New heights – but lower trading levels
Nils-Robert Persson – Cinnober
The JLN has been a daily read for me for many years and it’s great to get the chance to work with this amazing editorial team for a week. So, thank you John, and I hope your recovery goes well.
On this day 19 years ago, the Dow Jones Industrial Average closed on a new record high at 4430.59. At that time, we had a long period of growth behind us, and about five more years of growth to come. I was CEO of OM Stockholm, the Swedish derivatives exchange, and it’s easy to get nostalgic about those days. We would launch one new instrument a month on average, be it a new instrument type or asset class (I specifically remember the day we launched pulp futures). Far from all took off, at least 90 percent failed, but there was an enormous enthusiasm and we dared to test without lengthy analyses and investigations.
Today we are at new record heights with the DJIA at about 16,500. But why haven’t trading volumes fully recovered to the same levels as before the Lehman crash? The theories are many, what’s yours?
Without doubt, the need for financial markets hasn’t declined; the need to allocate capital to entrepreneurs and growth companies is as big as ever, and our aging population surely needs to invest its money for retirement income.
CME Clearing Europe to Offer Collateral System With SIX
Nandini Sukumar – Bloomberg
CME Group Inc. (CME)’s European clearinghouse and SIX Group’s central-securities depository have agreed to offer an integrated collateral-management service to insurance companies operating in Switzerland.
*** NRP: Well done, Otto and Lee!
Cawley exit signals SEF struggles
Mike Kentz | IFRe
The long slog of Dodd-Frank reform has claimed its first victim. Start-up swap execution facility Javelin Capital Markets and CEO Jamie Cawley have agreed to part company after shareholders expressed frustration at the platform’s slow pace of growth. Javelin, which launched in 2009 as a trading venue for interest rate swaps, has been battling negligible volume increases nearly three months after OTC swaps were first mandated to trade on SEFs by US regulators.
***NRP: A market limbo that no one benefits from…
Boom times for bank trading have gone, and may never come back
The boom years of financial market trading, when banks made unprecedented profits from bonds, currencies and commodities, may be over for good as financial firms realize there will be no cyclical upswing on their dealing desks.
***NRP: Another indication that the big banks will have a different position in the markets in the future
CFTC’s O’Malia taking a hard look at HFT
Michael Lewis’ book “Flash Boys” stirred up debate about high frequency trading like no other. Regulators, such as the Commodity Futures Trading Commission (CFTC) are taking a more in-depth look at the trading method to determine if there might be problems with HFT in the futures space as well.
CFTC Commissioner Scott O’Malia, speaking to John Lothian News for its market structure series, said that HFT has been on the agency’s radar screen for some time, and has created a sub-committee to bring experts on both sides of the debate.
Nasdaq OMX data shines new light on HFT activity
Tim Cave – Financial News
A clearer picture of high-frequency trading in Europe is emerging after Nasdaq OMX has become the first exchange in the region to disclose trading activity by its Nordic members in individual stocks.
***NRP: A good start – transparency is always welcomed and we need more.
HFT Is Damaging the Reputation of the Markets
Daniel Marcus – TabbFORUM
In the race for speed, disruptive high-frequency trading behaviour and an arms race for the fastest market data threatens to cause more reputational damage to financial markets. But regulators should ban bad drivers, not the cars.
***NRP: Everything that helps us achieve fair and orderly markets is good and as long as HFTs are following fair and transparent rules they are adding value.
Is Wall Street Killing Its Bankers?
William D. Cohan – Bloomberg View
It’s probably just a sad coincidence, but the sudden deaths since December of a group of young men who worked for JPMorgan Chase & Co. (or who once did) have conspiracy theorists in a tizzy. For the less conspiracy-minded, the deaths again raise a troubling question: Is the already-difficult job of working in finance even tougher in the aftermath of the financial crisis?
