John Lothian Newsletter: No Exchange for You! NYSE Channels Seinfeld in IEX Critique; CME boosts top executives’ pay; From Pits to Algos, an Old-School Trader Makes Leap to Spoofing

Nov 13, 2015

First Read

Goldman Sachs Names 425 New Managing Directors
Nearly a third of the Goldman Sachs Group’s 425 newly minted managing directors are millennials, or people born after 1980. Forty percent were hired as analysts. Roughly 21 percent are former summer interns.

***** The last line is very interesting, nearly 21 percent of the new managing directors named were former summer interns. Check out what interns heard this fall from CME’s Sandra Ro (below) at our World Of Opportunity event in London last month.


Sandra Ro, CME Group – Financial Services Disruption: the Rise of Bitcoin and Blockchain

“There is this big debate as to whether bitcoin is a currency or a commodity. I would argue that it is its own category.”

Sandra Ro is a veteran in the world of bitcoin and blockchain, which simply means that she has been following the cryptocurrency and its underlying technology for over two years. In this MarketsWiki Education talk, Ro takes us through the nascent world of digital currencies, from the volatility of bitcoin, to the rise of blockchain technology and massive investments being made by venture capitalists, banks and other strategic investors. According to Ro, the next few decades are going to be exciting.

Watch the video »

Is Wall Street Beneath Business Students’ Standards?
Peter Coy – Bloomberg
Graduates who consider themselves ‘highly ethical’ are shunning finance, New York Fed chief Dudley says he hears from deans.
Business school deans say some students who consider themselves “highly ethical” are avoiding careers in finance because they consider the field beneath their standards.

**JK: The need for education from our industry to students is more important than ever. Also from this piece, Christiane Lagarde, managing director of the IMF, pointed out that “public opinion of its integrity, the financial sector “ranks third from the bottom, after government and tobacco.”


CME Group Extends Employment Agreements with Executive Chairman & President Terry Duffy and CEO Phupinder Gill
CME Group
CME Group, the world’s leading and most diverse derivatives marketplace, today announced that it has extended its employment agreement with Executive Chairman and President Terry Duffy through December 31, 2020. In addition, the company announced that it has extended its employment agreement with CEO Phupinder Gill through December 31, 2019.

***** I was hoping for a long term deal for the Cubs’ Jake Arrieta, but I will take this instead for now.


Trader Development Programme 2016
On 1 January 2016, Eurex Deutschland and Eurex Zürich AG will launch the Trader Development Programme 2016 incentive scheme, supporting traders new to Eurex Exchange markets. Participants who qualify for the programme will benefit from significant fee waivers to support new traders taking their first steps with Eurex Exchange. The revised programme is applicable for new traders from Europe, Asia, Australia, the Middle East, Africa and the Americas.

***** Hear me now, or listen to me later…Eurex just wants to pump, (clap) you up.


Sponsored Content
CEINEX – Bridging Markets

China Europe International Exchange (CEINEX) provides international investors with efficient and transparent access to the world’s second biggest economy. Founded by three strong partners, the Shanghai Stock Exchange, the China Financial Futures Exchange and Deutsche Börse Group, CEINEX offers trading opportunities in Renminbi-denominated instruments at European trading hours.

Market participants will benefit from the new global liquidity pool for Chinese cash market products initially and derivatives at a later stage. The new marketplace will be based on Deutsche Börse’s proven infrastructure for trading – Xetra for cash market products and in the future Eurex for derivatives contracts.

It all starts on November 18! More details:

content from:


In China’s Widening Stock Crackdown, It’s ‘Kill the Chicken to Scare the Monkey’
Traders feel chill as arrests, probes spread in wake of summer’s market rout
China’s crackdown on alleged misdeeds by traders escalated dramatically in recent days, as officials went after one of the country’s best-known fund managers and then members of his family.

