John Lothian Newsletter: LME plans to launch HK-based commodities contracts; LSE to launch midday auction in 2015; BofA Refugees Said to Form Market Maker With Tom Joyce

Oct 21, 2014

First Read

Former Isda chief joins board of fintech start-up
Anna Irrera – Financial News
The former chief executive of the International Swaps and Derivatives Association has joined the board of a US-based fintech start-up in his first move since leaving the industry body in April.

***JM: Congrats, Bob! Doug “Garlic Dill” Ashburn wanted me to make some pickle jokes. I’m not sure why, and since he’s still in Europe and out of touch along with “Butter Chip” Kharouf and “Sweet Gherkin” Lothian, I can’t really do more.


Droit Appoints Industry Veterans In Derivatives Compliance Push – Former ISDA CEO Robert Pickel, FinTech Specialist Mark Beeston, And Former UBS Executive Seth Cohen Join Advisory Board

***JM: Here’s the press release for the above story. And if you wouldn’t mind doing me a personal favor, if you would call John “Sweet Gherkin” next time you see him, I’d really appreciate it. From this far away, I can’t do anything to his stapler when he’s out of the office.


Deutsche Boerse Begins Search for New CEO
Will Hadfield – Bloomberg
Deutsche Boerse AG, operator of the Eurex futures market and the Frankfurt Stock Exchange, has begun a search for a replacement for Chief Executive Officer Reto Francioni, according to a person familiar with the matter.

***SR: “Under German corporate law, CEOs can only seek one-year contract extensions after turning 60.” Wow. Some people are just hitting their stride at 60.


HFT tech being transformed to provide new era analytics
The Trade
Technology that was developed in order to meet demand for ever-lower latency as high-frequency trading (HFT) took off is now being used to fuel new forms of analytics, according to technology experts.

***SR: The end of the era of low latency wars?


Why High-Frequency Trading Is So Hard to Regulate
Peter J. Henning – Dealbook – NY Times
Stock manipulation is one of the great bugaboos among investors because it generates fear that the market is as rigged as a three-card monte game on a Bronx street corner. Since the publication of Michael Lewis’s book “Flash Boys” earlier this year, high-frequency traders have come under increased scrutiny for their use of sophisticated computer programs that can whipsaw prices by flooding the market with orders in milliseconds.

***JM: Retitle this piece “Why Market Manipulation Is So Hard to Prosecute” and it makes more sense. This isn’t really about HFT, but I love a good philosophical dilemma in any case.


So far so good for T+2, but…
David Pearson – Fidessa Post-trade
As the dust settles on the main part of the EU’s transition to T+2, the DTCC’s recent announcement that they have formed a steering committee to oversee the US market move to T+2 has shifted the focus across the pond. The EU move appears, by many accounts, to have gone smoothly. But under the hood many firms are bearing additional operational costs, providing tactical solutions to keep the settlement process on track.


New York FinTech Innovation Lab Calls for New Entrepreneurial Applicants
Becca Lipman – Wall Street & Technology
Wells Fargo is the latest addition to the group of mentors supporting the Accenture FinTech Innovation Lab program. Now in its fifth year, the 12-week program co-founded by Accenture and the Partnership Fund for New York City has helped early and growth-stage financial technology companies develop their business by giving them access to C-suite executives and real-world applications at some of the world’s largest institutions.


Tim McDermott, CEO, NADEX – You Can’t Google Map Your Career

“You will find that your career will be all about change.”

Tim McDermott, CEO of NADEX, gives an illustration of the winding road he followed throughout his career. Beginning with his time as a lawyer working for a law firm, McDermott began to take on numerous cases for First Options of Chicago, a large client for his law firm. Participating in cases involving financial markets litigation gave McDermott an introduction to the financial industry, which eventually led him to work at the CME and handle the market regulation area. Moving forward a few years, McDermott joined NADEX and eventually became CEO of the company. His overall message was that where you start isn’t necessarily where you may end up, and that every experience can either help or hurt you down the road.

