John out for a couple of days
Mr. Lothian is away from the newsletter for just a couple of days this week to root for his son Robby in an important baseball competition. I’ll be filling in with a few comments. We also have a report today from the IDX conference from Jim and Doug, and an update on Jon Matte’s driving lessons, below.
A few tidbits from London IDX
Jim Kharouf and Doug Ashburn – JLN
This year’s IDX, like most conferences, began on a serious note, slowly lightened up and, by the end of the final day, was rather lighthearted. IDX began this year with a panel of exchange leaders worried about regulatory complexity and ended with the CEO of the FIA donning a kilt. A selection of the day’s finer moments follows.
“Switching front end trading vendors is like getting divorced and remarried. Switching back office vendors is like getting a sex change. You better be committed to the idea.”
A prominent industry participant (who wished to remain anonymous for obvious reasons) said to me upon hearing the CFTC had named Aitan Goelman its new director of enforcement, “It is a very telling sign from the commission that, despite all of the lingering regulatory issues crippling the industry, Chairman Massad’s first order of business was to make sure the enforcement division is squared away.” Hmm.
The most talked-about panel of the day was a spirited look at the post-G20 interest rate swap market, subtitled “A Tennis Debate.” Under the watchful eye of an umpire, contestants volleyed the big issues facing the swaps market, while the audience judged and kept score. Hopefully the conference planners took note that, regardless of the content, the more interactive panels always generate more buzz.
In the day’s final panel, “The Changing Nature of Vendor Relationships,” Bill Templer, managing director of Faventus Consulting, expressed worry that there is a lack of interest in the fin-tech space at the college level. He followed with a plug for our MarketsWiki Education Summer Intern speaker series (headed to London July 1st and 2nd), saying it is the type of thing needed to attract the next generation of users and participants in our markets. Here is a link to sign up or sign up your summer interns: jlne.ws/1jYEkz6
Speaking of interns, often times they get the short end of the stick in terms of assignments – data entry, file organization and the occasional latte run. Other times they get the plum assignment. Our summer intern, Alison Fay, who happened to be in London during IDX week with her father, Russell Investments’ Pat Fay, was given such an assignment. While dad was attending the conference, she was asked to tour the city, from Threadneedle Street to Canary Wharf, filming video clips to be used as b-roll for John Lothian News and John Lothian Productions. Some life.
At Wednesday’s gala, FIA CEO Walt Lukken put on the kilt for Futures for Kids, and helped the organization reach a milestone – £2 million raised for the charity since its inception. He passed the kilt-wearing duty to FIA Europe head Simon Puleston-Jones, who will take the magic sporran to IDX 2015, joining such illustrious Kilt Challenge alumni as Clive Furness, Simon Rostron, Jeremy Grant and, of course, our own John Lothian, who did the honor in 2011. Carl Gilmore of KCG stepped up and bid £365 for our JLN marketing/advertising space in the newsletter for a week.
Good show, chaps, great cause and truly one of the brightest and best organizations in our industry.
Among our final visits of the week is a trip to DTCC, the clearing, data collection and trade repository organization, which is interestingly located on Snowden Street in London. They will no doubt be checking Doug Ashburn’s credentials twice from now on.
Dapper is, as dapper does
The most interesting man in the world, CQG’s Pat Kenny and FIA CEO Walt Lukken share a common interest in Scottish fashion at the FIA-FIA Europe gala dinner. We thought this might be an early indication of next year’s kilt wearer, but with the nod going instead to Simon Puleston-Jones, we’ll have to wait at least another year to see the Most Interesting Kilt in the World.
Why is my newsletter so darn late?
Just in case you’re wondering why the newsletter seems to be creeping into your inbox later and later… it’s not intended to be a permanent change. There are a couple of things going on.
Today, at least, the delay is partly caused by a denial-of-service attack against the Feedly RSS service. I use Feedly as one of several tools to gather a jillion stories together so that I can ignore most of them while picking out the various items each day that make up this newsletter. Starting yesterday, some anatomically-challenged folks decided to try and shut down Feedly and hold them for ransom. Since Feedly wouldn’t pay (and good for them), they’ve had some trouble keeping their service running, and I’ve been doing a LOT of manual searches just like back in the good (slow) days.
