John Lothian Newsletter: NYSE Promotes Arca Chief Adcock Amid Broader Management Changes; SEC Moves Closer to 5-Cent Tick Test; Thailand to Curb Stock Manipulation With Hefty Fines

Aug 27, 2014

First Read

Ed Tilly, CEO of CBOE – Embrace Change

“We were challenging people’s livelihoods…”

Reaching our goals in life does not always involve a linear path. Ed Tilly, CEO of the Chicago Board Options Exchange, discusses the long and winding road he followed in his career and key experiences that helped him get where he is today. He stresses that examining your own strengths and weaknesses and knowing the limits of your abilities is one of the keys to success. Making mistakes and taking chances are two other important areas that help us learn and grow in our careers. “You will fail,” he tells his audience, “and that’s okay.” For Tilly, not receiving a nomination to the CBOE’s Board of Directors motivated him to try again and come back the next year with fresh ideas to help improve the exchange.

Watch the video »


CBOE Holdings Announces New Officer Promotions
CBOE Holdings, Inc. today announced that Chicago Board Options Exchange has promoted five staff members to officer positions. The promotions were approved at this month’s Board of Directors meeting.

***** Do the officers get new badges?


Sandler O’Neill’s Rich Repetto Takes the ALS Ice Bucket Challenge
Richard H. Repetto, CFA, a Principal with Sandler O’Neill + Partners, L.P., has taken the ALS Ice Bucket Challenge in response to the challenge by CBOE CEO Ed Tilly.

***** The scouter in me liked the fleece vest, nice way to stay warm and dry as ice water is being poured on you. I stupidly just wore a t-shirt on top.


CFTC’s Massad gets set up for action
Luke Jeffs – Futures & Options World
Three months after Timothy Massad became the chairman of the Commodity Futures Trading Commission no-one could accuse him of hanging about. The most powerful futures lawmaker on the planet has spent the three months since his appointment hiring his senior team and maintaining a steady stream of no-action letters from the US regulator.

***** He is busy taking no-action?


Singapore needs to keep its financial reform ball rolling
Jeremy Grant – Financial Times
Foreign exchange trading desks in Singapore, Asia’s largest forex hub, have changed beyond recognition. First, there has been the impact of the electronic trading revolution that has swept those markets in recent years. The second impact has been the cold blast of regulatory change, which has also affected the way financial benchmarks such as the Singapore interbank offered rate – the smaller cousin of the scandal-ridden Libor in the UK – are handled.

***** I have been to the financial reform ball. It is a fine affair.


Keeping Corporate Lawyers Silent Can Shelter Wrongdoing
Have you heard of Maritza I. Munich? The answer is almost certainly no, yet she is a central figure in Walmart’s unfolding bribery scandal. Ms. Munich was a Walmart lawyer who advocated an aggressive response to investigating the scandal but has been silenced by Walmart, which has invoked the attorney-client privilege to keep her from speaking.

***** We have a special room for keeping our corporate lawyers tied up.


U.S. options exchanges hit by system issues
U.S. options exchanges, including all three owned by Nasdaq OMX Group, said on Tuesday that they had problems receiving information from the main option data processor, but that the issue had been resolved.

***** What is a little data loss among friends anyway?


Steve Crutchfield, EVP at IntercontinentalExchange – How to Build an Options Trading System (In Ten Minutes)

“You’ve got to come up with some numbers that describe the universe based on data that fit that model.”

Steve Crutchfield, Executive Vice President at IntercontinentalExchange, explains the three key components of building a trading system. Beginning with a brief history of the New York Stock Exchange, Crutchfield gives a glimpse of trading activity in its early stages and its evolution into today’s intricate electronic systems. Crutchfield emphasizes that looking at historical data and determining which numbers to pull out from it is a difficult problem to solve, among many other challenges in the trading world today.

Watch the video »


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Lead Stories

NYSE Promotes Arca Chief Adcock Amid Broader Management Changes
Sam Mamudi and Matthew Leising – Bloomberg
NYSE Group Inc. promoted Paul Adcock, who helped pioneer electronic equity trading in the 1990s, to oversee day-to-day operations of its U.S. stock exchanges, according to people familiar with the matter.

