John Lothian Newsletter: Liquidnet poised for fixed income trading platform launch; Pit traders abandon lawsuit against CME over grain rules; Judge Upholds U.S. Effort to Regulate Overseas Trading

Sep 17, 2014

First Read

Ethan Kahn, Principal, Wolverine Trading, LLC – Exploring ETF’s

“It’s a very competitive market out there. Constantly innovating and constantly adapting is what makes opportunities occur.”

Ethan Kahn, principal at Wolverine Trading, gives an explanation of ETF’s and shows why the product has become popular over the years. Kahn discusses the differences between ETF’s and mutual funds, breaking down how much lower the costs of ETF’s are and how there is more buying and selling flexibility compared to mutual funds. Finally, Kahn explains the importance of innovation and adapting in the financial industry, telling his audience that constantly changing with the industry is key to staying competitive.

Watch the video »


Ex-LCH Executive Joins CFTC to Advise Massad on Swaps Oversight
Silla Brush – Bloomberg
A former executive at the world’s largest clearinghouse for interest-rate swaps has joined the U.S. Commodity Futures Trading Commission to advise its chief on overseeing the $700 trillion global derivatives market. Jeffrey Bandman, who was head of partnerships and alliances for LCH.Clearnet Group Ltd., started last week as a counselor to CFTC Chairman Timothy Massad.

***** What is $700 trillion among friends.


CME Group Announces Open Interest Record for FX Futures and Options
CME Group, the world’s leading and most diverse derivatives marketplace, announced record open interest in its Foreign Exchange complex for Sept. 15, 2014. Open Interest for FX futures and options combined stood at 2,630,556 contracts yesterday, the notional equivalent of $309 billion. The previous record was set on March 19, 2013 with 2,589,468 contracts, $286 billion in notional.

***** A big number, but a drop in the bucket of $700 trillion.


Bourses choosing connectivity over mergers
Goh Eng Yeow – The Straits Times
Mergers among stock exchanges were all the rage a few years ago, as Singapore Exchange (SGX) shareholders will recall all too well. SGX jumped onto the bandwagon in 2010 with an audacious bid to buy ASX, its Australian counterpart, for A$8.4 billion (S$9.6 billion). That endeavour ended in tears, shot down by political opposition in Canberra, but investors in both bourses might well have breathed a sigh of relief.

***** I really like this reporter’s name.


OptionsPlay Ideas: The New Standard in Options Ideas and Analysis for Individual Investors
OptionsPlay redefines the options trading experience with the rollout of OptionsPlay Ideas. Freeing options investors from the drudgery of complex calculations, OptionsPlay handles the heavy computing and delivers what investors really want—ideas they can trade with confidence.

***DA: It is “go-time” for a firm we interviewed a couple months ago. Click HERE to read Jim Kharouf’s interview with founder Mark Engelhardt.


MSR Investments Launches Investable Index Platform
MSR Indices evolved from the premise that a meaningful majority of CTA, Hedge Fund and Fund of Funds strategies can be replicated and benchmarked using any one or combination of three basic trading strategies: 1) Long Only, 2) Trend Following and 3) Reversal. MSR Indices can be utilized for research purposes, investment purposes or both. Future releases in the weeks ahead will enable users to perform a wide variety of sophisticated and comparative analyses using MSR Index data as well as your own data.

***** They forgot the fourth basic trading strategy; the coin flip.


Asian billionaires create wealth fastest
Jeremy Grant in Singapore – Financial Times
Wealth was created faster by Asia’s billionaires than by those in any other part of the globe in the past 12 months, with the region accounting for almost a third of a 12 per cent increase in global billionaire wealth of $7.3tn, according to an annual survey.

***** A statistic I heard yesterday, China graduates more engineers every year than the U.S. has all graduates.


Between Bridges: Federal Court Tosses Out Challenges to CFTC Cross-Border Guidance and Policy Statement
Gary DeWaal – Katten Muchin Rosenman
A United States federal court on September 16, 2014, mostly tossed out all legal challenges brought by three industry groups to the cross-border guidance and policy statement initially issued by the Commodity Futures Trading Commission on July 12, 2013, and made effective on July 26, 2013. This guidance sought to explain how the CFTC would apply the Dodd-Frank Act’s provisions related to swaps—Title VII—and its newly implemented swaps rules in the cross-border context.

***** Not all legal challenges are equal, and some are just made to stall implementation.



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Lead Stories

Liquidnet poised for fixed income trading platform launch
Josh Noble in Hong Kong – Financial Times
Liquidnet plans to go live with its fixed income trading platform as soon as next month, the latest equity market operator to make the move into electronic bond trading.

