John Lothian Newsletter: LME to Run Replacement for Platinum to Palladium Fixings; Dark Pools Said to Rebuff Orders Amid U.S. Volume Surge; Data processor selection sparks governance row at U.S. exchanges

Oct 16, 2014

First Read

Share Your Secret Sauce! Alan Synder Says Emerging Managers Should Provide More Details
JohnLothianNews.com
Fund managers are faced with a myriad of challenges from trading and risk management to compliance and operating a business. But the challenge of marketing and raising money can be most daunting of all.

Jim Kharouf, editor-in-chief of John Lothian News, spoke with Alan Snyder, managing partner of Shinnecock Group, who says there are several keys to attracting and keeping institutional investors, and one of them is “sharing your secret sauce.”

Snyder said that providing deeper information about how a fund trades is part of the real key in the sales process – engendering trust.

Watch the video »

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CFTC Announces Departure of Clearing and Risk Division Director Ananda Radhakrishnan
The Commodity Futures Trading Commission (CFTC) today announced that Division of Clearing and Risk (DCR) Director Ananda Radhakrishnan will depart the agency at the middle of November.
jlne.ws/1sWMxcW

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PhillipCapital Trading Asia Symposium 2014
Tuesday, November 4, 2014, 11:00 a.m. – 2:00 p.m.
Hilton Chicago, Boulevard Ballroom, 720 South Michigan Avenue, Chicago

PhillipCapital cordially invites you to our second Trading Asia Symposium with our Asian exchange partners including DGCX, HKEX, SGX, TFEX and TOCOM. Led by John Lothian, the panel discussion includes:

* How to trade the Asian markets and embrace the opportunities while avoiding the pitfalls
* 2014 Highlights from the various Asian exchanges
* New exchange initiatives for the remainder of the year and 2015
* Technology updates by the Asian exchanges

DON’T MISS OUT!
Last year’s event was standing room only. Space is limited, please RSVP to laura@phillipcapital.com by November 2, 2014

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CBOE Holdings’ Exchanges set several Trading Records on October 15
CBOE Holdings, Inc. today announced that trading volume in S&P 500 Index (SPX) options and CBOE Volatility Index (VIX) futures set new single-day records, while C2 Options Exchange (C2) experienced the busiest trading day in its history on Wednesday, October 15.
jlne.ws/1sWMGx9

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Oceans of Data: Ari Rubenstein Talks About the Next Data Challenge and Solution
JohnLothianNews.com
Regulations are pushing firms to collect, store and organize data in new and complex ways. Ari Rubenstein, co-founder and CEO of Global Trading Systems, said this is creating a glut of data for firms and an opportunity as well. Managing big data in innovative ways, he says, will be the next competitive edge for firms.

Rubenstein’s firm has developed a solution which it believes can efficiently help firms manage and store trading data for regulatory and compliance needs. For him, that will help give firms an advantage over the competition.

Watch the video »

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ICE Futures Europe Announces Record Daily Volume In Low Sulphur Gasoil Related Contracts
Intercontinental Exchange, the leading global network of exchanges and clearing houses, announced today that ICE Futures Europe reached a daily volume record in trade for ICE Low Sulphur Gasoil futures. A new total daily volume record for ICE Low Sulphur Gasoil futures across ‘G’ and ‘ULS’ code contracts was set on Tuesday, October 14, 2014 with 67,110 contracts traded. The previous total daily volume record of 38,346 contracts was established Monday, October 13, 2014.
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***JM: 38K on Monday, 67K on Tuesday. As a technical trader, the trend clearly indicates to me that billions of contracts will be changing hands in very short order.

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Craig Donohue, executive chairman, OCC – Clearing Today and Tomorrow
JohnLothianNews.com

“When we first came into the industry, clearing, I guarantee you, was not sexy at all.”

Craig Donohue, executive chairman of OCC, begins by giving a quick overview of OCC and highlighting its achievements with equity derivatives contracts and margin collateral. He then goes on to discuss challenges in industry, including the 2008 financial crisis and the G20 response to shifting more risk to central counterparties. Donohue also explains what a systemically important financial market utility is, and what challenges OCC and other SIFMUs face in the future.

