John Lothian Newsletter: London Stock Exchange CEO Seeks U.S. Expansion; Singapore’s UOB gains Eurex Clearing membership; U.S. regional banks tip-toe into commodities as Wall Street faces shake-out

May 16, 2014

First Read

148 years backward and forward
Nils-Robert Persson – Cinnober
On this day 148 years ago, the U.S. Congress authorized the nickel; a five-cent coin made with non-precious nickel and copper. It is still used today, even though perhaps primarily to the benefit of charity collection boxes at airports.

In some markets, not least here in Stockholm, you’ll get weird looks if you try to pay in cash; plastic cards are being used far more often than paper and metal money, and new mobile payment solutions are rapidly being adopted. And the new big thing is of course Bitcoin and other virtual currencies that are fumbling their way along.

Are the crypto currencies a logical evolution, or the ultimate protest against the existing financial system? Like it or not, Bitcoin is coming to Wall Street; this week we’ve read about hedge funds starting up, investing in Bitcoin. No matter what the outcome, the means of payment we will use in another 148 years seems hard to predict today.

My best regards to John, with wishes for a great recovery after your “upgrade project”, and many thanks to the extraordinary JLN team for this exciting week – if you ever invite me to guest-edit again I sincerely hope it won’t be due to more surgery.

All the best and have a great weekend!

Nils-Robert Persson

***JM: Great to have you here! …and nice to work with somebody in my own time zone for a change 🙂 Next week… Alun Green of SunGard.

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TT at 20: So a CEO Walks Into a Bar
Jim Kharouf – JLN
Rick Lane, the new CEO of Trading Technologies, takes a seat at the bar to talk about a notable milestone – TT’s 20th Anniversary today.

The interesting thing about Lane and the bar is that they represent a major shift for the company and perhaps the industry.

The firm was founded in 1994 in Frankfurt by Gary Kemp and later run by the enigmatic industry pioneer and legendary trader Harris Brumfield from 2003 until he handed the reins to Lane in February. It is Lane’s turn to overhaul the company and its technology, and perhaps change the way trading software and networks are developed in this industry.

(For the rest of the article, visit the JLN blog at jlne.ws/RYNKQB)

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LSE Executive Who Rebuilt Trading Platform Is Resigning
Nandini Sukumar – Bloomberg
Tony Weeresinghe, the London Stock Exchange Group Plc (LSE) executive who helped rebuild the market’s core trading technology, plans to resign at the end of June.
jlne.ws/1lHRkZN

***NRP: As chairman of the competitor – should we be worried? All the best, Tony!

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Top SEC official raps U.S. risk council for seeking to grab power
Reuters
A top U.S. Securities and Exchange Commission official on Thursday railed against the U.S. regulatory risk council for trying to grab the SEC’s power in a “dangerous” quest to impose tougher rules on large asset managers.
jlne.ws/1qI4LOw

***NRP: Are we seeing more intense competition between regulators than between exchanges nowadays?

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Despite Concerns About High Frequency Trading, European Financial Industry Participants Have Not Changed How They Interact With Markets
ConvergEx Group, a leading provider of global brokerage and trading-related services, has released the results of its European Equity Market Structure Survey, exploring the concerns and actions of financial industry participants regarding high frequency trading (HFT), regulatory oversight and market stability. The survey found that less than a third (28%) of respondents believe that European equity markets are currently fair for all participants, and almost twice as many believe that HFT is harmful (28%) as believe it is helpful (14%). Despite these concerns, more than two-thirds (67%) report that they have not made any changes to the way they interact with markets.
jlne.ws/1nWcMen

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Increased financial regulation helps Deutsche Boerse -CEO
Reuters
International efforts to more strictly regulate financial markets in the wake of the 2007-2009 credit crisis will stimulate Deutsche Boerse‘s business, the German exchange operator’s chief executive said.
jlne.ws/1nWcOTg

***NRP: That’s true for CCP clearing but just watch out for the impact of European CSD regulation on the comfort of the incumbents!

