John Lothian Newsletter: Nasdaq plots European swap futures; EU Financial-Transactions Tax Faces More Delays; Deutsche Börse Group And Bank Of China announce Strategic Cooperation

Dec 2, 2013

First Read

IntercontinentalExchange Group and DTCC Announce Plans for Interest Rate Futures Listed on NYSE Liffe U.S.
IntercontinentalExchange Group and The Depository Trust & Clearing Corporation today announced plans to transition the clearing of interest rate futures listed on NYSE Liffe U.S. from New York Portfolio Clearing (NYPC) to ICE Clear Europe centralizing the trading and clearing of ICE’s global interest rate product portfolio. NYPC’s operations will be wound down and open interest transferred by the third quarter of 2014, subject to regulatory approval.

***** One small step for ICE, one giant leap for cost cutting. Personally, I would keep NYSE Liffe US open as an innovation incubator.


Social media moves on to the regulators’ radar
Anna Irrera – Financial News
When Twitter disclosed details of its listing last month, naturally it did so in a tweet. “We just priced our IPO,” it tweeted on November 6. That brief announcement joined a swelling torrent of financial information on social networks – which is rapidly attracting the attention of regulators.

***** LOL. My BFF.

***** Word is Nasdaq OMX is considering changing its name to Nasdaq OMG!


Perseus goes live with wireless connections between financial markets in the London metro
Perseus Telecom, a leading provider of high-speed global connectivity, High Precision Time and market-to-market networks today announced a new wireless service that connects the London based financial markets of NYSE Euronext, BATS Chi-X, London Stock Exchange, London Metal Exchange, ICAP EBS and Thomson Reuters

***** This is a company to watch.


Pitfalls in a Shifting Landscape: Trade Practice Issues for Futures and Securities
Katten Muchin Rosenman
Financial Services partners Arthur Hahn, Lance Zinman, Lisa Dunsky, Chris Kemnitz and Janet Angstadt will present the panel discussion “Pitfalls in a Shifting Landscape: Trade Practice Issues for Futures and Securities” at 4:00 p.m. on Tuesday, December 3. The session will address issues such as manipulation, block trades, wash trades, HFT requirements in the EU and a position limits update.

***** I would put this on your calendar and attend if you are in Chicago.


Regulation With a Clap of Thunder and a Massive Hammer
Marcus Cree – TabbFORUM
Thor, the Norse god, is a remarkable and timely metaphor for modern regulatory practice: protect the system first, the system’s participants second, and remember to carry a big hammer.

***** They really need a new headline writer over at TABB.


A minute is a long time in economics
Tim Harford –
High-frequency traders need high-frequency data

***** Take a minute to read this.


Render Unto Caesar, but Who Backs the Bitcoin?
How can bitcoin be anything but a passing fad? It seems you can’t open a newspaper or read a website these days without hearing about the super-yet-mysterious virtual currency known as bitcoin.

***** We are preparing a special report on Bitcoin. Coming soon.

***JM: The number of articles in the special report ranges from three to 600, depending on the day.


Gary DeWaal’s Bridging the Week: November 25 to 29 and December 2, 2013 (Attempted Manipulation, Client Money Breaches, and Money Laundering)
Gary DeWaal and Associates LLC
Turkey and stuffing might have been the main items on the menus of residents of the United States this past week, but a few litigation and regulatory developments provided supplemental food for thought for those in the financial services industry worldwide.


NSEL, board violated rules and failed to act against defaulters: Corporate Affairs Ministry
The Economic Times
The National Spot Exchange (NSEL) and its board not only violated multiple regulations but did not take action against repeated defaults which resulted in the current crisis at the bourse, according to an inspection by the Corporate Affairs Ministry.

***** Violation is a good word to describe this whole mess. Or, when the next exchange goes down it could be said it was “Jigneshed.”



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Lead Stories

Nasdaq plots European swap futures
Anish Puaar – Financial News
Nasdaq OMX is consulting with the market about launching swap futures in Europe that offer a cheaper, exchange-traded alternative to popular over-the-counter derivatives, potentially opening another front in its battle with Eurex.