Watch the video »

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Quick View: CME faces up to painful reality
Philip Stafford – Financial Times
One of the biggest criticisms in the industry for years has been the number of employees CME Group has employed. Now it is slimming down. Under a euphemistically-titled “refocus on future growth”, the CME is cutting 5 per cent of its global workforce, around 150 jobs.
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***JM: Good overview and analysis. Maybe they can add some of the laid-off people to the board of directors. Whoa, whoa, no punching, no punching!

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CME Group’s Risk Ranch Wins Best Children’s App Award
Risk Ranch, the educational children’s app developed by CME Group has been awarded the Best Children’s App Award by BestMobileAppAwards.com. Since its release earlier this summer, the app has been downloaded by kids and families in 85 countries around the world. Risk Ranch is an exciting agriculture-based learning application for children of all ages.
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***DA: When we played the game at CME Group’s office earlier this year, John got a blue ribbon feeder in his first attempt. I did not fare as well, but I got the last laugh as I named my calf “Lothie.”

***JM: I’m still waiting for the player-vs-player update, so we can invade each other’s farms…

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Tech Tap Live: Trading Eris Through TT
Tuesday October 28, 2014 from 4:00 to 6:30pm CT
TT Tech Tap, 222 South Riverside Plaza, 11th floor, Chicago
Trading Technologies and Eris Exchange cordially invite you to join us for a panel discussion, demo, drinks and hors d’oeuvres.

Event Features:
* Eris Swap Futures overview and price and yield execution demos though X_TRADER
* Remarks by Rick Lane, TT CEO and Neal Brady, Eris CEO

Q&A session with panelists expert panelists:
John Coleman, Director of the Fixed Income Group & Senior Vice President, RJ O’Brien
Don Wilson, Chief Executive Officer, DRW Trading
Bill Campbell, Product Manager, Trading Technologies
Kevin Wolf, Chief Business and Product Development Officer, Eris Exchange

Click here to register

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MarketsWiki

MarketsWiki Page of the Day
Michael S. Piwowar
jlne.ws/18AhWUU

MarketsWiki Recent Updates

People

Kendal Vroman; Benjamin Fussien; Maurice R. Greenberg; Edwin Marcial

Companies, Organizations and Groups

CME Group, Inc.; London Stock Exchange Group plc; ICE Futures Canada; American International Group Inc.; Bursa Malaysia Bhd.

Statistics

54,275,506 pages viewed, 8,055 articles, 186,511 edits
MarketsWiki Statistics

Lead Stories

LME to Run Replacement for Platinum to Palladium Fixings
Nicholas Larkin – Bloomberg
London Metal Exchange will run the replacement for platinum and palladium fixings in London, after the daily silver benchmark was overhauled this year and as the price-setting ritual for gold is being revamped.
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Dark Pools Said to Rebuff Orders Amid U.S. Volume Surge
Sam Mamudi – Bloomberg
Three of the largest dark pools told customers to trade elsewhere during at least part of yesterday’s session as concern about Ebola and global economic growth spurred the busiest day for U.S. stocks in three years.
jlne.ws/1u9czVv

Data processor selection sparks governance row at U.S. exchanges
Herbert Lash – Reuters
Outcries over a conflict of interest involving data processors central to securities trading could lead the New York Stock Exchange and Nasdaq to loosen their decades-long grip over a lucrative backwater of the U.S. stock market.
jlne.ws/1u9elpS

Traders Fight to Keep Clients’ Fears in Check
Corrie Driebusch And Cynthia Lin – WSJ
As the stock market and bond yields fell steeply in early-Wednesday trading, the atmosphere quickly became charged at the offices of Brean Capital LLC in New York.
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Hedge funds face their worst year since 2011
Stephen Foley in New York – Financial Times
Hedge funds are on course for their worst year since 2011, as several of their biggest and most popular trades turned sour and some managers were forced to cut their losses.
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SEC Official Says Too Many Regulators Are ‘Piling On’
Suzi Ring – Bloomberg
When too many U.S. authorities conduct overlapping investigations it can disrupt regulatory probes and lead to unnecessary lawsuits, a Securities and Exchange Commission official said.
jlne.ws/1sWSUNv

Singapore’s United Overseas Bank targets Dubai in futures push
Jeremy Grant – Financial Times
United Overseas Bank, Singapore’s third-largest bank by assets, has become the first bank in the Asian city-state to expand its futures business to the Middle East, with plans to become a clearing member of the Dubai Mercantile Exchange.
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Hedge funds have exacerbated equity sell-off -Fidelity’s Rossi
Reuters
The worldwide equity sell-off of the last two weeks has been exacerbated by the “poor positioning” of many investors, including hedge funds, said Fidelity Worldwide Investments’ equities global chief investment officer Dominic Rossi.
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***JM: Also in today’s news: Air contains oxygen.

