John Lothian Newsletter: ITG Considers Making Bid for ICE's Nyfix Trading System; Fed Issues Final Rules for Foreign Banks; Man Group steps up search for deal to diversify business

Feb 19, 2014

First Read

A Journey to Excellence
John Lothian

Ryan Lothian is leaving John J. Lothian & Company, Inc. and John Lothian News. After five years of helping us build our social media infrastructure and news organization, he is moving on to the next chapter in his career, a job managing digital projects with the Cook County Forest Preserve.

One can’t understate the influence that Ryan has had on the growth and development of our enterprise since 2009. His skill in designing websites, graphic design and technical integration has helped give John Lothian News and John Lothian Productions a reputation of excellence. His logical, thoughtful and artful work has given us elegant and dynamic platforms to deliver the content we produce.

During the last year Ryan designed the John Lothian News site, combining all of the websites of our newsletters and MarketsWiki.tv into one easy to use platform. He also redesigned the front pages of MarketsWiki and MarketsReformWiki and integrated the content from JohnLothianNews.com into them via RSS feeds.

He helped streamline the news delivery operation of John Lothian News with these improvements, giving us more time to deliver more original content, as well as to expand our rapidly growing video production business.

(To read the rest of this piece, please visit the JLN Blog at jlne.ws/1cWzBqW )

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Bits & Pieces
John Lothian
Former FIA President John Damgard and Patton Boggs attorney Micah Green are pictured in a photo on Huffington Post from a story titled “EXPOSED: Wall Street Overlords Unhinged”. The story by Kevin Roose was published on NYMAG.com with the title “One-Percent Jokes and Plutocrats in Drag: What I Saw When I Crashed a Wall Street Secret Society.” The story is adapted from the Kevin Roose’s book “Young Money,” which was recently published recently by Grand Central Publishing.

Personally, I have never seen John Damgard unhinged.

All this snow in Chicago is making me unhinged. Are you signed up and ready for the FIA’s International Conference in Boca Raton? I certainly am.

Ted Koppel has been added as a keynote speaker at the FIA’s Boca conference. I bet he does not become unhinged either. He will be the lunch speaker on Wednesday.

At Boca, don’t miss the Monday Morning Quarterbacks: Calling the Plays for 2014 Rule Implementation session headed by Scott O’Malia, Commissioner, Commodity Futures Trading Commission. Speakers for this mock Commission will include former commissioners Michael Dunn, James Newsome and Jill Sommers.

Follow our education efforts on Twitter at @MarketsWikiEdu

Our friends at Perseus Telecom have picked up Karen Bertoli to head their marketing efforts. We have known Karen for quite a while and we are sure she will attack it with her usual tenacity. Dan Watkins is partially shifting his marketing duties between Perseus and its broker-dealer subsidiary Marco Polo New World.

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I Crashed a Wall Street Secret Society
Kevin Roose – New York Magazine
Recently, our nation’s financial chieftains have been feeling a little unloved. […] This week, a billionaire investor, Wilbur Ross, proclaimed that “the 1 percent is being picked on for political reasons.” Ross’s statement seemed particularly odd, because two years ago, I met Ross at an event that might single-handedly explain why the rest of the country still hates financial tycoons – the annual black-tie induction ceremony of a secret Wall Street fraternity called Kappa Beta Phi.
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***** I don’t want to be a member of any secret Wall Street fraternity that would have me as a member. Hat tip to Groucho Marx.

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Taking The Stock Market To Higher Dimensions: Researcher Envisions A Geometrical Jewel At The Heart Of Finance
International Business Times
How do you picture the stock market: a bunch of guys yelling at computer screens on Wall Street? A long list of figures in the paper? Or, perhaps, an ever-shifting, higher dimensional jewel? The latter vision is that of Ovidiu Racorean, a Romania-based researcher for a hedge fund. He has an idea for how to encode the behavior of the stock market into an object that he calls the stock market polytope, or the “stockmarkethedron”.
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***** Brilliant or a fool’s errand?

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Brand New: Craig Donohue takes the reins at OCC
JohnLothianNews.com
In January, Craig Donohue returned to the financial industry as the new executive chairman of the OCC, the world’s largest clearing house. Donohue, who stepped away from the financial markets after 25 years and the CEO post at the CME Group, spoke with Jim Kharouf, editor-in-
chief of John Lothian News about why he took the job, governance issues at the organization as well as where the OCC may be heading next.

