First Read

Bits and Pieces
By John J. Lothian

Yesterday was the one-year anniversary of my new knees. On March 18, 2013, I underwent a double knee replacement, which has substantially made my life better.

I am however, not without pain, as I have serious back problems which predate my knee problems. In all likelihood I will be undergoing back surgery in late April.

Assuming I do that, I will again be out for four weeks or so recovering from the surgery and doing physical therapy to restore my life to a pain-free state. Or, so I hope.

We will most likely again employ guest editors for the John Lothian Newsletter during my absence, so if you have some suggestions of previous editors you liked, or new ones you think you would enjoy, let me know.

A year after my knee replacement, I find myself down in Naples, Florida, attending the CBOE’s Risk Management Conference which is up the road in Bonita Springs. The conference is unlike any I have attended as it is mostly end-users of options, or those who want to be.

There is something for everyone here, from high level updates on volumes, products and innovations to into the weeds presentations on portfolio re-balancing and of course how to use CBOE’s volatility products. The VIX is one popular contract and subject at the conference.

Another subject getting some play is the CBOE’s investment in Tradelegs, which was announced during the FIA’s Boca Raton International Conference last week, where we met briefly with Tradelegs CEO Gideon Agar. I will have more to say about Tradelegs in an upcoming commentary, but let me say that this is an exciting product to give portfolio managers a simple, interactive answer to their complex views on individual equity positions.

In upcoming releases, Tradelegs will be adding indices and some of the CBOE’s products to the analysis.

Lastly, let me give a plug to our CEO Interview Series. We interviewed six of the leading exchange CEOs from around the world and asked them about the global competitive landscape, regulation, growth prospects and technology. Today, we start with Jeff Sprecher, Intercontinental Exchange Group CEO who rocked the exchange world last year with his purchase of NYSE Euronext. Follow along with us over the next couple of weeks as we release two interviews per week.

We also are still working on our reader survey. Please take 30 seconds to fill it out. It helps us, help you, help us. Please click here for the survey: jlne.ws/1bOrYYC

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Exchange CEO Series – ICE Cover: Jeff Sprecher taking on “fierce competition” and hackers
JohnLothianNews.com
Exchanges have never faced more challenges and opportunities than they do today.
John Lothian News sat down with six exchange CEOs at the 2014 FIA Boca Conference to talk about their views on four main topics: competition, regulation, growth and technology. Here’s what Jeff Sprecher, CEO of the IntercontinentalExchange Group (ICE), had to say about each.
“It’s interesting to me that regulators today are trying to introduce more global competition when in reality, for those of us who are in the business, we realize that competition has never been more fierce and more global,” Sprecher said. “And frankly, we are all trying to look at the same opportunity set and trying to use our current positioning like never before.”

Watch the video »

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VIX Trading Set to Go ‘Round the Clock
Chris Dieterich – MoneyBeat – WSJ
Soon there will be no sleep for the market’s fear gauge. Exchange operator CBOE Holdings Inc. said Tuesday that it will expand futures trading on its CBOE Volatility Index to nearly 24 hours a day.
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**JK – Paranoid insomniacs rejoice!

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CME Group to Start North American Aluminum Futures on May 5
Maria Kolesnikova and Agnieszka Troszkiewicz – Bloomberg
CME Group Inc. (CME), owner of the world’s largest futures exchange, will start physically-delivered North American aluminum futures on May 5. The contract will serve as a price reference for the region’s aluminum industry and will trade on the floor as well as electronically, with over-the-counter trades executed on CME Clearport, the exchange said in a statement today.
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**JK – Miller/Coors Brewing Co. headquarters are just two blocks down the street from CME Group.

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JLN/MarketsWiki 2014 Annual Survey – Please Give us 30 Seconds of Your Time
John Lothian News
You still have time to fill out our quick demographic survey and get in the running for your choice of an iPad Mini or a pair of Bose Quiet Comfort Noise-Canceling Headphones. The cost is a mere 30 seconds of your time. Answers will be kept confidential.
jlne.ws/1bOrYYC

**JK – Way, way, way better odds to win than the Mega Millions lottery. And more meaningful too.

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Panama launches diamond exchange for bling-loving Latins
Jude Webber in Mexico City – FT.com
Latin America is getting a new financial market. But forget frenzied open-outcry pit trading or the dizzying blur of numbers on screens. In the new bourse, due to open in Panama this year, deals worth millions of dollars will be sealed with a solemn handshake and the Hebrew phrase “Mazal u’ Bracha” – “luck and blessing”.
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**JK – Panama, reaching well beyond funny hats.