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Schwab CEO: Disclose payment for selling client orders
Reuters
The chief executive officer of Charles Schwab Corp on Thursday suggested that regulators require brokerage firms to disclose how much they are paid for selling their clients’ orders.
jlne.ws/1nWcMuD

***NRP: Why wait for regulators to twist their arm? As a customer I would like to know who is taking care of my orders.

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Canadian regulators look at scrapping controversial fee model linked to high-frequency trading
Financial Post
Canadian regulators are looking into the impact of scrapping a controversial pricing model used by stock exchanges that is often linked to high-frequency trading
jlne.ws/1nWcMuF

***NRP: What happened to good old market economics – let the customers decide (and give them all the info)?

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LSE extends control of LCH.Clearnet
Philip Stafford – FT.com
The London Stock Exchange Group is extending its control of LCH.Clearnet by cutting more costs and renegotiating a key profit-sharing agreement with other stakeholders in the clearing house.
jlne.ws/1iSkLnp

***NRP: Xavier swings the cost cleaver again. More than fine tuning is certainly required. From my perspective, of course, extremely interesting that he did not confirm whether they would build or buy replacement technology for LCH.Clearnet…

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Lunch with the FT: Tim Geithner
Martin Wolf – FT.com
Over Indian food in New York, the former US Treasury secretary talks about future risks, crisis management, mistakes and misperceptions
jlne.ws/1nWcMuG

***NRP: I hope the conversation was as hot as the Indian food – vindaloo?

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Euronext announces second Pan-European Investor conference at the New York Stock Exchange
Euronext, a wholly owned subsidiary of IntercontinentalExchange Group, today announced its second pan-European Investor conference in New York aimed at raising the profile of its European listed companies among US investors. The event, which will be attended by over 50 large issuers from across all the Euronext countries and over 200 US investors, will take place over three days from 19th to 21st May 2014.
jlne.ws/1nWcMuI

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MarketsWiki

MarketsWiki Page of the Day
Tradeweb Markets LLC
jlne.ws/1lkAuhQ

MarketsWiki Recent Updates

People

Lance Zinman; Henry Bregstein; Alison Fay; Douglas Ashburn; Arthur W. Hahn

Companies, Organizations and Groups

LCH.Clearnet Group Ltd.; NASDAQ OMX Group, Inc.; U.S. Securities and Exchange Commission

Miscellaneous

Maker-taker; High-frequency trading; EDGAR; Commodity Trading Advisor; Asset manager; Securities Exchange Act of 1934

Statistics

48,950,548 pages viewed, 7,953 articles, 182,960 edits
MarketsWiki Statistics

Lead Stories

London Stock Exchange CEO Seeks U.S. Expansion
WSJ.com
The chief executive of London Stock Exchange Group PLC said Thursday that his company needs to expand in the U.S. and that the ownership of indexes was an important revenue driver for the exchange industry.
jlne.ws/1nWcOTr

Singapore’s UOB gains Eurex Clearing membership
Jeremy Grant in Singapore – FT.com
Singapore’s United Overseas Bank has become the first bank in Asia to obtain membership with Eurex Clearing, the Frankfurt-based clearing house operated by Deutsche Börse.
jlne.ws/1nWcMuK

***NRP: Another small indication of DBAG’s activities in Asia – they’re good at making big changes in small steps.

U.S. regional banks tip-toe into commodities as Wall Street faces shake-out
Reuters
Traditionally, Wall Street’s big banks were the go-to providers of such services, but since the financial crisis and the introduction of tougher regulations, they have been pulling back. At the same time, regional banks, more used to serving consumers and small and medium-sized businesses in the communities they serve, have been growing their energy and commodity lending and hedging businesses.
jlne.ws/1nWcOTx

U.S. SEC chief accountant to depart agency
Reuters
Paul Beswick, the chief accountant for the U.S. Securities and Exchange Commission, plans to leave the agency and return to the private sector, the SEC announced Thursday.
jlne.ws/1nWcP9K

Coal to power CME’s European engine
Anish Puaar – Financial News
CME Group is expecting to generate almost £17 million in trading revenues from its new London-based exchange next year, with coal products making up the bulk of its projections.
jlne.ws/1nWcMuL