Pit traders abandon lawsuit against CME over grain rules
Tom Polansek – Reuters
Veteran traders from Chicago’s grain pits on Tuesday dropped a lawsuit against CME Group Inc that sought to reverse a change to end-of-day settlement rules they said was killing open-outcry business.

Judge Upholds U.S. Effort to Regulate Overseas Trading
Ben Protess – Dealbook – NY Times
A federal judge on Tuesday upheld the Obama administration’s effort to rein in the sort of overseas trading that imploded in the financial crisis, upending Wall Street’s plan to roll back the regulatory overhaul.

U.S. SEC’s Gallagher calls for reforms in fixed income markets
Sarah N. Lynch – Reuters
A top U.S. regulator called on Tuesday for major reforms in the fixed income markets, saying many of the rules are out of date and lack enough protections for retail investors.

Doubts raised on Singapore-Taiwan exchange link
Rob Hartley – Euromoney Magazine
The Singapore Exchange (SGX) and the Taiwan Stock Exchange (TWSE) are hoping to forge closer ties with the announcement of plans for a direct link between the two bourses, but equity market bankers reckon it will do little to boost demand.

Dark Pools Confront More Transparent Future Amid Threats
Doni Bloomfield and Sam Mamudi – Bloomberg
Whether they like it or not, banks are opening up their dark pools, the private venues that host 17 percent of trading in the $24 trillion U.S. stock market.

Ex-AIB Rogue Trader Says Bonus Culture Encourages Fraud
Joe Brennan – Bloomberg
Financial-services fraud will continue as long as bonuses provide incentives to ignore limits, according to convicted currency trader John Rusnak, who lost $691 million at a U.S. unit of Allied Irish Banks Plc. (ALBK)

Regional US brokers quitting market – report
Joe Parsons – Futures & Options World
US money managers face the prospect of dwindling competition among the brokers that service their orders because tough rules on clearing and execution are forcing smaller US firms out of business, a report has found.

Barclays Hid Traders’ Role After Questions: Schneiderman
Chris Dolmetsch and Keri Geiger – Bloomberg
Barclays Plc hid the role of high-frequency traders in its dark pool even after the bank said it had shut off clients who engaged in suspect activity, New York Attorney General Eric Schneiderman said.


Ex-SEC chair Walter joins Finra board, and other recent job news
Tristan Carlyle, Michael Hegarty, Paige Long, Mark Sands –
Four new members for Finra board as existing members Bowsher, Burton, Dolan, Goldschmid, Norensburg and Stocker stand down

SEC and SBA to Partner on Events on Small Business Capital Raising Under the Jumpstart Our Business Startups (JOBS) Act
The Securities and Exchange Commission, in partnership with the U.S. Small Business Administration, announced today they will jointly host events to inform small business owners and entrepreneurs about new options that are and will become available for capital raising under the Jumpstart Our Business Startups (JOBS) Act.

FSB sees little evidence of reforms hitting finance
Walter Hemmens – Financial News
There has been no sign so far that the supply of long-term finance has been hampered by the wave of regulatory reform since the financial crisis, the Financial Stability Board has found.

ASIC And MAS Sign World-First Memorandum Of Understanding On Authorities Access To OTC Derivatives Trade Repository Data
ASIC and the Monetary Authority of Singapore (MAS) have entered into a Memorandum of Understanding (MOU) to allow trade repositories licensed in one jurisdiction to provide relevant data to the authority in the other jurisdiction.

Completing The Journey: Women As Directors Of Public Companies, SEC, Chair Mary Jo White, Sept. 16, 2014

Statement Of CFTC Chairman Tim Massad On The Dismissal Of The Cross Border Lawsuit

Exchanges & Trading Facilities

LSE takes steps to bolster small stock blocks
John Bakie – The Trade
London Stock Exchange (LSE) has made changes to the way smaller stocks are traded to help improve liquidity, particularly for block trades.

CME Group Statement regarding McKerr v. Board of Trade of the City of Chicago
“After two years of litigation, and following a lengthy decision by the Court denying plaintiffs’ motion for a preliminary injunction and raising serious doubts about the viability of their claims, the plaintiffs have agreed to dismiss their suit against CME Group and abandon all of their claims against the defendants. They have agreed to do so without receiving any payment whatsoever from CME. In so doing, plaintiffs today are acknowledging what CME has said all along

CBOE and C2 Plan to List Options on Alibaba Group Holding Limited
CBOE Holdings, Inc. (NASDAQ: CBOE) announced today that the Chicago Board Options Exchange and C2 Options Exchange plan to list options on Alibaba Group Holding Limited (ticker symbol: BABA) beginning on Monday, September 29, 2014, contingent on BABA meeting new options listing criteria.

