John Lothian Newsletter: Levin Hearing Ups Volume in High-Frequency Call to Action; LSE joins forces with Chinese banks; As Markit Heads to Market, Wall Street Smiles

Jun 18, 2014

First Read

No Clarity of Vision
Doug Ashburn – JLN
A letter has been circulating around the broker community from Vision Financial Markets, stating it had reached a settlement with the NFA, and that the firm would be spinning its FCM business into a new company called High Ridge Futures LLC.

According to the letter, the contents of which have NOT been confirmed by the NFA,, Vision will pay $1.5 million in fines and withdraw its FCM registration as soon as it can migrate accounts to the newly-created entity. Under the terms of the settlement, Vision neither admits nor denies the allegations, which involved lapses in back-office supervision and misallocation of customer funds.

The letter, signed by Vision executives and majority owners Robert Boshnack and Howard Rothman, claims that the settlement closes the matter entirely.

John Lothian News obtained a copy of the letter several days ago, and had been sitting on the story, in hopes that we could get verification from the NFA as to the settlement. Still no word.


Back to Regular Time
Jon Matte passed his driving test. The newsletter will resume its regular publication schedule tomorrow. Next week we have TT’s Rick Lane as guest editor and the week after that it will be KCG’s Carl Gilmore.

***JM: Turns out you can crash into parked cars and still get your license. They said the only real restriction was hitting people. So that worked out well.


Eurex’s Laurent Partouche to Ride for Cancer Charity
John Lothian News
Laurent Partouche of Eurex will be participating in the Ride to Conquer Cancer benefiting the Segal Cancer Centre at the Jewish General Hospital. He has joined the Vigi 4 Cure team to support this cause. You can contribute to Laurent’s fundraising by going to

***** Anyone who is going to ride 180 miles in 2 days deserves your support.


Stock exchange pricing model comes under fire at Senate hearing
Sarah N. Lynch – Reuters
The pricing model used by U.S. stock exchanges to attract liquidity came under fire on Tuesday, as a top Wall Street executive called for ending the practice and two U.S. senators raised concerns about the potential conflicts it creates.

***DA: Time for some new regulations to combat the unintended consequences of the old regulations.

**** TD Ameritrade was asked where they get best executions and it turns out it is where they get paid the most money. You have to respect the honesty.


Clearing houses could be the next source of chaos
Simon Johnson – Financial Times
Financial shadows are dangerous. Even more dangerous are interactions between poorly understood shadows and essential financial intermediation activities. And most dangerous is when officials and private sector executives encourage a class of transactions that supposedly provide modest risk mitigation, while really building a disguised form of systemic risk on a grand scale.

***DA: Which is why the new regime aims for transparency so there are fewer shadows.


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]].


CAIA Chicago and Katten Joint Educational Event
Join CAIA Chicago for an educational event on June 23, 2014, featuring investment executive-turned-SEC industry expert José L. Santillan, who will present “A Day in the Life of a SEC Asset Management Unit Industry Expert.” This event is generously sponsored by Katten Muchin Rosenman

***DA: Special shout-out to my fellow CAIA members, plus an invitation to come meet the chapter reps. CAIA’s new CEO, Bill Kelly, will be in attendance as well. You do not need to be a member of CAIA to join us.


OneChicago OCX.Weekly Futures To List Each Friday
OneChicago, LLC, an equity finance exchange, today announced it will offer a new suite of products called OCX.Weekly beginning Friday, June 20. The exchange will continue to list weekly futures each subsequent Friday. The OCX.Weekly futures will be listed only using the OCX.NoDivRisk contracts and will be physically settled with next day settlement upon expiration as opposed to the T+3 settlement cycle.