EU Financial-Transactions Tax Faces More Delays
A European plan to tax a sweeping range of financial transactions is facing new delays even after winning the support of Germany’s biggest political parties, as participating governments remain divided on key details of the levy.

Deutsche Börse Group And Bank Of China announce Strategic Cooperation
Deutsche Börse Group, a leading global market infrastructure provider headquartered in the EU with global customers and operations, and Bank of China, the most internationalized and diversified Chinese bank headquartered in Beijing with comprehensive products and powerful customer networks worldwide, today announced that they have signed a memorandum of understanding regarding a strategic cooperation.

Clearing deal fuels London ambition to become renminbi hub
Paul J Davies in Hong Kong –
British and other companies trading with China can now clear transactions done in renminbi in London, marking another step in the city’s push to become a leading offshore centre for the Chinese currency.

FCA Faces Calls for More Disclosure on Currency-Rigging
Gavin Finch, Suzi Ring & Sarah Jones – Bloomberg
The U.K.’s Investment Management Association, whose members oversee about 4.5 trillion pounds ($7.4 trillion) of assets, is pressing regulators to provide more information about the alleged manipulation of the foreign-exchange market, said two people with knowledge of the matter.

Expat bankers come down to earth
Michelle Price – Financial News
Times are tough for expatriate bankers, a breed that once enjoyed the high life on foreign postings in Hong Kong and Singapore.

Banking on Bitcoin
If a small city state had adopted Bitcoin as its national currency, it would now be in the grip of deflation as foreign speculators siphoned away its supply of the virtual currency. Money would be scarce, and prices would fall dramatically. Authorities might try to lift prices but they would lack one of their most powerful tools. Central bankers can create money at will, by printing notes or creating deposits. Bitcoin is based on digital tokens, which are generated at an unalterable rate by cryptographic algorithms running on the computers of volunteers, making it impossible to match supply to demand.


CFTC extends no-action relief to sole Asian Sef
Viren Vaghela –
Yieldbroker, the Australian inter-dealer broker, has been granted a further two weeks of no-action relief until December 16 while the Commodity Futures Trading Commission (CFTC) continues to consider its application to register as a swap execution facility (Sef).

Trayport Whitepaper: Managing Unique Trade Identifier (UTI) Generation, Communication And Matching For EMIR and REMIT Regulations
Trayport, a leading provider of energy trading solutions to traders, brokers and exchanges worldwide, today announced the launch of its whitepaper Managing Unique Trade Identifier (UTI) Generation, Communication and Matching in the context of EMIR and REMIT Regulations.

[FCA] Statement regarding Royal Bank of Scotland
The Financial Conduct Authority (FCA) has now considered the reports published this week by Sir Andrew Large into lending practices at the Royal Bank of Scotland (RBS) and, separately, by Dr Lawrence Tomlinson into banks’ treatment of customers in financial difficulty. The FCA has been kept informed by RBS during this period.

ESMA Identifies Deficiencies In CRAs Sovereign Ratings Processes

BCSC educates companies about B.C.’s money raising rules

Exchanges & Trading Facilities

TSE: Trading Overview in November 2013
1st Section average daily trading value was JPY 2.4860 trillion for November. Trading value for the ETF market in November was JPY 2.7102 trillion, the second highest level of the year following June. Total monthly trading volume for JPX Derivatives was 24,011,488 contracts. Trading volume for DJIA Futures on OSE reached its second highest level at 4,690 contracts. Trading volume for the TSE individual securities option auction market was 79,826 contracts in November, a record high since the introduction of the Market Maker Scheme in October 2009.

BATS Chi-X Touts 2014 Data Price Cap, BXTR Reporting as Basis for EU Tape
Faye Kilburn – WatersTechnology
BATS Chi-X Europe has pledged not to increase market data fees in 2014 for its US and European subscribers, following several well-publicized fee increases at regional exchanges, including the London Stock Exchange, which notified clients in October of a planned 2.5 percent increase in fees for a broad range of its market data services.

Program Trading Averaged 24.1 Percent of NYSE Volume during Nov. 18-22

TOM MTF Statistics Week 48, 2013

Hedge Funds & Managed Futures

Markit Expected to Appoint Majority-Independent Board
Markit Group, a financial information provider now worth an estimated $5 billion, is this week expected to appoint a majority-independent board for the first time in the latest sign it may pursue a public listing next year.