Watch the video »

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Binary options: separating fact from fiction
Dan Cook, Nadex | Futures & Options World
As a trading instrument, binary options have gained significant traction amongst retail traders throughout the past several years. However, despite rising popularity, binary options have been plagued by a myriad of misconceptions, with market participants unclear about the underlying differences and risks between foreign and US exchange-traded binary options.
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***** Dan Cook takes on the un-believers.

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Hedge Fund Suit Seeks Identity of Anonymous Blogger
MATTHEW GOLDSTEIN – NYTimes.com
David Einhorn has filed a lawsuit seeking to unmask the identity of an anonymous financial blogger who, he says, disclosed that Mr. Einhorn’s hedge fund was buying shares in a technology company. The legal maneuver illustrates the tension between a money manager’s ability to safeguard his trading strategies and the rights of others to report on them.
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***** David, I know you are rich. But never pick a fight with people who buy ink by the barrel and they don’t even have to buy the ink. It is not a battle you can win.

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On inequality
Lawrence Summers
Inequality has emerged as a major economic issue in the United States and beyond. Sharp increases in the share of income going to the top 1 percent of earners, a rising share of income going to profits, stagnant real wages, and a rising gap between productivity growth and growth in median family income are all valid causes for concern.
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****** Evidently Mr. Summers is a member of a different secret Wall Street fraternity.

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Down The Data Rabbit Hole With The CFTC
Jennifer Costley, Ph.D – Wall Street & Technology
One of my favorite exercises is to start with a press release or a speech of one or another high-level regulator and drill down (via the helpful links provided by their transparent if convoluted references) to the underlying truth. The truth being, in this context, what was actually discussed by the folks who are trying to address whatever the problem is that the high-level person is lamenting about.
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***** Get to it already!

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Lead Stories

Investment Technology Group Considers Making Bid for ICE’s Nyfix Trading System
Bradley Hope And Telis Demos – WSJ.com
Investment Technology Group Inc., a New York-based brokerage and technology firm, is weighing a bid for a trading system being sold off as part of the streamlining of the New York Stock Exchange by its new owner, according to people familiar with the situation.
jlne.ws/1gEWyDJ

Fed Issues Final Rules for Foreign Banks
NYTimes.com
Foreign banks with a major presence on Wall Street will no longer be allowed to avoid many of the tougher rules that the United States introduced after the financial crisis to prevent banking failures and bailouts.
jlne.ws/1gEWC6c

Man Group steps up search for deal to diversify business
Chris Newlands – FT.com
Man Group is stepping up its search to acquire another asset management business in a bid to diversify revenues away from its $12.5bn flagship managed futures fund AHL.
jlne.ws/1gEWyTY

U.S. court boosts SEC’s power to recoup insider trading profits
Reuters
A divided federal appeals court on Tuesday strengthened the U.S. Securities and Exchange Commission’s ability to recover insider trading profit from people who do not personally benefit directly from their alleged illegal trades.
jlne.ws/1gEWC6e

Buyside turns up FTT pressure ahead of crunch meeting
Anish Puaar and Mike Foster – Financial News
Some of Europe’s largest asset managers have fired their latest warning against the proposed financial transaction tax, ahead of a crunch meeting of French and German officials today.
jlne.ws/1gEWC6k

Fidessa boosts Singapore presence
Jeremy Grant in Singapore – FT.com
Fidessa, the UK trading technology company, has added a third collocation centre in Asia with an agreement to set up its trading and market data services at SGX, the Singapore exchange.
jlne.ws/1gEWC6n

RBS Said to Suspend Third Currency Trader Amid Internal Probe
Gavin Finch – Bloomberg
Royal Bank of Scotland Group Plc suspended a third foreign-exchange trader amid an internal probe into the alleged manipulation of currencies, according to a person with knowledge of the decision.
jlne.ws/1gEWyU5

Regulatory

To Regulate Foreign Banks in the U.S., ‘Trust, but Verify’
MAYRA RODRíGUEZ VALLADARES – NYTimes.com
The Federal Reserve is expected to finalize capital rules for “foreign bank organizations” on Tuesday, and it has reignited questions about whether the United States is being unduly harsh to European banks here. Absolutely not.
jlne.ws/1gEWyUa

Regulators can squeeze these investors, but shouldn’t bash them
Mark Cobley – Financial News
By tweaking their cost-of-capital metrics, UK regulators are cracking down on utility operators in a way that might reduce returns. To a certain extent, this is only fair. Indeed, it may be in the long-term interests of the investors that own the utilities.
jlne.ws/1gEWyUf

