Happy New Year from John Lothian News
By JLN Staff
Happy New Year to all our readers of John Lothian News! It has been a banner year for JLN that has seen us expand our education efforts, publish 95 news and education videos, publish several Special Reports and travel to South America, Asia, Europe and the Middle East to help expand our reach.
We have been to events in Paris, London, Geneva, Singapore, Hong Kong, São Paulo, Doha, New York, Boca Raton, Montreal, Los Angeles, Miami and of course our home base in Chicago.
JLN staff learned a lot about Airbnb in 2015, using the service in London, Singapore and Boca Raton.
We also saw an uptick in the number of surgeries John Lothian has had, as he replaced a shoulder and did something we can’t talk about to his bellybutton. It has been a challenging year for John and he faces more obstacles in 2016 as he battles recurring back problems.
We promoted charitable giving including supporting cancer research in the name of Kim Taylor of CME Group among others. In fact, our column on the “Laugh for Kim” campaign (“No One Fights Alone” – March 2015) was among our highest read stories of all time.The industry also generously supported three of John Lothian’s Boy Scouts, who attended the World Scout Jamboree in Japan. JLN also supported Futures for Kids, A Leg to Stand On, CME’s Pink and Movember campaigns, and a host of others.
We added Spencer Doar to the JLN editorial team in 2015 and Nancy Ashburn joined us as director of finance and administration, giving us the discipline Doug Ashburn knows best. We also saw our video team move out of state, though they come back to Chicago, New York or wherever when we need them for big shoots.
In 2015, several firms in Chicago participated in Trading Tech 300, a merit badge workshop program for the Boy Scouts dreamed up by John Lothian. We again thank Advantage Futures, NFA, Spot Trading, GlenStar Properties and the CBOE for their participation. We can’t wait to see Trading Technologies and XR Trading participate in 2016.
All in all, it has been a great year! We wish you a Happy New Year and a prosperous 2016!
A Note on the NFA Election
James Koutoulas – Commodity Customer Coalition
In a microcosm of what’s wrong with this country, NFA management has restructured the Board and set up this election to eliminate 50% of the representatives that were actually elected by you. This will result in even less oversight of a management team that has seen four major frauds happen on their watch recently. Their version of accountability for this has been giving themselves large pay increases while placing restrictions on Directors from criticizing the organization and making it easier to kick us off the Board. They also strongly pushed the opening of a loophole on behalf of one of the largest NFA members allowing CPOs to borrow money from commodity pools they manage if it’s under the pretense of becoming self-clearing.
***** NFA Board candidate James Koutoulas continues his fight to get re-elected. He neglects to address my central issue of how he has made the atmosphere on the NFA Board toxic with his actions and accusations. I endorsed Doug Bry and Ernest Jaffarian. They will continue to represent CTAs and CPOs with the dignity and class the industry deserves.
Let’s Raise a Glass to Aaron Burr
By Paula Dwyer – Bloomberg
Enough about Hamilton. Let’s talk about Burr. I mean, about “Burr,” Gore Vidal’s 1973 historical novel.
***** One of my goals for 2016 is to see the musical Hamilton.
Haim Bodek, Decimus Capital Markets – A Flash Course on Market Structure
“In the market there are edges that are permissible, and edges that are impermissible. It is the impermissible ones that you should care about. If it doesn’t smell right, leave.”
The 2014 publication of Michael Lewis’ Flash Boys ignited a firestorm of accusations and lawsuits regarding the tactics used by certain trading firms. It has also led to a robust national debate on market structure. Haim Bodek, a former algorithmic trader who now assists the Securities and Exchange Commission in whistleblower cases, frames this debate by explaining the regulation that created the current market structure. He goes on to explain how the market structure crisis is impacting market participants, as certain widespread industry practices are challenged. He says employees need to have an ethical compass, and be vigilant about practices in and around the firm.
Watch the video »
Lincoln Park mansion sells for year’s second-highest price, $13.3 million
By Dennis Rodkin – Crain’s Chicago Business
A Lincoln Park mansion that for much of the past 18 months was the city’s highest-priced home listing sold today for more than $13.3 million. It’s the second-highest price paid for a Chicago home this year, after the $18.75 million purchase of a Park Tower condo by an associate of filmmaker George Lucas and his wife, Mellody Hobson. Since October, the asking price for the mansion had been $16.9 million. The 14,000-square-foot home on Burling Street was sold by Tim and Alicia Mullen. He is an independent investor and part owner of the Tampa Bay Rays baseball team.