***** There is a part of me that just does not care anymore about SSFs.


CME Group and BarclayHedge Honor Managed Futures Leaders at Third Annual Managed Futures Pinnacle Awards
Last night CME Group and BarclayHedge recognized managed futures industry leaders at the third annual Managed Futures Pinnacle Awards. The ceremony featured live entertainment by Comedian Frank Caliendo. David Harding, CEO and Chairman of Winton Capital Management, won the Pinnacle Achievement Award. For more information, including a list of the winners, follow the link below

***DA: Among Caliendo’s best impressions, aside from his legendary Madden, Clinton and Bush, were Morgan Freeman, Charles Barkley and Al Pacino. He also thanked CME’s Kim Taylor and her renowned laugh for the enthusiastic support.

***** I had a chance to talk to Caliendo while he was off-stage. He was an excellent choice as an entertainer, they used him brilliantly as emcee and he is a down to earth guy. Excellent choice by the CME.


Intercontinental Exchange Agrees to Sell Wombat Unit to SR Labs
Matthew Leising – Bloomberg
Intercontinental Exchange Inc. (ICE), owner of the New York Stock Exchange, agreed to sell its Wombat technology unit to SR Labs. ICE, as the company is known, bought NYSE Euronext in November and said at the time it would shed some of the technology units that came with the purchase.

***DA: CME lists cattle and hogs, and ICE sells wombats? Oh. Never mind.


Banks rattled as authorities zero in on the ‘Red Dot’
Jeremy Grant – Financial Times
Singapore is a financial centre with increasing global heft: it is Asia’s commodity financing hub, its largest foreign exchange trading hub, and some surveys suggest it may eventually overtake Switzerland in wealth management. But recent events in the port city of Qingdao, far away on China’s northeastern coast, should give Singapore pause.

***DA: The collateral switcheroo is reminiscent of 1970s Texas, when you could fill an oil tank with water and add a splash of oil on top to fool creditors.


Of darkish pools
David Keohane – Financial Times
Here are your US dark pools charted: What allowed that chart to be put together were justifiably fidgety US regulators demanding that volumes in Alternative Trading Systems, places to trade away from exchanges, now have to be disclosed. Included in the lists of ATSs are your dark dark pools. Thank Michael Lewis, or the drive for transparency generally. Your choice. Anyway, those disclosures exposed some fun facts.

***DA: I prefer the West Texas Intermediate pools.


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Lead Stories

Levin Hearing Ups Volume in High-Frequency Call to Action
Silla Brush, Cheyenne Hopkins and Sam Mamudi – Bloomberg
Executives from exchange operators and fund companies are starting to join lawmakers and regulators in warning that the world’s largest equities market is beset with conflicts that can harm investors and undermine confidence.

LSE joins forces with Chinese banks
Anna Irrera – Financial News
The London Stock Exchange Group today signed agreements with Bank of China and the Agriculture Bank of China in an effort to help strengthen the renminbi offshore market in the UK.

At Senate Hearing, Brokerage Firms Called Out for Conflicts
WILLIAM ALDEN – Dealbook – NY Times
TD Ameritrade, a brokerage firm that handles vast numbers of stock trades for average investors, promises to execute those orders on the best possible terms.

Senate Explores How High-Speed Trading Impacts Retail Investors
Scott Patterson – MoneyBeat – WSJ
Sen. Carl Levin’s Senate investigative committee delved into concerns about conflicts of interest in the stock market Tuesday, with a focus on whether fees and payments offered by exchanges and others skewed how brokers route client orders.

As Markit Heads to Market, Wall Street Smiles
Katy Burne and Telis Demos – WSJ
Wall Street’s biggest banks are in line for a payday of up to a billion dollars from Markit Ltd.’s initial public offering, as they cash out part of their stakes in the financial-data firm and divvy up the underwriting fees. The 12 financial institutions that rank among the London company’s top shareholders expect to raise as much as $1.02 billion selling shares Wednesday at as much as $25 apiece, a rare bit of good news at a time of sluggish revenue, soft trading activity and regulatory scrutiny.

China’s sovereign fund mismanaged some investment – audit
China’s $575-billion sovereign wealth fund mismanaged some of its overseas investments between 2008 and 2013 that led to losses, the country’s top auditor said on Wednesday, without specifying the size of the loss.

