John Lothian Newsletter: Nasdaq's Friedman sharpens focus on listings, Silicon Valley; Euronext Hires Former SocGen Managing Director as ETF Head; Terms laid down for taming shadow bank risk

Oct 14, 2014

First Read

CBOE Futures Exchange Reports Busiest Week In History
The CBOE Futures Exchange, LLC today announced that trading volume during the week of October 6 through 10 — both exchange-wide at CFE and for futures on the CBOE Volatility Index — set new records for a one-week period.
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***SR: The most volatile week in quite a while was very good for the CFE.

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No More Mr. ICE Guy, Indeed: Marcial Steps Down at ICE
Anthony Malakian – WatersTechnology [Subscription required]
According to his LinkedIn profile, Edwin Marcial, chief technology officer at the IntercontinentalExchange, is stepping down after 18 years with the company. In a letter posted on his LinkedIn page (which also features a truly excellent video), he looked back wistfully on his career at ICE, saying, “I’ll remember the trust and confidence [ICE CEO] Jeff Sprecher put in me all these years. His vision and leadership has pushed us all beyond our limits to ends we never thought we could achieve.
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***SR: The article does not say what Marcial will do next, but we wish him the best. He was a big part of the exchange’s truly “meteoric” rise.

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SEFCON V: One Year In – November 12, 2014, Grand Hyatt New York
JohnLothianNews.com
The Wholesale Markets Brokers’ Association, Americas (WMBAA) will host its fifth annual SEFCON event on November 12. Register Here

Watch the video promo and register to join dealers, traders, exchanges and regulators for this once-a-year look at the state of the SEF world.

Now that SEFs have been operational for a year, it is time to take a fresh look.

Watch the video »

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Griffin’s Citadel, with record assets, outperforms hedge fund industry
Lynne Marek – Crain’s Chicago Business
Chicago’s richest man is getting a lot richer. Billionaire Ken Griffin’s net worth has surged this year as assets managed by his hedge fund, Citadel LLC, have shot up 50 percent to $24 billion, surpassing its previous peak and easily outstripping overall industry gains.
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***JM: Soon, instead of saying he manages “other people’s money”, he’ll be able to say he manages “everybody’s money.” Except mine. I’m saving up to buy a lemming farm.

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No Accounting for Wrath of Geithner at AIG Trial: Opening Line
C. Thompson – Bloomberg
After the second week of the AIG trial, which brought the court and other mere humans face to face with the so-called architects of the 2008 financial rescue — Henry Paulson, Tim Geithner and Ben Bernanke; after hours of exhaustive direct and cross examinations and, sometimes, redirects that drilled into both huge and tiny concepts with sharp terminology and, once, a possible tautology; after replaying through their testimony the freighted hours that went down in but a few days — the so-called Lehman Weekend — before an even greater meltdown was in the offing, the trial has made at least one thing abundantly clear: Don’t quote Geithner’s words back to him when you’re trying to make a point.
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***JM: It’s not Watergate, but it’s fun (for me) to watch them haul people up on the stand.

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Malaysia bourse to broaden offerings
Jeremy Grant in Singapore – Financial Times
Bursa Malaysia, the southeast Asian country’s exchange, is moving to revive its almost defunct financial futures products by relaunching government bond and interest rate contracts by the end of the year.
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***JM: Now we find out if the plant that didn’t grow before had bad soil, or was just a bad seed.

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Barclays Dark Pool Trading Rises 23% as Bank Recovers
Stephen Morris – Bloomberg
Barclays Plc (BARC) had a 23 percent rise in the number of U.S. shares traded in its dark pool, edging the bank to the cusp of top 10 venues after volume collapsed when it was sued for allegedly lying to customers.
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***JM: You just have to promise never ever to do [that thing you didn’t do] again, and shake hands, and it’s all good.

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James McNulty, Chairman, NYSE Liffe – An Integrated Approach To Corporate Governance
JohnLothianNews.com

“What I’d like to do today is talk to you about taking your career right now and rolling it forward 30 years.”

James McNulty, chairman of NYSE Liffe, breaks down the relationship between corporate boards and shareholders. He compares the conflicts that can arise between the two parties, strategies to create compromises and each of the roles both sides have. McNulty also touches on success strategies and establishing short and long term success. He also shows an example formula for creating a common language and metrics for the governing board. McNulty concludes by saying that when things become difficult, the strongest possible governance is desired in order to gain the confidence of the market.