***** Former First Options executive Tim Mullen lightened up his real estate portfolio.
***** Speaking of First Options, former First Options, MF Global and LIT America trading floor manager John Gura passed away on December 20 at the age of 55. He was most recently with ED&F Man Capital Markets, Ltd. Here are the details. Condolences to his family, friends and former colleagues.
MarketsWiki Page of the Day
MarketsWiki Recent Updates
Companies, Organizations and Groups
72,719,304 Pages viewed; 21,766 Pages; 195,599Edits
Nasdaq claims to break ground with blockchain-based share sale
Martin Arnold in London and Nicole Bullock in New York – FT
Nasdaq claims to have broken new ground on use of blockchain with a share sale on Wednesday that used a system based on the technology.
Divergence Between Fed, Other Central Banks to Test Global Economy; U.S. prepares to keep raising interest rates while Europe, Japan are still easing; currencies and trade could face turbulence
By JOSH ZUMBRUN – WSJ
The global economy will be tested by an unusual divergence among the world’s leading central banks in the year ahead: The Federal Reserve is poised to continue raising interest rates while its counterparts in Europe and Japan engage in full-throttle monetary easing.
Biggest Investors Say Beware the Bond Market as Fed Raises Rates
Wes Goodman – Bloomberg
JPMorgan expects returns in low- to mid-single digits
Goldman Sachs sees U.S. 10-year yield rising to 3% by end-2016
Bond returns will probably be ho-hum next year — just as they have been in 2015 — according to the biggest investors.
First Word Asia: What to Make of China’s Latest Bank Suspensions
The People’s Bank of China has suspended at least two foreign banks from conducting some cross-border yuan business until late March, according to people with direct knowledge of the matter. The clampdown comes as the growing offshore-onshore spread makes it profitable for those who skirt capital controls to buy the currency at a discount in Hong Kong and sell it in Shanghai.
Julius Baer Clears Path for Deals
By Duncan Mavin – Bloomberg
Two questions have lingered about Julius Baer in 2015. How would the Swiss bank settle with U.S. authorities investigating its tax dealings with American clients? And would Julius Baer be an acquirer or a target in Swiss banking? On Wednesday, CEO Boris Collardi answered the first of these — a move that could stoke more debate on the second.
Bommer Is Returning Money From Hedge Fund SAB After 17 Years
Saijel Kishan – Bloomberg
SAB Capital investors to get most money before mid-January
New York-based fund had $1.1 billion in assets at end of 2014
Scott Bommer, founder of SAB Capital Management LP, is returning all client money from his hedge fund after 17 years so that he can focus on managing his own wealth.
UK draws line under ‘banker bashing’ after scrapping assessment
Emma Dunkley – FT
A review of Britain’s banking culture has been ditched by the UK’s financial watchdog only months after its launch, in the latest sign that the years of “banker bashing” are coming to an end.
Sebi to seek reports on I-T raids from NCDEX, traders; E-commerce websites would be permitted to sell mutual funds next month
A day after the income-tax department conducted raids on NCDEX (National Commodity and Derivatives Exchange) and traders, the Securities and Exchange Board of India (Sebi) proposed to seek reports on it from them.
Swiss Oil Trader Vitol Biggest Buyer So Far for U.S. Shale Crude
Joe Carroll – Bloomberg
Vitol captured first two shale oil cargoes post-export ban
40-year export prohibition was lifted this month by Congress
A Swiss trader of everything from gasoline to sugar is the first overseas buyer to export U.S. shale oil since a 40-year ban on most shipments was lifted less than two weeks ago.
Upstart stock exchange IEX fuels frustrations about financial industry
The Globe and Mail
Even in the buttoned-up financial regulatory world, stock exchange applications are relatively boring affairs. In recent years, whenever the U.S. Securities and Exchange Commission has fielded an application from a private stock exchange to be registered as an official exchange – in other words, a request to be granted a status similar to the likes of the Nasdaq Stock Market – the commentary process has generated, on average, about one or two letters from the public. That is, until an upstart exchange, founded by a Canadian, tried to apply for official exchange status earlier this year. So far, that application has generated more than 200 letters.
?CFTC may be forced to lean more on industry self-policing after budget freeze
Neil Roland, MLex
The US Commodity Futures Trading Commission may have to rely more on the derivatives industry to police itself after the agency’s annual budget was frozen by Congress, a review of Chairman Timothy Massad’s recent statements shows.
SEC report sheds light on the August flash crash
The Washington Post
When fears of a slowdown in China sent U.S. stocks plummeting in late August, some of the market mechanisms meant to protect investors during times of volatility may have triggered even greater losses among exchange-traded funds, market regulators said in a report released this week.