ISE and ISE Gemini to List Options on Alibaba on September 29, 2014
The International Securities Exchange Holdings, Inc. (ISE Holdings) today announced that the ISE and ISE Gemini options markets will list options on Alibaba Group (NYSE: BABA) beginning Monday, September 29.

NOREXECO Gets License To Become The First Dedicated Forestry And Paper Exchange
The Norwegian Ministry of Finance has given NOREXECO ASA a license to operate as a regulated market exchange. NOREXECO plans to open up for trading before the end of 2014 and will become the world’s first and only dedicated exchange for pulp and recycled paper.

Shanghai gold trading platform given surprise launch date
Mark O’Byrne – Resource Investor
Today the Chinese government backed Shanghai Gold Exchange (SGE) brought forward the launch date of its international gold trading platform which is hosted in the city’s free trade zone (FTZ). The gold trading platform will be known as the ‘international board.’

NYSE Arca Resumes Trading Of Three Barclays ETNs (Symbols: AYT, JEM, And PGD)

Euronext Shares Start Trading On Lisbon Market

TOM Insight August 2014

Hedge Funds & Managed Futures

With Calpers Quitting Hedge Funds, Other Investors Reflect
Mary Williams Walsh and Alexandra Stevenson – Dealbook – NY Times
Hedge funds were once the domain of the rich. Today, it is the teachers, firefighters and other public employees in the country’s biggest pension funds who are among the industry’s main investors.

Calpers’ Hedge-Fund Exit Takes Toll In Europe Too
Sarah Krouse – MoneyBeat – WSJ
The move by the largest U.S. public pension fund to shed some $4 billion in hedge-fund investments will take a toll on the other side of the Atlantic as well, impacting a handful European fund managers.

Video: Calpers and hedge funds, the end of the affair
FT Alphaville
Joseph and Dan discuss the decision by the largest US public pension fund to ditch hedge funds, on the set of mastermind.

Norway to Launch I.P.O. of State-Owned Property Company
Chad Bray – Dealbook – NY Times
Norway’s government said on Wednesday that it plans to launch an initial public offering of Entra Holding, a state-owned office real estate manager and developer with a portfolio of properties worth about $4.2 billion.

Goldman Sachs’s Oryza Asia Hedge Fund Said to Top $1 Billion
Bei Hu – Bloomberg
Goldman Sachs Investment Partners (GS), set up to allow clients to invest with some of the bank’s top proprietary traders, raised about $1 billion for its first Asia hedge fund, said two people with knowledge of the matter.

Bill Gross Used $45 Billion Derivatives to Lift Fund Gain
Miles Weiss and Susanne Walker – Bloomberg
Bill Gross is relying on derivatives rather than Janet Yellen to raise his returns on government bonds.

BlackRock hires ex-Man Group’s Meisinger for alternative investment arm
BlackRock has hired former Man Group executive Lars Meisinger as chief operating officer in Europe for its alternative investment unit, the world’s biggest money manager said on Wednesday.

Managed futures buoyed by summer bounce
Philip Georgiadis – Financial News
Managed futures strategies have posted their strongest monthly performance for three years, putting them on course for their best annual return since the heady days of 2010.

Buy Side Slow to Trade on SEFs
Profit & Loss
Although buy-side firms are still avoiding trading on SEFs, market participants expect to see more of them using these platforms in the future

Banks & Brokers

MOVES-Evercore hires Denis Bovin as senior adviser
U.S. boutique investment bank Evercore Partners has hired dealmaker Denis Bovin as a senior adviser focusing on technology, aerospace and defence, according to a memo seen by Reuters on Tuesday.

JPMorgan Debuts Company Debt Fund as Rebound Seen: India Credit
Anoop Agrawal – Bloomberg
Global fund managers are starting their first Indian corporate bond funds as credit risk drops amid Prime Minister Narendra Modi’s bid to revive the economy.

Clearing & Settlement

LCH.Clearnet enhances swap compression service
Luke Jeffs – Futures & Options World
LCH.Clearnet has launched a new swaps compression service, marking the latest step by a clearing house to reduce the margin their cash-strapped clients have to give up to clearing.

BME’s CCP Gains EMIR Authorization
James Rundle – WatersTechnology
The Comisión Nacional del Mercado de Valores (CMNV) has given authorization to BME Clearing, in line with obligations from the European Market Infrastructure Regulation (EMIR).