IGDL, the first global SEF, regulated by the CFTC & FCA
Reuters
ICAP, a leading markets operator and provider of post trade risk mitigation and information services, announces today that its UK subsidiary, ICAP Global Derivatives Limited, has officially launched having received temporary Swap Execution Facility approval from the US Commodity Futures Trading Commission. IGDL is the first global SEF and Multilateral Trading Facility, regulated by both the CFTC and the UK Financial Conduct Authority.
jlne.ws/1ougm1v

Credit Suisse nears guilty plea in $2.5 billion settlement
Devlin Barrett – Financial News
Credit Suisse is expected to pay almost $2.5 billion to settle a probe into how the firm allegedly helped Americans evade taxes, including roughly $700 million to US regulators and approximately $1.7 billion to the Justice Department, according to people familiar with the discussions.
jlne.ws/1nWcMuN

Ex-Deutsche Bank CEO Says Technology Changed Bank Culture
Nicholas Comfort – Bloomberg
Hilmar Kopper, who took Deutsche Bank AG (DBK) into the league of global securities firms more than 20 years ago by buying investment bank Morgan Grenfell and hiring Merrill Lynch & Co. bankers, says electronic communication is driving a cultural shift in the industry lambasted for greed.
jlne.ws/1nWcP9M

Deutsche Bank warns traders in video over boasting, vulgarity
Alice Ross in Frankfurt – FT.com
Deutsche Bank traders: you have been warned. Boasting, vulgar comments and indiscretion are “not OK”. Colin Fan, the co-head of the German lender’s investment bank, has taken the unusual step of sending out an internal video with a severe warning to traders about their online behaviour.
jlne.ws/1nWcOTk

***NRP: Good luck!

Global Financial Markets Association Elects New Chair And CEO
The Global Financial Markets Association (GFMA), which represents the common interests of the world’s leading financial and capital market participants, announced a leadership transition as the terms of the current Chair and CEO expire. The appointments were approved at GFMA’s Board of Directors meeting in London.
jlne.ws/1nWcOTn

Regulatory

Chief Accountant Paul Beswick to Leave SEC
Press Release
jlne.ws/1nWcMuQ

Finra rejects ‘more than half’ of structured product adverts
Yakob Peterseil – Risk.net
A Financial Industry Regulatory Authority official has publicly commented for the first time on the structured product marketing materials used by brokers, singling out mass emails to retail investors as a particular concern
jlne.ws/1nWcMuR

Financial Regulation: European Commission Presents A First Comprehensive Review Of The EU’s Reform Agenda
jlne.ws/1nWcP9R

CSA Publishes Proposed Amendments to Order Protection Rule for Comment
jlne.ws/1nWcML7

SIFMA AMG Comments On Investor Cost Of SIFI Designation For Asset Managers
jlne.ws/1nWcP9X

Call For Papers For The Third EBA Policy Research Workshop
jlne.ws/1nWcMLa

Exchanges & Trading Facilities

New York Stock Exchange selling Belfast technology division
John Campbell – BBC News
The company that owns the New York Stock Exchange (NYSE) says it hopes to sell the bulk of its technology division, which employs about 400 people in Belfast, within months.
jlne.ws/1nWcP9Z

***NRP: ICE continues to concentrate on their core business – you could argue that other exchanges should do the same.

Equiduct eyes index play
Anish Puaar – Financial News
Equiduct, a pan-European retail-focused trading platform, is eyeing an expansion into indices in a further sign of efforts by exchange operators to diversify beyond trading and into data services.
jlne.ws/1nWcPa1

***NRP: Its amazing how many personality (and name) changes Equiduct has gone through in its life.

Deutsche Boerse: Voting Results AGM 2014
jlne.ws/1nWcMLk

April 2014 FIF Market Share And Market Dynamics Reports – Executive Summary
jlne.ws/1nWcPql

