First Read

Welcome to 2015

Welcome to the year 2015. It is a new year and time for new things. What the year will bring, only time will tell. Forget the prognosticators, though we feature quite a few of them at this time of the year. Only you matter to make things happen. Go out and make it happen.

The NFA election for the board of directors is still going on. See our collection of interviews and commentaries with candidates for the CTA/CPO positions on JohnLothianNews.com

In case you missed the news on Friday, Orc Group bought Tbricks. Tbricks was our MarketsWiki Page of the Day on Friday.

We have officially begun our 2015 JLN subscription drive. We are bringing back the policy of “Voluntary Pay.” The John Lothian Newsletter is again brought to you on a “voluntary pay” basis. If you find value in what we do, we ask you to contribute. If there are a bunch of you at a firm who are receiving it, we believe you find it valuable and will be sending you an invoice. Please click the button at the top of the newsletter to make a payment. Or, if you prefer an invoice gfor yourself and/or your company, please send an email to johnlothian@johnlothian.com

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Wainscott Capital hedge fund founder Thomas Gilbert shot dead

Claer Barrett, FT

Thomas Gilbert, the Wall Street financier who founded the hedge fund Wainscott Capital Partners, has been found shot dead in his Manhattan apartment.

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***** Sad news in the hedge fund world.

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Chaos Rules at Russian Hedge Fund as Boss Vanishes; Blackfield Capital Had Ambitious Plans to Expand in U.S.

By Bradley Hope, WSJ

Blackfield Capital CJSC was one of Moscow’s hottest hedge funds, hosting glitzy parties and embarking on ambitious plans to expand to the U.S. The firm’s founder in 2013 even rented a Manhattan apartment for a record-setting price, according to a real-estate broker, and instructed his U.S. staff to buy a $300,000 sports car. Now, the founder is missing, allegedly along with all of the firm’s assets, according to former employees, in an international mystery that has captivated Moscow’s investment community.

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****** The world seems to be backwards when a hedge fund manager is Russia disappears and one in New York gets shot in the head.

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Stocks come alive in years ending with ‘5’

By Jonathon M. Trugman, NY Post

With Wall Street about to begin the first full trading week of 2015, investors around the country have to be wondering if the equities markets are poised for further growth — or if the 20.7 average annual return over the last three years has exhausted the bull run.

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***** Party like it is 1985.

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Obama sets stage for debate over US oil export ban

Barney Jopson, FT

The Obama administration has set the stage for a fierce debate over a US ban on crude oil exports by allowing more overseas sales of lightly processed oil as it grapples with the consequences of cheap crude.

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***** I find it amazing that a country that is supposed to believe in free markets has such protectionary economic policies. Maybe it is time for that to change.

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The Working Life: Signs of Economic Promise Are Offering Some Hope for the New Year

By Rachel L. Swarns, NY Times

The news came in a text: All employees at Zara clothing stores would receive raises in the first month of the new year. Valery Jourdan, a sales associate at Zara, directed a dubious eye at her cellphone. Really? Really?

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***** 2015 is the year it all happens!

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Why 2014 Went Wrong for the Eurozone; Currency Bloc Was Supposed to Exit Debt Crisis, but Three Factors Held It Back

By Simon Nixon, WSJ

It was supposed to be the year the eurozone exited its debt crisis, when growth would return to the currency union bringing with it confidence and jobs. But 2014 didn’t work out that way. Although the economy emerged from its double-dip recession, likely growth of just 0.8% was even more feeble than the 1.2% forecast at the start of the year, while inflation fell alarmingly close to 0%, raising fresh questions about debt sustainability.

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***** This is the year I want to start a business in Europe.

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MarketsWiki

MarketsWiki Page of the Day

Tbricks

MarketsWiki Recent Updates

People

John H. Conolly; John H. (Bud) Frazier; Joyce Selander; Lori Sampson; David Ritchie; Tom Madden; Allen Goodman; Todd Fulton

Companies, Organizations and Groups

US Futures & Options Company, Inc.’The Frazier Associates; Tbricks; Orc Group; Nasdaq OMX Group

Statistics

56,821,536 pages viewed, 8,126 articles, 187,965 edits

MarketsWiki Statistics

Lead Stories

Nasdaq buys US index provider for $225m

Nicole Bullock in New York and Philip Stafford in London, FT

Nasdaq is pushing further into indexing and the growing market for exchange traded funds with the purchase of Dorsey Wright, a US index provider and analytics group, as part of a strategy to diversify its business.