BGC Partners Announces Third Party Clearing For Swaps Via Traiana’s CreditLink
BGC Partners, Inc., a leading global brokerage company servicing the financial and real estate markets, today announced that its Swap Execution Facility subsidiary, BGC Derivative Markets, L.P. has executed Made Available To Trade USD Interest Rate Swap transactions with pre-trade credit checking performed on behalf of third parties by Traiana CreditLink.

EU clearing timeline will not force out FCMs – poll
Catherine Contiguglia –
Despite a longer-than-expected wait for clearing rules to take effect in Europe, respondents to the latest poll are confident banks will not shut up shop

Brokers to prop-up buy-side on T+2
John Bakie – The Trade
Investment banks and brokers will have little choice but to step in to ensure their buy-side clients can cope with the introduction of T+2 on 6 October, according to industry experts.

ForexClear Expands Range Of Cleared Currencies
Service Now Includes Peruvian Nuevo Sol

Indexes & Products

Fed Bringing Stock Turbulence to Traders as VIX Climbs
Callie Bost and Jeff Kearns – Bloomberg
As investors try to decode the Federal Reserve’s next step, options traders are betting that regardless of what happens, it’ll be a rocky ride for stocks.


Barchart Trader Platform Adds Options Analysis and Strategy Builder, Inc., a leading provider of market data and information, today announced the release of advanced options analysis and an options strategy builder within Barchart Trader.

Fintech challenge targets asset management
Anna Irrera – Financial News
London’s latest fintech accelerator programme, hosted by French software company Dassault Systèmes, has chosen the six finalists startups that will participate in its challenge targeted at the investment management industry.

Startup Brings Pandora-Like Data Intelligence to Bond Voice Trading
Ivy Schmerken – Wall Street & Technology
Algomi is helping sales traders find the other side of less liquid bond trades, so that banks can become more efficient at voice trading.

NovaSparks Preps Third Gen of FPGA-Based Ticker Plant
Faye Kilburn – WatersTechnology
French FPGA feed handler and data appliance provider NovaSparks is preparing to launch a new version of its hardware-only NovaTick ticker plant, which will provide users with new features such as exchange recovery, which are typically found in software-only ticker plant services

Allianz Allies with Thomson Reuters for Bond Pricing
Max Bowie – WatersTechnology
German banking and insurance giant Allianz is to use Thomson Reuters’ independent pricing service to meet the firm’s fixed income pricing data needs around valuation and meeting international accounting standards.

EBS Unveils Latest Version of Ai
Profit & Loss
EBS will be rolling out the latest version of its API-based trading protocol, Ai 6.6, in October with several new features, including Iceberg orders and Midpoint Match

Xignite Supports FinTech Innovation At FinovateFall 2014 – Finovate Alumni Power Payment And Investment Platforms With The Xignite Market Data Cloud

UK Business Secretary To Announce GBP4 million Of Funding To Counter Cyber Security Threats At First Ever US-UK Cyber Innovation Summit.


SEC Sanctions 19 Firms and Individual Trader for Short Selling Violations in Advance of Stock Offerings
The Securities and Exchange Commission today announced the latest sanctions in a continuing enforcement initiative uncovering certain hedge fund advisers and private equity firms that have illegally participated in an offering of a stock after short selling it during a restricted period.

Employee of Law Firm Wilson Sonsini Charged With Insider Trading
Matthew Goldstein – Dealbook – NY Times
Federal authorities, for the second time in three years, charged an employee of Wilson Sonsini Goodrich & Rosati, a prominent law firm, with using confidential information about corporate deals to make illegal trades in stocks.

SEC Obtains Asset Freeze Against Company in Turks and Caicos Islands Behind South Florida-Based Ponzi Scheme
The Securities and Exchange Commission today announced an emergency asset freeze against a company located in Turks and Caicos Islands in connection with its operation of a South Florida-based Ponzi scheme.

CFTC Charges Ohio Resident Glen Galemmo with Commodity Pool Fraud in a Multi-Million Dollar Ponzi Scheme
The U.S. Commodity Futures Trading Commission (CFTC) filed a civil enforcement Complaint against Defendant Glen Galemmo of Cincinnati, Ohio, charging him with operating a multi-million dollar Ponzi scheme through his firm, QFC, LLC, from February 18, 2010 through at least July 17, 2013.

CFTC Revokes Registrations of S.A.C. Capital Advisors, L.P. and S.A.C. Capital Advisors, LLC Based on Criminal Action
The U.S. Commodity Futures Trading Commission (CFTC) today announced that it filed a Notice of Intent to Revoke the Registrations (Notice) of S.A.C. Capital Advisors, LLC (SAC LLC), a Delaware Limited Liability Company, and S.A.C. Capital Advisors, L.P. (SAC LP), a Delaware Limited Partnership.

