John Lothian Newsletter: NASDAQ, S&P eye acquisitions to build index businesses; Commodity exchanges miffed by Mifid; Fed to seek comments on restricting banks’ commodities trading

Jan 14, 2014

First Read

Scott Irwin Answers Kocieniewski
Streetwise Professor
Scott Irwin has provided his responses to David Kocieniewski. Read the whole thing.

***** And the fight continues.

***JM: I just wish Kocieniewski could do better than “I know you are, but what am I?”


ICE to Sell Parts of NYSE Technology – And Why Not?
Becca Lipman – Wall Street & Technology
If ICE can’t assimilate or find a structural reason to keep hold of the acquired technology, it should go.

***** Sometimes in commodities you have to blend in some of the good stuff with some of the bad stuff in order to make the grade.


Hong Kong Needs to Lift its Game, Says Li
Enda Curran – MoneyBeat – WSJ
Hong Kong needs to deepen its capital markets beyond equities and target growth in areas including fixed income, currencies and commodities if the city is to retain its status as a leading financial center, according to Charles Li, chief executive of the territory’s bourse.

***** The old leading financial center argument.


Brown to leave as head of DTCC’s Omgeo
Philip Stafford –
Marianne Brown is to leave as chief executive of Omgeo, a post-trade services company, after seven years following its takeover by Depository Trust and Clearing Corporation

***** Marianne Brown has had an impressive career so far. What will come next?


Market Structure Recipe For Success
Sang Lee, Aite Group – Wall Street & Technology
A concise look at the significant market structure changes in the US equities markets and what they will mean for the future.

***** I don’t think we have seen the end of market structure changes in the equities. I would say, they have just begun.


CME Group Announces Record Year For International Coal Futures In 2013
CME Group, the world’s leading and most diverse derivatives marketplace, today announced a record year for its international coal futures of 1,298,361 contracts (1.3 billion metric tonnes) traded in 2013. This is a 300 percent increase compared to the volume traded in 2012 which was 329,985 contracts (330 million metric tonnes).

***** I fear this means we had a lot of very bad little boys and girls this year. Santa Claus is a well known hedger in this market.


Exchange of the year: Ice
(subscription required to access) Risk magazine staff –
It took Ice six years to find a way into the interest rate futures market. Its arrival – via the $8.2 billion acquisition of NYSE Euronext – will intensify competition in over-the-counter derivatives clearing

***** ICE skates to a crystal clear win.


High-Frequency Trading: Caveat Emptor
Cristian Zarcu – TabbFORUM
Controversial and polarizing, high-frequency trading is here to stay and market participants shouldn’t wait for regulators to redefine the rules of engagement. Instead, they should acquire the tools to detect potentially predatory behavior and protect themselves against it.

***** This is why you keep your left hand up when boxing, assuming you are a righty. Defense is just as important as offense in competition.


Push to Combat Insider Trading May Go Too Far
Last week, BlackRock, the asset management giant, agreed to a settlement with New York State to stop conducting surveys of investment analysts. The state’s attorney general, Eric T. Schneiderman, cited the settlement as a wider effort to crack down on what he called “insider trading 2.0.”

***** “OK, we will go back to flipping a coin.”



MarketsWiki Page of the Day
Simon Puleston Jones

MarketsWiki Recent Updates


Paula Sausville Arthus; Clare Fraser; Ted Leveroni; Marianne Brown; Michael Bodson; Jignesh Shah; Simon Puleston Jones

Companies, Organizations and Groups

European Central Counterparty Limited; Fixed Income Clearing Corporation; Depository Trust Company; National Securities Clearing Corp.; Depository Trust & Clearing Corporation; American Economic Association


Swap Data Repository; Position limits


46,504,392 pages viewed, 7,739 articles, 176,451 edits
MarketsWiki Statistics

Lead Stories

Exclusive: NASDAQ, S&P eye acquisitions to build index businesses
Exchange operator Nasdaq OMX Group and index provider S&P Dow Jones Indices said they are interested in acquisitions to grow their index businesses, in a sign the sector could see a wave of deals as investors pour tens of billions of dollars into portfolios that track benchmarks.

