First Read

Midnight rate rise spurs turmoil in Russian rouble
Michael Hunter in London and Kathrin Hille in Moscow, FT
Russian currency markets were in turmoil on Tuesday as the rouble tumbled nearly 12 per cent to another record low after Russia’s central bank sharply raised interest rates in an emergency midnight action.

***** Too many clichés about Midnight and 1998 in this move.


Stocks slide as Russia turmoil rattles traders
Jamie Chisholm, Global Markets Commentator, FT
Turmoil in Russia’s financial markets is shattering investor confidence, battering stocks and boosting perceived havens such as the yen, gold and Bunds.

***** I am not rattled. I am simply terrified.


Wall Street’s famed bronze bull arrived 25 years ago (without permission)
By Jeremy Olshan, MarketWatch
Mascot’s origin story features daring overnight installation at NYSE — and a Dick Grasso eviction. It was 10 nights before Christmas, and all the way down Wall Street the coast was clear.

***** More clichés about Midnight.


SEFCON Snapshot 2014, Part I: Technology and Innovation

The WMBA Americas hosted SEFCON V on November 12, 2014, and John Lothian News was there. We interviewed 14 SEF operators, regulators and participants and put together this three part series on the state of SEFs one year into the mandate.

Part I looks at the state of innovation in SEF technology and market structure. The creation of the swap execution facility really forced a collision of the bilateral and listed worlds, and necessitated an entirely new workflow. Some of the technology is still being invented. Furthermore, the need for capital efficiency and product standardization have led to new product design.

Watch the video »


High school senior admits tale of his $72m stock-trading fortune was a hoax
The Guardian
Mohammed Islam founded his high school’s investing club and is said to have made $72m trading oil and gold futures before even graduating high school – but just before an appearance on CNBC, the young investor said he was misrepresented.

***** He almost fooled CNBC? How hard is that really?


Is This Prosecution a Spoof of a Real Manipulation Case?
Streetwise Professor
Michael Coscia, the defendant in the maiden criminal manipulation “spoofing” prosecution, is calling for dismissal of the case on the grounds that the relevant Frankendodd language is “hopelessly vague.” This is the obvious argument for him to make. The defendants in the BP propane criminal case walked because Judge Miller decided that the anti-manipulation language of the Commodity Exchange Act was “unconstitutionally vague” as applied to the facts of the case. In some respects, the blame for this goes back to the horrible CFTC decision in the case in re Indiana Farm Bureau. In any event, spoofing does indeed sound like a pretty damn vague allegation. Given that, it will be quite interesting to see whether the DOJ fares better in a Chicago courtroom than it did here in Houston in 2009.

***** Unconstitutionally vague is the phrase of the day.
***DA: Check out the anti-manipulation rule page in MarketsReformWiki and judge for yourself.


Bill Gross Says Bill Gross Isn’t Even a Little Crazy
by Kirsten Grind and Gregory Zuckerman, WSJ
Remember those outbursts, cool shades and colorful investor letters? Bill Gross was just trying to put the “fun” back in “bond fund.”

****** Watch this video on how to pick a wife and wait until the end to see if it matters if Bill Gross is crazy. Click Here


McDonald’s Japan rations fries as U.S. West Coast port dispute drags on
McDonald’s Holdings Co (Japan) Ltd has embarked on the emergency measure of only offering small-sized french fries to customers as a protracted labour dispute at U.S. West Coast ports has contributed to long delays in imports.

***** What, no supersize?


Veronica Augustsson, CEO, Cinnober – The Why & How of Technology

“If you don’t know the technology, you don’t really know what you can achieve. It’s when you combine the business knowledge and the technology that you achieve something special.”