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High-Speed Traders Still Trading Faster than Low-Speed Traders
Matt Levine – Bloomberg View
I find myself unable to get all that mad at New York Attorney General Eric Schneiderman’s weird quest to ban high-frequency trading. It has a lot of things I dislike — overheated rhetoric, efforts to criminalize things that everyone including regulators thought were fine when they were done, vague unfulfillable promises of level playing fields — but there’s a good point at the core of it.
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***JM: Is it better to do nothing, or to implement fixes that won’t actually work? Don’t know, but there’s commonly less loud barking associated with the former.

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The Stages of Bubble Mania: Ritholtz Chart
Barry Ritholtz – Bloomberg View
My friend Josh Brown reminded us yesterday of this terrific chart from Jean-Paul Rodrigue, a professor in the department of global studies and geography Department at Hofstra University.
jlne.ws/1j362Ms

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How to game a Sef: Banks fear arrival of arbitrageurs
Tom Osborn – Risk.net
Some banks are scared to make prices on platforms that offer both an order book and request-for-quote trading – other users might be able to game them by using the two approaches in conjunction, the banks claim. The result could be that dealers stop being 24-7 liquidity providers.
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MarketsWiki

MarketsWiki Page of the Day
Steve Dickey
jlne.ws/1kFGfY6

MarketsWiki Recent Updates

People

Nicole M. Kuchera; Steve Dickey; Thomas A. Kloet; Simon Puleston Jones; Emma Davey

Companies, Organizations and Groups

Oslo Børs; Futures and Options Association

Products

VIX; CME Group Aluminum Futures; CME Group metals products

Statistics

47,732,592 pages viewed, 7,852 articles, 180,623 edits
MarketsWiki Statistics

Lead Stories

Nasdaq OMX gets go ahead for clearing house under new rules
Philip Stafford – FT.com
Nasdaq OMX has become the first market infrastructure owner to receive approval for its clearing house to operate under tougher new European regulations designed to tighten oversight of derivatives markets.
jlne.ws/1gaiJD6

Australia regulators to probe forex price-rigging
Jamie Smyth in Sydney – FT.com
Australian regulators are launching a probe into the country’s US$168bn foreign exchange market, as the net widens in the sprawling international investigations into allegations of price-rigging by banks and currency traders.
jlne.ws/1gaiJD8

Exclusive: EU legal opinion opens door to Tobin tax on forex
Reuters
Deals from the multi-trillion euro a day foreign exchange market could in principle be included in a tax on financial transactions, a legal opinion from European Union lawyers seen by Reuters said.
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Attorney General Calls HFT Advantages “Insider Trading 2.0”
Becca Lipman – Wall Street & Technology
Attorney General Eric T. Schneiderman wants to eliminate the “fundamentally unfair” advantages exclusively provided to high frequency trading firms.
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Schneiderman Dislikes High-Speed Traders All Over
Jonathan Weil – Bloomberg View
New York Attorney General Eric Schneiderman is out again with another reminder that he doesn’t like the way high-frequency traders operate. He believes they have unfair advantages, and that it’s a bad idea for stock exchanges to sell them special services that cater to their wants. For that matter, so do I. So on that we can agree.
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Ruling Highlights Unequal Treatment in Penalizing Corporate Wrongdoers
STEVEN DAVIDOFF – NYTimes.com
Bankers are not exactly popular these days, but is it right to let directors escape scot-free when they do wrong and an investment bank pays the bill?
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Think Financial Systems Are Safe? Think Again, Warns Carney
Jason Douglas – MoneyBeat – WSJ
“It doesn’t take a genius” to see risks to the smooth running of the financial system are mounting today, Bank of England Governor Mark Carney noted Tuesday.
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U.S. Should Seek Swiss Banker Extradition, Senators Say
David Voreacos – Bloomberg
U.S. Senators Carl Levin and John McCain urged the Justice Department to seek extradition of about 30 Swiss bankers and others who are charged with enabling offshore tax evasion and haven’t appeared in federal courts.
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Regulatory