***** Congratulations to Paul Adcock, Steve Crutchfield and the others for their promotions.

SEC Moves Closer to 5-Cent Tick Test
Andrew Ackerman – WSJ
U.S. securities regulators moved a step closer to a one-year test of trading some stocks in five-cent increments, after more than a decade of trading in pennies. The Securities and Exchange Commission late Tuesday unveiled the highly anticipated plan, designed to determine whether trading the stocks of smaller companies in wider “tick sizes,” or the difference between what traders bid and offer for the shares, would boost interest in the stocks.

Thailand to Curb Stock Manipulation With Hefty Fines
Anuchit Nguyen – Bloomberg
Thailand is planning new rules to check stock-market manipulation by allowing the regulator to file civil lawsuits and impose hefty fines on the law-breakers. The rules take inspiration from the success of U.S. regulators in getting monetary settlements, Vorapol Socatiyanurak, secretary general of the Securities & Exchange Commission, said in an interview in Bangkok today.

***JM: Funny… this makes it sound like they are planning new rules to collect cash, not stop manipulation…

Heads leave Marex Pro-Trader amid probe
Luke Jeffs – Futures & Options World
The co-head of Marex Spectron Pro-Trader has resigned and the head of risk has left the firm amid an ongoing investigation into a possible breach of procedure. Ollie Jones, who had been with Marex more than ten years, and Laurie Bond, who had served as head of Pro-Trader’s risk unit for over 13 years, left the firm earlier this month

Calls mount for US-EU swaps rules recognition
Anish Puaar – Financial News
A lobby group whose members include some of the most well-known names in finance has urged regulators in the US and European Union to agree a coordinated approach to new rules governing the swaps market to prevent severe disruption to cross-border over-the-counter derivatives trading.

Argentina revokes Bank of New York Mellon’s authorization to operate
Argentina said on Tuesday it had stripped Bank of New York Mellon’s authorization to operate in the South American country, its latest move against the financial institution which obeyed a U.S. court ruling that tipped it into default.

IMF Chief Christine Lagarde Charged In France Over Tapie affair: Reports
According to reports on the AFP news-wire, InternationalnMonetary Fund (IMF) chief Christine Lagarde has been charged with “negligence” in the exercise of her public functions over a state payout to a businessman when she was French finance minister.


Credit Raters to Face New Conflict Curbs Under SEC Rules
Dave Michaels – Bloomberg
Credit-rating firms, whose lapses played a central role in the 2008 financial crisis, will face new restrictions on conflicts of interest under rules set to be adopted by the U.S. Securities and Exchange Commission.

SEC Names New Chief Accountant
Michael Rapoport – WSJ
The Securities and Exchange Commission named James Schnurr, a former partner at accounting firm Deloitte LLP, as the commission’s new chief accountant Tuesday. Mr. Schnurr was Deloitte’s vice chairman and senior professional practice director before he recently retired from the firm. He will begin his new job at the SEC in October.

SEC, stop insisting rich means smart
Joanna Schwartz – CNBC
The Securities and Exchange Commission is currently reevaluating the definition of what constitutes an “accredited investor,” the benchmark against which the SEC determines if an individual investor is eligible to invest in private ventures.

ASIC bid for tougher fines on corporate crime
Anthony Klan – The Australian
THE corporate regulator has upped its calls for higher fines for corporate crimes, and ruled out setting minimum balances for self-managed super funds in its second submission to the inquiry into the financial system. The Australian Securities and Investments Commission said it had widened a previous study into corporate crime penalties in other countries, and called for the government to ramp up penalties so at the least those caught breaking the law could not do so at a profit.