Regulatory

Radhakrishnan to leave the CFTC
Lukas Becker, Peter Madigan – Risk.net
Head of the CFTC’s Division of Clearing and Risk, Ananda Radhakrishnan, is reportedly leaving the US agency for a role in private practice
jlne.ws/1vy9dRI

Banks blame bond volatility on tighter regulation
Tom Braithwaite and Vivianne Rodrigues in New York – Financial Times
Wall Street’s biggest banks have placed much of the blame for violent swings in US government bond prices over the past 24 hours on new bank safety regulations that they say have reduced market liquidity.
jlne.ws/1u93AUo

After Scandals & Ethical Lapses, Financial Industry Needs a Code of Conduct
Ivy Schmerken – Wall Street & Technology
A financial markets trade body is bringing a model code of conduct to participants who work in interest rates, FX, commodities, and derivatives. After a series of fines, can this help banks repair their reputations?
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CFTC Financial Data For Futures Commission Merchants Update
Futures commission merchants (FCMs) and retail foreign exchange dealers (RFEDs) must file monthly financial reports with the CFTC’s Division of Swap Dealer and Intermediary Oversight (DSIO) within 17 business days after the end of the month.
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CFTC Staff Announces Self-Executing Registration No-Action Relief for Delegating CPOs when Certain Requirements are Met
jlne.ws/1sWMtKn

Exchanges & Trading Facilities

ISE and KCG Jointly Enhance Execution Capability
ISE today announced that KCG, an independent execution-only trading firm, has enhanced its execution capabilities for the stock component of multi-legged options strategy orders. These enhanced execution capabilities access liquidity directly from the equities exchanges, whereas previously, orders were sent only to alternative execution destinations, such as dark pools.
jlne.ws/1qwPvPi

Chi-X Australia hits personal best for daily turnover
Simon Osborne – The Trade
Chi-X Australia has said that it undertook A$ 675 million of trading value on Friday 10 October, a new high point for the Australian exchange.
jlne.ws/1u98Szo

Bats Chi-X Europe and Morgan Stanley triumph at FN awards
Tim Cave – Financial News
Bats Chi-X Europe and Morgan Stanley stole the show at last night’s 12th annual Financial News Awards for Excellence in Trading and Technology, each racking up a hat-trick of prestigious prizes.
jlne.ws/1u8SIpH

ASX chief downplays local HFT
Michael Roddan – Business Spectator
Chief executive of the Australian Securities Exchange, Elmer Funke Kupper, says American-style high frequency trading constitutes around 20 per cent of the local market, although instances of predatory high frequency trading are rare.
jlne.ws/1u9fa1K

ITG algo to seek good liquidity in bad pools
John Bakie – The Trade
Agency broker ITG is adopting a new approach to dark pool trading with a new algorithm that will seek to find the best liquidity options across all pools rather than excluding ones that are widely considered “toxic”.
jlne.ws/1sWNYIp

MIAX Options: Resolution Of Potential MBBO Display Issue For Resting Orders Following An Underlying Halt
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Hedge Funds & Managed Futures