Commodity exchanges miffed by Mifid
Xan Rice –
The name of the legislation is a mouthful and its acronym captures the feeling of many European commodity players towards it. The EU’s Markets in Financial Instruments Directive II, or Mifid (say it fast), could finally be agreed in Strasbourg today, after nearly four years of negotiations.

Fed to seek comments on restricting banks’ commodities trading
Gina Chon in Washington and Tom Braithwaite in New York –
Federal Reserve officials will ask for comments on whether it should restrict the trading of physical commodities by banks, according to people familiar with the matter.

Europeans Struggle to Set Derivatives Rules
Faced with intense lobbying from the oil and commodity industries, the European Union plans what could be a last-ditch effort on Tuesday to reach agreement on one of the biggest issues to come out of the 2008 financial crisis: how to rein in trading of derivatives and other complex instruments.

Federal Reserve Said to Probe Banks Over Forex Fixing
Keri Geiger and Caroline Salas Gage – Bloomberg
The Federal Reserve is investigating whether traders at the world’s biggest banks rigged benchmark currency rates, raising the risk that firms will be penalized for lax controls as regulators look for wrongdoing.

SEC Targets Hedge Fund Compliance Officers
Juliet Chung – MoneyBeat – WSJ
Securities regulators may have a new target in their sights: compliance officers at hedge-funds.

Across Wall Street, Efforts to Revise a Hard-Charging Culture
The high-achieving college students bound for Wall Street jobs have heard the stories of long nights and weekends spent at the office, a grueling schedule etched into big bank culture. But this year, many of the fresh recruits will encounter a new, unfamiliar reality: mandatory time off.

Bitcoin sees light at end of regulatory tunnel
Stephen Foley in New York, Josh Noble in Hong Kong, Avantika Chilkoti in Mumbai and Claire Jones in London –
A year ago, when the entire stock of Bitcoin was worth $150m, authorities were concerned most by the potential use of a new digital currency by drug dealers and petty criminals to hide their trades and launder profits. But now the Bitcoin system has swollen to $10bn, the world’s regulators are confronting additional and bigger headaches.


SEC Announces New Date for Compliance with Final Municipal Advisor Registration Rules
The Securities and Exchange Commission today announced that compliance with the final municipal advisor registration rules will not be required until July 1, 2014, the date on which the first set of municipal advisors will be required to register under the final rules.

CFTC Staff Issues No-Action Relief From The Limitation On The Holding Of Customer Funds Outside Of The United States Under Regulation 30.7(c)

FINRA Investor Education Foundation and the American Library Association Announce $1.19 Million in Grants to Public Libraries to Support Financial Literacy
The Financial Industry Regulatory Authority (FINRA) Investor Education Foundation and the American Library Association (ALA) have announced $1.19 million in grants to 17 recipients as part of the Smart investing@your library initiative.

FCA commissions review tipped for global impact
Sarah Krouse – Financial News
A review of the way fund managers pay for sellside research being conducted by the UK’s financial services watchdog could have ripple effects for asset managers’ global operations, consultants say.

CFTC cross-border guidance ‘has the feel of a rule’, lawyers agree
Peter Madigan –
The US Commodity Futures Trading Commission will lose a lawsuit challenging its cross-border guidance, lawyers are predicting – even though one commission insider insists it has done nothing wrong. It’s a prospect that should cheer the industry, but could usher in months of chaos.

Vague Volcker causes confusion
Peter Madigan –
From its treatment of portfolio hedges to correlation tests and inventory limits, the Volcker rule lacks detail on key elements, lawyers say. That is an attempt to give the industry – and supervisors – some flexibility, but it could make compliance a game of chance.