***** Kill the Chicken!!!!


CEOs: Apologize, but Keep It Manly; To investors, too much contrition is a sign of weakness.
Peter Robison – Bloomberg
Publicists are quick to tell clients what to do when the corporate nightmare of a misbehaving executive or a faulty product erupts: apologize, with feeling. The consultant who coached ice cream maker Blue Bell Creameries on a mea culpa after a deadly listeria outbreak in April has chief executive officers read their talking points three times—once aloud, once to himself, and again aloud—to make sure they sound authentic. “The key is to feel the message points, not just recite them,” says Blue Bell adviser Gene Grabowski, a former PR News Crisis Manager of the Year.

****** Interesting piece on how apologizing really doesn’t make it all better for shareholders. Somewhere Dick Fuld is nodding his head in agreement.


About Wallace
Hello. I am Wallace. I’m a singer/songwriter/producer from Chicago. For the last 5 years I’ve been working on producing records for other artists and playing in a band. Then about 2 1/2 years ago I fell in love with my best friend. Not recommended. Over that time I wrote songs every step of the way to help process the experience. The result was a 3 act, 12 song concept album that follows the evolution of a relationship from the realization that you’re in love through the eventual disintegration of the relationship, and everything in between. I’m pretty sure I’m the only person that this has ever happened to…if not, you should probably check out the record. And after that, stick around, because I’m going to be releasing lot’s of new music and covers of my favorite tunes, frequently. It sure was nice meeting you.

***** Check out the album from my nephew Andrew Wallace Lothian. Andrew played for our Summer Intern Education series in Chicago this year. This is Andrew’s best work yet.


Lead Stories

New York Stock Exchange Challenges Fairness of ‘Flash Boys’ ExchangeBy BRADLEY HOPE – WSJ
NYSE letter to SEC calls planned rules to slow down high-speed traders ‘unfair’
The New York Stock Exchange has lashed out against plans by IEX Group, Inc. to launch a new exchange, claiming its proposed rules are opaque and unfair.

No Exchange for You! NYSE Channels Seinfeld in IEX Critique
Comment letters to the Securities and Exchange Commission are typically dry affairs that center in on the arcane workings of stock exchanges. However, the New York Stock Exchange tried a new tack Thursday in a letter criticizing the application of IEX Group Inc. to become an exchange: referencing the television show Seinfeld.

CME boosts top executives’ pay
By LYNNE MAREK – Crain’s Chicago Business
CME Group’s board this week approved new employment contracts with Executive Chairman and President Terry Duffy and CEO Phupinder Gill, boosting their compensation and extending the terms of their employment for years.

From Pits to Algos, an Old-School Trader Makes Leap to Spoofing
Bloomberg Business
Michael Coscia is no one’s idea of a 21st-Century Wall Street wizard. In many ways he’s a throwback — a small-timer from Brooklyn who bootstrapped his way out and found the good life running a tiny firm near the Jersey Shore called Panther Energy Trading. Until last Tuesday, when the good life collapsed beneath him.

Bank of England’s Andy Haldane warns 15m UK jobs at risk from robots
Emily Cadman – FT
Andy Haldane, the Bank of England’s chief economist, has warned that 15m UK jobs could be taken by robots as automation spreads through the workforce.

Goldman promotions shift power to banking
Ben McLannahan in New York – FT
On Thursday, the bank said that it had anointed 425 new MDs, of which 96 would be in its advisory division, 13 in merchant banking and 103 in securities. During the previous round of MD promotions in 2013, the securities unit dominated, accounting for 91 of 280 elevations, comfortably ahead of banking (51) and merchant banking (eight).

Bitcoin Can’t Keep It Chill; A price spike and plunge renews questions about the currency’s viability.
Zeke Faux – Bloomberg
This was looking like the year that bitcoin would finally move beyond its sketchy reputation as an anonymous way to buy drugs and stolen credit cards. Banks had started to study how they could use the six-year-old digital currency to update the world’s outdated money transfer mechanisms; and its price swings were becoming less extreme, making it less risky for ordinary folks to use.

Banks expected to adopt new technologies rather than be overrun
New technology firms are battering all kinds of companies, but banks will remain as financial intermediaries, due to the regulations and duties governments have put on them, says a proponent of the technology behind the bitcoin cryptocurrency.

Beyond Banking: traditional talent pool dries up for hedge funds
Miles Johnson – FT
Hedge funds are drastically rethinking the way they recruit new employees as a decade-long production line of trading talent from investment banks has ground to a halt.