Gains for Einhorn and Loeb Could Bode Well for Hedge Funds
Forget about Black Friday. November is looking as if it could be the month that puts many hedge funds solidly in the black for the year, at least based on performance numbers for two notable portfolios.

BlackRock tests appetite for liquid ETF structure
Joe McGrath – Financial News
BlackRock is poised to launch on December 16 its first European-listed exchange-traded product under a new structure that will potentially improve liquidity and slash costs across its $193 billion European ETF empire. It could also pressure smaller rivals.

Zhao ready to dance to Chinese market revival
Paul J Davies in Hong Kong –
A cheap, electronic floor mat for dancing games does not sound like inspiration for a successful career in hedge fund management, but for Zhao Danyang it was a foundation stone.

Rathbone CEO Andy Pomfret to step down
Scheherazade Daneshkhu –
Andy Pomfret, chief executive of Rathbone Brothers, the wealth management group that dates back to 1742, said on Monday he would to step down at the end of February 2014 to follow a “plural career”.

It’s Not Your Retro Brent-WTI Spread
Streetwise Professor
The Brent-WTI spread reached a record level last week, defying predictions that the gap would continue to close. But this isn’t the retro spread of the last couple of years.

Banks & Brokers

Quiet Boss at Citigroup Setting Tone for Wall Street
Michael L. Corbat, head of one of the biggest banks in the world, recently strolled through Marea, the Central Park South restaurant where Manhattan’s elite go to be seen. No one in the crowded room even looked up.

One-third of UK consumers see ‘low value’ in financial advisers, index shows
Yakob Peterseil –
Financial advisers in the UK received a score of 73 out of 100 in a Vanguard survey designed to measure the value financial advisers deliver to their clients

Mortgages Without Risk, at Least for the Banks
There was no single cause of the financial crisis, but a chief one was surely the way mortgage loans were made by people who believed they had no reason to care if the loan was repaid.

UBS buys back bonds to cut costs and size of balance sheet
James Shotter in Zürich –
UBS is to buy back around SFr2.15bn of its own debt in an effort to cut its borrowing costs and shrink its balance sheet.

Lloyds Appoints Blackwell as Chairman
Lloyds Banking Group PLC said Monday it has appointed Norman Blackwell as chairman of the banking group with effect from April 3, when current chairman Winfried Bischoff retires.

Meet the 2013 Rising Stars of Investment Banking

Clearing & Settlement

Euroclear to grow Asian team by a third
Michelle Price – Financial News
Euroclear, the world’s largest provider of settlement services with about E22 trillion of assets under its care, plans to increase its staff in Asia by 30% over the next two years.

DTCC’s ambitious master of change
Anish Puaar – Financial News
The Depository Trust and Clearing Corporation has taken on one of the most ambitious tasks in the post-financial crisis era through its plans to establish trade repositories across the world.

CLS Group completes £160m fundraising
Philip Stafford –
CLS Group has completed a £160m fundraising after the world’s main service for settling foreign exchange deals was forced to turn to shareholders for cash by tough new capital regulations.

Euroclear UK & Ireland To Lead Local T+2 Settlement Initiative
Euroclear UK& Ireland (EUI), in cooperation with London Stock Exchange, BATS Chi-X Europe, the Irish Stock Exchange and Turquoise, will shorten the standard securities settlement cycle for the Irish and UK capital markets to T+2 in October next year.

Creditors in Iceland Banks Face Pressure to Speed Up Settlement
Omar R. Valdimarsson – Bloomberg
Iceland is considering forcing creditors in the nation’s failed banks to resolve their claims faster as Prime Minister Sigmundur David Gunnlaugsson says he’s looking into passing laws to speed up a settlement.

Indexes & Products

Stock exchanges wage war over index rights
Tim Cave – Financial News
The rivalry between national stock exchanges and alternative trading venues has often been likened to the clash in the aviation industry between low-cost carriers and long-established airlines.

