John Lothian Newsletter: Nasdaq says making progress on system that led to August outage; Currency Probe Widens as US Said to Target Markups; Rules push on clearing houses poses risk to banks

Jun 19, 2014

First Read

Dear Readers:
Our goal each day is to inform (and amuse) and help you understand key elements of this industry. This is also our goal for our upcoming MarketsWiki World of Opportunity Summer Intern Education Series on July 1st and July 2nd in London – to help young students and professionals learn more about the financial markets.

We have 14 speakers lined up over three 90 minute sessions at King’s College. As this is our first event in London we need your help. We would like you to sign up your interns for any of the sessions we have listed on our Marketswiki Education site –

If you have interns working for your firm this summer, you obviously value the idea that connecting with young talent now can help your firm or this industry in the future. Yep, we said it, these students are our future. This program enforces that.

You can see our full speaker list on our site; they are experienced professionals from the exchange, regulation, technology, and brokerage space. Each will help paint a picture for students that this industry is still rich with opportunity and open to new talent and ideas.

So in this appeal, we ask you to sign up your interns or newer employees. It’s time well spent for them. And they will be the ones who carry our industry forward.

To sign up, click on the link above. If you don’t know the names of your interns just yet, as they may not have started their internships, please reserve a spot by emailing John Lothian at


ICE suffers second day of trading glitches on Liffe derivatives
IntercontinentalExchange, a network of global financial market exchanges, was plagued by a second day of technical glitches on its Liffe derivatives markets on Wednesday, having to suspend trading in some money market contracts, a spokesperson for the company said.

***** Is it time for a pacemaker for Liffe?


Rules push on clearing houses poses risk to banks
Philip Stafford – Financial Times
The global regulatory push to force banks to use centralised clearing houses to process their derivatives trades may result in a rapid rise in short-term calls on traders to post sufficient margin to back their trades, a new study has found.

***** Don’t play the game unless you got the money to play. This has always been the case.


Perks Live Forever at CME Amid Review of Trade Incentives
Matthew Leising – Bloomberg
On the Chicago Mercantile Exchange, where competition among high-frequency traders is supposed to create a fairer market, some firms get a better deal than others. That’s piqued the interest of regulators.


MarketsWiki World of Opportunity Summer Intern Series Goes to London

John Lothian & Co. is pleased to announce the MarketsWiki World of Opportunity Summer Intern Education Series is coming to London on July 1st and 2nd, 2014 with the generous support of the [[CME Group]].


ICE May Price Euronext Near Lower End in $1.1 Billion IPO
Ruth David and Francesca Cinelli – Bloomberg
Intercontinental Exchange Inc. (ICE) may price the initial public offering of its Euronext NV unit at 20 euros, the lower end of its original price range, three people with knowledge of the matter said.


SWP Itoldyasopalooza
Streetwise Professor
First, the CFTC has reopened comments on the position limits proposed rule. The CFTC has taken intense incoming fire on the issue of hedge exemptions in particular, and with good reason. There are many problems, but the most egregious is the restriction on “cross hedges” (e.g., using gas futures as a hedge against electricity price risk).

***** Anyone ever heard of correlation? How about liquidity?


ICE Endex Achieves Daily Volume Record in Dutch TTF Natural Gas Futures
Intercontinental Exchange, the leading global network of exchanges and clearing houses, today announced that ICE Endex reached a daily volume record of 23,620 contracts in Dutch TTF natural gas futures on June 17, 2014. The previous record of 20,630 contracts was set on February 21, 2014.

***** No word on how much was cross hedges.


Does He Pass the Test?
Paul Krugman – The New York Review of Books
Stress Test is meant to be a story of successful policy—but that success is defined not by what happened but by what didn’t. America did indeed manage to avoid a full replay of the Great Depression—an achievement for which Geithner implicitly claims much of the credit, and with some justification. We did not, however, avoid economic disaster.

****** We avoided one type of economic disaster for another. And we have planted the seeds for the next disaster.


The Speed of Liquidity: How Low Latency Fuels Inefficient Markets
Martha Stokes – TABB Forum
There is an optimal speed-to-consumption ratio for the financial markets. Once that ratio is determined, regulating the speed at which various approved market participants can trade regardless of the venue will lead to a far more efficient market.