From ‘Bubble’ to ‘Crash,’ the Incredible Origins of 7 Finance Terms; High-frequency trading was once carried out by pigeons
Wall Street Journal personal-finance columnist Jason Zweig’s new book, “The Devil’s Financial Dictionary,” is a satirical glossary of investing terms that was inspired by Ambrose Bierce’s classic work, “The Devil’s Dictionary” (first published in 1906). Following are excerpts.

SIFMA Market Close Recommendations for the Thanksgiving Day Holiday
SIFMA confirmed its holiday recommendations in the U.S., UK and Japan in observance of the Thanksgiving Day holiday.


Delay in landmark EU securities rules could hamper other reforms
A delay in the European Union’s biggest securities reform in a decade could hamper separate rules to curb market abuses and make financial derivatives more transparent, a top EU regulator said on Thursday.

Olivier Girod Named SEC Deputy Director of Office of Support Operations
The Securities and Exchange Commission today announced Olivier Girod has been named Deputy Director of the Office of Support Operations (OSO). Mr. Girod will support building operations, records management, business management, security, and Freedom of Information Act services.

Marc Wyatt Named Director of the Office of Compliance Inspections and Examinations
The Securities and Exchange Commission today announced that it has named Marc Wyatt as Director of the agency’s Office of Compliance Inspections and Examinations (OCIE) and leader of its National Exam Program. Mr. Wyatt previously was OCIE’s Deputy Director and has been the office’s Acting Director since April 2015, following the departure of former director Andrew Bowden.

Regulators Release Detailed Data on Women on Boards and in Executive Officer Positions
The securities regulatory authorities in Manitoba, New Brunswick, Newfoundland and Labrador, Northwest Territories, Nova Scotia, Nunavut, Ontario, Québec, Saskatchewan and Yukon (participating jurisdictions) today published the underlying data (data This link will open in a new window and disclaimer This link will open in a new window) used to prepare CSA Multilateral Staff Notice 58-307 This link will open in a new window Staff Review of Women on Boards and in Executive Officer Positions – Compliance with NI 58-101 Disclosure of Corporate Governance Practices.

Big Sister on the Warpath Against Commodity Derivatives
Streetwise Professor
Elizabeth Warren’s panties were in a bunch the other night because of an ad that portrayed her as a “Commie dictator” (her description). (Liz’s panties always seem to be in a bunch, but they were bunchier than usual on Tuesday.) The ad, which blasts Warren’s anti-Constitutional monstrosity, the Consumer Financial Protection Bureau is actually somewhat amusing. Warren’s image appears in the background on a Big Brother-ish – or would that be Big Sister-ish? – banner.

CFTC Extends Time-Limited No-Action Relief for Swap Execution Facilities from Certain “Block Trade” Requirements
by Eric Mogel | Orrick – Structured Finance Group via JD Supra
On November 2nd, the U.S. Commodity Futures Trading Commission (“CFTC”) extended no-action relief to Swap Execution Facilities (“SEFs”) from the “occurs away” requirement in the definition of “block trade” under CFTC regulation Section 43.2. The definition of “block trade” includes publicly reportable swap transactions that occur, “away from the registered [SEF’s] or [Designated Contract Market’s] trading system or platform and is executed pursuant to the registered [SEF’s] or [Designated Contract Market’s] rules and procedures”. CFTC Letter 15-60 extends no-action relief from the “occurs away” requirement through November 15, 2016. Press Release. CFTC Letter 15-60.

SEC to whistleblowers: speak now, or get a smaller piece – 3 takeaways
by Patrick Hunnius, Perrie Weiner | DLA Piper via JD Supra
The SEC has announced its twenty-second whistleblower award: at least $325,000 to a former employee of an “investment firm” who provided the SEC with information that allowed it to bring a successful enforcement action.

OCIE Cautions Advisers About Outsourcing Compliance Activities
by Jay G. Baris, Kelley A. Howes | Morrison & Foerster LLP via JD Supra
In a Risk Alert dated November 9, 2015, the SEC’s Office of Compliance Inspections and Examinations (OCIE) said it found that outsourced compliance programs are generally effective, but some of these arrangements leave room for improvement.