IntercontinentalExchange says Liffe trading glitch now resolved
IntercontinentalExchange said the technical glitch that twice suspended trading in some money market contracts on the Liffe derivatives market on Tuesday has now been resolved.

Citic’s Missing Alumina Prompts Concern Over China Commodities Fraud
NEIL GOUGH – Dealbook – NY Times
Citic Resources, a Chinese state-owned commodities trader, said on Wednesday that it had been unable to locate more than 100,000 tons of alumina at a port in northeast China that is the focus of a commodities fraud investigation.

Citic Resources faces $40m exposure in metals probe
Lucy Hornby in Beijing – Financial Times
At least one company is facing paper losses of more than $40m as Chinese police investigate potentially improper use of metals as collateral in the northeastern port city of Qingdao, a probe that has already crimped Chinese importers’ access to credit.

World Gold Council to explore gold fix reform
Xan Rice – Financial Times
The World Gold Council is to hold an industry forum “to explore reform of the London Gold Fix” in a move that could hasten the end of the 95-year-old bullion benchmark.

Metadata and Orders: Why Low-Touch Trading Really Isn’t, and the Hidden Risks
James Biancamano – TABB Forum
There is a lot of data that is captured and stored throughout the trade process that is not always required for regulatory purposes. In fact, institutions may be unknowingly relinquishing their data to vendors and in doing so may be creating unintended risk.


SEC alters waiver policy to remove ‘too big to fail’ concern
The U.S. Securities and Exchange Commission recently removed language from an agency policy on granting regulatory waivers after an SEC official raised concerns it implied some companies are “too big to fail.”

New CFTC Chief Fleshes Out Staff – MoneyBeat
Andrew Ackerman – MoneyBeat – WSJ
Timothy Massad, the newly confirmed chairman of the Commodity Futures Trading Commission, announced a series of appointments Tuesday as he fleshes out his staff.

RPT-EU legal opinion says exemption for UK bank rules from EU curbs illegal
Exempting Britain’s banks from planned European Union rules to curb risky trading would be illegal, the bloc’s lawyers said on Monday in a legal opinion that marks another setback for UK attempts to limit Brussels’ influence on the City.

SEC silence on swap spread Sef trading frustrates market
Peter Madigan –
Securities regulator is refusing to offer guidance on packages that involve a US Treasury leg, say market participants and fellow regulators

Investor lobbyist warns against more scrutiny of big funds
International regulators seeking to impose extra scrutiny on investment funds deemed systemically important because of their size risk hampering savings and harming the real economy, a top industry lobbyist said.

S.E.C. Investigating Carrington’s Mortgage Deal With New Century
On the eve of the financial crisis, the hedge fund manager Bruce M. Rose did a surprising deal that took his firm into the business of collecting mortgage payments from people with tainted credit. Now, seven years later, securities regulators are scrutinizing the deal, looking in particular at how part of it was financed.

News Brief: Market Study Reveals Environmental Regulations As Top Influencer to Natural Gas Volatility
The increasingly rigorous regulatory environment was tagged as the top potential influencer of natural gas price volatility according to respondents in a recent market study conducted by SunGard.

ESMA Launches Call For Expressions Of Interest To Renew Its SMSC CWG
The European Securities and Markets Authority (ESMA) is looking to newly constitute a Consultative Working Group (CWG) for the ESMA Secondary Markets Standing Committee (SMSC) as the two-year-term of the existing CWG has recently expired. ESMA is therefore calling for expressions of interest from stakeholders to become a member of the CWG by 13 July 2014.

IOSCO Research Department Publishes Securities Markets Risk Survey
The Research Department of the International Organization of Securities Commissions (IOSCO) today published a Staff Working Paper entitled A Survey of Securities Markets Risk Trends 2014: Methodology and Detailed Results, which provides a detailed analysis of responses to its annual survey on market trends and emerging risks.