Watch the video »



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Lead Stories

LME plans to launch HK-based commodities contracts
Henry Sanderson – Financial Times
The London Metal Exchange plans to launch Hong Kong-based commodities contracts as it seeks to attract direct investment from mainland China, the world’s largest metals consumer.

***SR: Bit by bit, the LME is coming closer to achieving the goals that Hong Kong Exchanges & Clearing had when they bought the exchange.

LSE to launch midday auction in 2015
Tim Cave – Financial News
The London Stock Exchanges plans to introduce an intra-day auction process for UK equities from the middle of 2015, as part of group-wide efforts to boost trading in large institutional orders.

BofA Refugees Said to Form Market Maker With Tom Joyce
Sam Mamudi and Hugh Son – Bloomberg
Bank of America Corp. (BAC) traders who left as the lender dismantled their electronic market-making unit are attempting to recreate the business as an independent firm with former Knight Capital Group Inc. chief Tom Joyce.

Dudley Warns Banks Must Improve Culture or Be Broken Up
Matthew Boesler and Christopher Condon – Bloomberg
Banks must change the way employees are compensated and take other steps to fix a corporate culture that encourages misdeeds or face being broken up, said William C. Dudley, president of the Federal Reserve Bank of New York.

LMEWEEK-HK exchange wants trading link with Shanghai for commodities
Eric Onstad and Harpreet Bhal – Reuters
The Hong Kong stock exchange (HKEx) said it aimed to create a link to trade commodities with mainland China by adapting a share trading system with the Shanghai Stock Exchange that is on the cusp of going live.

SGX Renminbi futures debuts with over 1 billion yuan in trading turnover and margin collateral
Singapore Exchange (SGX) today successfully launched the Chinese Renminbi (RMB) futures, namely USD/CNH and CNY/USD futures. Transactions in the new SGX RMB futures achieved a first day volume of 1,836 contracts or approximately RMB 1.1 billion in notional value (equivalent to US$180 million). Trading was robust with active participation from a diverse pool of counterparties.

Regulatory Disharmony Continues to Fragment Swaps Market
Profit & Loss
The lack of international harmonisation regarding swaps regulation is continuing to fragment this market, a trend that could have negative implications in more volatile trading conditions

Forex-Rigging Fines Could Hit $41 Billion Globally: Citi
Richard Partington – Bloomberg
The cost for banks to settle probes into allegations traders rigged foreign-exchange benchmarks could hit as much as $41 billion, Citigroup Inc. (C) analysts said.

For Peer Lending, a Change in Financing
Ianthe Jeanne Dugan and – WSJ
Peer-to-peer lending is growing up quickly and leaving the “peer” behind. Veteran bankers—including John J. Mack , a former chief executive of Morgan Stanley ; Hans Morris, who was president of Visa after a career at Citigroup Inc., and Capital One Financial Services co-founder and QED Investors Managing Partner Nigel Morris —are betting on a rapidly growing new financing model that links investors with loans posted online by individuals raising money for everything from refinancing credit cards to bankrolling small businesses.

Libya-Goldman clash sheds light on formerly secretive fund
Jane Croft – Financial Times
In 2008, Catherine McDougall was a young Australian lawyer seconded to the Libyan Investment Authority’s offices in Tripoli to assist its legal team and review financial transactions conducted by Goldman Sachs. She was “shocked” by what she learnt, according to her witness statement detailed in a London court earlier this month.


SEC Is Steering More Trials to Judges It Appoints
Jean Eaglesham – WSJ
The Securities and Exchange Commission is increasingly steering cases to hearings in front of the agency’s appointed administrative judges, who found in its favor in every verdict for the 12 months through September, rather than taking them to federal court.

***JM: “Sir, shall we send this case to that place where we spend lots of cash for a very uncertain outcome, or just give it to our own guy so he can slam-dunk it?” What would YOU choose?

Experts Warn of New Legal Exposures in Futures Trading
Profit & Loss
Changing regulatory language within the futures market is leaving trading firms exposed to new liabilities, according to legal experts in New York

Basel to speed up work on leverage ratio
Sam Fleming – Financial Times
Global regulators are speeding up work on the leverage ratio, a measure of bank capital that is seen as less vulnerable to manipulation, as leading countries push for a tougher benchmark.