Moscow Exchange Indices Weekly Review: November 25-29, 2013


Aite Report: Alternative Data, Visualization, Historical Analysis Top Buy-Side Wish List
Faye Kilburn – WatersTechnology
Hedge funds and asset managers are integrating middle-office datasets into their front-office portfolio management workflows to support investment decisions, and are seeking more interactive ways to view and manipulate data, according to a report reviewing the current market for over-the-counter derivatives-focused portfolio systems from research firm Aite Group.


DOJ not planning to penalize banks on swaps probe – WSJ
The U.S. Justice Department is not planning any penalties on a civil probe relating to allegations that large banks tried preventing competition in the credit default swaps market, the Wall Street Journal reported, citing people familiar with the matter.

[AMF Canada] Financière Hélios Capital – Service of Decision by Bureau

[AMF Canada] Matter of Alain Péloquin – Notice of hearing

Environmental & Energy

Beijing Starts China’s Third Carbon Exchange With First Trades
Beijing opened the third of seven carbon exchanges planned in China, with first trades in the capital fetching higher prices than debuts in Shenzhen and Shanghai.

Mexico launches its first carbon exchange
Mexico’s stock exchange launched its first platform to trade carbon credits on Tuesday, a voluntary initiative that allows polluters to offset their emissions with tradeable certificates. The new platform, called MEXICO2, provides an electronic forum for certificates conferring the right to emit one tonne of carbon dioxide, thereby attaching a cost to pollution.

EU Carbon May Advance as EU Nations Consider Tightening Limits
European Union carbon permits may advance in the next five months as 37 nations in the Kyoto Protocol consider tightening emission limits before 2020, according to Climate Mundial Ltd. in London.


TOCOM and Ginga Energy Japan Establish Joint Venture Company for Operating OTC Platform
The Tokyo Commodity Exchange, Inc (TOCOM) and Ginga Energy Japan Pte. Ltd, announced today the establishment of the Japan OTC Exchange (JOE). This joint venture with Ginga, a Japanese subsidiary of Singapore-based energy broker Ginga Petroleum, will focus on OTC markets for petroleum and products.

Fearing Listings Flood, Investors Flee Shenzhen’s ChiNext
Isabella Steger and Mia Lamar – MoneyBeat – WSJ
How badly do Chinese investors fear a potential flood of new listings? Consider Monday’s performance of ChiNext–the country’s answer to the Nasdaq–which had tumbled 7.1% as of midday.

China’s IPO Overhaul Could Weigh on Hong Kong
Prudence Ho – MoneyBeat – WSJ
News that China may soon reopen its initial-public-offering market isn’t good news for one IPO venue: Hong Kong.

SGX and China Futures Association to collaborate
Singapore Exchange (SGX) and the China Futures Association (CFA) are cooperating in the development of derivatives markets in China and Singapore.

Overseas Investor Participation in HKEx’s Derivatives Market in Hong Kong Remains High
Overseas investors’ participation in HKEx’s futures and options market in Hong Kong remained high and their contribution surpassed that of local investors for two consecutive years, according to Hong Kong Exchanges and Clearing Limited’s (HKEx) Derivatives Market Transaction Survey 2012/13

Cargill hires ex-Credit Suisse M&A banker for Asia role -sources
Cargill Inc has hired Mumtaz Kazmi, previously the mergers and acquisitions head for Credit Suisse in the Middle East, to help the agribusiness firm expand in Asia, two banking sources aware of the matter said.

JCCH: Japanese Commodity Markets Summary for November 2013

Press Conference By Taro Aso, Japan’s Deputy Prime Minister, Minister Of Finance, And Minister Of State For Financial Services – Mizuho Bank

Frontier Markets

Prince Alwaleed’s CFO to leave investment firm Kingdom – sources
The chief financial officer of Prince Alwaleed bin Talal’s investment vehicle, Kingdom Holding , is to leave the firm, two banking sources aware of the matter said.

Financial Crimes Survey Report 2013 Where is the exposure?
This financial crime survey focused on the wider financial services industry across the East Africa region covering Kenya, Uganda and Tanzania with 32 respondents drawn from the banking, insurance, real estate and capital markets sectors. A majority of the respondents are banks and insurance companies and summarised below are the key highlights of the survey

EGX’s Board Approves The Egyptian Exchange’s Strategy For The Years 2013-2017

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