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Top GFI staff seek exit clause if rival BGC bid succeeds

Philip Stafford, FT

More than 100 senior employees at GFI Group, the US interdealer broker, are seeking changes to their contracts that would allow them to leave the company if a hostile takeover bid by rival BGC Partners is successful.

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Investor rush to artificial intelligence is real deal

Richard Waters in San Francisco, FT

Silicon Valley loves a new fad. To judge by the spate of fundraising by start-ups in recent weeks, it has found one in an idea that is more than half a century old: artificial intelligence.

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UK financial watchdog doubles interventions

Caroline Binham, Legal Correspondent, FT

The UK’s financial watchdog more than doubled the number of times it stepped in to alter company practices in 2014, making good on its pledge to be a more interventionist regulator by forcing businesses to change their models, products and marketing.

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Intercontinental Exchange Launches Clearing for Additional Sovereign CDS Instruments

ICE

Intercontinental Exchange (NYSE: ICE), the leading global network of exchanges and clearing houses, announced today that ICE Clear Credit and ICE Clear Europe are introducing credit default swap (CDS) clearing for additional sovereign single names, beginning today.

– See more at: http://otp.investis.com/clients/us/intercontinental_exchange_group/usn/usnews-story.aspx?cid=953&newsid=27273#sthash.CDm72eSl.dpuf

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E-Trading Disruptors Seek Untapped Liquidity in Corporate Bonds

Ivy Schmerken, WallStreet & Technology

Capital Markets Outlook 2015: Drawing on consumer tech examples like Spotify and Amazon, a new wave of fixed-income trading platforms is determined to help the buy side find liquidity in corporate bonds.

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Credit Hedge Funds Game `Stupid’ Wall Street to Top 2014 Ranking

By Anthony Effinger and Katherine Burton, Bloomberg

Brett Jefferson told his 5-year-old son this about Wall Street recently: “Never will you find a place where so many smart people do so many stupid things.”

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Republicans Lay Plans to Fight FCC’s Net-Neutrality Rules; Utility-Like Regulation Would Go Too Far, GOP Lawmakers Say

By Gautham Nagesh

Newly fortified Republicans in Congress are considering a number of ways to stymie the Obama administration’s planned regulations on broadband Internet providers in 2015, making Capitol Hill a new front in the fight over “net neutrality.”

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Stiglitz Blocked From SEC Panel After Faulting High-Speed Trades

By Dave Michaels, Bloomberg

Joseph Stiglitz, the Nobel laureate economist who called for a tax on high-frequency trading, has been blocked from a government panel that will advise regulators on issues facing U.S. equity markets, according to people familiar with the matter.

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OCC enjoys second highest year for cleared contracts

Securities Lending Times

OCC cleared 4,333,019,384 contracts in 2014, a 4 percent increase from the 2013 volume of 4,170,855,768 contracts.

This total has made 2014 the second highest year for OCC cleared contract volume to date behind 2011’s record volume of 4.6 billion contracts.

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Thai Bourse Announces Remarkable Performance In 2014

MondoVisione

The Stock Exchange of Thailand (SET) revealed that 2014 average daily trading value was THB 45.47 billion (approximately USD 1.38 billion), considered the highest in ASEAN for three consecutive years, while the average daily derivatives trading volume reached 147,025 contracts.

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Regulatory

Regulatory predictions for 2015

Annette L. Nazareth and Gabriel D. Rosenberg

Davis Polk lawyers believe Volcker rule will dominate first half

Ayear ago we offered our regulatory predictions for 2014. We correctly predicted a busy year of financial reform implementation, as well as intensified discussions of the relationships among international regulators. Many of these themes will continue this year.

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SEC agenda 2015: Swaps, ‘pay ratio’ and new Republican oversight

Patrick Temple-West – Politico

Liberal-leaning advocacy groups are revving up their lobbying of the the Securities and Exchange Commission, hoping to get the agency to finish its remaining rules from the 2010 financial reform law before the new Republican majority in Congress gets a chance to rewrite them.

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CFTC Provides Notice and Clarification of the Reopened Comment Period for its Rulemaking Proposals on Position Limits for Physical Commodity Derivatives and Aggregation

CFTC

The U.S. Commodity Futures Trading Commission (CFTC or Commission) has submitted for publication in the Federal Register a clarification and notice regarding the reopened comment periods for two Position Limit rulemakings.

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More scrutiny needed of retail forex trading platforms

Jonathan Ford, FT

Bets sold as way to dodge investment doldrums and get rich quick

The focus of most regulators in Europe and the US since the financial crisis has been on tightening the rules in professional markets. Whether the Libor scandal or the foreign-exchange rigging, fines and opprobrium have rained down mainly upon the heads of highly paid traders and their investment bank employers.