SEC Names Marc Wyatt as Deputy Director of National Exam Program
The Securities and Exchange Commission today announced that Marc Wyatt has been named Deputy Director of the agency’s Office of Compliance Inspections and Examinations (OCIE).

Julie Snyder and France Beaudoin star in AMF’s new campaign
This month, the Autorité des marchés financiers (the “AMF”) is launching a new financial awareness campaign featuring two well-liked media personalities and their popular TV shows: Julie Snyder (Le Banquier) and France Beaudoin (En direct de l’univers).

***JM: Haven’t seen this yet on Norwegian TV, but I’ll keep an eye out…

Regulatory reform hampering financial product innovation
Supervisors and bankers voiced their anxiety over the unintended consequences of regulation at a banking conference in London last week, calling for deeper reflection and cost/benefit analysis of the current framework.

Carlo di Florio, FINRA Chief Risk Officer And Head of Strategy, Remarks At NSCP 2014 National Conference, Washington, DC, October 20, 2014

Exchanges & Trading Facilities

Brokers give backing to Turquoise block launch
John Bakie – The Trade
Turquoise’s Block Discovery service launched today with support from more than 10 brokers, which the multilateral trading facility (MTF) attributed to high demand from buy-side firms.

LME to offer more electronic liquidity on monthly dates
The London Metal Exchange (LME) plans to offer more liquidity on on its electronic platform to attract more investment from speculators and funds, a top official said on Monday.

LME musters limited support ahead of steel contract launch
Maytaal Angel – Reuters
The London Metal Exchange (LME) has attracted little support so far for its planned steel derivatives, struggling to overcome limited appetite for steel contracts outside China, including for its own troubled billet future.

BATS Chi-X Europe Expands Into Turkish Stocks
BATS Chi-X Europe, Europe’s largest stock exchange, is to offer trading in Turkey’s most liquid stocks from 3rd November 2014.

ISE Announces KCG as new Primary Market Maker
ISE announced that KCG Americas, LLC will serve as the Primary Market Maker (PMM) for options products in Bin 5, effective today, October 20, 2014.

Lending Club Picks N.Y.S.E. as Home for Its I.P.O.
Michael J. de la Merced – Dealbook – NY Times
When Lending Club finally begins life as a publicly traded company, the giant of the peer-to-peer lending industry will do so on the Big Board, the same exchange where many of the banks it has sought to displace now trade.

Autilla breaks away from the LME for gold fix submission
Ian Walker –
Autilla has decided to break from its partnership with the London Metal Exchange in its bid for the administration of the gold fix, hoping to create a more transparent and reputable independent solution.

Hedge Funds & Managed Futures

Ex-NYSE Euronext executive Lisa Dallmer re-emerges at BlackRock
Sarah Krouse and Mike Foster – Financial News
A former NYSE Euronext executive, who spent around a decade at the exchange group before leaving her Paris-based role late last year, has taken a senior technology role at funds giant BlackRock in the US.

Misery Widespread at Hedge Funds
Juliet Chung, Rob Copeland and Maureen Farrell – WSJ
This month’s turmoil in financial markets has been a “bloodbath” for hedge funds, inflicting large losses at an array of multibillion-dollar firms in the industry’s worst stretch since late 2011.

Hedge fund exit requests drop to nine-month low in Oct
Investor requests to pull money out from hedge funds dropped to a nine-month low in October, new data released on Monday showed.

Private Equity Titans Open Cloistered World to Smaller Investors
William Alden – Dealbook – NY Times
For decades, David M. Rubenstein has persuaded big institutions like pension funds and university endowments to invest billions of dollars with his private equity firm, the Carlyle Group, promising them better returns than the general market. But in recent months, he has crisscrossed the country in a campaign to attract a type of investor that has relatively little experience in this industry: individuals.