FMA activates whistleblower hotline

ASIC Chairman Releases IOSCO Travel Spending And 2014 Travel Agenda

Exchanges & Trading Facilities

MGEX Reports Another Top Volume Day
MGEX, a Designated Contract Market (DCM) and Derivatives Clearing Organization (DCO), reports another top volume day on Friday, January 10, with 16,437 futures and options contracts traded, hitting number 18 on the daily Exchange volume records.

Americas Trading Group Receives World Finance 100 Award for 2013
Americas Trading Group (ATG), a company specializing in electronic trading that offers a multi-broker platform for order execution of financial assets in key Latin American markets, is pleased to announce it received the World Finance 100 Award in the Financial Services category.

***JM: Online source article is in Portuguese

OTC trading platform of the year: Tradeweb
Risk staff
Two platforms appeared to take an early lead in the first few months of the Sef regime, but one – Tradeweb – won high praise from users for its responsiveness, customer services and technology

NL Ondernemingsfonds (Dutch Entrepreneurs Fund) new source of financing for businesses
On the initiative of Euronext Amsterdam, banks, institutional investors and Robeco are joining forces to set up the NL Ondernemingsfonds to provide financing for businesses in the Netherlands. The fund will co-finance company loans. The NL Ondernemingsfonds, the long-term scope of which is projected to reach E 1 billlion, will issue its first loans this year.

[SIX] Trading turnover of over 1,000 billion in 2013
During the 249 trading days of 2013 on and SIX Structured Products Exchange Ltd (formerly Scoach Switzerland) the total number of trades reached 34,491,642, 9.3% more than in 2012. The biggest increase compared to the previous year was recorded in the ETF segment (+16.5%), followed by the segment for Equities incl. Funds and ETPs (+9.8%).

Joint Project Of Warsaw Stock Exchange And Gdansk Institute For Market Economics For The Polish Capital Market
“The European Financial Congress Project For Sustainable Development Of Poland’s Capital Market” Is A Joint Initiative Of Warsaw Stock Exchange And The Gdansk Institute For Market Economics

NYSE MKT Issues Short Interest Report

Hedge Funds & Managed Futures

Citadel’s hedge funds best peers in 2013
Lynne Marek – Crain’s Chicago Business
Chicago-based Citadel LLC’s two main hedge funds outpaced peers last year, gaining more than twice as much as the average hedge fund, though their returns didn’t beat the broader U.S. equity markets.

Amid a Languid Year for Hedge Funds, Some Stand Out
Rob Copeland and Juliet Chung – MoneyBeat – WSJ
As hedge funds turn in their 2013 report cards to investors this month, a few are posting standout performance in what was otherwise a muted year for the funds relative to the stock market’s gains.

Stung by Scandal, Giant Pension Fund Tries to Make It Right
After a pay-for-play scandal tarnished its reputation, the nation’s largest public pension fund turned to a courtly native of Quebec to help it restore order and improve performance in a crucial investment sector.

Investors exit hedge funds at fastest rate in four years
Investors pulled out money from hedge funds at the fastest rate for more than four years in December, following a year in which many managers’ performance disappointed, new data showed on Monday.

Citigroup’s former COO to join hedge fund spun off from bank
Citigroup’s C.N. former Chief Operating Officer John Havens has been appointed as non-executive chairman of Napier Park Global Capital LLC, the hedge fund spun out of the bank last year.

U.S. venture funds raise more in fourth quarter, but less for year
U.S. venture funds raised $4.85 billion last quarter, up 53 percent from the same period a year ago, but full-year 2013 fundraising fell 15 percent compared to the year before.

Majedie Investments to close Javelin Capital
Joe McGrath – Financial News
Majedie Investments said today it is to shut Javelin Capital, the emerging markets boutique that it seeded, after the company failed to attract third-party assets.

Hedge fund derivatives house of the year: Deutsche Asset and Wealth Management
Risk magazine staff
Deutsche Asset and Wealth Management has launched a number of new initiatives in 2013, while continuing to build its core managed account platform

Nominations are now open for the 2014 OpRisk Awards
Alexander Campbell –
The Operational Risk & Regulation Awards aim to recognise excellence in operational risk management across the financial sector.