Esma cautions on Mifid rules
Yakob Peterseil – Risk.net
The European Securities and Markets Authority (Esma) is concerned that issuers and distributors of complex products are falling short of European Union rules that govern product sales, as member states report a rise in the variety and complexity of investment products being sold to retail.
jlne.ws/1gEWCmL

State Street fines put spotlight on transition management firms
Charlotte Sterland – Risk.net
The fining of State Street UK for overcharging clients follows a regulatory review of the entire transition management sector in the UK, which has identified several potential risks and oversight failures in the industry.
jlne.ws/1gEWCmM

[AMF Canada] Application for authorization – Public contracts/subcontracts – Are you using the right form?
jlne.ws/1gEWzaz

Greg Medcraft, Chairman, Australian Securities And Investments Commission, Opening Statement – Senate Inquiry – Opening Statement 19 February 2014
jlne.ws/1gEWCmR

Exchanges & Trading Facilities

ICE distances itself from UK tech firm Fixnetix
Tim Cave – Financial News
IntercontinentalExchange has signalled its intent to sell off its recently-acquired stake in UK technology provider Fixnetix by removing its shareholder representative from the company’s board.
jlne.ws/1gEWzaF

Warsaw Stock Exchange Finalises Acquisition Of Aquis Exchange Stake
WSE has finalised the acquisition of 384,025 shares of Aquis Exchange for GBP 5,000,000. In the Company’s target shareholding structure, the stake will represent 36.23% of all shares conferring the right to 30% of votes in Aquis Exchange and a 30% share of profit. WSE’s investment aims to further diversify its sources of revenue, to strengthen its brand and the position of the Exchange on international financial markets, including continued improvement of the role of WSE as the leading financial hub in the CEE Region.
jlne.ws/1gEWCDb

A fair exchange of labour?
Dan Barnes | Futures & Options World
The international nature of derivatives trading challenges the ability of smaller, local markets to build liquidity, as the firms hungry for their derivative products may have no local presence. Being international can also set any two national exchanges apart as rivals. To set up the market requires a trading platform that will deliver the right flexibility around products and the resilience to support firms’ faith in a fledging market.
jlne.ws/1gEWCDg

ICE raises reasonability limit levels for coffee futures
Reuters
ICE Futures U.S. said on Tuesday it will increase the reasonability limit for Coffee (C) futures contract to 375 points, effective with the start of trading for Wednesday, Feb. 19.
jlne.ws/1gEWzr0

Moscow Exchange: Standard’s Extended Trading Hours To Be Cancelled From 17 February
jlne.ws/1gEWCDn

Hedge Funds & Managed Futures

Hedge fund assets seen reaching $3 trillion this year -survey
Reuters
Hedge fund industry assets are expected to reach a record $3 trillion by year’s end as investors plan to add fresh money, saying they were generally happy with last year’s returns and don’t expect bigger gains this year, a new survey shows.
jlne.ws/1gEWCDp

These Are the Most Successful European Hedge Fund Managers
Harriet Agnew – MoneyBeat – WSJ
Figures ranking the most successful hedge fund managers in Europe show Brevan Howard’s flagship fund, led by founder Alan Howard, as the best performer.
jlne.ws/1gEWCTG

Pimco’s Gross tries again to soothe clients
Reuters
Pimco’s Bill Gross, manager of the world’s largest bond fund, on Tuesday sought to reassure the firm’s clients about the new leadership structure he has put in place since his heir apparent stunned the investment community last month by announcing his departure.
jlne.ws/1gEWCTH

Pimco’s Bill Gross Praises Firm’s ‘Broader Bench’
Sarah Krouse – MoneyBeat – WSJ
Six deputy chief investment officers are better than none. That’s the message from the latest round of assurances from Pacific Investment Management Co., which says its “broader bench” of investment leadership is a sound decision.
jlne.ws/1gEWzrc

Lending Where Banks Can’t, Blackstone Thrives in Ireland
LANDON THOMAS JR. – NYTimes.com
Bankers have been blanketing Ireland in search of cheap assets and lucrative deals, and few firms have been as aggressive as the Blackstone Group.
jlne.ws/1gEWF1P

Asset management chiefs plan hires
Philip Georgiadis – Financial News
Asset management companies are in expansionist mode, with more than half of the CEOs surveyed by PwC expecting to take on more staff in the next year.
jlne.ws/1gEWCTP