But the rest of the story is that I’m in the process of learning to drive here in Norway. Driving tests and lessons are only done during normal working hours in this country, and that requires that I leave the office right as we’d normally be finishing everything up for the day. Yeah, you MIGHT be tempted to think that driving in the USA for 30 years would count for something over here. And given that, you can probably guess how grateful I am at the opportunity to pour thousands of dollars for lessons and tests into the local economy, and I’m sure you can also guess how sad I will be once this weeks-long process is finally over next Wednesday.
Sorry for the delays, and enjoy the newsletter!
Retired High School Teacher Hank Kauffman Named One of Three Finalists to Represent St. Louis Cardinals as All-Star Teacher
By Rob Merrilees, Founder, Spot Trading LLC
Some of us have been fortunate in our lives to meet a teacher who inspires us, challenges us and plants the seeds for a future we never dreamed we could have. I am one of thousands of former students inspired by Hank Kauffman, who taught math for 52 years at my high school in St. Louis. Hank was so influential in my life that I believe I may never have started Spot Trading if he hadn’t entered my life. I named my first son after him. I had him officiate my wedding. And I recently nominated him to represent the St. Louis Cardinals in the MLB’s “People [Magazine] All-Star Teachers” Contest presented by Target.
Now Hank is one of three finalists for that honor, and I ask my friends and colleagues in the industry to take a moment out of your day (from now until June 29) to cast your vote for him here (jlne.ws/1ubzwrr) so he can receive formal recognition as the All-Star so many of us already believe he is. Feel free to vote early and often, in the true Chicago tradition. It’s even encouraged.
Hank taught algebra and calculus, but he taught us far more about life. As a teacher, he was funny, friendly and inspirational, and he instilled great confidence. Little did we know he was a widower and single father, raising three kids on his own and overcoming true tragedy. He’s the kind of teacher all of us parents hope our kids will have, and he remains one of my most cherished friends to this day.
Markets need high-frequency trading, say global exchange chiefs
Joel Clark – Euromoney Magazine
High-frequency trading (HFT) has become an important component of financial markets and, despite widespread criticism, it can be a stabilizing factor during market stress events, according to a group of senior exchange officials.
****SR: I guess where you stand on HFT depends on where you stand in the industry.
UK plans to make currency-rigging a crime but rejects EU rules
David Milliken – Reuters
British finance minister George Osborne will reject European Union plans to outlaw currency market manipulation on Thursday and instead set out his own proposals to make rigging exchange rates a criminal offence.
****SR: A key sentence: “But no-one has been prosecuted under England’s existing laws.” So, is this closing the barn door after the horses have already escaped?
FIA Issues Third SEF Tracker Report On Swap Trading Activity
FIA today published the third issue of FIA SEF Tracker, a periodic report on trading activity taking place on swap execution facilities. “We’ve included a few enhancements to FIA’s SEF Tracker,” said Walt Lukken, President and CEO of FIA. “In addition to statistics on the volume of trading and comparisons of market share, we’ve added some charts showing interest rate swap trading by currency and more information about credit default swap trading. We’ve also started tracking two more SEFs—ICAP Global Derivatives Limited and LatAm SEF LLC.”
China metal financing fears spread to Singapore
Lucy Hornby in Beijing and Jeremy Grant in Singapore – Financial Times
An investigation into metals financing in a northeastern Chinese port city has cast a chill in Singapore, where a surge of business financing imports into China has bankers increasingly worried.
****SR: According to some sources I spoke with recently, the prevalence of this metals financing is a big problem in the copper market.
Behold the Burrito Bond
Josie Cox – MoneyBeat – WSJ
London high street fast food outlet Chilango, favored by City types with elastic waistbands, is offering an 8% coupon on a four-year corporate bond that gives some buyers a free burrito every week for the lifetime of the debt.
****SR: If the burritos are “as big as your head” – like the ones here in Chicago – they might have to loosen those waistbands even further.