Arbitrage wastes the talents of finance’s finest minds
John Kay – Financial Times
In 1997 the late Robin Potts was asked by the International Swaps and Derivatives Association to review the new market in credit default swaps. He delivered the answer ISDA hoped and expected: credit default swaps were neither insurance (which would have been taxed and regulated as insurance policies) nor wagers (that would have been taxed and regulated as bets). Potts deftly avoided a difficult issue: if credit default swaps were neither wagers nor insurance contracts, what were they? What was the purpose of the transaction?

BitBeat: For Bitcoin’s Miners and Spenders, a Supply and Demand Imbalance
Paul Vigna and Michael J. Casey – MoneyBeat – WSJ
The amount of hardware being thrown at bitcoin mining continues to rise, but if those mined bitcoins aren’t being used, an imbalance between supply and demand will develop that may increase volatility in the price, CitiFX’s Steven Englander wrote in a note.

Exchanges & Trading Facilities

London Metal Exchange dismissed from U.S. price-fixing lawsuits
Jonathan Stempel – Reuters
A judge has dismissed London Metal Exchange Ltd as a defendant from U.S. antitrust litigation accusing banks and commodity companies of conspiring to drive up aluminum prices by restricting supply, hurting manufacturers and purchasers.

Global futures exchange volumes fall 2% in July
William Mitting – Futures & Options World
Global exchange traded futures and options volumes declined marginally year on year in July as volume rises in the US partially offset declines in Asia, Europe and South America.

Nasdaq PHLX Adds Data Specs to Options Feeds
Max Bowie – WatersTechnology
Nasdaq OMX PHLX (formerly the Philadelphia Stock Exchange) is updating the specifications for three options data products, to include additional data in existing order exposure alerts and a solicitation mechanism.

Statistical Data Products Vet Goldberg Climbs at CBOE
Max Bowie – WatersTechnology
The Chicago Board Options Exchange has promoted 34-year CBOE veteran Alicia Goldberg to vice president of statistical analysis.

Montréal Exchange Sets New Volume Record On CGB Ten-Year Government Of Canada Bond Futures
TMX Group today announced that Montréal Exchange set a new volume record on the Ten-Year Government of Canada Bond Futures contract (CGB) with 440,939 contracts traded on August 25, 2014, surpassing the previous record of 429,577 contracts set on February 24, 2014.

Industry fears Mifid shake-up of futures clearing
Cecile Sourbes –
Dealers fear European rules designed to broaden access to over-the-counter derivatives clearing houses could be extended to the futures market, where a similar service already exists but is subject to much looser rules. If the stricter OTC standards were applied in the exchange-traded world, the service would require a radical rethink and may not be possible at all, banks and industry bodies argue.

The Mexican Stock Exchange (“BMV”) Joins The Sustainable Stock Exchanges (SSE) Initiative
BMV Group has announced its adhesion as a Partner Exchange to the Sustainable Stock Exchanges (SSE) Initiative. The initiative is the learning platform to explore how stock exchanges can work together with investors, regulators and companies to improve corporate transparency and eventually performance in Environmental, Social and Governance (ESG) issues in order to foster responsible and long-term investment approaches.

Cyprus Stock Exchange’s Monthly Bulletin For July 2014

MIAX Options Exchange – September 1, 2014 Fee Changes – Market Maker Volume Tiers, Transaction Fees & Priority Customer Rebate Program Incentives

NASDAQ Announces Mid-Month Open Short Interest Positions In NASDAQ Stocks As Of Settlement Date August 15, 2014

ASX Ltd Full-Year Edited Media Transcript

Hedge Funds & Managed Futures

Biggest Danish Fund Readies for Rate Shock as Exit Narrows
Peter Levring – Bloomberg
Denmark’s biggest pension fund, ATP, says it’s willing to sustain losses in the short term as part of a bet that central banks will need to reverse an unprecedented period of monetary easing.

Star trader Rokos slugs it out with hedge fund he co-founded
Nishant Kumar – Reuters
Former Brevan Howard star trader Chris Rokos has stepped up his legal challenge to a partnership agreement imposing a five-year ban on him setting up in competition against the hedge fund firm he co-founded.