SEC Grants Exemptive Relief With Respect to the Large Trader Rule
by Sarah Adams, Janet M. Angstadt | Katten Muchin Rosenman LLP via JD Supra
The Securities and Exchange Commission recently granted exemptive relief with respect to the large trader rule (SEC Rule 13h-1) (hereinafter referred to as the Rule) that (1) delays the implementation of certain requirements under the Rule until November 1, 2017, and (2) grants relief that may limit the obligations of certain options traders under the Rule.

Exchanges & Trading Facilities

TOCOM Appoints AT TOKYO Corp. as Proximity Provider
The Tokyo Commodity Exchange, Inc. announced today that AT TOKYO Corporation will provide proximity services at two of its data centers. The “AT TOKYO Chuo Data Center” (CC1) and “AT TOKYO Chuo Data Center #2” (CC2) (collectively called the “TOCOM Proximity Center”) will go into service in September 2016 in conjunction with the Exchange’s new trading platform.

London Calling
Economic Times
In January 1698, a stockbroker named John Castaing pinned to the wall of Jonathan’s Coffeehouse in the City of London the first ever list of stock prices. Over the course of the last 315 years, that list — and the investors and brokers who must have crowded around it — became the London Stock Exchange (LSE). Today, it is the world’s most international market.

***DA: Also see [[London Stock Exchange Group signs MoU with India’s Yes Bank to develop collaboration around bond and equity issuance]]| at

BM&FBovespa net income soars on CME group stake sale
Brazil’s exchange BM&FBovespa SA on Thursday posted net income of 2.01 billion reais ($520 million), well above the 413 million reais forecast in a Reuters survey of analysts.

***DA: Read the press release HERE

Khalid Al Hussan Acting Chief Executive Officer For The Saudi Stock Exchange
The Saudi Stock Exchange announces that Mr. Adel Saleh Al Ghamdi has submitted his resignation from his current duties as the Chief Executive Officer. The Board of Directors has accepted the resignation on 29/01/1437 ( 11/11/2015) and would like to take this opportunity to thank Mr. Adel for his efforts with the Exchange and wish him the best of luck.

Update on Mini-DAX® Futures: second week sees further increasing trading activity
Since 28 October we offer in parallel to our popular DAX® Futures (FDAX) new Mini-DAX® Futures (FDXM) which have a significantly lower contract value of only EUR 5. After only 11 days of trading the newly listed contracts have generated considerable liquidity.

Hedge Funds & Managed Futures

Fed’s Fischer Says Waiting to Raise Helped Offset Dollar Harm
Jeanna Smialek – Bloomberg
Vice Chair says December rate hike call depends on progress
U.S. economy is weathering this year’s dollar rise well
The Fed’s decision to delay raising interest rates has helped to offset the economic headwinds caused by a strengthening U.S. dollar, Fed Vice Chairman Stanley Fischer said, adding that it “may be appropriate” to raise rates next month.

SIFMA Asset Management Group Statement on the ISDA 2015 Universal Resolution Stay Protocol
SIFMA’s Asset Management Group today released a statement from Laura Martin, managing director and associate general counsel, after the announcement of the expanded ISDA 2015 Universal Resolution Stay Protocol (“Protocol”), a standardized approach for banks to comply with prudential regulatory initiatives relating to cross-border contracts:

Several Fed Officials Say They Are Ready to Raise Rates
Federal Reserve officials, poised to start raising the central bank’s benchmark interest rate in December, are turning from the question of whether to act to how quickly the Fed should raise rates thereafter.

Warren Buffett Has an Image Problem; Some say billionaire hides behind image of folksy businessman
Wall Street’s relationship with Warren Buffett has turned openly testy, rekindling a long-held complaint about the chairman of Berkshire Hathaway Inc: He gets to play by his own set of rules.

Banks & Brokers

Japan’s Biggest Banks Unveil Targets for Cutting Shareholdings
Gareth Allan – Bloomberg
Firmest commitment to boost governance, reduce market exposure
Mitsubishi UFJ and Mizuho beat profit estimates, SMFG misses
Japan’s biggest banks unveiled targets for cutting their shares in client companies, their firmest commitment yet to improve corporate governance and reduce their exposure to stock-market gyrations.