Former Securities and Exchange Commission Counsel Joins Drinker Biddle & Reath
Drinker Biddle & Reath announced today that Marc Leaf, former Counsel to Commissioner Luis A. Aguilar of the United States Securities and Exchange Commission (SEC), has joined the firm as a partner in the New York office and as a member of the firm’s Corporate Practice Group.

New Zealand’s Financial Markets Authority Releases Guide To Help Smaller financial Adviser Businesses With The Licensing Process For DIMS

SIFMA President And CEO Kenneth E Bentsen Jr Remarks – SIFMA Tech 2014

Exchanges & Trading Facilities

OneChicago Introduces Weekly Futures
Timothy Bourgaize Murray – WatersTechnology
The equity finance exchange today announced it will offer a new suite of products called OCX.Weekly beginning on Friday, June 20. The exchange will continue to list weekly futures each subsequent Friday.

Euronext IPO is fully subscribed – sources
European financial markets operator Euronext’s initial public offering (IPO) is fully subscribed with good demand, sources with knowledge of the transaction told Reuters on Tuesday.

London Stock Exchange Group Signs Partnership Agreement With Casablanca Stock Exchange
London Stock Exchange Group (LSEG) and Casablanca Stock Exchange (CSE) today announced they have signed a strategic agreement to expand CSE’s activity in the North Western and Central African regions.

TMX Group Launches TMX Quantum XA On Toronto Stock Exchange
TMX Group today announced the successful launch of its award-winning, high performance equity trading engine, TMX Quantum XA on Toronto Stock Exchange.

TOM Smart Execution Connects To BATS Chi-X Europe
Press Release
As of today TOM Smart Execution is connected to BATS Chi-X Europe, adding another trading venue to the Smart Order Router (SOR) and offering clients even better execution of their equity orders. With the connection to BATS Chi-X Europe, TOM Smart Execution now compares even more available prices across different pan-European exchanges.

CEO Joe Rattermans Remarks for U.S. Senate Permanent Subcommittee on Investigations

Direct Edge Trading Notice #14-22: Enhancement To Route Peg Orders

London Stock Exchange Welcomes Zoopla Property Group Main Market IPO

EnterNext welcomes Bluelinea SA on Alternext in Paris

Direct Edge Trading Notice #14-22: Enhancement To Route Peg Orders

Hedge Funds & Managed Futures

Event-driven duo Michel Massoud and Simon Davies exit Cheyne Capital Management
Vivek Ahuja – Financial News
The head of event-driven investments at Cheyne Capital Management is to retire after more than a decade at the $7 billion alternatives manager, while his former co-manager has already left the firm, putting its event-driven business in the hands of a recent senior recruit from global equities manager Meditor Capital Management.

[Video] A Time to Sell? Trends in the Private Equity Secondary Market
MoneyBeat – WSJ
The market for buying and selling interests in private equity funds is on pace to generate record volume in 2014 and fundraising for private equity secondary funds may also hit record or near-record levels.

Bain Capital Ventures Raises $935 Million to Back Growth Firms
WILLIAM ALDEN – Dealbook – NY Times
In a sign of continued investor enthusiasm for venture capital deals, Bain Capital Ventures has raised $935 million to back young companies, according to a person briefed on the matter.

Gender Diversity Champion Takes Top Asset Management Lobbying Role
MoneyBeat – WSJ
One of the biggest proponents of gender balance in U.K. corporate boardrooms has taken the helm of the trade body that represents the interests of asset managers in the U.K. managing £5 trillion ($8.45 trillion).

Maitland appoints international business development head
International legal, tax, fiduciary and fund services group Maitland has appointed David Kubilus to the newly-created role of head of business development, client management and marketing.

Hintze calls for asset managers to make a difference
Margie Lindsay –
As a hedge fund manager Michael Hintze is fairly typical. He is more comfortable in front of a screen, gets a thrill from trading and has academic qualifications that put the majority of financial services professionals in the shade: a BSc in physics and pure mathematics and a BEng in electrical engineering as well as an MSc in acoustics and an MBA from Harvard Business School.

