Timing is Overrated, and Reading is FUNdamental
Rick Lane – Trading Technologies
Today is my third day on the Lothian soap box and I’ve learned the importance of journalistic timing. Only hours after this newsletter included my opus on the blossoming scene for college kids looking to get into the business (see yesterday’s “Hire Education”), did John Lothian Media postpone their London Intern Series because of a lack of interns! BTW, thanks for the warning on that, John!
I’ll stand by my assertion that (at least in the States) our schools of higher ed are doing a good job creating opportunities for those interested in the financial markets.
With that lesson on timing in mind, I’ll keep today’s opening comments short. This newsletter is all you need to stay up on listed derivatives, but with all the extra time you saved by reading it, I encourage you to check out a few of my favorite sources of tech news for insight on the bleeding edge:
1. Wired – Arguably the gold standard in science and technology journalism, their monthly print model has lost some practical relevance with the proliferation of tech blogs (see below), but their online offering is much more up-to-date. It’s not often they cover our industry, so it’s always a treat when they do, especially when they are as prescient as this (which they tend to be quite often); in this case offering some foreshadowing to Flash Boys nearly two years before it printed.
2. Engadget – If Wired is the NY Times, Engadget is CNN — still pretty trustworthy and reliable, with a larger emphasis on breaking stories. If you want to be the first to know the details when [popular tech company] launches [some rumored device/product] this is where you go.
3. Ars Technica – A little farther along the geek spectrum than Engadget, Ars provides more in-depth analysis of tech trends, news, and expertise, with a bent toward software engineering.
4. Gizmodo – If Wired is the NY Times, Gizmodo is the NY Post. Snarky, humorous, sometimes crude commentary on breaking news and generally off-the-wall tech and science news.
5. Tales from a Trading Desk – The personal blog of Matt Davey, a technologist based out of the UK building software solutions for capital markets. I’ve come across very few people who have their finger on the pulse of technology and the financial markets to the extent he does.
And with that, on to the news that matters most for our industry:
London Summer Intern Education Series Postponed, Fall Date Eyed to Reschedule
John Lothian News is postponing our planned London Summer Intern Education Series. The simple truth is we did not have enough interns sign up for the July 1 and 2 dates. We are looking to reschedule the series for later in fall, after interns and other students have returned to classes.
We are still proceeding with our Chicago Summer Intern Education Series and are pleased to announce we have secured the auditorium at the Stuart School of Business at the Illinois Institute of Technology as the venue for the complete series.
The Chicago Series will begin on Tuesday July 29, followed by Thursday July 31. We will also have sessions on August 5, 7 & 8. Following the last session, we will have a social event at a nearby location.
Slick Transition: ICE Clear Europe’s Paul Swann Talks NYSE Integration
ICE Clear Europe is at the center of the Intercontinental Exchange’s effort to expand across Europe, as well as integrate NYSE Liffe products into its market. The clearing house has been busy trying to adjust to new regulations and structural changes in the industry, not to mention merge business lines with the former NYSE family of exchanges.
Paul Swann, president and managing director of ICE Clear Europe, said the clearing strategy for ICE has expanded greatly from just clearing energies in 2008 to now clearing credit swaps and a new host of NYSE Liffe contracts.
Commodity hedge funds out of favor, launches head for 8-year low
Commodity fund launches have slowed dramatically, heading for an eight-year low, data from industry tracker Preqin showed, after years of weak returns and some high-profile fund failures in the commodities sector.
Debate Over Conflicts of Interest in Equity Markets Rages On
Ivy Schmerken – Wall Street & Technology
Last week’s Senate hearing explored conflicts of interest faced by brokers that receive payment for order flow and rebates for routing orders to certain trading venues, but many experts warned against immediate change.
‘Crowdfunding’ muscles in on the bond market
Thomas Hale in London – Financial Times
Crowdfunding is coming for the bond market. Two UK restaurant chains have raised fixed-income debt in the past week through Crowdcube, a crowdfunding platform with 75,000 registered users.
***RL: Unfortunately, I used my only “muscle” pun yesterday. I’m learning the hard way that timing is key in this business.
Voice to return with volatility – Icap chief
Joe Parsons – FOW
Voice broking will come back into fashion and reverse a trend that has seen electronic execution become more important when market volatility returns, a swap head at Icap has claimed. Speaking to FOW Laurent Paulhac, chief executive officer of Icap Swap Execution Facility, said clients prefer screens in stable markets but default to voice in more unpredictable times.
Where Is the Top City to Spot Tech Talent?