Polar Capital hires L&G’s Rushton for absolute return launch
Laura Dew – Investment Week
Polar Capital has hired L&G’s Guy Rushton to head a new UK absolute returns team, with a first fund launch slated for Q3.

Feeney: Skandia between ‘rock and a hard place’ on Woodford switch
Nick Paler – Investment Week
Old Mutual Wealth chief executive Paul Feeney has contacted clients to defend a decision to shut the Skandia Invesco Perpetual income funds, pointing to “truly exceptional circumstances” following Neil Woodford’s departure.

PSigma Income sees largest client exit ahead of Mott’s departure
Laura Dew – Investment Week
The PSigma Income fund has lost £100m as clients including its largest backer redeemed holdings ahead of Bill Mott’s retirement.

eVestment Sizing The 2013 Hedge Fund, FoHFs Universe Offers Industry Perspective
The eVestment Sizing the 2013 Hedge Fund and Fund of Hedge Funds Universe report was created with two purposes: 1) to highlight the importance of using multiple databases for industry analysis, and 2) to provide the most comprehensive look at the size of the industry in terms of AUM and number of funds.

Banks & Brokers

Living Wills Could Hasten Bank Divestitures
Saabira Chaudhuri – MoneyBeat – WSJ
Big global banks will likely accelerate the divestitures of subsidiaries, especially small foreign operations, according to an analyst at Keefe, Bruyette & Woods.

Pictet: a picture of capital strength
Mike Foster – Financial News
At a time of turmoil for the Swiss private banking industry, Geneva-based adviser Pictet has reassured its clients by revealing a stronger reserve ratio than any other European bank.

Indexes & Products

Methodology Change To The NASDAQ-100 Index – December Modification To Fully Reflect Market Cap Of N-100 Companies

STOXX Changes Composition Of Benchmark Indices – Results Of The Third Regular Quarterly Review To Be Effective On Sept. 22, 2014


Wickr butts into conversation on Wall St chatroom
Hannah Kuchler in San Francisco – Financial Times
Wickr, a cyber security start-up, is in talks with banks and major financial services companies including Markit to create an alternative to Bloomberg instant messaging, just as Goldman Sachs tries to create its own Wall Street chat service.

Xignite CEO To Join FinTech Industry Executives On Panel To Discuss API’s
Stephane Dubois, Founder and CEO of Xignite, the leading provider of cloud-based financial market data, will be speaking at the September FinTech Startups Meetup on September 3, 2014, in New York.


CFTC fines Merrill Lynch $1.2 mln for supervision failures
The Commodity Futures Trading Commission (CFTC) on Tuesday said it had fined a unit of Bank of America Corp $1.2 million for failures to supervise processing of fees charged to its customers over a period of three years.

SEC Charges Investor Relations Firm Executive With Insider Trading Ahead of News Announcements By Clients
The Securities and Exchange Commission today charged a director of market intelligence at a Manhattan-based investor relations firm with insider trading ahead of impending news announcements by more than a dozen clients. The charges were filed against Michael Anthony Dupre Lucarelli, who garnered nearly $1 million in illicit profits.

FINRA Fines Citigroup Global Markets Inc. $1.85 Million and Orders Restitution of $638,000 for Best Execution and Supervisory Violations in Non-Convertible Preferred Securities Transactions
The Financial Industry Regulatory Authority (FINRA) announced today that it has fined Citigroup Global Markets Inc. $1.85 million for failing to provide best execution in approximately 22,000 customer transactions involving non-convertible preferred securities, and for related supervisory deficiencies for more than three years. FINRA also ordered Citigroup to pay more than $638,000 in restitution, plus interest, to affected customers.

Environmental & Energy

Health Benefits of Reducing Emissions Outweigh Costs Involved, Study
Headlines and Global News
Cutting carbon emissions from sources like power plants and vehicles can lower asthma rates and other health problems, a new study finds.

Now that’s green energy! ‘Photosynthesis’ replicated in the lab – and it could pave the way to limitless hydrogen fuel
Rachel Reilly, MailOnline
Scientists have successfully replicated one of the crucial steps in photosynthesis, paving the way for a new breed of solar energy.