Man Group’s assets jump to $72bn on acquisitions
Financial Times
Man Group’s assets under management jumped by 25 per cent to $72.3bn in the third quarter, as two hefty acquisitions, improving performance and net inflows outweighed the impact of the strengthening US dollar on the world’s biggest listed hedge fund manager.
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Man Group chief warns on ‘unpredictable’ markets
Claer Barrett and Robin Wigglesworth – Financial Times
Man Group’s chief executive has warned that “unpredictable” markets could deter some risk-averse investors from investing in the hedge fund manager’s products, even as it posted a consensus-beating performance for its third quarter.
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BlackRock Positions Itself Against Pimco
Kirsten Grind – WSJ
Its name was never mentioned, but Pacific Investment Management Co. was very much the topic of BlackRock Inc.’s quarterly earnings call with analysts and investors Wednesday. Over the course of nearly two hours, Blackrock Chief Executive Laurence Fink repeatedly lauded his firm’s team approach to investing, its wide range of services and its stability.
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BlackRock’s Fink says sovereign wealth funds are staying in equities -CNBC
Reuters
U.S. asset manager BlackRock Inc has not seen more than one sovereign wealth fund sell out of equities in last six weeks despite the global market volatility, Chief Executive Officer Larry Fink told CNBC Wednesday morning.
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Billionaire Hedge Fund Manager John Paulson’s Inversion Bet Falls Sharply
Forbes
Billionaire John Paulson, who initially made his fortune betting against subprime mortgage bonds, has been one of the most aggressive hedge fund managers to bet on stocks that would benefit from the tax-driven inversion deal wave that has swept corporate America this year. Now, one of Paulson’s big inversion bets appears to be in trouble as the U.S. government moves to discourage such tax inversion deals in which U.S. companies attempt to lower their tax rates by redomiciling offshore.
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Banks & Brokers

Advisers test robo-investing, with help from Fidelity
Jed Horowitz and Elizabeth Dilts – Reuters
Investment advisers concerned about competition from cut-rate digital investment firms known as “robo-advisers” received an olive branch on Wednesday from Betterment LLC, one of the largest of the new competitors.
jlne.ws/1u8XUcV

Commerzbank settlement with U.S. postponed amid probe
Reuters
Commerzbank AG’s settlement with U.S. authorities over alleged sanctions violations has been postponed, possibly until the end of the year, as prosecutors seek to coordinate the resolution of a separate probe stemming from transactions at the German bank connected to the massive Olympus Corp (7733.T) accounting fraud, according to people familiar with the matter.
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Moynihan reshapes Bank of America for an era without big legal costs
Peter Rudegeair – Reuters
While Bank of America Corp Chairman and Chief Executive Brian Moynihan has been working to end legal problems, he has also been quietly retooling the bank for a post-crisis world.
jlne.ws/1sWMiyr

ITG algo to seek good liquidity in bad pools
John Bakie – The Trade
Agency broker ITG is adopting a new approach to dark pool trading with a new algorithm that will seek to find the best liquidity options across all pools rather than excluding ones that are widely considered “toxic”.
jlne.ws/1sWNYIp

Cyberattack at JPMorgan Chase Also Hit Website of Bank’s Corporate Race
Matthew Goldstein, Nicole Perlroth and Jessica Silver-Greenberg – Dealbook – NY Times
The JPMorgan Chase Corporate Challenge, a series of charitable races held each year in big cities across the world, is one of those feel-good events that bring together professionals from scores of big companies.
jlne.ws/1sWMrCe

Clearing & Settlement

Fed official slams ‘fantasy’ of CCP default management
Cecile Sourbes – Risk.net
Banks have to send staff to help hedge and then auction a defaulting member’s portfolio. But Chicago Fed official says they lack the resources, and banks share those concerns
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DTCC Proposes Central Clearing For The U.S. $1.6 Trillion Institutional Tri-Party Repo Market
An Established, Proven Central Clearing Function Would Play A Critical Role In Ensuring Stability And Transparency For Participants In The U.S. Tri-Party Repo Market
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Indexes & Products

London Stock Exchange Welcomes 150th Fixed Income ETF
London Stock Exchange today welcomes the 150th fixed income ETF to its markets, the SPDR Thomson Reuters Global Convertible Bond UCITS ETF. Launched by State Street Global Advisors, the product gives investors an opportunity to gain exposure to global convertible bonds.
jlne.ws/1sWRMJy

VIX Index Rises 73% As New Volume Records Are Set
Matt Moran – VIX Views
The S&P 500 (SPX) Index declined by 5.4% and the VXST Index rose 113.3%. over the past week, and many investors are looking for havens to help protect their portfolios from left tail risk.
jlne.ws/1sWU0Zo