SEC and FINRA to Hold Regional Compliance Outreach Programs for Broker-Dealers
The Securities and Exchange Commission and the Financial Industry Regulatory Authority (FINRA) today announced the opening of registration for the regional compliance outreach programs for broker-dealers that will take place in Denver, Los Angeles, Chicago, Miami, Philadelphia, and New York, beginning in the spring.
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New commissioner appointed to the British Columbia Securities Commission
Brenda Leong, Chair and Chief Executive Officer of the British Columbia Securities Commission (BCSC), is pleased to announce the appointment of Christopher D. Farber to the BCSC Board.
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ASIC flags crackdown on deal leaks
The Australian
INVESTMENT bankers and lawyers condemning deal leaks may raise eyebrows. Still, deal-makers at the Intralinks M&A conference in Sydney today say there is a cultural change coming to Australia toward leaks led by the Australian Securities and Investments Commission.
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Remarks To The 2014 Mutual Funds And Investment Management Conference, Norm Champ,SEC Director, Division Of Investment Management, Orlando, FL, March 17, 2014
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Remarks Of Assistant Treasury Secretary For Financial Institutions Cyrus Amir-Mokri At The Securities Industry And Financial Markets Association (SIFMA) Conference “Cybersecurity Standards: Exploring The NIST Framework.”
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Exchanges & Trading Facilities

New York Stock Exchange is Front-runner to Land Prized Alibaba Listing
WSJ.com
The New York Stock Exchange is the front-runner to win the high-profile listing for the shares of Chinese e-commerce giant Alibaba Group Holding Ltd., according to people familiar with the matter.
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TMX CEO Says New Chief Needed for Next Growth Phase
WSJ.com
TMX Group Ltd.’s top executive Tuesday said he is retiring at the end of August after accomplishing what he set out to do and because he wasn’t prepared to make a long-term commitment to steer the exchange operator through its next stage of growth.
jlne.ws/1gaiKXI

CBOE Holdings top executives authorize stock sales
Reuters
CBOE Holdings Inc’s top two executives have each established plans to sell up to 14 percent of their shares in the company, the exchange-operator said on Tuesday, a day after its stock price hit a record high.
jlne.ws/1gaiKXM

ICE more than doubled CEO’s pay to nearly $18 million in 2013
Reuters
Exchange operator IntercontinentalExchange Group (ICE.N) more than doubled the total compensation of its chief executive, Jeffrey Sprecher, last year to just under $18 million, according to a regulatory filing.
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Greifeld 2013 Compensation Rises 55.3%
Bradley Hope – WSJ.com
Robert Greifeld, CEO of Nasdaq OMX Group Inc., NDAQ -3.10% was paid of $13.8 million in 2013, an increase of 55.3% from 2012, according to the company’s annual proxy filing.
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CBOT oats trade below posted 20-cent-per-day limit
Reuters
The May oats contract at the Chicago Board of Trade fell below its daily 20-cent limit on Tuesday, dipping to $4.31-1/2 per bushel, a decline of 26 cents from the previous day’s settlement, according to the website of the CME Group, parent of the CBOT.
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CBOE CEO Edward Tilly At 30th Annual CBOE Risk Management Conference: Announces Plans For June 22 Launch of 24-Hour VIX Futures Trading
Press Release
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Portuguese Stock Exchange presents capital markets to SMEs
Euronext, a wholly owned subsidiary of IntercontinentalExchange Group, today announced that for the second consecutive year, on 20 March 2014 in Porto, the Portuguese Stock Exchange will be presenting the capital markets as an alternative source that can and should be used more actively by enterprises , especially SMEs , in order to meet their development needs and financing options.
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SIX Readies Fatca Modification Monitoring
Michael Shashoua – Waters Technology
SIX Financial Information will go live with monitoring for material modifications that can make securities subject to Fatca rules, when compliance takes effect on July 1
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CBOE Holdings Announces That Certain Officers Have Entered Into 10b5-1 Plans
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Hedge Funds & Managed Futures

US hedge fund launches continue to surge
Margie Lindsay – Risk.net
US hedge fund launches grew around 10% in 2013. Seward & Kissel reports redemptions are tightening, as quarterly liquidity becomes the norm for fund launches
jlne.ws/1gaiMPr

Morningstar: Pimco Still Formidable But Questions Linger
Tom Lauricella – MoneyBeat – WSJ
It’s been nearly two months since the surprising departure of Mohamed El-Erian from bond-giant Pimco. Subsequent weeks have seen much focus on the apparent friction between Bill Gross and Mr. El-Erian. Now, the folks at Morningstar are turning the focus on what it all means for Pimco’s investors, and what the management tumult means for the firm’s culture and investment process.
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Och-Ziff warns over Libya probe by DoJ
Stephen Foley and Camilla Hall in New York – FT.com
Och-Ziff, the hedge fund group, warned that it could face a hit to its financial results from a Department of Justice investigation into alleged corruption in Libya before the fall of Muammer Gaddafi.
jlne.ws/1gaiMPv