SIX Exchange: Delisting Absolute Invest AG, Zug
jlne.ws/1nWcPqn

NZX Results Of Resolutions At Annual Meeting
jlne.ws/1nWcPqp

NZX Chairman & CEO Addresses To Annual Meeting
jlne.ws/1nWcPqr

Montréal Exchange – Market Holiday – Victoria Day
jlne.ws/1nWcN1D

ShaMaran Lists Its First Bond Issue On Oslo Børs
jlne.ws/1nWcPqv

EnterNext congratulates Réalités on listing on Alternext in Paris
jlne.ws/1nWcN1J

Hedge Funds & Managed Futures

The Apotheosis of David Tepper
The Reformed Broker
In every market moment, there is one man – and it is always a man – who is deified by his peers and the media; an anointed one in every sense of the term. His every word is hung on, his pronouncements are the day’s discussion, his off the cuff remarks become the business press’s front page headlines the following day. David Tepper now occupies this place in the firmament, wholly and completely.
jlne.ws/1nWcPqy

Paulson & Co. Opens Positions in Verizon, CBS; Stands Pat on Gold
Paul Rekoff – MoneyBeat – WSJ
John Paulson‘s Paulson & Co. hedge fund has taken new positions in Verizon Communications and CBS Corp. but stood pat on its extensive gold holdings in the first quarter, according to a securities filing Thursday.
jlne.ws/1nWcN1N

New York’s pension ‘smoothing’ may short-change retirement fund
Reuters
New Yorkers who rely on the state pension fund for their retirement may be short-changed about $735 million over the next 10 years as a result of Governor Andrew Cuomo’s policy of permitting local authorities to defer fund payments so they can fill budget gaps and pay for services such as schools, street lights and police.
jlne.ws/1nWcPGR

Marshall Wace to IPO Peer-to-Peer Lending Fund in London
WSJ.com
Marshall Wace LLP, one of Europe’s largest hedge funds, is to float an investment trust on the London Stock Exchange that will invest in peer-to peer loans. P2P Global Investments PLC, which will have Marshall Wace as its investment manager, said Friday it plans to raise £200 million ($335.8 million) in an initial public offering, which could be increased to £230 million.
jlne.ws/1nWcN1S

Pain of private equity’s TXU disaster fades amid renewed interest
Henny Sender and Ed Crooks – FT.com
In 2007 David Foley, head of energy investing for Blackstone, passed on joining in the biggest leveraged buyout of all time: the $48bn bid for TXU, the Texas utility. Just over a fortnight ago his decision was vindicated.
jlne.ws/1k7iyca

Europe money market funds shed assets
Christopher Thompson – FT.com
European money market funds have shed a fifth of their assets since the height of the eurozone debt crisis, as signs of economic recovery have persuaded yield-hungry investors to put their money into riskier assets.
jlne.ws/1nWcN1U

CalPERS Names Matthew G. Jacobs As New General Counsel
The California Public Employees’ Retirement System (CalPERS) has named Matthew G. Jacobs as the Pension Fund’s General Counsel.
jlne.ws/1nWcNi9

Banks & Brokers

How Many Women Are In the Banking Board Room?
Saabira Chaudhuri – MoneyBeat – WSJ
At Morgan StanleyMS -1.59%’s annual shareholder meeting in Purchase, NY, Tuesday, the firm’s board of directors fanned out over two rows of seats at the front of an auditorium.
jlne.ws/1nWcNie

FX volumes fall on Thomson Reuters, EBS in April
Reuters
Daily spot foreign exchange trading volumes on Thomson Reuters fell to the lowest since December last month while those on rival platform EBS were down by almost half.
jlne.ws/1nWcNig

ABN Amro Profit Hurt by Bad Loans
WSJ.com
Dutch bank ABN Amro Group NV said Friday that first-quarter net profit fell 25% as it set aside more cash to cover bad loans and on costs related to the rescue of a local rival. The state-owned lender posted net profit of EUR311 million ($426 million) compared with EUR415 million in the same period a year earlier.
jlne.ws/1nWcPH2

Jefferies investment banking co-head to join client board
Vivek Ahuja – Financial News
Jefferies’ joint head of European investment banking is to join the board of a Russian gold producer, one of the bank’s London-listed broking clients.
jlne.ws/1nWcNim