Citigroup Imports a Branch Style From Operations Abroad
Citigroup, as it begins to retool its retail operations and tries to revamp its image in the United States, is borrowing ideas from its overseas branches.

MOVES-Bank of America names David Leitch general counsel
Bank of America Corp appointed David Leitch as global general counsel, replacing Gary Lynch.

Meet Goldman’s New Managing Directors — The Full List
Goldman Sachs Group Inc. named a new class of managing directors.
The Wall Street firm promoted 425 employees to the Goldman’s second-highest rank. This year’s crop of managing directors is the first class since 2013, when the firm moved to appoint new managing directors every two years, instead of annually. In 2013 Goldman promoted 280 employees to managing director in 2013. The firm’s 2012 class included 266 names.

Clearing & Settlement

Blockchain to be in use in markets by 2016, report says
Highly scalable and secure, relying as it does on encrypted distributed ledgers to ensure accuracy and transparency, blockchain technology has the potential to change the way the industry tracks, clears and settles many of the institutional capital markets’ electronic transactions, disintermediating the need for an independent third party

The Hidden Risks Lurking in the Derivatives Markets
Traders News
Citadel managing director Paul Hamill discusses the new risk landscape and its impact on interest rates swaps with Kevin McPartland of Greenwich Associates

Indexes & Products

NYSE Aims to Flag ‘Aberrant’ ETF Prices; Exchange-traded products are drawing scrutiny after a wild trading session in August
The New York Stock Exchange has proposed to regulators guidelines for it to flag “aberrant” trades in exchange-traded products, the Securities and Exchange Commission said Thursday.

BATS WELCOMES NEW iSHARES BOND ETF; iShares International Aggregate Bond ETF Began Trading Today
BATS Global Markets (BATS), the #1 U.S. market for the trading of exchange-traded funds (ETFs), today welcomed the iShares International Aggregate Bond ETF (BATS: IAGG), which began trading today on the BATS ETF

MSCI to include Alibaba, Baidu, 12 other China ADRs in EM index
Index provider MSCI will add 14 U.S.-listed Chinese shares to its emerging markets index for the first time on Dec. 1, including Chinese Internet companies Alibaba and Baidu Inc, two of the largest U.S.-traded Chinese equities.

First India bond ETF, bond index to launch in London | Reuters
wo investment management firms on Thursday announced plans for an exchange-traded fund (ETF) dedicated to the debt of Indian state-run companies, that they said would be the first such vehicle in the world. The ETF, to be listed on the London Stock Exchange and launched to coincide with Indian Prime Minister Narendra Modi’s visit to Britain, is being launched by British firm Sun Global Investments and Indian firm Zyfin Funds.


Gravitas Partners with Mill Hill Capital LLC for Infrastructure Hosting, Network Support & Business Continuity Planning
New York – November 11, 2015 – Mill Hill Capital LLC and Gravitas Technology Services LLC announced today a new partnership whereby Gravitas will provide Mill Hill Capital with cloud hosting, archiving, network support and failover capabilities to ensure consistent and reliable computing support across the investment management firm’s trading, investment, portfolio management, finance, and operations functions.

Gene Amdahl, Pioneer of Mainframe Computing, Dies at 92
Gene Amdahl, a trailblazer in the design of IBM’s mainframe computers, which became the central nervous system for businesses large and small throughout the world, died Tuesday night at a nursing home in Palo Alto, Calif. He was 92.

Fintech and banking risk; cognitive dissonance de semaine
Izabella Kaminsk – FT
Chancellor George Osborne, speaking on Wednesday at a Bank of England Open Forum event, once again declared his desire to turn the UK into the “fintech capital” of the world.