Euronext Delays Open of Markets on Connectivity Fault
Alexis Xydias – Bloomberg
Euronext NV, operator of exchanges from Paris to Amsterdam, delayed the start of trading in cash markets and single-stock options by 30 minutes today due to a connectivity problem.
IMF sounds global housing alarm
Robin Harding in Washington – Financial Times
The world must act to contain the risk of another devastating housing crash, the International Monetary Fund warned on Wednesday, as it published new data showing house prices are well above their historical average in many countries.
City scandals prompt review of UK anti-bribery standards
Caroline Binham and Helen Warrell in London – Financial Times
Downing Street has ordered a wide-ranging review of the UK’s ability to tackle bribery and white-collar crime amid concern that repeated scandals are tarnishing London’s reputation as an international financial centre.
Isda warns on dangers of equity derivatives clearing
Anish Puaar – Financial News
The International Swaps and Derivatives Association has fired an early warning to European regulators on the introduction of clearing rules for equity derivatives, claiming that proposed regulations could lead to “operational hazard” and potential monopolies for clearing houses.
ICAP Reduces CEO Spencer’s Bonus 75% After Settlement
Edward Evans – Bloomberg
ICAP Plc cut Chief Executive Officer Michael Spencer’s bonus 75 percent after profit missed targets and the interdealer broker paid a fine to settle a probe by British and U.S. regulators into Libor-rigging.
Senior BNP Paribas Executive to Depart Amid Investigation
DAVID JOLLY – Dealbook – NY Times
A senior BNP Paribas executive who was said to have been targeted by New York State’s financial regulator in a major sanctions violations case is stepping down, the French bank said on Thursday.
U.S. Regulator Studies Mobile Financial Market
Alan Zibel – MoneyBeat – WSJ
A U.S. financial regulator is kicking off a broad inquiry into whether there are enough protections for consumers in the market for financial services provided via smartphone.
Exchanges & Trading Facilities
Rusal to Offer CME-Based Aluminum Pricing by July
Tatyana Shumsky – WSJ
United Company Rusal PLC, the world’s biggest aluminum producer, plans by next month to begin offering customers the option of using CME Group Inc.’s new aluminum futures contract to set prices, a company executive said in an interview.
Euronext and Dalian Commodity Exchange sign MOU
Euronext today announced that it has signed a Memorandum of Understanding (MOU) with the Dalian CommodityExchange (DCE). Its aim is to carry out joint research into the promotion, distribution and trading of commodity products, develop new strategies for improving the safe operation of orderly futures and options markets and discuss the feasibility of cooperatively developing new products.
Euroclear Delay Hurts Moscow Stock Trading Ambitions
Ksenia Galouchko – Bloomberg
A delay in the start of Euroclear Bank SA’s plans to offer international investors direct access to Russian equities is proving another setback in the country’s efforts to boost local stock-market trading.
Poland Wants Tamborski to Finalize Warsaw-Vienna Bourse Merger
Konrad Krasuski – Bloomberg
Poland will shuffle management of Warsaw Stock Exchange SA to speed up preparations for a merger with Wiener Boerse AG and help the country’s sole equity market operator cement its position as the largest in central Europe.
New participant at SIX Swiss Exchange
The Companies Listed On MAB Report Growth In Turnover, EBITDA And Employment In 2013
Hedge Funds & Managed Futures
Jane Mendillo, Harvard And Big Shot Money Management Disappointment
Jane Mendillo, who has run Harvard University’s $33 billion endowment for six years, has announced that she will be leaving the position by the end of the year. Her run at Harvard has been tumultuous and in some ways exemplifies the disappointment of big shot and highly compensated money management in the years since the financial crisis.
Finextra: Markit integrates real-time trade data into derivatives valuation service
Markit, a leading global diversified provider of financial information services, today announced that customers of its award-winning Portfolio Valuations service can now elect to have their portfolios updated automatically using a realtime trade feed from MarkitServ.