Bond star Michael Hasenstab warns on US debt
Ralph Atkins in London – Financial Times
Ukraine’s clash with Russia, which intensified suddenly at the end of February, frightened many global investors. But for Michael Hasenstab, star global bond portfolio manager at Franklin Templeton, it was an opportunity.

Legends Of Investing: Carl Icahn

Banks & Brokers

A Top Currency Executive at Citigroup Is Leaving
CHAD BRAY – Dealbook – NY Times
A top executive is leaving Citigroup’s currency business, the second prominent departure this year. Jeff Feig, who is based in New York and spent the last decade as head of Citigroup’s foreign exchange business, is leaving the bank after 25 years, the bank confirmed on Tuesday.

Jefferies profit rises on investment banking revenue
Investment bank Jefferies Group LLC, owned by Leucadia National Corp, reported a 55 percent rise in quarterly profit on improved investment banking revenue.

Shadow banks step into the lending void
Tom Braithwaite, Martin Arnold and Tracy Alloway – Financial Times
In an extended hangover from the 2008 crisis, banks are reluctant to lend because their balance sheets are too fragile or because regulators have constrained them. Into this void have stepped a variety of “shadow banks”, less affected by the new regulations and free to grab business.

Raymond James serves up structured products à la carte
Yakob Peterseil –
As one of the top three independent broker-dealers in terms of revenue, Raymond James oversees a pipeline that carries structured products across America.

Clearing & Settlement

Moscow Exchange Launches New Procedure For Settling Single Stock Futures
A new procedure for settling futures on Russian stocks – via T+2 trades on the Main Market – was applied on Moscow Exchange for the first time on 16 June.

CME Group Clearing: REVISED June 2014 Final Foreign Currency Settlement Prices

CME Group Clearing: HOLIDAY SCHEDULE – July 4th, 2014

CME Group Clearing: NYMEX Options Expiration Operational Procedures for the Trading Floor and Clearing Members (PAO, PO) Effective Wednesday, June 18, 2014

CME Group Margins: Performance Bond Requirements: Eris and Equity Index Outrights- Effective Wednesday, June 18, 2014

Indexes & Products

J.P. Morgan launching its first exchange-traded fund
J.P. Morgan Chase & Co is launching its first exchange-traded fund on Tuesday as the Wall Street bank’s asset management business makes its debut in the $1.8 trillion U.S. exchange-traded fund arena.

ETF strategy waits to gain in currency
Peter Davy – Financial News
While investors have been ploughing money into exchange-traded products over the past few years, niche exchange-traded funds that specialise in currency strategies have proved an exception to the rule.

New OMX Baltic 10 Portfolio Selected


iPad Futures Trading App Released by Barchart, Inc., a leading provider of market data and information, today announced the release of Barchart Trader for iPad. The app is available for free through the Apple App Store as “Barchart Trader”.

The Dawn of High-Frequency Compliance: Will You Win the White-Hat Arms Race?
Mitchel Kraskin – Wall Street & Technology
Don’t look now: The SEC is actively increasing IT spend and quant recruitment to enhance forensics in financial management systems. The implications for the financial services industry are enormous.

Dow Jones Calendar Live Implemented by CQG, Inc.
Dow Jones & Company has expanded its long-time partnership with CQG, Inc., a trade routing, market data and technical analysis provider, to include the delivery of Dow Jones Calendar Live through CQG Integrated Client (CQG IC), the company’s flagship trading platform that includes powerful charting and analytics features. The calendar became available on the platform earlier last month.

FIX Protocol Gains Traction Among SEFs
Ivy Schmerken – Wall Street & Technology
Most swap execution facilities have adopted the FIX Protocol to avoid fragmentation and allow for aggregation across multiple liquidity pools.

Getting Closer to the Metal in Financial Technology
Karl Antle – Wall Street & Technology
FinTech entrepreneurs are forgoing pre-built frameworks and building Web-based technology uniquely suited to financial applications.