US banks aim to cut pay of financial advisers
Tom Braithwaite and Camilla Hall in New York – FT.com
After cutting the pay of traders, bank executives in the US are manoeuvring to reduce their payroll for a 50,000-strong army of brokers who sell stocks and bonds to retail customers.
jlne.ws/1nWcPH4

Clearing & Settlement

London Stock Exchange Looks to Derivatives as LCH Boosts
Nandini Sukumar – Bloomberg
London Stock Exchange Group Plc (LSE) will increase its focus on futures to boost growth as LCH.Clearnet Group Ltd., the world’s largest clearinghouse for interest-rate swaps, buoyed its full-year financial results.
jlne.ws/1nWcNir

***NRP: LSE has long had an ambition to build a substantial derivatives exchange business ever since it sold its options market to Liffe for one pound in 1993. Can Xavier make the dream come true this time? It would be good to see more competition in European ETD.

Indexes & Products

SG offers hedge fund strategies in new LSE-listed ETN
Richard Jory – Risk.net
SG is offering professional and sophisticated retail investors in the UK an ETN that goes long stocks in the FTSE 100 and 250, and short the two indexes. Hinde Capital is the strategy manager for a product that is collateralised in a similar way to an ETF
jlne.ws/1nWcPXi

Changes To The Composition Of The Oslo Børs Benchmark Index (OSEBX)
jlne.ws/1nWcNyE

Technology

Values and abuses of big data at banks
Alexander Campbell – Risk.net
Banks increasingly have both the ability and the motive to collect huge amounts of data on their customers – which is good for compliance, but a temptation to abuse
jlne.ws/1nWcNyJ

FCM360 Expands Footprint in Asia with Equinix TY3 in Tokyo
FCM360’s Low Latency Financial Cloud hosting service is now available to brokers and traders at Equinix TY3 in Tokyo – one of the largest foreign exchange hubs in Asia.
jlne.ws/1nWcPXl

Enforcement

SEC Charges Rafferty Capital Markets With Illegally Facilitating Trades for Unregistered Firm
The Securities and Exchange Commission today charged New York-based Rafferty Capital Markets with illegally facilitating trades for another firm that wasn’t registered as a broker-dealer as required under the federal securities laws.
jlne.ws/1nWcNyQ

SEC Charges Unregistered Securities Salesman for Selling Millions of Dollars in Oil-and-Gas Investments
The Securities and Exchange Commission today charged a Tiburon, Calif.-based securities salesman for selling millions of dollars in oil-and-gas investments without being registered with the SEC as a broker-dealer or associated with a registered broker-dealer.
jlne.ws/1nWcPXn

CFTC Charges RP Martin Holdings Limited and Its Subsidiary, Martin Brokers (UK) Limited, with Manipulation and Attempted Manipulation of Yen Libor
The U.S. Commodity Futures Trading Commission today issued an Order against RP Martin Holdings Limited, and its subsidiary, Martin Brokers Limited, an interdealer broker, filing and settling charges of manipulation, attempted manipulation, false reporting, and aiding and abetting derivatives traders’ acts of manipulation and attempted manipulation of the London Interbank Offered Rate for Yen, a leading interest rate benchmark used to price trillions of dollars of transactions.
jlne.ws/QMrFDG

CFTC Charges Florida-Based Palm Beach Capital LLC and Lawrence Scott Spain with Engaging in Illegal, Off-Exchange Precious Metals Transactions
The U.S. Commodity Futures Trading Commission today announced that it filed a civil injunctive enforcement action in the U.S. District Court for the Southern District of Florida against Defendants Palm Beach Capital LLC of Palm Beach, Florida, and its owner and manager, Lawrence Scott Spain, of Boca Raton, Florida.
jlne.ws/1mwCu9x

SAC’s Steinberg loses bid for insider trading acquittal
Reuters
A U.S. judge on Thursday rejected a request to acquit Michael Steinberg, a day before the scheduled sentencing on an insider trading conviction for the former portfolio manager at Steven A. Cohen’s SAC Capital Advisors hedge fund.
jlne.ws/1nWcPXu