Watch the video »

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MarketsWiki

MarketsWiki Page of the Day
Abigail “Abby” Johnson
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MarketsWiki Recent Updates

People

Abigail Johnson; Patrick Thornton-Smith; Laurie Flom; Steven A. Cohen

Companies, Organizations and Groups

Ziliak Law, LLC; Euronext; Fidelity Investments; ConvergEx Group, LLC; London Metal Exchange

Statistics

54,216,663 pages viewed, 8,054 articles, 186,485 edits
MarketsWiki Statistics

Lead Stories

Nasdaq’s Friedman sharpens focus on listings, Silicon Valley
John McCrank – Reuters
Nasdaq OMX Group said on Monday it promoted several managers to executive vice president positions, sharpening the exchange operator’s focus on listings, Silicon Valley, and market technology, under new co-President Adena Friedman.
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Euronext Hires Former SocGen Managing Director as ETF Head
John Detrixhe – Bloomberg
Euronext NV (ENX), the newly independent European market operator, named a former Societe Generale SA (GLE) managing director to run its exchange-traded funds business.
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Terms laid down for taming shadow bank risk
Sam Fleming and Tracy Alloway – Financial Times
Global regulators have taken a landmark step towards taming risk in a key segment of the shadow banking system, outlining tougher rules on collateral for short-term lending which will affect both banks and non-bank players.
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Change in Derivatives Contracts Goes Only So Far
Peter Eavis – Dealbook – NY Times
It’s not every day that Wall Street comes out and celebrates a change that erodes its rights in a lucrative market. On the surface, the applause for the change, which was agreed upon this past weekend, didn’t make sense. Why would the banks back something that could lessen their longstanding privileges in one of their most profitable businesses — derivatives trading?
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Paul Volcker’s Headache: The Bank-Regulator Debate
Christina Rexrode and Victoria McGrane- MoneyBeat – WSJ
Dump a bunch of bank regulators in the same room to talk about which agency is better, and the resulting discussion will be, well, lively. That’s what former Federal Reserve chairman Paul Volcker did Sunday night, at a panel in Washington, D.C., at the law firm Jones Day.
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Barclays Dark Pool Trading Rises 23% as Bank Recovers
Stephen Morris – Bloomberg
Barclays Plc (BARC) had a 23 percent rise in the number of U.S. shares traded in its dark pool, edging the bank to the cusp of top 10 venues after volume collapsed when it was sued for allegedly lying to customers.
jlne.ws/1sc9Rk9

Stock Connect unlikely to see October debut
Jennifer Li – The Standard
The Shanghai-Hong Kong Stock Connect is likely to be delayed as no announcement was forthcoming from the local bourse yesterday. Hong Kong Exchanges and Clearing chief executive Charles Li Xiaojia earlier said the scheme was likely to start on a Monday in October, with an announcement to be made two weeks before its launch.
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No Happy Ending for Investors in Central Bank Fairy Tale
Simon Kennedy – Bloomberg
You know it’s a special moment in the financial markets when analysts ditch the jargon and reach for artistic references. Ed Yardeni cited “The Wizard of Oz.” International Monetary Fund Managing Director Christine Lagarde went with both “Alice in Wonderland” and Harry Potter. Stephen King — the HSBC Holdings Plc chief economist, not the author — trolled the fantasy aisle.
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Regulatory

Analysts warn dealing commission rules ‘worse than RDR’ for groups
Dan Jones – Investment Week
The unbundling of dealing commissions could have a more significant impact than the Retail Distribution Review on asset managers, with smaller groups and fund ranges particularly at risk, analysts have warned.
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FCA intensifies action against financial promotions
Laura Miller – Investment Week
The Financial Conduct Authority (FCA) is coming down hard on firms that continue to act outside of its rules on financial promotions, with the number of adverts withdrawn or amended by the regulator jumping 61% in the last year.
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Out-of-step regulators are walking swaps market into trouble
Tim Cave – Financial News
The European swaps industry is facing up to what some market practitioners have called a “doomsday” moment later this year.
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Banks must focus on conduct, not ‘conduct risk’
Ariane Chapelle – Risk.net
The UK’s FCA may put emphasis on conduct failures in its supervision, but that should not lead firms to set up yet another risk management silo
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UK’s Financial Conduct Authority: Interest Rate Hedging Products
In 2012, we identified failings in the way that some banks sold IRHPs. The banks involved agreed to review their sales of IRHPs made to unsophisticated customers since 2001. The full review started in May 2013.
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ESMA Publishes Updated Data On Performance Of The Credit Rating Agencies
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US And UK Officials Meet To Discuss Key Components For The Resolution Of A Global Systemically Important Bank
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SIFMA Submits Key Recommendations To FHFA On Proposed Single GSE Security Structure
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Dodd-Frank Bank Regulations `Are Complicated’: Chilton: Video
Bloomberg
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Exchanges & Trading Facilities