Veronica Augustsson, CEO of Cinnober, discusses the importance of tying together technical and business knowledge. Augustsson says that as a developer, one must not be easily discouraged when others tell them their ideas seem impossible. Knowing the capabilities of your technology will help generate new solutions to existing problems. Augustsson also touches on the importance of curiosity and why we should be driven by our curiosity to innovate and improve existing technologies. She says that finding an environment that helps inspire and drive your curiosity is essential.
Watch the video »



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Lead Stories

MF Global Holdings nears settlement with CFTC
By Douwe Miedema, Reuters
MF Global has agreed with the Commodity Futures Trading Commission to settle charges of wrongdoing during the collapse of the futures brokerage, which left a $1.6 billion shortfall in customer accounts, a court document showed

Dodd-Frank under fire in trading case
Gina Chon in Washington, FT
A new law against placing and quickly cancelling bid orders to sway others to trade was “hopelessly vague” and prosecutors over-reached by bringing the first criminal case against a high-frequency trader, according to a motion to dismiss the case.

ICE Futures U.S. Sets Daily Volume Records in Mini MSCI Complex
Intercontinental Exchange (NYSE: ICE), the leading global network of exchanges and clearing houses, announced today that ICE Futures U.S. achieved a daily volume record in the mini MSCI Index futures complex and a daily volume record in the mini MSCI All Country World Index Net Total Return future on December 12, 2014.

Brokers back new boost to bond liquidity
Tracy Alloway in New York, FT
If Wall Street were high school, Ronnie Mateo would be the cool kid with all the right friends in all the right cliques. The former Salomon Brothers and Citibank trader, known for his colourful bespoke suits and outgoing personality, has spent decades building up a little black book of contacts that would make even the most prolific of networkers blush.

DGCX offers new settlement services based on Cinnober technology
The Dubai Gold & Commodities Exchange (DGCX) and its central counterparty service provider, the Dubai Commodities Clearing Corporation (DCCC), have launched a new settlement service that will enhance trading and cost efficiencies for clearing members. Behind their state-of-the-art EOS platform stands technology supplier Cinnober.

China plans first oil futures contract
Henry Sanderson FT
China has approved a new oil futures contract, with the world’s largest importer of oil saying it hopes to attract foreign investors and brok

ICE urges caution on European derivatives reform
Philip Stafford, FT
Intercontinental Exchange has urged Europe to give clearing houses leeway over what products they must accept, warning that lawmakers’ plans to open up the derivatives market would remove operators’ incentives for innovation.

High-Speed Trader Charged With Spoofing Argues Law Vague
By Andrew Harris, Bloomberg
The first high-speed trader charged with a method of market manipulation known as spoofing contends the new law is too vague to be enforced and his indictment should be thrown out.

Ex-Flow Traders Employee Pleads Guilty in Code-Theft Case
By Chris Dolmetsch, Bloomberg
One of three men accused of stealing software from the Dutch trading house Flow Traders BV pleaded guilty to related charges two months ago, the first of a group of Wall Street workers pursued by Manhattan authorities for such theft to resolve his case.

Wedbush President & Firm Lose FINRA Appeal; Owe $350K in Fines
Wedbush Securities and the firm’s president lost their appeal of a FINRA enforcement decision imposing more than $300,000 in fines and a month-long suspension of the top executive for failing in their reporting duties.

This Hedge Fund Manager Who Remembers 1998 Says Prepare for Pain
By Simon Kennedy, Bloomberg
Stephen Jen landed in Hong Kong in early January 1997 as Morgan Stanley’s newly minted exchange-rate strategist for Asia.

Why 1998 Was Different, and Same, to Emerging-Market Crisis Now
By Ye Xie, Bloomberg
Oil prices were tanking. Emerging-market currencies were in a freefall. Venezuela was mired in a financial crisis and Russia had sunk into a debt default and devaluation.

Olam to become top-tier cocoa processor with $1.3 bln ADM deal
By Josephine Mason and Rujun Shen, Reuters
Olam International Ltd will buy Archer Daniels Midland Co’s cocoa business for $1.3 billion, catapulting the Singapore-based commodities firm into the top tier of global suppliers to the growing chocolate business.

Charges Dropped After Insider-Trading Ruling; Man Was Accused of Improperly Profiting From Tip on Herbalife
By James Sterngold, WSJ
The Securities and Exchange Commission dropped the insider-trading case of a man who had been accused of profiting from a tip that a hedge fund was about to launch an attack on Herbalife Ltd. shares.