Argentina asks U.S. Supreme Court to hear bonds case
Reuters
Argentina filed an appeal to the U.S. Supreme Court on Tuesday seeking to reverse lower court decisions ordering the country to pay $1.33 billion to hedge fund creditors in a case Argentine officials warn could force it to default on its sovereign debt.
jlne.ws/1gEWCTT

KKR Capital Markets lands rare lead on Pets at Home IPO
Richard Partington – Financial News
Kohlberg Kravis Roberts’ in-house capital markets business has scored a rare lead role on a London initial public offering with the £1.5 billion flotation of Pets at Home.
jlne.ws/1gEWF1W

Banks & Brokers

Goldman’s New York Times Wall Street whitewash
The Term Sheet
For anyone still trying to understand Wall Street, Goldman Sachs wants to help. Recently, an advertisement called “An Interactive Guide to Capital Markets” showed up on the New York Times website. The ad is clearly labeled as paid for by Goldman (GS). But the content reads more like a pitch for Wall Street as a whole.
jlne.ws/1gEWCTV

Credit Agricole returns to profit, Italy turning around
The Wall Street Journal
Crédit Agricole SA Chief Executive Jean-Paul Chifflet said he saw signs of a turnaround in Italy, where it owns a local lender, as the French bank swung back to profit in the fourth quarter.
jlne.ws/1gEWF22

BGC Partners Plans to Host Investors and Analysts on Thursday May 29, 2014
BGC Partners, Inc., a leading global brokerage company primarily servicing the wholesale financial and real estate markets, today announced that it plans to host sell-side analysts and professional investors for a half-day presentation about the Company in New York City on Thursday, May 29, 2014.
jlne.ws/1gEWF24

BNP Paribas And RBS Reach An Agreement For The Sale Of Certain Assets And Liabilities From RBS’s Structured Retail Investor Products And Equity Derivatives Business
jlne.ws/1gEWF26

Clearing & Settlement

CME Group Margins: Performance Bond Requirements: Equity Index and Petroleum Spread Outrights; Equity Index Intra-Commodity Spread Charges- Effective Wednesday, February 19, 2014
jlne.ws/1gEWDad

CME Group Clearing: Corrections in FEC+ for PIT Transactions / Exchange Fees
jlne.ws/1gEWDag

Indexes & Products

S&P Dow Jones Indices Announces Changes To The S&P/TSX Canadian Indices – Changes In The S&P/TSX Preferred Share Indices
jlne.ws/1gEWFio

Luxembourg Stock Exchange: Interim Revision Of The LuxX Index
jlne.ws/1gEWFis

Technology

Riding along on the crest of a wave
Hugh Cumberland | Futures & Options World
When the use of microwave technology became prevalent in North America for ultra-low latency connectivity, it was only a matter of time before it crossed the Atlantic. It was no surprise that within a very short space of time a number of different locations around London were connected by microwave to Frankfurt.
jlne.ws/1gEWDav

Brazilian Asset Manager Switches to Eze OMS
Jake Thomases – WatersTechnology
Rio de Janeiro-based asset manager Dynamo Administracao de Recursos is now live on the Eze Order Management System (OMS).
jlne.ws/1gEWDqL

HSE Rolls Out Trayport GlobalVision For Energy Market Overview, Trading
Faye Kilburn – WatersTechnology
Slovenian wholesale electricity trading firm Holding Slovenske Elektrarne (HSE) has rolled out Trayport’s GlobalVision Trading Gateway to enable its traders to view over-the-counter energy prices and trade on twenty European markets, power exchanges and broker platforms from a single screen.
jlne.ws/1gEWDqM

Simon Parkins appointed Global Sales Director as part of company expansion plan
Lombard Risk Management plc (Lombard Risk), a leading provider of integrated regulatory reporting, compliance and collateral management solutions for the financial services industry, has appointed Simon Parkins in the role of Global Sales Director as part of company expansion plan.
jlne.ws/1gEWFiA

Enforcement

In reversal, ex-Madoff aide takes stand in his own defense
Reuters
In an unusual move, Bernard Madoff’s former back-office director took the witness stand in his own defense on Tuesday, telling a federal jury that he had no idea his boss was operating a Ponzi scheme until the day Madoff was arrested in December 2008.
jlne.ws/1gEWFyQ

U.S. says ex-Jefferies banker lied, as TARP fraud trial starts
Reuters
A former Jefferies Group Inc investment banker “cheated, misled and defrauded” clients to boost profit in a $2 million scheme that took advantage of a federal program created in response to the 2008 financial crisis, federal prosecutors told jurors on Tuesday at the start of his criminal fraud trial.
jlne.ws/1gEWFyW