Gary DeWaal’s Bridging the Week: Exempt DCOs; O’Malia: Futures Markets Not Rigged; Deregulation
Katten Muchin Rosenman
Low latency trading continues to take center stage more than a month after the publication of Michael Lewis’ Flash Boys: A Wall Street Revolt. Indeed, this week a US Senate Committee will hold a hearing to assess how the US Commodity Futures Trading Commission ensures market integrity in light of such trading activities. But other regulatory developments also occurred internationally including two involving regulators themselves — one discussing its plans to deregulate, and another discussing its specific service commitments.
MarketsWiki Page of the Day
BOX Options Exchange
MarketsWiki Recent Updates
Companies, Organizations and Groups
48,860,068 pages viewed, 7,949 articles, 182,749 edits
Nasdaq Hires Friedman as Co-President, Likely Front-Runner to Be Next CEO
Nasdaq OMX Group Inc. has hired Adena Friedman as co-president as part of a broad restructuring of the company that positions the former exchange executive as the most likely to succeed Robert Greifeld in the top job. Ms. Friedman returns to Nasdaq after a three-year stint as chief financial officer at Carlyle Group LP.
***NRP: Now we know the two runners for Mr Greifeld’s job. Let the best woman or man win!
Goldman, Barclays, Credit Suisse Draw High-Speed Trading Scrutiny
Justin Baer and Scott Patterson – Law Blog – WSJ
New York’s attorney general is scrutinizing the private stock-trading venues run by Goldman Sachs Group Inc., Barclays PLC, Credit Suisse Group AG and others as part of a sweeping probe into whether hig
Nasdaq expects increase in IPOs from Israeli firms
Nasdaq expects a stronger year for initial public offerings (IPO) of Israeli firms than it had in 2013, the stock exchange’s vice chairman said on Sunday.
Dark pools at nine-month low despite growth in bigger trades
Anish Puaar – Financial News
Activity on dark pools hit a nine-month low as a share of European equities trading in March, with falls across almost all broker-owned platforms but gains for platforms that have encouraged large trades.
Tullett to cut jobs, buy oil broker to tackle revenue fall
Clare Hutchison – Reuters
British interdealer broker Tullett Prebon is cutting more jobs and buying oil broker PVM in its latest attempt to offset a drop in trading since the financial crisis.
Hated Stocks Unlock Market as Analysts No Guide to Gains
Lu Wang – Bloomberg
To pick a winning stock at the start of March, you had to find a company that was hated by analysts, adored by short sellers, avoided by institutional buyers and averse to doing just about anything but pay dividends. The unlikelihood of arriving at such a blueprint after a five-year bull market is taking a toll on asset managers, with more than 80 percent of growth and value funds trailing benchmarks in 2014.
***NRP: Dead fish can only follow the stream, the fittest swim against the flow.
2 Banking Giants Implore U.S. Authorities to Go Easy
BEN PROTESS and JESSICA SILVER-GREENBERG – NYTimes.com
Two of the world’s biggest banks, facing the threat of criminal charges, are mounting final bids for leniency. To avoid the fallout from pleading guilty — no giant bank has done so in more than two decades — BNP Paribas and Credit Suisse made last-ditch appeals to prosecutors and regulators in recent weeks, according to people briefed on the talks.
How the euro was saved – FT series
To the astonishment of almost everyone in the room, Angela Merkel began to cry. “Das ist nicht fair.” That is not fair, the German chancellor said angrily, tears welling in her eyes. “Ich bringe mich nicht selbst um.” I am not going to commit suicide. For those who witnessed the breakdown in a small conference room in the French seaside resort of Cannes, it was shocking enough to watch Europe’s most powerful and emotionally controlled leader brought to tears.
Hedge fund titans are testing the quality of US democracy
Edward Luce – FT.com
John Paulson made his fortune by taking a massive short position against the US housing bubble. Today the hedge fund billionaire is betting that the US political system will fail. This time he has company.