Fears subside over French HFT reporting
By Tim Cave, Financial News
Market practitioners have described new French reporting requirements imposed on high-speed traders and brokers in two weeks time as “benign” and “straightforward”, a relief to the industry that had feared they would be much more onerous.


Canada regulators to clamp down on routing stock orders to US
By Ben Dummett, WSJ
Canadian regulators signaled Monday that they are moving ahead with plans to clamp down on efforts by domestic brokers to route stock orders to US trading venues.

ESMA Press Release: Improvements needed in CRAs surveillance of structured finance credit ratings
The European Securities and Markets Authority (ESMA) has published a report on the findings of its investigation into the way credit rating agencies (CRA) conduct surveillance of their structured finance credit ratings.

U.S. Senator Levin aims to clamp down on physical commodity trading
U.S. Senator Carl Levin has introduced a bill seeking to crack down on trading on inside information in physical commodities, the first U.S. legislation limiting Wall Street banks’ ability to deal in physical markets from crude oil to aluminum.

Investors Say No to FINRA’s CARDS Plan
Think Advisor
Survey commissioned by SIFMA finds investor opposition to CARDS

What’s New on the SEC Website
Self-Regulatory Organization (SRO) Rulemaking and National Market System (NMS) Plans
BOX: Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Amend Interpretive Material to Rule 7150 (Price Improvement Period “PIP”) and Interpretive Material to Rule 7245 (Complex Order Price Improvement Period “COPIP”) to Extend the Pilot Period that Permit the Exchange to Have No Minimum Size Requirement for Orders Entered Into the PIP and COPIP Until July 18, 2015 (Release No. 34-73831; File No. SR-BOX-2014-27; December 12, 2014); see also Exhibit 5
BOX: Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Extend, Through June 30, 2015, the Pilot Program That Permits Certain Classes to be Quoted in Penny Increments (“Penny Pilot Program”) (Release No. 34-73822; File No. SR-BOX-2014-29; December 11, 2014); see also Exhibit 5
C2: Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Amend Exchange Rules Regarding Trade Nullification and Price Adjustment (Release No. 34-73833; File No. SR-C2-2014-027; December 12, 2014)
CBOE: Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Amend the Fees Schedule (Release No. 34-73832; File No. SR-CBOE-2014-092; December 12, 2014); see also Exhibit 5
NYSE Arca: Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Rule 6.62(k) to Disallow Market Orders from Being Eligible for Designation as An Immediate-or-Cancel Order (Release No. 34-73830; File No. SR-NYSEArca-2014-138; December 12, 2014); see also Exhibit 5
NYSEMKT: Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Rule 900.3NY(k) to Disallow Market Orders from Being Eligible for Designation as An Immediate-or-Cancel Order (Release No. 34-73829; File No. SR-NYSEMKT-2014-100; December 12, 2014); see also Exhibit 5

Post-implementation review of the Retail Distribution Review
We publish the findings from the first stage of our post-implementation review of the Retail Distribution Review.
The RDR was launched by the Financial Services Authority, the predecessor body of the FCA, in 2006. The rules aimed to make the retail investment market work better for consumers. They raised the minimum level of adviser qualifications, improved the transparency of charges and services and removed commission payments to advisers and platforms from product providers.

Early indications that reforms of financial advice are working
In December 2012, new rules (the RDR) were introduced to make the retail investment market work better for consumers. These raised the minimum level of adviser qualification, removed commission payments to advisers and platforms from product providers and aimed to improve the transparency of charges and services.

CFTC Requests Public Comment on Related Applications Submitted by LedgerX, LLC for Registration as a Derivatives Clearing Organization and Swap Execution Facility
The U.S. Commodity Futures Trading Commission (CFTC) is asking for public comment on related applications submitted by LedgerX, LLC (LedgerX), for registration as a derivatives clearing organization and registration as a swap execution facility. LedgerX plans to list and clear fully collateralized, physically settled options on bitcoin. Comments should be submitted on or before January 30, 2015.