Dhanya Ann Thoppil – MoneyBeat – WSJ
Move over Silicon Valley. The U.S. may no longer be the top city where technology professionals go to for business. According to a new study by LinkedIn, four of the top five cities that technology professionals moved to last year were not in the U.S. but in India–Bangalore, Pune, Hyderabad and Chennai.
***RL: Not surprising yet still alarming.
Futures and Options World and FOW Intelligence are now aligned under one united brand: www.FOW.com. For the first time you can access all the latest news and data in one consolidated location.
Our team of financial journalists, data analysts and specialist correspondents are dedicated to providing you with the most important news and analysis – validated with FOW market data – to ensure you stay ahead of the game.
McGraw-Hill, CME Said to Weigh Joint Bid for Barclays Index Arm
Matthew Monks – Bloomberg
McGraw-Hill Financial Inc. and CME Group Inc. are interested in acquiring Barclays Plc (BARC)’s index business and merging it with S&P Dow Jones Indices LLC — manager of the benchmark S&P 500 Index (SPX) and Dow Jones Industrial Average, according to people familiar with the matter.
***RL: Losing the Russell must still be smarting.
House Passes Bill To Limit CFTC On Swaps Rules
Andrew Ackerman and Michael R. Crittenden – WSJ
The House of Representatives signed off on legislation Tuesday to scale back the Commodity Futures Trading Commission’s ability to impose swaps rules abroad, a bill critics warned would make it easier for banks to circumvent tough U.S. rules.
Singapore to launch gold contract
Jeremy Grant in Singapore – Financial Times
Singapore has unveiled plans for an exchange-traded gold contract, boosting its ambitions to become Southeast Asia’s gold trading hub, and adding to calls for gold pricing to be influenced more by Asian trade.
Potential BNP Penalty Worries European Banks
David Enrich, Noémie Bisserbe and Madeleine Nissen – WSJ
The prospect of a gigantic U.S. penalty against BNP Paribas SA BNP.FR -0.59% is sowing fear in the executive suites of other top European banks that also are under investigation for allegedly doing business in countries subject to U.S. sanctions.
SEC Provides Details of 5-Cent Tick Test
The Securities and Exchange Commission unveiled plans for a one-year test of trading in some stocks in five-cent increments after more than a decade of trading in pennies.
Singapore joins clampdown on bank liquidity
Jeremy Grant in Singapore – Financial Times
Singapore has fallen in to line with other major financial centres by requiring that all banks operating in the city-state have enough cash and easy-to-sell assets in hand to allow them to survive a short-term market crisis.
Exchanges Get Test to Curb Dark Trading in SEC Program
Dave Michaels – Bloomberg
U.S. stock exchanges will be permitted to test a restriction that could shift more trading to their venues as part of a pilot program announced by the Securities and Exchange Commission. The experiment was sought by exchange operators including Nasdaq OMX Group Inc. (NDAQ) and Intercontinental Exchange Inc. (ICE), which have seen their share of trading fall as private platforms such as dark pools have taken 37 percent of share volume, according to data compiled by Bloomberg.
Euro-Zone Banks Grumble Over Supervision Fees
MoneyBeat – WSJ
The European Central Bank Tuesday invited European bankers – or rather banking representatives – to share their thoughts on the estimated EUR260 million ($354 million) their organizations will have to pay for the privilege of being supervised. What they heard was some griping mixed with a few helpful suggestions.
Save the Bank That Shouldn’t Exist
When the House Financial Services Committee holds its hearing tomorrow on the Export-Import Bank, some of its members might legitimately ask: Why should the U.S. even have an export-import bank?
***RL: Some of its members might legitimately ask… but they probably won’t.
Barclays Posts Dark Pool LX Form ATS on Website
John D’Antona Jr. – Traders Magazine
It looks like the push by brokers to provide more transparency into their dark pools just picked up steam. Barclays, operator of the LX dark pool, announced it has posted its Form ATS and other previously non-public documents on its website. Other documents now available to the public include monthly volume statistics, a Frequently Asked Questions item and the firm’s electronic order handling procedures.
SEC Is Gearing Up to Focus on Ratings Firms
The government’s top credit-rating watchdog has kept a low profile since taking the job two years ago to help prevent another financial crisis. That may be about to change.