In ‘Stress Test,’ Timothy F. Geithner Recalls Crisis Days
One afternoon in the summer of 2008, as the financial system was careening toward the abyss that would send the United States into the worst economic emergency since the Great Depression, Timothy F. Geithner — then president of the Federal Reserve Bank of New York, and later, President Obama’s Treasury secretary — tried to lighten the mood in his office with “an impromptu contest for the best metaphor for what was happening.”
***NRP: Clearly interesting times – no one outside this office spoke about real time risk management and clearing back then.
CFTC Issues Notice of Temporary Registration as a Swap Execution Facility to ICAP Global Derivatives Limited
The U.S. Commodity Futures Trading Commission (CFTC or Commission) today approved the application of ICAP Global Derivatives Limited (IGDL) for temporary registration as a swap execution facility (SEF). IGDL is a private limited company registered in the United Kingdom and is a wholly-owned subsidiary of ICAP Holdings (UK) Limited, a private limited company registered in the United Kingdom.
***NRP: Still someone who sees an opportunity here. Interesting that a UK entity has sought to be regulated in the US.
CFTC’s Global Markets Advisory Committee to Meet May 21, 2014
The U.S. Commodity Futures Trading Commission (CFTC) Acting Chairman Mark P. Wetjen announced today that he will convene a meeting of the CFTC Global Markets Advisory Committee (GMAC) on Wednesday, May 21, 2014 to discuss issues related to the CFTC’s coordination with foreign regulators on the oversight of foreign-based swap clearinghouses and foreign swaps execution facilities.
Clock is ticking on European consolidated tape tangle
Anish Puaar – Financial News
Picture a broker trying to benchmark the performance of a trade in Europe. Easy – unless the only source of price information was old-fashioned paper ticker tapes pouring in from every venue across the European Union. True, brokers no longer have a tangle of paper piling up on the office floor. What they face, however, is the electronic equivalent.
***NRP: Time to wake up the COBA, many differences though between US where the exchanges are responsible for best execution and Europe where brokers have that responsibility.
Remarks At The 46th Annual Rocky Mountain Securities Conference, SEC Commissioner Daniel M. Gallagher, Denver, CO, May 9, 2014
Exchanges & Trading Facilities
Russell 2000 Options Can Provide Cushion to Manage Small-Cap Exposure
Matt Moran – CBOE Options Hub
In 2013 the Russell 2000 Total Return Index rose a strong 38.8%, but since hitting its all-time high on March 4, 2014, the index has dropped 9 percent. Recent related headlines include “Will Diving Small-cap Stocks Sink Market?” in USA Today, and “Small-caps’ Slide Reflects a Market in Trouble” at Marketwatch.com.
CME Clearing Europe First To Receive Regulatory Approval For New Full Segregation Client Protection Model
2014 CBOE Risk Management Conference Europe
The Chicago Board Options Exchange and CBOE Futures Exchange will host the 3rd Annual CBOE Risk Management Conference Europe, from September 3 through 5, 2014, at the Powerscourt Hotel in County Wicklow, Ireland.
LME keeps clearinghouse fees steady, introduces annual levies
The London Metal Exchange has set the day-to-day fees for using the soon-to-be-launched LMEClear at the same level as existing LCH.Clearnet tariffs.
***NRP: A brand new state of the art clearing house will enter the arena later this year, competition will increase on services as well as performance and risk management.
Canadian Securities Exchange Added To OTC Markets Group’s List Of “Qualified Foreign Exchanges”
CSE Issuers Now Eligible To Apply For Trading On The OTCQX And OTCQB Marketplaces
NYSE Group Inc. Issues Short Interest Report
NYSE MKT Issues Short Interest Report
NASDAQ Announces End-Of-Month Open Short Interest Positions In NASDAQ Stocks As Of Settlement Date April 30, 2014
[SIX] April 2014: trading activity slightly lower
Ljubljana Stock Exchange: Monthly Statistical Report For April 2014
EEX: Call For Applications For The 2014 “EEX Excellence Award” – Term For The Submission Of Applications Concludes At The End Of September
TOM MTF Statistics Week 19, 2014
TOM Insight April 2014
Hedge Funds & Managed Futures
Fund managers face passive-aggressive backlash
Pauline Skypala – FT.com
It’s official: paying active managers to pick stocks is a waste of money. Who says so? The UK government, which is consulting on whether the GBP178bn Local Government Pension Scheme should switch from active to passive management for listed assets.