WSE targeting prop traders in growth push
Futures & Options World
The Warsaw Stock Exchange is targeting proprietary trading firms as it seeks to grow its international profile, an audience at FOW’s Derivatives World CEE heard this morning. Izabela Olzewska, managing director of market development divisions at the WSE, said that the exchange had lowered barriers to entry and launched new products and services in a bid to bring more prop houses to the market.
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SIX Swiss Exchange: The exchanges as a crucial source to finance economic growth
Today, the Federation of European Securities Exchanges (FESE) published the detailed version of its “Blueprint for European Capital Markets”. It describes the vision of FESE to increase the competitiveness of European capital markets and, as a result, to create ideal framework conditions for the European real economy. FESE’s vision is based on five concrete recommendations:
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Nasdaq Announces Leadership Appointments to Support Strategic Growth Initiatives Across Listings and Market Technology Businesses
Nasdaq today announced a series of leadership appointments across the company’s Listing Services and Market Technology businesses. The moves are designed to align leadership responsibility with areas of strategic growth potential, enabling the company to further broaden and deepen client relationships across the world.
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The Exchanges As A Crucial Source To Finance Economic Growth
In A Blueprint, The Federation Of European Securities Exchanges (FESE) Points Out How Regulated Markets Can Contribute To Boost European Growth
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The Processing Capacity Of The Bucharest Stock Exchange’s Arena Trading System Increases After The Trading/Post-Trading Systems’ Segregation
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BKK Lists The First Green Bond On Oslo Børs
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TOM Insight September 2014
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Hedge Funds & Managed Futures

Fidelity Names Granddaughter of the Founder as New Chief
William Alden – Dealbook – NY Times
Fidelity Investments has named Abigail Johnson as chief executive, a largely expected move that nonetheless ended years of speculation about the succession plans at the top of the mutual fund giant.
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Extra cash for good behavior at Cohen’s Point72
Lawrence Delevingne – CNBC
Steve Cohen’s new family office is taking a largely unprecedented step to push employees to be highly ethical and civic-minded: a cash bonus. The recently announced “Rewarding What Matters” bonus system is for stock investment teams based in the U.S., the family office’s main strategy.
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Ackman, Buffett, Gates Ride the Rail Boom to Profits
Anupreeta Das, David Benoit and Liz Hoffman – MoneyBeat – WSJ
Some investors in railroads have lately had a great ride. Whatever happens with the potential tie-up of Canadian Pacific Railway Ltd. and CSX Corp., reported Sunday by The Wall Street Journal, investor William Ackman has made a lot of money in Canadian Pacific, which he started buying about three years ago.
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Ex-Goldman, Noble trader’s new hedge fund gains 11 pct in Sept.
Reuters
Guard Capital, a macro hedge fund firm launched by two former top traders at Goldman Sachs and Noble Group in August, gained 11.2 percent last month as its currency and interest rate bets paid off, a letter to investors obtained by Reuters showed.
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Large hedge funds highly exposed to asset-backed securities
Risk.net
Analysis of many of the largest hedge funds shows how their asset-weighted portfolios might perform in periods of market exuberance and market shocks
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Alan Brown to retire from Schroders
Mike Foster – Financial News
Alan Brown, the former chief investment officer of Schroders who currently works as a senior adviser to the UK-listed fund manager, is to retire from the firm at the end of this month.
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Strategic bond managers hedge against further high yield sell-off
Anna Fedorova – Investment Week
Strategic bond managers have started increasing their high yield hedges via synthetic exposure in anticipation of further stress in the asset class.
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Banks & Brokers