Financial Conduct Authority’s review of banking culture is scrapped
East Anglian Daily Times
The Financial Conduct Authority (FCA) said it had decided instead to “engage individually with firms to encourage their delivery of cultural change”. The move means the watchdog’s so-called “banker bashing” review has effectively ended after only a few months.
?LEI regulator offers to play role in harmonizing transaction IDs
Neil Roland, MLex
A global regulator of derivatives traders’ identification tags offered to play a role in harmonizing similar codes for swaps transactions. The offer, by the Global Legal Entity Identifier Foundation, highlights the possibility that bureaucracy and coding already in place for LEIs could play a part in formation of transaction tags for which no standards yet exist.
Exchanges & Trading Facilities
Nasdaq’s Blockchain-Based Securities Platform Records First Transaction
By PAUL VIGNA – WSJ
Most people think that it will likely be years before bitcoin-based technologies make significant inroads into the traditional financial infrastructure. That may well be, but another small step was taken just before this year closes out, as the first securities transaction to be processed and settled on Nasdaq ‘s new blockchain-based platform, called Linq, occurred on Wednesday, the exchange operator said.
CME Changes Spread Fees on FX, E-mini and E-micro FX Products
For FX and E-mini FX Futures, the CME is adding spreads to volume discounts. Globex trades and give-ups are currently eligible for the reduced fees based on the monthly average daily volume (ADV) thresholds noted in the chart below. Effective January 1, 2016, Globex spread transactions will also be included when determining the monthly ADV and applying the reduced fees.
Trading Overview in Year 2015 & December 2015
Japan Exchange Group
Japan Exchange Group released Trading Overview in Year 2015 & December 2015.
NYSE US EXCHANGES TO CLOSE IN OBSERVANCE OF NEW YEAR’S DAY
In observance of New Year’s Day, the New York Stock Exchange, NYSE MKT, NYSE Arca, NYSE Arca Options, NYSE Amex Options, NYSE TRF, and NYSE Bonds exchanges will be closed on Friday, January 1, 2016.
Bermuda Stock Exchange Will Be Closed For the New Year’s Holiday
The Bermuda Stock Exchange (“BSX”) advises that the BSX will close the Local Market at 1 p.m. on Thursday, 31 December, 2015, before closing for the Public Holidays on New Year’s Day, Friday, 01 January, 2016, and will re-open on Monday, 04 January, 2016.
US views on climate change pose test for 2016 candidates
Barney Jopson in Washington and Hannah Murphy in London – FT
Global warming or hot air? Democratic politicians say climate change is a grave threat to the US. Their Republican counterparts accuse them of alarmism over a non-issue. A close study of public opinion suggests that neither stance chimes with a majority of Americans.
Iowa Ethanol Group Rolls Out the Un-Welcome Mat for Ted Cruz; The leader of the Republican presidential pack in Iowa gets a “bad” rating from a group backing corn-based alternative fuels.
Alan Bjerga – Bloomberg
As Republican presidential candidate Ted Cruz prepares to launch a bus tour of Iowa next week, one influential state organization is working to ensure the U.S. senator from Texas isn’t welcomed in the state’s cornfields.
Farmers Try Political Force to Twist Open California’s Taps; Few in agriculture have shaped the debate over water more than the several hundred owners of an arid finger of farmland west of Fresno.
By MICHAEL WINES and JENNIFER MEDINA – NY Times
The message that Maria L. Gutierrez gave legislators on Capitol Hill was anguished and blunt: California’s historic drought had not merely left farmland idle. It had destroyed Latino farm workers’ jobs, shuttered Latino businesses and thrown Latino families on the street. Yet Congress had turned a deaf ear to their pleas for more water to revive farming and farm labor.
Politicians May Have to Wear Donor Logos in California
Steven Nelson – US News
A wealthy Republican wants to require unprecedented transparency in California by forcing state politicians to plaster their suits and dresses with the logos of their top 10 donors — and voters fed up with those politicians may actually get the chance to vote on the idea in November.
Hedge Funds & Managed Futures
Fund failure exacerbates liquidity fears
Robin Wigglesworth, US Markets Editor – FT
Corporate debt has been one of the slam-dunk investments of the post-financial crisis era, handing investors juicy and stable returns. As a result, billions of dollars have gushed into the market. But some fear the party is about to result in an epic hangover.