Few funds ready to follow Stanford’s lead on fossil fuel stocks
Few if any of the big U.S. pension or college endowment funds appear ready to follow in Stanford University’s footsteps and pull their money out of shares of coal miners or other fossil fuel producers.
Hedge Fund Returns Are Falling Because Hedge Fund Returns Used To Be Just Great
Tim Worstall – Forbes
Dam McCrum over at FT Alphaville has a look at why the top hedge fund managers are making so much darn money. I don’t disagree with anything he says I just want to pick up on a point and expand it. For we can explain some of what has been happening just with some pure Adam Smith from a couple of centuries ago. what is being said here about new and small hedge funds also rather applies to the entire industry:
Implied vs Realised Volatility
Jessica James and Jonathan Fullwood – FOW
It is used to predict spot changes. It is used to predict volatility changes. Folk even do technical analysis on it. We lost count of the times that we were asked, when visiting a client, ‘What have you got on implied-to-realised vol spread as a predictor?’
Pension schemes do better managing their money themselves says Hymans Robertson review
Mark Cobley – Financial News
If you want something done properly, perhaps it really is better to do it yourself. One of the most intriguing sections of Hymans Robertson’s review of the structure of the £178 billion Local Government Pension Scheme, published just over a week ago, was its look at the small number of funds that run most of their own money. They seem to do a better job than many of their peers who employ expensive private sector asset management firms.
Pimco Total Return cuts mortgages securities to near 4-yr low
The Pimco Total Return Fund, the world’s largest bond fund, cut its holdings of U.S. mortgage securities for a third straight month in April to its lowest level since July 2010 on continued bets that the Federal Reserve will conclude bond purchases this year, data from the firm’s website showed on Friday.
FN hedge fund awards 2014: Caxton named best hedge fund manager in global macro
Emma Cusworth – Financial News
Succession is not something hedge funds have generally been very good at. Many managers, particularly among macro funds, close their business and return money to investors rather than hand over to new leadership. Caxton Associates, founded by Bruce Kovner in 1983, has therefore succeeded where others have failed.
FN hedge fund awards 2014: Makuria wins new hedge fund manager
Lucy McNulty – Financial News
While many of Europe’s hedge fund newcomers have struggled in a tough fundraising climate of recent years, a notable exception has been credit specialist Makuria Investment Management, the recipient of the Financial News award for New Hedge Fund Management Firm of the Year.
Hedge funds prepare for Hong Kong to become gateway to Chinese savings
James Williams – Financial News
The mutual recognition scheme that will allow Hong Kong to become a gateway to the whole of China has stirred interest among international hedge funds. Eyeing the country’s untapped $6.6 trillion retail savings market, several major hedge fund managers say they are preparing to take advantage of a the scheme when it’s launched.
Man Group: Interim management statement for the quarter ended 31 March 2014
Banks & Brokers
Goldman Under Investigation for High-Speed Trading
RACHEL ABRAMS – NYTimes.com
Goldman Sachs’ high-frequency trading operations have been getting a lot of attention recently. Just perhaps not the bank’s favorite kind.
Deutsche Bank managers cleared in internal Libor probe: report
Deutsche Bank has cleared its top management after an internal investigation into manipulation of the Libor benchmark interest rate, German magazine WirstschaftWoche reported.
Interactive Brokers Group, Inc. CEO Explains the ‘Magic’ of His Business (IBKR)
Brendan Mathews – Motley Fool
Motley Fool Stock Advisor senior analyst Jim Mueller and analyst Brendan Mathews recently traveled north to tony Greenwich, Conn., to interview Thomas Peterffy, CEO and founder of Interactive Brokers – and now they’re sharing their interview with Fool.com readers.