Banks & Brokers
US Chamber of Commerce voices concern over potential BNP fine
Hugh Carnegy in Paris – Financial Times
The US Chamber of Commerce, the powerful American business lobby, has voiced concern about the potential scale of a fine on French bank BNP Paribas by US regulators, echoing anxious demands by the French government for moderation.
Deutsche Bank – too little, too late on telling right from wrong
Jon Macaskill – Euromoney Magazine
The Las Vegas casino that Deutsche Bank finally managed to sell just before announcing its most recent capital increase – The Cosmopolitan – uses the catchphrase “Just the right amount of wrong” to tempt customers.
Goldman’s Blankfein Talks Energy and Politics
Dealbook – NY Times
In a round of interviews this week, Lloyd Blankfein, the chief executive of Goldman Sachs, was eager to talk about natural gas drilling in advance of the bank’s energy summit, which began on Wednesday. But he was hesitant to throw his weight behind one of the most politically divisive issues in energy independence: the Keystone XL pipeline.
Clearing & Settlement
QCCP stand-off could hurt EU banks, says CME’s Taylor
Tom Osborn – Risk.net
European banks will suffer if EU authorities do not give the thumbs-up to US clearing house rules, according to Kim Taylor, chief executive of CME Clearing – the result of a huge jump in capital requirements that would apply to trades they clear with US central counterparties (CCPs).
Just 3% of some futures reports can be matched – DTCC
Fiona Maxwell – Risk.net
Only 30% of inter-repository OTC derivatives and 3% of listed trade reports can be paired, conference is told – a problem stemming from the lack of trade identifiers
LCH.Clearnet Ltd Receives EMIR Authorisation
LCH.Clearnet Ltd, LCH.Clearnet Group’s UK-based central counterparty (CCP), today announced that the Bank of England approved its application as a central counterparty under the European Market Infrastructure Regulation (EMIR).
CME Group Clearing: Product Modification Summary: Soybean Crush Options- Effective June 15, 2014
Indexes & Products
BlackRock’s Wiedman Sees ETF Disruption as Banks Retreat
Christopher Condon – Bloomberg
Mark Wiedman, who oversees the world’s largest lineup of exchange-traded funds at BlackRock Inc. (BLK), cut fees and forged a partnership with Fidelity Investments to attract more individuals to his iShares ETFs.
Is ‘smart beta’ smart enough to last?
John Authers – Financial Times
How smart is Smart Beta really? Does it depend on Dumb Beta staying dumb and never wising up? Those lucky enough not to speak fluent financial jargon could be excused for not understanding these sentences. But they cut to the heart of the debate over how to attempt to beat the stock market.
Asia-specific Vix indexes fail to ignite market interest
Justin Lee – Risk.net
The Asian volatility index market is at a nascent stage with a number of Asian exchanges launching volatility-based indexes and futures products on the back of them. However, uptake has been slow, with liquidity and low volatility hampering widespread trading
Institutional investors bond over fixed-income ETFs
Yakob Peterseil – Risk.net
European institutional investors are using exchange-traded funds to position themselves in high-yield and emerging markets bonds ahead of expected interest rate hikes
Mimicking the S.&P. With an Index for Ad Prices at 500 Publishers
A LEADING advertising trade publisher, MediaPost Communications, is seeking to be a kind of Dow Jones or Standard & Poor’s for Madison Avenue, introducing an index that intends to track in real time the movements in price for ads bought and sold on the websites of 500 publishers.
iBroker Mobile Trading Platform Now Connected to Popular CQG Trading Platforms
Technology firm TradingMotion introduced its iBroker application with enhanced mobile trading capabilities now connected to Continuum and available for free download in the Apple and Android app stores.
Broadridge Extends Multi-Asset Processing Support
Victor Anderson – WatersTechnology
Lake Success, NY-based Broadridge Financial Solutions has extended is multi-asset post-trade processing support by broadening its exchange-traded derivatives processing platform.
Colt ‘Unifies’ Colt, MarketPrizm Capital Markets Teams
Giulia Lasagni – WatersTechnology
UK-based network and hosting services provider Colt has created a new unified Colt Capital Markets team that covers sales, product operations and delivery across Europe, drawing from its own staff and from employees from MarketPrizm, the UK-based market data and trading infrastructure services provider it acquired in 2011.