N.Y. says Barclays move to toss fraud case should be denied
Herbert Lash – Reuters
New York’s attorney general said on Tuesday that Barclays Plc’s motion to dismiss the state’s lawsuit alleging the bank lied to customers about “high-frequency” trading on its private trading platform should be denied.

ASIC: NAB Pays $40,800 Penalty For Misleading UBank Advertisements

Environmental & Energy

Fixing Climate Change May Add No Costs, Report Says
Justin Gillis, The New York Times
In decades of public debate about global warming, one assumption has been accepted by virtually all factions: that tackling it would necessarily be costly. But a new report casts doubt on that idea, declaring that the necessary fixes could wind up being effectively free.

***LB: Also in this story “A global commission will announce its finding on Tuesday that an ambitious series of measures to limit emissions would cost $4 trillion or so over the next 15 years, an increase of roughly 5 percent over the amount that would likely be spent anyway on new power plants, transit systems and other infrastructure.”

Scottish ‘Yes’ vote could harm clean energy investment, say analysts
Will Nichols, BusinessGreen
A vote for Scottish independence is likely to damage clean energy investment in the near term, according to new analysis by Bloomberg New Energy Finance (BNEF).

***LB: Also in this story “One renewable energy developer, Infinis Energy, has already postponed decisions on two wind projects in Scotland until the result of the vote is known and BNEF warns others could follow suit.”

EU wind chief: governments must ‘relinquish strangleholds’ over energy policy
Jessica Shankleman, BusinessGreen
The chief executive of Europe’s biggest wind power trade association has made a fresh call for the EU to move towards a single energy market, warning that “vested interests” and lack of co-operation between member states is derailing progress towards energy union.


Singapore delays plans for gold contract
Singapore has been forced to delay its plans for an exchange-traded gold contract because of technical issues, sources said yesterday, adding a dent to its ambitions of becoming South-east Asia’s gold trading hub.

SGX investigates relationship between stock price and liquidity
Simon Osborne – The Trade
The Singapore Exchange (SGX) has conducted a review of the market quality of the Singapore securities market during 2013 and has published its findings. It predicated its research on studies that show stock price is an important function of liquidity, which in itself is a major component of market quality.

BNP Paribas Securities Services makes Asian appointments
Simon Osborne – The Trade
BNP Paribas Securities Services has appointed Stephanie Marelle as head of Hong Kong. She has replaced Bruno Campenon who has relocated to New York to become head of clearing and custody services/corporate trust services for the Americas.

Sell-side firms duel for e-trading accolades
The Trade
A survey of algorithmic usage in Asia was carried out by the TRADE Asia during the summer and the top three firms in each category were announced last week.

SGX Consults On Minimum Trading Price
Singapore Exchange (SGX) is consulting the public on details of the minimum trading price requirement and proposed changes to the existing watch-list. SGX also seeks public feedback on its proposal to retain and codify the notification process and privy list requirements for specific transactions into its Listing Rules.

Hong Kong’s Securities And Futures Commission Suspends Eric Shum Kam Chi For Three Years For Sponsor Failures

Frontier Markets

UPDATE 1-Goldman Sachs gets strong demand for landmark sukuk issue
Archana Narayanan – Reuters
Goldman Sachs raised $500 million with its debut sale of Islamic bonds on Tuesday, becoming the first conventional U.S. bank to issue sukuk as Islamic finance develops beyond its traditional homes in the Middle East and southeast Asia.

Africa: Trade hangs in the balance
Kanika Saigal – Euromoney Magazine
Infrastructure development and streamlined processes have helped the East African Community make great strides to become one of the most successful trading blocs in Africa. But regional inconsistencies threaten to derail further integration.

Locals line up for African growth
Euromoney Magazine
Investment banking has the potential to be big business in sub-Saharan Africa. But which banks are setting themselves up for success in the region?

Turkey Fires a Salvo at Rating Agencies. Again – MoneyBeat
Emre Peker – MoneyBeat – WSJ
Turkey’s love affair with credit-rating firms is proving short-lived, with officials slamming companies that in the last two years elevated the country to investment-grade status.

Wary of Another ‘Tantrum,’ Emerging Economies Prep for Fed Rate Hike
Matt Day – MoneyBeat – WSJ
As the Federal Reserve debates the timing of a potential interest rate increase, some policymakers in the developing world aren’t taking any chances.

Dubai Financial Market (DFM) Signs Memorandum Of Understanding With Korea Securities Depository (KSD)
The MoU outlines Areas Of Cooperation Including Exchange Of Information And Joint Efforts To Develop The Post-Trade Securities Infrastructure

John Lothian Newsletter

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