****° I am a little slow to consume here. Maybe say this a little slower for me. Or is it one speed fits all?


Sponsored Content

FOW re-launched

Futures and Options World and FOW Intelligence are now aligned under one united brand: For the first time you can access all the latest news and data in one consolidated location.

Our team of financial journalists, data analysts and specialist correspondents are dedicated to providing you with the most important news and analysis – validated with FOW market data – to ensure you stay ahead of the game.

Register for your free complimentary trial today and experience how FOW can benefit you.


Lead Stories

Nasdaq says making progress on system that led to August outage
OMX Group has made changes to the system that caused a three-hour trading halt in Nasdaq-listed stocks last summer, to make it more robust and to limit possible future outages to 10 minutes, a company executive said on Wednesday.

Currency Probe Widens as U.S. Said to Target Markups
Keri Geiger, Liam Vaughan and Julia Verlaine – Bloomberg
U.S. prosecutors are broadening their investigation of the foreign-exchange industry as they question salespeople at the world’s biggest banks on their practices, according to two people with knowledge of the matter.

Global exchanges prepare to square off on cocoa market contracts
The world’s two major agricultural commodity exchanges will soon go head-to-head in cocoa, but insiders are sceptical that the small market can support the addition of a third futures contract.

***** This cocoa thing is just nuts.

Regulator warns Deutsche Bank over commodity trading controls
Alice Ross in Frankfurt – Financial Times
Germany’s financial watchdog has warned Deutsche Bank that the lender had insufficient controls in place to prevent manipulation of commodity prices, as commodity markets come under increased scrutiny from global regulators.

Morning MoneyBeat: When Low Volatility Becomes Too Low
MoneyBeat – WSJ
When it comes to volatility in financial markets, at some point low becomes too low. The CBOE’s VIX Volatility Index–otherwise known as the stock market’s fear gauge–dropped 12% Wednesday to 10.61 after Federal Reserve Chairwoman Janet Yellen offered an upbeat economic outlook. Only 11 times in the past 10 years has the VIX been lower than it is now, according to FactSet, with the last time coming in February 2007.


Cicely LaMothe Named Associate Director In The Division Of Corporation Finance
The Securities and Exchange Commission today announced that Cicely LaMothe has been named as an associate director in the agency’s Division of Corporation Finance.

The For-Profit Exchange Red Herring Are Running Again
Streetwise Professor
One of the reddest of herrings is that the movement to for-profit exchanges is the source of our current woes in securities and derivatives markets. The herring were running today in DC, at a hearing on HFT held by the Permanent Subcommittee on Investigations. One of the witnesses, Andrew Brooks of T. Rowe Price testified thus:

Chalk ruling up to commonsense at ASIC
John Durie – The Australian
AUSTRALIAN Securities & Investments Commission boss Greg Medcraft has won an important victory for commonsense in corporate disclosure by finally following through right to the Federal Court, where corporate Australia fears to tread.

Steven J. Randich, FINRA Executive Vice President And Chief Information Officer, Remarks At SIFMA Tech 2014

SIFMA Executive Vice President Randy Snook Remarks At SIFMA Tech 2014 – June 18,

General Approach On Anti-Money Laundering (AML) Legislative Package Agreed By EU Member States

Exchanges & Trading Facilities

FESE Announces Winner Of The Josseph De La Vega Prize 2014
Press Release
The Federation of European Securities Exchanges (FESE) is delighted to announce that this year’s winner of the De la Vega Prize 2014 is Kai Zimmermann from Goethe University Frankfurt for his paper “Price Discovery in European Volatility Interruptions”.

Athens Exchange Transition Of Settlement Cycle To T+2

TSX Markets Top 20 Largest Consolidated Short Position Report – June 15, 2014

EEX Welcomes EUROPEX Response To The ACER Consultation On Energy Regulation Until 2025

Hedge Funds & Managed Futures

BlackRock, Pimco Sue Deutsche Bank, U.S. Bank Over Trustee Roles
Investors led by BlackRock Inc. and Pacific Investment Management Co. are zeroing in on a new target in their bid to recoup losses tied to the U.S. housing bust: the so-called trust banks that oversee payments and enforce terms on more than $2 trillion in residential mortgage securities.