Ex-Jefferies manager loses appeal in SEC insider trading case
Reuters
A divided federal appeals court on Tuesday strengthened the U.S. Securities and Exchange Commission’s ability to recover insider trading profit from people who do not personally benefit directly from their alleged illegal trades.
jlne.ws/1gEWFyY

CFTC Orders Florida-based Worth Asset Management and its Owner, Paul L. Kaulesar, to pay over $6.2 Million in Restitution and a Fine for Multi-Million Dollar Fraudulent Precious Metals Scheme
The U.S. Commodity Futures Trading Commission (CFTC) today filed and settled charges against Worth Asset Management LLC (Worth Asset) of West Palm Beach, Florida, and its sole owner and manager, Paul L. Kaulesar of Royal Palm Beach, for solicitation fraud and engaging in illegal, off-exchange precious metals transactions. Neither Worth Asset nor Kaulesar has ever been registered with the CFTC.
jlne.ws/1gEWDr1

Agreement between AMF and Industrial Alliance
Agreement between AMF and Industrial Alliance The Autorité des marchés financiers and Industrial Alliance Insurance and Financial Services Inc. have entered into an agreement for the payment of $165,000 with respect to commercial practice violations.
jlne.ws/1gEWFz7

Lloyd’s pays $25,000 penalty to AMF
jlne.ws/1gEWDHh

New Zealand’s Financial Markets Authority: Charges Laid Against Contributory Mortgage Brokers
jlne.ws/1gEWDHn

Environmental & Energy

EEX To Expand Service Portfolio In The Framework Of REMIT
New Website Planned For Transparency Platform – Reporting Of Fundamental And Transaction Data In Preparation
jlne.ws/1gEWDHt

Qingdao city next in line to set up emissions market in China
Reuters
Qingdao has become the latest Chinese city to plan a market to reduce greenhouse gas emissions, as a group of advisers backed by its mayor is hammering out rules for an emissions trading scheme that could start next year.
jlne.ws/MyGWq4

China’s carbon offsets market makes cautious progress
Commodities Now
China’s Certified Emission Reduction (CCER) programme will generate credits that can be used to offset carbon emissions in the domestic pilot compliance markets. The National Development and Reform Commission (NDRC) will guide the development of this market by controlling approval of certain projects, leading to a much lower offsets supply than potentially available, according to Thomson Reuters Point Carbon, the leading provider of market intelligence, news, analysis and forecasting for the energy and environmental markets.
jlne.ws/1bkC576

Asia-Pacific

China Bulked Up on Longer-Term Treasurys in 2013
Min Zeng – MoneyBeat – WSJ
China, the largest foreign owner of U.S. Treasury debt, ramped up its holdings of longer-term securities last year at the fastest pace in five years, signaling no worries over the sharp rise in U.S. interest rates during that period.
jlne.ws/1gEWFPo

HKEx: Stock Exchange Participants’ Market Share Report
jlne.ws/1gEWFPp

Fidessa Builds Out Infrastructure And Reach Across Southeast Asia – Co-Locates With SGX And Extends Connectivity Network Into Vietnam
Press Release
jlne.ws/1gEWFPr

NASDAQ OMX Opens New Office In Manila, Philippines
Opening Underscores NASDAQ OMX Corporate Solutions International Growth, Dedication To Customer Service Excellence
jlne.ws/1gEWFPt

Frontier Markets

An EM credit crunch, not a sudden stop
Gavyn Davies | FT Alphaville
The crisis in the emerging markets’ “fragile 8”, which threatened to sweep all before it a few weeks back, seems to have settled down almost as quickly as it erupted onto the scene. Investors are already asking whether it is now safe to enter the undoubted attractive valuations in the emerging world.
jlne.ws/1gEWDXX

Emerging Markets Too Quiet?
Alex Frangos – MoneyBeat – WSJ
All’s quiet on the emerging markets front. Maybe too quiet. As January’s selloff has faded, investors clung to comforting statistics about how the overall balance sheets of the big emerging markets actually weren’t so bad. One way to measure this is to set off a country’s external debt against its currency reserves.
jlne.ws/1gEWDY0

Liquidity concerns over moves to reform Indian benchmark rates
Justin Lee – Risk.net
The proposed move to an observed traded rate for certain financial benchmarks by the Reserve Bank of India (RBI) faces potential problems due to questions over liquidity and significant traded volumes, say market participants.
jlne.ws/1gEWFPB

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