Banks and investors see appeal of commodity finance
Mark Nicholls – Risk.net
Despite the retreat of major global banks from commodities, commodity finance is nonetheless viewed as an attractive opportunity. But it is an area where banks face increased competition from trading houses.
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Former E*Trade Unit Lays Off Several Employees, Including CEO
Bradley Hope – WSJ
G1 Execution Services LLC laid off several employees, including its CEO, eight months after the company was acquired by Susquehanna International Group LLP, according to people familiar with the matter. G1 Execution Services CEO Dave Grove was among about a dozen employees laid off by Susquehanna, the people said. Susquehanna closed its acquisition of the unit from E*Trade Financial Corp. for $75 million in February.
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JPMorgan posts profit as legal costs ease: website
Reuters
JPMorgan Chase & Co reported a third-quarter profit as the biggest U.S. bank moved past the huge legal claims that caused it to book a rare loss in the same quarter last year, according to an apparently authentic document posted on website shareholder.com.
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JP Morgan chief FX trader in London Richard Usher leaves bank -source
Reuters
JP Morgan’s chief currency trader in London, Richard Usher, has left the bank, a source familiar with the matter said on Tuesday.
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Clearing & Settlement

OCC Announces Laurie Flom As New Head Of Enterprise Risk Management
OCC announced today that Laurie Flom has joined OCC as First Vice President and Head of Enterprise Risk Management.
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Pressure mounts on regulators to consider FX SEF phase-in
Jon Watkins – The Trade
US regulators are being urged to employ a phase-in period for foreign exchange derivatives to be traded on swap execution facilities (SEFs) after they become subject to mandatory clearing.
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Pension funds “adopting OTC clearing despite exemption”
Futures & Options World
Pension funds are signing up with clearing members in Europe to begin clearing despite expectations of an extension of their exemption from OTC clearing under Mifid II, according to an industry expert.
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First Week Of New Settlement Regime A Success
The new settlement regime, introduced by the Irish Stock Exchange (ISE) on Monday, 6 October 2014, makes settlement 33% quicker and went very smoothly according to Brian Healy, Director of Traded Markets, Development, Operations at the ISE.
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Ice Clear Europe eyes 2015 rates push
Tim Cave – Financial News
IntercontinentalExchange is planning to introduce an over-the-counter interest rate swap clearing service to coincide with the introduction of European reforms next year, in a bid take on incumbent provider LCH.Clearnet.
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EuroCCP rejects derivatives move, citing lack of synergy
John Bakie – The Trade
Poor synergy between cash equities and equity derivatives along with shifting goalposts for the implementation of derivatives clearing rules mean EuroCCP has ruled out entering the market.
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You Might Have Read This Somewhere Before. Like Here.
Streetwise Professor
The FT has a long article by John Dizard raising alarms about the systemic risks posed by CCPs. The solution, in other words, might be the problem. Where have I read that before?
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Indexes & Products

Janus makes foray into ETFs with VelocityShares deal
Jessica Toonkel – Reuters
Janus Capital Group Inc , fresh from hiring bond star Bill Gross, said on Monday it plans to make its first foray into the $1.8 trillion exchange-traded funds (ETF) space through the acquisition of VelocityShares parent, VS Holdings Inc.
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FTSE launches pension benchmark index
Rachael Singh – Financial News
The UK’s move to enroll millions of new savers in pension plans has left an information gap that index provider FTSE Group is hoping to plug.
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‘Fear gauge’ at highest since eurozone crisis
Ralph Atkins in London and Vivianne Rodriguez in New York – Financial Times
US stock market volatility has jumped to the highest since the eurozone debt crisis, according to a closely watched index highlighting the global turbulence created by worries over the world economic recovery.
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MSCI Releases New Equity Analytics
Faye Kilburn – WatersTechnology
Index provider MSCI has added seven new US and Asia specific models to its suite of Barra equity portfolio risk models, which factors in additional risk considerations called Systematic Equity Strategies, to help financial professionals to design and report the risk and performance of their investment strategies.
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13 Volatility Indexes Rose More Than 10% Today
Matt Moran – CBOE Options Hub
Today the S&P 500 (SPX) Index fell 31.39 to close at 1874.74, and, as shown in the table below, thirteen of CBOE’s volatility indexes rose by more than 10%.
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Technology