Dealers rail at ‘absurd’ EU margin rules
Matt Cameron – Risk.net
European banks fume after regulators clarify that draft rules would force them to collect margin from non-EU corporates
A Few Things Directors Should Know About the SEC, Chair Mary Jo White, Stanford University Rock Center For Corporate Governance, Twentieth Annual Stanford Directors’ College, Stanford, CA, June 23, 2014
Testimony Of US Treasury Secretary Jacob J. Lew Before The House Financial Services Committee On The 2014 Annual Report Of The Financial Stability Oversight Council
FIA Statement On House Vote To Reauthorize The CFTC
Hong Kong’s Securities And Futures Commission Annual Report: Upholding Standards
ESMA Publishes Draft RTS On CRA3 Transparency Requirements
Exchanges & Trading Facilities
ICE raises EUR1.4bn from Euronext disposal
Philip Stafford – Financial Times
IntercontinentalExchange confirmed on Tuesday it would receive about EUR1.4bn ($1.9bn) in cash from last week’s disposal of Euronext, the European exchanges operator.
CME Group Inc. Announces Date of Second-Quarter 2014 Earnings Release, Conference Call
CME Group Inc. will announce earnings for the second quarter of 2014 before the markets open on Thursday, July 31, 2014. The company has scheduled an investor conference call that day at 7:30 a.m. Central time.
RBS Joins Eris Exchange As An FCM
Eris Exchange, a US-based futures exchange offering capital efficient interest rate swap futures, today announced that RBS Securities Inc. will now provide clearing services to RBS’s global client base via Eris Exchange.
***RL: Team Eris keeps grinding up. We are a believer.
Singapore Kilobar Gold First In The World To Trade On Exchange Platform
At the annual London Bullion Market Association (LBMA) Bullion Market Forum held for the first time in Singapore today, Mr Lim Hng Kiang, Minister for Trade and Industry, announced a new exchange-traded Singapore Kilobar Gold Contract . This is the first wholesale 25 kilobar gold contract to be offered globally.
Warsaw Stock Exchange: Adam Maciejewski Receives Grand Prix Manager Award 2014
The President of WSE has received the award at a gala ceremony at the Polish Business Roundtable Club in Warsaw. The GRAND PRIX MANAGER AWARD is given to outstanding managers who set the tone for the Polish economy. The award was established several years ago by the Business Magazine Manager Publishing House, the publisher of the Manager monthly addressed to managers.
Warsaw Stock Exchange: PLN140K Goes To Futures Trader Competition Winners
The Futures Trader competition organised by WSE and Dom Maklerski mBanku and addressed to the fans of the futures market closed on the exchange investment platform GPWTr@der on 20 June 2014.
Ice Futures U.S. says cotton daily price limit reverts to 3 cents
***RL: Cotton has a tendency to do that.
FACC Starts Trading On The Vienna Stock Exchange
Deutsche Börse: IPO In The Prime Standard: Braas Monier Building Group SA
Deutsche Börse: Subscription Starts For UBM Realitätenentwicklung AG Bond
NASDAQ Announces End-Of-Month Open Short Interest Positions In NASDAQ Stocks As Of Settlement Date June 13, 2014
Hedge Funds & Managed Futures
Bain Capital’s Andrew Balson Starts New Private Equity Fund
WILLIAM ALDEN – Dealbook – NY Times
Andrew B. Balson, a longtime managing director at the Boston-based private equity firm Bain Capital, has left to start a new investment fund.
Operational improvements fuel private equity returns
Alec Macfarlane – Financial News
Operational improvements, rather than debt, have fuelled returns at private equity-backed businesses sold since the financial crisis, according to a new study which challenges the view that leverage has driven returns from boom-era deals.
Norway’s oil fund to boost international exposure
Kjetil Malkenes – MarketWatch
Norway’s oil fund, the world’s biggest sovereign-wealth fund, plans to significantly increase staffing and reliance on external managers as it raises its exposure to emerging markets and real estate holdings in major cities.
Canadian fund manager AGF posts profit as income tax expenses fall
Canadian fund manager AGF Management Ltd reported a quarterly profit, helped by a nearly 84 percent drop in income tax expenses.
The 10 asset managers bankers should fear
Mike Foster – Financial News
Data provider Proxy Insight has unearthed the asset managers that chief executives at the world’s 20 largest banks should fear the most.
Jupiter to expand fixed income team
Joe McGrath – Financial News
Jupiter Fund Management is seeking to grow its fixed income team, with a particular eye on strengthening its emerging market debt business.
Banks & Brokers
David Polen Promoted To Global Head Of Electronic Execution At Fidessa
Fidessa group plc announced today that it has appointed David Polen as Global Head of Electronic Execution. David will report to Mark Ames, Global Head of Sell-side Services for Fidessa. This new role at Fidessa reflects the markets’ changing execution requirements.