Banks & Brokers

Banks to Keep Padding Profits by Freeing Up Reserves
Michael Rapoport – MoneyBeat – WSJ
Big banks are expected to scale back their reserves for bad loans yet again — and thus boost their profits — when they announce their fourth-quarter results starting Tuesday. The question is by how much, and whether that will provoke bank regulators, who have been watching the banks closely over the issue.

After Its Gold Debacle, SNB Has More Luck With U.S. Equities
Neil MacLucas – MoneyBeat – WSJ
The Swiss National Bank’s gold holdings haven’t fared well. But some of the Swiss central bank’s U.S. stockholdings likely helped offset the pain, at least a little.

J.P. Morgan Profit Declines
J.P. Morgan Chase & Co.’s fourth-quarter earnings dropped 7.3% as the bank grappled with weak results from its investment banking unit, but results beat expectations.

Banks respond to new rules with Volcker-friendly CLOs
Tracy Alloway in New York –
Bankers have been quick to respond to the Volcker rule released last month by adapting a popular type of structured product to comply with the new regulations.

UBS Sees Increasing Swiss Competition in U.K. Wealth Push
Giles Broom – Bloomberg
UBS AG, Switzerland’s largest bank, plans to boost client assets in the U.K. this year even as Swiss competitors try to break into London’s $1.2 trillion private wealth market to help counter withdrawals at home.

Clearing & Settlement

Canada Debt-Clearing House Makes Changes to Bond-Data Product
Ben Dummett –
Canada’s main debt-clearing house last month had to make changes to one of its bond-data products and publicize it more widely after big market participants raised concerns that some information was being used for profit at their expense.

Clearstream And Eurex Clearing Enhance Collateral Service Offering
Eurex Clearing Now Linked To Clearstream’s Efficient Tri-Party Solution – Link Allows Automatic Management Of Margin Collateral For Eurex Clearing – Important Step In Integrating Deutsche Börse’s Services For Superior Collateral Efficiency

Traiana Embeds Reconciliation Engine to Address US Swaps Rules
Nicholas Hamilton – WatersTechnology
Traiana has integrated Duco’s reconciliation engine so it can reconcile reference data from central counterparties, swap execution facilities and futures commission merchants ahead of the introduction of new regulations for the US swaps industry

TriOptima resumes compression of cleared interest rate swaps with LCH.Clearnet bringing total notional eliminated to more than $200 trillion

Clearing house of the year: LCH.Clearnet

SWIFT Eases Trade Reporting For EMIR Compliance
Practical, Flexible Solutions Enable Financial Institutions And Corporates To Meet February 2014 Deadline For Reporting Derivatives Transactions Under European Market Infrastructure Regulation


AQR Capital Management Goes Live With Fidessa Sentinel – Fidessa’s Flagship Compliance Solution Adopted By Global Investment Management Firm
Fidessa group plc announced today that AQR Capital Management, a global investment management firm, has implemented Sentinel, its award-winning compliance solution for the buy-side. The solution automates trade compliance management across all of AQR’s business, which currently includes over $90.2 billion in assets under management.

S&P Cap IQ Adds SGX Data to Low-Latency Feed
Faye Kilburn – WatersTechnology
S&P Capital IQ Real-Time Solutions (formerly French low-latency data vendor QuantHouse, which S&P acquired in 2012) has added the Singapore Exchange (SGX) to its QuantFeed consolidated datafeed and QuantLink fiber-optic network.

FastMatch, A Forex ECN, Picks Caplin to Build Front End
Ivy Schmerken – Wall Street & Technology
FastMatch has retained Caplin Systems to build a front-end for its spot FX matching service.


Three Former Rabobank Traders Charged in Libor Case
The Justice Department filed criminal charges on Monday against three former traders from the Dutch lender Rabobank, the latest step in the wide-ranging investigation into the banking industry’s manipulation of interest rates.