Exclusive: Steven Burrill Removed From Control Of Venture Fund For Unauthorized Payments
G. Steven Burrill, the CEO and founder of Burrill & Co., a San Francisco financial firm specializing in biotechnology and life sciences investing, was ousted from control of a $283 million venture capital fund earlier this year by big institutional investors that cited willful or reckless misconduct related to unauthorized payments, according to documents recently filed in California State court in San Francisco.

TCI Hedge Fund in Britain Ends Ties to Charitable Arm
JENNY ANDERSON – Dealbook – NY Times
When Christopher Hohn, the founder of one of Britain’s largest and most successful hedge funds, chose to structure his fund to automatically donate a portion of its fees to charity — specifically his wife’s charity — people took notice.

Man Group to Buy Boston-Based Numeric Holdings
CHAD BRAY – Dealbook – NY Times
The British hedge fund manager Man Group said on Thursday that it had agreed to acquire Numeric Holdings, an investment manager based in Boston, for up to $494 million.

Saba, Brevan Struggle to Profit as Volatility Disappears
Katherine Burton and Kelly Bit – Bloomberg
For Boaz Weinstein, founder of Saba Capital Management LP, historic calm in credit markets is proving to be more than boring. It’s costing him money.

Managers target insurers’ asset pool
Joe McGrath – Financial News
Europe’s asset management bosses have set their sights on winning insurance clients, investing in talent and infrastructure in the hope of attracting new revenue.

Goldman funds CIO fights back against passive investment
Andrew Pearce – Financial News
Goldman Sachs Asset Management is fighting back against the index-driven investment approaches that have been winning business at the expense of active managers over the last five years.

Banks & Brokers

Heatmap: Investment banking blows hot and cold
Financial News
With more ups and downs that a yo-yo, investment banking fees are rarely dull – and a bruising first quarter for fixed income, coupled with gains for DCM, ECM and M&A, has shifted the league tables again. Financial News charts the evolution of IB fees since 2012 using reports from analytics firm Coalition.

Citigroup Names New Head of Asia-Pacific Corporate and Investment Banking
Dealbook – NY Times
Citigroup on Thursday appointed Mark Slaughter, a senior New York banker, as its head of corporate and investment banking for Asia-Pacific, filling a vacancy created last month when Farhan Faruqui left to join the Australia and New Zealand Banking Group.

Santander sells half of custody business
The euro zone’s biggest bank Santander said it is selling a 50 percent stake in its $1.3 billion securities custody business to a group led by Warburg Pincus, marking the third major deal between the bank and U.S. private equity firm.

Clearing & Settlement

Banks track US-facing business to avoid swap dealer tag
Peter Madigan –
Less than half of the world’s largest banks have registered as swap dealers, with many absentees saying they are now monitoring and limiting their US-facing business. Other banks see the rules as a chance to corner their local market

Regulators edge towards opt-in fix for OTC stays issue
Lukas Becker –
Counterparties will likely select a resolution regime in Isda documentation, but it remains unclear how buy-side firms will be persuaded to give up their termination rights

The Klearing Kool Aid Hangover
Streetwise Professor
Back in Houston after a long trip to Turkey, France, Switzerland, and the Netherlands speaking about various commodity and clearing related issues, plus some R&R. Last stop on the tour was Chicago, where the Chicago Fed put on a great event on Law and Finance. Clearing was at the center of the discussion. Trying to be objective as possible, I think I can say that my critiques of clearing have had an influence on how scholars and practitioners (both groups being well-represented in Chicago) view clearing, and clearing mandates in particular.

Indexes & Products

Xetra/Börse Frankfurt: Lyxor UCITS ETF German Mid-Cap MDAX Launched On Xetra

ChiNext 50 Index Issued

Deutsche Börse Celebrates 15 Years Of SDAX


Calypso Technology Opens New Office In Toronto
Calypso Technology, Inc., a leading provider of cross-asset front-to-back technology solutions for financial markets, announced today that it has opened a new office in Toronto, Canada. Located centrally in the Toronto Financial District, the new office will serve as a sales, support and professional services hub for Calypso’s growing portfolio of customers in Toronto and other regions in Canada.