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Fears of brain drain at Bank of England’s PRA as staff leave; Freedom of Information figures show almost one in six staff leaving Prudential Regulation Authority in last year

By James Titcomb

Fears of a talent shortage at the Bank of England’s financial regulator have been raised by new figures showing almost one in six staff leaving in the last year.

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ESMA provides 18 month respite to CSDR discipline regime

The Trade

The implementation of a ‘settlement discipline regime’ in Europe is set to be delayed until the second quarter of 2017, according to the European Securities and Markets Authority (ESMA).

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Self-Regulatory Organization (SRO) Rulemaking and National Market System (NMS) Plans

CBOE: Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Amend Rule 6.54 (Release No. 34-73974; File No. SR-CBOE-2014-093; December 31, 2014); see also Exhibit 5

FICC: Notice of Extension of Review Period of Advance Notices, as Amended, to Amend and Restate the Third Amended and Restated Shareholders Agreement, Dated as of December 7, 2005 (Release No. 34-73975; File Nos. SR-FICC-2014-810, SR-NSCC-2014-811, SR-DTC-2014-812; December 31, 2014)

ISE: Order Instituting Proceedings to Determine Whether to Approve or Disapprove a Proposed Rule Change Amending its Information Barrier Rules (Release No. 34-73973; File No. SR-ISE-2014-43; December 31, 2014)

NASDAQ: Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Modify Nasdaq’s Rule Governing Modification of Orders in the Event of an Issuer Corporate Action Related to a Dividend, Payment or Distribution (Release No. 34-73972; File No. SR-NASDAQ-2014-126; December 31, 2014); see also Exhibit 5

NYSEMKT: Notice of Filing and Immediate Effectiveness of Proposed Rule Change Proposes to Amend NYSE MKT Rule 500 – Equities to Extend the Operation of the Pilot Program that Allows “UTP Securities” to be Traded on the Exchange (“Release No. 34-73969; File No. SR-NYSEMKT-2014-112; December 31, 2014”)

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Exchanges & Trading Facilities

Nasdaq to boost smart beta index business with $225 million deal

Reuters

Nasdaq OMX Group Inc (NDAQ.O) will buy smart beta index provider Dorsey, Wright & Associates LLC (DWA) for $225 million to boost its index business.

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Total trading volume at Eurex Group at 2.1 billion contracts in 2014; Average daily volume approximately 8.3 million contracts

Eurex

The international derivatives markets of Eurex Group ended 2014 with a turnover of approximately 2.1 billion contracts (2013: 2.2 billion contracts). The total volume for 2014 splits into 1.5 billion contracts traded at Eurex Exchange (2013: 1.6 billion) and 607.4 million contracts traded at the International Securities Exchange (ISE) (2013: 638.8 million). This corresponds to a daily average trading volume of 8.3 million contracts, thereof 5.9 million contracts at Eurex Exchange and 2.4 million contracts at ISE.

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EurexOTC Clear: Report changes

Eurex

Against the background of increasing demand from the Clearing Members (CMs) and to support their STP processes, Eurex Clearing has decided to introduce some short-term changes in the EurexOTC Clear reports. The EurexOTC Clear reports change respectively after the introduction of new reports on 19 January, 16 February and 2 March 2015 in production. The additional report fields and reports introduced are optional changes.

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CME Group Volume Averaged a Record 13.7 Million Contracts per Day in 2014, Up 9 Percent from 2013, with Annual Average Daily Volume Records for Interest Rates and Treasuries

CME Group

– Fourth-quarter 2014 volume averaged 14.8 million contracts per day, up 31 percent from fourth-quarter 2013, with double-digit growth across all product lines and 38 percent growth in options volume

– December 2014 volume averaged 13.6 million contracts per day, up 25 percent from December 2013, with growth across all product lines and options volume up 27 percent

CME Group, the world’s leading and most diverse derivatives marketplace, today announced that December 2014 volume averaged 13.6 million contracts per day, up 25 percent from December 2013. Total volume for December 2014 was more than 299 million contracts, of which 87 percent was traded electronically. Options volume in December averaged 2.6 million contracts per day, up 27 percent versus December 2013, with electronic options growing 44 percent over the same period.

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Futures transactions hit all-time high last year

Taipei Times

Transactions on the local futures market hit a record high last year, with investors’ enthusiasm for futures trading on the rise after the Taiwan Futures Exchange (TAIFEX) launched massive promotion campaigns, the TAIFEX said.