In Silicon Valley, Morgan Stanley Reigns
Despite dire predictions post-Facebook, Morgan Stanley is firmly ensconced at the top of the closely watched league tables for technology deals, which track investment banking performance. Since Facebook went public, Morgan Stanley has been involved in 47 technology public offerings with a total value of $23.4 billion.
Why Barclays Did What It Did (and Why It Might Not Be Enough)
Ben Wright – MoneyBeat – WSJ
On Thursday, Barclays decided to dial down what for the best part of two decades has been its core strength: fixed income trading. Why? Well almost every bank’s fixed income trading business is hurting. But some are hurting more than others.
Goldman banking revenue to grow with global economy: Barron’s
Goldman Sachs Group Inc (GS.N) may reward long-term investors as demand for the U.S. investment bank’s worldwide underwriting, trading and custodial services grows with the global economy, according to Barron’s.
JPMorgan examining its relationship with domestic U.S. banks -WSJ
JPMorgan Chase & Co may cut down on its domestic correspondent banking business, as it scans its relationship with several hundred of domestic correspondent banking clients, Wall Street Journal reported, citing people familiar with the matter.
Clearing & Settlement
Industry to meet regulators on FX options clearing plans
Industry utility CLS, central counterparties and trade bodies will meet with global regulators and supervisors in June in a bid to continue discussions on establishing a viable framework for clearing physically settled FX options. Market participants and regulators have been trying to come up with a solution to moving physically settled over-the-counter FX options into central clearing, without incurring a same-day liquidity shortfall of potentially as much as $161 billion in a stress event, or other unintended consequence, such as disrupting the global payments system.
Clearstream’s April 2014 Figures – 5 Percent Increase In Client Assets Under Custody In April 2014 Compared To April 2013
Custody, Settlement, Collateral Management And Investment Funds Business Continue To Grow – Stefan Lepp: “Collateral Strategy Already Confirmed, But Will Kick In Fully With TARGET2-Securities”
[HKEx] OTC Clear is Now Able to Offer its Services to US Clearing Members
Indexes & Products
Deutsche ETP unit eyes US passive assets
Sarah Krouse – Financial News
Deutsche Asset & Wealth Management, Europe’s second-largest exchange-traded product provider, is making a push for assets in the US, bulking up its sales staff and plotting its growth strategy in a market where it ranks 12th.
[OSE] Change of Component Issues for RN Prime Index
[TSE] New ETF to be Listed on May 29, 2014(Thu.) – Simplex Asset Management “TOPIX Bear -2x ETF”
[TSE] ETF/ETN Monthly Report for Apr. 2014
SunGard launches Hedge360 Risk Reporting Service
SunGard has the launched Hedge360 Risk Reporting Service, providing hedge funds with independently validated data and analytics to help meet investor demand for due diligence and risk management.
Exegy Releases Faster, Feature-Rich Appliances And API
Exegy Inc. has released new versions of its hardware-accelerated Ticker Plant and Market Data System appliances and Exegy Client API that deliver substantial improvements to performance, operational transparency and resiliency.
Former e-commerce exec pleads guilty in eBay insider case
A former executive at an e-commerce company that was acquired in 2011 by online retailer eBay Inc pleaded guilty on Friday to insider trading in connection with the takeover.
U.S. Advances Offensive on Use of Swiss Insurance to Hide Assets
U.S. authorities delivered a public blow to a Swiss firm that helped Americans use insurance products to hide money, part of a broader campaign to root out undeclared assets stashed in the offshore wealth haven.
Environmental & Energy
Obama to give push on climate
Coral Davenport, The New York Times
President Obama will announce on Friday a handful of executive actions and private and nonprofit groups’ investments in energy efficiency and renewable energy.
***LB: Also in this story “they are part of a broader campaign to build public support for an Environmental Protection Agency rule that the White House will unveil in June. The rule, which has already run into objections, will limit carbon pollution from coal-fired power plants and is expected to create a major new market for zero-carbon energy from sources like wind and solar.”