Madoff trustee wins court fight over Picower settlement
Two former investors with Bernard Madoff cannot pursue claims against the estate of a Florida businessman who was one of the convicted swindler’s biggest clients, a federal appeals court ruled on Monday.

CFTC Charges Florida-Based Vertical Integration Group LLC And Its Owners, Richard V. Morello And Junior Alexis, With Engaging In Illegal, Off-exchange Commodity Transactions
The U.S. Commodity Futures Trading Commission (CFTC) today announced that it filed a civil injunctive enforcement action in the U.S. District Court for the Southern District of Florida against Vertical Integration Group LLC (Vertical) of Lake Worth, Florida, its owner, Richard V. Morello of Lake Worth, Florida, and Junior Alexis of Boynton Beach, Florida. The CFTC Complaint charges the Defendants with engaging in illegal, off-exchange financed transactions in precious metals with retail customers.

Finansinspektionen (FI) – Swedish Financial Supervisory Authority – Withdraws The Authorisation Of Exchange Finans

Environmental & Energy

Korea Exchange wins bid to host nation’s carbon trading
The Korea Exchange (KRX) will host trading under South Korea’s emissions trading scheme, set to become the world’s second biggest when it launches on Jan. 1, 2015, the Ministry of Environment said Monday.

European Energy Exchange acquires majority stake in Cleartrade Exchange
EEX Press Release
The European Energy Exchange (EEX), the leading Energy Exchange in Europe, and Cleartrade Exchange (CLTX), a Singaporean Futures Exchange founded in 2010, today announced that an investment deal has been concluded. EEX has become the new majority shareholder, with a 52 % holding in CLTX.

Top Global Emitter China Best on Climate Change, Figueres Says
China, the top emitter of greenhouse gases, is also the country that’s “doing it right” when it comes to addressing global warming, the United Nations’ chief climate official said.


Distress appears in Asian funding markets
Henny Sender –
Just before Christmas, Apollo Global Management, Hong Kong-based hedge fund Asia Research & Capital Management, Goldman Sachs and the World Bank’s International Finance Corporation jointly made a $340m loan to Niko Resources, a Canadian company that is a joint venture partner to Reliance Industries and BP in a giant gas project off the coast of India.

Hedge Funds’ Bets on China Pay Off
China-focused hedge funds are beating out the country’s lackluster stock indexes and attracting inflows, illustrating how alternative investors are profiting as Beijing pushes through sweeping reforms weighing on growth.

HKMEx chair Cheung ordered to repay $33.7m loan
The Standard Finance
The chairman of the failed Hong Kong Mercantile Exchange, Barry Cheung Chun-yuen, was ordered by the High Court to repay a loan of HK$33.7 million with interest to a financial firm as well as HK$12,000 litigation costs.

Dalian Commodity Exchange Opens Public Wechat Platform

Commercial Banks May Issue Corporate Bonds At Shanghai Stock Exchange To Replenish Capital

Shenzhen Stock Exchange Market Bulletin 13 January, 2014 – Issue 2

Frontier Markets

Ashmore, Artio and flashes in pans
Dan McCrum | FT Alphaville
Ashmore, the emerging markets specialist, fell victim to the taper at the end of last year. Outflows of $3.5bn in the last quarter, more than 4 per cent of its $78.5bn total, as well as some fee changes, had the market a little spooked on Tuesday.

Turkey: Clash of values
Daniel Dombey –
As a corruption probe swirled around his government and his family in December, Recep Tayyip Erdogan, Turkey’s prime minister, returned to the tactic he used against last year’s mass protests: he blamed his problems on a vast international plot.

John Lothian Newsletter

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Past JLN Newsletters

CME to permanently close most trading pits

CME to permanently close most trading pits

First Read $40,626/$300,000 (13.5%) Anonymous ++++ Hits & Takes John Lothian & JLN Staff Without fanfare or amplification from its executives, the CME Group shut the books on most -- but not all -- of its floor trading history Tuesday afternoon with the...

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