizm has announced an agreement with CME Group to provide raw market data and order routing services at the Singapore Exchange (SGX).
jlne.ws/1n5FUxV

Euronext’s I.P.O. Will Be a Tough Sell
Dealbook – NY Times
Euronext’s initial public offering looks like a tough sell. The firm is seeking a valuation of 1.3 billion euros to 1.8 billion euros when it floats later this month. Anchor investors have a vested interest in backing the issue. But for other buyers, it is a leap of faith.
jlne.ws/1l5K8CY

Toronto Stock Exchange Hosts Investor Day In London
Press Release
Today, Toronto Stock Exchange (TSX), owned by TMX Group, will host an investor day today in London, U.K. to raise awareness with the U.K. investment community of Canada’s premier equities market.
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NASDAQ Announces End-Of-Month Open Short Interest Positions In NASDAQ Stocks As Of Settlement Date May 30, 2014
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Warsaw Stock Exchange: Deutsche Boerse CEO Is The Special Guest Of GEMS
Warsaw Stock Exchange hosts the 19th annual Global Equity and Derivatives Markets Seminar. GEMS stands for unique expertise combined with direct exchange of experience with capital market practitioners from around the world. The special guest of this year’s GEMS is Reto Francioni, CEO of Deutsche Boerse.
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Moscow Exchange Selects FINCAD to Support its OTC Derivatives Trading and Clearing Capabilities
FINCAD, the leading provider of OTC derivatives pricing and risk management solutions, today announced that the Moscow Exchange (MOEX) has chosen FINCAD’s F3 Platform to support its OTC derivatives trading and clearing services.
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Moscow Exchange: Main Market Trading Interrupted
Press Release
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Elior lists on Euronext
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Direct Edge Trading Notice #14-21: BATS / Direct Edge Integration Test And Member Certification Schedule
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Hedge Funds & Managed Futures

TrimTabs and BarclayHedge Report Hedge Funds Get $18.7 Billion in April but Underperform S&P 500. Year-to-Date Inflow of $56.4 Billion More Than Triple Inflow in Same Period Last Year
BarclayHedge
BarclayHedge and TrimTabs Investment Research reported today that the hedge fund industry took in $18.7 billion (0.8% of assets) in April, up from $10.6 billion (0.5% of assets) in March.
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Pimco hires hedge fund manager in Europe
Harriet Agnew in London and Stephen Foley in New York – Financial Times
Geraldine Sundstrom, one of the most high-profile women in the European hedge fund industry, is set to join Pimco, the world’s biggest bond fund manager.
jlne.ws/1l5OY37

Endowment Chief to Exit at Harvard
Dealbook – NY Times
Jane L. Mendillo, the manager of Harvard’s $32.7 billion endowment, plans to step down by the end of the year, the university said on Tuesday.
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June 2014 Barclay Insider Report
BarclayHedge sends this monthly report to keep industry insiders up-to-date on news and activity in hedge fund and managed futures investments.
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Banks & Brokers

In Tough Market, Investment Banks Seek Shelter or Get Out
STEVEN M. DAVIDOFF – Dealbook – NY Times
The world of Goldman Sachs, Morgan Stanley and the rest of the investment banks is being remade, squeezed by new regulations and record low volatility in the markets. So what will the new world look like?
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Morgan Stanley CEO expects commodities sales to close in 3rd qtr
Reuters
Morgan Stanley will “probably” close sales of two physical commodities businesses in the third quarter, Chief Executive James Gorman said on Tuesday.
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Look Who’s Hiring Bankers in London Now
Nick Kostov – MoneyBeat – WSJ
Three big professional services firms–EY, KPMG and PwC–are stepping up their efforts to snatch a slice of the M&A market from investment banks – by hiring the banks’ own talent.
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How UBS reacted to Adoboli losses
Alexander Campbell – Risk.net
In the aftermath of a $2.3 billion rogue trading loss, UBS overhauled its operations and set up a middle office for the first time
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Some Wells Fargo brokers balk at signing new team agreements
Reuters
Wells Fargo Advisors has asked its brokerage teams to formalize their pay and account arrangements in a way it says is generous, but which some brokers fear could lead to a client grab when teams change or dissolve.
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Morgan Stanley Cutting Jobs From Currency and Rates Trading Businesses
WSJ
Morgan Stanley is cutting jobs from its currency and rates trading businesses in response to the slowdown in those markets, the firm’s chief executive said Tuesday.
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Morgan Stanley crude oil head trader resigns
Reuters
Morgan Stanley’s head of crude oil trading in New York, Tom O’Connor, resigned last week, a person familiar with the matter said.
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Clearing & Settlement

Real-time clearing – the story
Cinnober
The Johannesburg Stock Exchange (JSE) recently selected Cinnober’s TRADExpress RealTime Clearing to replace its current clearing technology with a single multi-asset real-time platform, to support their strategy for growth. JSE – among the world’s top 20 exchanges in terms of market capitalization – currently uses separate clearing systems for its different asset classes.
jlne.ws/1l5DAUO

ISDA Research Study: Central Clearing In The Equity Derivatives Market
The approval of the first central counterparties under the European Market Infrastructure Regulation has focused attention on how a clearing determination will be applied across the European Union. This paper outlines the composition of the equity derivatives market and the extent of central clearing today, as well as the criteria that should be assessed when determining whether a clearing mandate should apply in the EU.
jlne.ws/1l5QB0H