Chicago-Area Attorney Charged After SEC Exam Spots Fraud in Real Estate Investment Offering
The Securities and Exchange Commission today charged the founder of an investment advisory firm located in suburban Chicago with defrauding investors in connection with a real estate venture for which his firm offered securities.
CFTC Obtains Default Judgment against New York-based SK Madison Commodities, LLC and its Principals, Michael James Seward and Yan Kaziyev, for Commodity Pool Fraud and Other Violations
The U.S. Commodity Futures Trading Commission (CFTC) today announced that Judge Sidney H. Stein of the U.S. District Court for the Southern District of New York (Manhattan) entered an Order of default judgment and permanent injunction against CFTC Defendants Michael James Seward, Yan Kaziyev, and their company SK Madison Commodities, LLC (SKMC), a Commodity Pool Operator based in New York City.
SEC Charges Against Wedbush Securites Raise Issues With Direct Risk Controls
Wall Street & Technology
The regulator accused Wedbush of violating the Market Access Rule by allowing customers to set their own risk controls on proprietary and third-party platforms.
Goldman Sachs and Bain to Pay $121 Million to Settle Collusion Case
WILLIAM ALDEN – Dealbook – NY Times
Goldman Sachs and Bain Capital have agreed to pay a combined $121 million to settle a lawsuit that accused them and other firms of colluding to drive down the prices of takeovers before the financial crisis, according to a court filing on Wednesday.
Ex-Goldman director Gupta loses bid to stay out of prison
Former Goldman Sachs Group Inc director Rajat Gupta has failed to persuade the U.S. Supreme Court to delay the June 17 start of his two-year prison term while he pursues an appeal of his insider trading conviction.
South Korea’s status: clarity at last
Josh Noble – Financial Times
The years of periodic “will-they-won’t-they” chatter about South Korea’s potential upgrade to developed market status are over, at least for now. Index compiler MSCI has finally thrown in the towel. But rather than bump up Korea (and Taiwan), it has instead decided to boot them off its upgrade watch list.
Nomura Eyes Acquisitions to Fast-Track Mideast Expansion
Nicolas Parasie – MoneyBeat – WSJ
When stock markets in Dubai and elsewhere in the Middle East region nosedived in the wake of the global financial crisis, there was the inevitable exodus of asset managers and brokers from the region. Now, as local equity markets are on an upward swing, several international finance firms are ready to pounce again.
Shanghai looks to create freight derivative markets
Xiao Wang – Risk.net
Chinese authorities have made regionally established commodity benchmarks a policy aim and now Shanghai is looking to create derivative products in the underlying freight markets
Hedge Fund Myriad Says Weaker Yuan to Stay
Mia Lamar – MoneyBeat – WSJ
The surprising slide in the Chinese yuan this year has a lot further to go, says hedge fund manager Carl Huttenlocher, who runs Myriad Asset Management Ltd., one of Hong Kong’s largest home-grown funds.
Asia Pacific Stock Exchange to Employ Nasdaq Technology
Jake Thomases – WatersTechnology
Nasdaq OMX will deliver its trading technology, X-stream, as well as Genium FIX, to Asia Pacific Stock Exchange to power its APeX trading platform, which is expected to go live in late 2014.
LME Welcomes First Middle Eastern Aluminium Committee Member
The London Metal Exchange (LME) is pleased to announce the appointment of Mr Walid Al Attar as a member of its Aluminium Committee. Mr Al Attar, responsible for marketing and sales at Emirates Global Aluminium (EGA), is the first representative from the Middle East to sit on the committee.
DGCX Appoints Sanjeev Vohra as Head of Soft Commodities
Dubai Gold and Commodities Exchange (DGCX) has appointed Sanjeev Vohra as the Head of Soft Commodities. Vohra, who has over nine years of experience in product and business development in the Exchange industry, will be responsible for developing new products and exploring growth opportunities for DGCX in the soft commodities sector.