ASIC investigation leads to Interactive Brokers refunding $1.5 million to Australian customers
Following an investigation by ASIC, Interactive Brokers LLC (IB), a US-based online brokerage firm, will refund approximately $1.5 million in fees and commission payments to its retail margin lending customers.
The refunds will be made as part of an enforceable undertaking (EU) accepted by ASIC and follow an ASIC investigation which found that IB did not, during the period July 2010 to August 2013, hold an Australian financial services licence (AFS) licence which authorised the provision of margin loans.

Ex-U.K. Financial Regulator to Join Oliver Wyman; Management Consultancy Advises Some Banks That Hector Sants Regulated as FSA Chief
By David Wighton, WSJ
Hector Sants, once the U.K.’s top financial supervisor, is to join management consultant Oliver Wyman, a year after he stepped down from Barclays PLC because of stress and exhaustion.

Fallout for the S.E.C. and the Justice Dept. From the Insider Trading Ruling
By Peter J. Henning, New York Times
The Justice Department and Securities and Exchange Commission may find that an appeals court decision overturning the insider trading convictions of two hedge fund managers has stirred up a host of challenges to previous cases.

Regulator Finds Deficiencies With Mortgage Servicer Ocwen Financial
By Peter Eavis, New York Times
Ocwen Financial, a firm that collects the payments on millions of mortgages, has fallen afoul of another regulator.

Exchanges & Trading Facilities

Delisting of 12 Single Stock Futures, five equity options and one Single Stock Dividend Future

Euronext eyes dividends as trading resumes
Futures & Options World
Pan-European exchange Euronext said it plans to launch a number of single stock dividend futures on the most liquid stocks listed on its Amsterdam, Brussels, Lisbon and Paris markets. The exchange said the new dividend futures contracts will be available for trading in the first quarter of 2015, beginning with CAC40 Index components. Euronext said the single stock dividend futures will give investors additional dividend trading potential and will enable them to benefit from efficient pricing.

Additional Margin File – New Release – December 17, 2014
Minor Revisions to CBOT Rules in Connection with the Launch of Trading in Treasury Invoice Spreads
Pre-Execution Communications
Simultaneous Buy and Sell Orders for Different Beneficial Owners; Trading Against Customers? Orders Prohibited
Amendments to Gasoil-Related Futures and Options Contracts
December 2014 Final Foreign Currency Settlement Prices
Application of Collateral Haircuts – March 2, 2015
Amendments to the Floating Price Rule for Two Brent Crude Oil CFD Futures Contracts
OTC Holiday Advisory – Christmas and New Year?s Day

Deutsche Börse in retail land grab; ups share in Tradegate
FTSE Global Markets
Deutsche Börse AG is exercising call options on shares in Tradegate AG, thereby increasing its stake in Tradegate AG from approximately 5% to almost 15%. “This increase is strategic for us,” explains Dr Martin Reck, cash market managing director at Deutsche Börse.

Error Prompts Nearly Full-Day Shutdown of ISE Options Markets
By Sam Mamudi, Bloomberg
The two U.S. options markets run by International Securities Exchange Holdings Inc. were closed for most of Monday’s session due to a technology malfunction.

Hedge Funds & Managed Futures

Oil price lessons from 1983
Crude oil prices dropped precipitously in the latter part of 2014, raising challenging questions about where they might go in 2015. Undershooting well below a mythical fundamental equilibrium price is a distinct possibility if history is any guide.

California Pension Fund May Change Benchmark for Private Equity
By Michael B. Marois. Bloomberg
The California Public Employees’ Retirement System, the biggest U.S. pension, may change the benchmark it uses to measure private equity performance as $31.3 billion in investments underperform.

Foreign Investors Pile Into Bonds; Buying by China, Japan Shows Demand for Safe Government Debt Amid Global Turmoil
By Min Zeng
Foreign investors are snapping up Treasury bonds at the fastest clip in two years, propelling yields to fresh lows even as the U.S. economy gains steam.