Brooks Macdonald makes ‘reasonable’ start in Q1 as AUM hits GBP6.7bn
Laura Dew – Investment Week
Brooks Macdonald has grown discretionary assets under management to GBP6.7bn, according to its first quarter results, with new business topping GBP100m despite market headwinds.

Charterhouse loses control of second portfolio company this month
Becky Pritchard – Financial News
Charterhouse Capital Partners has lost control of washroom services provider PHS, making it the second portfolio company the buyout firm has lost control of this month.

Banks & Brokers

JP Morgan: Inside Europe’s busiest ECM business
Lucy Burton – Financial News
Few noticed it, but JP Morgan passed a milestone late last month. With a quarter of the year still remaining, the US bank notched up its 100th equity capital markets deal of the year in Europe – passing its own full-year record of 95 deals, set in 2009.

Wall Street Execs Heading to New York Fed To Discuss Bank Culture
Victoria McGrane – MoneyBeat – WSJ
Six years after top Wall Street executives gathered at the Federal Reserve Bank of New York to try and salvage a faltering Lehman Bros. they’ll meet there once again Monday – this time to discuss how they can improve their corporate ethics and culture.

Bank of England tells bankers to prepare for pay cuts
Laura Dew – Investment Week
The Bank of England’s Sir Jon Cunliffe has warned bankers they are paid too much and should expect a pay cut following a sharp drop in banks’ profits.

Switzerland Leaves Banks to Face the Music Alone
John Letzing – WSJ
The head of Switzerland’s finance department delivered a blunt message to one of the country’s banks this year: You’re on your own.

EuropEuropean Bankers Broadcast Stress-Test Messages
Max Colchester in London, Eyk Henning in Frankfurt and Giovanni Legorano in Milan – WSJ
Europe’s banks will get the results of a key health check Sunday—and some executives are already managing expectations about the outcome of the “stress tests”.

GP Bullhound’s Antony Northrop launches TMT-focused merchant bank Nor Capital
Vivek Ahuja – Financial News
A veteran of the investment banking sector, whose 30-year career has included stints at Lazard and Swiss Bank Corporation, has left independent technology advisory boutique GP Bullhound to build a new TMT-focused merchant bank.

JP Morgan promotes three to banking head in Europe
Nick Kostov – Financial News
JP Morgan has named new banking heads in France, Iberia and Italy, as it chases the top spot for European investment banking revenues.

Blackwell Global Chooses FlexTrade For White Label FX, Precious Metals Trading And TCA – Implements Global FX Solution With MaxxTrader, A Turnkey ASP Front-End For Trading Spot Currencies & Precious Metals, & FlexTCA

Clearing & Settlement

US could hold key to solving CCP stalemate
John Bakie – The Trade
US regulators may need to take the first step in resolving cross-border clearing issues with Europe due to pre-existing EU laws, according to an industry association.

European T+2 could prompt Asia post-trade overhaul
The Trade
The wider effects of Europe’s transition to T+2 securities settlement suggest under-investment in technology is leaving investment managers heavily reliant on the sell-side.

REGIS-TR Passes One Billion Mark
The Trade
REGIS-TR has become the first trade repository to report it has processed one billion derivatives trades since European trade reporting rules came into effect eight months ago.

Asia most advanced in forex clearing, Europe and US lagging
India, China and South Korea are the most advanced economies in terms of clearing FX contracts such as non-deliverable forwards, in contrast with Europe, where the timetable for clearing mandates is vague, and the US, where 2017 has been pencilled in for kicking off the new regime.

Indexes & Products

Investors Seeing Korean Bottom Return to Leveraged ETFs
Sharon Cho – Bloomberg
Investors are returning to funds that amplify the share performance of South Korea’s biggest companies and exiting funds that reward declines after stock valuations fell to the lowest level in more than five years.

Embedded Investors turn to junk ETFs amid sell-off
Tracy Alloway and Michael Mackenzie – New York – Financial Times
Investors are increasingly turning to exchange traded funds to dip in and out of junk bonds in times of market stress, according to new research from Fitch Ratings.