New Zealand’s Financial Markets Authority: Finance Company Legal Adviser Found Guilty Of Fraud
jlne.ws/1nWcQup

[AMF Canada] Illegal distribution and illegal practice as a dealer – 24 charges against Yvan Leclair
jlne.ws/1nWcPXB

Illegal practice as a dealer and distribution without a prospectus – AMF files 60 charges against Samir Daher
jlne.ws/1nWcQuz

Administrative agreement between Charles K. Langford inc. and AMF
jlne.ws/1nWcQdW

Environmental & Energy

Moscow Hosts Summit as Gazprom Warns Ukraine on Gas Cut
Jake Rudnitsky and Elena Mazneva, Bloomberg
A two-day meeting designed to improve global energy security starts in Moscow today just as Russia threatens to halt natural gas shipments to Ukraine, risking disruption to European supplies.
jlne.ws/1iWCoH0

***LB: Also in this story “At least 18 ministers from countries including Saudi Arabia, Iraq and Turkey are attending the International Energy Forum’s conference, where Europe will also be represented. They meet days after an ultimatum to Ukraine raised questions about Russia’s reliability as a supplier.”

Russia sees no chance of Ukraine gas payment even with discounts
Reuters
Russia sees no possibility of Ukraine paying for its gas supplies even if it is granted discounts because of the country’s economic situation, Russian Energy Minister Alexander Novak said on Thursday.
jlne.ws/T5Yj5i

Ukraine says ready to pay Russia $4 bln by end of May for gas
Reuters
Ukraine is ready to pay Russia $4 bln for gas supplies by the end of May, Deputy Energy Minister Ihor Didenko said on Thursday, adding that Kiev used $268.5 per 1,000 cubic metres as the base price to calculate the sum.
jlne.ws/1lsT7iq

Asia-Pacific

Watchful China should do as Japan says not as it did
Gillian Tett – FT.com
If there is any country where bureaucrats, bankers and economists might want to learn from Japan’s mistakes right now, it is China. It would not be the first time.
jlne.ws/1nWcQKV

Riots risk ruining Vietnam’s industrial zones; lynchpin of growth
Reuters
Dexter Hsu spent Tuesday night barricaded inside his workers’ dormitory in Vietnam’s Binh Duong province. Tables were stacked up against the doors, but he and his dorm-mates were terrified by the shouts and sounds of nearby rioting.
jlne.ws/1nWcQL1

China Orders Interbank Lending Curbs to Quell Shadow Banking
Bloomberg News
The Chinese government ordered lenders to curb interbank borrowing in the latest effort to check growth in the informal shadow-banking industry that threatens to undermine the nation’s financial system.
jlne.ws/1nWcQe2

HKEx To Host RMB FIC Market Strategy Forum On 22 May
Hong Kong Exchanges and Clearing Limited (HKEx) is hosting a renminbi (RMB) fixed income and currency (FIC) market strategy forum on Thursday, 22 May 2014 in Hong Kong.
jlne.ws/1nWcQL5

Frontier Markets

Egyptian Exchange To Start Block Trading After Approval By Egyptian Financial Supervisory Authority
Block Trading Starts 18 May 2014
jlne.ws/1nWcR1n

Egyptian Exchange: Covering The Arabian Cement Company IPO Exceeds 18.5 Times
jlne.ws/1nWcT9D

Johannesburg Stock Exchange Launches New Services For Listed Companies
Today the Johannesburg Stock Exchange (JSE) announced that it is to launch new services to its listed companies and other issuers. The range of services will help companies identify prospective investors, build profile and communicate with existing investors and the market.
jlne.ws/1nWcT9J

MSCI Announces List Of Qatari Stocks To Enter MSCI Emerging Markets Index
jlne.ws/1nWcTq1

Malayan Banking Berhad to List Yen-Denominated Foreign Bond on TOKYO PRO-BOND Market with Value of JPY 31.1 billion
jlne.ws/1nWcR1F

Malawi Stock Exchange Weekly Report-16 May, 2014
jlne.ws/1nWcRhW

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