Investors wait for Cargill to raise Nutreco stakes
Emiko Terazono, FT
US commodity trader prepares to trump SHV’s existing offer
Any doubts about Cargill’s intentions for Nutreco, the Dutch animal and fish feed group, were erased last week, as the US commodity trader finally showed its hand.

Cohen Seeks Law Experts For Fund
By Matthew Goldstein, New York Times
Steven A. Cohen beat them, and now he wants them to join him.

Banks & Brokers

Barclays Dark-Pool Suits to Be Handled by New York Judge
By Jef Feeley, Bloomberg
Barclays Plc (BARC) investors suing over claims the bank hid high-frequency traders’ role in its dark pool will have their cases consolidated before a federal judge in New York to make pretrial information exchanges quicker and less costly.

Lehman trustee petitions Supreme Court over Barclays dispute
The trustee handling the liquidation of the brokerage unit of Lehman Brothers Holdings Inc filed a petition with the U.S. Supreme Court on Monday seeking review of the business’s cash assets awarded to Barclays Plc (BARC.L).

Investment Banks Enjoy Strong Year for Asia Deals
Investment banks have had their busiest year in Asia since 2010, and the outlook for 2015 is positive as well. As the WSJ’s Enda Curran reports:

DealBook: 3 Banks Fall Short in Bank of England Stress Test
The Royal Bank of Scotland, the Lloyds Banking Group and the Co-operative Bank would not have had sufficient capital to comfortably weather a sharp financial downturn at the end of 2013, the Bank of England found.

Clearing & Settlement

SPAN Parameter file which will be applicable from December 16, 2014.xls

Indexes & Products

Goldman files for a new batch of exchange-traded funds
By Ashley Lau, Reuters
Goldman Sachs Group Inc has filed for a slew of new exchange-traded funds, most of them alternative, another step by the Wall Street bank in its pursuit of the fast-growing, nearly $2 trillion U.S. ETF market.

ETFGI Is Proud To Announce That Deborah Fuhr Received The William F. Sharpe Indexing Lifetime Achievement Award
ETFGI is proud to announce that Deborah Fuhr, Managing Partner & Co-founder of ETFGI, is the 2014 William F. Sharpe Indexing Lifetime Achievement Award winner. She was honored at IMN’s 19th Annual Global Indexing & ETFs conference at the JW Marriott Camelback Resort & Spa in Scottsdale, Arizona on December 8th. This distinguished award recognizes the most accomplished innovators and practitioners in the indexing industry, and was presented by The Journal of Index Investing.


Rakuten Securities Joins Trading Technologies’ MultiBroker Platform
Trading Technologies
Trading Technologies International, Inc. (TT), a provider of high-performance professional trading software, today announced Rakuten Securities, Inc. (Rakuten) is now a participating broker in TT’s global MultiBroker service. Customers may select and route orders to Rakuten through TT’s high-performance global trading network, which provides direct market access (DMA) to 40 markets across five continents.

Euronext launches iOS app for retail investors
Automated Trader
A new iOS app providing retail investors with access to market data from Euronext’s Cash markets and other equity exchanges on their mobile devices is being launched by Euronext. The app offers information on indices, stock prices, currencies and more. Aimed primarily at investors in Euronext’s home markets in Belgium, France, Portugal and The Netherlands the app is free to download from Apple’s App Store as of today.

SunGard Wins FOW Best New Product Award for Cross-Asset Risk Solution
SunGard’s Front Arena cross-asset risk solution was awarded best new trading and execution product at the FOW International Awards last week in central London.


Citigroup (C) Fined $3 Million by FINRA for Negligence – Analyst Blog
Citigroup Inc. was recently fined $3 million by the Financial Industry Regulatory Authority (FINRA) on failure to send prospectuses for exchange-traded funds (ETFs) to more than 250,000 brokerage clients. The bank failed to convey prospectuses for approximately 160 ETFs among 1.5 million ETF purchases from 2009 through Apr 2011.