BNP said to move compliance operations to U.S. as settlement nears
BNP Paribas SA is relocating its U.S. sanctions compliance operations to New York from Paris, ahead of a nearly $9 billion settlement it is expected to reach with U.S. authorities over violations of sanctions on Sudan and other countries, according to people familiar with the matter.
***RL: An established bank moving into the US, not out. Hmmm…
JP Morgan primed to pip Deutsche Bank in Europe
Nick Kostov – Financial News
The first half of the year is nearly up, and as things stand JP Morgan sits atop the European investment banking league tables, beating Deutsche Bank by a whisker.
A Hunt to Find the Next Generation of Financial Planners
RACHEL ABRAMS – Dealbook – NY Times
Joseph H. Clinard Jr. is 76 and spends his days planning for retirement — just not his own. Mr. Clinard has worked for more than 50 years as a financial adviser, and he has no plans to stop anytime soon, despite the fact that many of his clients have stopped working or soon will.
HSBC to Sell Some Swiss Private Bank Assets to Liechtenstein Group
Dealbook – NY Times
The British bank HSBC said on Tuesday that it had agreed to sell a portfolio of Swiss private banking assets to a unit of the LGT Group Foundation of Liechtenstein.
Macquarie Hires ECM Banker John Kent – MoneyBeat
Gillian Tan – MoneyBeat – WSJ
Australian investment bank Macquarie Group Ltd. has hired the former co-head of U.S. equity capital markets at Nomura Holdings Inc
Fed grants four banks more time to submit capital plans
The U.S. Federal Reserve on Tuesday gave four banks more time to resubmit capital distribution plans it had earlier objected to, saying this would give the firms more time to address capital planning weaknesses.
JonesTrading Launches PrimaryAccess
JonesTrading Institutional Services LLC, a leading block trading firm in U.S. and international securities for its institutional customer base, announced today that it has launched PrimaryAccess, providing access to corporate management for institutional investors.
Deutsche Bank completes $11.6 billion cap hike
Deutsche Bank successfully completed an 8.5 billion euro ($11.6 billion) capital increase aimed at fortifying its regulatory ratios and paying for restructuring at Germany’s biggest lender.
Clearing & Settlement
LCH.Clearnet’s Australian ambitions dealt a blow
Anish Puaar – Financial News
Australian market participants hoping that the country’s incumbent clearer might be about to face some competition have been dealt another blow, after a report published yesterday suggested there was little need to open up the clearing market because post-trade costs in the country are already in line with global peers.
Default fund capital will halve under final rule, banks say
Matt Cameron – Risk.net
In theory, swaps market participants will be pushed towards clearing houses by a supportive capital regime, but in practice, banks claim, successive regulatory proposals would have killed the business. However, the verdict on a final version of the rules is now in, and it’s positive.
Four questions raised by CFTC’s plans for non-US CCPs
Annette Nazareth, Jeffrey Dinwoodie – Risk.net
The CFTC is working on a new exemptive regime for foreign clearing houses, likely to be based on international principles. The plans raise four key questions for non-US clearing houses and market participants.
Fixing swaps privacy clash needs time – Canadian regulator
Joe Rennison – Risk.net
Countries must be given time to change privacy laws that clash with over-the-counter derivatives reporting rules, according to Marc Stephens, an analyst responsible for derivatives oversight at Québec’s Autorité des Marchés Financiers.
First Fully Electronic JSCC-Cleared Swap Trade Is Executed On Tradeweb
Tradeweb Markets, the leading global provider of electronic fixed income and derivatives marketplaces, announced that the first electronically-traded and JSCC-cleared yen swap transaction by a Japanese bank has been executed.
Indexes & Products
VIX Futures Now Round-the-Clock, as ETH Volume Tops 1.68 Million Y-T-D
Matt Moran – CBOE Options Hub
Futures on the CBOE Volatility Index now are available nearly 24 hours a day, five days a week (see below for more details). Trading volume for VIX futures during Extended Trading Hours (ETH) has topped 1.68 million contracts so far in 2014. The charts below show key daily values in 2014 that you could compare – the VIX daily closing values, the 30-day historic volatility of the S&P 500 Index, and the daily volume in VIX futures during ETH.
Higher Demand for Market Data in Compliance Investigations
Becca Lipman – Wall Street & Technology
An emerging trend of risk-and-compliance officers requesting specific blocks of market data suggests new opportunity for information providers.