Tullett Prebon launches aggregated SDR feed for interest rate swaps » Banking Technology
Tullett Prebon has launched an aggregated swap data repositories data feed for the interest rate swaps market, aiming to increase price transparency in accordance with the Dodd-Frank Act.

TraderPlanet Awards Second Annual Louis B. Mendelsohn Entrepreneur Scholarship, in enthusiastic sponsorship of the Hope High Dollars for Scholars Awards Program, presented the second annual Louis B. Mendelsohn Entrepreneur Award during ceremonies held on May 21, 2014 in Providence, Rhode Island.


Judge OKs SAC Capital insider trading pact with SEC
A federal judge on Wednesday granted final approval to a $602 million insider trading accord between a unit of billionaire Steven A. Cohen’s SAC Capital Advisors LP and the U.S. Securities and Exchange Commission.

Environmental & Energy

China to launch final CO2 exchange, national scheme uncertain
David Stanway and Kathy Chen, Reuters
China launches its seventh and final pilot carbon market in the sprawling city of Chongqing on Thursday, but plans to set up a national trading scheme within three years remain shrouded in uncertainty in the world’s top emitter of greenhouse gases.

We can turn the tide of climate change by working with China
Ed Davey,
Much has been written about the nuclear agreements signed at the UK-China summit. Given the boost to low-carbon electricity, to energy security and to jobs, the Chinese interest in taking forward investment at Hinkley Point C, the UK’s first nuclear station in a generation – is hugely welcome.

UK and China to “redouble” joint climate efforts
Will Nichols, BusinessGreen
The UK and China have pledged to cooperate on the development of low carbon policies, technologies, and financing mechanisms while pushing for “a global framework for ambitious climate change action”.


Hong Kong Panel Proposes Changes to IPO Rules After Alibaba Loss
Fox Hu – Bloomberg
Hong Kong should accommodate new shareholding and management structures to allow companies in different legal forms to conduct initial public offerings in the city, a government advisory panel proposed.

China’s CIC Vows to Improve Management
China Investment Corp., the nation’s sovereign-wealth fund, said Thursday that it plans to improve the management of its overseas investments after it was publicly criticized by the government’s auditing agency for a string of irregularities that led to unspecified losses.

Templeton bond manager: Japan easy money will bolster global liquidity
Templeton bond fund manager Michael Hasenstab, an influential voice on emerging market debt, said Wednesday that Japan’s easy money policy will bolster global liquidity, but he also warned that debt conditions in the Asian country are worrisome.

Thai Alternative Bourse Celebrates 15th Anniversary

HKEx: Stock Exchange Participants’ Market Share Report

Hong Kong’s Securities And Futures Commission Proposes To Amend Exemptions For Disclosure Obligations

Frontier Markets

Argentines want debt deal as economic woes pile up
Argentina’s decision to talk with holdout creditors to end its long-running bond dispute and possibly avoid another damaging default is likely to be popular in a country that is sliding into recession, even as many Argentines say they despise the hedge funds involved.

Argentina serves opening gambit to avoid default
John Paul Rathbone in London – Financial Times
Many years ago, when Argentina was still considered a powerful economy and was yet to cement its reputation as a serial defaulter, a former US ambassador to Buenos Aires wrote a languid memoir that helps explain the country’s current debt problems – and also the remarkable plan it has announced on how it hopes to solve them.

Russell Indexes To Reclassify Egypt As A Frontier Market At Upcoming Reconstitution

Dubai Mercantile Exchange: Oman Crude Oil Futures Contract (DME Oman) Traded Above $110

John Lothian Newsletter

We visit more than 100 websites daily for financial news (Would YOU do that?)

“John Lothian and Company… our industry intelligence.”

Rick Lane

CEO, Trading Technologies

Past JLN Newsletters

Pin It on Pinterest

Share This Story