Vanguard Lists 3 New ETFs On Euronext – Euronext Further Expands Its ETF Offering
jlne.ws/1sWPWIT

Technology

Trading Game Startup Nous Raises Funds to Boost Participation, Data Value
Max Bowie – WatersTechnology
Nous, a provider of a mobile trading game and a feed of investor and active trader market sentiment, has raised $600,000 in new funding to expand the user base of its Spark Profit trading game from 79,000 users in 190 countries to 250,000 users over the next six months to increase the value of its Spark Feed, an aggregated feed of game participants’ price predictions that the vendor sells to banks, hedge funds, and other financial institutions.
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Enforcement

SEC Announces Enforcement Action Against Former Wells Fargo Advisors Compliance Officer for Altering Document
The Securities and Exchange Commission today announced an enforcement action against a former Wells Fargo Advisors compliance officer who allegedly altered a document before it was provided to the SEC during an investigation.
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New York Attorney General Eric T. Schneiderman Announces Multi-state Settlement With TD Bank Over Data Breach – 1.4 Million Files From 260,000 Customers Were Compromised, Including Data For 31,407 New York Customers
jlne.ws/1sWQ234

Environmental & Energy

Take on the “fatcats” or scrap EU carbon market – think-tank
Megan Darby, RTCC (Responding to Climate Change)
ArcelorMittal is hoarding a surplus of climate pollution permits worth almost twice its annual carbon emissions, a think-tank has revealed.
jlne.ws/1qx1a0z

***LB: Also in this story “Heavy industrial companies benefitting from a glut of cheap permits under the EU’s emissions trading system (ETS).”

Lockheed announces breakthrough on nuclear fusion energy
Reuters
Lockheed Martin Corp said on Wednesday it had made a technological breakthrough in developing a power source based on nuclear fusion, and the first reactors, small enough to fit on the back of a truck, could be ready for use in a decade.
jlne.ws/11oZZe3

Competition drives climate action, not science -PwC
Nina Chestney and Susanna Twidale, Reuters
Competition and regulation push companies to take action to protect themselves from the effects of climate change, not climate science, Jon Williams, partner at global consultancy firm PwC told the Reuters Global Climate Change Summit.
jlne.ws/ZZToq9

Asia-Pacific

Hedge funds pile into Japan dispersion trade
Viren Vaghela – Risk.net
Increasing retail appetite for single stock uridashi structured products in Japan has driven a spike in dispersion trading by hedge funds as dealers look to the sector as a way to hedge their long vega positions.
jlne.ws/1vy9UdG

China Misses $4 Trillion Club
Alex Frangos – MoneyBeat – WSJ
Diversification has its benefits. For China, it means not being the pioneer member of the $4 trillion reserve club, a distinction that would only focus the ire of China skeptics in Washington.
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Thailand Futures Exchange’s Derivatives Volume Up 88 Pct In The First Nine Months
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Frontier Markets

Deutsche Börse Partners With African Stock Exchange – First Pan-African Exchange To Open In 2015
The African Stock Exchange (AFSX) plans to use the technology and support services of Deutsche Börse’s Xetra trading venue.
jlne.ws/1sWRFh5

Macquarie Launches Structured Warrants In Malaysia
Press Release
Macquarie Capital Securities (Malaysia) Sdn. Bhd. (“Macquarie”), today announced the launch of its first Structured Warrants on Bursa Malaysia. Macquarie’s first issuance will be over AirAsia X, Berjaya Corp, DRB-Hicom, Hong Leong Industries, Inari Amertron, KNM Group, and MY E.G.
jlne.ws/1sWRIJU

Strong dollar warning for emerging markets
Luke Smolinski – Risk.net
As the dollar strengthens, what investing opportunities are to be had in emerging markets?
jlne.ws/1vy9a8w

Basel III Sales Build With Oldest Malaysia Bank: Islamic Finance
Elffie Chew – Bloomberg
Malaysia’s oldest Shariah-compliant lender is tapping the sukuk market for the first time, joining a rush among the nation’s Islamic banks to sell Basel III bonds before interest rates rise further.
jlne.ws/1u9bVaN

Borsa Istanbul e-bulletin And Markets Report
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