Markit, hang seng indexes roll out offshore rmb bond index
Markit and Hong Kong’s index provider Hang Seng Indexes have launched a bond index series that track the performance of offshore renminbi-denominated sovereign and corporate debt, in response to increased demand from regional and international investors for the ability to invest in offshore debt.

VXEWZ Index at All-time High of 72.83 As Brazilian Election Nears
Matt Moran –
Today’s closing price was an all-time daily closing high of 72.83 for the CBOE Brazil ETF Volatility Index (VXEWZ), which reflects the implied volatility of the EWZ ETF.


Infinigon bows api access to twitter analytics
New York-based Infinigon Group, a provider of social media analytics that monitors Twitter for price-impacting information and provides the resulting data to trading firms, has released an API for firms to programmatically access its analytics.

Charles river partners with interactive data for corporate actions
Charles River’s IBOR offering has been improved with the addition of Interactive Data’s corporate actions data Charles River, a front- and middle-office investment management solution provider, is now offering Interactive Data’s Corporate Actions Service to its buy-side clients, the company has announced.

OneVue Taps Into Calastone Network
OneVue is streamlining the delivery of its unit registry service in a move designed to boost efficiency, reduce risks and costs.

B-Next Upgrades Global Control Room
James Rundle – WatersTechnology
Compliance and surveillance specialist b-next has upgraded its CMC: Global Control Room suite, allowing compliance officers a global view of activity and information flows within an organization.

Algomi Wins “Most Innovative Trading Product/Service” At Financial News Awards In Trading And Technology

Azul Systems Showcases Award-Winning Java Solutions At Conferences throughout November 2014
Catch Up With Azul In San Francisco, Chicago, New York, Munich And London

Thai Bourse To Affirm Attractiveness On U.S. And Asia Roadshows In Oct-Nov


Canadian sues SEC to stop Herbalife insider trading case
Jonathan Stempel – Reuters
A Toronto man accused by the U.S. Securities and Exchange Commission of insider trading in Herbalife Ltd on Monday sued the federal regulator to stop it from pursuing its case.

FOS reports rise in annuities and income drawdown complaints
Carmen Reichman – Investment Week
Complaints to the Financial Ombudsman Service (FOS) about annuities and income drawdown products have accelerated since the March Budget, new figures have shown.

[AMF Canada] Raphaël Huppé found guilty

[AMF Canada] Illegal practice as insurance of persons representative – Robert Lemieux pleads guilty

Environmental & Energy

EEX Acquires Majority Stake In Powernext
PEGAS Markets To Be Operated By Powernext – Management Board Of EEX To Be Extended By Three New Members


Victors of TRADE Asia country execution awards
The Trade
This year we have expanded the TRADE Asia’s polls and annual awards to include local country-specific and regional brokerages providing trading and execution to Asia’s buy-side.

TOCOM To Adjust Crude Oil Futures Contract Specifications In January 2015

TOCOM Foreign Customer Trades Comprised 44% Of Total Volume In September – All-Time High

SGX 1Q Net Profit At $78 Million

Osaka Exchange: Latest Update Of Deliverable Bonds And Conversion Factors Of JGB Futures

KRX To Host “2014 World Federation Of Exchanges General Assembly And Annual Meeting”

KRX To Host “2014 World Federation Of Exchanges General Assembly And Annual Meeting”

Thai Bourse Announces 75 Firms, 6 Ceos Nominated For SET Awards 2014

Frontier Markets

OMGI to launch Pan African fund for UK investors
Julia Rampen – Investment Week
Old Mutual Global Investors is to launch a mirror version of its Pan African fund for UK investors.

Dubai Mercantile Exchange And Shanghai International Energy Exchange Corporation To Collaborate On Energy Products

Borsa Istanbul: IFTC Newsletter – October 2014

Bursa Malaysia Registers Profit After Tax And Minority Interest (PATAMI) Of Rm145.1 Million For 9 Months Results Ended 30 September 2014 – Strong Trading Activities Contribute To Higher Revenue Growth

John Lothian Newsletter

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Past JLN Newsletters

How Ken Griffin rebuilt Citadel’s ramparts

How Ken Griffin rebuilt Citadel’s ramparts

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