Orc Smart Order Router Offers High-Performance Order Routing And Rich Feature Set For Multi-Venue Trading
Orc, a global leader in derivatives trading technology, today announced Orc Smart Order Router (SOR), a flexible, high-performance routing engine designed to enhance quality of execution, reach the best liquidity and reduce costs. It also enables brokers and firms to consolidate their market access infrastructure to one global vendor.
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Hedge Funds Gain Access to Data on Prime Services, Swaps & Funding Costs
Ivy Schmerken – Wall Street & Technology
S3 will distribute counterparty analytics through Portware to help hedge funds and asset managers understand the costs of prime services, swaps, and custody services.
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EuroCCP Expands Its OTC Trade Services By Adding Traiana’s Harmony Platform
EuroCCP announced today its clearing services for clients’ matching OTC transactions with Traiana.
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Gearslinger appoints Director of Sales
Gearslinger, network and technology equipment reseller, has announced that Dani Hoffman Sittloh has accepted the role as Director of Sales to lead the growth and development of the Chicago-based gear reseller targeting the financial markets and other sectors.
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Asia Pacific Institutions Turn To Portfolio Reconciliation Ahead Of Regulatory Changes
TriOptima’s triResolve Service Gains 78 Clients In Region
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Hermes Funds To Be Distributed Over The Calastone Network
Calastone Expands Single-To-Many Automated Cross-Border Fund Messaging
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Dion Global Solutions Launches Technology To Support The Shanghai-Hong Kong Stock Connect Programme
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Enforcement

Bankers Get a Painful Reminder About Conflicts of Interest
Reynolds Holding – Dealbook – NY Times
Bankers just got handed a painful, and necessary, reminder about conflicts of interest. A $76 million penalty against RBC Capital Markets, the investment banking arm of the Royal Bank of Canada, for working both sides of a deal, is the latest blow to skewed loyalties.
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UK banks pay out $2.5 billion for swaps mis-selling
Reuters
Britain’s biggest banks have paid out 1.54 billion pounds ($2.46 billion) to compensate small firms mis-sold complex interest rate hedging products, the financial regulator said on Tuesday.
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Environmental & Energy

Triodos Renewables unveils GBP5m green energy crowdfunding offer
BusinessGreen
Triodos Renewables has today launched a GBP5m crowdfunded share offer in a bid to finance an expansion of its green energy portfolio.
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Reports: Mark Carney lends weight to carbon bubble theory
Jessica Shankleman, BusinessGreen
The Governor of the Bank of England has reiterated his warning that fossil fuel companies cannot burn all of their reserves if the world is to avoid catastrophic climate change, and called for investors to consider the long-term impacts of their decisions.
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***LB: Also in this story “Carney is the latest high profile figure to lend his weight to the “carbon bubble” theory, which warns that fossil fuel assets, such as coal, oil and gas, could be significantly devalued if a global deal to tackle climate change is reached.”

US climate action can drive growth and reduce emissions, report says
Danny Bradbury, BusinessGreen
The US can save money and the planet at the same time, according to a report issued Friday by the World Resources Institute (WRI). The payoff associated with reducing greenhouse gas emissions can outweigh the costs, the organisation said.
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Asia-Pacific

Silver price set-up attracts China banks
Thomas Hale and Neil Hume – Financial Times
Several Chinese banks have expressed interest in participating in the new global price setting mechanism for silver, according to the head of the London Market Bullion Association.
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Longtime Chief Leaves C.I.C.C., a Major Chinese Investment Bank
David Barboza – Dealbook – NY Times
The China International Capital Corporation, one of China’s biggest investment banks, said on Tuesday that Levin Zhu, its longtime chief executive and the son of a former Chinese premier, had resigned ahead of a planned initial public offering that was expected this year.
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BlackRock Warns of Potential China Capital Flight
Chao Deng – MoneyBeat – WSJ
Watch out for possible capital flight from China into Hong Kong when a trading link opens between Hong Kong and Shanghai, says Ewen Cameron Watt, chief investment strategist at BlackRock Investment Institute.
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Singapore Fixed Income Indices (SFI) Weekly – 13 October 2014
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Frontier Markets

Gibraltar to launch its first stock exchange next month
Reuters
Gibraltar will next month open its first stock exchange, which will list collective investment schemes known as open-ended funds, after receiving approval from its financial regulator.
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Ashmore to Open Saudi Office Ahead of Market Opening
Nicolas Parasie – MoneyBeat – WSJ
Ashmore Group, an emerging markets-focused fund manager, is setting up an office in Saudi Arabia ahead of the long-awaited opening of the country’s stock market to foreign investors.
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