Facebook faces IPO class-action lawsuits
Hannah Kuchler in London and Richard Waters in San Francisco – FT
Facebook will face two class-action lawsuits after a federal judge said shareholders could pursue their case against the social network, which plaintiffs claim hid concerns about its growth forecasts ahead of its $16bn initial public offering
Dueling Financial Forces to Test Markets in 2016; Fed tightening, China slowdown, commodities malaise figure to shake investor confidence
By GREG IP – WSJ
Global financial markets in 2015 were pulled between two opposing forces: The Federal Reserve’s determination to raise interest rates as the U.S. job market strengthened and pressure for lower interest rates in much of the rest of the world as China’s economic growth slowed and commodity prices sank.
Here Are the Best- and Worst-Performing Assets of 2015; From currencies to corporate bonds.
Julie Verhage – Bloomberg
As 2015 draws to a close, it’s time to tally up the best- and worst-performing investments of the year. Here they are, in glorious and sometimes excruciating detail.
Apple Pressured by Investor for Racial Diversity in Senior Ranks
Laura Colby – Bloomberg
Company objects to what it calls micromanaging of recruitment
Percentages of blacks and Hispanics in management fell in 2015
Apple Inc. shareholders could make history next year by deciding whether the company should be forced to increase the number of non-white executives and directors, with a vote on a proposal the iPhone maker has tried to squelch.
7 ways mutual funds and ETFs will challenge investors in 2016
By Chuck Jaffe – MarketWatch
You don’t need tarot cards, a crystal ball, the entrails of animals, a rooster pecking at grains, tea leaves, or coffee grounds to tell the future of the mutual fund business. You just need to look at trends underlying the industry.
Riskiest Bank Debt Pays Off as Safety Net Erected Under Lenders
Tom Beardsworth – Bloomberg
Regulators’ efforts to make banks safer are paying off for investors who prefer to live a little dangerously.
Buyers of bank debt that would be written off first in a crisis have earned an average of 8.2 percent this year, according to Bank of America Merrill Lynch’s contingent-capital index. The notes were the best-performing credit assets globally, according to Royal Bank of Scotland Group Plc.
Banks & Brokers
Derivatives specialist among City names on New Year’s Honours list
By Fareed Sahloul – Financial News
A derivatives and regulatory expert recently involved with the UK government’s review of wholesale financial markets, the founding chief executive of the public pension scheme Nest, and a former Lord Mayor of London, are among a small number of City names to feature on the 2016 New Year’s Honours list.
Phillip Capital Inc. becomes FINRA member, adds securities clearing to services
By: Maria Nikolova – Leaprate
Phillip Capital Inc., a Chicago-based firm, which is part of the Singapore-based PhillipCapital Group, on Wednesday announced that it has become a Financial Industry Regulatory Authority (FINRA) member. As a result, Phillip Capital has expanded its financial services offering beyond futures and Forex to include self-clearing corporate equity and debt securities.
Indexes & Products
Germany’s DAX Beats World With More Gains Expected
Alex Longley – Bloomberg
German stocks set 27 records and slid to bear market in 2015
Strategists call for 9.8% gain in 2016 amid weak euro, oil
German stocks outperformed European and global peers in 2015. Investors are betting on more gains next year.
How the Aim market managed to outperform the FTSE 100; Small cap stocks outperformed London’s main market over the past 12 months
By Tara Cunningham- Telegraph
It was an interesting year for the UK’s Alternative Investment Market (Aim), as small-cap stocks outperformed large caps despite an almost 50pc drop in new equity issues.
iShares MSCI USA Minimum Volatility ETF Experiences Big Inflow
Looking today at week-over-week shares outstanding changes among the universe of ETFs covered at ETF Channel , one standout is the iShares MSCI USA Minimum Volatility ETF (Symbol: USMV) where we have detected an approximate $71.5 million dollar inflow — that’s a 1.0% increase week over week in outstanding units (from 167,800,000 to 169,500,000). Among the largest underlying components of USMV, in trading today Paychex Inc (Symbol: PAYX) is off about 0.3%, Automatic Data Processing Inc. (Symbol: ADP) is down about 0.1%, and General Mills, Inc. (Symbol: GIS) is lower by about 0.2%. For a complete list of holdings, visit the USMV Holdings page » The chart below shows the one year price performance of USMV, versus its 200 day moving average:
iShares MSCI USA Minimum Volatility Index Fund ETF (ETF:USMV), Johnson & Johnson (NYSE:JNJ) – A Sound ETF Idea For 2016
It took Tuesday’s strong showing to lift the S&P 500 into positive territory for 2015, but for now, the benchmark U.S. equity index is sporting a year-to-date gain of less than 1 percent. That does not mean equity investors have not been rewarded this year.