Whistleblower costs will rise further for Paradigm Capital
Jessica Meek –
Action taken against Albany, New York investment adviser Paradigm Capital Management for retaliating against an internal whistleblower will cost the firm much more than the fine imposed by the US Securities and Exchange Commission (SEC), one compliance expert warns.

Rengan Rajaratnam’s Insider Trading Trial – The Short Answer
The trial of Rengan Rajaratnam in Manhattan federal court is the latest in the government’s yearslong crackdown on insider trading. Rajaratnam may be a household name at this point given the insider-trading conviction of his older brother, Raj, in 2011 but this trial presents prosecutors with new challenges.

Jury Selection Starts in Insider Trading Trial of Rengan Rajaratnam
MoneyBeat – WSJ
Jury selection began Tuesday in Manhattan federal court in the insider trading trial of Raj Rajaratnam‘s younger brother.

Ex-Madoff accountant expected to plead guilty
Bernard Madoff’s former accountant is expected to plead guilty to charges in connection with the convicted swindler’s massive Ponzi scheme, a U.S. prosecutor said at a Tuesday court hearing.

Judge Rules Refco May Sue Cantor Fitzgerald, but Narrows Scope of Suit
A federal judge allowed Refco Inc. to pursue litigation against Cantor Fitzgerald LP and its chief executive, though she narrowed the scope of the defunct commodities brokerage’s lawsuit.

Environmental & Energy

Green managers stuff funds with Apple after environmental reforms
Ross Kerber, Reuters
Apple Inc, criticized in the past for greenhouse gas emissions, use of toxic materials and the hiring of underage workers, has improved its practices and earned better scores from groups such as Greenpeace. That’s good news for environmentally-aware mutual funds that hold Apple for another big reason – it makes money.

Dana Gas Investors Weigh Iraqi Turmoil Amid Kurdish Calm
Samuel Potter, Bloomberg
Investors in Dana Gas PJSC (DANA)’s Islamic bonds are weighing how much credence to give company assurances that its Iraqi output is secure from the sectarian violence ripping through the nation.

***LB: Also in this story “The company is a partner in two Iraqi gas fields, which accounted for 53 percent of its first-quarter revenue and are less than 100 miles from Kirkuk, where Kurdish forces are facing the breakaway al-Qaeda group Islamic State in Iraq and the Levant.”

Russia cuts off Ukraine gas supplies as European energy security concerns escalate
The scale of the threat to European energy security presented by the escalating tensions between Russia and Ukraine was underlined today, as Russia cut off gas supplies to its neighbour after a payment deadline lapsed.


China closer to relaxing foreign investment rules
Rachael Singh – Financial News
The Chinese Securities Regulatory Commission is considering relaxing the rules that restrict foreign investment in China-domiciled mutual funds, in a bid to entice investment from overseas.

S. Korea to expand autonomy of derivatives market
The South Korean financial regulator said Tuesday it will open a new derivatives market, including U.S. dollar futures night trading, to promote the high-risk, high-return financial sector.

IFC issues renminbi green bond in London
Thomas Hale – Financial Times
The first renminbi-denominated “green bond” has been issued in London, marking a further step forward in the internationalisation of China’s currency.

TOCOM Kerosene Advances Highest In Nearly 6 Years

SGX welcomes listing of Gazprom GDR

Shenzhen Stock Exchange Market Bulletin 16 June, 2014 – Issue 19

China Development Bank Corporation (CDB) Enters Into Comprehensive Cooperation With TheCityUK

Corporate Logo Revision for JPX Group Companies

Frontier Markets

Argentina Defiant Against Supreme Court on Bond Payments
The Argentine government said on Tuesday that it had started to take steps to circumvent a United States court order to avoid a technical default.

SEBI Issues Consultation Paper on Crowdfunding In India

[SEBI] Base Issue Size, Minimum Subscription, Retention of Over-Subscription Limit and further disclosures in the Prospectus for Public Issue of Debt securities

Malaysia PLCs Amongst The Top Scorers In ASEAN Corporate Governance Scorecard

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