Germans Are Still ‘Equities Grumps’
MoneyBeat – WSJ
German private investors continue to play it safe. Despite their growing confidence in the German economy, private investors continue to shun equities in favor of deposits and savings accounts with skinny returns, according to a quarterly survey from Union Investment.
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Banks & Brokers

J.P. Morgan Agrees to Sell Commodities Trading Business
WSJ.com
J.P. Morgan has become the latest bank to scale back its commodities business, striking a deal to sell its physical assets and trading arm to Swiss trader Mercuria Energy Group Ltd. Wednesday, according to a person familiar with the situation. The terms of the deal aren’t yet clear, but when the bank first opened its books to potential buyers in October it valued the assets at $3.3 billion.
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A Credible Strategy to Fix Barclays
DOMINIC ELLIOTT – NYTimes.com
Barclays’ plan to transform itself needs urgent transformation. The year-old strategy set forth by its chief executive, Antony P. Jenkins, to revamp the lender is already struggling.
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Equities and investment banking offset fixed income at Jefferies
Sarah Krouse – Financial News
Investment banking helped boost revenues at US bank Jefferies Group during its fiscal first quarter, despite fears of a fall-off in fixed income.
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Bankers fear leaks from ECB health check
Reuters
Euro zone bankers are worried that sensitive information will leak out before the official publication of the bloc’s review of bank balance sheets, triggering speculation and making investors uneasy.
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Citigroup Sees Equity Solutions Fueling Derivatives Sales
Alexis Xydias and Elisa Martinuzzi – Bloomberg
Customized trades may generate half the equity-derivatives revenue at Citigroup Inc. (C) within two years as investment banks seek to offset lower profit from stock broking and clients demand services beyond traditional dealing.
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Global Finance Names The World’s Best Banks By Region 2014
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Clearing & Settlement

ISDA Publishes The First Clearing Member Reliance Opinions
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CME Group Clearing: March 2014 Final Foreign Currency Settlement Prices
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Indexes & Products

Options Show More Bullish Bets on Bond ETFs As Rate Fears Ease
Chris Dieterich – MoneyBeat – WSJ
About those bond worries… With Ukraine in turmoil and China showing signs of a potential slowdown, the options market is showing a renewed bullishness for U.S. Treasury bonds. That marks a sharp change from the consensus view last year, when most market watchers warned that rising interest rates would inflict losses on bonds.
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Gold-Mining ETF Outshines Bullion Fund as Haven Bet: Commodities
Debarati Roy – Bloomberg
Investors seeking a hedge against a waning U.S. economic recovery and escalating conflict in Ukraine made twice as much money buying gold-mining shares rather than the metal the companies produce.
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STOXX Introduces STOXX Japan Strong Balance Sheet Indices
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Technology

Bloomberg Launches Software Provider Partner Program
Faye Kilburn – WatersTechnology
Bloomberg’s Enterprise Solutions and Trading Solutions business units have established a formal partnership program to enable third-party financial software providers to connect to Bloomberg applications and market data to provide its customers with integrated, scalable and reliable enterprise services.
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Anova’s First AOptix ULL-3000 Now Installed in the Field
Anova Technologies together with their joint venture partner, AOptix Technologies, today announced that construction on the first ULL-3000 path has now commenced in New York/New Jersey metro area.
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FCM360 taps Peter Heales, Former FIA Chair and Bear Stearns head of listed derivatives as Managing Director for Europe, Middle East and Asia
Peter Heales, who became one of the world’s most influential authorities on listed derivatives when he was chairman of the Futures Industry Association (FIA) Europe has joined FCM360, the financial systems infrastructure strategy and implementation company.
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Thomson Reuters Launches A Managed KYC Service In Partnership With Banks, Corporates And Asset Managers And In Consultation With Regulators
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Enforcement

CFTC Orders Sean R. Stropp To Pay $250,000 Penalty To Settle Charges Of Making False And Misleading Statements During A CFTC Investigation
The U.S. Commodity Futures Trading Commission (CFTC) today issued an Order filing and settling charges against Sean R. Stropp (Stropp), formerly of Jupiter, Florida. Stropp is ordered to pay a $250,000 civil monetary penalty for making false and misleading statements of material fact, and omitting material facts, to CFTC staff during a CFTC Division of Enforcement (DOE) investigation.
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FINRA and BATS Order Citigroup Global Markets Inc. to Pay $1.1 Million for Illegal Short Selling In Advance of Five Public Offerings and for Related Supervisory Violations
The Financial Industry Regulatory Authority (FINRA) and BATS Exchange1, Inc. announced today that they have jointly ordered Citigroup Global Markets Inc. to pay approximately $1.1 million in connection with short selling ahead of five public offerings of securities, in violation of Rule 105 of Regulation M.
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BCSC panel finds that Nevada corporation and two B.C. residents illegally distributed securities and breached cease trade order
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Financières Hélios Capital – Service of Decision by Bureau
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Environmental & Energy