PayPal and Lending Club Prove Fintech Is Ready to Sit With Banks at the Grown-Ups’ Table
The Street
Put simply, it’s a zero-sum game. If you use sites like PayPal (PYPL) to transfer money to friends and pay bills, you are not logging into your primary bank. And banks are starting to feel the pinch. Banks also feel the pinch when customers shop for a loan from the comfort of their couch on sites like Lending Club (LC), instead of putting on a suit and heading to their local branch to face what can sometimes be an intimidating conversation with a loan officer. It is a trend that is about to pay off for the online lender, to the detriment of larger banks.


Ex-BNY Mellon employee sentenced to 6 months in U.S. prison
A former Bank of New York Mellon Corp employee was sentenced on Thursday to six months in prison after admitting to illegally making $737,000 trading on tips a friend at Merck & Co Inc supplied him about potential pharmaceutical mergers.

Law clerk in trading fraud involving chewed napkins pleads guilty
A former clerk at a prestigious New York law firm on Thursday became the third and final defendant to plead guilty in an insider trading scheme in which an accomplice ate evidence written on napkins to conceal the fraud, federal prosecutors said.

Environmental & Energy

Global oil inventory stands at record level
Anjli Raval, Oil and Gas Correspondent – FT
Global oil inventories have risen to a record level just shy of 3bn barrels, the world’s leading energy agency said on Friday, even as the collapse in prices has boosted demand to a five-year high.

New York AG mulls widening effect from Peabody climate settlement
The New York state attorney general’s office, which told Peabody Energy this week to give investors more details about how its sales would suffer from measures to curb global warming, is now mulling whether the tactic it used with the coal firm could be applied to companies beyond the energy sector.

UK’s oil capital Aberdeen reels from global price slump
In the bars, boardrooms, hotels and high streets of the Scottish city of Aberdeen, there is one question on most people’s lips: how do you survive a global oil price slump?

Canada’s Oil Producers Brace for Latest Test: Higher Carbon Taxes; National, Alberta governments promise moves to rein in greenhouse-gas emissions from oil sands
CALGARY, Alberta—Canadian oil producers, pummeled by the prolonged slump in oil prices and a string of political setbacks, now face another challenge: higher carbon taxes.

Clinton proposes $30 bln plan to help coal-producing areas
U.S. Democratic presidential candidate Hillary Clinton on Thursday proposed a $30 billion plan to help displaced workers in coal-producing areas find new jobs and continue receiving health benefits as the country shifts to using renewable energy and more natural gas.


Goldman Says Only China Can Rescue Metals as Miners’ Cuts Won’t
Jake Lloyd-Smith – Bloomberg
Mine supply cuts confirm bear case for metals, Goldman says
Metals demand in top user slips again in October, bank says
Only a substantial rise in Chinese metals demand is likely to be sufficient to balance copper and aluminum markets, according to Goldman Sachs Group Inc., which said recent output cut by miners aren’t large enough to rescue prices. Copper fell to the lowest since 2009.

China’s Troubled Credit Swells to Sweden-Sized $628 Billion
Bloomberg Business
Chinese banks’ troubled loans swelled to almost 4 trillion yuan ($628 billion) by the end of September, more than the gross domestic product of Sweden, according to figures released by the industry regulator.

Addition of China ADRs independent of A-share review: MSCI
Adding U.S.-listed Chinese companies to MSCI’s Emerging Markets (EM) index is not a gateway for the long-anticipated A-share inclusion, according to the global index provider.

Frontier Markets

MSCI Equity Indexes November 2015 Index Review
Business Wire
The three largest additions to the MSCI Emerging Markets Index measured by full company market capitalization will be Alibaba Group Holding ADR (China), Baidu ADR (China) and Emirates Telecommunications Corporation (United Arab Emirates). There will be 21 additions to and 21 deletions from the MSCI Frontier Markets Small Cap Index.

IMF: We can bank on Islamic finance for stability
Arab News
The fast growing, Shariah-compliant Islamic finance industry has the potential to promote financial stability because of its risk-sharing and asset-backed features, International Monetary Fund Managing Director Christine Lagarde has said.

From grey to red on Ponzi schemes
Business Standard
Parliament panel concerned at multiple regulatory bodies, ambiguities between jurisdictions in monitoring money pools
Parliament’s standing committee on finance could propose a common regulator for money pooling schemes, many of which thrive by operating in a regulatory grey area.

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