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HKEx should focus on commodities, boosting trading ties with China, say analysts

South China Morning Post

Hong Kong Exchanges and Clearing should strengthen trading connections with the mainland this year and further develop commodities trading, say analysts. They also urged HKEx to adopt measures from other exchanges to help boost turnover and attract more new listings

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Boerse Stuttgart generates 2014 turnover in region of EUR 88 billion

Boerse Stuttgart

Record turnover in exchange-traded products // Boerse Stuttgart leads European market in securitised derivatives and German bond market

Based on its order book statistics, Boerse Stuttgart’s total annual turnover for 2014 was around EUR 88 billion, roughly on a par with the previous year. Exchange-traded products set a new annual turnover record. Retail investors traded ETPs through Boerse Stuttgart with a total volume of around EUR 8.8 billion, over 13 percent up on the previous annual record set in 2011 and 24 percent up on the figure for 2013.

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Hedge Funds & Managed Futures

“New All-Time Highs”

by Joshua M Brown , The Reformed Broker

“New all-time highs” Just reading or hearing the term itself engenders a certain kind of hysteria in people. It suggests that things are about to tip the other way any second, as we all carry within ourselves a cognitive defect known as the Gambler’s Fallacy. We innately believe that random occurrences are meant to balance out over short periods of time. That ten straight coin flips landing on heads virtually assure…

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Wall Street Strategists Forecast More Stock Gains in 2015; A Rate Boost by Fed Is Unlikely to Derail Multiyear Rally, Analysts Say

By Alexandra Scaggs

Wall Street has a message for U.S. stock investors: Don’t fear the Federal Reserve in 2015.

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PIMCO sees further $19.4bn outflow from former Gross fund

Laura Dew

The PIMCO Total Return Bond fund reported $19.4bn in outflows last month as redemptions accelerated again as the year drew to a close.

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Wealth Adviser: Keep the Focus on Managing Clients

By Kevin Noblet

The U.S. stock market won’t keep rising forever. Presuming 2015 will be the year things get difficult, many advisers cling to a faith in active portfolio management and predict – as they did a year ago – that this year active fund managers will prove their worth. That’s not likely, says Craig Lazarra of S&P Dow Jones Indexes. In bear markets most active managers still fail to beat indexes, he writes on the firm’s blog, Indexology. Advisers are better off focusing on managing clients, he believes. “Advisers who can keep their clients from succumbing to the alternating temptations of fear and greed perform a valuable service. Advisers who think they can identify active fund managers who will reliably outperform their index benchmarks, on the other hand, should realize that the odds are against them.”

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Vanguard Sets Record Funds Inflow; Investors Gave Stock Pickers a Vote of No Confidence in 2014

By Kirsten Grind

Investors gave stock pickers a resounding vote of no confidence in 2014, pouring $216 billion—a record inflow for any mutual-fund firm—into Vanguard Group, the biggest provider of index-tracking products, according to preliminary figures from the mutual-fund group.

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Banks & Brokers

Banks want compulsory consortium arrangement for large credit; Bankers say guidelines issued by RBI have failed to bring desired discipline in the multiple banking arrangements

Abhijit Lele, Business Standard

With loopholes in multiple banking arrangement adversely impacting books, commercial banks now want consortium formation to be made mandatory for large corporate credit.

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Clearing & Settlement

15 Things to Watch in 2015 in the Payments Industry

PaymentsSource

The payments industry is quickly adapting to new technology, new regulations and new consumer demands. Here are 15 of the industry’s major transformations already in progress.

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Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of Filing of Proposed Rule Change To Provide for the Clearance of Additional Standard Western European Sovereign Single Names

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Indexes & Products

Index funds will be higher priority in future UK IPOs

Steve Johnson, FT

Passive index tracking funds should get a better deal in future UK privatisations, a government-commissioned review into the controversial flotation of Royal Mail has concluded.

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Ex-divs to take 0.28 points off FTSE 100 on Jan. 8

Reuters

The following FTSE 100 companies will go ex-dividend on Thursday, after which investors will no longer qualify for the latest dividend payout.

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Brad Hunt to leave Markit

Securities Lending Tims

Brad Hunt is leaving Markit to pursue other interests. He will relocate from Singapore to join his family in London. Hunt will continue to assist Markit’s information division leadership team during early 2015.

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Technology

Tech groups race to grab carmakers’ attention at CES

FT

Kanwalinder Singh hopes to turn some heads when he rolls up with a souped-up Maserati and a new Cadillac to the largest tech industry convention of the year.