White House solar panels power up
Suzanne Goldenberg, The Guardian
Barack Obama will on Friday unveil several new initiatives intended to expand the deployment of solar power on Friday, as officials confirmed that a set of solar panels on the roof of the White House was now operational.
Moscow ups stakes in gas dispute
Jack Farchy and Roman Olearchyk, The Financial Times
Gazprom will only supply Ukraine with gas that has been paid for in advance from the start of June, Moscow said on Thursday, after Kiev missed another deadline to pay its mounting energy debt to the Russian company.
***LB: Also in this story “The move to pre-payment raises the prospect of a disruption in gas supplies through Ukraine – a key transit point for about 15 per cent of European gas supplies.”
Hong Kong Right to Reject Alibaba – Fund
Enda Curran – MoneyBeat – WSJ
Even as investors gear up for Alibaba Group Holding Ltd’s blockbuster listing in the U.S., one of the world’s biggest pension funds is backing Hong Kong’s decision to turn down that IPO.
Lawmakers urge governance shake-up at Japan pension fund
Ben McLannahan in Tokyo – FT.com
Lawmakers in Japan are pushing to overhaul the governance structure of the Y129tn ($1.3tn) Government Pension Investment Fund , paving the way for the world’s biggest pool of retirement savings to invest more broadly across a range of assets and markets.
SGX welcomes Genting Hong Kong to Mainboard
Korea Exchange: Single Unit Trading Now Available For KOSPI Market Stocks
Tokyo Commodity Exchange: Good Delivery Material Price Differential For May 2014 Rubber Contract
Ban on fresh Multi Commodity Exchange contracts worries brokers
The Forward Markets Commission’s latest directive to Multi Commodity Exchange of India Ltd Financial Technologies to dilute its 26% stake in the next two to three months.
Erdogan Courts Gulf’s Billions After Wrong-Way Bet on Egypt
Alaa Shahine, Isobel Finkel and Onur Ant – Bloomberg
Turkish Prime Minister Recep Tayyip Erdogan is seeking to limit the economic costs of picking the losing side in the regional power struggle over Egypt.
Qatar Exchange Closes London Leg Of Investor Forums To Coincide With Inclusion Of Qatar In MSCI Emerging Markets Index
The Top 13 Participants Achieve A Return Of 12.3% On Average Within 2 Weeks: Dubai Financial Market Honors The Winners Of Its Annual Stock Game
Sharjah Islamic Bank (SIB) Joins NASDAQ Dubai Murabaha Platform For Islamic Financing
Malaysia’s Audit Oversight Board Annual Report 2013: Oversight Focus On Internal Monitoring Systems
Profits Of Listed Companies On The Palestine Exchange Grow By 9% In The First Quarter Of 2014
Malawi Stock Exchange Monthly Market Performance Report – April 2014
The 10 Minutes Session Further Enhances Closing Price Calculation And Purges Last Trade Effect: DFM Implements Pre-Closing Session As Of 14th May 2014
The New Facility Enables Members To Enter Limit Orders To Be Executed At The Market Closing And Is Timely Implemented With UAE Inclusion In MSCI’s Emerging Market Category
Cargill seeks fresh recipe for success
Gregory Meyer in Saskatoon and Neil Hume in Minneapolis – FT.com
A muddy industrial complex on the Saskatchewan prairie is a crossroads of Canadian agriculture. Bags of seed are stacked in a shed, awaiting sale to farmers. Wheat and barley are piled in concrete silos, ready to fill trains to Pacific ports. Shrouded in fragrant steam, the world’s largest canola processing plant crushes 1.5m tonnes of the oilseed every year.
How ‘Big Corn’ lost the ethanol battle to Philadelphia refiners
Six months ago the U.S. oil industry scored a surprise win against farm groups when the Obama administration proposed slashing the amount of ethanol refiners must blend into gasoline, a move that could save them billions of dollars.