Interactive Data Taps Gartland To Lead Evaluated Pricing
Max Bowie – WatersTechnology
Bill Gartland, formerly of TradingScreen, has been hired as senior director of Interactive Data’s new Continuous Evaluations service
Capita Begins Rolling Out StatPro Revolution Analytics to Asset Managers
Max Bowie – WatersTechnology
London-based fund administrator Capita Asset Services has begun providing clients with access to portfolio data and analytics software vendor StatPro’s Revolution cloud-based analytics tool, to offer its customers more interactive reporting and analysis services.
Thomson Reuters Gives Access to CME Direct in Eikon
Marina Daras – WatersTechnology
Thomson Reuters has announced that its flagship product, Thomson Reuters Eikon, will provide access to CME Direct, CME Group’s front-end trading platform for commodity futures, option and over-the-counter (OTC) markets.
***RL: As another flagship financial product built in HTML5, we are following Eikon closely. This will be an interesting integration.
Hauck & Aufhäuser Privatbankiers KGaA Is Live With Dion’s SEPA Gateway Solution
***RL: Exciting! I think!
Volta Announces C4L PoP At Their Great Sutton Street Data Centre – C4L Chooses Volta To Expand Their Private Fibre-Optic 1-100Gb CoreTX Network In Central London
Jury in trial of Rajaratnam’s brother hears of insider’s tips
A former Intel Corp executive on Tuesday, testifying in the insider trading trial of Rengan Rajaratnam, told jurors how he leaked details of a major deal to the former Galleon Group portfolio manager’s brother, Raj Rajaratnam.
Ex-Credit Suisse trader spared prison for faking mortgage prices
A former London-based Credit Suisse Group AG trader was spared prison on Tuesday over his role in artificially inflating subprime mortgage bond prices, in one of the few U.S. criminal prosecutions stemming from the financial crisis.
Environmental & Energy
Corporate carbon investments: Over $1 billion saved
Will Nichols, GreenBiz.com
The largest U.S. companies are saving more than $1 billion a year by buying renewable energy and embracing emissions reduction targets, a new study has revealed.
***LB: Also in this story “The companies posting the biggest improvements to their bottom line were UPS, which saved more than $200 million annually, Cisco Systems which made a saving of $151 million, PepsiCo which saved $120 million, United Continental which cut costs by $104m, and General Motors with a saving of over $73 million.”
Climate policies could lift global GDP by $2.6 trln/yr-World Bank
Nina Chestney, Reuters
Global economic output could rise by as much as an additional $2.6 trillion a year, or 2.2 percent, by 2030 if government policies improve energy efficiency, waste management and public transport, according to a World Bank report released on Tuesday.
***LB: Also in this story “For example, if China deployed 70 million low-carbon cook stoves, it could avoid around 1 million premature deaths from pollution and reap almost $11 billion in economic benefits, the report showed.”
Sandor remains optimistic about carbon, despite EU ETS
Mark Pengelly – Risk.net
Despite turmoil in the EU ETS, the notion of emissions trading is continuing to gain ground
Investment Treaty With China a Top Priority, U.S. Ambassador Says
Richard Silk – WSJ
The U.S.’s incoming ambassador to China said Thursday that hammering out a new investment treaty between the two countries would be among his priorities.
China expands plans for World Bank rival
Jamil Anderlini in Beijing – Financial Times
China is expanding plans to establish a global financial institution to rival the World Bank and the Asian Development Bank, which Beijing fears are too influenced by the US and its allies.
Aberdeen Asset Management names CEO for Thailand business
Aberdeen Asset Management Plc said it appointed Korawut Leenabanchong chief executive officer for its Thailand operations.
Expelled from one, expelled from all: FMC
To bring uniformity in commodity futures market, the regulator Forward MarketsCommission (FMC) has directed exchanges to expel members who have been expelled by any commodity exchange.
Global unrest fails to unsettle vintage year for investors
James Mackintosh – Financial Times
It looks like 2014 is turning into a vintage year for investors. There may be a civil war in Iraq, a new military dictator in Thailand and a slowdown in China, but markets just don’t care. Barring a sudden upset in the next few days, this will be the first year since 2003 in which investors got to the halfway stage showing a profit on bonds, developed world equities, emerging market shares, gold and commodities.
U.K. Poised to Become First Western Nation to Sell Islamic Bonds
The U.K. is poised Wednesday to become the first Western nation to sell Islamic bonds.
Egyptian Exchange Market Hours During Ramadan
HKFE Announces Revised Margins For Futures Contracts