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Enforcement

RBS Said Settling Mortgage Probe as Early as This Quarter

By Richard Partington, Bloomberg

Royal Bank of Scotland Group Plc (RBS) could pay a fine to settle claims of misconduct in its handling of U.S. mortgage securities as early as this quarter, a person with knowledge of the matter said.

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Year in Review: Government Enforcement/Financial Litigation Developments

The National Law Review

This year we have seen a number of interesting and important developments in the world of government enforcement and financial/regulatory litigation. Here are our “Top 5:”

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Environmental & Energy

Will 2015 Be The Year of the Climate?

By Brian Palmer – onEarth

Some years are linked inextricably to landmark events. 1215: The Magna Carta. 1492: Columbus sails the ocean blue. 1776: the Declaration of Independence. 1964: The Civil Rights Act.

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Global carbon emissions to rise 2.5% in 2015 – PwC

By Sophie Yeo – RTCC

Global greenhouse gas emissions could rise by around 2.5% in 2015, an increase on 2013 levels but lower than the average over the past decade, according to analysts at consultancy firm PwC.

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Let this be the year when we put a proper price on carbon

By Lawrence Summers (op-ed) – Financial Times

The case for carbon taxes has long been compelling.

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Farmers need to milk UK consumers for more than a dash of dairy

Kate Burgess, FT

Lower sales of cheese and yoghurts leave producers with little profit to cream off the top

If your new year’s resolution is to go on a dairy-free diet to counter the brandy butter and Stilton at Christmas, stop for a moment. Spare a thought for the UK’s cheesemakers and butter churners for whom 2015 has already turned a little sour.

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Chinese energy stocks surge 10%

Patrick McGee in Hong Kong and Gabriel Wildau in ShanghaiA

Shanghai energy stocks roared into the new year, with two-thirds of the counters nudging up against the 10 per cent daily limit, as investors appeared to call a floor on the ailing sector.

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Canada’s Richest Grain Family Betting on Rebound in Oil

By Jen Skerritt, FT

A decade after expanding its grain business during a slump in prices, the Richardson family of Winnipeg, one of the richest in Canada, is making a similar bet on oil.

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Asia-Pacific

Japan volumes strong throughout 2014

The Trade

The Japan Exchange Group (JPX), has released its trading overview for 2014. Trading volume for 1st Section domestic stocks in the cash equity market was 612.7 billion shares, the second-highest level in the history of the market.

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Tokyo Financial Exchange: Trading Volume In December 2014 And Year 2014

MondoVisione

The trading volume of Three-month Euroyen futures in December was 115,038 and its average daily volume was 5,478 . See the table for the composition of the trading volume.

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Okasan Securities Co., Ltd. To Participate On Chi-X Japan PTS

MondoVisione

Chi-X Japan Limited, a wholly owned subsidiary of market operator Chi-X Global Holdings LLC, today announced that Okasan Securities Co., Ltd. will access Chi-X Japan through a trading platform provided by Fidessa.

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HKFE Announces Revised Margins For Futures Contracts

MondoVisione

Hong Kong Futures Exchange Limited (HKFE), a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEx), has announced that with effect from the commencement of trading on Wednesday, 7 January 2015, the minimum margins to be collected by an Exchange Participant from its clients in respect of their dealings in the following futures contracts will be as outlined in the table below. The adjustments are based on the clearing company’s normal procedures and standard margining methodology.

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Frontier Markets

Ljubljana Stock Exchange: Monthly Statistical Report December 2014

MondoVisione

Click here to download the monthly statistics of the Ljubljana Stock Exchange for December 2014.

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Bupa plans to raise stake in Indian venture

James Crabtree in Mumbai and Amy Kazmin in New Delhi, FT

UK-based health group Bupa plans to raise its stake in its joint venture with Indian insurer Max India to 49 per cent, becoming the first foreign business to outline plans to take advantage of a recent liberalisation of the country’s insurance market.

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Turkey central bank raises forex reserve requirements

FT

Turkey’s central bank raised foreign exchange reserve requirement ratios on Saturday, citing the need to support financial stability amid volatility in global markets.

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Miscellaneous

Art Cashin’s New Years Poem

by Joshua M Brown

In case you missed it, my pal Art Cashin’s annual New Years poem came out the other day and the cleverness is overflowing, as alway

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Why New Credit Cards May Fall Short on Fraud Control; Banks Take Measures Against Counterfeiting, but Opt Not to Use PINs, Considered More Secure Than Signatures

By Robin Sidel

Big U.S. banks are steering clear of an advanced security measure used in credit cards around the world, opting for a system that is more convenient for shoppers but may leave them vulnerable to fraud.

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