Bruker to pay $2.4 mln to settle US SEC charges over bribery
Massachusetts-based manufacturer Bruker Corp will pay $2.4 million to settle civil charges alleging it violated federal bribery laws by providing improper payments to Chinese government officials in exchange for business, U.S. regulators said.

BBX, CEO liable for fraud in SEC financial crisis case, U.S. jury says
By Nate Raymond, Reuters
Florida lender BankAtlantic Bancorp Inc and its chief executive defrauded investors in 2007, early in the U.S. financial crisis, a federal jury found on Monday.

Madoff Aide Sentenced to Six Years in Prison; JoAnn Crupi Was Convicted in March of Concocting Phony Trading Records
By Christopher M. Matthews, WSJ
A federal judge sentenced JoAnn Crupi to six years in prison on Monday for her role in aiding Bernard Madoff’s Ponzi scheme, capping the legal odyssey of five former Madoff employees convicted of helping enable the fraud.

SEC Charges New Orleans-Based Energy Company and Executives With Fraudulent Stock Manipulation; Houston-Based Attorney Charged With Facilitating Scheme in Gatekeeper Role
The Securities and Exchange Commission charged a New Orleans-based oil-and-gas company and five executives with running a stock trading scheme in which they claimed to have struck oil in Belize in order to manipulate the price of the company’s stock as they illegally sold restricted shares to the public.

SEC Charges Massachusetts-Based Scientific Instruments Manufacturer with FCPA Violations
The Securities and Exchange Commission charged a Billerica, Mass.-based global manufacturer of scientific instruments with violating the Foreign Corrupt Practices Act (FCPA) by providing non-business related travel and improper payments to various Chinese government officials in an effort to win business.

Environmental & Energy

Banks hire environmental, social specialists to reduce NPA risks
Somasroy Chakraborty, Business Standard
‘Go green’ appears to be the new mantra for banks as they struggle to stem asset quality risks in the current uncertain macro-economic environment.

China climate negotiator says Lima deal ‘balanced’
By Jennifer Duggan – The Guardian
Chinese media coverage of the Lima climate change talks included comments by the country’s top climate negotiator who described the deal reached as “balanced”.

In Climate Talks, Soft is the New Hard – and That’s a Good Thing
By Andrew C. Revkin – The New York Times
This piece takes the long view in gauging efforts to stem global warming and its impacts using the tools of diplomacy.

PEGAS – Final steps of migration of EEX Natural Gas business to Powernext


HKEx finds that Stock Connect has been a success after all
The Trade
Hong Kong Exchanges and Clearing (HKEx) has found that the Shanghai Hong kong Stock Connect has actually been a success, trading-wise.

China Auditors See Settlement Nearing in Standoff With SEC
By Alan Katz, Bloomberg
U.S. regulators and Chinese affiliates of the four largest accounting companies said they can probably reach an agreement within a few months to end a standoff over access to audit documents belonging to the firms’ clients.

Frontier Markets

Securities and Exchange Board of India Notices
Interim order in the matter of Option One Industries Limited
Order in the matter of M/s Just-Reliable Projects India Limited
Order in the matter of Yash Dream Real Estate Ltd
OnMobile Global Limited – Public Announcement
DWS Mid & Small Cap Fund

UAE economy minister reassures investors after stock market plunge
Ups and downs in stock markets are normal and markets tend eventually to resume their upward trends, United Arab Emirates economy minister Sultan bin Saeed al-Mansouri said on Tuesday.

Saudi Arabia is playing chicken with its oil
By Mohamad Bazzi, Reuters
In August 1973, Egyptian President Anwar Sadat paid a secret visit to the Saudi capital, Riyadh, to meet with King Faisal. Sadat was preparing for war with Israel, and he needed Saudi Arabia to use its most powerful weapon: oil.


ADM to sell cocoa business for $1.3 billion
Bloomberg via Crain’s Chicago Business
Olam International, a commodity trader controlled by Singapore’s state investment company, agreed to buy Archer Daniels-Midland’s cocoa business for $1.3 billion to boost production capacity.

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