Voracious Worm Evolves to Eat Biotech Corn Engineered to Kill It
Brandon Keim – Wired
One of agricultural biotechnology’s great success stories may become a cautionary tale of how short-sighted mismanagement can squander the benefits of genetic modification.
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***JB: Mother Nature is nothing if not tenacious. Build a better mouse trap and she builds a better mouse.

California May Cut Gasoline Demand 9% by 2020, BNEF Says
Alex Morales – Bloomberg
California may cut gasoline demand by at least 9 percent through 2020 as consumers switch to greener cars and state and federal policies boost efficiency.
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Spill Stirs Watchdog to Act
Valerie Bauerlein – The Wall Street Journal
Beneath the surface of the Dan River, which flows along the foothills on the Virginia state line, lie the soggy remnants of a coal-ash spill that is roiling the political landscape in the state and the regulatory environment nationwide.
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Asia-Pacific

HK hedge funds tap ‘fake’ Alibaba shares ahead of IPO
Josh Noble in Hong Kong – FT.com
Can’t face waiting for the Alibaba mega-listing? Don’t worry, investment bankers have got you covered. Some hedge funds in Hong Kong have already been loading up on synthetic shares, sold by investment banks as certificates.
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SGX To Launch New Order Types For Securities
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Thai Alternative Bourse Aims To Strengthen Companies, List More Quality Firms
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Dalian Commodity Exchange: Egg Futures Passes Market Test, March Contract Delisted – Steady Market Operation Seen, Economic Functions Shown
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Dalian Commodity Exchange: Notice On Test Of Night Trading
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China Business Conditions Improve In March
MNI China Business Indicator Increases To 53.4 In March From 50.2 In February As Firms Report Improved Credit Conditions
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Frontier Markets

Euronext Signs Agreement On UTP Implementation With Four MENA Exchanges – Underlining Success Of UTP Model
Euronext, a wholly owned subsidiary of IntercontinentalExchange Group (NYSE: ICE), today announced that it has successfully signed agreements with four exchanges in the Middle East and North Africa (MENA) region for the implementation of its new UTP solution, UTP-Hybrid.
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Equity capital markets: Erbil exchange courts Kurdish capitalists
Orlando Crowcroft – Euromoney magazine
At the Erbil Stock Exchange (ESX) on 100 Metre Road there is an awkward wait as the automatic doors fail to open. Once inside, a bare concrete lobby gives way to sparse offices. The doors of Iraqi Kurdistan’s first bourse, originally due to launch this month, serve as an unfortunate indication of its progress so far.
jlne.ws/1gaiLLq

Long way to go but Pakistan’s risk profile steadily improving
Jeremy Weltman – Euromoney magazine
The upward trend in the sovereign’s risk-score has continued since the 2013 elections as the state taps the market for sufficient credit to close a substantial financing gap.
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EM central banks sell US government bonds
Michael Mackenzie in New York – FT.com
Central banks sold US Treasury debt at the start of the year, according to the latest official data released on Tuesday, as stress among emerging market countries intensified.
jlne.ws/1gaiM1K

Deutsche Bank’s India wealth management head Bagga quits
Business Standard
Ajay Bagga, managing director and head of the private wealth management business of Deutsche Bank in India, has resigned from his post, people familiar with the development told Business Standard. Bagga, who joined the German lender in 2009, quit last week.
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Global Finance Names The World’s Best Emerging Markets Banks In Asia-Pacific 2014
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Miscellaneous

U.K. to Replace 1-Pound Coin With Secure 12-Edged Design
Svenja O’Donnell – Bloomberg
The U.K. will introduce a new 1-pound coin in 2017 as part of a crackdown on counterfeiters, after the current model spawned millions of fakes.
jlne.ws/1j32wBO

A Prison Life: Ex-Banker Struggles
WSJ.com
Lee Farkas only a few years ago was chairman of a major mortgage company with a seaplane and a fleet of cars at his disposal. Now, he chooses to eat some of his meals standing up, out of fear of his fellow inmates, and says he feels like a “zombie.”
jlne.ws/1gaiNTv

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