China Races Ahead of the Pack as Bike Sharing Goes Viral
Flavia Krause-Jackson, Bloomberg
Back in the summer of ’65, a group of self-styled anarchists whitewashed 50 bicycles and stationed them in the center of Amsterdam.

***LB: Also in this story “There is now a bike-sharing program in more than 600 cities in 52 countries, according to Russell Meddin, who maintains and updates The Bike-Sharing World Map, a website that surveys cycle plans around the globe.”


Tokyo Stock Exchange acts on apparent media leaks
Ben McLannahan in Tokyo – Financial Times
The Tokyo Stock Exchange has tightened its standards on corporate disclosure, in the wake of a Financial Times story shining light on apparent leaks of price-sensitive information to the Nikkei newspaper.

China foreign investment pattern changes as challenges grow
Pete Sweeney – Reuters
China’s foreign investment mix is changing, with portfolio investors buying more stocks but foreign direct investment falling to a two-year low on a slowing economy, rising business costs and anti-monopoly probes and crackdowns on foreign firms.

China’s Bad Banks Dangle High Yields
Fiona Law – MoneyBeat – WSJ
China’s bad banks are gaining traction from bondbuyers as their juicy yields attract those desperate for returns. China Orient Asset Management Corp. becomes the latest example as it sold $1 billion in bonds late Tuesday, attracting $10 billion worth of demand from global investors.

New Taiwan Exchange Platform Slashes Latency, Triples Capacity
Faye Kilburn, Max Bowie – WatersTechnology
The Taiwan Stock Exchange has rolled out the second generation of its trading platform, dramatically increasing the system’s capacity and throughput, and reducing latency, to support the introduction of continuous trading next year.

HKFE Announces Revised Margins For Futures Contracts

Thailand Focus 2014 Attracts 60 Foreign Fund Firms Worldwide

FSB Regional Consultative Group For Asia Holds Its 7th Meeting

HKEx: Update On Legal Proceedings: US District Court For The Southern District Of New York Issues Ruling On LME’s Motion To Dismiss Pending Class Actions On Grounds Of Sovereign Immunity

Frontier Markets

India plans crackdown on securities fraud
James Crabtree in Mumbai – Financial Times
India is set to launch a fresh crackdown on securities fraud with a long-awaited revamp of insider trading rules and powers to boost investigation and enforcement, the head of the country’s main market regulator has said.

India Hedge Funds Perform Best Globally on ‘Modi, the Hero’
Klaus Wille – Bloomberg
Hedge funds investing in India have become the world’s best performers this year on expectations that Prime Minister Narendra Modi will revive Asia’s third-largest economy.

Argentine default fails to halt emerging market bond rally
Vivianne Rodrigues in New York – Financial Times
In late December 2001, when Argentina defaulted on nearly $100bn in debt, it took emerging market bonds just 48 hours to start staging a rebound, recalls Jerome Booth, a veteran emerging market analyst.

Israeli Bourse Mulls Trading Week Change
James Rundle – WatersTechnology
The Tel Aviv Stock Exchange (TASE) is considering a change in its trading week that will see it line up with standard practice at other exchanges. Currently, the TASE operates a Sunday to Thursday week. The board of directors has expressed its support for changing this to a Monday to Friday schedule, with the market closing at 14:00 on Fridays.

Zimbabwe launches asset manager to buy bank bad debts
Zimbabwe has set up an asset management company to buy non-performing loans from banks, the central bank governor said on Tuesday, a move designed to restore stability to a sector stung by rising bad debts.

Prospects Of Promoting Islamic Finance In Cyprus – By Mr. Nondas Cl. Metaxas, Director General – CEO Of The Cyprus Stock Exchange

Tehran Stock Exchange (TSE)s CEO Held Its First Press Conference After His Re-Election In 2014

Cairo Amman Bank: Jordan Capital Market Development – Account Segregation Requirements

Malaysia’s PM Launches Securities Commission Malaysia Book On Capital Market Development

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