Clearstream’s May 2014 Figures
In May 2014, the overall value of assets under custody held on behalf of customers registered an increase of 4 percent to EUR 12.1 trillion (compared to EUR 11.7 trillion in May 2013).
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Indexes & Products

MSCI leaves Chinese stocks out of indices
Josh Noble in Hong Kong and Nicole Bullock in New York – Financial Times
MSCI has chosen not to press ahead with a controversial plan to add mainland Chinese equities to its global benchmark indices, while South Korea and Taiwan will no longer be considered for a developed markets ranking.
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Equity strategy launches turn post-crisis corner
Risk.net
Last year was the best for net launches for long/short equity and market neutral equity strategies since before the financial crisis
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STOXX Minimum Variance Indices Licensed To Resona Bank In Japan – Indices To Be Used In Passive Funds Used By Japanese Pension Funds
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The ETFs linked to the Ibex 35 manage assets representing EUR 2 billion (Sociedad Rectora de la Bolsa de Valores de Madrid SA)
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Technology

Barclays chief Antony Jenkins warns of banking industry need to innovate at speed and with scale
Vivek Ahuja – Financial News
Barclays group chief executive Antony Jenkins has warned that the banking industry is on the cusp of a technological revolution and must embrace innovation to adapt to new regulations and growing competition from tech firms.
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GRAVITAS HIRES ROBERT DIAZ, JR. AS GLOBAL HEAD OF DELIVERY
Gravitas announced today that Robert Diaz, Jr. has joined the firm as global head of delivery, effective today, a new position designed to ensure service delivery and support marketing efforts. Mr. Diaz brings a wealth of industry experience to Gravitas having spent the last 13 years at GLOBEOP Financial Services SA, where he was responsible for fund services, serving as global head of fund accounting, operations and investor services across North America, Europe and India.
jlne.ws/1q2JcHd

Des Peck Joins Object Trading as New Business Sales Executive in Europe
Object Trading, an independent provider of global direct market access (DMA), today announced the appointment of Des Peck as New Business Sales Executive in Europe. Mr. Peck will be responsible for leading Object Trading’s sales and business development initiatives
jlne.ws/1q2Jo9v

S&P Capital IQ joins Markit’s open messaging networkCOLLAPSE
Markit, a leading global diversified provider of financial information services, today announced that S&P Capital IQ, a business unit of McGraw Hill Financial and a leading provider of financial research, data and analytics, will join Collaboration Services, the open messaging network from Markit.
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FIX becomes the pre-eminent standard for OTC Derivatives trading on SEFs
FX-MM
FIX Trading Community, the non-profit, industry-driven standards body at the heart of the global electronic trading community, announces the adoption of the FIX Protocol by an overwhelming majority of Swap Execution Facilities (SEFs), including BGC Derivative Markets, L.P., Bloomberg, trueEX, GFI Group, ICE Swap Trade, MarketAxess, Tradeweb (TW and DW), Tradition Trad-X and Tullett Prebon.
jlne.ws/1xICGrh

Environmental & Energy

Russia’s Gazprom says gas flows to Ukraine, EU stable on Tuesday
Reuters
A spokesman for Russian top natural gas producer Gazprom said on Tuesday gas supplies to the European Union were stable and that he had no information on a possible supply cut.
jlne.ws/1l2zGR9

Russia and Ukraine resume efforts to solve gas dispute
Vladimir Soldatkin and Denis Pinchuk, Reuters
Russia and Ukraine will resume efforts to resolve a gas pricing dispute on Tuesday after a Russian deadline for Kiev to pay some of its debts passed without Moscow cutting off supplies.
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Lithuania competition watchdog fines Gazprom $48 mln
Reuters
Lithuania’s competition authority has fined Russia’s Gazprom a record 123 million Lithuanian litas ($48 million), saying that the company had prevented competition in the Baltic state.
jlne.ws/Sv1IJG

Asia-Pacific

Hong Kong Regulators Tense About China Loans
Dealbook – NY Times
A surge in business loans to the slowing mainland Chinese economy has prompted Hong Kong regulators to impose strict financial rules four years before they are required under new global standards.
jlne.ws/1u41J3A

Dalian Commodity Exchange Rounds Off 1st Full-market Night Trading Test
To effectively make technical preparations for the night trading, from the evening of June 7 to the afternoon of June 8, Dalian Commodity Exchange (DCE) successfully carried out the first full-market networking test for night trading.
jlne.ws/1u428D0

Japan’s Financial Services Agency: Japan-South Korea Shuttle Meeting On Financial Issues
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Frontier Markets

Waiting for a windfall from Iran
Dominic Dudley – Euromoney Magazine
Can Dubai take advantage of Tehran’s rapprochement with the US to once again become Iran’s de facto financial link to the world?
jlne.ws/1l5COHh

Six pieces of an Iranian jigsaw
Chris Wright – Euromoney Magazine
Iran has a heavily populated and complex banking sector, with several large state-owned banks that hold most of the country’s assets and deposits and at least 17 privately owned banks that tend to be smaller but more nimble and entrepreneurial. Euromoney profiles six institutions that represent different parts of the picture.
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