Nasdaq Linq Enables First-Ever Private Securities Issuance Documented With Blockchain Technology
Transaction by Chain.com Marks Significant ‘Proof of Concept’ and Major Step Forward in Use of Blockchain; Blockchain Holds Potential for 99% Reduced Settlement Time and Risk Exposure in Capital Markets
Nasdaq (Nasdaq:NDAQ) today announced that an issuer was able to use its Nasdaq Linq blockchain ledger technology to successfully complete and record a private securities transaction – the first of its kind using blockchain technology. Chain.com, an inaugural Nasdaq Linq client and blockchain developer, documented its issuance of shares to a private investor using Nasdaq’s blockchain-enabled technology. This transaction represents a major advance in the application of blockchain technology for private companies.
U.S. hedge fund founder is denied early release in insider case
BY JONATHAN STEMPEL – Reuters
A federal judge on Wednesday rejected hedge fund manager Doug Whitman’s request to end his two-year sentence for insider trading early while he pursues his latest appeal of his 2012 conviction.
Julius Baer Has Agreement in Principle in U.S. Tax Probe; Bank says it has set aside $547 million to settle the matter and expects a final settlement in the first quarter of next year
By JOHN LETZING – WSJ
Julius Baer Group AG on Wednesday said it is on the verge of settling a long-standing U.S. investigation into the Swiss bank’s aiding of U.S. tax evasion.
Environmental & Energy
U.S. grain prices soar as floods shut waterways, threaten crops
BY P.J. HUFFSTUTTER AND MICHAEL HIRTZER – Reuters
U.S. grain farmers scrambled to find shelter for their crops and handlers hunted for alternative transportation routes, as widespread floods shut waterways from Illinois to Missouri and spurred a surge in physical prices of corn and soybeans.
BP orders complete evacuation of Valhall field in North Sea
BP (BP.L) said it ordered a total evacuation of its Valhall platform in the North Sea on Thursday after a barge broke its anchor and was drifting towards the installation following a storm.
China cracks down on coal producers as pollution worsens
China’s national energy regulator has implemented strict new rules that domestic coal producers must cut output by 60 million tonnes in 2016 and declared no new mines will be opened in the next three years, in a bid to reduce oversupply and help fix the worsening pollution crisis.
Midwest Flooding Might Make the Oil Glut Worse
Barbara J Powell – Bloomberg
Pipeline, terminals near St. Louis shut before expected flood
Ozark shutdown seen adding to record Cushing oil supplies
The worst flooding across the U.S. Midwest in four years has shut some oil pipelines and terminals near St. Louis, potentially swelling a glut of crude and extending this year’s price slide.
The Right Way to Tax Carbon
By Editorial Board – Bloomberg
In 2016, voters in Washington will get the chance to enact the first state carbon tax. To make sure they provide a good example for the other 49, they should adopt the smartest policy with the broadest bipartisan appeal: a revenue-neutral tax.
World Bank exit highlights China fears
Shawn Donnan in Washington – FT
When the Postal Savings Bank of China announced it had raised $7bn from a group of international investors it marked a significant step towards what is expected to be one of the biggest Chinese listings in 2016.
China cracks whip on foreign banks with forex shut-out
BY ENGEN THAM AND DENNY THOMAS – Reuters
Chinese authorities are starting to police the nation’s foreign exchange market in a way currency traders have rarely seen before, levying penalty payments for aggressive trading and prompting some banks to turn down business.
SocGen to shut India equities research desk
The Mumbai-based desk employed four people who were all offered the option to relocate to Bengaluru to join the bank’s offshore equities research operations.
Colombia’s Economic Struggles Are Reflected In The Global X MSCI Colombia ETF – Global X MSCI Colombia ETF (NYSEARCA:GXG)
Andre Waldron – Seeking Alpha
In order to fully understand the issues within the Colombian economy, it is important to review the economic struggle within the Latin American region. It is no secret that the Latin American region has had a very poor economic run in 2015. The economy in Venezuela is dealing with high inflation that could be seen in quite a few statistics such as the inflation rate, core inflation rate, consumer price index and food inflation.
Economic monitor: Central Asia’s unpegged post-crisis drift
Azerbaijan’s thinly-traded eurobond sold off sharply as the central bank followed through on its early year pledge to float the currency after initial devaluation, and it promptly fell 30% overnight against the dollar. The pattern mirrored peg adjustment in Central Asia’s other major oil exporter, Kazakhstan, with world prices half the budgeted level and the Russian ruble also recovering against the local unit, putting international reserves under unprecedented strain to maintain previous exchange rates.